* U.S. plantings next year could fall to 2009 levels -
Allenberg
* Cotton down over 2 percent on the week

NEW YORK, July 27 (Reuters) - Cotton futures were flat to
slightly higher on Friday as fears about a drought in India, the
world's largest producer, and a prediction by Allenberg, the
world's largest cotton merchant, that China will continue to
stockpile fibers into next year offset concerns about the global
surplus.

Fiber contracts rose over 2 percent in early trade,
recouping all the ground lost earlier in the week, but ran out
of steam as the euro pared some of its gains versus the dollar
with fears about the deepening euro-zone debt crisis returning
to the fore.

That took the market down over 2 percent on the week even
after the Indian government warned of a possible drought which
could hurt crops due to delayed monsoon rains.
The benchmark December cotton contract on ICE Futures
U.S. settled at 71.45 cents per lb, almost flat compared with
Thursday's settlement at 71.39 cents.
The Indian authorities' caution on Thursday reinforced
speculation that the country may restrict exports, although Food
Minister K.V. Thomas said there are no such plans in place. The
government will review the situation in mid-August.

"India is going to be an issue before long. They've had 50
percent of their monsoon rain and that's disastrous for them,"
said John Flanagan, analyst at Flanagan Trading Corp in North
Carolina.

The market's reaction was subdued by the global surplus
which will continue to weigh on prices for now, he said.
In fact, it could take as long as two years for the market
to work off the extra inventory even if there is a drastic cut
in crops in India, he cautioned.
His forecast was more downbeat than comments from Allenberg
President and Chief Executive Joe Nicosia earlier on Friday, who
predicted that China's strategic reserve, which already accounts
for almost half of 2012/13 stocks, will continue to hoard
fibers, helping to offset the overhang of the surplus on the
market.

"As long as China continues to build its reserves, the
cotton market will be protected from its surplus," said the
chief of the wholly owned unit of trading giant Louis Dreyfus
and the world's biggest cotton merchant and trader.

He also predicted massive erosion in plantings due to
soaring grains prices, which will help reduce inventory. U.S.
farmers will switch out of cotton and grow more soybeans, which
could take 2013/14 plantings back to 2009 levels around 9
million acres, he said. Some analysts have pegged plantings as
low as 6 million acres.

The high-profile trader was a panelist in the Ag Market
network's much-anticipated annual radio program from New York.