* Cotton notches biggest quarterly gain in 2 years
* Early session gains evaporate after prices breach 90 cents
* USDA planting forecast in line with expectations
* Acreage lowest in decades as farmers gravitate to grains
NEW YORK, March 28 (Reuters) - Cotton prices ended lower on Thursday but still posted an 18 percent quarterly gain, even after investors took profits ahead of the long Easter weekend.
Cotton rose 6 percent for March and ended the first three months of 2013 with its biggest quarterly gain in two years.
Prices rallied early, after the U.S. Department of Agriculture report forecast this year's acreage would fall almost 20 percent, largely in line with expectations.
But buying evaporated after prices breached 90 cents per lb and technical selling kicked in.
The most-active May cotton contract on ICE Futures U.S. slid 0.07 cent, or 0.08 percent, to settle at 88.46 cents a lb on healthy volumes. Trading will be shut on Friday for the Easter holiday.
Last year's losses have been erased by three months of gains largely driven by speculators boosting their bullish bets to their highest levels since 2008.
On Thursday, most of the market's attention was on the USDA report, the first concrete indication of the size of 2013 plantings.
The USDA forecast U.S. farmers will sow a historically small crop of 10 million acres as they switch to higher-priced grains.
The forecast was largely in line with the market's expectations and unchanged from the government's previous estimate.
"The initial reaction to the number is, of course, bullish,"said Peter Egli, director of risk management for Plexus Cotton Ltd, a British-based medium-sized merchant. But he noted that the acreage numbers could still change.
In a distinctly bearish outlook for grains, the government predicted U.S. corn plantings will be the highest since 1936. Corn prices sank 5 percent on the news.
Speculation had mounted ahead of the report that growers may not cut their cotton acreage as much as expected after the rally in prices. A survey in February had shown plantings would fall below 10 million acres. It has only done that five times in the past century. (Reporting by Chris Prentice; Writing by Josephine Mason; Editing by David Gregorio)