* USDA due to first full 2014/15 outlook on Friday
* Dealers book profits, avoid 'risk exposure' to report
* U.S. farmers behind prior years' plantings - USDA data
NEW YORK, May 6 (Reuters) - Cotton futures eased on Tuesday, giving back the previous day's gains as investors squared their books ahead of a report on Friday when the U.S. government will deliver its first full supply-demand outlook for the 2014/15 season.
The most-active July cotton contract on ICE Futures U.S. closed down 0.77 cent, or 0.8 percent, at 93.98 cents a lb after trading in a tight range of less than 1 cent throughout the day.
The U.S. Agriculture Department is due to release its monthly crop report on Friday, including its first full forecast for the season that begins on Aug. 1.
"Traders are trying to figure out their positions ahead of this USDA report. People want to lock in profits, instead of risking exposure to the report," said Michael Smith, president of T&K Futures and Options in Port Saint Lucie, Florida.
Merchants, analysts and farmers expect U.S. inventories to jump next season as growers boost output and Beijing overhauls the stockpiling program that has driven huge demand for foreign bales.
Even so, traders remain uncertain over whether a multi-year drought in Texas will cause crop damage and hurt output in the United States, the world's top exporter.
Total market open interest rose to 193,300 lots on Monday, up from 189,610, to the highest level since November 2013, ICE data showed on Tuesday.
Speculators have piled into the cotton market, raising their bets in the most recent reporting week, as dry skies in Texas stoked worries over tight supplies in the world's top exporter.
A weekly U.S. government report released on Monday after the market closed showed U.S. farmers were planting less than in prior years, with 16 percent of acres sown compared with the five-year average of 25 percent. (Reporting by Chris Prentice. Editing by Andre Grenon)