* US output seen down 300,000 bales vs USDA est-Reuters poll
* World-ending stocks seen below 70 mln bales - Reuters poll
* Texas crop seen at 5.5 mln bales vs 3.5 mln yr ago - poll
NEW YORK, Aug 9 (Reuters) - Cotton futures eased slightly on
Thursday ahead of the U.S. government's keenly awaited monthly
crop report on Friday, with market participants expecting record
inventory this year even as concerns mount about crop damage in
India and the United States, the world's No. 2 and 3 producers.
After rising above 77 cents for the first time since
mid-May, investors took profits late in the session, pushing
prices back to near unchanged by the close.
The benchmark December cotton contract on ICE Futures
U.S. settled at 75.95 cents per lb, down just 0.05 cent from
Wednesday.
The 2012/13 season, which started on Aug. 1, hangs in the
balance, as traders speculate whether China will release a
portion of its massive 27-million-bale strategic stockpile.
Beijing may auction off a share of that stash, which
accounts for almost half of the 2011/12 ending stocks, as it
readies for another shopping spree during this marketing season.
Brokers say the aim is twofold: maintain ready fiber
supplies for its textile mills if needed and support cotton
prices for domestic farmers.
"Everything I see points to Chinese government buying and
releasing when they need it," said Ron Lawson, managing director
of logicadvisors.com.
Whatever secretive moves the authorities make behind the
scenes, it is likely to prove decisive to global trade flows,
particularly if India's crop is damaged by the drought.
The chances of a prolonged dry spell rose on Thursday after
the U.S. weather agency cautioned that the El Nino phenomenon,
which caused India's last drought, is almost certain to occur in
the next two months and will last into 2013.
Indian authorities have already sounded the alarm on a
potential drought - the first in three years - after the weak
start to the vital monsoon rain season.
In the domestic market, the next two weeks will be crucial
for farmers in Texas, the country's largest-producing region, as
blooming crops struggle without rain.
"It looks hot and thirsty," said Jay Yates, risk specialist
with Texas AgriLife Extension Service, standing in a field
planted with cotton in Texas. "We had enough moisture to get
things started, but less than an inch since."
PRICED IN CUTS
Following the 10-percent jump in prices since the start of
the month, the market may be expecting a larger cut to the
USDA's ending stock levels in Friday's report than is realistic.
An informal poll by Reuters showed analysts, traders and
academics expect global ending stocks in the 2012/13 season of
69 million bales.
That is still the highest since the government records began
in 1960 and builds on the 66.7 million bales estimated for the
end of the 2011/12 season.
But it is down 5 percent from USDA's 72.4-million-bale
forecast, largely due to expectations crop damage in India, for
which the USDA is unlikely to have accounted yet.
The USDA's output projection for India of 24 million bales,
down from 26.5 million bales in the 2010/11 season, is too high,
but may not come down yet, traders said.
Keith Flury, cotton analyst at Rabobank, pegged the eventual
number in the low 20-million-bale area.
A dry spell in Texas, still recovering from last year's
drought which halved the crop size, has also forced analysts to
reduce regional and national forecasts.
A poll of 10 analysts, traders and academics pegged U.S.
output at 16.6 million bales, down from the USDA's current
estimate of 17 million, but up from the 15.57 million produced
last year.
A third of that will come from Texas with output there seen
at 5.5 million bales, the survey showed. That is almost
two-thirds higher than the 3.5 million bales produced last year,
but below historic averages of 6 million to 7 million bales.