* July cotton up 0.5 pct in rebound ahead of USDA crop data
* Market bolstered by better-than-expected weekly exports
May 8 (Reuters) - U.S. cotton snapped a two-day decline to end up on Thursday, bolstered by higher-than-expected weekly exports and optimism that a government crop report due in the next session may be favorable to the market.
Net sales of U.S. all upland cotton were up 11 percent from the prior four-week average, according to data on Thursday that surprised traders expecting lower exports due to competing sales of Chinese cotton.
On Friday, the U.S. Department of Agriculture will issue a monthly report that features its first full forecast for the 2014/15 cotton season that begins on Aug. 1.
The most-active cotton contract on ICE Futures U.S., the second month July, ended up 0.5 cent, or 0.5 percent, at 93.05 cents a lb after trading in a 2 cent-wide band.
In the previous session, the contract fell 1.5 percent on worries there may be high cancellations of U.S. cotton sales in Thursday's data in favor of Chinese exports.
"We had some specs jump ship yesterday, and today they're jumping back in on the (U.S.) export sales," said Sharon Johnson, senior cotton analyst at KCG Futures, a division of commodities broker Knight Capital, in Roswell, Georgia.
"We're still selling and shipping more than we need to meet forecasts (for the year). We're not rationing cotton to the degree we probably need to be yet."
Total market open interest rose to 195,914 lots on Wednesday, up from Tuesday's 195,428, and the highest since Nov. 6, 2013, ICE data showed.
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.
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.
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 Barani Krishnan; Editing by Chris Reese )