* Monthly U.S. government forecast seen 'mildly bearish' -trader
* Futures traders position themselves ahead of report
* Higher 2013/14 U.S. output forecast expected by many
NEW YORK, Sept 11 (Reuters) - Cotton futures were little changed on Wednesday as traders positioned themselves ahead of a monthly U.S. Department of Agriculture (USDA) report on Thursday which was expected to include a bigger U.S. crop forecast.
The most-active December cotton contract on ICE Futures U.S. eased 0.12 cent, or 0.1 percent, to settle at 84.35 cents per lb, down for the first time in four sessions.
Nearby contracts closed lower as the March and May saw slight gains on the day.
The USDA is largely expected to raise its projections for output in the United States, the world's top exporter, in the 2013/14 crop year than began on Aug. 1, after a larger-than-expected drop in the forecast last month fueled a speculator-driven rally.
Production figures are also expected to be higher for India, where weather conditions have been favorable for a bumper crop.
Meanwhile, dealers will be eyeing any changes to import demand figures for China, the world's leading cotton buyer. Bulls expect that estimate to be raised from last month's outlook of 11.0 million 480-lb bales.
The expectations for higher demand in top consumer China and climbing output left traders looking to rebalance their positions to flat ahead of the report, dealers said.
"We've got some people covering shorts, some people taking positions off," said John Flanagan of Flanagan Trading Corp in North Carolina.
"The report is going to be mildly bearish as you'll find more cotton production in the United States and probably find it increased outside of the U.S. as well."
Even with the day's slight loss, the second-month contract is poised for its first weekly gain in four weeks.
A larger-than-expected reduction in last month's forecast helped fuel a speculator-driven rally that lifted cotton to a five-month high of 93.74 cents.
The noncommercial dealers who had piled into fiber market have since abandoned it in droves, sending prices tumbling.
The start of government stockpiling in China has underpinned futures prices this week, putting a floor under prices with the government purchasing fiber at about $1.50 per lb.
Beijing began the stockpiling program in 2011, paying above world prices to support farmers and spurring voracious demand for lower-priced, foreign cotton in the world's top textile market.
China's share of world inventories is expected be more than 60 percent by the end of July 2014.
The world is forecast to hold a record of nearly 93.77 million bales of cotton by the end of the crop year, seen as historically high prices in 2011 led mills to turn to lower-priced, synthetic alternatives. (Reporting by Chris Prentice; editing by Jim Marshall)
