* Benchmark prices drop to 75.03 cts/lb, pare losses

* Exchange inventories continue climb to 11-month highs -ICE data

* Expectations of bearish U.S. plantings report weigh on prices

NEW YORK, June 25 (Reuters) - Benchmark cotton futures tumbled to a 1-1/2-year low on Wednesday after the release of disappointing U.S. economic data and as stop-loss orders propelled deeper losses.

The benchmark December cotton contract on ICE Futures U.S. dropped to 75.03 cents a lb, the weakest for the third-month contract since December 2012, before paring losses to close down 1.23 cents, or 1.6 percent, at 75.26 cents a lb.

The U.S. economy contracted more sharply than expected in the first quarter, sparking heavy selling. Fiber extended losses as trading volumes picked up.

The spot July contract finished down 0.01 cent, or 0.01 percent, at 81.80 cents a lb. The July contract traded within a narrow range relative to the wild swings seen earlier this week.

The contract plunged over 7 percent on Tuesday after price limits were removed due to the delivery period. The contract sank limit-down late the prior day as traders dumped long positions in the final moments of trade.

Traders continued to liquidate long positions on Wednesday, though short-covering buoyed the front-month.

Total market open interest slipped to 145,458 lots on Wednesday from 145,800 previously, ICE data showed. That was down from 157,280 lots on Friday to the lowest since late 2011.

"We're dialing in a lot of negativity today," said Keith Brown, principal at cotton brokers Keith Brown and Co in Moultrie, Georgia.

Bearish expectations that next week's update from the U.S. government will show a big increase in planted acres of cotton weighed on prices, traders said.

U.S. output is expected to rise sharply in the new crop year that begins on Aug. 1 after farmers raised acres and the top-producing state of Texas saw much-needed rains this year.

July prices have traded at a premium above the December contract, which represents 2014/15 supplies, for months as traders worried over tightening inventories in the world's top exporter at the end of the 2013/14 year.

Traders have raced to liquidate cotton that will be worth less once the July contract expires on July 9.

The premium crawled higher on Wednesday to 6.54 cents a lb, but was still down sharply from last week's peak of 13.96 cents a lb.

The July delivery is expected to be relatively large, with another 3,000 lots still open in the contract. Holders of cotton have pledged about 16,400 bales so far, the most recent ICE data showed.

Newedge USA LLC, Louis Dreyfus Commodities unit Term Commodities, and ADM Investor Services had so far issued notices to receive bales.

ICE inventories continued to climb to 11-month highs. They were 444,585 bales on Tuesday, up from 439,198 bales previously, ICE data showed. (Reporting by Chris Prentice; Editing by Paul Simao)