* Cotton pierces key 90-cent mark
* Traders cite rumors Beijing plans new import quotas
* USDA expected to cut inventory forecast in Monday's crop report
NEW YORK, March 6 (Reuters) - Cotton futures shot to their highest since August on Thursday on a late burst of buying as rumors circulated that China has issued new import quotas and strong export sales reinforced hopes that the U.S. surplus will shrink more than many expected.
In its best daily performance since June last year, the benchmark May cotton contract on ICE Futures U.S. closed up 2.85 cents, or 3.24 percent, at 90.71 cents a lb.
Most of the day's gains and turnover were in the final hour of trade, in part due to technical buying after prices pierced the psychologically key 90-cent mark and short covering.
Prices jumped to as high as 90.80 cents, its loftiest since August last year. Volumes were decent with over 23,000 lots of May contract changing hands.
Traders cited speculation that Beijing plans to issue a new kind of import quota as part of its plans to ditch its contentious stockpiling program that has bolstered global prices for the past three years.
"Prices will explode" if the Chinese government implements a so-called "processing quota", a trader said in a note. Details of the plan were not known but traders said it would be in addition to a widely expected offer of one tonne of import quota for every four tonnes of cotton purchased from the state.
That has fueled hopes that demand from the world's No. 1 textile industry will remain firm even after Beijing ends its stockpiling policy.
Concerns that sales from the state's massive reserve will crimp import demand have worried growers and U.S. traders and hurt prices in recent months.
Buying was also driven by expectations of an upbeat monthly crop report from the U.S. government on Monday after weekly export sales data released on Thursday morning.
Many traders expect the U.S. government will cut its forecast for inventory below 3 million 480-lb bales for the current season to end-July to reflect strong exports.
Some suggested the U.S. Department of Agriculture may even cut its carryover estimate to 2.5 million 480-lb bales. That would be the lowest since 1990/91. (Reporting by Josephine Mason; Editing by David Gregorio)
