(Reuters) - Cotton prices in India are expected to edge higher this week, supported by lower supplies in the local market while lower-than-expected release from China and expectations that U.S. farmers will sow a historically small crop are seen aiding sentiment.

The April cotton futures contract on the Multi Commodity Exchange (MCX) rose 0.16 percent to 19,360 rupees per bale of 170 kg each at 0802 GMT.

"Less than expected release by China and forecast of lower acreage in the United States are expected to keep cotton prices firm," said Prerana Desai, vice-president of research at Kotak Commodities.

China, the world's top cotton consumer, kept volumes of cotton offered from its state reserves steady on Monday, defying expectations that it could ramp up sales to help ease tight domestic supplies after stockpiling most of the domestic crop.

The U.S. Department of Agriculture has forecast U.S. farmers will sow a historically small crop of 10 million acres as they switch to higher-priced grain crops.

Cotton supplies to spot markets across India, the world's second largest producer, are at around 100,000 bales per day, down from 200,000 bales per day at the start of February, according to traders.

Cotton supplies from the beginning of the crop year in October 2012 to March 24, 2013, were at 24.68 million bales, down from 24.96 million bales a year earlier, the Cotton Corporation said.

On Saturday, the most-traded domestic spot Shankar-6 variety closed 200 rupees higher at 38,400 rupees per candy of 356 kg, data from the Cotton Association of India showed.

Government agencies have procured between 2.5 million and 3 million bales and they would start releasing the stocks from April, according to industry and trade estimates.

In New York, the most active May contract on the Intercontinental Exchange was up 0.68 percent at 89.06 cents per lb.