NEW YORK, Jan 12 (Reuters) - Cotton futures ended lower on Thursday,
unwinding its advance to a two-month peak, after most estimates in the U.S.
Department of Agriculture's December supply/demand report were seen as bearish,
according to several brokers.

Benchmark March cotton futures finished 1.18 cents lower at 95.69
cents a lb after falling to a four-day low at 94.13 cents. Earlier, it reached a
high last seen on Nov. 18 at 97.50 cents.

Volume was a healthy 17,209 lots, above the 30-day norm, according to
preliminary Thomson Reuters data.

The action picked up as some longer-term bulls grabbed cotton around the
session low, leaving prices in the middle of their recent higher range, despite
ending down on the day.

'There's nothing in the supply/demand report this morning that was anything
but flat out bearish. That's what started the selling and then the fact that
corn got hammered,' said Jobe Moss of MCM Inc in Lubbock, Texas.

He added that agricultural products often trade in tandem, reasoning that if
corn rallies, for example, cotton prices will chase it to compete for acreage.

'The corn market getting knocked down cast a shadow on cotton, but I think
we're in rare air up here at these prices even though declines aren't
sustained,' Moss said.

He and others pointed out that commodity index rebalancing has drawn
purchases of at least 11,000 lots so far this week, helping to underpin prices.

Similarly, medium-term weather forecasts for dry conditions in cotton
growing states has put a floor under prices as has competition for acreage.

Cotton experts have said the fiber will likely lose out to other crops like corn
and peanuts, eventually lifting prices.

Still, they agreed that the U.S. Agriculture Department's monthly
supply/demand report was decidedly bearish for cotton. In the December report,
it raised world 2011/12 end-of-season cotton stocks to 58.35 million bales from
57.67 million.

John Flanagan of Flanagan Trading Corp in North Carolina noted the USDA
report cut U.S. exports by 300,000 bales, more than offsetting a reduction in
production of 153,000 bales.

World figures were also bearish. World production was cut by 580,000 bales
but world use was cut by 1,350,000 bales which increased world ending stocks by
680,000 bales.

'World consumption fell below the levels we got to back in 2009 during the
financial debacle when everything just cratered,' said Moss.

China's cotton imports soared in December and the country will soon issue
another import quota of 1.1 million tonnes (5 million 480-lb bales), offsetting
the bearish impact of a U.S. crop report.

Without China, however, world stocks are lower, said Sharon
Johnson, senior cotton analyst at commodities brokerage Penson
Futures in Atlanta, Georgia.

Meanwhile, weekly export sales of cotton were 93,900 running bales with
shipments at 169,300 bales, 'Both decent figures,' said Flanagan.

Total volume traded Wednesday came to 16,008 lots, off Tuesday's count of
16,137 lots, ICE Futures U.S. data showed.

Open interest, an indicator of investor exposure, rose to 149,509 lots from
the previous tally of 147,317 contracts.