* Market rallies on trade, speculative buying

 * Strong USDA export sales data boosts cotton futures

 * COMING UP: Friday's USDA supply/demand report

 NEW YORK, Oct 7 (Reuters) - Cotton futures closed sharply
higher Thursday on speculative and trade buying as players
braced for release of a key government crop report, brokers
said.

 ICE Futures U.S. benchmark December cotton contract CTZ0
went up the 4.00-cent limit to finish at $1.0375 per lb, the
highest close for the second position cotton contract in a
week. The session low was at 99.64 cents.

 Back contracts posted gains from 0.83 cent to 2.03 cents.

 The U.S. Agriculture Department's monthly supply/demand
report will be released Friday at 8:30 a.m. EDT (1230 GMT). The
cotton trade is anxious to see if USDA raises its estimate of
U.S. cotton exports and production figures for top consumer
China, No. 2 producer India and flood-hit Pakistan.

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 Graphic on cotton prices: link.reuters.com/far47p)

 Factbox on cotton supply and demand [ID:nN22231408]

 Timeline on U.S. cotton trading [ID:nN22245547]

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 Total volume traded hit 30,642 lots at 2:53 p.m. EDT (1853
GMT), about two-thirds above the 30-day average at 18,305 lots,
preliminary Thomson Reuters data showed.

 Ron Lawson, an analyst at brokers logicadvisors.com in
Sonoma, California, said fiber contracts jumped when a large
block of speculative orders forced trade accounts to pile in as
well, triggering a "domino effect" of buying in the market.

 He said the underlying structure of the market remained
bullish and that cotton got a further boost from the weekly
export sales report from the U.S. Agriculture Department.

 USDA said total U.S. cotton sales hit 647,000 running bales
(RBs, 500-lbs each), the fourth consecutive week that sales
topped 500,000 RBs.

 Lawson said most of the sales were booked while cotton was
rallying to its highest level in 15 years. The advance was
fueled by strong demand, tight stocks and buying by funds who
believed cotton was undervalued.

 Brokers Flanagan Trading Corp sees resistance in the
December cotton contract at $1.0385, with support at $1.026 and
$1.0135.

 Volume traded Wednesday reached 13,569 lots from the prior
tally of 28,039 lots, according to data from ICE Futures U.S.

 Open interest in the cotton market stood at 231,203 lots as
of Oct. 6, ICE Futures U.S. data showed.