* India may allow some cotton exports
* Trade awaits USDA crop report on Friday

NEW YORK, March 7 (Reuters) - Cotton futures finished
lower on Wednesday for the second straight session, as news that
India could allow limited exports of cotton already under
contract deflated the market, analysts said.
Exactly a year after cotton hit a record high following a
seven-month rally, investor selling helped push the benchmark
May contract on ICE Futures U.S. down 1.30 cents, or 1.4
percent, to 90.12 cents per lb. It dealt from 91.54 to 89.75
cents.
Cotton prices have more than halved since hitting $2.27 a lb
last March 7, as demand shriveled and sowings increased world
wide.
Wednesday's volume of around 21,000 lots was about 13
percent below its 30-day norm, Thomson Reuters preliminary data
showed.
Mike Stevens, an independent cotton analyst in Louisiana,
said the market is not considering the situation in India, for
now, and trading the bearish supply/demand fundamentals in
cotton futures.
"India is the big unknown," he said. "The market has a slow
grind going down."
Government sources in India, the world's No. 2 producer and
the second biggest exporter behind the United States, said New
Delhi may allow some shipments to go ahead as up to
2.5 million bales of cotton have been registered for export.

Traders said there is widespread uncertainty over how
government ministers in India will decide on the issue when they
meet on Friday.
The cotton market was thrown into confusion after India's
farm minister said Tuesday he would challenge an export ban
announced a day earlier by another government agency.
The ban rallied global cotton markets by raising fears that
mills in China, the world's largest consumer, would turn to the
United States at a time when its own supplies of cotton are
almost sold out.
Investors were wrongfooted by the move. Data from the U.S.
Commodity Futures Trading Commission showed that speculators had
switched to a net short position in cotton for the first time in
a year.
For now, cotton traders said they were looking toward the
release of a pair of reports from the U.S. Agriculture
Department over the next two days.
On Thursday, the USDA will hand out its weekly export sales
data which will be used to gauge world cotton demand.
USDA will release its monthly supply/demand report on
Friday. Both reports are due out at 8:30 a.m. EST (1330 GMT).