NEW YORK, May 12 (Reuters) - U.S. cotton futures hit
one-month lows on Monday after a bearish government crop report
from last week brought more pressure onto a market traders said
could be set for a deeper correction.
The most-active July cotton contract on ICE Futures U.S.
fell to an April 11 low of 90.50 cents a lb before
settling at 91.30 cents, down 1.06 cents or 1.1 percent.
The contract has lost almost 2 percent of its value over the
last two sessions after the release of the U.S. Department of
Agriculture's preliminary cotton report for 2014/15, which
forecast higher output, lower demand and rising inventories.
"Follow-through selling from Friday's USDA report is being
seen," said Sterling Smith, a futures specialist at Citigroup.
"The action does look to be fund-driven (and) the market does
(seem) to have ample downside room."
The USDA cautioned that China, the world's largest textile
market, will slash cotton imports by a third in 2014-15 as the
Chinese government overhauls its stockpiling policy.

In the United States, the department said it expects ending
stocks of cotton to rise to 3.9 million 480-lb bales, from 2.8
million in the current crop year, in line with market
expectations.
Its global outlook was more bearish, projecting ending
stocks at 101 million bales versus 97.91 million in 2013-14, in
what would be fourth straight year of record high production.
Traders and analysts had initially scoffed at that estimate,
which came in higher than the 99.9-million bales expected in a
Reuters survey for 2014-15 world ending-stocks.
But in Monday's trading, ICE futures' December contract
, which will include the new crop covered in the USDA
forecast, settled down as well, although only marginally lower
with a 0.4 cent loss.
Total open interest in ICE cotton slipped to 194,558 lots on
Friday, from Thursday's 196,506, ICE data showed.
The potential of tight supply from both the old and new
cotton crops had sent the most-active cotton contract on ICE to
a more than two-year high of 97 cents a lb in late March.
A separate USDA report from a week ago showed U.S. farmers
were planting less than in previous years, with 16 percent of
acres sown compared with the five-year average of 25 percent.