NEW YORK, Dec 13 (Reuters) - U.S. cotton futures ended Tuesday with small gains after falling for a second consecutive day to a 16-month low, where buyers found value, brokers said.

The selloff this week followed Friday's monthly supply/demand report from the U.S. Department of Agriculture that portrayed a large reduction in demand, they added.

The selling 'was still a hangover reaction from the USDA report last Friday, especially the huge cut in world consumption,' said Mike Stevens, an independent cotton analyst in Mandeville, Louisiana.

Benchmark March cotton futures rose 0.15 cent to finish at 87.31 cents, after falling earlier to a low at 86.63 which dates back to August 2010 on a continuation chart.

Stevens said cotton prices could trade sideways for the short-term, perhaps trading higher from current levels, but will eventually continue its slide. He cited potential downside targets in the 80 to 82 cent area.

USDA forecast world 2011/12 cotton consumption at 111.34 million (480-lb) bales, down from 114.27 million bales last month.

Open interest in the cotton market, usually taken as an indicator of investor exposure in the market, was even at 141,120 lots on Monday, exchange data showed.

Volume traded on Monday came to 10,793 lots even with the prior session's tally, ICE Futures U.S. data reported.