Oct 18 (Reuters) -ICE cotton futures ticked higher on Wednesday as lower production in key growing areas in the United States fueled supply concerns, while muted demand continued to cap gains.

* The most-active December cotton contract CTZ3 rose 0.58 cent, or 0.7%, to 83.81 cents per lb at 12:56 p.m. ET (1656 GMT).

* "In reality, the U.S. crop won't get any bigger than it is estimated at the moment, while China and India also have the potential to see tighter supply," said Valentin Olah, cotton risk management consultant at StoneX Group.

* The U.S. Department of Agriculture (USDA) in a weekly crop progress report said on Monday 30% of the cotton crop was in good to excellent condition, compared with 32% last week.

* However, U.S. cotton prices have failed to gain much traction as demand from key buyer China continues to be muted. nL4N3B53DZ

* Further limiting gains in the natural fiber, the dollar was up 0.4%. Stronger dollar makes cotton more expensive for buyers holding other currencies. USD/

* Investors will watch out for the USDA weekly export sales report due on Thursday.

* "I think we could see the relatively better recent business reflected in tomorrow's report," Olah said.

* Elsewhere in the grain market, Chicago wheat futures rose on bargain buying, while soybean futures rose as strong demand in the U.S. domestic market underpinned prices. GRA/

Reporting by Sherin Elizabeth Varghese in Bengaluru; Editing by Shailesh Kuber