Jan 12 (Reuters) - ICE cotton futures rose more than 2% on Wednesday after the U.S. Department of Agriculture (USDA) lowered U.S. production and ending stocks estimates for the 2021/22 crop year, while a weaker dollar added to the upbeat mood.

Cotton contracts for March was up 2.70 cents, or 2.4%, at 118.72 cents per lb, by 01:40 p.m. ET, its highest since Nov. 24.

“The USDA surprisingly cut the U.S. crop, which ultimately brought the ending stocks down. They also lowered exports, but overall this is a friendly report to the market,” said Keith Brown, principal at Keith Brown and Co in Georgia.

In its January World Agricultural Supply and Demand Estimates (WASDE) report, the USDA projected U.S. production at 17.62 million bales for the 2021/22 crop year, about 660,000 bales lower than the previous month, bringing its ending stock estimate 200,000 bales lower to 3.20 million bales.

The USDA also cut its global output estimate by about 610,000 bales to 120.96 million bales, bringing ending stocks forecast to 85.01 million bales from 85.73 million bales last month.

However, the agency trimmed U.S. exports estimate by 500,000 bales to 15.0 million bales, citing lower U.S. crop and continuing logistical issues.

“If we can start to see some improvement in the month of January on the logistics issues, we may not see strong cancellations,” Brown said.

Further lifting cotton’s appeal, the dollar slipped to a fresh two-month low against its rivals, while oil prices hit two-month highs on tight supply as crude inventories in the United States dropped.

Total futures market volume rose by 4,247 to 27,824 lots. Data showed total open interest fell 136 to 244,451 contracts in the previous session. (Reporting by Brijesh Patel in Bengaluru; Editing by Shailesh Kuber)