(Reuters) - ICE cotton futures jumped 3% to a more than two-year high on Tuesday after the U.S. Department of Agriculture (USDA) lowered ending stocks estimates for the 2020/21 crop year and projected an increase in U.S. exports in its monthly supply-demand report.

The cotton contract for March,, settled up 2.65 cents, or 3.1%, at 86.93 cents per lb, its highest level since August 2018.

“They (USDA) did leave the U.S. crop unchanged, but they did raise exports and lowered the carry out. All that is positive,” said Keith Brown, principal at cotton brokers Keith Brown and Co in Georgia.

“Also, the market still thinks that there will be a cut to the U.S. production number in the month of March,” he added.

In its latest World Agriculture Supply and Demand Estimates (WASDE) report, the USDA lowered its projection for U.S. ending stocks to 4.3 million bales from 4.6 million in January.

The agency left the U.S. production forecasts unchanged at 14.95 million bales, while global ending stocks estimates were lowered to 95.7 million bales from 96.3 million.

“The 2020/21 world cotton forecasts include higher production, consumption, and imports, led by changes in China,” the USDA said.

Offering further support, the dollar index fell to a more than one-week low, making greenback-denominated cotton less expensive for investors holding other currencies. [USD/]

“The long-term trend to upside is still in place, but it’s definitely heated up pretty quickly, so we may see a correction in the near future,” said Bailey Thomen, cotton risk management associate with StoneX Group.

Total futures market volume rose by 13,480 to 84,884 lots.

Certificated cotton stocks deliverable as of Feb. 5 totaled 92,617 480-lb bales, up from 89,849 in the previous session.

Reporting by Brijesh Patel in Bengaluru; Editing by Chizu Nomiyama