* March contract up by daily limit early, sold off

* Market frets over tight supplies as U.S. stocks shrink

NEW YORK, Dec 10 (Reuters) - U.S. cotton futures closed higher on Friday on investor buying in moderate trade, with analysts saying a government crop report underlined tight supplies in the market.

The benchmark March cotton contract on ICE Futures U.S. rose 1.02 cents to finish at $1.3697 per lb, trading from $1.353 to $1.4095. On the week, the market gained 3.5 percent.

Trading volume hit about 27,336 lots, roughly a quarter below the 30-day average of 35,361 lots, Thomson Reuters preliminary data showed.

Business has recently slowed. On Thursday, cotton volume reached a three-month low of 15,036 lots, exchange data showed.

Cotton is still the best performer in the Reuters-Jefferies commodity index, up over 70 percent in the year to date.

The March contract climbed by the 5-cent daily limit ahead of the U.S. Agriculture Department's monthly supply report but "slowly sold off" after the release of the data, said Lou Barbera, an analyst for brokerage VIP Commodities.

The USDA estimate of 1.9 million 480-lb bales in U.S. cotton ending stocks for 2010/11 emphasized the tight situation, traders said.

But the global numbers took a bearish tone.

The USDA raised global production in 2010/11 to 115.53 million bales from 115.25 million, reduced world consumption to 116.25 million from 116.82 million and raised world ending stocks to 43.39 million against 42.20 million bales.

With those numbers in, Barbera said market players "took a little profit" although the supply situation into the spring of 2011 remained "tight".

Chinese cotton prices rose, with the May futures last done at 26,825 yuan per tonne, up 255 yuan.

Going forward, market players will turn to prospective spring 2011 cotton plantings in countries such as the United States and China.

Analytical firm Informa Economics upped its U.S. cotton plantings forecast for 2011 to 12.2 million acres, a four-year peak and nearly 12 percent higher than 2010 cotton sowings of 10.909 million acres.

Industry group National Cotton Council will release its survey of potential cotton sowings in February and the USDA will hand out its own potential cotton plantings data on March 31, 2011.