NEW YORK, Jan 10 (Reuters) - U.S. cotton futures finished
higher on Monday on speculative and possibly some mill buying,
but business was moderate as most players awaited release of a
key government crop report this week, traders said.

Benchmark March cotton contract on ICE Futures U.S.
increased 2.65 cents to conclude at $1.4325 per lb, trading
from $1.405 to $1.446.

'It's really lethargic,' Lou Barbera, cotton specialist at
commodities brokerage VIP Commodities, said. 'It's more a lack
of trade selling than quality buying.'

The level of interest by players was reflected in the
volume of business. Contracts traded stood at around 16,700
lots, about 10 percent below the 30-day norm, Thomson Reuters
preliminary data showed.

Analysts said most market players were apparently sitting
back to wait for release of the U.S. Agriculture Department's
monthly supply/demand report on Wednesday at 8:30 a.m. EST
(1330 GMT).

Cotton industry analysts said the market will watch for any
significant changes to world cotton supply figures, especially
the numbers being released on China, the world's top consumer,
and India, the No. 2 producer of the fiber.

Another factor would be the rebalancing by index funds who
will be reducing risk from cotton and other overly-weighted
agriculture markets and adding exposure to natural gas and
crude oil. The rebalancing runs between this week and next.

Investment bank JPMorgan Chase has estimated that nearly
14,000 cotton contracts could be offloaded under the exercise,
which may pressure cotton futures despite bullish market
fundamentals.