NEW YORK, April 7 (Reuters) - U.S. cotton futures ended
mixed on Thursday, with the front-month May contract recoiling
from an intraday limit-up peak, as index fund rollovers heated
up and traders readied for a government crop report on Friday.

The key May cotton contract on ICE Futures U.S.
peaked at its 7-cent limit at $2.1506 per lb, before selling
off in the last hour of business to end with a 0.16-cent gain,
at $2.0822.

Market players attributed the late-session volatility in
the May contract to increased index fund rollover business, as
funds rolled out of May into July, with first notice day for
May cotton just two weeks away.

'For the next five days, the Goldman Sachs index funds will
roll 20 percent of their position forward,' said Mike Stevens,
an independent analyst in Louisiana.

'They have been big-time long in the May contract, so what
they did was come in and sell thousands of May's right at the
close. That's what brought the July contract up off the lows.'

After the close, ICE Futures U.S. raised cotton maintenance
margins for speculators by 25 percent to $2,500 per contract
from $2,000.

The new-crop December cotton contract tumbled 4.03
cents to end at $1.3794.

Trading volumes were brisk, with more than 43,600 lots
traded by 3:30 p.m. EDT 1930 GMT, more than 80 percent above
the 30-day norm, Thomson Reuters preliminary data showed.

Open interest in cotton futures continued to creep higher,
rising 3,469 lots to an eight-week high at 199,158 lots as of
April 6, according to ICE Futures U.S. figures.

Prices also stumbled after reports of an earthquake
measuring 7.4 shook northeast and eastern Japan. A tsunami
warning was issued for the northeastern coast but later lifted.

Cotton market participants were also seen positioning in
front of Friday's release of the U.S. Agriculture Department's
monthly supply/demand report.

Traders said the market will pay attention to any
adjustments in consumption and stock levels.

The first estimates for the 2011/12 cotton season will be
released by the USDA in its May production report.

The market has already digested the USDA's estimate of U.S.
cotton sowings and players are keeping an eye on the very dry
conditions in the top growing area of Texas, which is expected
to plant about half of the U.S. cotton crop.