NEW YORK, April 27 (Reuters) - U.S. cotton futures finished
sharply lower, with the benchmark July contract ending at the
downside limit, and despite the Federal Reserve's essentially
unchanged policy, the market's supply glut pressured prices
into Wednesday's close.

Many players sold cotton along with other commodities in a
measure to lower risk ahead of the U.S. central bank's
policy-setting meeting.

July cotton futures fell by the downside limit in early
morning business. Once the Fed issued its communique that
pledged to maintain an exceptionally low interest rate policy
for an extended period.

Some reassured buyers bought cotton at the lows following
release of the Fed's news, but sellers were more persistent.

'July has a heartbeat, but just barely,' said Ron Lawson,
Managing Director of logicadvisors.com.

Most-active July cotton on ICE Futures U.S., tumbled
7.0 cents to settle at their downside limit of $1.5339 per lb.,
a 4.36 percent decline, despite fleeting attempts to bounce off
the low after the Fed released its policy statement.

With May cotton undergoing deliveries, it slid 6.95
cents, or 3.82 percent, to finish at $1.74 per lb.

There were no delivery notices again on Wednesday, with a
total of 13 being issued to date.

New-crop December cotton closed 4.84 cents lower at
at $1.2460 cents a lb., a 3.74 percent drop.

The Federal Reserve signaled it is in no rush to scale back
its extensive support for the U.S. economy and said a run-up in
commodity prices that has dented growth should be fleeting.

STORY: STATEMENT

Some participants read the Fed's decision to mean the U.S.
economy lacked enough vigor to consider anything except an
extremely accommodative policy, which suggests that demand for
cotton is unlike to pick up by much any time soon.

The message came as a slew of supply from Brazil, Argentina
and Australia hits the market at aggressive prices.

In the U.S., Texas is largest producing state and has been
troubled by drought, possibly affecting crop due in December.

So far, forecasters see no rain in the foreseeable future
for Texas. If that changes, and rains do come, even more cotton
would eventually be hitting the U.S. market.

'Every Memorial Day for the last 100 years they've had rain
in Texas, but we'll see,' said Lawson.

Further signs that the market is facing too much supply in
the short term should come with the U.S. Department of
Agriculture's weekly export sales data on Thursday.

Analysts, on average, look for weekly sales of about
135,000 bales, with a decline expected in current crop sales as
the market faces a fifth straight week of order cancellations.

An offsetting factor, could come with floods from the
Mississippi River in about two weeks.

'On May 10, the Mississippi River is predicted to top in
Memphis at a level that is higher than during the 1937 floods
from that covered a third of Arkansas,' Lawson added.

The ICE issued a notice on Wednesday that 500 bales of
cotton at an exchange licensed cotton warehouse in Memphis
suffered water damage as a result of storms overnight.

While not significant amid total U.S. inventories, flooding
remains an issue to keep an eye on, brokers said.