Cotton futures drop in light volume, supply concerns
* Potential for increased cotton supply weighs on market sentiment
* Corn plantings delayed by rain may mean increased cotton acres
* Open interest continues decline to mid-Jan lows
NEW YORK, April 19 (Reuters) - ICE cotton futures finished lower for the second day in modest volume as many players, preoccupied by events surrounding the Boston bombing, kept to the sidelines or weighed the many supply factors pressuring prices, traders said on Friday.
"I think the commodities and financial markets collectively were fixated on Boston, which has nothing to do with markets but that's what people are watching," said Keith Brown of cotton brokerage Keith Brown and Co.
By late Friday afternoon, Black Hawk helicopters and heavily armed police descended on a Boston suburb in a massive search for an ethnic Chechen suspected in bombing the Boston Marathon earlier in the week.
"I think no one wants to buy anything ahead of the weekend," said Brown, citing the heightened anxiety from the Boston news.
Most-active July cotton on ICE Futures U.S. closed down 0.12 cent at 85.36 cents a lb. It marked the contract's third weekly loss in a row.
Prices fell even more sharply on Thursday after China's state reserve announced it would sell some of its massive reserves beginning on Friday.
Brown said he was surprised there was not greater negative impact from the China news, pointing out that some of the country's sales would be from cotton imported in 2011.
"The market should have convulsed on that," he said.
Jobe Moss, president of Moss Capital Management in Texas, said the cotton market had generally lost its upside momentum, noting that July cotton futures were priced nearly in line with December. At one time, he said, the July contract ran more than 500 points over December futures.
Another potential increase to cotton supply could come from delays in corn crop plantings, cotton brokers said. Heavy rains in the corn growing regions may mean more acres devoted to cotton and fewer to corn across the American South.
Commodity Weather Group indicated a larger portion of the Midwest than previously expected will probably receive 0.5 inch to 2 inches (1.3 to 5.1 cm) of rain next week, which could threaten corn plantings.
As a result, the U.S. Department of Agriculture's estimate of cotton acres could swell from 10 million in their March plantings report to 11 or 12 million by late June, brokers said.
USDA's final plantings reports for the 2013/2014 crop year will be released on June 28.
At an industry conference, an executive said the pace of cotton contract defaults is starting to slow after reaching an all-time high last year as price volatility and a historical run-up in early 2011 sent the industry reeling. (Reporting by Carole Vaporean; editing by Andrew Hay)