* Plantings intentions expected higher than previous estimate
* Mill buying came in to support cotton off recent lows
* Head-and-shoulders pattern forming - broker
NEW YORK, March 27 (Reuters) - Cotton prices inched up on Wednesday, as merchants and investors hung to the sidelines ahead of a U.S. government plantings report that may help determine if fiber’s recent rally still has momentum.
The most-active May cotton contract on ICE Futures U.S. gained 0.49 cent, or 0.6 percent, to settle at 88.53 cents per pound after mixed trading throughout the day.
Cotton prices saw an “inside day” of trading within yesterday’s ranges amid limited volume ahead of the U.S. Department of Agriculture’s plantings report expected on Thursday, after seeing stronger gains on Monday on expectations of continued strong demand from China.
“A lot of people are on the sidelines ahead of this planting intention report,” said Ron Lawson, a partner at commodity investment firm Logic Advisors.
Cotton prices have climbed about 17 percent since the start of the year, rising to a one-year high earlier this month, largely driven as speculators boosted their bullish bets in fiber to the highest levels since 2008.
The steep rally has come despite forecasts of a record global surplus expected by the end of the crop year through July, as more than half of that is expected to become part of China’s stocks and are seen as unavailable to the global market.
Beijing began building its reserves in 2011, paying above global prices to support farmers.
The stockpiling by the world’s largest consumer has created a situation of two perceived supplies, one of global stocks and a second of global stocks excluding China‘s. The second has been seen as tightening.
Prior to the year-to-date gains, cotton saw two years of falling prices, as lower-priced, synthetic alternatives eroded demand for natural fiber.
Against that backdrop, U.S. growers have been forecast to plant 9.02 million acres this year for next year’s crop, the smallest in 20 years, based on the industry’s earliest plantings intention report from the National Cotton Council.
Many traders and growers put that number as low, particularly given cotton’s recent rally.
Thursday’s plantings report from the U.S. Department of Agriculture will offer a more current number of growers’ planting intentions and of what size crop the U.S. may see next year.
The recent rally in cotton prices is expected to have driven more U.S. acreage to cotton, Macquarie analysts said in a note on tightening cotton supplies. The United States is the world’s largest exporter of cotton, and only cotton of U.S. origin is deliverable against the ICE exchange, the global benchmark contract.
That, plus expectations of more “aggressive” destocking of Chinese reserves, is making the outlook for this year’s crop less bullish, they said.
China plans to increase sales from state reserves of fiber in April. The country will continue its stockpiling program into next year, however.
Physical buying has pushed cotton up from recent lows after prices fell nearly 6 percent last week, as mills saw the dips as opportunity to buy, traders said.
Total volume reached just over 17,000 contracts on Wednesday, about 30 percent below the 30-day average, preliminary Thomson Reuters data showed.
The May contract appears to be forming a head-and-shoulders pattern, a bearish chart formation, traders said.
The head of the pattern at the March 15 peak of 93.93 cents, left shoulder at the March 8 high of 88.78 cents and right shoulder at Monday’s high of 88.88 cents a lb, Lawson said.
The market may trend toward the neckline value of about 84.41 cents a lb before investors reassess, he said. (Reporting by Chris Prentice; Editing by Chizu Nomiyama)