By Chris Prentice

NEW YORK, May 12 (Reuters) - China's cotton reserve auctions
are off to a rapid start, outpacing last year's sales in the
first week alone, a sign of a shortage of high-grade supplies in
the world's top textile market, the U.S. government said a
report published on Thursday.

Beijing sold 120,350 tonnes (over 550,000 480-lb bales) in
its first week of sales that began May 3, 2016. The bales sold,
mostly imported, represented nearly the entirety put up for sale
and almost double the total volume sold in 2015, the U.S.
Department of Agriculture (USDA) attache in Beijing said in a
report dated May 9.

"This indicates a serious shortage of high-grade cotton for
China's textile sector," USDA said.

In the past, the reserve sales have met tepid demand,
raising questions over the quality of the fiber that's piling up
in China's warehouses following a years-long stockpiling program
that Beijing scrapped in 2014.

The country's inventories were estimated to have swollen to
some 11 million tonnes during the program.

USDA said the aggressive buying pace is likely to continue
as China's spinners remain short of cotton, a situation that
will continue "further temper" imports. The daily rate of about
30,000 tonnes auctioned is likely to continue to be upped and it
appears this year's offer price was more acceptable to buyers,
USDA said.

That may take the wind out of a recent rally in benchmark
cotton futures price in New York, which are recovering
from 2009 lows seen in March as demand worries and waves of
investor selling weighed. Beijing's overhaul in 2014 sent prices
tumbling from over 90 cents per lb.

In its first official outlook for the 2016/17 crop year that
begins Aug. 1, USDA on Tuesday forecast China's imports at 4.5
million 480-lb bales (about 980,000 tonnes), up slightly from
this year's 13-year low but only one-fifth of the record buying
pace seen four years ago.

(Reporting by Chris Prentice; Editing by James Dalgleish)