Oct 9 (Reuters) -ICE cotton futures held steady in choppy trading on Monday as persistent supply woes offset a stronger dollar, while market focus shifted to federal monthly supply-demand report due later this week.

* Cotton contract for December CTZ3 little changed at 87.04 cents per lb at 01:29 p.m. EDT (1729 GMT).

* The World Agricultural Supply and Demand Estimates (WASDE) report is due at 12:00 p.m. EDT on Thursday.

* "I think it's going to be a choppy week... We'll see a little bit of lower production," said Jack Scoville, vice president at Chicago-based Price Futures Group.

* Due to the military clashes in Israel, the oil market is higher and that's kind of supporting the cotton market, Scoville added.
* Oil prices surged more than 3% as the clashes between Israel and the Palestinian Islamist group Hamas ignited fears that a wider conflict could impact oil supply from the Middle East.

* Higher oil prices make polyester, a cotton substitute, more expensive. O/R
* In the grain market, Chicago corn and soybean futures gave up overnight gains as traders shifted focus to the harvest pace in the American Midwest. GRA/
* Limiting gains in cotton prices, the dollar index .DXY was up 0.3%, making cotton less attractive to buyers overseas.USD/

* Speculators cut net long position by 9,469 contracts to 38,218 in week to Oct. 3, data from the Commodity Futures Trading Commission (CFTC) showed on Friday.

Reporting by Sherin Elizabeth Varghese in Bengaluru; Editing by Shailesh Kuber