Nov 20 (Reuters) -ICE cotton futures fell on Monday, on track for their biggest drop in eight sessions, as speculators doubled their net short position on the natural fiber, while a weaker dollar capped the downside.

* The second-month March contract CTc2 was down 0.34 cent, or 0.4%, at 81.17 cents per lb at 1:12 ET (1812 GMT).

* "It looks like cotton started turning down out of a little high that it put together over the last week and that's where most of the selling has been coming from," said Jack Scoville, vice president at Chicago-based Price Futures Group.

* Prices rose 2.5% last week, their best week in two-and-a-half months.

* In the week to Nov. 14, speculators increased net short position by 6,283 contracts to 11,550 contracts, data from the Commodity Futures Trading Commission showed on Friday. CFTC/

* "They're selling a market that I think is sold out and the market generally shifts from a supply market to demand market by Thanksgiving," said Rogers Varner, president of Varner Brokerage, in Cleveland.

* Around 67% of the U.S. cotton crop had been harvested as of the week ended Nov. 12, according to the U.S. Department of Agriculture's weekly crop progress report. US/COT

* The dollar was down by 0.4%, making cotton less expensive for overseas buyers, while Wall Street's main indexes also gained, putting a floor under the prices. USD/ .N

* "Rains in the Delta and Southeast this week will slow cotton harvesting once again," weather forecaster Maxar wrote in a weekly note.

* Extreme dryness is forcing farmers to give up on soybeans to plant cotton or another crop in Brazil's top farm state Mato Grosso, cotton lobby groups and growers said on Friday.

* In the grain market, Chicago soybeans and corn rose as dealers assessed forecasts of rain for parched Brazilian crops.GRA/

Reporting by Sherin Elizabeth Varghese in Bengaluru; Editing by Shilpi Majumdar