* Open interest lowest since Jan. 2012 -ICE data
* March drops over 2 pct to 10-mth low of 76.65 cts/lb
* "Full pipeline" of supplies weighs -trader
NEW YORK, Nov 22 (Reuters) - ICE cotton slid to a fifth-straight weekly loss on Friday, its longest rout since June 2012, as investors continued to exit the cotton market in droves as waves of supplies come online and as worries build about waning demand.
The most-active March cotton contract on ICE Futures U.S. dropped 1.12 cent, or 1.4 percent, to settle at 77.23 cents a lb.
Total open interest sank to 154,203 lots on Thursday, ICE data showed.
That was lowest level since January 2012, in the wake of the MF Global Holdings Ltd bankruptcy that crippled trust and tanked liquidity across commodities markets.
ICE Futures U.S. on Friday lowered the initial margins for speculators to $1,150 per contract from $1,600 previously, a move that boosts liquidity by lowering the financial barrier for entry.
Cotton was the second-worst performer of the nineteen assets in the Thomson Reuters/Core Commodity CRB index, a benchmark for global commodities markets.
The "inevitability" of China's selling from its mammoth state reserves and the potential for reduced import demand by the world's top buyer pressured prices to a ten-month low of 76.65 cents a lb.
Speculators have cut their bullish bets in cotton and switched to a small net short position in fiber in recent weeks, according to U.S. government data.
Several firms were due to take delivery of about 83,000 bales of cotton against the December contract as of Friday's first notice day, exchange data showed.
The December contract is due to expire on Dec. 6.
Friday's tumble followed spread-related gyrations that left December at a discount of 3.56 cents a lb on Thursday ahead of the first notice day, the biggest discount the spot month has held to the second-month in almost four years.
"December was going to be the saving grace where there was (supply) tightness, and we traded to new lows. Now we have a full pipeline coming," said a U.S. trader.
Harvests in key producers in the Northern Hemisphere have ramped up, pressuring prices.
U.S. weekly sales data showed that a steep drop in prices has stirred demand, but the mill buying has not been enough to outweigh the investor selling and buoy prices.
Further, traders said that they expected the United States to see stiff competition this season from other origins, especially No 2 producer India.
China's buying for its strategic reserves has slowed this season, and Beijing is expected to soon begin auctions.
Second-month prices have slumped 18 percent from an August peak near 94 cents, pressured by harvest, high prices that crimped demand, and larger exchange inventories.
The tumble has left the March contract below both its key short- and long-term moving averages.
"Technically, we haven't been this bearish in years," the trader said. (Reporting by Chris Prentice; Editing by Bob Burgdorfer)
