ICE cotton futures fell over 1% on Thursday, sinking to a near two-month low, dragged down by strong dollar and a federal weekly export sales report that highlighted lower China demand for the natural fiber.

* Cotton contracts for March (CTc1) fell 0.76 cent, or 1.12%, to 67.01 cents per lb at 15:55 GMT, hitting their lowest level since Nov. 19.

* "It's just the strong dollar that has been hurting cotton, and China is not participating too much on the buy side anymore," said Peter Egli, cotton market consultant.

* The U.S. dollar index rose 0.2%, making cotton more expensive for overseas buyers.

* Chicago soybean futures fell sharply as the market braced for record production from top producer Brazil, while corn futures eased on tighter U.S. forecasts and dry weather in Argentina. Wheat dipped amid lacklustre demand.

* Meanwhile, the United States Department of Agriculture's (USDA) weekly report showed the export sales of upland cotton was at 224,800 RB, a marketing-year high, up 17% from the previous week, with China's export at 25,000 RB.

* The report further showed net sales of upland cotton totaling 316,200 running bales (RB) for 2024/2025, up 71% from the prior four-week average.

* Oil prices fell slightly, a day after settling at multi-month highs on U.S. President Joe Biden's latest sanctions targeting Russia and a larger-than-expected fall in U.S. crude stocks.

* Lower crude oil prices make cotton-substitute polyester less expensive.