* Benchmark prices fall ford 3rd straight session

* Speculation mounts of impending China policy announcement

* December contract trades actively in tight 1-cent range

By Luc Cohen

NEW YORK, Sept 16 (Reuters) - Cotton futures fell for the third straight session in active trading on Tuesday, amid mounting speculation that China, the world's top buyer, would soon announce details of this year's pilot subsidy program.

The most-active December cotton contract on ICE Futures U.S. dropped 0.29 cent, or 0.4 percent, to settle at 65.55 cents a lb.

Cotton futures saw their biggest one-day rout in four months on Monday on concern about oversupply and waning demand from China.

Speculation has mounted that China might announce within days the details of the crop subsidy program it is launching this year, as farmers in the world's largest producer and consumer ramp up harvesting.

Beijing in January announced plans to scrap a stockpiling program it has operated for three years, with plans to switch to direct farmer subsidies. In April, China's government set the target price for the difference between market prices and a target of 19,800 yuan per tonne.

Futures in New York and China have since slumped, amid rising expectations that the government policy shift would crimp China's import demand and that farmers in the United States, the world's top exporter, would harvest a bumper crop.

The expected announcement has cooled the momentum of last week's price rally, adding to the bearish sentiment of a cotton market already reeling from a 20 percent price drop from May highs.

Import demand in China soared due to high local prices, and the country's inventories ballooned to about 60 percent of world stocks.

"China is going to try to force feed their mills with domestic cotton ... at the detriment of imports," said Andy Ryan, a senior risk management consultant with INTL FCStone in Nashville, Tennessee.

Even so, the December contract traded in a tight range throughout the session of less than one cent, buoyed by weather worries in the United States. (Reporting By Luc Cohen)