* ICE cotton sinks to key 65-cent level, pares losses

* Rains in Texas, top-producing U.S. state, add pressure

* Exchange inventories steady at January lows -ICE data

NEW YORK, Aug 25 (Reuters) - ICE cotton ended little-changed on Monday, paring the day's losses as support at key technical levels and buoyant equities markets offset pressure from weak grains markets.

Fiber fell in sympathy with tumbling grains markets, with corn and soybean futures down on expectations of record output. Cotton competes with corn and soybeans for acreage in the United States.

The benchmark December cotton contract on ICE Futures U.S. closed down 0.03 cent, or 0.05 percent, at 66.15 cents a lb after sinking near the key support level 65 cents.

Prior to the day's slight loss, the contract posted four straight sessions of gains.

"We sold off initially because of the break in Chicago (markets) but came back on trade buying. It could be mills buying or gins covering their positions," said Sharon Johnson, a cotton specialist with KCG Futures in Atlanta.

The December contract sank to support at its near-term moving averages before late-session buying pulled prices back to near unchanged.

The benchmark ICE cotton contract has slumped some 30 percent from March highs near 97 cents a lb as speculators have moved to a big bearish bet and expectations have risen that U.S. farmers will harvest a bumper crop in the world's top exporter.

Rains in Texas added weight, easing worries over the return of dry weather to the top-producing U.S. state that has been plagued by drought since 2010.

U.S. government data on Friday showed that speculators trimmed a huge bearish bet in cotton futures and options in the week ended Aug. 19.

Exchange inventories steadied at 83,309 bales on Friday, unchanged from the previous session, the most recent ICE data showed. That was the lowest level since late January. (Reporting by Chris Prentice; Editing by Marguerita Choy)