NEW YORK, Nov 20 (Reuters) – ICE cotton futures fell in late-day selling after trading in positive territory for most of the day following a U.S.government report that showed a drop in the percentage of exchange-grade cotton, stoking supply concerns.

“You have a big hole in the world that the U.S.needs to fill, and you have fewer tenderable grades this year,” said Peter Egli, director of risk management with British merchant Plexus Cotton.

The report, released Friday morning by the U.S. Department of Agriculture, showed 57.6 percent of U.S.upland cotton was exchange-grade, down from 58 percent last week.

A March cotton on ICE Futures U.S. CTc2 CTZ5 settled down 0.29 cent, or 0.46 percent, at 62.83 cents per lb. It traded within a range of 62.75 and 63.42 cents a lb.

The contract closed the week up 1.3 percent, its second-straight weekly gain and its sharpest weekly gain since the week ended Oct.16.

Total futures market volume fell by 1,109 to 20,290 lots.

Data showed total open interest fell 451 to 174,966 contracts in the previous session.

Certificated cotton stocks CERT-COT-STX deliverable as of Nov.19 totaled 59,015 480-lb bales, up from 55,859 in the previous session.

The dollar index .DXY was up 0.58 percent. The Thomson Reuters CoreCommodity CRB Index .TRJCRB , which tracks 19 commodities, was down 0.21 percent.

The Relative Strength Index in the most-active contract CTc1 fell to 53.807.

(Reporting By Luc Cohen; Editing by Diane Craft)