* Cotton pierces 200-day MA; next support seen at 81.6 cents/lb

* Export sales drop as China cancels orders

Aug 29 (Reuters) - U.S. cotton futures fell to their lowest in almost three months on Thursday, piercing a key technical support as speculators continued to exit long positions betting on lower prices due to global oversupply and concerns about China's policy.

Weekly data revealed a drop in export sales last week and cancellations of orders by China, the world's top cotton consumer, Japan and Bangladesh as prices were plunging, reinforcing concerns about weakening demand for U.S. cotton.

Benchmark December cotton contracts representing the 2013/14 harvest on ICE Futures U.S. settled at 83.24 cents a lb, down 0.51 cent or about 0.6 percent.

Selling accelerated after piercing its 200-day moving average at 83.47 cents and sending the market to a low of 83.22 cents, its weakest since early June.

Speculative selling vastly overwhelmed mill pricing and flurries of short covering.

"You're still getting the longs out. If the hedge funds are going to turn the ship, it'll get uglier first," Lou Barbera, cotton dealer at ICAP Cotton in New York.

Some 68,800 running bales of cotton were sold for export in the week to Aug. 22, down 15 percent from the previous week but in-line with the average of the previous four weeks.

That is well below the weekly average needed to meet the U.S. government's estimate for exports in the current season to end-July next year.

The U.S. Department of Agriculture has pegged exports at 10.6 million 480-lb bales, down from 13.1 million in the season that just ended.

Measured in running bales, that is 10.2 million bales, which equates to almost 200,000 bales per week.

"We're doing less than half that," said Barbera.

The summer months are typically slow for export and China picks up the pace of its buying early in the calendar year.

But many merchants worry that Beijing will soon curb its stockpiling program that has propped up demand and supported prices for the past three years.

"It's all China, China, China at the moment. You can talk about the weather and its affect on Texas, but it's really all about China," said one broker.

Cotton has broken correlation with broader commodity markets, which are being roiled by the Syrian conflict.

Profit taking knocked grains markets lower after sharp rallies earlier this week due to concerns about the impact of hot, dry weather on crops.

Technically, contracts are close to being oversold, raising the chances of brief short covering rallies as the market repairs from the 11 percent fall from 93.72 cents on Aug. 16.

The market's next support is at 81.6 cents, Barbera said, and with this year's global inventory expected to hit fresh records, the long-term tone is bearish.

"If we keep grinding lower, it will be hard to stop the slide," he said. (Reporting by Josephine Mason; Editing by Theodore d'Afflisio)