NEW YORK, Nov 1 (Reuters) - Cotton futures closed lower
Tuesday on liquidation by investors spooked by a reemerging
euro zone debt crisis and news from U.S. brokerage MF Global.

The key December cotton contract on ICE Futures U.S.
dropped 2.75 cents or almost 2.7 percent to finish at 99.54
cents per lb, moving from 98.77 cents to $1.0275.

Total volume traded Tuesday rose over 31,700 lots, on track
for the highest since June 10 and more than double the 30-day
norm, preliminary Thomson Reuters data and ICE Futures U.S.
data showed.

On Friday, the contract ended at $1.0437 in the highest
settlement for spot cotton in six weeks mainly due to optimism
the European debt crisis had been resolved.

Greece's surprise call for a referendum on the latest euro
zone bailout deal rekindled fears the country could face an
imminent default and roiled financial markets.

Financial markets were also hit by news that bankrupt
brokerage MF Global Holding Ltd failed to protect customer
accounts by keeping them separate from its own funds, sending
shockwaves through commodities.

'You're seeing a lot of pressure from MF Global
liquidation. You're getting selling from the macro economic
situation in Europe,' said Mike Stevens, an independent cotton
analyst from Mandeville, Louisiana.

'Until further notice, everything's going to be very
defensive,' he said of commodity markets.

Technically, dealers said the December contract may soon
take aim at the recent low of 96 cents hit last week and
possibly go toward 93 or even 90 cents further afield.

Open interest in cotton, usually taken as an indicator of
investor exposure in cotton, stood at 163,505 lots as of Oct
31, its highest level since April 20, exchange data showed.

Total volume traded Monday in the cotton market reached
25,331 lots, down from the previous tally of 26,389 lots, ICE
futures U.S. data reported.