NEW YORK, June 3 (Reuters) - U.S. cotton futures settled lower Friday
on investor profit-taking after surging to a month high due to the worst
drought in a century in the big growing state of Texas, analysts said.

The benchmark December cotton futures on ICE Futures U.S. fell
0.53 cent to end at $1.387 per lb, moving from $1.3725 to $1.409. On the
week, the market is up 7.1 percent.

On Thursday, the contract finished at $1.3923 per lb, the highest
settlement for the third position cotton contract since May 3.

Spot July cotton dropped 2.61 cents to conclude at $1.6163 per lb.

'I don't think we're going to go down very far,' said Mike Stevens, an
independent cotton analyst in Louisiana, adding the focus of the trade will
remain firmly on the drought in Texas, the biggest cotton growing state in
the United States.

The National Drought Monitor said in a report on Thursday that more
than half of Texas is experiencing 'exceptional' drought.

Open interest in the cotton market was at 160,725 lots as of June 2,
its loftiest level since April 20, the exchange data showed, and a seeming
indication of renewed investor interest in the cotton market.

Total volume traded Friday reached almost 23,400 lots, more than 40
percent above the 30-day norm, Thomson Reuters preliminary data showed.

The market was also pressured by weak export sales in the U.S.
Agriculture Department's weekly export sales report which showed the 10th
consecutive week of canceled sales.

Certificated cotton stocks continued to shrink to stand at 43,207
(480-lb) bales as of June 3. Traders said that meant deliverable cotton
supplies against the spot July contract would be very tight when the
contract goes into delivery later this month.