NEW YORK, July 28 (Reuters) - Cotton futures settled lower Thursday on
profit-taking and investor sales to end a brief surge over the last two
sessions, with players keeping an eye on the unresolved U.S. debt crisis,
analysts said.

The key December cotton futures on ICE Futures U.S. fell 1.04
cents to finish at $1.0257 per lb, trading from $1.0065 to $1.0365.

Since hitting a session low of 93.20 cents on Tuesday, cotton shot up
by over 12 percent to hit a Wednesday peak at $1.0444, its highest since
gapping lower on July 14 and 15.

Total market volume Thursday hit almost 8,400 lots at 2:45 p.m. EDT
(1745 GMT), about 50 percent below the 30-day norm, Thomson Reuters
preliminary data showed.

Traders said investors who made money on the market for the month opted
to cash in their gains ahead of the last trading day of July.

'I think some of the funds just went to the gate and just cashed in,'
said Jobe Moss, an analyst for broker and merchant MCM Inc. in Lubboc,
Texas.

Many players awaited news on whether the U.S. will be able to stave off
a default on its obligations on Aug. 2 if Congress approves a law to raise
the country's debt ceiling.

Traders said they were monitoring tropical storm Don as it moved
northwestward toward the Texas coast.

Cotton farms in the southern coastal bend of Texas are about to begin
harvesting their crop in August. The biggest cotton growing area in Texas,
the main cotton producing state of the country, is located way to the north
around Lubbock.

Any cotton hit in southern Texas would have plant bolls that are open
and quality may take a hit if they get drenched in torrential rain. The
crop is the most heavily irrigated in a state reeling from one of the worst
droughts in Texas history.

Volume traded Wednesday came to 16,710 lots, against the Tuesday total
of 20,136 lots, which is the highest since July 18, ICE Futures U.S. data
showed.

Open interest stood at 142,285 lots as of July 27, the highest level
since June 21, according to exchange data.