May 2 (Reuters) ICE cotton futures rose 3% on Monday, boosted by supply concerns due to worsening drought across key growing regions and mill buying.

* Cotton contracts for July rose 4.03 cents, or 2.77%, at 149.66 cents per lb, at 1605 GMT. Prices traded within a range of 145 and 150 cents a lb.

* Rain fell short in growing areas while "the position is too large by the mills and they have no choice but to buy their way out," said Louis Barbera, partner and analyst at VLM Commodities Ltd.

* In the wider grain market, Chicago wheat futures dropped to a three-week low on Monday, falling for a fourth session, as rains in key growing parts of the U.S. Plains provided much-needed relief to the crop.

* The cotton market moved higher despite a stronger dollar. The U.S. dollar rose 0.7%, making the commodity more expensive for overseas buyers.

* "The worsening drought, mill on-call fixations, and strong rumors regarding temporary export ban of raw cotton in India ultimately pushed the market higher," Louis Rose of Tennessee-based Rose Commodity Group wrote in a note.

* Speculators cut net long position in cotton by 2,528 contracts to 57,420 in the week to April 26, data from the Commodity Futures Trading Commission showed on Friday.

* China, one of the biggest consumers of U.S. cotton, reported 7,822 new COVID-19 cases on May 1, the National Health Commission said on Monday.

* Total futures market volume fell by 20,575 to 13,594 lots. Data showed total open interest gained 686 to 205,586 contracts in the previous session.

(Reporting by Seher Dareen in Bengaluru; Editing by Shailesh Kuber)