Oct 31 (Reuters) -U.S. cotton futures shed more than 1% on Tuesday and was on track for their worst month since October last year, amid muted export demand as the harvest season progresses.

* The cotton contract for December CTc1 fell 1.26 cents, or 1.5%, to 81.64 cents per lb at 1:01 p.m. ET (17:01 GMT). It traded in a range of 81.59 and 83.1 cents a lb.

* Prices were set to fall nearly 6% on the month.

* "We're harvesting our crops right now... supplies available in the cash market are increasing daily and demand is not rising to soak up the increased supply," said Jack Scoville, vice president at Chicago-based Price Futures Group.

* The U.S. Department of Agriculture's weekly crop progress report released on Monday indicated that 49% of the cotton crop had been harvested in the week ending Oct. 29, compared with 41% in the prior week. US/COT

* "Overall export demand has been really lacking here and concerns about the Chinese economy are still weighing on the market," Scoville said, adding that prices could drop to as much as 79 cents if they fail to hold the recent low of 81.51 cents. EXP/COT

*The dollar .DXY headed for its third consecutive monthly gain, making cotton more expensive for overseas buyers. USD/

* India's cotton production in 2023/24 is likely to fall 7.5% from a year earlier to 29.5 million bales on lower planted area and as El Nino weather hit productivity, Cotton Association of India (CAI) said.

* Elsewhere, Chicago wheat futures extended losses on easing supply concerns in the southern hemisphere but prices were still heading for their first monthly rise since July. GRA/

Reporting by Deep Vakil in Bengaluru; Editing by Shailesh Kuber