NEW YORK, March 16 (Reuters) - U.S. cotton futures finished
near a three-week low Wednesday, dropping for the 6th time in
seven sessions as investors exited positions after news Japan's
nuclear emergency was getting worse.

Europe's energy chief warned the situation at the
earthquake-damaged plant was 'out of control' and urged people
to leave the country.

The key May cotton contract on ICE Futures U.S.
dropped 5.82 cents to close at $1.8512 per lb, trading from
$1.8501 to $1.9794. It was the lowest close since Feb. 25.

Since hitting a record top at $2.27 last month, cotton has
lost nearly a fifth of its value, Thomson Reuters data showed.

Open interest in the market, an indicator of investment
exposure in cotton, stood at 174,801 lots as of March 15,
compared with 172,588 lots in the previous session, which was
the lowest since July 29, 2010, data from ICE Futures U.S.
showed.

Volume traded stood at 27,500 lots, about 15 percent below
the 30-day norm, Thomson Reuters preliminary data showed.

'It's pandemonium (selling) over Japan,' said Keith Brown,
the president of commodity firm Keith Brown and Co. in
Moultrie, Georgia.

He said a vacuum of news over what is happening in Japan's
nuclear reactors was filled in by the European declaration and
this prompted already skittish investors to dump cotton late.

'The markets hate uncertainty and that uncertainty always
breeds selling,' said Brown.

Analysts have said the damage of the killer quake and
tsunami to an economy as large as Japan's will eventually hit
cotton demand and change the market's underlying fundamentals.

The next bit of information which will provide direction
for cotton futures would be the potential plantings report by
the U.S. Agriculture Department due out on March 31.

That is the first government survey of likely plantings for
major row crops like cotton, corn, soybeans and wheat in 2011.

Despite the rally in cotton, the fiber has to compete for
acreage against similarly high-priced grains this year.