U.S. cotton prices fell on Tuesday after players took profit on the market's run-up the previous day on fears of storm damage to crops. The benchmark December cotton contract on ICE Futures U.S. slid 0.52 cents, or 0.7 percent, to settle at 75.62 cents per lb.

The contract jumped 1.2 percent on Monday on worries about the potential harm Tropical Storm Isaac could cause to cotton crops as it headed toward Alabama and Mississippi - two important states in the U.S. cotton belt.

Isaac strengthened into a hurricane just off the U.S. Gulf Coast on Tuesday, churning toward landfall in the New Orleans area seven years after the city was devastated by Hurricane Katrina.

"Today's cotton market is a classic case of day traders at work, taking profit after pushing prices up a day earlier," said Mike Stevens, an independent cotton analyst based in Mandeville, Louisiana.

Despite the hurricane, there are some concerns about a shortage to cotton supplies. Texas, the country's main cotton growing region, will be unscathed by Isaac. Total U.S. cotton output is expected to grow 14 percent to over 17 million bales in the marketing year to July 2012.

While the supply situation for cotton is comfortable, investors have struggled with conflicting signals of late in the market.

Traders say the global surplus in the textile market is expected to hit record levels. But some funds see opportunities if weak monsoon rains curb output in key cotton grower India, forcing the government to restrict exports.

Hedge funds and other speculative investors doubled the size of their net long to 12,333 lots in the week to Aug. 21, the latest Commodity Futures Trade Commission data showed on Friday.

That is the most bullish position for hedge funds in cotton since February, and a dramatic turnaround from a net short just three weeks ago that contrasts with the weak supply-and-demand fundamentals.