Cotton planting has begun in Queensland and national estimates of the upcoming crop are down by 20 per cent
But there are reports of a 50 per cent reduction on last year in some regions.
Lower prices mean growers are considering grain crops this season for a better return on investment.
Cotton Australia CEO Adam Kay says while Australia's production ramped up considerably last season, consumption is yet to match it.
He says with a growing world population, demand for the fibre will grow, but poor prices seem to be a short-term consequence of the high world stocks.
"Generally across the Australian industry, the reduction is really in the dry land or rain-grown cotton," he said.
"The bulk of the irrigated cotton growers, who have been in the game a long time, they're sticking with cotton because they've probably even got some of the crop marketed and they know that there's going to be pricing opportunities over the next six to nine months."
Mr Kay says the national crop will be down by around 25 per cent, but consultants in central and southern Queensland predict regional yields will be over 50 per cent lower.
The 2011/12 crop was the largest Australia has ever seen, so large it's still being ginned and has an estimated yield is 5.4 million bales
Emerald agronomist Graham Spackman says growers are looking to spread their risk.
"Cotton is quite an expensive crop to grow and when the prices are quite good the gross margin can be strong.
"The last two or three seasons people have actually lost money. Some people are thinking of managing their risk."
Not surprisingly, it's the same story in southern Queensland where planting is still a few weeks away.
Dalby Cotton Growers Services agronomist Rob Evans says world stocks are still high.
"Even though the irrigators have considerable amounts of water in their storage, some of that may go to cotton or corn or sorghum," he said.
"The world stocks are pretty good and that's probably going to keep a lid on prices for the near future."
Cotton picking has wrapped up on the northernmost cotton crop in Queensland, with the last of the modules trucked out of the Richmond property, Silver Hills, this week.
Corbett Tritton's crop was visited as part of the Northern Outback Irrigators Forum earlier this year, to showcase how cotton can be grown successfully in the region.
He says the quality of the cotton has been exceptional, despite a long winter of below average temperatures.
"The plant loves growing here. That's the good news story, and the quality is excellent, the colour is excellent, the length is excellent, the strength is pretty good, but micronaire strength was affected by the frost a little bit."
