Flooding in Australia, the fourth- largest cotton exporter, washed away some crops and may reduce yields in Queensland state, an industry group said.

About 7,500 hectares (18,533 acres) at Theodore have been destroyed, David Bone, communications manager at Sydney-based Cotton Australia, said by phone. The effect of rain on crop losses and yields in other areas, where floods may more quickly subside, will depend on weather in coming weeks, he said.

Cotton futures surged to an all-time high last week on speculation that global demand led by China will outpace supply. Cotton Australia said Dec. 8 that national production this season may reach a record 4.2 million bales, with 665,000 hectares planted, after wet weather ended drought in the country’s east and boosted irrigation dams.

“Around Theodore, crop has been washed away,” Bone said. “There would be losses in other areas but you need the water to go off the land and for the crop to attempt to recover before you can really say what the situation is,” he said.

It’s too soon to revise output forecasts, with harvesting to mostly start in April, he said.

Cotton for March delivery declined 1.4 percent to $1.4231 a pound on ICE Futures U.S. at 2:54 p.m. Melbourne time. The price reached a record $1.5912 on Dec. 21.

Production in Australia may gain to 894,000 metric tons in 2010-2011, compared with 387,000 tons last season, the Australian Bureau of Agricultural and Resource Economics and Sciences said in a report Dec. 7. The forecast equals 3.9 million bales weighing 227 kilograms (500 pounds) each, according to Bloomberg calculations.

Australia had its wettest September-to-November spring on record, according to the Bureau of Meteorology. The rain has continued this month, disrupting grain harvesting and coal production and forcing hundreds of people to be evacuated.