Cotton production in Australia, the fourth-largest exporter, may surge to the highest in almost a decade because of increased rainfall and prices, according to a producers group.

Output is forecast to rise to 2.7 million Australian bales and may gain to around 3 million bales with further rain, Cotton Australia Ltd. Chief Executive Officer Adam Kay said by phone from Sydney. Output was 1.7 million bales this year and last reached 3 million bales in 2001-2002, according to the group.

Cotton prices in New York gained 48 percent in the past 12 months as rising demand outpaced supply. Above-average rainfall in parts of eastern Australia has boosted dams, improved the planting and production outlook for crops and sent cattle prices to the highest level in four years.

“Seed companies report sales have been very strong and in a way our estimate might even be conservative,” Kay said. Australian farmers plant cotton from October and rain in the next eight weeks could help boost area, particularly for non- irrigated crops, he said.

December-delivery cotton advanced 0.3 percent to 85.12 cents a pound at 5:40 p.m. Melbourne time on ICE Futures U.S.

Australian cotton production may gain by 34 percent to 520,000 metric tons as more planting of non-irrigated crops helps increase output, Melbourne-based National Australia Bank Ltd. said in an e-mailed report earlier today. That equals 2.3 million Australian bales of 227 kilograms (500 pounds).

The Australian Bureau of Agricultural and Resource Economics forecast national output for 2010-2011 at 518,000 tons in its June quarterly report. That would be the largest crop since 2005-2006, according to data from the Canberra-based bureau.

Water storages in the Murray Darling Basin, where more than 90 percent of Australia’s cotton is grown, were 47 percent full as of yesterday, according to the basin management authority’s website, compared with 39 percent on Aug. 4. Irrigated cotton may account for about 70 percent of plantings, according to Cotton Australia.