US officials have greatly overstated cotton export prospects for Brazil, with low prices to prompt a bigger cut in output than had been thought, leaving the country unlikely to regain its title of the world's third-ranked shipper.

The US Department of Agriculture bureau in Brasilia pegged at 2.20m bales Brazil's cotton exports in 2014-15, which started last month – half those recorded two seasons before.

The figure is also well below the USDA's official estimate of a revival in shipments to 3.70m bales this season, based on a ideas of production showing only a modest decline, to 7.3m tonnes.

In fact, output will drop by 12% to 6.90m bales, as low prices prompt growers to cut sowings to 1.0m acres, the bureau said.

'High risk-reward crop'

"Earlier in the year, due to attractive global prices and high global demand, many farmers were initially attracted to cotton production, with the hope of higher profit margins," the bureau said in a report.

"However, since cotton is a high risk-reward crop, the current domestic price situation affects farmers who would typically plant cotton after the 2014-15 soybean harvest."

Brazilian cotton prices - which closed on Monday at R$1.6892 ($0.7212) per pound, down 1.5% in the first half of the month, according to the Cepea institute - have in fact fallen below minimum levels which supposedly guaranteed by the government, which has actually this month allocated R$300m ($134m) to support cotton producers.

"In this current price environment, farmers who do not own machinery for cotton production are expected to exit cotton production in 2014-15 and plant another crop to avoid the high capital costs, level of risk, and stringent management practices," the bureau said.

Brazil vs Australia

The lower export estimate would appear to dash Brazil's chances of regaining third spot in world cotton shipments, despite a dent to production hopes in rival Australia from dry weather.

Australian cotton output in 2014-15 will slump by 35% to a five-year low of 580,000 tonnes (2.66m bales), according to the official Abares commodity bureau last week – but high carry-in stocks will allow the country to export 821,000 tonnes.

This will be the third successive season when Australian exports have exceeded output.

"Australia is expected to remain the world's third-largest cotton exporter in 2014–15, behind the US and India," Abares said on Tuesday.