Oct. 12 (Bloomberg) -- Cotton futures fell the most in almost three weeks after the U.S. government raised its crop forecast.

Farmers will produce 16.608 million bales of cotton in the harvest that began in August, 0.3 percent more than projected in September, the U.S. Department of Agriculture said today in a report. Output gains in California, Mississippi and Georgia are making up for losses in Texas, where crops were damaged by the worst drought in more than 100 years. The USDA also cut its forecast for exports by the U.S., the worldΆs largest shipper.

“ThereΆs more supply and less demand,” Keith Brown, the president of Keith Brown & Co., a broker in Moultrie, Georgia, said in a telephone interview. “Global inflation is affecting foodstuffs, and people will go to that before they go to cotton.”

Cotton for December delivery slumped 2.9 percent to settle at $1.0051 a pound at 2:36 p.m. on ICE Futures U.S. in New York, the biggest decline since Sept. 22. The fiber has tumbled 54 percent from a record $2.197 on March 7.

U.S. exports will total 11.5 million bales, down 4.2 percent from last monthΆs forecast of 12 million bales and 20 percent lower than shipments in the previous year, the USDA said. Each bale weighs 480 pounds (218 kilograms).

Prices also may be lower on concern that demand may will in China, the largest user and importer, Brown said.

The U.S. Senate passed a bill aimed at punishing China for keeping the yuan undervalued. Chinese officials said the measure risks damaging trade relations and undermining the global recovery.

The yuanΆs slow gain against the dollar is hindering growth and “blocking what might be a normal recovery process in the global economy,” Federal Reserve Chairman Ben S. Bernanke said last week. House Speaker John Boehner today said he has “grave concerns” with the bill because it may start a trade war.