Attractive cotton prices, cheap water and strong overseas demand has seen Australian cotton growers double their plantings this season.

It comes as prices have steadily climbed throughout the year, the second consecutive season where global consumption would exceed production.

Prices have also been supported by reports of global cotton stocks decreasing, as China — which holds an estimated half of the worlds cotton stocks in reserve — works through its stockpiles.

In the year to date, Chinese cotton imports were down 42 per cent compared with the previous year, leaving Pakistan, Bangladesh, Indonesia and Vietnam to pick up the excess demand.

Chinese officials recently announced a cutback in imports, in an effort to further reduce stockpiles, but Commonwealth Bank of Australia (CBA) agri-commodity analyst Madeleine Donlan is tipping that might not last long.

"Between March and August next year, China will be looking to start reserve auctions again, but they've probably already sold the highest quality cotton first," Ms Donlan said.

"Because these stocks are ageing, the quality is going to become an issue and it will require blending.

"So if higher quality stock isn't available domestically, it will have to come from overseas."

Prices have not moved sharply upward in some time, leading CBA analysts to warn that investors in the market may look to sell up their near-record long position (holding contracts in anticipation of a price rise) in cotton.

"Even over the last few days, we've seen some reasonably sharp falls in prices from investor profit-taking before the holidays," Ms Donlan said.

"If these sharp falls are repeated enough, it can become an explosive problem if it turns into downward momentum.

"Given the size of investors' position in the market, if they do rush to the exits, that'll push down prices, but that could be just a short-term issue."

Growers not deterred by difficult conditions

NSW cotton buyer, RivCom's Ross Harvie, agreed investors had been behind recent volatility in the market.

"We've got big short positions held by the trade, and equally big long positions held by speculative investors, so right now it depends on who spooks first," he said.

Mr Harvie said growers in southern NSW were not deterred from difficult planting conditions.

"There's every reason to grow cotton — prices are very good, water is available and other commodity prices are low, so [there's] a strong incentive to plant," he said.

ABARES recently tipped cotton, along with sugar to be among the most valuable crops this season.

In Queensland, growers in the Emerald region deployed new research and development work suggesting early sowing might help growers avoid harvesting in monsoon January conditions.

"The significance of this season is that new transgenic varieties of cotton have allowed growers to sow early on a commercial scale," scientist Paul Grundy said.

"Looking around, quite a few of the crops have been sown early, and those crops look very good.

"Very early crops are opening their bulbs now, so we're hoping we can have them picked by the end of January but those planted at the more traditional September/October timeframe, they're only just starting to flower now."

Agronomist Jaimie Iker said planting early gave farmers the chance to fit in more rotations.

"It gives the cotton industry more diversity, you've got an opportunity to spread planting planting, risk and take advantage of spring an summer rainfall," he said.