Record-high carryover stocks of cotton and future weather patterns are just a few factors affecting cotton prices heading into 2013, according to a Texas A&M AgriLife Extension Service economist.

"We will see a cutback in Texas cotton acreage as farmers take advantage of strong corn, wheat and sorghum prices," said Dr. John Robinson, AgriLife Extension cotton economist in College Station.

Robinson said cotton prices are still adjusting to historic prices in 2010-2011 when $2-plus per pound cotton prices led to higher world production and reduced consumption. That set of circumstances led to record-high carryover stocks of cotton worldwide and weaker prices.

Robinson said China accounts for about half of the world's carryover stocks, and most of those are held off the shelf in government reserve, he said.

"The combination of these bearish fundamentals and policy uncertainty sets the stage for what we may see in 2013," he said. "We can certainly expect significant reductions in cotton acreage, starting with Australia, Brazil and Argentina last month."

With the strength in 2013 corn, soybean and wheat future prices, Robinson expects major shifts to grains and oilseeds in the Mid-south and Southeast. He projects if U.S. cotton planted acreage dips to 8.9 million acres, "We could still see 14 million bales of production."

"I would project a likely range of December 2013 prices at 65 cents to 85 cents per pound," he said. "The upshot is that the insurance base price established in early 2013 will likely be in the 70 cent range—far, far lower than in the previous two years."

The continuation of the sovereign debt issues in Europe or fiscal cliff fears in the U.S. "will only reinforce negative to slow economic growth in 2013," he said.

"That suggests little room for a demand-driven rally in cotton prices," Robinson said. "In addition, if some major cotton-producing country has a production disaster, the market shock could easily be squelched by China simply releasing some of their government reserve stocks. In short, weak demand and policy distortion will likely keep the upside capped and the downside open."