About 61 percent of the Texas crop was in poor or very poor condition on Aug. 7, compared with 7 percent a year earlier, U.S. Department of Agriculture data show. Texas accounted for 44 percent of output last year in the U.S. On July 12, the USDA cut its month-old forecast of U.S. output by 5.9 percent to 16 million bales. A bale weighs 480 pounds, or 218 kilograms.

About half of Johnie Reed's 6,000-acre farm in Kress, Texas, 60 miles north of Lubbock, was scorched by the dry spell. Reed said he insured 60 percent of his non-irrigated crop with policies that ensure a government-mandated claim rate of $1.23 a pound. That's 26 percent more than prices on ICE Futures U.S. in New York, which have tumbled 56 percent since touching a record $2.197 on March 7 because of slowing demand in China, the world's top buyer.

"It's not a good year, and it doesn't look pretty, but financially we'll be breaking even with the insurance" on the 2,800 acres of non-irrigated crops, Reed said by telephone. The 3,200 acres of irrigated cotton probably will be profitable, yielding about one bale an acre, approximately half the normal output, he said.

The government on July 12 forecast that 30 percent of the U.S. crop will be lost, topping the previous record of 26.9 percent in 1933, when dust storms wiped out fields in Texas and Oklahoma amid the Great Depression.

Eoin Treacy's view Cotton prices more than halved from their March peak and have returned to the psychological 100¢ level where they appear to be in the process of building support.

Prices pulled back sharply over the last few days in sympathy with other risk assets. However, they found at least short-term support today and a sustained move below today's lows, near 94¢ would be required to stifle potential for at least a bounce.