Australia is set to reap a record cotton crop in 2011 despite crop losses caused by severe flooding in northeastern Australian state of Queensland, a top cotton trading firm said on Thursday.

About 7,500 hectares of crop had been destroyed in  Queensland state but that represented little more than 1  per cent of 665,000 hectares planted across Australia, Industry  body Cotton Australia said.

"I still think we are still looking for a record crop for  Australia but also think the losses will be more than the  7,500 hectares that is being talked about," said Gordon  Cherry, Chief Executive of U.S. owned trading firm Dunavant  Enterprises in Australia.

Cherry said overall losses would not be significant as  farmers had planted around three times the area in cotton than  the previous year as spring rain had encouraged sowing dryland  crops and also made more water available for irrigated crops.

High prices also attracted more planting with the fibre  rallying to levels not seen since the U.S. Civil War in the  19th century, driven by renewed demand from China.

On Wednesday U.S. cotton futures eased in thin trade with  the March contract finishing at $1.4043 per lb after  hitting a year high of $1.5912 on Dec. 21.

Cherry said before floods hit cotton growing areas in  Australia, there had been forecasts of a crop exceeding four  million bales.  (0.9 million ronnes).

"I still think we will exceed the previous largest crop. I  don't have any problem with that even though we have lost a  reasonable amount of cotton over the past week," he said.

Australia's largest cotton crop to date was 3.52 million  bales in 2001.

"I think we would have been over four million with this  crop before this last flood event but I think we will be under  four now," said Cherry.

He said it was too early to assess actual crop losses as  it depended on how quickly the water drained from crop land  and allowed plants to recover.

"We really don't know at this stage but there is the  possibility of fairly significant losses given the volume of  water that's hanging around," said Cherry.

Cotton Australia spokesman David Bone said the area around  Theodore, about 565 kms northwest of the state capital of  Brisbane, was of most concern as most of the 10,000 hectares  planted had been washed away.

Overall, Bone said it was too early assess the  implications on the national crop, which would not be  harvested until April.

"I'm not saying anything about bells and whistles at this  time but in terms that we have over 6,650 hectares planted,  this is a relatively small portion of the national crop," he  said, referring to the losses in Queensland. – Reuters