A solid crop is on the cards again this season with excellent growing conditions coming into 2012-13.

According to the National Australia Bank (NAB) July Rural Commodities Wrap the cotton crop is expected to exceed four million bales in 2012-13.

While down on the record five million bales last season, this still represented the second-largest crop in the past 20 years.

NAB Agribusiness general manager Khan Horne said rainfall throughout the past two years had replenished dams across cotton growing regions, setting the sector up for high yields and above-average crops.

"We have seen the resurgence of cotton since the devastating drought in the 2000s, especially 2007-08 which resulted in the smallest crop in 30 years," Mr Horne said.

"It's exciting to see such an important industry far exceeding previous production levels.

"Australian cotton growers have seized every opportunity presented by the high prices last year and the excellent growing conditions."

Global cotton production is forecast to hit a record 123 million bales this year, which will also put stocks at record levels. As a result prices have come down from the highs seen in 2011.

More recently they have stabilised, supported by the late start of monsoonal rains in India and yield concerns for the crop in the United States.

Looking ahead, the market is expected to remain extremely well supplied.

Recent forecasts suggest that by the end of the 2012-13 marketing year, global warehouses are likely to be holding around eight months' worth of supply.

"The level of Chinese imports this year will also play a key role in influencing global prices," he said.

"Chinese State Reserve buying last year managed to provide a very solid underpinning to global prices, however buying is likely to be subdued this year."