Australia’s sheep industry is set to enter a lower supply phase in 2026, with flock numbers forecast to decline and production tightening after several years of difficult seasonal conditions.
Meat & Livestock Australia’s 2026 Sheep Industry Projections show the national flock is expected to fall 2.7 per cent to 67.1 million head by 30 June 2026, reflecting the cumulative impact of below average rainfall across key southern regions including Victoria, South Australia, Tasmania and southern New South Wales.
MLA Senior Market Information Analyst Emiliano Diaz said three consecutive years of challenging conditions had taken a toll.
“Producers have been managing through sustained seasonal pressure, and the high levels of turnoff over recent years have reduced flock size and constrained the potential for a rebuild if the seasonal outlook improves,” Mr Diaz said.
While some late summer rainfall has provided short-term relief, soil moisture and pasture conditions remain under pressure in many areas.
Lamb and mutton availability is expected to tighten further in 2026 as producers retain more breeding stock where possible.
Lamb slaughter is forecast to decline 11 per cent to 21.86 million head, following an estimated 6.9 per cent fall in 2025. Mutton slaughter is expected to contract more sharply, dropping 30 per cent to 7.13 million head.
Despite the decline in slaughter numbers, productivity gains are helping to offset some of the impact. Average lamb carcase weights are forecast to rise to 24.6 kilograms, supported by genetic improvements, grain feeding and processor demand for heavier stock.
Lamb production is expected to fall 10 per cent to around 537,000 tonnes carcase weight, still among the stronger production years on record. Mutton production is forecast to decline 29 per cent as earlier heavy turnoff continues to affect supply.
Mr Diaz said the figures highlight the role of productivity improvements in maintaining output.
“While lamb turnoff is forecast to be lower in 2026, improvements in genetics, feeding systems and carcase weights mean production remains relatively resilient by historical standards,” he said.
Export conditions remain mixed, with tighter domestic supply expected to limit exportable volumes. However, reduced global supply, particularly from New Zealand, is continuing to support demand for Australian sheepmeat.
“Global sheepmeat supply remains tight and Australian product continues to be well regarded across key export markets. However, higher livestock prices, freight costs and currency movements are expected to influence competitiveness and trade flows through the year,” Mr Diaz said.
Live sheep exports also face ongoing uncertainty, with volumes declining in 2025 due to lower supply, vessel availability and high domestic prices. Trade conditions continue to be influenced by shipping disruptions and geopolitical instability in the Middle East.
Despite these challenges, demand for Australian sheep remains strong across international markets, supported by the country’s reputation for quality and animal health.
Looking ahead, price forecasts suggest relatively stable conditions across sheep indicators in 2026, with values remaining above long-term averages. The National Heavy Lamb Indicator is forecast to lift one per cent, the Trade Lamb Indicator to rise 0.5 per cent, while the Restocker Lamb Indicator is expected to ease four per cent.
“Lower flock numbers and reduced turnoff are expected to support prices, but conditions remain finely balanced. The pace of any potential flock rebuild in the future will depend heavily on seasonal improvement and producer confidence,” Mr Diaz said.
MLA expects 2026 to be a year of adjustment rather than expansion for the sheep industry, as producers manage constrained supply, ongoing cost pressures and variable seasonal conditions.
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