The southern ewe flock could shrink by more than 60,000 in the coming year as at least 26 sheep farms convert to dairying.
After a several years with few conversions, eight farms in South Otago and West Otago will convert to dairying in time for the 2011-12 season, and at least a further 18 in Southland.
This will result in an estimated 60,000 ewes being replaced by dairy cows and tens of thousands fewer lambs being available for the sheep meat export trade, accentuating an existing problem of surplus meat-processing capacity.
The reasons for farmers changing range from farm succession, which many say cannot be funded out of sheep income, and ageing farmers struggling with the physical work of sheep farming, to frustration at the lacklustre performance of the sheep and wool industries.
A former Clutha Agriculture Development Board farmer of the year, Stephen Bamford, is selling 3000 ewes and converting 300ha of his 800ha Warepa farm to eventually milk 800 cows, and said sheep industry leaders should not underestimate the level of farmer dissatisfaction with the sector's performance.
"It wouldn't be a surprise if there was a landslide of conversions next year," he said.
He was frustrated at the lack of profitability of sheep farming compared with dairying, and said he wanted to future-proof his business to allow him to one day step back and still have an income.
Mr Bamford said sheep farmers might receive $100 for prime lambs this year as meat companies competed for fewer lambs.
Federated Farmers board member and Southland sheep farmer David Rose was surprised at the number of conversions, but said dissatisfaction with sheep returns were not the only reason.
Farmers were getting older and less able to do all the physical work required, but they could not afford to employ staff or contractors.
Also, many were looking at passing their farm on to their children, which sheep returns could not fund.
September's storms may also have pushed some farmers to make a decision about their future, as they face a lamb crop 20% to 30% lower than expected, as well as the cost of replacing ewes killed in the storm.
Mr Rose said others would have been thinking of converting as, like him, they have had only two or three years of healthy profits in their careers.
Southland Federated Farmers dairy section chairman Vaughan Templeton said converting a sheep farm could cost $10,000 a ha, but he said banks were much more willing to lend for dairying than sheep.
"Banks are far happier to lend money to convert to cows than they are to expand a sheep business."
Mr Templeton said farmers switching to dairying had told him the sheep industry lacked a vision.
He said farmers had to change for the right reasons.
They had to want to milk cows and be prepared to handle the stress of managing people and large debt.
The number of sheep farmers converting may not let up, with a bank seminar on dairying two weeks ago in Invercargill attracting 76 people.
