The rebuilding of storm-decimated ewe flocks could be hampered by competing record mutton prices which are returning $100-plus a ewe to farmers - similar prices to prime lambs.
Cash-strapped farmers say that cull ewes capable of one more lambing are returning more for meat value than for breeding and are being sold to meat processors.
Farmers attending a Perendale Sheep Society of New Zealand field day in West Otago last week described mutton prices as the hidden success story of the season, but several admitted it would mean a delay in rebuilding flocks and could see quality genetics trucked off to processing plants.
Alliance Group livestock manager Murray Behrent said high mutton prices were a symptom of a world shortage of sheep meat and growing demand for protein, especially out of China.
He told about 60 people at the field day that flaps, which were selling for $700 to $800 a tonne, were now fetching $3000-plus a tonne in China.
Demand for mutton was also growing in the Middle East at a time when the Australian sheep flock has halved in size in 10 years ago and flocks in te United Kingdom and Ireland have fallen 7% in recent years.
Beef and Lamb New Zealand Economic Service director Rob Davison said for the month of December, the average export price of mutton meat exports was 26% higher than at the same period a year earlier. Skin and wool prices were also higher.
Mr Davison said in 2008-09 Australia exported 146,000 tonnes of mutton but, in the year ended, that volume was 24% lower at 111,000 tonnes with forecasts of a further 10% decline this year.
Australian production would dictate future mutton supplies and prices.
Mr Behrent said unsatisfied demand for sheep meat allowed companies to direct product to the highest paying markets and those where companies were not being harmed by wild exchange-rate fluctuations.
Price rises for some products have been such that exchange-rate fluctuations were being cancelled out, he said.
Lamb middle cuts in the United States, for example, several years ago reached a high of $12 a pound before the market reacted and prices halved.
These were now back to between $10 and $11 a pound.
Co-products were also strong. He said 17 years ago co-products contributed 23% of carcass returns to farmers. This fell in recent years to 7% but has since recovered to 14%.
He expected values to reach 18% of lamb value by the end of the season.
The price of pelts has risen 40%, wool was better and meat meal prices have also improved.
"I've never seen it so good in co-products and sheep meat," he said.
Mr Behrent said even if New Zealand farmers had had the large spring lamb crop many were forecasting before September's storms, the market would have absorbed everything produced.
"Even if we had the bumper crop this year, we still wouldn't have enough lamb," he said.
A consequence of the current lamb shortage, however, was the lower emphasis on quality as companies tried to fill orders.
Other commentators are saying the high pricing will make farmers less accepting of change, as they start debating a new business strategy for the red-meat sector.
While farmers were relishing lamb prices $20 a head higher than last year, many will still make less money than last year because they have less product to sell.
One farmer in the middle of lambing when the storm struck said his income would still be $100,000 less than last year.