World sheep meat may be in short supply, but there are signs sheep farming countries are starting to ramp up production.
Meat & Livestock Australia (MLA) reported last week the Australian flock is expected to grow 2% this year due to favourable growing conditions and what it called exceptional lambing rates prompting restocking in eastern states.
Australian lamb production this year is expected to increase 7% and exports to grow by a similar amount.
Beef and Lamb New Zealand's (BLNZ) mid-season update reports European Union sheep production has been in decline, but both the United Kingdom, where production has fallen 5% in recent years, and France are showing signs of rebuilding their breeding flocks.
The immediate future still appears tight globally, with importers reporting stocks were at record lows.
BLNZ warned European consumers switching to cheaper forms of protein would result in further declines of sheep meat consumption this year, but given global shortages, prices for lamb were expected to remain strong and relatively stable.
A shortage of sheep meat in North America was expected to curb consumption, but imports were expected to grow 9% to compensate for the drop in domestic production.
"If exchange rate relativities between the euro and United States dollar favour the United States dollar, then an increase in supply from New Zealand can be expected," BLNZ said.
Demand for sheep meat in Asia and the Middle East was expected to stay high due to the global shortage and strong growth in those regions.
Launching Meat & Livestock Australia's 2011 Sheep Industry Projections last week, senior economist Sylvia Athas forecast lamb production in 2011 to increase by 7% to 436,000 tonnes as a result of increased slaughter and carcass weights, expected to average 21.6kg.
Exports were forecast to rise by 7% in 2011 to a record 167,000 tonnes, with the Middle East expected to become Australia's largest export destination for lamb, while Southeast Asia and China were also seen as strong growth prospects.
The domestic lamb market was resilient in 2010 but consumption in 2011 is forecast to rise 7% to 236,000 tonnes.
Demand for live sheep in the Middle East remains strong, but drought has depleted stock numbers in Western Australia and the lack of suitable cull wethers as a result of the reduced merino flock could mean exports fall 6% to 2.8 million.
Mutton exports are forecast to recover slightly, increasing 12% to 111,000 tonnes.
BLNZ reports wool prices were pushed by manufacturers competing for stock to replenish depleted inventory, with cotton producers enjoying similar demand and high prices.
US beef prices rose 26.7% in the year to December, helped by limited supplies from New Zealand and Australia and what BLNZ called "robust demand".
Australian exports are forecast to fall 2% to 880,000 tonnes this year, due in part to the Queensland floods and a low US exchange rate relative to the Australian dollar, forcing some beef to be redirected to Russia and Asia.
BLNZ says there was plenty of uncertainty about US beef production.
New Zealand beef exports to north Asia were static due to slow economic growth, the high NZ-US exchange rate and competition from Australian and US beef.