A third year of drought on the North Island's East Coast and changes in land use have taken total sheep numbers at the end of June to 33.14 million, the Meat and Wool New Zealand Economic Service says.
But the decline has slowed, the flock having shrunk a massive 11.4% the previous year, also because of drought and land-use change.
The economic service's executive director, Rob Davison, said the Otago-Southland flock had fallen from 12.8 million in 1999-2000 to 9.7 million this year and it still represented about 30% of the national flock.
For the second consecutive year, there were more sheep in Otago than Southland, numbers in Otago growing 3.1% in the past year but falling 1% in Southland.
Southland ewe numbers were down 4.8% to 3.6 million, but Otago sheep numbers grew 1.6% to 3.6 million.
Three years of drought on the East Coast of the North Island, which represented 25% of the national flock, saw its flock fall from 9.5 million to 7 million.
Nationally, Mr Davison said breeding-ewe numbers had fallen 3.4% to 22.7 million.
North Island numbers were down 2.9% and South Island 3.8%.
Depending on spring weather, Mr Davison said pregnancy-scanning results, which were on average 10% greater, indicated a lamb crop 2%, or 560,000, higher than last year at 27.8 million.
But with breeding flocks being rebuilt, he expected the number of lambs available for slaughter to be down 2%.
Mr Davison said a large increase in the number of hoggets being retained was a further sign farmers were rebuilding their flocks.
South Island hogget numbers alone were up 15.8% on a year ago, the Otago increase being 12.7% and Southland 15.2%.
Some of these hoggets were being kept for sale over winter, but Mr Davison said the figures still suggested flocks were being rebuilt.
Beef cattle numbers were 1.7% lower at just over 4 million, the North Island herd being 1.9% lower at 2.9 million and the South Island down 1.2% to 1.16 million.
The Otago beef cattle herd went against the trend, rising 4.7%, while Southland numbers were static, but there was a move away from breeding cows in the province, which declined 3.3%.
