This is likely to pinch lamb supply in the South Island for meat processors in the leadup to Christmas.
A report by Beef + Lamb New Zealand (B+LNZ) confirms earlier estimates for fewer lambs born in spring compared with last year.
The numbers of lambs tailed was back by 1.1 million head, or 5.2%, bringing the total to an estimated 19.2 million.
Final figures still to be accounted for the South Island are expected to be in closer to Christmas, but the report was released so meat processors can make plans and provide the industry insights into the state of the sector.
The decline is slightly greater than B+NZ originally forecasted in June.
Better lambing rates than expected in the North Island were offset by worse lambing rates in the South.
Wet weather and snowstorms in southern South Island curbed lamb survival, but this seems to have been less than originally feared.
B+LNZ forecasts the lower lamb crop will reduce export lamb numbers by 6.5% across the season. Australian lamb production is also expected to be lower too which tightens global supply and may lead to stronger prices in international markets.
Processing companies are closely monitoring livestock numbers and capacity, and the report indicates large shortfalls in supply could arise in the South Island in the leadup to Christmas.
Overall lamb export processing is forecasted to be down 11% in the three months to Christmas, but there are wide differences between the islands.
In the South Island, export lamb processing for the first quarter of the season is expected to be down 22%, but up 2.4% in the North Island.
Adult sheep exports are also expected to be 10.9% lower than last year across the entire season.
B+LNZ chairwoman Kate Acland said in a statement there were signs of cautious optimism for the sheep and beef sector, despite the challenges.
"The North Island has had excellent lambing conditions and lambs have been growing well.
"Farmers in the South Island did a fantastic job of minimising potential lamb losses in the face of prolonged cold, wet weather during lambing in [the] southern South Island and snowstorms in other regions."
Early-season farmgate prices for sheepmeat were higher than last spring and cattle prices remain strong. Alongside solid returns, the reductions in interest rates are expected to ease financial pressure on farmers.
