AUSTRALIA’S sheep industry is entering a lower supply phase in 2026, with Meat & Livestock Australia’s latest Australian Sheep Industry Projections forecasting a further decline in flock numbers after several years of elevated turn-off and challenging seasonal conditions.

The national sheep flock is estimated to fall 2.7 per cent to 67.1 million head by June 30, 2026, reflecting the cumulative impact of below average rainfall across key southern production regions including Victoria, South Australia, Tasmania and southern New South Wales.

While some late summer rainfall has provided short term relief, soil moisture and pasture conditions remain under pressure in many areas.

MLA senior market information analyst Emiliano Diaz said three consecutive years of difficult seasonal conditions have weighed heavily on the flock.

“Producers have been managing through sustained seasonal pressure, and the high levels of turnoff over recent years have reduced flock size and constrained the potential for a rebuild if the seasonal outlook improves,” Mr Diaz said.

Lamb and mutton availability is expected to tighten further in 2026 as producers retain more breeding stock where possible.

Lamb slaughter is forecast to decline 11 per cent in 2026 to 21.86 million head, following an estimated 6.9 per cent fall in 2025, as the effects of several years of heavy turn-off continue to flow through the system.

Mutton slaughter is expected to contract more sharply, falling 30 per cent to 7.13 million head, reflecting the tighter supply dynamic.

Despite lower slaughter volumes, productivity gains and heavier carcase weights are continuing to support output.

Average lamb carcase weights are forecast to lift to 24.6kg, supported by ongoing genetic improvement, grain feeding and processor demand for heavier stock.

As a result, lamb production is expected to decline 10 per cent in 2026 to around 537,000 tonnes carcase weight, which would still rank among the stronger production years on record.

Mr Diaz said the figures highlight how productivity gains are underpinning supply even as numbers tighten.

“While lamb turnoff is forecast to be lower in 2026, improvements in genetics, feeding systems and carcase weights mean production remains relatively resilient by historical standards,” Mr Diaz said.

Mutton production is forecast to fall 29 per cent as the effects of earlier heavy ewe and wether turnoff further reduced supply.

Export conditions for Australian sheep-meat remain mixed in 2026.

Tighter supply is expected to limit exportable volumes, although reduced global availability continues to support underlying demand, particularly as New Zealand’s flock remains constrained.

Australia continues to benefit from its reputation as a reliable supplier of high quality sheep-meat into global markets.

“Global sheep-meat supply remains tight and Australian product continues to be well regarded across key export markets. However, higher livestock prices, freight costs and currency movements are expected to influence competitiveness and trade flows through the year,” Mr Diaz said.

Live sheep exports also face ongoing uncertainty. Volumes declined in 2025 due to lower supply, vessel availability and high domestic prices, and trade conditions remain influenced by shipping disruptions and geopolitical instability in the Middle East.

Despite this, demand for Australian sheep persists across the region, reflecting Australia’s strong animal health and quality reputation.

Price forecasts point to relatively stable conditions across sheep indicators through 2026, with prices remaining well above long term averages despite some mixed movements.

The National Heavy Lamb Indicator is forecast to lift 1 per cent, the Trade Lamb Indicator to rise 0.5 per cent, while the Restocker Lamb Indicator is forecast to ease 4 per cent by June 30, 2026.

“Lower flock numbers and reduced turnoff are expected to support prices, but conditions remain finely balanced. The pace of any potential flock rebuild in the future will depend heavily on seasonal improvement and producer confidence,” Mr Diaz said.

While slaughter and production are expected to stabilise over the medium term, MLA expects 2026 to be a year of adjustment rather than expansion for the sheep industry, as producers manage through constrained supply, ongoing cost pressures and variable seasonal conditions.

MLA’s Market Information Team will run through the key findings of the report and answer questions during the Cattle and Sheep Industry Projections 2026 Webinar.

To register, go to Cattle and Sheep Projections Webinar.

To view the full report, visit Sheep Industry Projections 2026.