Chief economist Tim McRae said consecutive good seasons in the eastern states and drought breaking rain in WA will see the Australian sheep flock continue its early steps toward rejuvenation in 2012.

“Lamb supplies will increase in 2012; therefore prices are expected to be lower than the record levels reached in 2011. However continued strong demand, particularly from export markets, should see good producer returns continue.

“High feed availability in 2012 will have many producers weighing up the opportunity to turn lambs off at heavier weights versus shifts in stocking and lambing rates.

Mr McRae said the increases in returns to Australian lamb producers have largely been driven by growing demand in export markets, particularly the Middle East and Greater China.

“Lamb exports now generate a much higher proportion of income than in previous years, with a record 48.5% of total lamb production sent off shore in 2011. The Middle East was the largest export market with 34,893 tonnes swt (22%), followed by the US, 21%, and the growing Greater China, 18%. These markets are expected to continue to grow, with the US starting to recover in 2012.

“Live sheep exports are assumed to stabilise after 2011’s decline, in terms of numbers shipped, as more ewes and wethers become available to the trade, particularly later in the year.

“Mutton exports are also forecast to increase after a decline in 2011, which was due mainly to restricted supply. Strong demand in the Middle East is expected to continue, with over 41,000 tonnes forecast to be shipped to the market in 2012.

“The main factor limiting the potential for producers to continue to benefit from these market conditions is the ability to supply enough to meet demand, however, fortunately for the industry conditions remain conducive to an ongoing flock rebuild.”