Meat and Livestock Australia is reporting that ABARE's Australian Commodities forecast state that average saleyard lamb prices are forecast to increase 16pc in 2008-09 to average 390¢/kg (carcase weight) – the highest annual price in real terms since 2004-05.

According to ABARE, an expected fall in the number of lambs marked will lead to a 4pc decline in lamb slaughter during 2008/09 to 20 million head.

This is expected to result in a 6pc fall in lamb production in 2008/09 to 404,000t.

Reflecting the lower lamb slaughter and production levels forecast for 2008-09, Australian lamb exports are expected to slip 2pc, to 160,000t (shipped weight).

Shipments to the US are forecast to fall 5pc to 40,000t due to tight Australian supplies and some weakening in US demand.

ABARE estimates the Australian sheep flock at 30 June 2008 to be around 80 million head – a fall of 7pc year-on-year due to poor seasonal conditions, high grain prices and enterprise shifts from wool production to cropping.

A further 4pc fall is forecast for 2008-09 to 77 million head.

A sharp decline in sheep turnoff compared to lambs is expected in 2008/09, with slaughter forecast to decline 15pc to 10.1 million head – based on the assumption of normal seasonal conditions.

With the contraction in sheep turnoff, saleyard mutton prices are forecast to average 10pc higher in 2008/09 at 175¢/kg.

The fall in sheep turnoff during 2008-09 is expected to impact Australian live sheep exports, with exports for the year forecast to decline 9pc to 3.7 million head, while demand remains steady.