Sheep meat prices (a weighted average of lamb and mutton) in 2026 are tracking at their best levels in deflated terms at least since 1980, even better in deflated US dollar terms. With this in mind, this article takes a look at the bigger picture background to the Australian sheep meat market.
In terms of sheep meat production Australia has been an outlier in recent decades. Where other countries have reduced sheep flocks and in doing so reduced sheep meat production, Australia which started with a very high (by historical standards) merino component in the flock, had room to switch capacity to lamb production even as the flock shrank. So while sheep numbers fell the Australian production of sheep meat was steady, if variable. Figure 1 shows Australian sheep meat production by year for the past four decades. The volumes of 2023-2025 are the main exceptions, helping explain why prices plummeted in 2023.
An international total of sheep meat production from a selected group of countries (Australia, New Zealand, the USA, UK and six of the larger European producers) is shown in Figure 2 (left hand axis) along with a NSW trade lamb prices series (deflated US dollar and dressed weight) referring to the right hand axis which is reversed so that as the price rises the line falls. From around 2002 to 2012 the international volumes fall and the price responds by rising. Since 2012 the price has responded to changes in the volume but there have been no real trends in either volume of price.
Australia’s importance as a supplier of sheep meat has increased in recent decades. Figure 3 shows the Australian proportion of sheep meat supply from the selected countries. This has risen from 25-28% in the early 1990s to as high as 46% in 2024. In 2026 the proportion looks to be settling back to around 40%. Australia is the big swing producer of sheep meat, with changing seasonal conditions being the key factor in year-on-year changes in the supply.
In Figure 4 the year-on-year change in total sheep meat supply (right hand axis- reversed) is compared to the year-on-year change in the NSW mutton price. Mutton is very sensitive to changes in supply, with a negative correlation – increased sheep meat supply puts downwards pressure on the mutton price. In 2025 and 2026 it has been the reverse, lower sheep meat supply has pushed mutton higher.
The ABARES estimates total factor productivity (TFP) for sheep enterprises during the past four decades to be 0.5% annually compared to cropping with 1.6%. This disparity in TFP helps explain the loss of farm area to crops by the sheep industry since the early 1990s. It also shows how lucky the lamb industry has been, with falling international sheep meat production underpinning higher sheep meat prices, while TFP stagnated and wool prices struggled against cheaper competing fibres.
What does it mean?
Structurally the sheep meat industry continues to be underpinned by low supply, with sheep numbers continuing to be under pressure in many countries. Australia has been unusual in maintaining/growing its sheep meat production. However, the sheep industry has a poor record in productivity improvement which the wool industry is suffering from but the lamb industry has been shielded by lower international production. Luck is a good thing to have but is not a long term plan.
Key Points
- International sheep meat production continues to underpin Australian mutton and lamb prices structurally.
- Australia is the key swing producer of sheep meat.
- There is still plenty of room for sheep meat price volatility in response to changes in supply, usually driven by changes in seasonal conditions.
- The lamb industry has had a lucky few decades, with international supply driving prices higher.
Click on figure to expand
Click on figure to expand
Click on figure to expand
Click on figure to expand
Data sources: MLA, RBA, ABS, Eurostat, USDA, DEFRA, Statistics NZ, CME Group, ICS, Mecardo
