KEY POINTS:
New Zealand's sheep flock continues to fall, hitting a level last seen in 1950, according to new data from Statistics NZ.
The provisional estimate for the national sheep flock was 33.9 million as at June 30, 2008 - a drop of 12 per cent on the previous year and less than half the 70 million peak in 1982.
Beef cattle numbers fell 6 per cent to 4.1 million, while the dairy herd continued to expand, up 6 per cent to 5.6 million animals.
Meat & Wool New Zealand economic service executive director Rob Davison said about 60 per cent of the reduction in the sheep and beef flock was due to last summer's drought, with the change in land use to dairying accounting for 40 per cent.
However, Fonterra's dairy payout had come off the boil, dropping 33 per cent from last season's effective payout to a forecast of $5.10 per kg of milksolids this season, Davison said.
"So there will be some dairy expansion still but after that I think there'll be a lot of confidence coming back into sheep," he said.
Overseas market prices for lamb had been reasonable despite the recession and the exchange rate had been more favourable, Davison said.
Prices for sheep farmers had been low for three years, with last season's average of about $58 a lamb expected to rise to $80 this season, he said.
"So lamb's come up but it's still not particularly good," Davison said. "Keep in mind last year we had a very high exchange rate ... [which] cuts deeply into what farmers get in New Zealand dollars for it."
The exchange rate had come down from US80c to US53c, he said.
The Statistics New Zealand data was within expectation, Davison said.
Farmers who had been hit by the drought could rebuild flocks.
"They do but you've got to balance the right speed of build-up against [the] need to generate income because it's been pretty tough out there and we've got a much higher internal cost structure than what we had five years ago."
Meat & Wool expected the sheep flock to drop by about another 1 per cent before levelling off at about 33-34 million.
Rabobank's Agribusiness Review for February said bull and steer prices were 10-20 per cent higher than the same time last year in the North Island and 5-15 per cent higher in the South Island. The weaker New Zealand dollar had been the key driver along with firmer US prices and reduced availability of stock for processing, Rabobank said.
Lamb prices were 40-50 per cent above last year, with higher prices in the South Island than the North.
LIVESTOCK NUMBERS
As at June 30, 2008
* 33.9 million sheep, down 12 per cent
* 4.1 million beef cattle, down 6 per cent
* 5.6 million dairy herd, up 6 per cent
* Sheep flock is now less than half the 70 million peak in 1982.
