Australia's national flock is predicted to grow by 3.5 million head in 2022 to reach 74.4 million head, its highest level in nine years.
According to Meat & Livestock Australia's latest Sheep Industry Projections, the national flock will grow by 4.9 per cent, driven by the strength of the NSW and Victorian flocks.
The projections highlight a bright future for the sheepmeat sector, with a strong supply anticipated for the year and confidence remaining high across the industry.
Lamb slaughter is expected to reach 21.6 million head off the back of a strong 2021 lamb cohort, while sheep slaughter is expected to reach six million head.
Strong domestic production conditions will help drive the growth though weather conditions and COVID-19 related issues affecting processor capacity and labour availability across supply chain will remain major challenged.
The outlook for sheep live exports has been described as "subdued", with high prices and summer export prohibition restricting trade but the projections suggest exports may be stronger from September when exports to the Gulf can resume.
Exports for 2022 are anticipated to be similar to 2021 when a total of 575,529 head of sheep were exported, 29pc fewer than in 2020 and the lowest number since 1969 when 396,519 head were exported.
MLA's market information manager Stephen Bignell said generally the Australian sheepmeat industry had outperformed expectations.
"Given the abundance of feed across the key lamb producing regions of eastern Australia during both 2020 and 2021, average national lamb carcase weights are expected to gain a modest 0.2kg to reach 25kg in 2022," he said.
"Production is set to increase in the next few years to record levels.
"In 2023 it is predicted that production for lamb will be at an all-time high of 567,000 tonnes which will subsequently flow through to higher exports.
"Overall, Australia's sheepmeat industry is positioned to strengthen, and confidence remains high across most parts of the industry, including the production end where seasonal conditions and overall historical market prices have never been more favourable."
Mr Bignell said as the high-value Australia-UK- Free Trade Agreement comes into effect later in 2022, the Australian sheepmeat industry was in a good position.
"Australia will benefit from enhanced access to the UK market," he said.
"This will include a tariff-free volume of 25,000 tonnes of sheepmeat in year one, increasing to 75,000 tonnes by year 10.
"Australia is likely to emerge as the only country with the production and transport infrastructure available to meet supply challenges over the next decade as well as ongoing demand from markets that lack the capacity for domestic supply."
It comes as prices remain historically strong.
Thomas Elder Markets analyst Matt Dalgliesh said after recalibrating their Eastern States Trade Lamb Indicator fair value model, prices could be set to be even better than predicted late last year.
Late last year the TEM ESTLI model was predicting an annual average of 846c/kg cwt for the 2022 season, but that was now estimated to reach 906c/k cwt.
The modelling suggests that prices will range between 725c to 1085c/kg cwt this year.
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