Economics of sheep production

The aims of this paper are to give a brief overview of world sheep production at present and to describe in detail sheep production and profitability using New Zealand as a case example. Sheep numbers have been declining throughout the world over the last five years, resulting in decreased sheep meat production and a resultant shortage of supply. There is evidence that demand in the short-term will not be met by the major exporters (New Zealand and Australia). Although sheep numbers have declined in New Zealand, production has increased dramatically, with lambing percentages increasing from 98% in 1987 to 125% in 2008 and carcass weights from 14 to 17 kg, respectively. Despite this production increase, return on capital in the farming business has been around 1% per annum. However, property values have increased by around 10% offsetting the low return on capital from farming sheep. There are a number of challenges facing New Zealand’s sheep farmers, namely changing land-use patterns, climate change and greenhouse gas mitigation, all of which will potentially impact on future profitability.