Sheep producers can expect to be rewarded with sustained high prices for their heavy and trade lambs over the next year as Australian processors chase the American rainbow.

Market analyst Simon Quilty, Global AgriTrends, Wangaratta, has the outlook for heavy lamb rising from the current 1095c/kg CW (carcase weight) to peak at 1350c/kg in July/August then fall to 1100c/kg by December 2026.

The price will rise steadily to 1250c/kg CW by June/July 2027 before bottoming out at 1013c/kg in December 2027 as processors drop capacity to minimise losses.

When it comes to trade lambs, prices are tipped to peak at 1361c/kg CW by July, bottom out to 1100c/kg in November 2026 before rising to 1272c/kg in March 2027.

Looking further out, trade lamb prices are forecast to reach a low of 936c/kg in August 2027 and then rise steadily to 1094c/kg by June 2028.

This is all on the back of a sustained period of flock liquidation over two and a half years.

Mr Quilty was a keynote speaker at the Pasture Agronomy Service conference in Wagga Wagga on 10 March.

He outlined how air freight of light lamb had stopped due to the crisis in the major Australian markets of the Persian Gulf states, creating a net effect of light lamb carcase weight prices falling 20 per cent from 1195c/kg to 951c/kg.

Conversely, heavy trade lamb prices have increased, creating a market opportunity for buyers to pivot towards lighter lambs for grain feeding.

The Middle East consumes 19 per cent of our nation’s lamb exports, with the majority being light lamb, and 27 per cent of Australia’s mutton exports.

“If the US-Iran conflict goes for an extended period, mutton prices will be impacted, but thankfully we have had outstanding rain in the last two to three weeks in southern Australia, and the mutton kill is truly struggling,” Mr Quilty said.

“With that, there has been less pressure on getting product out to ports.

“In the last year, Iran has truly suffered with airfreight of our exports into that market falling by 80 per cent.

"Iran has gone from being our number one market two years ago for chilled lamb carcases to number four behind Dubai, Kuwait and Qatar.”

All export light lambs are destined for either the Middle East or domestic feedlots, with an estimated eight million head grain fed each year for domestic and US markets.

Mr Quilty described the North American market for lamb as “exciting”, with a 30kg carcase weight lamb worth AUD $16.25/kg.

This comes at a time when the Australian Wool Production Forecasting Committee’s report of a decline in Australian wool production to 251.5 million kilograms greasy in 2026, a 10.2 per cent fall from the previous year.

The number of sheep to be shorn has been adjusted down 12 per cent to 63 million, with an average cut per head comparable to 2023/24 at 4.45kg greasy.

“We will see 6.5 million sheep slaughtered this year, pointing to high mutton prices out to 2028 as the national flock will not grow back to what it was," Mr Quilty said.

"Mutton could go from today at 750c/kg to a high of 850-880c/kg next year.

“The flock has fallen, over the last two and a half years, by 15 per cent and if lucky enough, we might see part of that regained during the rebuild, but it may rise only by eight per cent.

"Those days of the large flock are gone as wool has suffered for so long and there will be more exodus out of that Merino flock before it is said and done.”

Australian processors could expect sheep and lamb supplies to be tight for at least two years.

“The higher the US prices go in terms of quality beef they will take lamb with it," Mr Quilty said.

"US prices for lamb shoulders are up 20 per cent compared to this time last year, lamb racks are up 18 per cent and legs up one per cent.

“The market is in good shape, and the US takes all the valuable parts of the animal, so America is truly driving the bus.”

Driving the US demand is Gen Z, blending their high protein diet with gym culture, and baby boomers focusing on protein to slow age related muscle loss.

The US Department of Health and Human Services also flipped the food pyramid on its head, placing priority on protein and fats.

“What is exciting in this space is the marbling is being measured and rewarded," Mr Quilty said.

"There is an inverse relationship between fast weight gain and feed efficiency versus marbling.

“Merino lambs seem to be more adapt at producing marbling due to their slower growth rates over and above the faster growing self-shedding sheep.

“Every major Australian processor is starting to develop the right equipment to measure intramuscular fat and go down this path.

“Given the challenges of the wool industry, this is a bright spot on the horizon.”