Latest figures from Meat and Livestock Australia (MLA) and the Australian Bureau of Statistics suggest sheep numbers have fallen to an 85-year low of 80 million head.

MLA chief market analyst Peter Weeks said the national sheep flock was still heavily reliant on the Merino ewe.

Last year 61 per cent of ewes in Australia were pure Merinos.

“We are likely to see Merinos as the base for any rebound in the national flock,” Mr Weeks said.

“The Merino ewe is central to our sheep industry and the erosion of breeding ewe numbers over the last few years has been quite alarming.

“If major sheep producing regions get a decent run of seasons I can see Merino numbers rounding quite strongly and this is what we need for a sustainable lamb industry, let alone wool.”

Latest forecasts by the Australian Wool Production Forecasting Committee tipped a six per cent drop in wool production in the 2008-09 season to 375 million kilograms greasy.

It predicted 83.6 million sheep would be shorn in the 2008-09 season – back 7pc from 90.2 million – with the big drop offset slightly by a likely 1pc increase in average cut per head to 4.48kg.

The committee said the drop could largely be traced to reduced sheep numbers from a continued sell-off of sheep - encouraged by high prices for both lambs and sheep for slaughter and the live sheep trade and forced in many cases by the season.

For full analysis read this week's Stock & Land, October 9.