Southern farmers have played a major role in boosting New Zealand's beef cattle herd which increased 2.6 per cent in the year ending June 30.

Last week Beef + Lamb New Zealand released its annual stock number survey which estimated there were now 3.8 million beef cattle and 27.4 million sheep in New Zealand. The sheep flock was up 0.4 per cent.

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Otago and Southland were the fastest-growing regions in beef cattle, up by 12.9 per cent and 12 per cent respectively, as strong prices encouraged farmers to maintain or lift herd sizes, the report said.

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New Zealand's breeding ewe flock dropped 1.1 per cent to 16.97 million and most regions decreased, largely driven by strong prices for cull ewes.

The number of hoggets increased 3.4 per cent to 9.55 million, largely due to increased numbers in Marlborough-Canterbury.

Ewe condition was generally poor across the country due to less feed availability during and after mating.

Early pregnancy scanning results varied between regions but were generally lower due to fewer ewes mated.

The result of those factors was a forecast decrease in the lamb crop by 570,000 head (-2.4 per cent) compared with spring last year.

Breeding ewes in Otago-Southland decreased 2.1 per cent to 2.47 million.

The decline was the greatest on intensive finishing farms in both regions, where strong mutton prices meant ewes that were marginal to carry through another season were not given the opportunity.

Hogget numbers increased 8.3 per cent to 2.21 million. The number of ewe hoggets retained for breeding declined in Otago but increased in Southland.

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The proportion of ewe hoggets mated was static in Southland and lower in Otago, where conserving feed was a priority.

ANZ's latest Agri Focus report said mutton and lamb prices were at record levels and beef prices were not far below records, which was driving positivity in the red meat sector.

China's appetite for lamb and mutton remained strong as it looked for alternative protein sources to fill the void in domestic pork production.

The demand from that market for mutton and cheaper lamb cuts continued to underpin schedule prices.

In-market prices for higher-value cuts such as French racks and legs were at their highest level in several years.

A disorderly Brexit remained a key risk for the lamb market.

The clock was ticking towards the October 31 deadline and there was not much more certainty about how that process might occur than there was six months ago.

A no-deal Brexit would cause the greatest disruption to lamb markets, as lamb would no longer be freely moved between the UK and EU member countries.

Chinese demand continued to underpin beef markets. Store markets were strong but were yet to see the sharp lift that was typically associated with spring pasture growth.

However, business confidence in the primary sectors was ''dismal'' as food producers grappled with finding optimal solutions to meeting future expectations of ''how'' food should be produced, the report said.

There was still considerable uncertainty as to ''where the environmental goal posts lie'' and how to reach those goals and that was hindering confidence and investment.