The volume of lamb exported from Australia this year is 26 per cent above the five-year average.
The Rural Bank Ag Answers Australian Sheep Update found high prices and a bumper spring for pasture growth has created a potent mix for a longer term positive outlook for the industry.
Rural Bank's agribusiness general manager Andrew Smith said the demand for Australian lamb was really strong, with exports playing a big role in the market.
"Our view is that in terms of red meat, lamb is still a pretty good product," he said.
"As we rebuild our flock on the back of some better seasonal conditions, which across the country we are really building a bank of feed again, we should really see a return to some more normal production levels."
He said it was pleasing the national trade lamb indicator had held up and was trending 11 per cent higher on the same time last year.
"This uplift in price has been driven by export demand and tighter supply."
Wet season has farmers holding on to stock
The US and China, United Arab Emirates, Qatar and Japan were also still major trading partners for Australian lamb.
"When I look at figures for the past six months for the US, Australia is running at about $380 million worth of lamb exports into that market now, which is pretty significant," Mr Smith said.
On the back of the wet season, Mr Smith said more people hanging onto sheep had resulted and in reduced supply of mutton.
"People are holding onto older sheep to get some breeding from them, which is lifting the price for mutton in the market," he said.
"Also when we look at joining for the coming period we have some very good prices being paid for ewes in most markets at the moment."
Long term, Mr Smith anticipated there would be more expansion for Australian lamb exports activities and domestic prices would also remain strong.
