New Zealand-A Big boost for sheep farmers.

A rebound in lamb prices is expected to pump another $100 million into the Southland sheep meat industry.

Dairy farmers also got some good news yesterday.

The monthly auction achieved an average price for whole milk powder of US$2158 a tonne 16.6 per cent up on the previous month.

Lamb is selling for an average of $4.57 a kilogram this season compared with about $3.30/kg last year with a prediction it could sell for up to $6/kg this winter.

The lift comes after three years of poor returns for sheep farmers.

Southern South Island Meat and Wool director Leon Black said although the price was heading in the right direction, it needed to remain at that level or rise more to offset the increasing cost of production.

With about 5 million lambs killed in Southland each season, the lift in prices is partially counteracting last month’s reduced dairy payout forecast for the 2008-09 season, which would cut $358 million from the region’s economy.

A global shortage of lamb was behind the rebound, Mr Black said.

Farmer Jeff Grant, a former Meat and Wool representative, said there was a shortage of lamb coming out of Australia, France and the United Kingdom. While a lower exchange rate was also helping the industry, the global recession could still put a dampener on the upward trend in price, he said.

"Indications are that by the end of this month there will not be any significant numbers of lambs in either the North or South Island.

"I would not be surprised to see it go to $6/kg in winter," he said.

Elders livestock manager Jono Robertson said 20kg lambs were consistently hitting the $100 mark.

"As long as the rest of the world keep paying that price, then it will stay there."

Otautau farmer Keith Milne said farmers were buoyed by the firmer prices but still wary of short booms followed by longer busts.

"With the firmer prices, farmers will probably break even but we are still concerned, particularly given the international turmoil," he said.