Nearly 27 million lambs have been tailed this spring after good weather conditions ensured high survival rates throughout the country.
Beef + Lamb New Zealand's Economic Service says lamb numbers are up by 1.9 million on last year due to a combination of the good spring weather, improved fertility in the national flock and favourable feed conditions leaving sheep in top condition.
Executive director Rob Davison said that for every 100 ewes the sheep industry produced 123 lambs this year.
He said the breeding flock fertility has gone up, management on farms has changed and a lot of technology has been adopted to lead to a higher lambing percentage.
Mr Davison said that in 1990 for every 100 ewes 100 lambs were produced, now for every 100 ewes 123 lambs are produced.
He says it hasn't happened by chance and it's a great success story of productivity.
However, Mr Davison said the lamb crop is still the third lowest since the early 1950s as land use changes in New Zealand continue to reduce the number of sheep and beef farms.
"There's just fewer breeding ewes around to produce lambs and that's come from land use change and conversion of sheep and beef farms to dairy and loss of some of our more extensive land into other land uses and into the conservation estate, particularly in the high country."
New Zealand's lamb production peaked at 52.8 million in the 1984-85 season, shortly before the end of government subsidies.
Meanwhile, Federated Farmers says sheep farmers will be hoping the increased lamb production this season will offset lower international prices and the effects of the high New Zealand dollar and that The Hobbit movie may stimulate overseas demand as well for New Zealand products, including wool.