The region's profit before tax was estimated to be similar (up 1%) to last year at $168,000 per farm, Beef and Lamb New Zealand's mid-season update for the sheep and beef sector showed.
Eighty-three percent of revenue came from sheep and 11% from beef cattle, a sharp contrast to the North Island where 63% of revenue was from sheep and 32% from beef cattle.
The 2010-11 year was the first reasonably profitable one following an "appalling" series of flat years from 2005-06 to 2009-10, Beef and Lamb central South Island director Anne Munro said.
During that period, weak international prices and unfavourable exchange rates saw farm profit for the region range from $28,900 to $101,700.
Extreme dry conditions in December and early January saw store lamb sales to other regions, which had constrained sheep revenue to some extent, southern South Island director Leon Black said.
December was the driest month on record for most of Southland with as little as 3% of the historical average rainfall in some parts.
Rain during January brought some relief, although parts of western Southland continued to feel the pinch from the weather, Mr Black said.
The country's average sheep and beef farm profit before tax reflected the positive price outlook for meat and wool relative to recent years, economic service director Rob Davison said.
Profit for 2011-12 was estimated at $133,800 per farm, up 17% on last year. In inflation-adjusted terms, that would be the highest profit since 2001-02, which in today's money terms was higher, at $156,200 per farm.
The mid-season update included predictions around pricing, export receipts and the international situation for each species exported and it contained few surprises, Mr Davison said.
Statistics New Zealand's provisional livestock result, released in December, showed sheep numbers were down 4.3%, a stronger decrease than the 2.1% previously estimated.
The export lamb slaughter had been revised and, with fewer ewes, it was down 4.1% from earlier estimates to 19.7 million. The global lamb supply continued to remain tight overall, Mr Davison said.
Lamb prices for the season were expected to average $115 per head, slightly down (-2.2%) on the record high of 2010-11.
This season, expectations were for offshore prices to remain at good levels, although the estimated stronger New Zealand dollar against the euro (+7.1%e) and British pound (+3.2%e) softened the price outlook at home. The recent strengthening of the NZ dollar against the US dollar was also a concern.
Global mutton supplies remained tight. Australia was expected to ship 4% more than last year (up 3300 tonnes) while New Zealand supplies were estimated to fall 30% (down 31,800 tonnes).
That decrease followed last year's "exceptionally high" mutton off-take, which was underwritten by record prices. A similar off-take this year would cut sheep numbers and was not expected, Mr Davison said.
The outlook for beef production was a lift in exports of 4.5%, with the cattle slaughter up 1.7% and heavier weights (up 2.8%).
Overall, the outlook was for farm gate export beef prices to remain similar to last year.
