There has been a sharp fall in the number of sheep being offered for slaughter, with 200,000 fewer animals being processed here last year than in 2006.
Figures released by An Bord Bia, the Irish Food Board, at the weekend showed the number of animals processed at export plants fell from 2.94 million to 2.5 million last year.
The board's weekly market monitor said this was a 7 per cent drop and it predicted a further fall of 4 per cent this year.
It said the numbers reflected the drop in breeding ewe numbers combined with a lower carry-over of lambs from late 2006.
"For 2008, sheep supplies are forecast to fall by a further 4 per cent, reflecting an anticipated smaller carry-over of lambs and a lower lamb crop," said the report.
During the first half of 2007, sheep supplies were 13 per cent lower than in the previous year, as lower lamb availability and poor weather conditions negatively affected the finishing of lambs for the market.
"In the latter half of the year supplies were only 2 per cent lower as higher market prices following the foot-and-mouth-related restrictions on UK exports increased the throughput of Irish lambs," the report continued.
"As a result, the 8 per cent reduction in lamb numbers seen in the June census was not fully evident in lamb supplies. This suggests a smaller carver of lambs is available for the spring of 2008," it said.
The fall in the number of sheep being farmed here from a high of nearly eight million in 1994, has been causing the Government concern in recent years.
Last year it commissioned a special report on the industry and EU reports on the future of the sector are being drawn up by the European Parliament and Liam Aylward MEP.
There is growing concern too over the future of the pig industry, which has also witnessed a dramatic decline in the number of animals being produced.
The latest figures showed that Ireland has lost 8,000 of the 150,000 breeding sows, and the number of producers has dropped to below 500.
Last week Teagasc, the agriculture and food development authority, launched a strategy for the industry, which employs more than 7,000 people directly and in processing.
Its main problems, the strategy found, stemmed from rising food costs and competition from abroad where Ireland's position as a world leader in pig production had been overtaken by a number of competitors.
The head of the Teagasc pig unit, Brendan Lynch, said Ireland would have to improve levels of skills on farm.
He pointed out that during last year, pig feed prices escalated rapidly and today accounted for 70 per cent of the cost of producing pigs.
The industry here, which is worth €250 million annually and is the third most important sector after milk and beef, has also suffered serious competition from cheap imported pork from outside the EU.