At the recent annual PGG Wrightson breeding ewe fare at Frankton Saleyards in Hamilton, the sheep yarding fetched $1 million, Lyons said.

"Sheep are selling like there's no tomorrow. The top price two-tooth Romneys made $300 a head, and the four-tooths $298 a head."

Lyons attributed the returns to lower overall sheep numbers and good returns for lamb.

"There are now only about 32 million sheep in New Zealand, a 19 per cent fall since 2004-05.

"Lamb, mutton, wool - the whole sheep industry is better than it's ever been before," Lyons said.

About 5500 ewes were yarded for the sale from the Waikato region, of which 4800 ewes were yarded by PGG Wrightson. About 269 buyers registered.

Traditional Romney ewes from Three Oaks topped the sale with their two-tooth ewes fetching $300 and $298, Lyons said. PT Hyde two-tooth ewes fetched $275, and top five-year-old Perendale ewes from Swaps Farming from Matamata received $192, he said.

Beef+Lamb New Zealand executive director of economic services, Rob Davison, has said sheep and beef farmers are looking at an average $114,000 profit this season, compared to the $10,000 low made in 2005-06.

PGG Wrightson wool general manager Cedric Bayly said he was optimistic about the long-term outlook for wool, with coarse wool in short supply around the world.

New Zealand prices had virtually doubled in just over a year, helped by a decline in sheep populations. Commodities such as wool were on a long-term growth path driven by large-scale demand from economies such as China, Asia, Britain and mainland Europe.

"We're also seeing increased demand, in China and Asia especially with the increasing affluence they have and heightened consumer demand for quality wool carpets," Bayly said.