New Zealand's sheep flock dropped 3 per cent to the lowest level since the 1930s Depression as farmers sold stock to cope with drought conditions and facial eczema.

Lamb numbers are likely to fall 2.9 per cent this spring.

Sheep numbers reduced to 28.3 million as at June 30 from 29.1 million a year earlier, marking the lowest level since 1934, according to the latest survey from the Economic Service of farmer-owned industry organisation Beef + Lamb New Zealand.

Lamb numbers this spring are forecast to drop 2.9 per cent to 23.3 million.

New Zealand now has about seven sheep for every person, down from 22 per person in 1982 when there were more than 70 million sheep.

All regions reduced sheep numbers in the latest year as farmers chased higher returns for cattle, facial eczema impacted flocks, farmers reduced stock due to dry conditions, and as a result of fewer lambs the previous spring.

The number of breeding ewes fell 3.1 per cent, the 10th consecutive annual decline.

"North Island ewe numbers decreased 2.9 per cent to 9 million with drought conditions and facial eczema a significant cause," said Beef + Lamb New Zealand chief operating officer Cros Spooner.

"South Island numbers dropped 3.3 per cent to 9.5 million, also affected significantly by drought."

The largest drop in breeding ewes was in Marlborough and Canterbury, where numbers dropped 6.5 per cent due to ongoing drought conditions.

The lamb crop estimate will be updated in November.

Beef + Lamb noted that land use change towards dairy farming had slowed considerably over the past year, underpinned by a low farmgate milk price and increasing concerns over future environmental regulations for the sector. However, strong returns for beef cattle increased the lure of cattle production.

The country's beef cattle herd increased 2.8 per cent to 3.7 million, following a 3.3 per cent decline the previous season.

The Economic Service noted that farming practices were more efficient than in the 1930s, with lamb production 1.7 times greater, mutton production 60 per cent greater, and the average lamb slaughter weight up 23 per cent.