LAMB production in Australia could rise by 39pc and exports as much as 58pc by 2010, according to Meat and Livestock Australia's (MLA) Japan market services and analysis manager Linda Wilson.
Ms Wilson predicted mutton production and exports could rise by 20pc and 25pc respectively in that period.
"The increased production of lamb and mutton is based in part on the ending of the drought as well as continuing strong demand for lamb both domestically and internationally and encouraging producers to turn off more lambs and continued investment in ensuring year-round supply, such as feedlots," Ms Wilson said.
Ms Wilson primarily works on the Japanese market, but has recently been more involved in the development of the international strategy for both beef and sheepmeat.
Australia's largest key lamb market is the US at 29pc, followed by the EU, Japan and the Middle East.
In value terms, the structure is much the same as in volume with the US the number one market, holding 41pc.
The market does have some stifling issues, according to Ms Wilson.
She said although Australia had a prime advantage by being able to increase supply, it might be a challenge.
"The challenges faced by the industry include increasing supply, differentiating Australian lamb from that of our competitors and introducing lamb to consumers that are unfamiliar with our product in international markets," Ms Wilson said.
She said MLA's marketing strategy for lamb involved the creation of consumer demand, menu development, product integrity positioning, trade promotions, ICAs, brand development and increasing lamb market access.
The lamb strategy also involved targeting growth regions, continuing awareness and trial programs and increasing market access.
There was also the long-term strategy possibility of developing a premium brand.
For the future, Ms Wilson said several countries offered good growth opportunities for Australian lamb.
"The US and Japan are an opportunity, however, pockets in the Middle East, China and pockets of Asia will also offer good opportunities," Ms Wilson said.
"It is important to diversify and offer exporters more than one market to export product to."
According to Ms Wilson, not all countries value all cuts.
She said the shoulder cut was not valued in Japan, whereas countries such as the US treated the same cut as a commodity product.
For the mutton market, Ms Wilson said MLA's tactic was to maintain and increase access and to explore the potential of value added products for the EU market.