Sheep are raised for both meat (lamb or mutton) and wool. The U.S. sheep and wool industries have seen significant change since the mid-1970s, marked by smaller inventories, declining production, shrinking revenues, and fewer operations. Historically, lamb and mutton were viewed as byproducts of wool production, even though wool receipts accounted for a smaller share of revenue. As wool revenues have declined, producers have turned their attention to lamb and mutton production and the possibility of other byproducts such as sheep leather.

Inventory data on U.S. sheep began in 1867, when there were approximately 45 million sheep in the United States. Sheep numbers peaked in 1884 at 51 million head. Since then, numbers have declined to nearly 5.0 million head on January 1, 2016. The number of sheep operations has declined as well. Since the 1990s, sheep operations have dropped from more than 105,000 to less than 80,000, as producers experienced shrinking revenues and low rates of return.

During the two decades between 1992 and 2012, sheep operations saw double digit declines throughout the Mountain States, Northern Plains, Lake States, and Corn Belt. These were mainly larger operations. Significant increases were seen in the Pacific States and the Southeast, but these were mainly smaller operations. Between 2003 and 2007, the number of operations increased in all regions except the Northern Plains and Corn Belt. However, these are mainly small-farm flocks that do not offset the loss of large operations in the West. As a result, sheep inventory continues its downward trend.

Sheep producers range in size from those with small flocks to large western operations. Two types of enterprises exist: stock-sheep production and lamb feeding. Stock-sheep producers manage grazing flocks on pasture and range forage, often on arid western lands with few alternative uses. Stock-sheep producers sell lambs that are either slaughtered or placed in feedlots. Feeder lambs are raised on forage until they are around 60-80 pounds, then placed in feedlots to be fattened and finished for slaughter.

Although the sheep industry accounts for less than 1 percent of U.S. livestock industry receipts, sheep operations are important to the economies of several States. More than two-thirds of U.S. operations are located in the Southern Plains, Mountain, and Pacific regions, and the regional distribution has remained fairly constant since the early 1900s. Texas is the largest sheep producing State, followed by California.

Attempts to diversify sheep production have sparked increased interest in hair sheep production. Hair sheep have high parasite resistance and low heat stress and are known to provide multiple lambing possibilities. Apart from the ability of hair sheep to produce lamb and mutton, their leather is a viable source of revenue.

The U.S. market for lamb and mutton has weakened throughout the decades. Since the 1960s, per capita consumption has dropped from nearly 5 pounds to just about 1 pound. This drop is due in part to declining acceptance of lamb from a growing segment of the population, as well as competition from other meats, such as poultry, pork, and beef. Most meat is sold as lamb and comes from animals under 14 months old. Mutton comes from older animals and is often less expensive but less desirable to consumers. U.S. lamb consumers prefer high-quality cuts such as legs and loins. Some of the lower quality, less desirable cuts go to the pet-food industry or are exported.

The Northeast, with its high concentrations of Middle Eastern, Caribbean, and African consumers, is a major market for lamb products. The typical lamb consumer is an older, relatively well-established ethnic individual who lives in a metropolitan area such as New York, Boston, or Philadelphia; in the Northeast; or San Francisco or Los Angeles on the West Coast, and who prefers to eat only certain lamb cuts. In contrast, beef, pork, and poultry buyers tend to be geographically dispersed, younger, and less ethnically oriented and tend to buy a wider variety of cuts.