The sheep industry is playing catch up with the beef industry as electronic identification rules ramp up.
Agriculture Victoria manager livestock traceability Ben Fahy said in terms of lost tags and incorrect placement of tags, the sheep industry was at the same point as the beef industry was when the National Livestock Identification System was introduced 20 years ago.
Mr Fahy said some sheep producers were not placing tags correctly, leading to loss of tags.
He said correctly placed tags would generally remain in the ear on-farm and through the supply chain.
Agriculture Victoria closely monitored sheep entering saleyards and notified producers when it saw tags that were placed incorrectly.
"Tags need to be correctly applied to the ear in a biosecure way," he said.
Mr Fahy said in saleyards there wasn't a large percentage of sheep without tags, but there were instances of sheep that were incorrectly tagged or without tags.
Producers needed to ensure that all animals leaving their property were tagged.
Shelburn manager Gordon Brown, Shelford, said tag loss was costly in terms of time, extra tags and loss of data on individual sheep.
Mr Brown said the farm's 2800-ewe flock had been tagged for the past six years in conjunction with on-farm scanning and management.
He collects data on weights and lambing rates from individual ewes and tracks their progeny using ear tag identification.
"When a sheep loses a tag, we replace the tag, but we lose all the data from that sheep," he said.
"We use Pedigree MatchMaker to identify which lamb belongs to which ewe and when a tag is lost we lose that information."
He said marking time was a critical time and there wasn't much room for error when placing the tag.
After having losses in some cases of 9 per cent, and averaging around 4pc, Mr Brown employed an extra person at marking just to apply the ear tag.
Since the change, tag losses had fallen to less than 1pc.
He said the time between lamb marking and weaning was the critical time when tags could be lost.
The flock at Shelburn was regularly weighed and monitored.
"We are trying to breed an elite flock of ewes and the data is important so that we can get rid of under-performing sheep," he said.
Weights of young ewes were tracked to measure weight gains and to match that with conception rates.
Rams used include White Suffolk, Highlander and Glendemar Merinos.
The introduction of Glendemar dual purpose Merinos reduced the flock wool average by 6.5 micron.