Independent butchers say rising wholesale lamb prices are making it increasingly difficult to compete with the major supermarkets.
Many have been forced to trim off all the profit market to keep prices competitive, a particularly painful move during the lead up to Australia Day, the most popular week for lamb sales.
South Melbourne's Kirkpatrick's Meats manager Barry House said, as wholesale prices continued to rise, more and more of the profit margin had disappeared.
"Customers don't want to come in and see the price going up and down week-to-week," he said.
"People are still coming in and buying lamb, they're still buying what they want — for now — but if the price keeps rising they'll start to make changes."
According to Mecardo analyst Matthew Dalgleish, major supermarkets often cut their margins on popular barbecue items ahead of Australia Day to bring more customers through the door.
"Retail lamb is banging on the door at around $16 a kilo as average across all the cuts, while beef is around $20 a kilo across the cuts," he said.
"The only thing working in favour for consumers is that certainly last year we saw a bit of discounting on lamb from the major supermarkets, used as one of the carrots dangled out to shoppers."
Mr House said that made it hard for smaller retailers to pass on the cost of the wholesale rises.
"Lamb is the biggest seller on Australia Day, lamb sausages, lamb chops, butterflied legs — it's the biggest week for lamb," he said.
Record prices
Mr Dalgleish said while it was tough for butchers and consumers, producers stood to benefit.
"It's almost like you would call it a perfect storm," he said.
Prices for lamb at livestock sales opened 2018 by breaking a new record for the market's main index of prices, the Eastern States Trade Lamb Indicator (ESTLI).
"The ESTLI opened this year at 698 cents a kilogram carcase weight, and it's settled back around 650 cents a kilogram for lamb, and 450 cents a kilogram for mutton," Mr Dalgleish said.
Those prices are around 10 per cent higher than they were last year, driven higher by a combination by a major drop in the size of the national flock, and a new burst of demand from China.
"Lamb's retail price has more than doubled in since 2000, while chicken has only gone up by 10 per cent," a recent report from Meat and Livestock Australia (MLA) said.
Yet the volume of lamb consumed has remained steady, "highlighting the the strength lamb has in the minds of Australian consumers", according to the MLA.
Sheep numbers set to rise
Although they're slowly building up again, Australia's sheep numbers are near historic lows, compared to the days when Australia 'rode on the sheep's back'.
Poll dorset stud owner and prime lamb producer Geoff Oliver of Inverleigh, Victoria, said the combination of strong sheep meat prices and wool prices reaching record highs would see existing sheep producers encouraged to build up their flocks.
"A lot of people who have gone into cropping and let their sheds and their fencing fall down would find it difficult to go back into livestock," Mr Oliver said.
"But I can see people who've maintained their properties well, and who are running a few sheep now building up the numbers.
"It's a really great time to be in the sheep industry."
The MLA backs the opinion, with predicting the amount of lamb and sheep moving through sale yards and abattoirs in 2018 to drop "as producers maintain intentions to expand their flocks".
