Lamb prices hitting record highs as output shrinks but demand grows

Lamb prices are hitting record highs on the market, with lamb selling at a Yass stockyard for $344 per head last week. In Tamworth on Monday lambs fetched $354 per head.

Agricultural analysts said a growing Chinese demand, a weak Australian dollar and the slow reduction of lamb stock in Australia and New Zealand were to blame.

In Canberra, butchers were feeling the pinch as prices cut into their profit margins, with one restaurant pulling lamb from the menu.

As cute as Mr Hodgkinson's lambs were, they'll end up on someone's dinner plate soon. But he said where lamb was once a daily staple for Australians, it's now a meat reserved for special occasions.

"It might be once a month, a token meal," Mr Hodgkinson said. "I think people might have different cuts, demographics have changed, families aren't as big as they used to be."

Mr Hodgkinson said farmers were loving the high price their lambs were getting, but they were really just hoping for rain to break the drought.

"Everyone's saying we'd just love it to break and get a really good spring flush," he said.

He said it was a careful balance. With less grass, a lot of farmers were grain feeding their lambs.

Pellets for lambs was expensive - at least $660 per tonne - and birthing rates on Mr Hodgkinson's farm were down to about 60 per cent last year, even 15 per cent in some parts of NSW.

Less feed meant lambs took longer to gain weight, which delayed offloading which meant longer periods between pay day, Mr Hodgkinson said.

While prices were high, an unbroken drought would be trouble for farmers as production cut further into their profits, he said.

At the same time he was grateful for Meat and Livestock Australia's work promoting lamb overseas.

Likewise, lamb farmer Tania Cusack said the high prices were good but made up for previous years.

"Pretty much you're recovering from your losses, that hits us hard," Ms Cusack said. "People see it as, 'Wow, what a great year for the farmers'."

She said she also grew wheat and canola, which she would allow the lambs to graze off. But with the drought conditions gripping the state, last year meant it was more viable for Ms Cusack to feed her stock than harvest her canola.

"Next year is a really big question mark," Ms Cusack said.

Matt Dalgleish, a market analyst from agricultural analyst firm Mecardo, said the recent prices could be pinned on a combination of factors.

Australia and New Zealand's lamb output was shrinking, despite representing 70 per cent of world's lamb market.

The Chinese demand for lamb was growing and the weak Australian dollar had made it affordable.

"You might have seen them reduce their appetite had the Aussie been up 85, 90 cents or something," Mr Dalgleish said.

Mr Dalgleish said China's lamb uptake was helped by African swine fever currently effecting the country's pigs.

"There's a big gap in that protein space," he said.

New Zealand had been reducing the size of its lamb stock over the past decade.

But, the drought currently gripping Australia had also had an impact on the size of Australia's lamb output.

Locally, the high price of lamb was forcing retailers to shrink their margins just to sell the meat at an affordable price.

"You can see that there's not much room for them to manoeuvre," Mr Dalgleish said. "It's going to be tricky to try and make a profit if you're selling it for anything less than $15 or $17 a kilo."

"Once you get beyond $25 a kilo you're not going to have anybody buying it."

He said everyone, from independent butchers to large supermarket chains, would be cutting margins.

Larger chains could afford to heavily discount lamb to get people in the store to buy other products, Mr Dalgleish said.

"Lamb as a meal is quickly becoming less of a regular meal and more of a luxury meal," he said. "If you contrast that back to 10, 20 years ago: it was a staple."

Geoffrey Martin, owner of Country Pride Sausages in Lyneham, said he'd never cut so far into his margins in his 33 years running his shop.

"[Prices have] slowly and gradually increased, and then in the last two months, it's sort of gone up a third again," Mr Martin said. "At the moment we're cutting it up for nothing because it's so expensive. I'm probably selling a third of what I used to."

Mr Martin said he didn't think lamb was going much cheaper at supermarkets.

But he said his higher quality of meat compared to supermarkets was like "chalk and cheese".

Mr Martin said a lot of the restaurants he supplied were also selling less lamb.

"The world's hungry and Australia's feeding them. We're starting to pay world prices because the big exporters are taking over."

At Kingston's Otis Dining Hall, owner Damian Brabender said lamb was coming off the menu until spring.

"We're seeing that the quality of lamb is as good as its ever been," Mr Brabender said. "But lamb is becoming an almost inaccessible protein."

Mr Brabender said lamb was always expensive in winter, but it was hard to follow current price changes.

He said restaurants typically had to charge $3 for every $1 in costs.

"Remember days when you used to go out to the pub and have lamb cutlets with mash and gravy. That's a $45 meal in restaurants now," Mr Brabender said.