AS the first of the sucker lambs begin to come through WA saleyards, Australia's biggest processor, Roger Fletcher has warned producers not to expect prices anywhere near last year's highs.
Due to the European financial crisis, Mr Fletcher says there was an oversupply of lamb on the global market, with New Zealand looking to offload cheap lamb anywhere it can.
New Zealand has a quota of just over 228,000 tonne of lamb for the European Union, but Mr Fletcher said thanks to Europe's financial conditions, it has not taken anywhere near this amount and what it has taken it is finding hard to sell and this has to find a home somewhere.
Mr Fletcher says he was not trying to talk the market down, rather making producers aware of the reality of the situation facing all Australian lamb processors.
"Europe is in a mess, they are not getting rid of lamb and even though the New Zealand season has finished, there is still a large amount of unsold lamb on the market," he said.
"The New Zealanders are looking to offload what they have left wherever they can and because they work under a different wage structure to us - they don't pay super or payroll tax - they are in a position to sell lamb cheaper than what we can.
"The other advantage they have at the moment is their dollar is 30 per cent cheaper than ours at the moment.
"They are trying to divert product wherever they can and that is putting a hell of a lot of pressure on our export market."
Mr Fletcher has called on Meat and Livestock Australia (MLA) and the Federal Government to help spread Australia's export potential by opening up new markets for lamb.
"There is massive potential there for lamb sales but MLA and the government do not seem to be prepared to do the hard work to get access into India, Asian markets, China, Turkey and North African countries such as Nigeria and Morocco, or Iraq and Iran," he said.
"These markets are untapped in terms of potential. We need to open these markets so we are not so reliant on the same markets all the time.
"I can do the hard work to try and get into these markets but a lot of the time it needs to be done on a government-to-government level.
"The Federal Government needs to take action and work to drive tariffs down into these countries, at the moment tariffs make it impossible.
"We accept their imports easily enough - they should return the favour and take our exports."
Mr Fletcher said despite the short-term pain coming this season there was still a bright future for lamb.
"This will probably straighten itself out by next year but producers need to be aware of these issues and the fact that prices will be hit," he said.
"The price coming down domestically may see more people go back to eating lamb. It is also good to see McDonald's promoting its lamb burger and this is helping move lamb.
"There are positives out there - if the mining slow-down continues then the dollar may drop and resultant cheaper prices may help us find more markets - but the next few months are going to be tough for the industry as a whole."
WAMMCO chief executive Coll MacRury was hesitant in putting a dollar figure on where lamb prices might set in the next couple of months.
"It is really a suck it and see situation," Mr MacRury said.
"The retail price of lamb domestically has dropped so you would hope more people would go back to eating it, which will help.
"But I agree with Mr Fletcher in the fact the export market is struggling due to the Australian exchange rate and the large supply of lamb out there at the moment.
"New Zealand has a lot of lamb on the market and is operating on a lower exchange rate than what we can which is helping them sell it."
Mr MacRury said WA would also be competing with the Eastern States' market, where there would be an increased supply of lamb coming through this season.
"There are reports of maybe one million or 1.5m more lambs than last year so with more numbers price will decrease you would imagine," he said.
"WA processors will have to compete at those prices to move product."
Mr MacRury said WAMMCO's Katanning plant was operating four days a week at present but was expecting that to go to five days as sucker lamb numbers increase.