The company – which last year purchased about 13 per cent of Australian lamb – will spend about $13 million during the next financial year absorbing the cost of the price reduction and funding an advertising campaign promoting Australian lamb.
Woolworths will reduce lamb chops by 30pc, while prices of cutlets, roasts, racks and mince will be slashed by 20pc in a bid to increase consumption, general manager of fresh food Pat McEntee said.
“If you look at last year, the Middle East purchased almost the same amount of Australian lamb as Woolworths did,” Mr McEntee said.
“From our point of view it’s very much about coming back to building consumption and demand.
“If we’re out there advertising lamb, promoting lamb to Australian families and building demand for Australian lamb, it can only be good for the farmer.”
NSW Farmers sheepmeat committee chairman James Jackson said the diversity which had developed in the Australian lamb market in the past decade should continue to ensure competitive prices.
Mr Jackson said he hoped Woolworths continued to absorb the price reduction and that the move would not lead to a reduction in the farm gate price.
“The reality is if the price goes down much further, people will stop producing the product,” he said.
“We’re certainly concerned, (Woolworths) is a big player and there is always that risk that everybody matches it and it causes decreased tension in the marketplace.
“I don’t think it would be in their interest to drive down the prices because ultimately that’s going to cause supply tension and there is nowhere else in the world producing lamb... so it’s not as though they can go somewhere else and find it, it’s just not there.”
Sheepmeat Council of Australia president Ian McColl said the Woolworths price reduction would provide an opportunity for consumers to continue to “experience lamb at a number of different price points”.
“While the Sheepmeat Council supports a diversity of domestic retailers and respects the retailer’s right to set prices in their stores, it is important to note that the industry operates in an international environment and the domestic market is not the ultimate price setting mechanism,” he said.
“We have been talking to Woolworths about our issues of concern, especially the potential for these price cuts to reduce farm gate prices.
“We will keep the lines of communication open so they understand our costs of production.”
Tasmanian Farmers and Graziers Association chief executive Jan Davis said the decision was a blow to farmers.
“Despite apparent assurances that Woolworths will not reduce the price it pays to farmers for the cheaper meat, logic and precedent suggests that it will,” Ms Davis said.
“We’ve seen what has happened to dairy farm-gate prices in the past 12 months; and three of Australia’s largest producers of tomatoes went into receivership after supermarkets moved to fixed pricing on some fruit and vegetable lines.
“The retail price of lamb should reflect the state of the market, not the state of mind of supermarket management.”