LAMB prices must fall for the sake of the industry, according to one of Australia's leading lamb processors.

Country Fresh Australia livestock manager Andrew Jackson said lamb prices would need to settle at 450 cents a kilogram to keep the Australian industry sustainable.

Mr Jackson said lamb prices of 450c/kg and mutton at 250c/kg would be a win-win for all sectors of the supply chain.

He warned beef could be the big winner out of high lamb prices, as butchers moved to the product with the biggest profit margin.

He said that, in recent weeks, Country Fresh had paid 490-550c/kg for export weight lambs (22kg plus) from Riverina saleyards and private producers.

"I don't think these high prices are sustainable. We've got to be careful we don't out-price ourselves," Mr Jackson said.

"Good trade heifers are selling for 330c/kg landed, while our lambs are bought for 550c/kg landed plus costs.

"Butchers will start to push beef as they can get a better margin out of it.

"We have too much kill space in Australia and the next chapter is who will have the deepest pockets to last."

High lamb prices were not the only threat to the industry, according to Mr Jackson.

He said the nation's small sheep flock was in "dire straits', with the yearly slaughter exceeding levels for maintaining a sustainable flock.

Speaking at a Riverina prime lamb field day, Mr Jackson said global customers wanted antibiotic and HGP-free grass-fattened Australian product.

He said the US and an emerging Swiss market were built on a grass-fattened product while Japan took grain fed lamb.

"In Switzerland, we have gone from a small shipping container three years ago to 10 containers a week of high end, value added product," he said.

Another growing market is China, where importers prefer breast and flap cuts.

Five years ago, these secondary cuts would have been exported to South Africa or Papua New Guinea.

Mr Jackson said the trend to a 30kg Australian carcass was outstripping New Zealand lamb on the world stage.

"New Zealand lamb producers have stuck with the 15-17kg carcass into the European Union while Australian lambs have been getting bigger," he said.

"Our efficiency in bone-out product is why we are (winning) so many more markets."