LAMB could soon be dressed up as mutton as a dire shortage of sheepmeat pushes prices skywards.

A critical shortfall of mutton to kill has squeezed the gap between lamb and sheep prices to within 80c/kg.

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Despite a strong Australian dollar, the Victorian mutton indicator closed last week at 395c/kg carcass weight, just 76c/kg short of the average price paid for heavy export lambs.

This time last year, that gap was 231c/kg carcass weight, with mutton making just 244c/kg.

Bendigo's sheep market last week showed just how hot mutton prices are.

The National Livestock Reporting Service recorded 18-24kg carcass weight Merino wethers sold from 421-503c/kg carcass weight.

This translated to $108.60-$123 a head.

And even on the eve of Easter, when processors normally curtail bidding due to a shutdown of their works, heavy and medium-weight mutton averaged 377-399c/kg carcass weight at Wagga Wagga last Thursday. Years of drought and now a better season are limiting the number of sheep available to kill.

Last week's NLRS figures show just 38,453 sheep were yarded in Victoria, South Australia and NSW. This compares to 91,970 for the same selling period last year.

Slaughter statistics also reflect the shortage of sheep.

Victorian processors killed 35,331 sheep last week, compared to 58,374 the same time last year.

But it was in NSW where slaughter statistics have crashed, with 35,118 sheep killed last week compared to 90,722 for the same week a year ago.

Sheepmeat Council of Australia  president Kate Joseph said mutton prices had "never been like this before".

She said a combination of burgeoning demand for Australian mutton had combined with a supply shortage.

Adding to the numbers squeeze were better seasonal conditions which had allowed producers to hold on to more breeders. "We all wish we had more mutton sheep to sell at the moment," Ms Joseph said.

"It doesn't matter what you get at the moment (for mutton), you can't complain."

Ms Joseph said she had sold old breeders in late February for between $80-$100.

The sheep would have made only $20-$40 in past years.

"We thought the prices were good then but they have gone up even more," she said.