SHEEP producers are being tempted to cut harder into their flocks as record prices for mutton become too attractive to ignore.

But in a double-edged sword, the high values are also making restocking more costly.

Both the prime and store sheep markets are emerging as battlegrounds between processors and producers, each keen to secure stock from the limited offerings.

That was evident at Hay's store sale late last month, where producers seemed to have more money, but the trade still took some old ewes and young Merino wethers.

Victorian producers are seeing the best of the mutton values at both the saleyard and over the hooks as a scarcity pushes prices skywards.

The Victorian mutton indicator closed up again late last month at 451c/kg carcass weight, a whopping 220c/kg higher than the same time last year and the best of any state.

But isolated sales are topping that price with mutton making up to 555c/kg at Bendigo on Monday last week.

The national mutton indicator slipped slightly late last month to close down 7c/kg at 411c/kg, but was still 37 per cent higher than at the same time a year ago.

Elders livestock co-ordinator Graham Nicholson described the mutton market as "volatile and scary".

While prices of up to 480c/kg for good heavy Merino wethers were "understandable", Mr Nicholson said prices paid for light sheep were "frightening".

"You can understand how a good Merino wether carcass can earn good returns overseas but these lighter sheep, you wonder about," he said.

Mr Nicholson said producers "can't believe the money they are making". "They've definitely sold sheep they wouldn't normally sell, and with the money in their pockets, will have that to spend on replacements," he said.

"It's why we've seen in excess of $200 paid for sheep already to replace ones they have sold."

The mutton juggernaut rolled on at Bendigo on Monday last week, where the best ewes sold for $155.20 and Merino wethers made $150.

The National Livestock Reporting Service quoted mutton $4-$5 dearer, with the 3000 sheep making 420-450c/kg carcass weight.