EXCLUSIVE: THE controversial debate over mulesing has shifted into the sheepmeat sector.

The world's largest supermarket chain, UK-based Tesco, plans to source Australian lamb from flocks that don't mules.

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Tesco already sells Australian lamb, but has approached meat-processing giant JBS Australia to supply some of its stores with lamb from accredited, mulesed-free Australian farms.

Victorian Farmers Federation livestock councillor and sheep producer Geoff Fisken said the move reflected broader retail trends.

"It's just the way our customer is going. They are wanting assurance further down the supply chain that everything is being produced as ethically as possible," Mr Fisken said.

Though prime lambs are generally not mulesed, The Weekly Times understands Tesco is seeking lambs from flocks that do not practice mulesing.

Tesco has 5380 stores in 14 countries, 2500 in the UK alone, and strong ties to Coles which, over the past 12 months, has waged a war on its major competitor on the basis of animal-welfare issues.

Mr Fisken said producers should expect retailers to increasingly use such marketing tactics.

"It's just another one of those boxes producers are going to have to tick if they want to supply those markets," he said.

"The more demands they (the customer) put on us, the harder it is to meet those demands, but at the same time, it will accelerate change."

But while market pressure to move away from mulesing has caused angst in the wool sector, lamb producers have welcomed the inquiry.

Sheepmeat Council of Australia president Kate Joseph said the development was positive for Australian lamb producers.

"I think it's great. Any new market is a good thing," Ms Joseph said.

"In all markets, it's about supplying the customer with what they want."

It's not the first time the world's second-largest retailer, after Walmart, had made such inquiries, Ms Joseph said.

"I talked to them about it in 2009, at Anuga in Germany (a global trade fair). It's one market segment and if they want to differentiate (using that market segment), that's fine. We are always out to capture new markets," she said.

"There are a lot of lambs out there that aren't mulesed by nature," she said.

Australia has a relatively small European Union sheepmeat quota of about 18,700 tonnes. New Zealand, by comparison, has a quota to supply the EU with close to 230,000 tonnes, but had been falling well short of this mark in recent years.

New Zealand has traditionally dominated the UK lamb markets; almost half of all lamb produced in New Zealand goes to Britain.

Victorian breeder Dwain Duxson of Multipurpose Merinos at Marnoo, said branded meat offered exciting opportunities for producers.

"I think it's a good thing. There are quite a number of people out there breeding the type of sheep that doesn't need mulesing, which can be easily fed into niches like this."

He pointed to the wool industry's National Wool Declaration system as proof breeders could adopt farm assurance programs that would satisfy growing demands from retailers.

"With growing demand for protein, it's a niche market, but one that could increase dramatically."

"It's an exciting thing, the way meat brands are heading. As producers, we have to listen to what our customer wants.

"Instead of producing for a market we don't know much about, having a customer say what they need is a good thing."

JBS Australia sent its first shipments of Australian lamb legs to Tesco about six weeks ago and the retailer is reportedly hungry for more Australian lamb and niche products to complement its three standard offerings of lamb: value, finest quality and organic.

The retailer already stocks New Zealand lamb alongside locally-grown product.

JBS Australia declined to comment.