"Around Christmas, when we were seeing an increase in prices, we did see people looking at cheap proteins such as chicken and pork, and lamb was really becoming an item for a special occasion."
Andrew Murray, who owns The Milford Butcher in Auckland, said customers started to balk when a standard leg of lamb hit $55 last year.
"It really did scare a lot of people and it became a luxury cut.
"A lot of people were definitely frightened by the price and started using alternatives."
A leg of lamb now costs about $15 to $18 a kilogram.
Some supermarket chains have been discounting lamb to around $9 and $10 a kilo - down from $22-$23 a kilo just before Christmas.
"People have have noticed that the price has come down," Mr Murray said.
Lamb prices hit a record $156.70 a head in September last year, but look likely to average $114.75 a head in the current 2011/12 year, according to Beef and Lamb New Zealand.
The general outlook for 2012-13 is for per head prices to fall by another 10 per cent.
The price of a frozen leg of lamb exported to Britain has fallen by about 41 per cent in the past year and the price of a French-style rack of lamb to the United States has dropped by about 18 per cent over the same period.
Domestically, the price decline has been reflected in the food price index for June - the most recent figures available - which showed prices for mutton, lamb and hogget feel 1.4 per cent over the month, and were down 5.5 per cent compared with June last year.
Beef + Lamb New Zealand chairman Fred Hellaby said lamb was a high-quality product and Kiwis would be pleased to see it back in their shopping trolleys.
"Obviously it's important consumers can afford lamb again," he said.
"But that balance we want is for sheep farmers to be able to stay in business - so we hope to find that middle ground."
