With the pound still weak against the euro and supplies of new-season lamb tighter, prices should remain above long-term average levels.

But Eblex Ltd says producers will still need to keep a close eye on rising costs to make the most of favourable trading conditions.

The latest figures show high slaughtering of old-season lambs pushed sheep-meat production up significantly in the first four months of the year.

But the favourable exchange rate also meant a better uptake from the export market, with year-on-year volumes up by about 2,000 tonnes, or eight per cent.

It also had a marked impact on imports which were 1,600 tonnes, or three per cent, lower, with chilled imports in particular showing a decline of 12 per cent on last year.

The overall picture was that, from being three per cent below the long-term average in January dead-weight, lamb prices strengthened to become 19 per cent higher than the average in March and 26 per cent higher--at 370p/kg--in May.

However, Eblex economic and policy adviser Michal Kolesnikow said there was a downside.

"These prices led to an increase in imports and sparked some export resistance from April, and those two factors led to a cooling- off in levels," he said.

"Even so, returns only fell back in line with the normal seasonal pattern to the end of June, and they have remained 23 per cent above their long-term average at 330p/kg deadweight."

Meanwhile, with the pound down about 15 per cent against the euro year-on-year, export prospects for the rest of the year continue to look good--barring any unforeseen marketing disruptions.

Sheep-meat exports are expected to reach 82,000 tons, compared with the 78,000 tons forecast at the start of the year and the 70,000 tonnes actually exported last year when figures were depressed by foot-and-mouth controls.

As for imports, they are now forecast to reach 132,000 tons--1,000 tons less than envisaged at the start of the year.

At the same time, the continued decline in the national breeding flock and lower lambing rates than last year's historic high will probably result in a lower overall 2008 lamb crop.

While the larger than normal carryover of lambs from 2007 means total slaughterings for the year are expected to be up by two per cent, the underlying trend points to falling lamb availability over the rest of the season.