Woolworths has opened a new front in the supermarket price war by announcing a significant cut to its price for lamb legs alongside reductions in other fresh meat products.
As Coles responded with an immediate match to its rival's latest move on Wednesday, the peak farmers' body expressed concern about the impact any long-running discount war would have on meat producers.
Woolworths announced a 28 per cent reduction in its regular price for lamb leg roasts on Wednesday, plus cuts to other meat prices as part of a $45 million spend on lowering prices in the meat category.
Coles in turn announced a 30 per cent reduction in whole lamb leg roast in a weekly specials deal that ends on Tuesday, June 21.
The latest price battle follows $1 bread and the damaging $1 a litre milk saga, which has been criticised by dairy farmers since its introduction in 2011.
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Woolworths and Coles have also cut prices on whole chickens and BBQ roast chickens and despite rising beef prices in the past 12 months, the supermarkets have also focussed on reducing the cost of beef mince.
Both supermarket giants say they are dipping into their own profit margins to pay for the price cuts.
Forager senior equities analyst Daniel Mueller says while Woolworths can afford to fund price cuts in meat, he was skeptical as to whether the strategy would work given Coles and Aldi will most likely follow suit and lower meat prices.
"Fresh is one area that Aldi is not as competitive in as the bigger players and it may help with consumers' perception of Woolworths," Mr Mueller said.
"But it is creating another deflationary spiral and I don't know if it is a real game changer for Woolworths."
National Farmers' Federation chief executive Tony Mahar said farmers could not afford to absorb any price cuts due to increasing energy and transport costs, commodity price fluctuations and the impacts of droughts and floods.
"We'd be concerned if there was an ongoing approach from retailers to discount meat and that flowed back to farmers," Mr Mahar told AAP.
"It's fine for retailers to drop their prices periodically, and they have done that in the past, but if there were any moves towards a more sustained price reduction then we'd want to make sure it comes from the retailers' margins."
Aldi has been increasing its fresh offering and has rolled out new store formats in Sydney that bring fresh food displays to the front of the shop.
