Fine wool growers are in for a tough 12 to 18 months as the recession sees the auction price for some wool types $4 to $5 a kg less than a year ago.
New Zealand Merino commercial manager Keith Ovens said prices peaked a year ago before easing, but with sales of high cost merino wool suits and clothing falling 40% to 60% in some markets, it would take a while for wool stocks to run down.
"As far as a significant correction goes, nothing is going to happen in the immediate future unless something dramatic happens in the market or with supply."
Buyers bought their wool 12 to 18 months in advance and Mr Ovens warned that, with weak retail sales, it would take some time for those stocks to clear.
About half the fine wool handled by New Zealand Merino was supplied under contract to end users at prices Mr Ovens said were significantly higher than the current market.
The company had held two auctions in Melbourne this season, and while clearance had been above 75%, Mr Ovens said prices were well back.
In the first sale, 1500 of the 1800-bale offering sold and last week 1600 of the 2000 bales offered were sold.
Chinese buyers had become the largest purchaser of New Zealand merino wool this season, buying 80% to 90% of the offering.
Mr Ovens said a factor in New Zealand's favour was the dramatic decline in Australia's fine and crossbred wool production, for various reasons including drought.
In the year to June, production was 8.9%, or 33,800 tonnes, less than the previous year.
This was equivalent to 6.5 million fewer sheep being shorn.
Australia's latest drop in wool volume was equivalent to a 13.4% decline compared to the five-year average.
New Zealand's total annual merino production was about 8000 tonnes.