While Australian merino wool growers are being subjected to boycotts initiated by animal welfare groups, New Zealand farmers have been quietly encouraged to replace the practice with other more costly and labour-intensive measures.
"Largely in New Zealand, where it had been practised, it's stopped now,'' New Zealand Merino chief executive John Brakenridge said of mulesing.
He said "a minority'' of growers were still doing it, as they looked for alternatives.
The animal welfare group, People for the Ethical Treatment of Animals (Peta), has encouraged and activated shop protests in a number of European and United States retail chains to stop them stocking products made from Australian fine wool because of mulesing, where farmers
use hot iron tongs to sear the skin folds around a sheep's anus.
It is done because urine and faeces can get caught in the folds of the skin, leading to fly strike and, in many cases, the animal's slow, agonising death.
Mr Brakenridge said major contract buyers of New Zealand fine wool, such as Icebreaker, SmartWool and Designer Textiles International, had agreed to pay a premium price for an assurance by farmers they no longer practised mulesing.
That wool is sold under New Zealand Merino's ingredient brand Zque, and to qualify growers must meet environmental, stewardship, social responsibility and product performance requirements, including not mulesing sheep.
"There are a number of platforms [and] animal welfare is one of them.'' Farms are audited by an independent third party.
"Our growers [understand] that if they didn't adhere to the issue, we in New Zealand will lose markets and overall wind up losing markets, as was occurring now with the Australian industry.''
It was important the industry was seen to be taking the issue seriously and not be accused of green-wash, or only offering a token response.
"Our differentiation needs to be bigger than non-mulesing,'' he said.
Peta has been made aware of what New Zealand merino farmers are doing and appears to have taken this into account in its protest activities.
Its latest target has been the British 200-store retail chain Matalan, which has declared it will not source Australian wool.
The Australian Sheep and Wool Industry Taskforce described the move as a joke, saying the retailer had never been a customer for Australian wool.
But the pressure from Peta has seen about 50 European and US retailers boycott Australian wool, including H&M, Timberland, and Abercrombie & Fitch.
Hugo Boss has also threatened to join the boycott, giving Australian sheep farmers until 2010 to stop the practice.
Peta has also been protesting outside Australian embassies in several European countries.
There was no single answer to replace mulesing, Mr Brakenridge said.
It required a mix of management changes, such as where tails were cut at tailing, extra crutching and more monitoring of flocks.
"It comes at an extra cost, hence the requirement from the market.''
Australian researchers have developed clips which are attached to the skin wrinkles, clamping them so it has a similar effect to mulesing, but is less painful. But markets do not see it that way and Hugo Boss has rejected the clips, calling them "clip-mulesing''.