The two companies have met four times since just before Christmas, and Primary Wools chairman Bay de Lautour said there was still plenty of common ground to explore.
"We can see a model that we can agree on," he said.
While not prepared to elaborate, Mr de Lautour said such a model would not be one where a grower body stepped in and took over the wool industry, saying that had been tried many times before and failed.
"From my point of view if we were to get something going, say one big farmer co-op, we have got to make sure everybody in the wool industry has got a part."
Mr de Lautour said farmers were tired of in-fighting between the commercial companies.
He saw a structure where farmers were united but commercial entities were still free to function.
Wool Grower Holdings chairman Jeff Grant said he wanted to explore all options, ranging from a merger to a collaborative working agreement.
He was sufficiently optimistic to delay the release of Wool Grower Holdings (WGH) capital raising prospectus until all options with Primary Wool had been exhausted.
Should those talks fail, he expected to go the market with a prospectus by June 30.
Wool Grower Holdings owns 50% of Wool Partners International (WPI), having bought it off PGG Wrightson in July 2008 for $37.5 million.
PGG Wrightson has retained the balance.
Primary Wool is a 50% shareholder in Elders Primary Wool.
Mr Grant said WGH still owed PGG Wrightson an undisclosed amount of money after buying its strong wool business, the transaction initially valued at $46 million.
The lower sale price was the result of PGG Wrightson excluding its mid micron business, which it sold to New Zealand Merino, closing debt levels and final due diligence adjustments.
The initial agreement involved $10 million in cash, with the balance a combination of debt and equity in WPI.
Wool Partners International chief executive Iain Abercrombie said recently the company had survived on a $10 million loan from PGG Wrightson, used to buy the WPI shares, plus operating revenue from handling 45% of the country's strong wool clip.
Agriculture Minister David Carter said he was confident Murray Horn, an independent convener appointed to unite the strong wool industry, was making progress.
He said his optimism came from farmers and the industry saying that the status quo was not an option, and the fact Dr Horn came from outside the sector so had some independence and that he was determined to achieve what he was asked to.