Farming leaders fear New Zealand sheep farmers may be forced to electronically tag the country's 34.2 million sheep now it will be compulsory for United Kingdom farmers to do so from January 1 next year.
The Daily Telegraph has reported the European Union has passeda law requiring all 30 million UK sheep to carry electronic identification tags (EID) so their movements can be tracked from birth to death.
British farmers have vowed to fight the law.
Ian Corney, the chairman of the body implementing an EID scheme in New Zealand for cattle and deer, said it was only a matter of time before it would be a requirement for sheep.
"I would have to say it was definitely on the horizon. We have seen Australia tagging sheep and the European countries moving into it."
EID tags have been a requirement for European sheep farmers since 2003, at a cost of $NZ270 million, and EID was being implemented to help contain an outbreak of exotic disease, such as foot-and-mouth.
Federated Farmers meat and fibre section chairman Bruce Wills feared the requirement could be imposed on New Zealand.
But if it was proposed, he would want to know why and what in-depth analysis had been done.
Political and farming leaders and the National Animal Identification and Tracing (Nait) implementation body have all said that while markets required traceability in cattle and deer, there was no such driver for sheep.
That could change, Mr Wills said, if UK farmers were to demand all lamb and sheep meat suppliers to the British market had to meet the same requirements as them.
A Nait system would be in place for New Zealand cattle and deer farmers from mid-2011 due to market concern after several incidents of bovine spongiform encephalopathy (BSE) in cattle supplied from Canada, the United States, Britain and continental Europe.
Nait project manager Craig Purcell said, in an interview, the system would allow the movements of cattle and deer to be monitored throughout their life but the technology could also be used to track the nation's sheep flock.
He said little work had been done on implementing it for sheep.
Mr Corney said it was fruitless for farmers to ignore EID.
"As the price of tags fall, the technology gets better and markets more and more demand it, it is not something we say `no we're not going to meet it'."
With 70% of lambs born in New Zealand going to slaughter, that could change the way a traceability system worked here.
UK farmers were digging in to fight the measure, which was estimated to cost the industry $NZ160 million.
An electronic reader was estimated to cost $12,000 and tags about $3.70 each.
There was already talk of protesting on the streets, with farmers saying the logistics made tagging of sheep impossible to implement.
Mr Wills said any move to implement it in New Zealand had to be based on market requirements and market reward.
"If there is a good return back to farmers for the additional cost of compliance, we don't have a problem with that."