"I have to look at making the most profitable use of my land," the 42-year-old high-country farmer said.
Mr Pinckney has reduced the number of merinos he runs on his and wife Jan's 12,500ha property, near Cromwell, and has invested in viticulture projects.
He is also exploring tourism-related activities.
Like some other merino farmers, the Pinckneys had to choose between two business models: traditional merino wool production, or the "higher potential" opportunities of the region's expanding viticulture and tourism industries.
Some farmers claim government policies and rising costs are undermining the viability of the fine wool industry, which has been cited as the business model for other primary industries - such as the dairy, kiwifruit and meat industries.
New Zealand Merino chief executive John Brakenridge fears reduced sheep numbers could prevent it filling some future supply contracts as tenure review, higher rents and costs, irrigation, subdivision and viticulture reduce the breed's attraction.
Merino wool has been transformed to a high-value product by uniting growers to create scale, then linking them with end users.
But falling returns and increased costs had prompted Mr Pinckney to cut stock numbers and look at other options.
A 23ha vineyard was planted on the farm in 1999 and now produces about 2000 cases of predominantly pinot noir under the Northburn Station label.
The Pinckneys have since decided to pursue a larger slice of Central Otago's burgeoning wine industry and are opening a million-dollar, 531sq m, multipurpose wine-tasting and function centre in December.
Mrs Pinckney, a former chef and restaurant owner of Cavells, in Queenstown, now runs her own catering business and produce store in Cromwell.
While merino wool appeared to have a growing market in the clothing and apparel industry, Mr Pinckney said his average returns had fallen in the past three years.
"If merino was demonstrably profitable we would be cranking up our flock numbers," he said.
By Matthew Haggart and Neal Wallace
