Wool prices held firm at New Zealand wool auction even though Chinese buyers were not present due to the Chinese Lunar New Year holiday this week. China is the largest export market of New Zealand. At the auction, some 83 percent of the 12,024 bales of wool offered were sold.

The price for clean 35-micron wool, a benchmark for crossbred wool used for carpets and accounting for the majority of New Zealand's production, advanced to $5.81 per kilogram at the combined North and South Island wool auctions, from $5.74/kg at last week's auctions, according to AgriHQ. That's 14 percent higher than the same time last year.

As per analysts, New Zealand wool prices are being as sheep numbers fall to the lowest levels in more than 70 years, and as a 10 percent drop in the value of the New Zealand dollar against the US dollar in the past year makes the country's wool exports more affordable. Still, a slump in the price of oil has made rival synthetic fibres cheaper, keeping the textile market competitive.

Lamb wool, traded at record highs of $7.50/kg this season, plunged to $7.03/kg at this week’s from $7.14/kg last week, although it remains 11 percent above the same time last year.

According to Agricultural specialist Rabobank, wool exporters globally are facing some headwinds through 2016. With synthetic fibres already at low levels and weak oil prices set to continue, the textile fibre market is likely to get even more competitive.

Currency and tightening supply will be critical factors in buffering these challenges to protect returns to New Zealand woolgrowers.