International wool trader Australian Merino Export has suffered a 30-40 per cent drop in the wool market amid the COVID-19 pandemic.
Director Chris Kelly said they have been "severely" impacted with international clients cancelling contracts.
"It has been serious, especially when you lose such a big share of your market," he said.
"The wool market supply chain is made of wool growers, brokers, exporters, top makers, spinners, weavers, knitters and the garment shop who sells the products.
"A lot of the contracts that were in that pipeline have been cancelled.
"Even the contracts that were in place prior to COVID-19 have been torn up, reduced or cancelled completely ... as an industry it has been difficult."
Australian Merino Direct, located in Ararat, offers an introduction for wool growers to international clients through the affiliated Australian Merino Exports.
Mr Kelly said the company would normally distribute 65 per cent of its wool to China while the rest goes to Europe, Japan, India and Taiwan.
"Almost all of those other markets have stopped buying, except from China," he said.
"Now China has the luxury of having access to about 95 per cent of Australia's wool clip and their ability to buy that much in this environment is clearly too much."
Every year, about 500 shearers from New Zealand come to Australia to help farmers with the busy spring shearing period.
"They have a very good skill set ... with the border restrictions they will find it impossible to come," Mr Kelly said.
"When you take 500 shearers out of Australia it is very time consuming, there is going to be a shortage of shearers.
"That will also put pressure on Australia's wool market. Because if the shearer can't shear his sheep when he normally does and has to wait a couple of months, the wool becomes too long and you can cop a penalty.
"The Ararat area will be starting in a month ... it is a problem for the whole of Australia."
He said Australian Merino Export had adapted to COVID-19 by minimising cost and overhead structure.
"This wasn't something that was foreseen ... it crept up on everyone and you don't really have time to get in front of it," he said.
"The wool industry has been quite healthy in the past few years.
"Wool is not a commodity that you have to have, you can live without it. The wool industry is going to be very dependent on China's domestic market.
"We will try to continue trading that's all we can do ... the recovery will be led by the consumer."
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