After a stellar last year, lamb and wool prices are starting to drop under the pressure.

While they've already dropped, ASB's expecting to see both wool and lamb prices sink lower in the next few months, before strengthening again mid-year.

Rural economist Nathan Penny says this will impact New Zealand's wool production.

"That means the price of synthetic fibre has fallen which means more competition for wool and carpet manufacturers might increase the amount of synthetic fibres in their blends," he says.