Woolgrowers Robert and Pamela Sandlant produced the 100kg bale, which measures 11.4 microns.

Mr Sandlant said it was the best parts of the fleece taken off about 200 sheep in late December and early January.

Previously, a bale from a Hillcrest stud in the New South Wales Southern Highlands held the record for the finest bale, after it measured 11.6 microns.

It sold for $259,000.

The Sandlant's bale will go under the hammer next week and is tipped to make between $2000 and $3000 a kilogram.

The bale is expected to be sold to one of the world's main processors in Italy or India and is likely be used to make designer men's and women's suits.

Mr Sandlant has been farming merinos for the past 40 years to grow superfine wool, before going into ultrafine wool nine years ago.

The fourth-generation woolgrower runs about 6000 merinos on his 202ha property.

He uses genetics from David and Sue Rowbottom's Rowansville stud at St Helens in Victoria's southwest.

Mr Sandlant said the processes between growing the superfine and ultrafine wool were totally different, requiring three full-time staff and part-time staff, seven days a week.

Despite producing the world's finest bale, Mr Sandlant said he believed there was still scope for a finer wool to be produced over the years, although he expected it would be harder to do.

"With the testing machines and genetic machines open to us, I think we can go a bit finer yet," he said.

"We do get individual animals who can still do 10.5 microns, just one or two (out of the flock)."

Mr Sandlant said it was great to have someone committed to the industry like David Rowbottom.

"A lot of paddock wool hasn't been making much money over the years, so for the people who stay in the industry, it's a credit to them," he said.