Lice irritate the sheep's skin, causing them to scratch against trees and fences, which damages their wool.

Rowan Woods, a wool broker in Forbes, said the lice problem in flocks was the worst he had seen in a two-decade long career, and some farmers were having to deal with the costly pests for the first time.

''There are more people affected by lice than I can remember,'' Mr Woods, the managing director of Jemalong Wool in Forbes, said.

He said lice could cost farmers thousands of dollars because of the poorer quality wool.

Not only is the wool matted and ragged from the constant rubbing, infested sheep excrete waxy substances from their skin which can discolour the fleece.

This could knock more than a dollar a kilogram from the price of the wool, which would be a discount of more than $14,000 to a farmer shearing 2000 sheep.

This cost did not include the loss of wool rubbed off in the paddock, said Mr Woods, who helped organise a workshop in Parkes to discuss the issue.

Garry Levot, a parasite expert with Industry and Investment NSW, who spoke at the workshop attended by than 70 sheep farmers, said chemical resistance and inadequate management of flocks had contributed to a recent increase in lice infestations.

Farmers could overcome resistance problem by using the range of products available to get rid of lice and rotating from one group to another.

Investing in fences was also important to prevent the pests from spreading.

''Without good fences it is difficult to control sheep, let alone the lice on them,'' Dr Levot said.

Jack Hewitt, who has 250 ewes near Gunnedah, said he routinely applied a lousicide after they had been sheared. ''If the sheep are lousy their wool is devalued. The cost is too high.''

A matted fleece was also hard for shearers to remove, he said. ''They have to jab and poke and prod with their hand piece and that makes it difficult for them as well as the sheep.''

Sheep lice costs the state's producers about $123 million a year in treatment costs and lost production.