This prevents the potentially fatal flystrike, where maggots hatch and burrow into the skin. Accumulations of urine and faeces in wool attract blowflies, leading to flystrike.

But hope for an alternative to the painful and controversial practice has arisen after the discovery of sheep with naturally wool-free behinds at the Calcookara Stud farm on the Eyre Peninsula in South Australia.

"We believe this will change the entire industry," said Peter Swan, genetics and wool quality programme manager for Australian Wool Innovation (AWI).

"Contamination of the wool has been a large problem, so if we can breed this trait successfully it would stop the urine staining of wool. It will stop the flies and the need for mulesing," he told Reuters.

Fourth-generation wool farmers Niel and Pat Smith first spotted the trait in their Calcookara sheep in 2002. They said their first reaction was that they would be unable to show their prize rams for judging.

But what was initially a concern for the Smiths could be a revolutionary development for a billion-dollar industry in a nation which prides itself as being built on the sheep's back.

"No commercial farmer likes mulesing. It is a horrible thing but it's far crueller to just leave them for the flies to take hold," Niel Smith told Reuters.

Out of 2,000 Calcookara sheep, about 200 ewes have "bare bums", while the Smiths say their rams "Cojak" and "Garrett" are showing the best of the bald-behind trait.

Swan said it seemed that the trait occurred naturally and that the wool quality had not been affected.

Scientists from the University of Adelaide and the AWI used sperm and eggs from the Smiths' "bare-bum" sheep to create embryos from which the first batch of lambs were born earlier this month.

"All of the Smiths' sheep have been mulesed in the past. The key now is to see if we leave the progeny unmulesed, do they get flystrike or not?" Swan told Reuters.

Industry officials say chemical dipping is an alternative to mulesing to prevent flystrike but is less desirable because it is a short-term solution and can leave residues in wool.