Australian actor Toni Collette has backed away from her strong criticism of a controversial farming practice after talks with wool farmers.

US-based animal rights group People for the Ethical Treatment of Animals (PETA) last month enlisted the Oscar nominee's help in its fight to end mulesing - in which farmers cut skin folds from sheep's backsides to prevent flystrike.

Collette wrote an angry letter to Prime Minister John Howard demanding an end to what she said was an "unimaginably cruel practice".

The Australian wool industry has agreed to phase out mulesing by 2010 and sought talks with Collette.

The actor released a statement today to clarify her position.

"I have had contact with a number of farming organisations and individual farmers, and now have a clearer understanding of the complexity of the issues surrounding mulesing in Australia," Collette said.

"The issue is not as black and white, as was previously presented to me.

"I was given to understand that there were effective and humane alternatives to prevent fly strike and they are currently available. I am now aware that there are no simple alternatives available to farmers at this time."

Collette said she hoped an alternative to mulesing could be found much sooner than 2010.

The Australian Wool and Sheep Industry Taskforce, a coalition of groups formed to fight PETA's campaign, applauded Collette's statement.

"Toni has taken the time to review our information and was motivated enough to clarify her position. For a woman of her profile that takes enormous courage and I applaud her for that," taskforce spokesman Robert Pietsch said.

The wool industry argues that ending mulesing now, without a viable alternative in place, would result in the deaths of millions of sheep from flystrike.

PETA says the practice could be scrapped immediately and has urged clothing retailers to join an international boycott of Australian wool.

The campaign has had limited success with some US and British retailers joining, but others - notably Italian fashion giant Benetton - resisting.

PETA's boycott has landed the group in the Federal Court in Australia, where research and development company Australian Wool Innovation (AWI) is trying to use trade practices laws to end the campaign.

That battle is continuing, with the court throwing out AWI's original action and ordering it to pay costs of PETA president Ingrid Newkirk, but permitting the company to resubmit its claim.

PETA released a statement today saying it has asked the court to strike out the latest version of AWI's claim.

AAP