You have to farm for it. Places like Waterworks, Briskbreeze, Ghost Avalon, Mirror Lake. It's one of the new reagents required for the transmute to Amber, Hair from Merle's Beard.
I am totally amused by needing Merle's beard hair for a spell. I love it.
Question: why on earth would any of the farming mobs or bosses HAVE Merle's hair on them as a drop??? Kinda funky isn't it?
What if it were something that could be found lying around, like mistwood. Of course the thought of Merle's hair lying around the spiral doesn't sound much better, does it?
Eh, I'll take what I can get. I'm just happy to have a transmute for amber.