Below is a map of the second island and circled in yellow are the locations that thread can be found in. Image created by @honeykonfetti on discord.

Thread can only be found in these two locations on the map, and it can not be crafted (in the current game state as of June 21, 2024).

Player beware! It seems to be the case that once the thread is collected, it will not respawn. So try to hold back on gathering it until you need it for the quest, otherwise you risk being softlocked.

I recognize that the developers are aware of the issues regarding the thread in game, however I would like to add a few notes of feedback.
There is quite a lot of confusion in parts of the game such as this one. Thread is a new resource that is not explained on how to acquire it and it hard to happen across because of how out of the way its locations are. It needs to be explained that it has to be found around the map (at first, my co-player and I thought we had to craft it from reeds) and it needs to be found in a place that the player is more likely to be in.
Additionally, when people are stuck on parts of the game's story progression, it is unacceptable to provide a solution in a random discord channel with high traffic instead of a more accessible place. Please find better ways to provide support for your players that have problems in the game, and keep it available for more people to see in case they are having a similar issue.
Thank you for listening to everyone's feedback! I hope the promised fixes are seen through.