The 50 million sheep of New Zealand outnumber its people 13 to 1, the highest such ratio in the world. At the wool industry’s peak, in the 1950s, the wool growers of that country delivered 40 percent of its total export revenues. Yet this figure has now fallen to less than 4 percent, with a proportionate drop in the industry’s profitability and pride. New Zealand accounts for 14 percent of global wool production—second only to Australia, with 31 percent—and is the world’s largest producer of "strong" wool used mostly for carpets. But for the past 20 years, competition from synthetics has driven down the price of clean strong wool by an average of 5 percent a year, to $1.90 a kilo, from $7.30.¹ At the same time, production has dropped to 135,000 tons a year, from 190,000 tons, as farmers switch their land to other uses. Thus wool has fallen behind beef, lamb, milk, butter, cheese, fish, fruit, and wood and pulp as an agricultural export earner.

In a study of the industry’s prospects, McKinsey concluded that the route to profitability is improving productivity rather than raising wool prices. Pointing to the long-term decline in agricultural prices and...