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By far the most common knitting wool in use today, merino was not always so accessible. Sheep originate from Asia Minor and parts of Europe, but the ancient Phoenicians, in their role as importers and exporters, introduced them to the North African region, and from there they were imported to Spain, Wikipedia suggests as late as the 12th century. Compare this to England, where sheep were introduced by Neolithic settlers around 4000 B.C.E.
Spain made up for lost time, though, by breeding a fine wool sheep. The Spanish imported English sheep to improve the quality of their stock and between the 12th and 16th centuries they became major wool exporters. The new breed, Merino, had a small body and soft, fine wool with a short staple. The flocks were owned primarily by powerful land owners in Castile who formed a guild known as Honrado Concejo de la Mesta. They formed agreements to allow the nomadic sheep right of way along Cañadas Reales (drover’s roads) still legally protected for sheep to this day, though the laws are no longer strictly followed. Some of the older cañadas may be neolithic in origin, following the paths laid out by migratory herd animals. Sheep can graze in areas too unstable for arable farming, so the sheep moved freely through the no man’s land between Islamic and Christian Spain, moving with the seasons, and making the members of the Mesta, who included many Spanish nobles and Church officials, rich. Members of the Mesta were exempted from military service. Exportation of their precious Merino sheep was punishable by death. Their power and wealth grew and wool money financed much of the Castilian economy. With only Spain and England as the only European wool exporters, it seemed like the wealth was only going to continue growing.
Habsburg Spain, however, had become overdependent on the wool money of Castile. The Mesta’s power was too great, the sheep too cossetted. The powerful Mesta began to ignore the cañadas, allowing their sheep to trample farmland without fear of repercussion. The land of Castile became barren. Crops failed, and grain had to be brought in from outside the region at great expense. The price of food staples skyrocketed. The economy was in trouble for other reasons as well. Near constant wars fought largely on credit had brought Spain into difficult straits at a time when it was still recovering from plagues and famines of the previous centuries.
In the 18th century, Spain relaxed its hold on the merino and began exporting small numbers of live sheep to other countries. The first major exportation, though, would come in 1765, when a large number of sheep from the Royal Escurial flock were sent to Saxony. In 1786, King Louis XVI purchased more than three hundred Spanish Merinos, the foundation of what would become the Rambouillet breed, which would in turn be the basis for the Australian Merino. Merinos have served as the basis and backbone for many sheep breeds around the world since they became available as breeding stock. The world at large gained access to the Merino sheep after Napoleon’s invasion of Spain, during which time many flocks were killed or destroyed by the invading army.
Today, the sheep that once was a protected state valuable is now the most common in the world. Almost all finewool breeds today are at least in part Merino. There are worries that a preference for merino wool may be endangering some of the more rough coated sheep, as the fall prices of wool in favor of synthetic fabrics have made the wool industry a costly and losing business proposition for many sheep producers.
(Note: Most information in the above post was obtained through specific web searches for information. I did try to find more than one source for much of the above, but there may be inaccuracies. Please let me know if I’m wrong in any specifics.)