It's all processing. Wool is a free by-product, sheep have to be sheared. More than 20 years ago, it was a pretty lump sum for someone who would shear 10K sheep a year. Still not much compared to the shearing price, but that helps sheep get more meat, reduce disease problems, and also reduce their size to the feeding stations. So a win for everybody.

Then, everything closed and the only thing left was to send it to China. Priced dropped entirely, to the point where it would mostly be considered a net negative. You have to store it before you can send a batch, and that takes a lot space. Not only that, but it has to stay dry. Then, consider you want to have a basic sort already done, because you don't want the whole batch to be paid little because it would be considered the lowest grade. So Bags should be consistent; they also have to be dense enough to avoid taking too much space (typical bags are around 1 cubic meter / 100kg). Most of these operation require quite a lot of very tiring human labor, which also require some skills, a problem pervasive with the sheep industry.

So yes, in the end it's too cheap to produce but too expensive to buy.