This paper investigated the relative financial performance of woolled and mutton sheep and the determinants of woolled sheep ownership for 34 full-time sheep farms in Laingsburg South Africa, where rainfall is only 128 millimetres per annum. A comparison of fourteen woolled sheep flocks and eight similar sized mutton flocks revealed 1) a slightly but insignificantly higher unit production cost for wool producers, 2) a 40% but insignificantly higher net farm income per breeding ewe for woolled sheep, 3) a significantly lower tagging percentage for woolled sheep and 4) a significantly lower predation percentage for woolled sheep. The percentage of woolled sheep in the flock was a logit function of farm size, size of the irrigated (crop) area, tradition and terrain ruggedness, although the latter was not significant. Farmers in extensive grazing areas should take notice of woolled sheep's ability to compete and the wool industry should pay attention to further improving the reproductive performance of this sheep type. The finding of woolled sheep's apparent lower susceptibility to predators deserves further study as it could become a strong argument for why farmers ought to switch (back) to woolled sheep.