Two methods:

There are two main methods of producing woollen yarn: the 'Worsted' System and the 'Woollen' System.

 

The Worsted System creates a longer length wool staple and makes the wool into a 'top' before it is spun into yarn. 80% of Australian wool is made this way. The Woollen System uses a much shorter wool staple, taken from locks, crutchings, bellies and lambs wool.