The last patch introduced additional sheep spawns; but it's still not enough. On Balmung sheep are still camped 24/7 and prices have barely dropped on the markets - the increase in supply simply increased demand due to the perceived availability of the substance.

However, I believe I've identified the bottleneck and how it can be resolved.

The problem is that fleece is being treated the same way the other weaving materials are; you need 2 fleece to make 1 yarn and you need 2 yarn to make 1 bolt of wool. In otherwords 1 bolt of wool needs 4 fleece (1:4 ratio) - this works fine for gathered materials like flax, and has parity with the mining crafts (ie. 3 mythril ore per ingot, 4 electrum ore per ingot), because it encourages the consumption of what is a very easily obtained material. Leatherworking materials are almost all obtained by killing mobs - yet leatherworking does not suffer from over-farming typically. For example raptors are seldom over-farmed even though they provide the equivalent level craft material as sheep - the reason is simple: Leatherworking materials are crafted at a 1:1 ratio, Vs weavers 4:1 ratio.

So, you can see the answer: Fix the ratios!

This can be approached from three directions - by adjusting either the input or the output. In the input case, you reduce the amount of materials need, ie. 1 fleece = 1 yarn, 1 yarn = 1 bolt. Alternatively, you increase the output to suit ie. 2 fleece = 2 yarn. 2 yarn = 2 bolts. Finally, they could increase the fleece dropped - leather drops 0-3 units per animal, to make sheep equivalent sheep need to drop 0-12 fleece per kill.


tl;dr

They need to treat fleece like leather and give it a better ratio of raw materials to products.