By Toby Poston
Business reporter, BBC News, the Lake District
The coarse wool from Swaledale sheep doesn't earn much at auction
The flocks of sheep that cling to the fells and dales of Cumbria present an idyllic image of a hill farming tradition that stretches back over a thousand years.
Unfortunately the economic forecast for many of these sheep farmers is now as bleak as the weather on these windswept moorlands.
This type of farming has been propped up by subsidy for many years, but recent reforms to the European Union Common Agricultural Policy mean that financial support is slowly ebbing away.
And while hardy breeds such as the Herdwick and Swaledale may look fluffy and cuddly, the colour and coarseness of their fleeces make them unsuitable for making most types of clothing, and their wool has traditionally been used for carpets.
As with all sheep farms, the wool from these animals has to be sent to the British Wool Marketing Board in Bradford, where it is graded and then sold in fortnightly electronic auctions.
Wool prices have been falling steadily, to near 30-year lows over the past season, and for most hill farmers, the price they receive from the Board for their less popular Herdwick or Swaledale fleeces does not even come close to recouping their shearing and transport costs.
British Wool Marketing Board established in 1950 to provide a central market for UK's 60,000 wool producers
39m kgs of wool sold per year by fortnightly electronic auction
70% of British wool is used to make carpets
As a consequence many farmers prefer to treat the wool as a waste product and end up burning or burying it.
But some of Cumbria's farming community are using a little bit more imagination.
Simon Bland is a third-generation farmer on 120 acres near Penrith.
He last sent his wool to market three years ago, when he realised it was costing him 90p to shear each sheep and he was getting 45p for the wool.
"The wool clip used to pay my father's rent in the 60s or 70s, but I realised that shearing sheep had become more of a welfare issue than an economic one," he says.
Mr Bland reckons that he will earn a profit of £4,000-£5,000 from his flock this year, and has also had to contend with the delayed arrival of his Single Farm Payment - the new one-off subsidy cheque farmers are supposed to receive each year.
Adding wool to compost improves nitrogen content and water retention
Luckily, he has developed another source of income - compost.
He has been producing his own brand of peat-free Lakeland Gold compost for nine years using the bracken that carpets the valley his farm sits in.
Bags of success
For six of those years he has been trying to come up with a recipe that uses the wool from his sheep.
"I had seen old gardening books from the 1940s which talked about laying whole fleeces in the bottom of planting pits, because they help retain water and are a good source of nitrogen," he says.
These attributes make it an ideal partner for the bracken compost, which is a great natural source of potash, an essential ingredient for anything that fruits or flowers.
Now he has come up with a technique for adding wool to the compost mixture, and is trialling his new blend with a number of well-known Cumbrian gardeners.
He managed to use 50 tonnes of wool in his first batch of 50,000 bags of compost.
It has been on sale for a few weeks since it was profiled on the BBC's Countryfile programme, and Mr Bland has sold 6,000 bags so far.
He is even breaking the Wool Marketing Board's monopoly and buying wool from his neighbours for more than they can earn at auction.
He hopes it may help a few of them make ends meet.
"I think an awful lot of hill farmers are scratching a living. It will get worse and a lot of small farms will disappear."
A few valleys away, another farming family has found a different use for its woolly assets.
Christine Armstrong sold her interior design business to focus on wool
Farmer's daughter Christine Armstrong had left the land to open an interior design business, but came upon an alternative use for Cumbrian wool when she was renovating her 17th Century farmhouse.
She wanted to restore it using as many traditional materials as possible - lime plaster and mortar, horsehair - and found out that sheep's wool had been used to provide thermal insulation in the past.
There were modern equivalents on the market, but unfortunately they had to be imported from New Zealand.
A few years later and with some help from the non-woven textiles department at Leeds University, she had sold her business in Penrith and invested the capital in a new company, Second Nature, which turns British wool into insulation for buildings.
"I had to research the market place and my route to it," she says.
"This meant understanding the wool industry, how to buy it and how to manufacture the product. I also had to understand building regulations and what standards the product had to be made to."
The product, Thermafleece, is made from 15% polyester and 85% wool and marketed as a green alternative to traditional building insulation, which is made from glass or mineral fibres and uses a lot more energy in the manufacturing process.
Launched in 2001, the company's turnover hit £800,000 last year and is expected to grow 30% this year.
Thermafleece now meets all current building regulations
Despite its idyllic farmyard location, Ms Armstrong is determined for her business not to be seen as a cottage industry.
The company spent £30,000 on achieving British Board of Agrement accreditation so that Thermafleece met all current building regulations, and has worked hard on selling the product's environmental credentials.
The message has been getting through. The wool that used to keep Cumbrian sheep warm is now fulfilling a similar role insulating a variety of buildings across the UK.
Most Thermafleece is sold via builders merchants for use in private homes, but it has also been used extensively by historical organisations such as English Heritage and the National Trust, and in local authority and housing association building projects.
Woolly compost and wool insulation are never going to reverse the declining fortunes of Cumbria's hill farmers.
But they do send the message that with a combination of old traditions and modern business nous, it is possible to make a profit from the Lake District's fluffiest tourist attraction.