Chinchilla cloth can be a confusing name for a fabric, given that it contains no chinchilla fur or fur fiber. A friend of mine speculated that it is called chinchilla cloth because chinchillas would rather you wear it than their fur! The real reason for the name? Read on...

This is from the VFG Fabric Resource:

Chinchilla cloth 
Constructed like fleece with a long nap, chinchilla cloth is given a machine finish which rubs the nap into nubs. It is made of wool or wool blends, and the warp may be cotton for strength. The town of Chinchilla, Spain, is where the present fabric was first made. 
Uses: Coats, hats 
See also:

Fleece
©Vintage Fashion Guild - Text by Margaret Wilds/denisebrain,  photo by Hoyt Carter
Right now I have a soft-as-a-blanket 1950s chinchilla cloth coat in my Etsy shop.



That “100% Sheeps Wool” seems to be directed at the confusion possible with the
fabric’s name

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