I have read a couple of different versions of this folk tale but prefer the following which was written by fellow missionary , Shilo Cain.
Two young men loved the Cacique's (Chief's) daughter. While he alone determined her destiny, he loved his daughter and desired her happiness. He devised a contest that would be sure to show which young man would be best suited to marry his daughter. Each one must bring a gift. But not just any gift. A unique gift. One that would cause the Cacique to release his daughter to marriage.
One young man was very rich, and there was nothing he could not buy. He gathered every kind of animal and prepared them to be taken to the Cacique.
But the other young man was beyond poor (you knew it would be so, surely). He had nothing, and no way to buy anything for his beloved. As he wandered through the woods, he looked up and saw an elaborate spider web hanging from a branch. He thought to himself, "How perfect! I will take this as my gift!" But as he reached up to grab it, it dissolved in his hands. He left the forest weeping, completely defeated.
His mother heard his cries and found him. As he poured out his dilemma, she assured him that all would be well. She found another spider web and sat down to mimic it's pattern and create her own beautiful web. Using the hair from her own head, a stunning salt and pepper, she weaved the first ñandutí.
When the poor young man presented his gift, the Cacique gave his daughter to him. Since that day women all over Paraguay have been creating ñandutíi out of lovely colored thread.