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Yeah, took me a while - you need a sheep farm first, not a farm house as I discovered. A sheep farm also counts as a pasture for 5 sheep.
Then you need the sheep themselves and I got them through the livestock trading post. You need to set your target quota of sheep on the right hand column. Then you need a family assigned there to bring them in. They can bring in a max of one per month so it takes a while.
Made it through the first winter without overextending, made a fletcher in one of my level 2 houses, suddenly found myself with a fuckload of warbows and 200 villagers to use them. Shat on 3 bandit camps from afar (with spear line to protect them). Now I'm about to use my influence and try to take on another region. Got sheep in pastures, fertile farmland filled on rotation, huge orchards.
Think when this game is fully featured and tidied up it's gonna be special.