Sheep are smart enough to distinguish between content and angry faces. They show a strong preferance for the happy human and sheep faces. http://news.bbc.co.uk/2/hi/uk_news/england/cambridgeshire/3796017.stm
There are also a few other studies that show that all animals pick up on feelings and emotions through their digestive systems. The digestive system, more to the fact, the nervous system that takes care of the gut, has receptors that can pick up on all emotions. Did you know that all animals have emotions and are capable of thought? Emotions are unconscious to most animals, but if one animal becomes frightened the rest of the herd, or flock in this case, feel it in their gut as a wave of awareness and act on it to survive. They also know, without a doubt, if you are being honest with yourself as well as with them. One thing about smiling at animals... remember that humans are predators. Sheep, Goats, Horses, Cattle, Deer... are Prey animals. To smile with your teeth bared is a threat to them. Direct eye contact for more than brief glances is also a threat. So remember, if you're thinking about going out and smiling at some sheep today... Don't show your teeth. Just Grin.
