A food source which have been seen around in the forest beside Alduin's Keep. Mutton may be a favourite food for Grayson, as while sheep have been seen near Alduin's Keep, they have not been seen near Grayson's house, hinting that they were killed for food.
They are also a source of wool, so another reason few are ever seen is because of the need for beds for everybody in the Badlands, as nobody would want to stay up late at night with the Nightmares around.
Sheep were also seen in Iron Myre, near Grayson's residence in Iron Port, where Drake called one a sheep and then called it a goat, confusing Armen, he said "Goat? You just said it was a sheep". He then confirmed it was a sheep.