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Apparently there's an item called sheep shears. Characters with "pet pal" talent can equip this, talk to sheep and get some wool. Never knew that.
You don't have to equip it, I have the shears in my inventory (even in the backpack) and the option is there, I get the wool. There's also another sheep just where you start, when you go through the only unlocked door, there it is, with the Pet Pal talent, there's a funny conversation between you and that sheep.