In T9 Beta a pen contracted pox with ~50 onions still inside. Another pen 240 coords away had < 10 onions but was safe. Owner of the safe pen took out all but 1 sheep and upped the onions to about 104. I killed 1 poxed sheep per minute for 4 minutes and the 240 coord away pen did not contract pox. (Y1-Akhet I-14) - tehm w/ Ashen

Near the end of T9, I started playing again. I built a sheep pen in Bahariya Oasis. My sheep have caught the pox about every 30 days. I have been playing in BO for 90 days now and just got "poxed" again for the third time. I can't say that I have all of the active sheep pens in BO but I've never seen another active camp in BO except for a late in the tale player that moved in near me - he has NO sheep, never have has. My sheep have never had less than 2000 feed. Conclusion: in a given area/region(?), every so many days, someone's sheep get the pox and if you have the only sheep, it's always your problem. (Y4-Peret III-24) - Petozer

Sheep may contract Sheep Pox from

Being underfed/starving (evidence requested)
Slaughter of nearby sheep with Pox (confirmed)
Randomly (2 adjacent pens, but only 1 has pox - highly unlikely 2nd was just outside radius of nearby slaughter)

Treatment

Once Animal Husbandry 2 has been researched, give the sheep Sheep Supplement
Alternatively, if Sheep Supplement is not available yet, build a new pen nearby and then destroy the infected pen. Your sheep will pop up and can be transferred to the new pen

Note that Sheep cannot be removed from an infected pen.