On the 20th, Barley will come by and ask if you would like to enter one of your sheep in the sheep festival, which takes place the 21st in Rose Plaza. If you're going to enter a sheep, make sure it has all of it's wool. Barley will take your sheep from your farm for the contest.
When it's the 21st, go to Rose Plaza at 10:00am. There is a small gathering of people looking at various sheep. To start the festivities talk to Barley. The screen will go black and then the festival is over. Barley will return your sheep back into the barn so don't forget to feed it before you go to bed.
If you win you'll earn 10 Animal points.