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oh, trust me - they certainly do! i had 80 mules for a 40 man party, and could barely move...
as far as i know herd penalty is party size : animals ratio. all horses, mules, camels, hogs, sheep and cows count towards it. to avoid that you either need to get more men or fewer animals.
So if you have x number of mounted units and y number of foot units, you can have x + 2y total horses, sumpters, mules, warhorses and herded animals without incurring herd penalty.
This also allows you to get the map speed bonus for having mounts for your foot units to ride.
I hardly ever herd sheep, cows or pigs because of the hit your speed takes with them.
Note: Once you have maxed out your herd penalty, you can pile on as many animals as you want and your speed won't go lower than 1. I have collected as many as 3000-4000 mules and a like number of sumpters for trading and still been able to move at speed of 1. But if you try to do that, you had best be the meanest mother on the block because you damn skippy cannot outrun anything.