Yes, rules can get messy when mixing game mechanics.
On page 45 of CAR v7.4 you can see what the dragon eats (including shepherds).
So it's a matter of going from case to case until eventually, you learn it by heart. To some, this is the intriguing part of the game.
Quote from page 45:
Dragon meal plan (dragon can eat): follower, follower on a tower, big follower, wagon (has a tasty crew), mayor, phantom, abbot, shepherd, sheep token, builder, pig, mage, witch.