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Taken from BCRescue.org
What exactly is "herding instinct"?
The herding instinct in Border Collies is a behavioral trait that has been bred "into them" over the past two hundred years or so. What many people fail to realize, even long-standing Border Collie owners, is that the herding instinct is simply a modified version of the killing instinct of wolves. The instinct has been toned down somewhat through selective breeding. In fact, the instinct has not been bred "into them" but rather, "out of them". Border Collies retain the circling and gathering instinct so vital in hunting wolf packs but refrain from actually going in and making the final "kill".
Rogue dogs however, are not uncommon, and in many European countries, Australia and New Zealand, where the dogs are often allowed to roam free, sheep and calf-killing Border Collies can pose occassional threats to livestock. Many people say that once a Border Collie has tasted blood, they can never be trusted again and normally, the dogs are summarily exterminated.
The instinct to herd in Border Collies evidences itself differently than in most other herding dogs. Whereas most breeds of herding dogs drive the livestock away from the handler, Border Collies circle the livestock at the far end and bring them back to the handler (known as "gathering" or "fetching"). Additionally, Border Collies tend not to use force (initially) to drive the livestock where they want to but rather, use what is known as "eye", a sort of threatening stare-down that intimidates the stock into moving in the desired direction. If the non-physical means of moving stock do not work, a Border Collie's natural instinct is to slowly escalate the encounter into an ever-increasing use of force. Barking, nipping, and eventually gripping (biting) are used to get the point across to the more stubborn sheep.