Erm, we're talking about clooning here, aren't we? Not genetic modification? Because it's GM which allows you to "implement genetic traits that never were part of the species' gene pool".
Cloning a sheep will not produce "penicillin-producing, medicinal drug-dispensing lamb chops". It'll just produce more plain, ordinary lamb chops.
I'm not saying that the use of cloned animals for breeding stock is a good plan, however, as it will likely reduce the genetic diversity of the breeds. Here's the scenario: a particularly big, juicy-looking bull is bred by normal means. Farmers want *their* beef herds to gain some of this big-ness and juicicity. Ergo, they all buy clones of this super-cow (Uber-milch?).
So suddenly, the next generation of each herd shares a lot of the same DNA, as each calf, in each herd, born from one of these clones effectively has the same father. Now, follow this through each generation, with the "best" bull being cloned and each herd getting one of these clones - pretty soon we have a very genetically uniform population.
Now, imagine a new bovine disease (BSM v2.0, or somesuch). In such a uniform population, all individuals will have about the same succeptibility to the disease - none will have more natural imunity/resilience than the rest. So if the disease is virulent enough, the population could be decimated, with no pockets of resistance to recover from.
A big risk to take for a juicier steak...