At the time of this post, there wasn't any information as to where this is used. I just looked on Mysterytour and the only place I found is in Mist Pumps. Wonder what is sells for.
The guilds have been known to give recipes that are low level even though they require a key item. This probably has a lvl cap of 4 even though you need a key item that you can't get until 28 >.<
Actually I wouldnt' be surprised if he didn't get the smooth sheep leather recipe. Albeit you need the key item to make it I would assume it's around the same level. But who knows, you won't have the key item to make it until you're much higher anyway.