Version 0.202.14 (Hearth & Home) introduced sweeping changes to the food system. One of these is that domesticated animals are now protected from friendly fire. This is helpful to keep from killing your own guard wolves, for instance.

However, to butcher your animals for meat and leather, you need to bypass this protection. You may turn on PvP (enable friendly fire) to allow yourself to damage your animals (and friends). Otherwise, you can craft and use the Butcher Knife, whose entire purpose is to allow you to slaughter your livestock without the risk of team-killing.