www.horse.com is an excellent reference for equine behavior and facts. An article of interest contains the following:
"According to David Whitaker, PhD, of Middle Tennessee State University, "Horses depend on their sense of smell the way we depend on language."
It's generally agreed that dogs are the domestic animals with the most sensitive noses, but horses aren't far behind. As prey animals, it behooves them to be able to detect even the slightest scent of danger on the wind. They're also quick to detect the "smell of fear" in other animals and in humans (probably an emanation of chemical signals we cannot detect). Many trainers over the centuries have agreed that horses also seem to be able to recognize the smell of death, sometimes reacting suspiciously to a spot where another horse has died, sometimes for months or years after the animal perished."
The full article is located at
http://www.thehorse.com/ViewArticle.aspx?ID=62 but it may require sign in.