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I've been to sheep-shearings - as long as the sheep is regularly sheared, it'll know what's going on and won't be upset; it's not painful (as long as the person with the trimmer is expert enough not to nick the skin), and the wool starts peeling off in chunks anyway if you don't shear it during the summer.

Caveat: I have no idea if there's some horrible mechanized way to shear sheep at greater scale. But on the smaller scale the most efficient way is to keep the sheep calm and cooperative. The cheapest way to keep large numbers of sheep also seems to be to let them wander over a large area of cheap land (rocky, steep, uneven, etc. -- unusable for cow grazing or farming is just fine). On the Isle of Skye in Scotland there are simply sheep wandering everywhere, often in the roads, as the sheep farmers don't always bother with much fencing.

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