The reason the sheep are "mutilated" is to prevent fly strike. Fly strike is where botflies lay eggs around the sheep's anus. The eggs hatch into maggots which then eat the animal. Alive. From the inside.

The picture you see here is completely misleading, because these sheep's tails have been cut off. Most sheep have their tails removed through a method called docking. Docking is where a tight rubber band is placed high up on the tail. It cuts off the blood circulation and the tail slowly drops off over the course of a few months.

Do farmers want to do this to their animals? Of course not! They do want to prevent them from being eaten alive from the inside out though, so that takes priority.