Relatively few lambs now pass through an auction. Most producers have developed a relationship with a processor and sell their lambs directly to it. A producer can forward contract lambs or sell them at the time they are shipped. There is a detailed classification system and the producer gets a printout showing how every lamb sold was graded. The identity of the lamb is kept through the slaughter plant and the classification is based on the carcass.
Primary criteria are weight, thickness of fat and confirmation.
The original sale price is based on the desirable grades so lambs that don't meet the grade are docked. The prices paid to the producers the last few years have been favorable and allowed efficient sheep farmers to make a profit after many years of red ink. Most of the producers visited had at least 2000 ewes as well as cattle and sometimes deer. Relatively little labor is hired by farmers. The whole industry from producer to marketer takes advantage of the benefit of scale which helps to keep the cost per unit low.