A crowded hay heck, or one which is placed too high, can lead to this, where sheep sprinkle hay including seeds on each other's backs. Add in endless rain, some heat above 7 degrees C and the hay seeds germinate. Another result of moisture plus warmth is a pink algae - one of my very fine-fleeced ewes turned pink sometimes and of course it wrecked her fleece for selling.
If left then you will get rotting of the fleece and potentially flies etc attracted to the rot. Best to clear/shear it off.
All you can do to prevent this is to alter your feeding system to try to prevent sheep sprinkling hay on each other, or move somewhere dry