Do I need to sand my new fence before staining?
If you were hoping for a smooth finish, buying rough lumber was probably not the way to go.  Nobody would try to sand a fence - if nothing else, because of the time required.  Boards like that get run through a planer to take off the roughness in a few seconds - sanding would take far longer.  I suspect you'd throw in the towel at about board #2, even using a belt sander.

Cedar is soft and porous, and will absorb stain just fine either rough or smooth.  As far as application goes, either way should work.  You'll have to repeat the process every few years anyway if you want to maintain the look and protect the wood.  Personally, I'd stick with what you've got, make sure the boards are dry and clean, and rent or buy a good sprayer.