THE agricultural industry was facing its biggest-ever challenge, Steve Ellwood, head of agriculture for HSBC bank, told a large gathering of farmers.

He was one of four speakers at a conference From Plough to Plate, held at Thirsk Racecourse and organised by HSBC and Wm Morrison Supermarkets.

In his introduction, Steve Nelson, HSBC divisional agriculture director, said it was important that all who earned a living in farming ensured they got a share of the market.

"There are three Cs - choice, change and challenge. We have to rise to the challenge that the Single Farm Payment will bring," he said.

Mr Ellwood said the advent of the SFP heralded a new era in UK Agriculture. A sound understanding of the food supply chain was increasingly vital in shaping farming decisions, he said.

"It is a brave new world you have to face and the Government is no longer going to provide a solution to your problems. This will be difficult for many when you are used to negotiating with the Government, but we have been catapulted into a new system. If you were to try to write a formula to get rich quick, agriculture is not the answer."

It was fair to say that agriculture had not faced such a challenge for 150 years, since the repeal of the corn laws, he said.

"The four things I believe businesses need to be successful are to be rational, open minded, honest with themselves and brave with choices," said Mr Ellwood. "The majority of farmers have not got the right structure to go forward. The old structure will not work with the new regulations as the level of flexibility of the 1970s is not available."

The total output of British Agriculture in the 1970s and 1980s, when farmers were urged to seek grants, had gone and the 1990s produced stock which could not be sold. That had seen a dip in output over the last two to three years.

"If the volume of output doesn't change, it is increasingly important for management to ensure efficiency, so that a profit is made. Labour is being replaced by machinery to create more profit. Fewer people are working harder, longer hours and farm incomes have declined," he said.

"This is the message: whatever else we do, we need to recognise that UK farmers are extremely vulnerable to exchange rates."

The SFP would demand three things of farmers: the need to recognise that the payment would reduce total payments received; that there would be more "green" strings attached to a payment for which farmers would have to jump through hoops, and a realisation that the payment was about redistribution of grants.

"Anyone who thinks he can set aside the Single Farm Payment for other sidelines is wrong. Most businesses are going to need the payment to continue to operate their farm."

Nor should payment be used for continuation of a system if it was not bringing in a reasonable return; changes were needed. "While payments will give us some breathing space, they will no doubt be reduced in the future. The gap between what farmers receive in grants and what the public buys in today's world of speciality products, packaging, quick meals, is widening. If agriculture wants to enjoy benefits of this, it has got to change.

"The sooner we get back to family Sunday lunches and proper breakfasts the better," said Mr Ellwood.

"Farmers need to find a way to work in this market, or they will lose it. What will make you succeed is confidence and determination to make it happen."

Other speakers were: Christine Tacon, general manager, Farmcare Division of the Co-operative Group; Chris Blundell, Wm Morrison Supermarkets, and Irene Dorner, general manager, HSBC