SHEEP farmers have plenty of reasons to be optimistic.

John Thorley, chief executive of the National Sheep Association, gave this upbeat message at the fair, which he described as a landmark occasion.

It was the first major sheep event of 2005 and in the era of the new single farm payment.

"It is a time for reflection; a time for looking for opportunities - not only for our own businesses but the sheep industry in its entirety," said Mr Thorley. "It is worth questioning whether we as sheep farmers have any reason to have confidence in the future.

"I think we do, for a whole variety of reasons, but the key and pivotal reason is that we still have the most forward-thinking sheep industry in Europe."

Mr Thorley said the future was "a bit bleary" because there were a great number of imponderables, but the UK was still the most important sheep meat producer in Europe.

The continued low price of grain might result in more marginal lowlands being put to grass and grazed by sheep. This could result in the hills and uplands becoming much more of a breeding ground for the Mule and half-bred ewe, with the new lowland grazing returning to its traditional role of rotational farming, including sheep to increase soil fertility.

Although that could lead to a slight increase in sheepmeat production, Mr Thorley believed it could be spread out more throughout the year and reduce surpluses which could affect the price.

"The very clear message that comes out is that everyone must watch their own business and be aware of their own strengths and weaknesses in a more targeted way than ever before," he said.

He advised producers to be careful if borrowing at the moment, in case interest rates rose after the expected General Election.

Sheep had an important environmental role, with sheep farming highly visible to the visiting public, and Mr Thorley said it was likely to come under even greater public scrutiny with increased access to the countryside.

Other pressures would continue to come from cheap imports from New Zealand, unless better arrangements could be reached.

He was critical of the Government's contradictory approach to supermarkets. On the one hand it applauded them for cutting prices for consumers but ignored the urgent need for them to pay better prices to producers.

The Government and supermarkets had to accept that farmers needed proper returns for their products, particularly with the removal of financial support.

He emphasised the huge role sheep farming played in supplying the landscape, environment and economy in rural areas.

"We have some problems ahead but, on balance, we have some real opportunities," said Mr Thorley. "I remain totally positive about the UK sheep industry, but we do have an uphill fight and all sheep farmers must get behind the National Sheep Association to ensure we win."