UK FARMERS must invest in becoming more efficient managers.

Mr Steve Ellwood, head of agriculture with HSBC Bank, said that was his most important message of the day.

"We need to recognise that the risks in agricultural production are far greater than before and we have to find ways to manage and mitigate this," he said.

A business could not be managed until it was efficient and competitive and he encouraged farmers to concentrate on costs of production. "How you can invest to become more efficient in terms of costs of production should be the way, rather than how you can invest to produce more," said Mr Ellwood.

He was addressing the seminar which was organised by the bank and Smiths Gore on behalf of the North-East Country Landowners' Association.

He said he also believed that farmers must become involved in food production beyond the farm gate. The UK was unique in that the farmer's involvement usually stopped there.

"That is not the case in any other country, where farmers are more involved in adding value," he said. "But I believe UK producers will be driven by commercial circumstances to do this."

The value of agricultural support should be recognised and Mr Ellwood highlighted the fact that the Americans had shown the way by finding a new way of describing a subsidy.

"You should not get too upset about the morals of this," he said. "I think we should make sure when we go into the World Trade Organisation talks that we do it from the front rather than the back foot."

The UK farmer was hugely affected by the pound/euro exchange rate. "It has an immense impact; every time we see a 1p change, it is the equivalent of £100m to British agriculture.

"It puts into perspective where the industry is when we talk about agri-monetary help. There was £34m arable aid, but that is worth less than 0.3p on the pound/euro exchange rate."

He believed prices were probably more difficult to predict now than at any time over the last three generations. There was hope, however.

The world population was forecast to rise from today's 6bn to up to 9bn by 2030, mainly because of people in Asia living longer. "They will live past 30 into their 40s and 50s, and living mainly in an urban or semi-urban environment not growing their own food, they will rely on imports to satisfy their needs."

The last two years had seen the Asian and Pacific Rim economies pick up to the point where he believed they had now recovered.

"We are seeing significant increase in the value of food and I am convinced this will lead to long-term good news for global food producers."

China was more difficult to assess. It could be either a net importer or net exporter in ten years but it would be a fully-paid-up member of the World Trade Organisation and unable to impose tariffs to control trade.

"In the long term, I think there is scope for some optimism with economic growth and population," said Mr Ellwood.

Wheat stocks had continued to fall over the last couple of years as consumption had exceeded production and European Union stocks of milk powder had disappeared completely through demand from North African and Far Eastern countries.

"Because of that, world prices for dairy products have gone up dramatically and all the signals are that we should see increases in prices in the UK, although they have not come yet.