GOLDEN Vale will have to substantially reduce the price paid to its milk suppliers if its margins are to be maintained, according to Mr Jim O'Mahony, chief executive of the Co Cork based food processor. Although margins on some of the group's added value products are improving, the increase is not sufficient to offset the fail in commodity product prices, Mr O'Mahony told Golden Vale's annual general meeting yesterday.
The price of key commodities, such as milk powder, have dropped by an average of 10 per cent from their 1995 peaks. Butter prices have been particularly weak, failing 14 per cent from last year's peak, Mr O'Mahony said. Commodity prices are now at or slightly below their EU support prices, he said.
These reductions equate to a decrease in the margin on each gallon of milk processed of almost 13p, Mr O'Mahony explained.
Golden Vale and the other major milk processors, including Avonmore and Waterford Foods, are expected to seek a cut in the milk price over the coming weeks. Dairygold Co-op, the largest of the non-quoted co-ops, is not expected to seek cuts to the same extend and neither is Kerry Group which is hoping to persuade its farmer shareholders to reduce their holding below 50 per cent this year.
Golden Vale's shares were unchanged in Dublin yesterday at 67p after Mr O'Mahony's report. However, the shares were marked down in London, to their Dublin levels, on the news.
