Donegal Creameries yesterday expressed concern that decreasing produce prices could threaten the immediate future of farming.

Speaking at the company's annual meeting, chairman Mr Lexie Tinney said: "Farmers accustomed to striving for increased efficiencies now face a future of farm gate produce prices moving downwards towards world prices, while expenses inevitably increase."

The meeting noted that pre-tax profits of 5.925 million for 2003 were up €120,000 on the previous year, and that the net asset value per share increased by 9 per cent.

Shareholders approved a final dividend of 6.75 cents per share, bringing the total dividend to 12 cents, an increase of 5.3 per cent.

The meeting also heard how the recent creation of Europe's largest mushroom company was expected to boost business this year.

Mr John Keon, managing director, said a loss in the group's mushroom operations last year due to the combined effects of multiple pricing, the strengthening euro and problems with compost quality had made the merger of Carbury Mushrooms and rival Monaghan Mushrooms an imperative.

Completed early in June, the merger is expected to produce a positive result in the mushroom division for 2004 following a negative outcome last year.

Dealing with other sectors, Mr Keon said management was optimistic for a good 2004 performance by Irish Potato Marketing despite trading conditions being more difficult in the year to date than last year.

Oatfield, the confectionery business, was maintaining profitability in difficult circumstances and it would have new products in the marketplace shortly.

While dairy turnover rose 10 per cent last year, and profit contribution was up, keener competition this year for milk in Northern Ireland allied to more expensive sterling had depressed margins.

But it was hoped some lost ground would be recovered in the second half of the year.