TO say that Golden Vale has a propensity for annoying the market is something of an understatement. Right now, Golden Vale - which came to the market in 1991 as a definite rising star in the food business - is suffering from a severe crisis of investor confidence and the company will need to address that lack of investor confidence, sooner rather than later.

Some might say that Golden Vale has simply been unlucky in the hiccups it has suffered in the past couple of years. But the way the company handled last week's revelations about a £3.1 million milk superlevy underpayment is unusual to say the least. For Golden Vale to baldly say that it "agrees" that it underpaid the superlevy over a two year period and that the £3.1 million involved has been repaid with interest to the Department of Agriculture is simply not good enough.

Golden Vale needs to tells its shareholders - and the milk suppliers from whom it says it plans to recoup the £3.1 million - exactly how these "miscalculations" came about, and when they were first discovered. If it took the Department of Agriculture to uncover these "miscalculations", then it says little about Golden Vale's internal accounting controls.

The Minister for Agriculture, Mr Yates, went to great pains to differentiate between the technical irregularities involving Kerry's administration of its milk quota and Golden Vale's miscalculation of its superlevy bill. If the rest of the industry was able to calculate its superlevy bills, why was not Golden Vale able to do likewise? That question must be answered.

Golden Vale has quite rightly said that under EU rules, the responsibility for that superlevy underpayment rests with its milk suppliers and that the group will be looking to recoup that £3.1 million. How is that to be done? Is Golden Vale going to place a levy on its 1,000 odd milk suppliers? Is it going to cut - milk prices in the current year by more than would normally he required?

One thing seems certain, it will be no easy job recouping that £3.1 million from Golden Vale milk suppliers. They are entitled to believe that the company they supply - which has the responsibility of managing the EU milk quota in its catchment area - would have accurately managed that quota and the attendant superlevy bill.

Golden Vale executive directors are well rewarded by their company. Chief executive, Mr Jim O'Mahony, and finance director, Mr Liam Irvine, between them received £483,000 last year, salary, pension, benefits in kind and performance bonuses. That level of reward comes with a commensurate level of responsibility and both chief executive and finance director would be well served by explaining in more detail than a four line statement how this superlevy debacle came out.

If Golden Vale wants to regain some credibility with investors, then that is the least that should happen.

The difficulties at Golden Vale should also be seen against a background of what, at face value, seems to be a new found willingness in the dairy sector to confront the need for rationalisation. Mr Malt Walsh's refreshing comments at the Waterford,

Foods a.g.m. in Dungarvan, and previous positive sounds from Avonmore's Mr Pat O'Neill, are the most positive signals yet that the major dairy producers may finally bite the bullet and look once again at mergers and/or alliances.

Put it this way: Denmark with just four milk processors handles more milk than Ireland with its 40 plus processors. The squeeze on margins as a result of GATT, increased production from eastern Europe and other factors mean that the major processors cannot simply sit back scale and efficiency is going to become all important as the dairy industry moves, towards the third millennium.

Kerry's Mr Denis Brosnan has ruled himself out of any link ups with other Irish milk producers on the basis that he does not want any further exposure to a quota based business such as milk. But other major Irish food companies who have taken the strategic decision to remain largely within the diary sector have the responsibility to move towards rationalisation before they are confronted with the realities that will emerge in the years ahead.

That really means that Avonmore, Waterford, Dairygold and despite its current difficulties Golden Vale must take, the lead. Whether that will be done through the mediation of the likes of ICOS or Forbairt is not really relevant - it just has to be done if the domestic food industry is to become a major player in the worldwide food industry.