VIEWS may differ markedly on where the Irish market will go from here - up 10 per cent by mid 1997 as forecast by Davy or down 10 per cent by year end as forecast by Bloxham, but this week saw some substantial profit taking from the first time since the current bull market began.

Most in the Dublin market do not believe that the market is in for any serious setback - bar a sudden collapse on Wall Street. But it does seem clear that the frantic upward movement of the past few weeks will not be maintained unless heavy convergence trading in Irish government bonds results in strong buying interest in the financial shares.

While most of the activity in recent weeks has focused on the leading financial and industrial stocks as well as some special situations, such as Tullow, there is one sector where sharp performance differences have arisen and where the sector has now embraced two tiers. This is the food sector, or to be more specific the non dairy food sector and the dairy food sector.

Figures for the past five years show stark contrasts between the performance of the dairy and non dairy sectors, with the dairy based plcs heavily underperforming the ISEQ Index while the non dairy plc's have provided exceptional value for investors.

In a report this week, Bloxham has highlighted these differences and the fact that, over the past five years, IAWS, Greencore and Kerry have all provided returns well in excess of the ISEQ, while Avonmore has slightly underperformed the market and Waterford Foods and Golden Vale have badly underperformed.

It is no coincidence that the companies that have performed have been those who are not dependent on the vagaries of dairy commodity prices and particularly on the apparent requirement to pay unrealistically high prices for milk to farmers, who also happen to be shareholders.

Given the seasonality of milk production, any cut in the milk price now will have little impact on producers' margins. But come next spring when milk begins to flow, those companies most dependent on dairy production will be expected to have milk prices more in line with their output prices.

If not, margins will once again be squeezed and share prices will suffer.

For farmer shareholders, whose main priority is the price they get for their milk, that may not be a problem, but for institutions who have invested heavily to support the expansion by these companies it is a major problem.

Given the response by the IFA to Waterford Foods' 2p a gallon cut in the September milk price, it would seem that any substantial cut in the April 1997 milk price - and it will have to be substantial - will be stoutly resisted by farmers.

The IFA statement last week accusing Waterford Foods of pandering to the stock market and institutional investors showed little appreciation of the millions of pounds that institutions have pumped into the Irish diary sector - with little return. Those investors could be forgiven for feeling they are viewed by farmer shareholders as a cheap source of money.