Food group Glanbia has settled a dispute with Dunnes Stores over milk supply after a week-long dispute over "trading terms".

Liquid milk from Glanbia was off the shelves last week after a dispute with the retailer which takes about 5 per cent of Glanbia's supply.

At the firm's a.g.m. in Kilkenny, group managing director Mr John Moloney said he was happy to report that Glanbia milk was back and that differences between the two parties had been resolved.

After the a.g.m., a Glanbia spokesman denied the firm had been forced to drop the price of its milk supply to Dunnes to end the row. He said the dispute was over "trading terms" alone and was not a milk price war.

He refused to discuss the nature of the differences with Dunnes Stores and said it was policy not to comment on negotiations with customers.

Reports last week suggested a fresh attempt by Dunnes to drive prices down was the cause of the dispute. Dunnes is believed to be concerned at the prices being charged by German retailers Lidl and Aldi.

Both chains import cheap milk in Northern Ireland for sale in outlets in the Republic. Dunnes also sells own brand milk and this is also contributing to a squeeze on prices.

At the a.g.m., Mr Moloney said Glanbia had been forced to drop the price it paid dairy farmers because of a general weakness in the market.

He said returns for food groups had declined in recent months and there was no option but to adjust milk prices downward. He was responding to questions from farmers attending the meeting.

On the general outlook for the company he said that based on current trading conditions, he believed the full-year performance would be in line with expectations.

He said trading conditions in international dairy markets continued to be particularly tough, with a strengthening euro undermining a recovery in prices. Currency fluctuations would be an important factor going forward, he added.

He said the company was currently examining acquisition possibilities in the United States, with nutrition and cheese businesses the main focus. He said the company was also organising all its nutritional activities into one business unit.

The firm incurred an exceptional charge of €80 million in 2002 as it refocused and rationalised its operations. This involved the closure of its British consumer meats business and the sale of the British food service distribution operation.