The average family farm income decreased by 9 per cent last year to €24,060, official figures for the sector show.
The Teagasc National Farm Survey, published on Wednesday, shows that, despite increased direct payments, further falls in milk prices and poorer crop yields than in recent years resulted in a decline in average farm income.
The roll-out of GLAS and the Beef Data Genomics Programme (BDGP) meant direct payments on cattle farms increase by between 5 and 11 per cent in 2016 relative to the previous year.
This increase helped offset lower cattle prices and it meant that the average farm income on cattle farms increased by between 2 per cent and 4 per cent in 2016 depending on the production system.
Despite the increase, average cattle farm incomes remain quite low, at just €12,908 for cattle rearing farms in 2016.
"Cattle farmers are still very reliant on direct payments which comprise a large proportion of their income," said Brian Moran of Teagasc. "The BDGP and GLAS schemes are of particular importance on cattle and sheep farms."
Milk price was down almost 10 per cent in 2016 on the back of a 20 per cent reduction in 2015. However, milk production continued to expand in 2016. This resulted in income on dairy farms falling by 17 per cent to an average of €51,809.
Analysis of farms over the period since quota removal shows that four out of every five dairy farms have increased production.
"Increases in milk volume and production efficiency further reduced production costs in 2016, but lower milk prices meant that dairy farmers were unable to maintain their incomes," said Teagasc economist Trevor Donnellan.
Tillage farms were “severely affected” by a decline in crop yields in 2016. Coupled with a reduction in the price of cereals, this resulted in a 10 per cent fall in average tillage farm income to €30,816.
Lamb prices decreased by 2 per cent in 2016 and with direct payments receipts relatively unchanged the average sheep farm income remained stable at €16,011.
Almost €690 million was invested by farmers in their businesses in 2016, of which over €245 million was invested on dairy farms.
As in previous years, two-thirds of farms have no business-related debt, with many choosing to fund new investment from working capital. On the remaining one-third of farms the average debt level is €63,764 or 1.8 times the income level.
Farming continues to remain “highly reliant” on direct payments. The average direct payment per farm was nearly €18,000 in 2016, comprising 75 per cent of farm income on average and almost 100 per cent of income on the average cattle and average sheep farm.
The farming population in the Republic includes a considerable number of part-time farms with almost one in three farmers working elsewhere off-farm. Just over half of all farm households have an off-farm income source from either the farm-holder or spouse.
In spite of the fall in income in 2016, average farm income has become “less volatile” over the last five years, the survey says.
“Looking ahead to 2017, prospects for dairy are very positive, with a dramatic recovery in incomes forecast. Average incomes on drystock farms should remain relatively stable.”