Despite a collapse in milk prices, average farm incomes in the Republic rose by 6 per cent to €26,526 last year, according to Teagasc.

The group’s National Farm Survey found income on dairy farms, traditionally the most profitable, fell by 4 per cent to €63,020 amid a 20 per cent decline in prices.

The survey, now in its 44th year, is the most definite measure of agricultural income here.

It suggests dairy farmers compensated for falling prices by expanding production, which was facilitated by the lifting of EU milk quotas in April 2015.

Almost one in three dairy farms increased their milk production by 20 per cent or more, the study found, with just one-fifth of farms choosing to reduce output.

"The lower milk price in 2015 meant that dairy farmers had to increase their milk output by at least 20 per cent to just maintain their income at the 2014 level," said Dr Thia Hennessy, head of the Teagasc National Farm Survey.

On the outlook for 2016, Dr Hennessy said milk prices would probably be down again by 15-20 per cent again this year and that farmers were unlikely see any significant upturn in dairy before the end of 2016.

“Production will be an important factor in determining where incomes go,” she said, noting that first quarter milk output was already 32 per cent higher this year, albeit this was a spurious comparison as quotas were still in place during the first quarter of 2015.

In contrast to milk prices, cattle prices rose by 6-16 per cent depending on animal type, lifting average incomes by up to 34 per cent to €12,904.

The relatively low income figure reflects the predominantly part-time nature of beef farming here.

Despite a modest reduction in the value of cereals, income on tillage farms increased by 16 per cent to an average of €33,731, mostly due to strong cattle prices and lower fuel costs.

The survey showed farming here remains highly reliant on subsidies from Brussels with the average direct payment per farm amounting to €17,000, equating to 64 per cent of farm income in general and almost 100 per cent of income on cattle and sheep farms.

“Cattle farmers are still very reliant on direct payments which comprise a large proportion of their income,” said Teagasc’s Brian Moran.

“However, 2015 represents the first year in recent times where cattle farms generated a profit from production before they received these payments,” he said.

The study also revealed that over €800 million was invested by farmers in their businesses in 2015, over €300 million in dairy businesses.

Surprisingly, nearly two thirds of farms had not business-related debt.

Average borrowings on dairy farms were €97,363, representing a 3 per cent decline on the previous year.

The study suggested dairy farmers had funded new investment, aimed at exploiting the lifting of quotas, from working capital built up during the bumper years of 2012 and 2013.

The running down of cash reserves to fund new investment will leave many farmers exposed if the dairy downturn continues into 2017, Dr Hennesy said.