Agricultural income declined by 12.1 per cent last year according to the final estimate issued by the Central Statistics Office (CSO) yesterday. The decline followed a bumper year for farmers in 2005 when a 21.5 per cent increase was recorded because of a changeover in the system of direct payments to farmers.

The CSO said the change to the Single Farm Payment system and the timing of payments of subsidies with a large amount of arrears paid in 2005, had a large influence on the figures.

The output from the sector last year was put at €5.2 billion and subsidies stood at €1.8 billion. The operating surplus after intermediate consumption was €2.42 billion. In 2005, output was €5 billion, intermediate consumption was €3.5 billion and subsidies amounted to €2.1 billion, leaving a surplus of €2.7 billion.

IFA president Pádraig Walshe said that, while national farm income declined by 12 per cent in 2006 relative to 2005, it still was 4.7 per cent up on the 2004 level.

"Clearly farm income in 2005 benefited from a once-off boost due to the timing of the changeover to the decoupled payments system, and this is the main reason for the 12 per cent decline in national farm income in 2006.

"Looking at the income trends in 2007, there clearly has been a recovery in dairy markets. While some price increases to farmers have come through, I believe there is major scope for further price increases this year. Also, world grain markets are quite strong as we approach the 2007 harvest.

"However, cattle and sheep prices are very disappointing this year. Winter beef finishers lost heavily due to poor prices and higher costs. In the sheep sector, continuing low prices and margins are resulting in a serious decline in the national ewe breeding flock," he said.

Ireland, Estonia, Finland, Slovenia and Spain were the only countries in the EU 25 to record a drop in agriculture income over the year.