Farm incomes rose last year by 32%, according to the State farm body Teagasc.

However, it says this is likely to have been a short-lived spike in income because global prices for some commodities, especially dairy products, are already on the way down.

Teagasc says that the average farm income last year was €24,800 - a record level.

However, on more commercial full-time farms, the average income was around €56,000.

Incomes on dairy farms increased by 38%, and incomes on cattle farms rose by 50% - this was from a very low base and the average income for cattle farmers was only €11,000.

Lamb prices were also up last year, but tillage incomes remained relatively unchanged.

Teagasc says that farmers used the favourable market conditions last year to repay debt, and the figure for farm debt of €1.8bn was 20% down on the previous year. However, the majority of farms have no farm-business related debt.

Farmers are still confident about the future with new investment last year of €666m, mainly on dairy and tillage farms.

Thia Hennessy, co-author of the Teagasc report, said subsidies remain a very important component of farm incomes, with many depending on them to cover production costs and stay in business.

She told RTÉ's News at One that without the "cheque in the post" incomes would be negative for many cattle and sheep farmers.

She said the number of farmers and their spouses working off-farm for alternative income has fallen from 60% at the height of the boom to 40% last year.

Dairy exports performing strongly - McEntee

Minister of State for Agriculture Shane McEntee has said that dairy exports had performed strongly in 2011, and that there was every reason to believe that the medium and long-term prospects for the sector were good.

The minister also said that the 50% dairy expansion targeted in Food Harvest 2020 plan was on track.

At the annual conference of the National Dairy Council, Mr McEntee warned that there was no room for complacency, particularly given the likelihood of continuing price volatility in international markets.

There has been a significant price correction in dairy markets over recent weeks, he said, and this provides a reminder that the realisation of the dairy expansion target will depend on the achievement of maximum efficiency at production and processing levels.

Independent economist Ciaran Fitzgerald told the conference that the Irish dairy sector has the potential to create 15,000 new jobs over the next three to five years.

He said the Irish dairy sector is one of the few sectors that has shown strong growth in recent years.

Mr Fitzgerald said that with the abolition of EU milk quotas in 2015, growth is predicted to increase by as much as 50%.

He said that there are certainly barriers to this growth ranging from price volatility and access to capital for expansion which create challenges, but with balanced and informed economic policies supporting solutions to these challenges and with appropriate processing capacity, the dairy sector has the potential to give a major boost to the Irish economy.

National Dairy Council Chief Executive Zoe Kavanagh said that as a business model, the Irish dairy industry is unique.

She said that with production in the hands of Irish farm families, and the co-operative structure embedded in the communities they serve, the income and employment generated by Irish dairy are important contributors to our economy, which are spread across the country.

Dr John Fanning, of the UCD Michael Smurfit Graduate Business School, described the dairy industry as the "jewel in the crown" of Ireland's economic recovery.

He said that increasing global demand for sustainable, nutritious dairy produce means that the dairy industry will be the engine of Ireland's economic recovery.