New figures from the Central Statistics Office show the price farmers are receiving for milk is down 24% compared to this time last year.
The reduction is being driven by lower milk prices in the global market place.
Despite the drop in prices, the amount of milk being produced is at an all-time high as farmers have increased their output in response to the abolition of EU milk quotas at the start of April.
Milk production figures for April and May were 12% higher than for the same period last year.
Today's figures show that despite optimism about the potential of the Irish dairy sector to expand production and to deliver a very significant boost to our rural economy, dairy farmers are making significantly less money than they were this time last year although they are producing and investing a lot more.
President of the Irish Creamery Milk Suppliers Association John Comer said there is a lot of anxiety among his members, particularly those who have a lot of borrowings, who are finding themselves constrained because of a lack of profitability.
That has a serious effect not only on the members but also on the economy, he said.
Every one once cent drop in the milk price paid to farmers takes €60m out of the rural economy, Mr Comer said.
Milk, he said, has currently dropped by 10 cents since this time last year, which means there is €600m less in the rural economy.
He said all the euphoria about milk quotas being abolished has been dampened greatly due to the harsh reality of supply and demand.
He also called for a serious "root and branch" examination of the milk supply chain before it gets to the consumers table.
Consumer prices have not come down even though prices being paid to farmers have dropped 30%.
Mr Comer said we need more transparency in the food supply chain.