The national farm survey conducted by the State agency Teagasc has shown that average farm incomes fell by 9% in Ireland last year, bringing the average income for the farming sector to €24,060.
The figure relates to the return for the farmer's labour and for the land and the capital employed in the business.
According to Teagasc, the fall in income came about despite an increase in direct EU payments to farmers and a reduction in key input prices such as fertilisers.
Lower milk prices and poorer crop yields and crop prices were the key factors behind the fall in incomes.
The milk price was down almost 10% in 2016 following a 20% reduction in 2015.
Despite this, however, milk production continued to grow last year.
The farm survey shows that income on dairy farms fell by 17% as a result and now averages €51,809.
According to Teagasc, these results show considerable efficiency gains were achieved by dairy farms in 2016 despite the fall in milk prices.
Its analysis shows that four out of every five dairy farms have increased their milk production since the abolition of EU milk quotas.
Tillage farmers were severely affected by a drop in crop yields last year as well as a reduction in cereal prices.
The result was a 10% fall in average income on tillage farms, to €30,816.
The report said that farming continues to remain highly reliant on direct payments. The average direct payment per farm was nearly €18,000 in 2016, comprising 75% of farm income on average and almost 100% of income on the average cattle and average sheep farm.