Irish dairy farms are amongst the most profitable in Europe, according to research published by Cork Institute of Technology and Teagasc.
The study, which examined the Irish dairy sector since quotas were lifted, described the growth in the sector as "phenomenal" during the five year period from 2014-2019.
Irish milk prices were the lowest of all the EU countries examined, using the LTO Monthly Milk pricing comparison, while the Dutch milk price was the highest.
The average price difference over the five year period was 5.2 cent per litre between Irish and Dutch milk prices.
The Netherlands, Denmark, Germany, France and New Zealand were also part of the study.
Notwithstanding the fact that the Irish milk prices paid to farmers were amongst the lowest, profitability here is the highest. This is explained by a much lower cost base in Ireland.
The higher milk prices paid across Europe only partly compensated for the higher costs of production incurred by dairy farmers in those countries, according to the research.
The Irish net margin was the biggest, despite a perception that returns from milk production in Ireland are lower, due to the milk price paid in Europe.
The report concludes that this is achieved substantially because of lower production costs.
"Across the five year period studied, from 2014 to 2019, when milk prices are compared using the LTO (Monthly Milk Price comparison for milk), the Irish milk price was lowest of the EU countries considered, with the Dutch milk price the highest," Dr Declan O'Connor, a lecturer at Cork Institute of Technology, said.
"An average difference over the period of 5.2 cent per litre was reported between the Irish and Dutch, with the other EU countries falling between these two. The Irish milk prices, however, followed the commodity market returns for skim milk powder and butter during this period," Dr O'Connor said.
The report warned that care needs to be taken when benchmarking industry performance based solely on milk price.
It suggested comparisons should reflect farmer profitability, investment in processing capacity relative to who has made the investment and seasonality to ensure that the comparisons reflect the ultimate impact on industry profitability.
The study also looked at Irish dairy processing capacity here and found that processing capacity utilisation in Ireland stands at approximately 62% when averaged over the full year, which compares utilisation levels of over 90% in the other EU countries.
Interestingly, it found that under-utilisation of processing capacity results in higher processing costs which determines the lower milk price paid in Ireland.
But the report concluded that it is "substantially more profitable" for the Irish dairy industry to invest in additional processing capacity for expansion rather than trying to flatten the milk supply curve. Given Ireland's dependency on grass fed cattle, milk production tends to peak when grass growth is strongest.
The rapid expansion of the dairy sector has been widely criticised by environmentalists who say it has had a very negative impact.
The Director of the Environmental Protection Agency has also referred to the issue.
Laura Burke has said in recent weeks that the sector's green reputation does not necessarily reflect the reality, claiming that agriculture is responsible for one third of greenhouse gas emissions here.
