The dairy sector is warning that the impact of Covid-19 could result in milk prices being paid to farmers falling by as much as 20% this year.

It said this would cost the economy the equivalent of 11,000 jobs.

A report commissioned by Dairy Industry Ireland, which represents primary and secondary dairy processors, said that urgent measures were needed to support the dairy industry.

Covid-19 restrictions across Europe have meant the virtual closure of the food service industry, which is costing the sector hundreds of millions in exports.

The EY report commissioned by Dairy Industry Ireland finds that milk prices could fall by as much as 20%, which would reduce the dairy output here by more than €2bn this year.

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The reports finds:

The dairy sector is one of the largest indigenous contributors to the Irish economy, and was anticipated, pre Covid-19, to be worth €11.3bn in 2020.

Output from the industry could fall by as much as €2.3bn in value as a result of falling demand and potential losses in processing capacity due to Covid-19.

A 10% to 20% fall in milk price due to a fall in demand and market pressures would result in a reduction in annual payments to farmers of up to €840mn.

Additional working capital of up to €550mn could be required by the industry to cater for increased stockholding and other requirements.

Processing capacity is tight over the peak milk production season. Infection among just a small number of circa. 150 key workers in the industry could lead to major processing disruption.

The overall economic impact of a 20% fall in revenue would be a €2.3bn output reduction and a loss of more than 10,700 full time equivalent jobs.

Director of Dairy Industry Ireland Conor Mulvihill said: "The report highlights in stark terms the threat facing the Irish dairy processing industry as well as farmers and the rural economy without national and EU supports.

"The Minister for Agriculture Michael Creed and his team have engaged in Trojan work in seeking to activate EU supports to the industry, but this report clearly shows that far more needs to be done to protect the industry at national & EU level.

"Irish dairy is an engine of the rural and the national economy and it is vital that the necessary steps be taken quickly to enable the industry to be in a position to contribute to the national economic reboot when it occurs."

Separately, Minister for Agriculture Michael Creed has secured the support of all member states in the EU to demand a pan-European solution to the problem.

In a letter to the EU Agriculture Commissioner, Mr Creed added that "those working to maintain food security, must be protected to the maximum possible extent from the economic impact of the crisis".