The sheep sector is "under severe pressure" as Irish prices "fall well behind", the Irish Cattle and Sheep Farmers' Association (ICSA) said.
ICSA sheep chair Willie Shaw said Irish sheep farmers are "lucky to clear €25 per lamb at current prices, before a single hour of their own labour is counted".
"Factories are quoting around €7.50 to €7.70/kg here," Shaw said.
"At the moment in Spain, lamb is making €10.77/kg and in France it is €9.73/kg.
"That €2 to €3/kg difference adds up to a staggering €75/head, and there is no justification for Irish farmers to be so far behind those markets."
Shaw said Irish farmers are "producing to the same EU standards".
"Our costs are not lower, and once inputs and overheads are taken into account the margin left on a lamb is extremely tight," he said.
"If you are lucky you might clear €25 per lamb.
"That is before you account for the reality that sheep farming is a seven days a week, and often a round-the-clock job.
"That is not a viable income, and it is certainly not a signal that would encourage a young person into sheep farming."
Shaw said the current National Sheep Welfare Scheme is effectively "propping up ewe numbers and disguising the fact that many farmers are planning their exit".
"Farmers are maintaining ewe numbers because they are tied into scheme commitments," he said.
"Many are simply waiting for those commitments to end.
"Many farmers I speak to are just hanging on until they have the option to step away.
"That tells you there is something seriously wrong."
Shaw said current prices are "not giving farmers any reason" to stay in the sector.
"At €7.50/kg, sheep farming in Ireland becomes a fool’s game, not a livelihood," he added.