Based on forecast production levels, output price and input cost movements, dairy margins are likely to improve in 2017 compared with this year, according to the Teagasc Annual Review and Outlook. The report forecasts an average net margin on Irish dairy farms of 10.5c/l or €1,198/ha in 2017.

Average dairy farm income set to rise to over €70,000 in 2017 - @teagasc Review and Outlook
— Odile Evans (@OdileEvans) November 29, 2016

In 2016 milk production increased by an estimated 5% due to an increase in cow numbers. This trend is forecast to continue in 2017 based on an increase in cow numbers and yield improvement. Any additional milk produced next year is expected to be at a low marginal cost, contributing to the increase in margin achieved per ha.

Listen to "Discussing Teagasc's outlook for 2017" on Spreaker.

'An increase in prices encourages more production so we need to be cautious in how optimistic we get' - T Donnellan, on 2017 dairy outlook pic.twitter.com/eklU3lefLN
— Odile Evans (@OdileEvans) November 29, 2016

Apart from fuel, input costs on dairy farms in 2017 are expected to stay the same as this year.

The forecast, presented by Trevor Donnellan, shows a 15% to 20% increase in the average annual milk price next year. However, the build up of SMP stocks is an area of concern, with market demand needing to be robust enough to allow stocks to be released without adversely affecting price.