Teagasc’s mid-year outlook for agriculture anticipates income drops for all farm sectors in 2026, with the year-on-year decline forecast for dairy farmers is the most severe blow levelled against any sector.

Teagasc expects this year’s milk price to average 20% lower than 2025’s at a 38c/l base (36.4c/l ex-VAT base price) if prevailing dairy market conditions allow for “modest” monthly farmgate prices into the back end.

An average family farm income of €78,000 is forecast in dairying after a bumper 2025 that left incomes averaging €150,000.

Any change to milk output is expected to be “marginal” and “largely determined by summer grazing conditions and farmer decisions about drying off date”.

Higher bills

The outlook expects fertiliser usage in the 2025/2026 growing season to remain in line with last year’s use, but that farmers’ combined fertiliser bills will be up 20% as a result of higher per tonne costs.

Fuel costs are also expected to rise 20% year on year and with no let-up foreseen in 2025 levels of spending on feed.

This collapse in milk price coupled with higher or stagnant costs is to see the halving of dairy incomes mirrored in the sector’s margin figures.

Teagasc’s researchers expect average net margins between 11c and 12c/l as the cost of producing a litre of milk looks 5% higher than it did last year at around 37c/l.

Global output stays strong

The outlook put weakness in Irish milk prices down to a “sharp dip in international butter prices”.

It flags 2026 milk output growth across the EU, the UK, the US and New Zealand that were “driven by favourable weather and farm decisions made due to improved farm profitability last year” as having kept markets well supplied with product.

The pace of this growth is showing signs of slowing, which Teagasc indicated “should lead to some dairy commodity price improvement” in the second half of this year, although commodities are not to show much movement until after the summer months.

However, the report is keen to stress that the two curveballs of 2026 – the Strait of Hormuz supply chain disruptions and the extended summer dry spell – make accurate forecasting difficult.