Spiralling fertiliser costs, increased use and the price of concentrate feeds are set to reduce dairy farming margins by 22% in 2022 to just under 12c/l.
However, this reduction in margin for 2022 is based on the record high margins expected for 2021, with a 31% increase in net margin compared to 2020 forecasts for this year.
Teagasc is predicting that milk prices next year will be similar to this year, meaning the reduction in profit will be driven by rising costs.
It is predicting that feed use will increase by 7% as farmers are likely to spread less fertiliser due to the high costs.
Growth in Irish milk output for 2022 is set to slow to 2%, as farmers focus on containing cost increases, the report says.
This trend in slower growth is set to be replicated internationally, a primary reason for stability in milk prices.