Teagasc Forecasts Sharp Decline in Irish Dairy Incomes Amid Lower Milk Prices

Teagasc’s mid-year agricultural outlook projects a challenging year for Irish dairy farmers, with dairy incomes expected to experience the steepest decline among all farming sectors in 2026.

The advisory body forecasts that average dairy farm incomes could fall by nearly half due to lower milk prices and rising production costs.

📉 Milk Prices Expected to Fall by 20%

Teagasc expects Ireland’s average milk price for 2026 to decline by around 20% compared to 2025 levels.

🥛 Forecast milk price: 38 cents per litre (base price)
🥛 Excluding VAT: 36.4 cents per litre

The decline follows exceptionally strong returns in 2025, when favourable market conditions supported record farm profitability.

💶 Dairy Farm Incomes Set to Halve

Average family farm income in the dairy sector is forecast to fall to approximately:

💶 €78,000 in 2026

This compares with average dairy incomes of around:

💶 €150,000 in 2025

The expected decline represents one of the most significant year-on-year income contractions across Irish agriculture.

📈 Rising Input Costs Add Further Pressure

Despite weaker milk prices, production costs remain elevated.

Teagasc projects:

🌾 Fertiliser costs to rise by 20% due to higher per-tonne prices
⛽ Fuel expenses to increase by 20% year-on-year
🌿 Feed costs expected to remain at elevated levels

As a result, the cost of producing milk is estimated to increase by approximately 5%, reaching around:

🥛 37 cents per litre

📊 Dairy Margins Under Pressure

The combination of lower milk prices and higher production costs is expected to significantly compress dairy margins.

Teagasc estimates average net margins of only:

📉 11–12 cents per litre

This marks a substantial decline from the strong profitability experienced during 2025.

🌍 Strong Global Milk Supply Continues

According to the outlook, weaker Irish milk prices have largely been driven by:

🧈 A sharp decline in international butter prices
🌍 Continued expansion in global milk production

Milk output growth has been observed across:

🇪🇺 European Union
🇬🇧 United Kingdom
🇺🇸 United States
🇳🇿 New Zealand

Favourable weather conditions and strong farm profitability during 2025 encouraged increased production, keeping global dairy markets well supplied.

🌦 Market Uncertainty Remains High

Although global milk production growth is beginning to slow, Teagasc believes dairy commodity prices may only improve gradually during the second half of 2026.

However, two major uncertainties continue to cloud market forecasts:

⚠️ Supply chain disruptions linked to the Strait of Hormuz
⚠️ Extended summer dry weather conditions

These factors could significantly influence milk production, commodity prices and farm profitability during the remainder of the year.

Outlook

While some improvement in dairy commodity markets may emerge later in 2026, Irish dairy farmers are expected to face a significantly more difficult operating environment than in the previous year.

The sector will continue to monitor:

📈 Global dairy demand trends
🌦 Weather developments in key producing regions
💹 Commodity market movements
💰 Input cost inflation

as producers navigate a period of increased market volatility.