Based on a milk production increase of 6pc, the Teagasc forecast net margin on dairy farms to increase by 78pc to an average of €1,413 per hectare next year.
It made the forecast in its Annual Outlook report based on the expectation that dairy markets are will continue to recover into 2017.
It is forecast that the annual average milk price will increase by 20pc in 2017 relative to the 2016 level, bringing the annual average milk price to 32.2c/L (CSO actual fat and protein ).
Teagasc also says that assuming normal weather conditions in 2017, feed expenditure on dairy farms is expected to increase marginally, particularly on farms that are expanding production.
Meanwhile, it says fertiliser prices are expected to drop 5pc as early season prices should be lower than in the same period in 2016.
However, it says this price reduction may be offset by higher usage, leaving overall fertiliser expenditure relatively unchanged in 2017
Further growth in Irish national milk production is forecast in 2017, by Teagasc.
Following the estimated 5pc increase in production in 2016, further growth of 6pc is forecast in 2017.