"For continued expansion of our dairy herd, we need to be planting more trees."
Dairying and sheep have "strong positives" according to Donnellan, who said that net margins in the sheep sector are "quite respectable".
Irish milk production is up 3pc this year, as the dairy herd cow numbers increased by 3.5pc to 1.48m, but milk prices were down 7pc, the Teagasc figures show and dairy farm incomes were hit by a drop of 22pc, but are expected to rise by 10pc next year.
Previous predictions of a 60pc fall in dairy incomes this year did not materialise, but the feed volume increase was not on average as high as expected.
On the typical dairy farm feed expenditure is estimated to have increased by almost 50pc this year, while feed prices were up 6pc and fertiliser prices were up 7pc, while fuel prices were up 10pc.
Nevertheless, dairy incomes remain head and shoulders above other sectors, even at the reduced €67,000 income estimate for last year.
Milk prices in 2019 are forecast to decrease by 5pc, year on year, but with feed input costs expected to be back at normal levels, margins are predicted to increase.
Gross margins on suckler farms are estimated to be down 19pc this year at €11,670, while gross margins on finisher enterprises are estimated to be down 11pc at €16,902.
The Teagasc figures show that calf prices were down 10pc, while weanling and store prices were down 3pc and 8pc respectively. A very difficult spring and summer on cattle farms saw grass availability a problem for many farmers, while feed, fertiliser and fuel prices were all up.
Teagasc has predicted that calf, R3 steer, stores and weanling prices will increase in 2019, with gross margins predicted to increase by 20pc on suckler farms and 19pc on finisher farms.
However, it warns that exchange rates and Brexit will likely play a major bearing on the cattle sector here and a further weakening of sterling could lead to an even more pessimistic outcome for Irish cattle prices, while the ongoing profitability challenge faced by beef farmers here may be exacerbated by the impact of Brexit it warns.
Sheep incomes for 2018 are estimated at €17,756, down 1pc on 2017. Lamb prices were up 6pc this year, but an increase in input costs saw gross margins down 3pc.
Feed concentrates, which accounts for around 40pc of input costs on sheep farms, were up 34pc this year.
While Ireland exports 72pc of sheepmeat, the majority to France, 70pc of sheepmeat traded internationally is from Australia and New Zealand.
Gross margins are predicted by Teagasc to increase by 10pc next year, with net margins predicted to increase by 37pc.
Tillage farmers had serious difficulty with spring sown crops in 2018, with yields well down on normal. However, yields of winter crops were not affected to the same extent. Cereal and straw prices at harvest in Ireland increased substantially on 2017 levels due to limited supplies.
Winter wheat and winter barley saw prices and straw prices boost incomes as there was a "scramble to fill grain stores" this year, according to Fiona Thorne. The average specialist tillage farm saw an increase of €165/ha in net margins.
Some 78pc of tillage farmers, she said, had a positive net margin. However, she predicted that net margins will decline in 2019 with prices to decrease by 20pc and one third of tillage farmers will not have a positive net margin situation in the coming year.
Over 770,000ha of forestry exists in Ireland, or 11pc, according to the Teagasc figures and 50pc is owned by 22,000 private owners with 83pc of these farmers.
Irish forestry sequestered 3.8m tonnes of carbon last year. Teagasc also said there is cautious optimism in the sector around the future of forestry and that forestry should not be seen as a competition to other farming sectors.
While they did not have to face the challenges presented by the poor weather in 2018, pig farms saw margins squeezed by a severe drop in pig prices at a time of rising feed costs and pig farmers saw the lowest margins in years - down 44pc on 2017.