New Zealand farmer confidence tumbled in January as a drought and uncertainty over new government policies take their toll.

A net 34 per cent of those surveyed were pessimistic about general economic conditions over the next 12 months, a marked deterioration from 16 per cent who were optimistic in July, according to the latest new season Federated Farmers' Farm Confidence January survey.

Within the different industry groups, 43 per cent of dairy farmers said they now expect general economic conditions to worsen over the next 12 months versus 5.8 per cent in July, 34 per cent of meat and fibre farmers are expecting the same, versus 12 per cent in July, while 47 per cent of arable farmers are expecting a deterioration, versus 12 per cent in July.

The farmer confidence echoes the business sentiment surveys showing growing pessimism about the country's economic fortunes under a new administration, triggering Finance Minister Grant Robertson to acknowledge the mood at a select committee hearing last month and say ministers are seeking to allay those concerns.

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"Pretty much all recent surveys of businesses have found a drop in confidence because of the disruption and uncertainty over October's general election. And in mid-January, when our survey was done, farmers in many regions had endured weeks and weeks of little or no rain," Federated Farmers vice president Andrew Hoggard said.

On farmer profitability, 54 per cent said they are generating a profit, 35 per cent were breaking even and 9.3 per cent were running at a loss. In July, 55 per cent were profitable, 34 per cent breaking even and 9.6 per cent running at a loss.

However, a new 3.7 per cent were pessimistic about farm profitability over the next 12 months versus 39.4 per cent who were optimistic in July.

Regarding farm debt, 91 per cent had debt in January compared to 88 per cent in July. Only 37 per cent of all farms carrying debt expect that to reduce in the latest survey versus 51 per cent in July. The proportion of farms expecting their debt to increase rose to 15 per cent from 9.6 per cent over the same time period.

Similar to the July 2017 survey, the greatest concern for farmers was regulation and compliance costs. The dry weather was also on their minds, and worry about climate change policy and the potential for livestock emissions to be included in the emissions trading scheme showed a marked increase, Hoggard said.

Also, compared to previous years, biosecurity concerns such as pests & diseases is more evident and at the highest level ever seen in these surveys. "The cattle disease Mycoplasma bovis is the likely culprit," Federated Farmers said.

The ability to recruit staff is becoming increasingly difficult - the hardest in the 18 surveys that have been carried out since 2009. "The labour market is tight with low unemployment and high labour force participation, and recent restrictions to immigration policy appear to be exacerbating the problem," according to Federated Farmers.

The January online survey received 1070 responses from farmers in four industry groups over 24 provinces.