New Zealand farmer confidence dropped in the final quarter of the year, and has tumbled 41 per cent in the past six months, mainly on concerns the coalition government will enact policies that constrain the rural sector.

Farmers expecting the rural economy to improve dropped to a net 13 per cent from a net 38 per cent in the previous Rabobank Rural Confidence Survey. Those that see it improving fell to 29 per cent from 46 per cent while those seeing poorer times ahead rose to 16 per cent from 8 per cent.

"For those farmers who thought the rural economy will worsen over the next 12 months, government policies were cited by 80 per cent as a key reason for holding this view," Rabobank New Zealand general manager for country banking Hayley Moynihan said in a statement.

"During the election campaign, each of the three parties that now make up the government indicated they wanted to make changes to how New Zealand's rural economy was operating," she said.


"These results indicate that farmers have some concerns about what these potential interventions could mean for the future performance of the rural economy."

Farmer confidence has also been dented by expectations they will face rising input costs and falling commodity prices.

The biggest drop in positive sentiment was among horticulturalists, with net confidence tumbling to 16 per cent from 51 per cent previously. Among dairy farmers, net confidence fell to 18 per cent from 50 per cent, while sheep and beef farmer confidence halved to 11 per cent from 22 per cent.

Farmers were also less optimistic about their own farm performance over the next 12 months, with a net 28 per cent seeing improvement, down from a net 44 per cent in the previous survey.

"With a downward correction in the milk price anticipated before the end of the year, it was not surprising to see dairy farmers' confidence in their own farm business performance register the most drastic fall of all the sector groups," Moynihan said.

She said 39 per cent of dairy farmers expect their own farm business performance to improve over the next 12 months, down from 62 per cent.

Fonterra Cooperative Group's board is meeting this week and there are widespread expectations it will announce a reduced forecast milk payout for 2017/18, given recent declines in prices of dairy products. The latest GlobalDairyTrade auction is tonight.

Farmer investment intentions fell for a second quarter, with 26 per cent expecting to increase investment (down from 29 per cent).

The survey was conducted by TNS, which polled about 450 farmers.