New Zealand farmer confidence slid in the past quarter amid concern about the impact of Mycoplasma bovis cattle disease on the country's agricultural sector, with the number of farmers expecting conditions to improve now only just outweighing those expecting them to worsen, according to the latest Rabobank rural confidence survey.

"The run of strong commodity prices across virtually all sectors continues to support on-farm profitability and farmer optimism, but, despite the positive broad-based returns, the uncertainty in the operating environment means many farmers are wary of what the next 12 months will bring," Hayley Gourley, Rabobank New Zealand general manager for country banking, said in the report.

The number of farmers expecting the rural economy to improve in the next 12 months fell to 26 per cent, from 27 per cent in the last quarter while the number expecting the rural economy to worsen jumped to 24 per cent, from 12 per cent in the previous quarter, according to the quarterly survey, which was completed last month.

Among farmers expecting the agricultural economy to deteriorate, 78 per cent cited Mycoplasma bovis and the consequences of the eradication process as the key reason for holding this view, Gourley noted.


"Government intervention was the second predominant reason for farmer pessimism, however, this was cited far less frequently than in previous quarters," Gourley said.

Some 46 per cent were expecting similar conditions for the rural economy in the next 12 months, down from 59 per cent, the survey showed.

Overall confidence in the broader agricultural economy had been driven lower by reduced expectations among sheep and beef farmers and horticulturalists, according to the report.

Net confidence dropped sharply among sheep and beef farmers, turning to a negative 6 per cent, from a positive 11 per cent in the previous quarter, while it fell to a negative 9 per cent among horticulturalists, down from a positive 34 per cent previously.

Dairy farmer confidence, however, strengthened, in part because of Fonterra Cooperative Group's strong opening forecast of $7 per kilogram of milk solids for the 2018-19 season, according to Gourley.

"The Fonterra opening forecast was announced just prior to this survey being undertaken and has set a positive tone for the coming year, amidst a period of uncertainty as the industry continues to work through the eradication of mycoplasma bovis," she said.

"Spirits have been further buoyed by a weak kiwi dollar relative to the US dollar, helping to underpin favourable farmgate milk prices," Gourley added.

Conducted since 2003, the Rabobank rural confidence survey is run by independent research agency TNS, which polls about 450 farmers each quarter.