Confidence in the rural sector this Spring is being sapped by lower commodity prices and a continuing high New Zealand dollar, according to survey results out today.

Of about 450 farmers surveyed by Rabobank late last month, 44 per cent said they were expecting things to worsen over the next 12 months.

That compares to 36 per cent in the previous quarter's Rural Confidence Survey, and 10 per cent at the same time last year.

Only 15 per cent of farmers surveyed this quarter were expecting economic conditions to improve.


Farmer confidence had been sliding since March last year but this survey was the first to show that farmers now expected a greater negative impact on their own businesses, said Rabobank NZ boss Ben Russell.

"Farmers' expectations of their own farm business performance had previously held up better than confidence in the agricultural economy as a whole, however this measure has also now showed some deterioration."

The survey found 42 per cent of farmers expected their own farm business performance to worsen over the next 12 months. That compares to 29 per cent in the previous quarter.

Russell said 50 per cent of farmers who were expecting conditions to worsen cited the high dollar and falling commodity prices as key factors.

"Overseas market conditions and rising input costs were also shown to be a concern," he said.

Farmers who had a positive outlook said their confidence came from an expectation that the US drought would have positive flow-on effects to New Zealand.

Beef and sheep farmers were the least confident in terms of their own farm business, with 54 per cent expecting their performance to worsen over the next year. Only 12 per cent expect an improvement.

"Sentiment in the sheep and beef sector is being dampened by the softer global lamb market now, following two seasons of strong prices," Russell said,

Optimism amongst dairy farmers has lifted, with one third expecting performance to improve, more than one third for it to remain static, and just less than a third expecting performance to worsen.

"Some dairy producers are concerned that the record production year seen in 2011/12 is unlikely to be repeated or beaten," Russell said.

"However, despite milk prices moving lower in August, the 15 per cent lift in global dairy commodity prices we've seen since they troughed in July is likely to have curbed some dairy farmer pessimism."

Confidence in the horticulture sector has slumped, with 43 per cent of horticulturalists expecting their farm performance to worsen, up from a mere six per cent with that view in the previous quarter.

That pessimism was underpinned by concern about the impact of PSA on the kiwifruit sector, Russell said.

The Rabobank Rural Confidence Survey is administered by an independent research agency called TNS and involves interviewing a panel of about 450 farmers each quarter.