"Instead of a slight easing, farmer confidence found the trap door and jumped right in."
A net 38.7 per cent of farmers surveyed said they expected general economic conditions to worsen over the next 12 months.
A net 39.5 per cent expected their own farm's profitability to worsen in the same period.
Farmers' biggest concern was the level of commodity prices and/or farmgate prices, the survey showed.
Recent falls in commodity prices without any significant drop in the dollar had "eaten into farmgate returns", Wills said.
"As farmers are exporters, the European sovereign debt crisis has been extremely negative on sentiment. That comes on top of weak growth out of Japan and the United States."
Things weren't helped by uncertainties over whether China could sustain high growth rates, he said.
"This is the backdrop for farmers at the start of the 2012/13 season," Wills said.
"We aren't alone because our survey reflects a general pessimism among the wider business community."
Most farmers seemed to be hoping they could continue increasing production and reduce on-farm spending, he said.
"Lower spending will have an impact on the local, regional and especially, the national economy. This partly explains farmer pessimism about the general economy."
The survey showed farmers' highest priority is for reduced government spending and/or reduced government debt.
"They want to see a reduction in government spending, government balancing its books and a reduction in government debt," Wills said.
The Farm Confidence Survey is recorded biannually, at the beginning of the new season, July, and mid-season, in January. It is emailed to all Federated Farmer members to complete.
