Worries about the deteriorating global economy, along with concerns about the sustainability of high agricultural commodity prices, have put a dent in New Zealand farmer confidence.
The latest quarterly Rabobank rural confidence survey showed a drop in farmer sentiment, following two previous quarters of high confidence levels.
Only 35% of the country's farmers expected the agricultural economy to improve in the next 12 months, compared to 48% in the previous survey.
Those expecting conditions to worsen increased from 6% to 10%.
While agricultural conditions have been good across most of the country, farmer sentiment was being influenced by external factors, particularly concerns about the global economy and the public debt issues being faced in Europe and the United States.
The survey results also reflected a recognition that while agricultural returns had been good, commodity prices would not remain at high levels forever, Rabobank general manager New Zealand Ben Russell said in a statement.
Although all sectors had registered a decline in confidence, the survey showed overall, on a net basis, sheep and beef farmers remained more optimistic than dairy producers.
Lower dairy farmer confidence likely reflected the expectation that last year's record prices were unlikely to be repeated in 2011-12, Mr Russell said.
Horticultural operators had also become more pessimistic.
Lower global economic growth was expected to affect export markets, the effects of Psa disease were weighing on kiwifruit growers and the high exchange rate was beginning to bite.
Overall, farmers were more optimistic about the outlook for their own businesses than for the agricultural economy in general.
Farmers' investment intentions showed some decline, following a surge in the previous two surveys.
The number intending to increase their farm business investment declined from 36% to 30%, while those planning to decrease investment climbed from 4% to 7%.
However, investment intentions were relatively stable with 63% intending to hold investment at current levels.
Some reduction in investment was expected, given that recent global financial market turmoil had reminded investors across all asset classes of high volatility and the need for secure foundations for any investment decision, he said.
