Farmer confidence in New Zealand has hit a near 10-year low, driven by concern over falling commodity prices.
Rabobank's latest rural confidence survey showed more than half of farmers surveyed had a pessimistic outlook on the agriculture sector over the coming 12 months, significantly up from the 30% with that view in the previous survey in late 2015.
Dairy farmers continued to be the most pessimistic, although sheep and beef sector confidence was also down due to lower lamb prices.
The horticulture sector was more positive, growers increasingly optimistic about their future business performance.
Confidence edged slightly lower in the middle of last year, when the realisation of the severity of the dairy downturn "hit home'', Rabobank New Zealand general manager for country banking Hayley Moynihan said.
The last time farmer sentiment had been at the current lows was in February 2006, she said.
Given the length and severity of the current downturn in the dairy sector, it was not surprising confidence was again at such a low level, she said.
Fonterra's milk price forecast sits for 2015-16 sits at $3.90, the lowest in a decade.
The break-even for the average New Zealand dairy farmer is estimated to be $5.25.
Dairy farmers were continuing to pull back on on-farm investment, with 38% of those surveyed expecting to reduce their investment in the upcoming season.
Disappointing lamb returns for the current season were probably affecting sentiment in the sheep and beef sector, Ms Moynihan said.
Weaker prices were reflecting the challenging trading conditions in key markets, such as China, particularly for frozen product.
A supply shortage was looming and that might bolster returns towards the latter half of 2016.
Higher slaughter volumes much earlier in the processing season, combined with a smaller lamb flock, suggested lamb supplies would contract significantly during the second half of the year, she said.
