Farmer confidence continues to slump on the back of dry weather and an export-unfriendly exchange rate.
A record milk payout was not enough to maintain optimism among dairy farmers in the latest Rabobank-Nielsen Rural Confidence Survey, with the sector experiencing the biggest decline in confidence, just 15% expecting the economy to improve compared to 59% in the previous survey in December.
Nearly a third of dairy farmers surveyed expect the economy to worsen compared to 6% previously.
Overall, 38% of farmers expect conditions to worsen compared to 22% in the previous study, and just 15% expect it to improve compared to 34% in December.
Rabobank's Rural New Zealand manager Ben Russell said drought and the exchange rate had impacted on farmer sentiment.
The dry summer had also impacted on other rural sectors with just 9% of beef farmers expecting conditions to improve and 45% for them to worsen.
Nearly half of beef farmers, 45% of sheep farmers and 49% of dairy farmers expected lower incomes in the coming year. In the December survey 83% of dairy farmers expected higher incomes.
A fifth of farmers planned to reduce their on-farm investment in the coming year.