New Zealand farmer confidence has rallied on the back of higher dairy commodity prices, a looming drought-induced supply shortage in beef and lamb and a lower dollar.
The latest quarterly Rabobank rural confidence survey showed 54% of the country's farmers expected the rural economy to improve over the next 12 months, compared with 28% in the previous survey.
Only 8% of those surveyed expected conditions to worsen, down from 29% in the previous quarter.
Various factors helped to lift farmer spirits, but particularly the stronger dairy prices, reduced sheep and beef supply, the lower dollar and the end of drought, Rabobank New Zealand chief executive Ben Russell said.
Dairy farmers led the optimism in the survey and 61% expected the rural economy to improve in the coming 12 months.
The forecast high milk price for the 2013-14 season due to higher dairy commodity prices was a big contributor, while good autumn conditions had enabled a swift recovery from drought for most farms and meant spring milk production was unlikely to suffer any significant negative impact, Mr Russell said.
Sheep and beef producers and mixed farmers also had a more positive outlook, with 52% of sheep and beef farmers expecting an improvement in the agricultural economy, up from 24% in the last quarter.
The looming shortage of lamb and beef production following the summer drought was fuelling optimism as it was likely to be reflected in higher farm-gate prices through the 2013-14 season.
''Sheep flocks around the world have contracted again and this will tighten lamb supply globally over the coming year,'' he said.
Business viability remained an issue for sheep and beef farmers, despite their improved optimism about the economy. Of those surveyed, 53% considered themselves just viable or unviable.
Increasing confidence in the rural sector has also been reflected in the rural real estate market.
All regions were reporting a shortage of listings and those farms available for sale were attracting very strong attendance at open days and attracting multiple offers, Real Estate Institute of New Zealand rural market spokesman Brian Peacocke said.
The limiting factor on sales was the availability of properties to meet demand, impacting on sales volumes in the latter part of the June quarter.
''In most regions, farms that have now been on the market for two to three years have now been sold,'' Mr Peacocke said.
Data released yesterday by the REINZ showed there were 68 more farm sales for the three months ended June than for the corresponding period last year.
The median price per hectare for that period was $19,716, a 12.3% increase on the $17,565 recorded for the three months to June 2012. The median price fell 3.8% compared to May.
There were 43 farm sales in Otago in the three months to June, which was down from the 50 sales in the three months to May, but up from the 37 in the three months to June last year. They were mostly grazing and finishing properties.