Rural confidence has experienced a significant fall as the country's farmers anticipate an end to the recent ‘golden run' of strong commodity prices and excellent seasonal conditions.

According to the latest quarterly Rabobank Rural Confidence Survey, farmer confidence is dropping into negative territory for the first time since August 2009, with more New Zealand farmers expecting conditions to worsen than to improve.

The survey – completed earlier this month – found almost a third of farmers, or 27 per cent, expect the agricultural economy to worsen in the next 12 months – that's a 12 per cent increase in the previous survey.

The survey said those expecting conditions to improve declined to 17 per cent, from 33 per cent previously.

However, farmers' investment intentions – an indicator of long-term confidence in the sector – remain robust, with horticulture producers improving considerably since the previous survey, says Rabobank New Zealand CEO Ben Russell.

Ben says the considerable overall fall in farmer confidence registered in the latest survey could largely be attributed to the changing market conditions experienced by many agricultural producers in early 2012.

He says adding to this is the declines in key commodity prices and a persistent high New Zealand dollar.

'Farmers are also expecting the recent golden run of good seasonal conditions for agricultural production we've been experiencing in most areas of the country will inevitably be coming to an end soon.”

Of those farmers expecting conditions to worsen, 39 per cent cited the high New Zealand dollar as cause for their pessimistic outlook.

Other factors nominated as cause for concern were buyer resistance economic recession and the likelihood that high commodity prices and good seasonal conditions won't last.

Ben says while price seasonality is a factor, sheep and beef farmers had seen farm-gate prices fall between 15 and 20 per cent since the start of the year.

International dairy commodity prices had also eased by approximately 18 per cent, in New Zealand dollar terms, in this period.

The survey showed the beef and sheep sectors to be the least optimistic, with only 13 per cent expecting the agricultural economy to improve over the next 12.

Dairy sector confidence has also gone down, with 21 per cent of dairy farmers registering a positive view, compared to 28 per cent in the last survey.

However, there was some cause for positive outlook among farmers, says Ben.

Of those expecting the agricultural economy to improve, 40 per cent cited fundamental macro-economic factors – including global population growth and growing world demand for food – as the key drivers of their optimism.

Farmers were also overall more optimistic about the performance of their own individual farm businesses than the agricultural economy as a whole.

A total of 28 per cent of those surveyed expected to see improved performance in their own farm businesses over the next 12 months.

However, this figure had also fallen significantly from the previous survey when 45 per cent had a positive view of their future business performance.

The number of farmers expecting their own business performance to worsen in the next 12 months increased to 20 per cent, from just eight per cent the previous quarter.

Ben says the survey showed, interestingly, farmers' investment intentions indicated an underlying confidence in the long-term outlook of the sector.

'This measure remains quite robust, with 92 per cent of farmers surveyed expecting to maintain or increase the level of their on-farm investment in the coming 12 months.

'That said, the proportion expecting to actually increase their investment this survey has fallen to 26 per cent, from 33 per cent in the previous quarter.”

Ben says horticultural producers' investment intentions had improved considerably since the previous survey, with only 11 per cent expecting to decrease their investment compared to 39 per cent with that intention in the last quarter.

'This is likely to reflect the improvement in potential options available for kiwifruit growers in the face of Psa.”