According to the latest Rabobank Rural Confidence Survey, farmer confidence was at its highest level since late 2019.
However, sentiment remains at net negative levels overall, with significantly more of the country's farmers pessimistic than optimistic about the year ahead.
After falling marginally in the September 2020 quarter, the final survey of the year - completed late last month - found net farmer confidence was up to -23%, from -32% recorded in the last quarter.
The survey found an increase in the number of farmers expecting agricultural economic conditions to improve in the coming 12 months (up to 16% from 13% last quarter) while there were less farmers expecting conditions to worsen (39% from 45% previously). The number expecting the performance of the agricultural economy to stay the same rose to 44% from 40% last quarter.
Rabobank New Zealand chief executive Todd Charteris said confidence was up among the pastoral sector with dairy, sheep and beef farmers all citing improved demand and overseas markets as the key reasons for a positive outlook.
"Demand for New Zealand dairy products has held up well since the last survey in September and Global Dairy Trade (GDT) results have trended upwards over recent months."
Last week's additional 20 cent lift in Fonterra's payout mid-point will have further buoyed those in the sector. However, this came after the survey cut-off and is not reflected in the results.
"Sheep and beef farmer confidence also inched higher in this survey from the historically low levels recorded in September, with this driven by generally solid demand for New Zealand red meat products in key markets like China and the US," says Charteris.
Despite the sentiment being up this quarter, Charteris says overall confidence among pastoral farmers remained mired in negative territory amid concerns over government policy and Covid-19.
"Government policy and Covid-19 remain the most significant concerns for New Zealand's pastoral farmers with these factors cited as a source of apprehension by more than half of dairy, sheep and beef farmers holding a pessimistic outlook for the year ahead."
The survey found horticulturists continue to be the most optimistic of all the sector groups about the outlook for New Zealand's broader agricultural economy, however, growers are now less positive than last quarter.
"The government's recent decision to allow 2000 Registered Seasonal Employer (RSE) scheme workers into the country early next year - announced after the close of the survey period - will have been welcomed by growers. However, significant labour shortages are still anticipated over coming months and this is clearly weighing on growers confidence."
