NEW South Wales rural confidence has taken a knock as dry weather conditions impact much of the state, the latest Rabobank Rural Confidence Survey has shown.
Grain growers were particularly cautious about their prospects, with dry conditions and frost during the latter part of the cropping season reducing yield potential - although sheep and beef producers also lowered their expectations for the coming year.
This slide in confidence comes after a significant rebound in NSW farmer sentiment recorded in the previous survey.
The latest Rabobank Rural Confidence Survey - completed last month - found NSW farmer confidence had fallen to a net reading of -4%, after posting a solid rise to 17% last quarter.
The number of the state's farmers with a positive outlook on the next 12 months declined to 23% (from 36% previously), while those expecting conditions to worsen increased to 26% (from 19%). A total of 45% expected similar conditions to last year.
A comprehensive monitor of outlook and sentiment in Australian rural industries, the Rabobank Rural Confidence Survey questions an average of 1000 primary producers across a wide range of commodities and geographical areas throughout Australia on a quarterly basis.
Rabobank New South Wales state manager, TJ Mulder, said farmers had wound back their expectations for the coming year on the back of dry spring conditions, particularly October which was the eighth-driest on record.
"Coming out of winter, farmers were generally buoyant about their prospects, particularly grain growers. However, this has been tempered by dry seasonal conditions during spring," Mr Mulder said.
"October was very dry, and this has knocked around the yield potential of crops, particularly in central and southern New South Wales. While some significant frost events have seen farmers cut canola for silage and bale wheat for hay.
"There is certainly a sense of disappointment out there, with earlier season projections pointing to a good crop, but weather events now lowering expectations to an average to below-average outcome."
Mr Mulder said farmers in the north-west of the state were continuing to face the most difficult seasonal conditions, with prevailing dry weather.
The survey showed confidence in the beef and sheep industries had also slipped, with many graziers reviewing their feed supplies to determine whether to offload stock to get through summer.
In contrast, confidence picked up in the dairy sector, with 43% of NSW dairy farmers surveyed expecting the agricultural economy to improve in the coming year.
Mr Mulder said this was likely the result of more benign seasonal conditions seen in the state's key dairy-producing regions, as well as the positive global outlook for the dairy sector.
Mr Mulder said confidence in the cotton sector was coming off a very high base and, while sentiment dropped off this quarter, it remains strong from a historical context.
NSW farmers' investment intentions also eased, but remained solid with 84% expecting to retain or increase their level of investment - down from 90%.
"Farmers are generally more upbeat than this time 12 months ago and, with interest rates at low levels, they are taking an opportunistic approach to any property acquisitions," Mr Mulder said.