Farmers' economic confidence improved in the first months of 2010, boosted by sheep and beef prices although optimism in some regions was restrained by drought conditions, a new Rabobank survey shows. It found 34 percent of farmers expected the rural economy to improve in the next year, up from 32 percent previously, while the proportion of farmers expecting conditions to worsen fell to 11 percent from 26 percent reports The ODT.

The Rabobank rural confidence survey was completed this month but before yesterday's announcement by Fonterra that it had increased its milk price forecast for this season by 40c to $6.10 a kg of milksolids. Rabobank general manager rural NZ Ben Russell said the survey showed much of the improvement in rural confidence had been driven by sheep and beef farmers, who had a more optimistic outlook about their sectors. Factors working in the favour of sheep and beef producers included a small fall in the NZ dollar during the survey period, and good news in terms of commodity prices in the sectors.

Lamb prices, in particular, had held at higher levels than expected during the main processing season, due to good offshore market prices, Mr Russell said. Farmgate lamb prices for the season to date had averaged around $80 a head, compared to about $70 a head expected at the start of the processing season. Beef prices had also improved earlier than usual during the peak processing season from the lows before Christmas.

Among dairy farmers, 94 expected the agricultural economy to either stay the same or improve, compared to 88 percent in the previous survey. Regional differences were noticeably pronounced in the latest survey, with 33 percent of pessimistic upper North Island survey respondents citing drought as a concern, Mr Russell said.