Farmer confidence is at its lowest level since the beginning of the Covid-19 pandemic due to rising input costs, rising interest rates and concerns over government policy.
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Rabobank's latest quarterly rural confidence survey has net farmer confidence sitting at -35 percent - a huge drop from -3 percent in the previous quarter.
Of the 450 farmers surveyed, 48 percent expect conditions in the agricultural economy to worsen over the next year.
Farmers were also markedly less confident about their own business in the year ahead and more than a third were expecting their farm business performance to worsen.
Rabobank New Zealand chief executive Todd Charteris said rising input costs were the major driver of the lower sentiment recorded in the latest survey, cited as a reason for concern by 63 percent of farmers with a negative outlook.
"This is the highest level of concern ever expressed about input costs in the history of the survey," Charteris said.
"Since our last survey in March, we've seen Russia 'weaponise' food and energy as part of their on-going conflict with Ukraine and its allies, and this has pushed prices for fertiliser, fuel and feed higher.
"We've also seen the local labour market tighten further, lifting costs for on-farm labour and therefore squeezing farmer margins."
While farm input prices were the main area of concern, they were certainly not the only source of anxiety, he said.
"As it has across recent surveys, government policy remains a major worry for farmers, with this cited by more than half of those with a negative outlook. Rising interest rates and overseas markets - both cited by 15 percent of pessimistic farmers - also emerged in the latest survey as additional concerns for primary producers."
Charteris said the survey concluded in late June which meant developments in early July like the drop at GDT and the release of the He Waka Eke Noa emissions pricing plan had likely only further dampened the mood in the agriculture sector.