NSW was the only state to report an upswing in farmer confidence in the past three months, with the impacts of COVID-19 contributing to a downturn in confidence in all other states.
That is according to Rabobank's latest Rabobank Rural Confidence Survey, which found the positivity in NSW was overwhelmingly due to the continued improvement in seasonal conditions and winter cropping activities, while heightened concerns about the economy and falling commodity prices as a result of COVID-19 undermined Victorian farm confidence.
More than half of the NSW farmers surveyed expect conditions to improve in the next 12 months (52 per cent, up from 48 per cent last quarter) with confidence strong across most regions and all commodity sectors.
In December, just 13 per cent of the state's farmers said they expected conditions to improve in the year ahead.
One of the sectors that have seen the biggest jump in NSW is dairy, with improved commodity prices and seasonal conditions resulting in 59 per cent expecting conditions to improve, jumping from 19 per cent in March.
Despite a strong start to the year and improved seasonal conditions in drought-affected areas, the number of Victorian farmers expecting business conditions to worsen almost doubled since the last survey in March.
The latest survey results reveal overall Victorian rural confidence was primarily dragged down by a decline in sentiment in the sheep and dairy sectors.
However, Victorian grain growers bucked the trend with seasonal conditions in cropping regions helping bolster business confidence for the year ahead.
It wasn't just Victoria's grain growers who are optimistic, with 42 per cent of growers nationally reporting an improvement in business sentiment, almost entirely seasonally driven.
Higher water availability ahead of the 2020-21 cotton season, and a wetter-than-average three-month outlook, has triggered a major turnaround in farm sentiment for cotton producers, who are now the most confident sector (44 per cent, up from 27 per cent) about prospects for the coming year.
Rabobank Australia chief executive officer Peter Knoblanche said uncertainty about COVID-19 was undoubtedly hanging over the farm sector at the moment and had "taken the shine off historically-high levels of confidence" recorded at the start of this year.
“Winter cropping activities are in full swing and the forecasts already are for a bumper harvest, which is really positive news for the nation's crop farmers after so many years of drought,” he said.
“Livestock rebuilding is also under way and confidence among beef and sheepmeat producers is generally very good, particularly in light of excellent prices at the moment.”
Mr Knoblanche said the agricultural sector had also benefited from a relatively lower Australian dollar and historically low borrowing costs.