Farmer spirits are up chiefly because of higher dairy commodity prices and a shortage of lamb and beef after last summer's drought, says Rabobank.
The bank found, in its latest quarterly survey, that farmers are more confident with a much improved outlook for the year ahead.
In the survey completed last month, more than half of the country's farmers expect the rural economy to improve, compared with 28 per cent in the last quarter.
Only 8 per cent of surveyed farmers expected conditions to worsen - down from 29 per cent.
Rabobank New Zealand chief executive Ben Russell said higher dairy commodity prices and a looming supply shortage in lamb and beef from the drought were in particular helping to lift farmer confidence.
"The lower dollar has also been another cause for optimism, with 27 per cent of farmers who expected conditions to improve nominating the falling dollar as the reason."
He said many farmers would be "breathing a sigh of relief" that the major difficulties of the past year were behind them and feeling that conditions could only improve.
"The severe drought that had been experienced in many parts of the country, particularly in the North Island, had really knocked farmer confidence, as had the consistently high currency and overall generally difficult economic conditions. Many are now taking cheer that the worst of these conditions are now behind them."
Dairy farmers were the most optimistic in the survey, with 61 per cent expecting the rural economy to improve.
Good autumn conditions had helped many farmers to make a swift recovery from the drought and spring milk production was not expected to suffer.
Sheep, beef and mixed farmers also had a more positive outlook. About 52 per cent of sheep and beef farmers thought the agricultural economy would improve, up from 24 per cent previously.
Russell said lower lamb and beef production had given farmers optimism.
"Sheep flocks around the world have contracted again and this will tighten lamb supply globally over the coming year."
Horticulturists were more confident with 41 per cent expecting the rural economy to improve, up from 18 per cent, perhaps driven by the lower dollar.
A total 55 per cent of farmers surveyed expected the performance of their farming enterprises to improve, compared with 42 per cent, and only 10 per cent expected their business performance to worsen (down from 21 per cent).
Dairy farmers were again most positive, buoyed by the forecasted milk price of $7 a kilogram of milk solids for 2013/14 - more than 20 per cent up on the previous season's price.
- © Fairfax NZ News