Sentiment in Victoria's agriculture sector has fallen to a 12-month low as seasonal conditions take their toll on farmers in the north, the latest Rabobank Rural Confidence Survey has revealed.
In a tale of two differing seasons, sentiment took a tumble in the northern regions and parts of Gippsland - where drought concerns are heightened - while confidence in the south-west was comparatively strong, buoyed by decent rain in recent weeks.
Despite the drop-off in overall rural confidence, the strength of the state's farming sector remained virtually unscathed, with the majority of farmers (92 per cent) rating their farms viable.
The latest survey released on Monday found a smaller percentage of farmers (20pc) expect agricultural and economic conditions to improve in the year ahead, down from 37pc with that view in the September quarter.
Those expecting little change to conditions stood at 36pc, similar to last quarter's reading of 39pc.
The proportion expecting conditions to worsen, however, more than doubled this quarter to 35pc.
One-thousand farmers were interviewed across geographical regions and commodity sectors for the survey, including about 250 Victorian producers.
Rabobank southern Victoria and Tasmania regional manager Hamish McAlpin said dry conditions had intensified "north of the divide" with some parts of the northern Mallee facing their second failed crop in a row while crops in other northern regions had been cut for hay.
"Heading into spring the state was on track for an above-average harvest volume ... but the poor finish has greatly diminished prospects in the Mallee, north central and Goulburn regions," he said.
In the Wimmera, Mr McAlpin said rainfall in the growing season had been relatively low, but many had been able to preserve moisture and this year's crop was shaping up to deliver one of the best financial results for growers in the region.
"Meanwhile those in the Western District cropping regions benefited greatly from late-spring rain of between 15 to 35 millimetres," he said.
While confidence in the grains sector fell back this quarter - with slightly more grain growers (26pc) expecting conditions to worsen rather than improve (22pc) - it was the dairy sector which took the greatest hit to confidence.
"It is also a story of two halves in the dairy sector, with those in the southern dairy regions in a better position to capitalise on higher milk prices given their on-farm hay and silage reserves, while in the north, the big challenge is elevated water and fodder prices," Mr McAlpin said
"The situation has seen many sell their water allocation for the year, or the bulk of it, at prices up to $800 per megalitre and then use those funds to buy-in fodder."
In the livestock sector, Mr McAlpin said protein prices remained buoyant with the drop-off in beef and sheep producer sentiment all driven by seasonal concerns.
"The survey found 41 per cent of the state's dairy farmers expect an improvement in gross farm incomes in 2020, while 37 per cent of grain growers also hold that view compared with this year," he said.
"We are seeing some investment going into new dairies in Gippsland as well as infrastructure development in the grazing regions of western Victoria."