Victorian farmer confidence has lifted, with the increase attributed to good seasonal conditions and commodity prices, the latest quarterly Rabobank Rural Confidence Survey has found.
The survey found the dairy sector had the greatest jump among farmers expecting the agricultural economy to improve.
It found 19 per cent of dairy farmers were holding an optimistic outlook, compared with only 11pc in the first quarter of the year.
Almost half (47pc) expected agribusiness conditions to remain unchanged in the year ahead (previously 49pc). But a further 31pc are anticipating economic conditions will decline.
Rabobank southern Victoria and Tasmania regional manager Deborah Maskell-Davies said despite opening milk prices being lower than last year, farmer confidence remained upbeat.
"Labour is an ongoing issue for Victorian dairy farmers, but the recent strong prices mean many farmers have taken the opportunity or are looking to upgrade dairy facilities - improving labour efficiency," she said.
Ms Maskell-Davies said access to quality fodder was an issue this year for some dairy farmers. Many fodder and grain growers had grain and hay crops adversely affected by the wet season in 2022.
"The rainfall throughout 2022 has delivered feed availability, filled water storages and provided full soil moisture profiles - setting farmers up well for this season," Ms Maskell-Davies said.
But the survey also reflected concerns about the return of the El Nino, reported in the annual Dairy Australia survey.
Dairy farmer Markus Lang, Tatura, said water was plentiful, and an "average" season would be nice. Mr Lang and his brothers milk 2100 cows, across three farms, supplying Bega Cheese.
"It feels like a very wet El Nino, at the moment," he said.
"Water is readily available, we are putting it away for next year - the price means we can put it away and we are able to hedge our bets a little bit."
He said in a "big" year, the farms would use 5000 megalitres, irrigating perennial pastures, lucerne and Italian ryegrass.
"We are in a consolidation phase, at the minute, we have been through a period of significant growth."
Mr Lang said the family was reducing debt levels.
"Fertiliser prices have come down, but there are plenty of other costs that have risen dramatically - insurance, power and diesel," he said.
"You'd like to think diesel has reached a peak, a bit like fertiliser, you'd like to think it has room to come back."
He was hoping processors could increase their prices again. "I'm not holding my breath, but every bit is positive and we welcome every increase that comes.
"To have a sustainable industry everyone in the value chain needs to earn a crust."
Murray Dairy deputy chair Rachel Napier, Blighty, NSW, milks a herd of 230 cows, supplying Riverina Fresh.
"The coming season is looking promising, we are all waiting with bated breath to see what the milk prices will pan out to on July 1 and how all our commodities are going to fall in around that." Ms Napier said.
The biggest challenge was putting away quality fodder, after last year's wet conditions.
"That's at the forefront of everyone's mind," she said.
She said there was a lot of confidence and positivity around the industry.
"Everything is going along as you would expect it to, in a reasonable year," she said.
Lockington farmer Dustin Kemp, who has a 180-strong herd and supplies Bulla, said he had his fingers crossed for "an uneventful season.
"The milk and water price is positive," he said.
"I'm looking forward to the season."