Improved sentiment among sheep and beef farmers and horticulturists has seen a lift in rural confidence, according to Rabobank's latest quarterly survey.
However, overall farmer confidence in New Zealand still remains in negative territory, after there were three consecutive quarters of decline last year.
The latest survey, completed earlier this month, shows net farmer confidence had lifted to - 2 percent, up from - 9 percent recorded in March 2019.
Rabobank New Zealand chief executive Todd Charteris said improving demand was the key reason cited by farmers expecting the agricultural economy to improve.
That sentiment among sheep and beef farmers was not surprising given they had seen demand for their products lift in recent months, largely due to the devastating African Swine Fever outbreak, he said.
"[this disease] has crippled Chinese pork production and created new opportunities for New Zealand red meat producers in the Chinese market," he said.
Horticulturalists had also seen demand for their products strengthen over the last quarter with import growth occurring in a existing and new export markets, particularly for kiwifruit and apples, Mr Charteris said.
The survey found dairy farmer confidence relatively unchanged from earlier in the year with roughly a quarter of those surveyed having an optimistic outlook on the 12 months ahead, a quarter expecting conditions to worsen and the remaining half expecting little change.
Among farmers with a pessimistic view of the agricultural economy, government policy remained the major concern, cited by 72 percent of farmers with a negative outlook on the next 12 months.
This was back marginally on the 75 percent who held this concern last quarter.
"Since the last survey, we've seen the government categorically rule out introducing capital gains tax, with this likely to have come as a relief to most in the agricultural sector," Mr Charteris said.
"However, we've seen also seen the government recently introduce the Zero Carbon Bill proposing ambitious targets for gross methane reductions without the ability to use on-farm planting to directly offset these reductions. And this is a concern for some farmers," he said.