South Australian farmer confidence has been unable to sustain the rally seen throughout much of 2009 and has faltered in the most recent quarter, according to the latest Rabobank Rural Confidence Survey.

The survey showed that the prospect of lower farm gate returns as a result of the stronger Australian dollar has eroded confidence in the sector, although there are still more South Australian producers expecting conditions to improve over the next 12 months compared with those expecting conditions to deteriorate.

The latest survey - taken approximately a month ago - found 31 per cent of primary producers in South Australia expect the agricultural economy to improve over the next 12 months, down from 39 per cent last quarter. A total of 25 per cent of farmers expect the agricultural economy to worsen, compared to just 11 per cent in the previous survey.

A comprehensive monitor of outlook and sentiment in Australia‟s rural industries, the Rabobank Rural Confidence Survey questions an average of 1200 farmers across a wide range of commodities and geographical areas throughout the nation on a quarterly basis.

Rabobank state manager for South Australia James Robinson said after recovering throughout 2009, the improvement in farmer confidence could not be maintained in the last survey period.

He said while farmer sentiment had received a big boost from the generally favourable conditions over the winter cropping season, the weakness in grain markets and strength of the Australian dollar had undermined confidence.

Of those South Australian primary producers surveyed who expected conditions to worsen over the next 12 months, 64 per cent cited the rising Australian dollar as a major contributing factor. And 50 per cent of respondents specifically mentioned falling commodity prices.

"The consistent rainfall received over the growing season has meant that South Australian farmers should produce their biggest crop since 2001, making it the second largest crop ever," Mr Robinson said. "It is unfortunate that the weaker price outlook means many producers will not be able to fully capitalise on the higher production levels."

Of those South Australian primary producers surveyed who expected conditions to improve over the next 12 months, 59 per cent cited „improved seasonal conditions‟ as a major contributing factor.

Sheep producers have shown resilience with confidence higher than other sectors in the state. The strong prices for lamb and high prices for breeders recently have underpinned confidence in the sector.

Sentiment is weaker in the grains and beef sectors with the weak prices constraining outlook. Of the different regions, confidence is highest in the Eyre Peninsula.

In terms of farmers‟ own businesses, the Rabobank survey found 39 per cent of South Australian respondents expected to see improved performance over the next 12 months, with 13 per cent expecting business performance to worsen. While declining since the last survey period, the result was significantly better than farmers‟ perception of the overall agricultural economy.

Investment intentions were stable despite the fall in headline confidence. A total of 91 per cent of South Australian farmers surveyed expected to increase or maintain the current level of investment in their farm businesses in the next 12 months, compared with 90 per cent last quarter.

"The stability in investment intentions and the perception of individual business performance being better than the agricultural economy as a whole indicates a healthy level of underlying confidence in the sector," Mr Robinson said.

The latest Rabobank survey found South Australian farmers overall reported slightly lower incomes over the previous three months, with 31 per cent receiving lower incomes than at the same period in the previous year and 27 per cent receiving higher incomes.

The most robust study of its type in Australia, the Rabobank Rural Confidence Survey has been conducted since 2000 by an independent research organisation interviewing an average of 1200 farmers throughout the country each quarter.

The next results are scheduled for release in March 2010.