Climate change policy and the Emissions Trading Scheme has topped the list of biggest concerns for farmers for the first time since 2010, according to the latest Federated Farmers Farm Confidence Survey.
Nearly a quarter of the 1,432 farmers who responded to the July survey said it was their number one worry.
- Fonterra loss signals more pain to come for New Zealand dairy farmers - analyst
- No reason for 'carbon guilt' over NZ meat, milk, says Fed Farmers
The second greatest concern was regulation and compliance costs (19 percent), followed by debt, interest and banks (10 percent).
Federated Farmers economics spokesperson, Andrew Hoggard said the result was expected.
"That result is hardly surprising, given analysis coming through that significant numbers of dairy and sheep and beef farms will be uneconomic if the government continues to pursue methane reduction targets that are far more stringent than are necessary to ensure there is no additional global warming," he said.
"That's coupled with concern that the targets, and government incentives for forestry, is driving blanket planting of pines on productive farmland, with huge long-term detriment to rural communities," said Hoggard.
Just over half of the farmers surveyed (55 percent) said their businesses were currently making a profit (similar to the January survey which showed 56 percent.)
The proportion of farms making a loss increased slightly by 2 points to 11.3 percent.
Slightly more farmers expect their profitability to worsen than improve.
The July survey, conducted by Research First, found that the proportion of farmers who consider current general economic conditions to be good (24.9 percent) had decreased slightly over the last six months.
The proportion who consider conditions to be bad remains lower, but not by much (21.3 percent).
The survey also found the lowest level of confidence in the economy since July 2009, in the wake of the Global Financial Crisis.
"On that front, we're no different to the gloom being expressed by the wider business community," said Hoggard.
"For us there is particular concern about the global uncertainty and instability arising from fallout from Brexit and US-China tensions and how that will impact on our key markets and export returns."
All regions expect farm production to increase over the coming 12 months but they are mostly less optimistic than six months ago, with large falls in expectations for Auckland-Northland and Taranaki-Manawatu.
Slightly more farmers expect to increase their spending rather than reduce it over the coming 12 months but this is also down on January's survey.
Farmers continued to find it hard, if not harder than ever, to find skilled and motivated staff.
Read the full survey here.