The latest quarterly Rabobank Rural Confidence Survey found confidence levels are the lowest since 2006, during the devastating millennium drought.

More than half of farmers surveyed had a pessimistic view on the 12 months ahead.

Some 56 per cent of those surveyed expect economic conditions to deteriorate over the next 12 months, significantly up from 35 per cent in the June quarter.

Those expecting an improvement in conditions declined to from 18 to 13 per cent, while 25 per cent expect similar conditions to last year, down from 41 per cent last quarter.

But the drought has done little to dent resilience in the sector, with farmers reporting relatively strong business viability at levels higher than much of the past decade.

Rabobank Australia chief executive Peter Knoblanche said farmers across the country were demonstrating exceptional resilience and adaptability through worsening conditions.

"Parts of central and western Queensland have been in drought for seven years, with only sporadic short-term relief, while the whole of NSW is drought declared and its reach is spreading into South Australia and Victoria," he said.

Drought was cited as a key reason conditions were likely to worsen by 89 per cent of people, up from 75 per cent.

While there are growing concerns because of drought, Mr Knoblanche said longer-term business outlook remained positive with 93 per cent of farming businesses reporting viability

That figure is well up on levels during the millennium drought.

"The outlook for Australia's ag sector is fundamentally very sound, with strong commodity prices - particularly for lamb, beef, wool and cotton and, more recently, grain - ensuring the majority remain in overall strong positions," Mr Knoblanche said.

Mr Knoblanche said farmers in Western Australia, South Australia and southern Victoria were enjoying improved seasonal conditions.

All of NSW is affected by the big dry, while more than 58 per cent of Queensland is officially in drought.

Australian Associated Press