Drought and plunging lamb prices have taken their toll on optimism in the sheep and beef sector.
The latest quarterly Rabobank Rural Confidence Survey shows half the country's sheep and beef farmers are concerned about the viability of their business and a quarter expect to reduce investment in their farms over the next 12 months.
A year ago only 7% expected to cut back investment.
The survey, which was carried out in early April, has found that, overall, farmer confidence has shown some improvement on the lows 2012, thanks to the more optimistic outlook of dairy farmers.
More than 50% of dairy farmers are expecting an improvement in the agricultural economy over the next 12 months, up from 35% in the previous survey.
Rabobank New Zealand chief executive Ben Russell said that while dairy farmers were also hit by this year's drought - with a third of all North Island farmers saying the impact on their farms has been severe - the sheep and beef sector has had to cope with the added issue of low prices.
Lamb prices were generally down around 30% on 2012, he said, and many farmers, faced with selling fewer lambs at lower weights and a larger food bill for their stock, were questioning the future of the meat and wool sector and their position in it.