VICTORIA'S farmers are the nation's most optimistic.

While nationally the rural outlook is sombre, Victoria's producers are brimming with confidence, thanks to good rain and a recovery in dairy prices.

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Things have been on the up for more than a year, and confidence among the state's farmers is at its highest level for two years.

The revelations came in Rabobank Australia's latest quarterly survey of farm confidence, released early this week.

They were supported by the National Australia Bank, which this week predicted a 10 per cent lift in dairy prices next season due to strong demand locally and from China and India.

Based on interviews with 1200 farmers across Australia last month, the Rabobank survey found farmers in the nation's southeast, particularly Victoria, were cock-a-hoop, while the rest of the nation's rural areas were down in the mouth.

Only 29 per cent of the nation's farmers thought rural conditions would improve during the next 12 months, while almost one in four - 23 per cent - were expecting a deterioration.

Depressed grain prices and the locust plague were the main negatives, offsetting the positive impact of good rain and livestock prices in many areas.

But in Victoria, 38 per cent of farmers were optimistic about the year ahead, while only one in nine - 11 per cent - believed things were going to get worse.

Rabobank Victorian manager Mark Bennett said promising autumn rain and good prices for milk, lamb and sheep meat had fuelled farmer optimism.

The biggest boost in confidence was in the state's north, where higher water allocations had eased pressure on irrigators, particularly in dairy, he said.

Dairy producers had also been boosted by rising milk prices and low feed costs, with only 4 per cent pessimistic about the year ahead.

Victorian Farmers Federation president Andrew Broad said it wasn't surprising to see optimism this time of the year.

"If they've got a crop in, had some opening rain and can see a way forward, it does instil confidence," he said.

Mr Broad said farmers in the south were seeing good returns from prime lambs and dairy.

"But up in the north, the locust threat is causing concern and poor grain prices are making many farmers cautious."