VICTORIA'S farmers are the happiest they've been for three years.

The latest Rabobank survey of rural confidence has found the state's farmers are the most optimistic in Australia about the year ahead.

Good winter rain and strong commodity prices have fuelled the positive outlook, with the state's dairy farmers the most buoyant.

According to the survey conducted this month, 48 per cent of Victorian farmers thought the rural economy would improve over the next 12 months, up from 41 per cent three months earlier.

Only 8 per cent were pessimistic.

More than half - 54 per cent - anticipated a lift in their own businesses, with only 6 per cent pessimistic. And more than 90 per cent were planning to maintain or boost on-farm investment.

It was the sixth successive lift in confidence levels according to the quarterly surveys, pushing Victorian farm confidence to its highest level in three years.

Rabobank's Victorian manager Mark Bennett said it was a pleasing result after several difficult years for most of the state's producers.

"It's fantastic to see the green pastures again,'' Mr Bennett said.

"I'd actually consider these conditions average in the historical context, but the problem has been that we haven't had an `average' season for almost 10 years.''

Dairy confidence was being driven by good rain, strong opening milk prices and the prospect of irrigation allocations ending the year at 100 per cent.

Crop farmers also got a great start to the season, but the threat posed by locusts and mice had taken the edge off things.

"If it weren't for (these threats) I suspect confidence in the grain sector would at historic highs,'' Mr Bennett said.

"This concern has caused some growers to hold back from forward selling into the current strong market.''

Some parts in the state's south had also received too much rain which was a problem for crops and livestock. "Some regions will be hoping for some sunny days,'' Mr Bennett said.

Australia-wide, the Rabobank survey covering 1300 farmers found them at their most confident in two and a half years, with 37 per cent optimistic and 13 per cent pessimistic about the rural economy for the year ahead.

Good rain and commodity prices were the two main drivers, and grain producers the most optimistic.

NSW farmers weren't far behind Victoria's in their positive outlook, with sentiment strongest in the Riverina and central regions.