Rabobank's most recent rural confidence survey has revealed that although impacts from drought-like conditions remain a primary concern for SA livestock producers, optimism about the sector had mostly increased because of higher farmgate prices.
From a commodity perspective, sentiment has increased substantially in SA's dairy sector this quarter.
Rabobank SA regional manager Roger Matthews said the dairy industry had experienced a "horrible run" in the past few years.
"But with milk supply continuing to fall, we have seen retailers increasing their milk prices and farmgate prices continue their upward trajectory," he said.
"However, while prices are improving, they are still coming off a very low base, so it is perhaps not surprising that most farmers are confident of an improvement."
Mr Matthews said confidence among sheep producers had "pulled back slightly" this quarter after experiencing a highly profitable 2018/19 season.
This quarter, 23 per cent of SA sheep producers were expecting conditions in the rural economy to continue to improve, down from 30pc in the previous survey.
There was also an increase in the number of farmers in the sheep industry anticipating a decline in conditions, with 27pc now holding this view, up from 21pc, previously.
"For those sheep farmers who are expecting worsening conditions, the majority highlighted drought as their primary concern, although commodity prices came in not far behind," Mr Matthews said.
"Sheepmeat continues to show amazing strength and, while declining as new season lambs come to market, prices are likely to remain strong."
Mr Matthews said wool prices on the other hand had dropped dramatically in August as demand from China eased.
SA beef producers maintained high confidence levels, with 55pc optimistic about the year ahead and only eight per cent reporting negative sentiment.
"Beef prices, while easing recently, remain good as supply tightens but there is long- term confidence across the meat industries as seen in the recent announcement by Thomas Foods to rebuild its meat processing plant at Murray Bridge," Mr Matthews said.
"After the Murray Bridge facility was completely destroyed by fire, some feared the facility may not be rebuilt, but Thomas Foods announced in June that they are not only rebuilding, but expanding," he said.