This has been discussed to death in different places; some people think farang is a racist term (has negative connotations), some don't.
Since it came up in a Quora question I added my own take, including some more background related to the possibility people use it in different ways, and related to stereotyping in general. I'll include the Quora link but the whole answer is cited here, per my typical approach a bit meandering and wordy:
https://www.quora.com/To-people-living- … n-Bickel-5
For me, not really. People's opinions vary on whether there really is any positive or negative connotation involved with it. It seems to be a majority view that it just means “white foreigner,” that it doesn't include judgement beyond that. Of course different people could use it in different ways, and could feel differently about different types of foreigners, which I'll develop further.
My understanding about origin is that there are a few possible stories but that it probably ties back to calling people French. “French” in French is francais, which is quite close to farang. It makes sense that an earlier version of “white” would tie to people being French, given the early dominance of France in this region as a colonial power.
Some associated sayings that involve the term farang could lead people to think that it's a negative term, and of course some people really are using it that way, if they dislike foreigners and see the concept as involving that part of their judgement. “Pleng farang” literally translates as “foreigner's song,” and it refers to the odd melodic sound that is an attribute of foreign speech. That's not necessarily a negative judgement, I don't think, but it starts to mix in the idea that foreign language sounds like some kind of song versus conventional speech, which could easily be taken more negatively than the bare concept of farang.
I think it doesn't work to completely separate the idea of “farang” being negative or tone-neutral from the question of how Thais in general see foreigners, especially Western or white foreigners. It's my interpretation and opinion that the degree of stereotype involved would be seen as negative in the PC / politically correct climate back in the US right now. Let me explain.
If you make a claim that all Mexicans, black people, Middle-Easterners, Native Americans, Asians, etc. are all alike in a certain way in the US you have moved beyond making culture-based observations to over-generalizing by race. It's stereotyping, which is regarded as negative and flawed (by most; not universally). This is what Thais are doing, in general, or at least it's my understanding that they are.
To some extent it's not the right question to consider if the general impression is mostly positive or not. The right question is whether or not that type of sweeping judgement is valid. Even if someone pushed that down a level, and was open to seeing all English people as the same in certain ways but different from all Americans, the same problem occurs. To go a little deeper, the generalities being generally accurate versus inaccurate is only part of the issue; it's more about rejecting certain types of perspective generalizations as a standard practice.
Culture is a real thing. I've just claimed that most Thais see white Westerners and white culture as continuous and sharing common attributes (more or less); I've expressed that a broad generality in perspective holds across a lot of Thai culture. Of course that invokes some degree of error. Opinions on such things would vary, just as “farang” would be used in different ways, and Westerners might be seen negatively by some, or in certain value-neutral ways by others.