Surging farmland prices in the U.S. Plains states jumped even higher in the first quarter as strong farm income fueled demand for farmland, the Federal Reserve Bank of Kansas City said on Tuesday.

The value of nonirrigated crop land jumped 25 percent and irrigated farm prices jumped more than 30 percent from the first quarter of 2011. For irrigated farmland, it was the biggest year-to-year percentage increase in the 30-year history of the survey. Ranchland values also surged 16 percent, with high feed costs boosting the demand for pasture.

"District farmland value gains accelerated in the first quarter even as record-high farmland values enticed more landowners to sell," the Fed said in its survey of 235 bankers in the district. "For the first time since the survey began in the late 1970s, the annual value of District cropland rose more than 20 percent for two consecutive years."

The Fed also said credit conditions for farmers and agricultural banks continued to sparkle. Cash flows allowed grain farmers to retire debt even as capital spending on equipment and buildings expanded. Farm asset values rose and loan demand shrank again as many farmers paid bills with cash.

Farmland values are closely watched by economists at the Federal Reserve and by commercial bankers as a barometer of U.S. banking assets and as a benchmark for agricultural balance sheets. Farmland is a basic collateral for farm loans.

Some bankers have worried about the possibility of a farmland bubble like the one seen in the 1980s, when over-extended farmers lost their land as interest rates jumped. The debt posture of many farmers is far different now than it was in the 1980s, however. Net farm assets in the United States are expected to rise to more than $2.2 trillion in 2012, according to the U.S. Department of Agriculture.

The Fed's 10th district stretches across the big wheat, cattle and corn states of Colorado, Kansas, Nebraska and Oklahoma, along with Wyoming and parts of New Mexico and Missouri. This region has benefited from growing ethanol production needed for regional and Western oil refineries, which has powered corn prices to record highs in recent years.

The big corn state of Nebraska saw the biggest jump in land prices -- 38.6 percent for nonirrigated farms and 41.4 percent for irrigated land.

"Timely rains and a mild winter bolstered winter wheat crop conditions, brightening farm income prospects in Oklahoma and Kansas," the report said. "Strong export demand and low cow inventories underpinned a first-quarter rise in cattle prices, but profit margins varied with production costs."

A third of the bankers surveyed projected farmland values would keep rising in the next few months.