Farmland values in the central U.S. Plains held mostly steady in the July-September quarter compared to a year ago, with land prices and loan demand generally tracking commodity price trends, the Federal Reserve Bank of Kansas City said on Thursday.

“Non-irrigated and irrigated crop land values declined modestly from last quarter and were hovering just above year-ago levels by 1 percent and 2 percent, respectively,” the bank said in its quarterly survey of farm bankers.

“Ranch land values, however, were still rising, although at a slower pace than in the past several years. Improved profitability in the livestock sector and the potential for herd rebuilding has underpinned demand for high-quality pasture.”

Farmland prices are closely watched by Fed policymakers, bankers and farm suppliers - from equipment makers to seed dealers - since land is the basic collateral for most farm loans.

In recent years, farmland prices have set records as a boom in biofuels and exports pushed crop prices to all-time highs. But the drop in grain prices, particularly corn, in the past year, has raised fears about a potential “farmland bubble” popping after the boom.

The bank’s district includes Kansas, Nebraska, Oklahoma, western Missouri, eastern Colorado and parts of New Mexico and Wyoming, with wheat, corn, and cattle among the leading commodities.

The Chicago Fed will release its farmland survey Thursday afternoon.

In Kansas, the top wheat state, non-irrigated land values were 3.5 percent higher than a year ago, while irrigated land prices rose 8.8 percent. But in Nebraska, a big corn state, non-irrigated land prices fell 2.5 percent from last year and irrigated land was 2.6 percent lower.

In Oklahoma, a leading cattle state in the region, range land prices were up 5.5 percent and non-irrigated crop land values jumped 10.6 percent.

"Although crop prices have fallen significantly over the past year, the drag on farm income from lower prices may be lessened for producers with crop insurance and those that sold a portion of the 2014 crop at higher prices earlier in the year,” the Fed said.

“In contrast, the livestock sector posted strong profits in 2014. Cow/calf operators were selling feeder cattle at record high prices due to several years of herd culling that reduced U.S. cattle inventories.”

Overall, bankers reported “a modest deterioration” in working capital for crop producers in the quarter and a rise in loan demand after the boom in crop income of recent years.