The average price of quality U.S. farmland fell 3 percent in 2014, marking the first annual decline in almost 30 years, the Federal Reserve Bank of Chicago said in its quarterly survey of district bankers on Thursday.

"The District's annual decrease of 3 percent in good farmland values for 2014 was the first loss for a year since 1986," the bank said in its survey of 224 regional farm banks in the north-central United States, the main production area for corn, soybeans and hogs. "Still, at the end of 2014 the index of inflation-adjusted agricultural land values for the District was 68 percent higher than at its 1979 peak from the 1970s boom."

The Chicago Fed said half of the regional farm bankers, citing the depressed price outlook for grains, expect farmland prices to continue to fall in the first quarter of 2015 despite holding steady in the last three months of 2014 with the previous quarter.

The bank's district includes Iowa, northern Illinois and Indiana, and most of Wisconsin and Michigan. Aside from producing about a third of U.S. corn and soybeans, the region is a major producer of hogs, beef and dairy cattle, wheat, sorghum and other crops.

Farmland prices are closely watched by Fed policymakers, bankers and farm suppliers since land is the basic collateral for most farm loans.

Since 2010, the price of farmland has set record highs amid a boom in biofuels and exports that also drove grains prices to all-time highs.

"Even though there is a softness to farmland markets it's not severe pressure," David Oppedahl, a Chicago Fed economist, told Reuters. "Look at where we've come from - a strong increase over the past 5-10 years and we are still at very high levels relative to past history."

Farmland values were down in 2014 even though the district as a whole set records for both corn and soybean production. Record large crops drove grain prices to five-year lows in 2014 and will weigh on farm land economic returns and thus pricing in 2015, the Fed said.

A spectacular drop in grain and feed prices, on the other hand, benefited long-suffering livestock producers and aided grass land prices.

The St. Louis Fed reported earlier Thursday that farmland values in its district were steady in late 2014 compared with a year ago. The Kansas City Fed will release its bank survey on Friday.