"It's not that we think this is going to be the most likely outcome," Jason Henderson, the Kansas City Fed's lead agricultural economist, said in an interview. "It's a discussion of the black swans and fat tails -- the low probability events that catch people off guard."

Henderson runs the Kansas City Fed's Omaha branch and leads several of the Fed's efforts to track the rural economy. He has encouraged supervisors across the central bank's system to monitor the capitalization rate of farmland, or the income from land divided by its capital cost.

"Are they going to resist that temptation of low interest rates and strong incomes and keep leverage low?" he said. "It's the next couple of years that are going to be key to determining that future of agriculture."

Soybean prices at $11.64 a bushel and corn at $6.06 a bushel, though lower than in August, remain above their decade- long averages of $8.31 a bushel and $3.27 a bushel respectively. The Department of Agriculture said Aug. 30 that farm income will jump 31 percent this year to a record $103.6 billion.

These estimates were made even with drought conditions in much of southern Kansas, Oklahoma and Texas, the three biggest U.S. growers of hard, red winter wheat used to make bread. The states have had less than half of normal rainfall in the past 90 days, National Weather Service data show.

The Fed's Beige Book, an anecdotal survey of economic conditions released on Sept. 7, reported that "farmland values rose further" in several districts even as "harsh summer weather strained agricultural activity."

The growth in demand for food, spurred by the rising middle class in China, India and other emerging markets, is likely to continue. Even with signs of a slowing economy in the U.S. and globally, the United Nations Food and Agriculture Organization said overall food prices in August were only 2.8 percent below their peak in February.

Consequently farmland prices are booming, according to regional Fed surveys. Values were 20 percent higher in the second quarter than a year ago in the district of the Kansas City Fed, which oversees 614 agriculture banks. The Chicago Fed, which oversees 538 banks, reported a 17 percent increase for the same period in its district, the most since the 1970s. Non- irrigated farmland in the Minneapolis Fed district, which oversees 393 banks, increased 13.9 percent.

By comparison, at the peak of the housing bubble, real estate prices were rising 17 percent year over year, according to the S&P/Case-Shiller index of property values in 20 cities.

Hoenig cited Fed interest-rate policy as being "an important factor" in the runup in farmland prices during an interview last month.