"Certainly we have had an increase in ag prices of some significance," he said. "The other thing that is affecting land values is long-term interest rates are at historic lows and what we call the cap rates or discount rates on this land are also at historic lows and your ability to expand, to borrow against land you may already own, has facilitated the demand for land and accelerated this boom."

Hoenig, who stepped down Oct. 1, joined the Kansas City Fed in 1973 as an economist in the banking supervision area, just as farm prices climbed and then collapsed. According to data from the Chicago Fed, land values soared throughout the 1970s, rising as much as 28 percent in 1976.

In the early 1980s the bubble burst and land prices notched annual drops of more than 10 percent in four of the next five years. The aftermath forced thousands of farms into foreclosure, pushed small towns to the brink of depression and brought down 347 banks in the Kansas City Fed's district from 1982 to 1992.

Memories of the 1970s bubble and bust have made regulators and bankers more cautious this time, said David B. Oppedahl, a business economist at the Chicago Fed who compiles the bank's AgLetter. "It just doesn't seem like it's the same set of circumstances because the farmers remember that time period, and lived it, and so have a lot of the bankers and regulators," he said. "You have some experience that is helping to keep people from going too far from what they can afford to do in their plans."

In a survey at the end of 2010, lenders reported to the Kansas City Fed that loans were between 50 percent and 90 percent of the value of the land, with an average of just over 70 percent. Higher loan-to-value ratios pose greater risk to lenders. At the peak of the housing bubble, by comparison, the National Association of Realtors reported in 2006 that more than 40 percent of borrowers put no money down for loans, a loan-to- value ratio of 100 percent.

On occasion bankers have found the regulators to be over- zealous, said John Blanchfield, who runs the ABA Center for Agricultural and Rural Banking at the American Bankers Association.

"The FDIC is convinced there's a bubble and they're not going to miss this bubble, by God," he said. Regulators are concerned about banks' concentrations of agriculture loans, he said. "How are these bankers supposed to respond to that? Every direction in 500 miles from their bank is corn fields."

Blanchfield notes the "manic" tone of some stories about agriculture, such as a July 10 article in Time magazine titled "Want to Make More than a Banker? Become a Farmer!"

"When I saw that I said 'the farm boom is over' because now Time is reporting it," he said, referring to a common belief that favorable coverage in mainstream magazines can signal that an investment or asset has peaked.

Far from Wall Street's gyrations and Washington's impasses, Newman Grove's Gerhart believes he is prepared for whatever may come for the $35 million bank.