The American Farmland Price Boom Is Over

However the rate of price growth has collapsed.

"The rapid run-up in the price of farmland appears to be over," write Paul Ashworth and Paul Dales of Capital Economics.

"We suspect that the slowdown in the growth rate of farmland prices last year will develop into an outright decline in prices this year, at least in the corn belt that saw the most dramatic rise in prices."

In Iowa for instance we saw farmland prices surge 33% in 2011 and 24% in 2012. But prices climbed just 5% last year.

The key concern is whether or not we headed for an outright boom-bust cycle like we saw in 1970s and 80s.

"The US should avoid another severe bust in farmland values," write Ashworth and Dales. "For a start, with the Fed focused on the labour market, there is little prospect of any sharp rise in interest rates, which was the principal reason for the slump in prices in the 1980s. The stabilization in crop prices, is also encouraging."

While corn and wheat prices have fallen, soybean prices have held up quite well and farmers are earmarking more land for soybeans.

"The buoyancy of current soybean prices should prevent any major declines in farmland values in the near-term," they write. "Unfortunately, there are reasons to suspect that crop prices will fall further, with soybean prices dropping the most." This sharp decline in crop prices will exacerbate the decline in farmland prices.

With a bumper harvest and easing tensions in Crimea, wheat prices are expected to fall to 500 cents per bushel. Meanwhile, corn and soybean prices are expected to tumble to 350 and 1,000 cents per bushel respectively.

And this is unlikely to have wide repercussions on the financial system because farmers have been buying land with their savings, rather than borrowing. And, agricultural loans aren't as big a part of banks' balance sheets with farmland loans amounting to just 0.5% of total bank assets.

Here's a look at the trajectory of farm prices that show the recent slowdown: