A survey of 227 Midwest banks found the decline in the value of farmland listed as "good" was steeper than in any quarter since 1985, the federal bank said.
The drop came in spite of historically low interest rates for loans, which fell to 6.2 percent for new operating loans and 6.14 percent for farm real estate loans during the quarter.
The quarter brought the annual increase in prices down to 2 percent.
Two thirds of the local banks now predict prices will hold steady in the second quarter, while a third forecast continued declines.
In the first quarter, prices varied from state to state with arable land in Iowa rising 2 percent from a year ago, while land in Illinois and Indiana gained 4 percent in the same period.
Farmland in the dairy state of Wisconsin gained the most from a year ago, rising 6 percent. However, Wisconsin land dropped the most from the previous quarter, falling 7 percent, the bank's AgLetter said.
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