The slide in US farmland prices looks unlikely to develop into a rout despite weak prospects for non-farm buying which has taken an area nearly the size of Ireland from agricultural production.

Demand for farmland from housing developers looks likely to remain muted, given forecasts that housing starts will "only edge up" next year, a report from the Federal Reserve's Kansas City bank said.

"Concerns remain about the sustainability of a resurgent housing market," the briefing said.

With unemployment levels set to remain "elevated", and consumer spending rising by a modest 1.8%, demand from lifestyle buyers may flag too.

"The recovery may lack the strength to spur recreational demand," the report said.

Farming profits

The forecasts put a question mark over purchasers responsible for taking 16m acres of land out of farm production between 2002 and 2007.

Land purchases for wildlife recreation jumped 62% to $8.9bn in the decade to 2006.

However, decent prospects for farming should prevent the decline in farmland prices – the first since 1987 – developing into a correction.

"Near-term projections suggest that returns to crop production may be strong enough to support [the market]," the report said.

"While the volatility in agricultural markets has raised concerns about future farmland values, current projections suggest little risk of a sharp collapse in the near term."

Price slide 

Even pessimistic forecasts for crop prices suggested farmer's returns would remain above 2006 levels.

Meanwhile, forced sales look unlikely, with debt levels among farmers far lower than in the early 1980s, when land prices fell about 40%, in real terms, in five years.