Farmland values dropped across much of the Midwest in the fourth quarter, according to Federal Reserve reports on Thursday, a symptom of continued weakness in the agricultural sector fueled by several years of depressed crop prices.

The average price of "quality" farmland in the Federal Reserve Bank of St. Louis district, which includes parts of Illinois, Indiana and Missouri, fell 2.5% compared with year-before levels as farm incomes slid, the bank said.

In the Kansas City Fed's district, which includes Kansas and Nebraska, nonirrigated cropland values sank 4% from a year before, while the average price of irrigated land declined 2%, the bank said. Irrigated farmland, which is common in the region, depends on man-made water systems for moisture ratherthan rainfall.

The reports reflect a continuing downturn in the U.S. farm economy, which has been marked by listless crop prices and softer demand for agricultural land after prices for both shot higher for much of the past decade. The yearslong farmland boom was fueled by drought and growing demand for grain from ethanol producers and foreign importers.

But last year, U.S. farmers collected bumper corn and soybean crops for the third-straight season, adding to already-plentiful world supplies at a time when a strong dollar and stiff global export competition are dampening demand for U.S. supplies. Revenues for farmers have declined as a result, prompting the U.S. Department of Agriculture this week to project that net U.S. farm income will fall this year to the lowest level since 2002.

Midwestern bankers surveyed by the Fed banks in St. Louis and Kansas City said farm income dropped in the fourth quarter, and many expect land values to soften further in the current quarter as crop prices and farm profits remain subdued.

"Sustained weakness in corn, soybean and wheat prices has had a particularly negative effect on farm income because these three crops account for about 70% of harvested crop acreage in the Tenth District States," the Kansas City Fed said in its report on Thursday.

Average values for ranchland, used for grazing livestock, were flat to lower in parts of the Midwest, according to the St. Louis and Kansas City Fed districts.

The St. Louis Fed said ranch or pasture land prices fell 5.3% in the last three months of 2015 versus prior-year levels. That figure represents the largest drop since the second quarter of 2014, the bank said. The Kansas City Fed said ranchland values flatlined in the fourth quarter, showing zero growth amid a sharp drop in cattle prices and reduced profit margins in the livestock sector.

Write to Jesse Newman at jesse.newman@wsj.com

(END) Dow Jones Newswires

February 11, 2016 15:05 ET (20:05 GMT)