Farmland values in the Midwest posted their second-largest increase in  30 years in 2010, according to a quarterly report released Thursday by the Federal Reserve Bank of Chicago.

Agricultural land values in Iowa, Illinois, Indiana, Wisconsin and Michigan rose 12 percent in 2010. The report surveyed 212 agricultural bankers in the area. More than half  said they expect farmland values to continue increasing in the first quarter of 2011.

David Oppedahl, the economist who penned the report, said “2010 was a stellar year for agriculture in the Midwest.”

Every sector performed well except for dairy, where milk prices tapered off in the fourth quarter, he said. Credit conditions also improved for the region’s farmers.

According to the report, the U.S. Department of Agriculture expects net farm income to rise 20 percent this year, to $94.7 billion. In 2010, net farm income jumped 27 percent, to $79 billion.

The survey also said 54 percent of the Midwestern bankers predicted that farmers would spend more on land and equipment in 2011.

“Now, the issues facing agriculture will be how to manage the volatility seen in recent years and how to prepare for when the good times slow down,” Oppedahl wrote.