Marc Faber, a Hong Kong-based investor who manages about $300 million, says one of his favorite stocks is Cresud SA, a landowner in Argentina's Pampas region. The shares jumped 63 percent last year. Farmland is ``very inexpensive in a world of inflated asset prices,'' he said in an interview Feb. 4 from Bermuda. The demand for corn used in ethanol got a boost from U.S. President George W. Bush last month, when he urged a fivefold increase in renewable fuels by 2017. To meet Bush's goal, 12.5 billion bushels of corn would be needed, 19 percent more than was harvested last year in the U.S., the world's biggest producer. ``It is not the investor that is pushing up land prices, it is the surge in corn prices from ethanol demand,'' said Jim Farrell, chief executive officer at Farmers National Co. in Omaha, which manages almost 1.2 million acres of farmland on 3,700 farms. ``Midwest farmland is predicated by the strength or weakness of corn prices.'' Less Farmland The rally is helped by a reduction in the number of acres available for planting. About 5 million to 8 million hectares of the world's total of 1.5 billion (3.7 billion acres) of farmland goes fallow each year because of deteriorating quality, according to the Worldwatch Institute in Washington, which does research on food production. Crop land also is lost because of development and lack of irrigation, the institute said. ``Ethanol is not the only story here -- it is just the one getting headlines,'' said Jeff Conrad, 45, president and managing director for Hancock Agricultural, a unit of Manulife Financial Corp. ``The supply side is the big unknown because we know demand is rising.'' Conrad manages 126,000 acres in the U.S. and 7,000 acres of wine grapes and macadamia nuts in Australia. U.S. farmland declined by 9.6 million acres, or 2.8 percent, in the two decades ending in 2001, according to the most recent data available from the government. Farm Bulls Jim Rogers, the hedge fund manager who predicted the start of the commodity rally in 1999, said global warming will hinder crops and has advised purchasing farmland for at least a decade. ``Because of the disruptions, agricultural prices will go through the roof,'' he told reporters in Melbourne on Feb. 7. ``I am extremely bullish on agriculture.'' To be sure, farmland has seen rallies before that were halted by surging interest rates or plunging commodity prices. In the three years ending in 1975, prices rose more than 30 percent annually in Iowa, when the cost of fuel surged during the 1973 Arab oil embargo and the former Soviet Union bought record amounts of U.S. corn and wheat to make up for domestic crop losses. U.S. farmers bought more land with borrowed money. Iowa farmland more than tripled from $482 an acre in 1972 to $2,147 in 1981. After the Federal Reserve boosted interest to 20 percent in 1980 and again in 1981 to curb inflation, farmland prices plunged more than 60 percent from 1981 to 1986. Interest-Rate Risk ``Sharp interest-rate increases are a risk to farmland appreciation'' by boosting the value of the dollar and hurting U.S. crop exports, Conrad said. ``A sustained drop in crude-oil prices would take the shine off the ethanol market,'' he said. ``Farmland prices are dependent on commodity prices, which are incredibly volatile,'' said Liam Bailey, head of research at Knight Frank LLP, a real estate agent in London that handles about 25 percent of U.K. farmland sales. ``You have to be prepared to ride the ups and downs. You could see a massive reversal in prices.'' Returns from farmland have averaged 10.9 percent annually the last 15 years, the National Council of Real Estate Investment Fiduciaries in Chicago said. The Standard & Poor's 500 Index of stocks has risen 10.7 percent each year, while the return from the Lehman Government Bond Index was 6.3 percent. Home prices fell in half of the cities in the U.S. last quarter, the National Association of Realtors said last week. Prices in 70 U.S. cities including Las Vegas and Washington may drop 10 percent or more between now and 2009 on higher borrowing costs, according to a study by Economy.com, a unit of Moody's Corp. Iowa Rising Land in Iowa, the biggest U.S. producer of corn and home to the most ethanol plants, surpassed $5,000 an acre from a high of $4,200 a year ago, said Monty Meusch, 55, a vice president for Farmers National Co., a property broker and farmland manager in Omaha, Nebraska. A 200-acre Iowa farm increased 14 percent in a month when it sold for $5,700 an acre in October, he said. In Manhattan, the average apartment increased by 3.2 percent last year, the smallest gain in a decade, to $1.22 million, estimates Miller Samuel Inc., the borough's largest appraiser. While asking prices soared 62 percent in London's Kensington and Chelsea neighborhoods, the rise in actual sales prices was 16 percent last year to 677,318 pounds ($1.32 million), according to Land Registry and realtor data. ``Three years ago people were skeptical about investing in farmland,'' said Olivier Combastet, founder of Pergam. ``It's become much more sexy.'' He anticipates annual returns of 15 percent in the next five years from his South American land investments.