Investors are buying more U.S. farmland as a hedge against inflation as commodity shortages caused by Russia’s invasion of Ukraine have pushed world food prices to record highs.

Land values ??in the Midwest Grain Belt have risen 25-30% over the past year, and auctions have drawn fierce bidding for available land.

Demand for land has picked up in the past month as the war in Ukraine and financial sanctions on Russia have curtailed important exports of wheat and corn from the Black Sea region. The United Nations’ World Food Price Index for February was up 24% from a year earlier.

“Interest in the asset class has never been higher,” said Bruce Sherrick, professor of farmland economics and director of the TIAA Center for Farmland Research at the University of Illinois.

In Iowa, where the Midwest restricts business ownership, last month’s buyer base included 35 percent investors and 65 percent farmers. Realtor Land Institute, compared with 18% in 2019. Prices for Iowa farmland rose by a third between March 2021 and March 2022, the institute said.

Large institutions have long sought farmland, led by fund groups such as the TIAA and public pension plans, but according to industry estimates, institutional investors own only 2 percent of the $3 trillion U.S. market. Over the past five years, more than 40 funds have raised $8.7 billion to invest in U.S. farmland, according to data provider Preqin.

Retail investors can buy farmland investment trusts such as Gladstone Land, whose shares have doubled in the past year and trade under the symbols LAND or Farmland Partners, up 21% over the past year.

“Our investor education team can’t answer all the calls they get. It’s hard to deal with the backlog of inquiries,” said Carter Malloy, founder of AcreTrader, which enables retail investors to buy stakes in farms.

As land prices have risen, competition for available farms has intensified. Investors have to work harder to find attractive places. “We are now moving away from a lot of farms that are priced more aggressively,” said Artem Milinchuk, founder of farmland investment platform FarmTogether.

In some cases, higher land prices outweighed the earning potential of farmland, resulting in return on income TIAA-owned Nuveen Natural Capital said the impact on investors had declined in recent years.

But total returns, including price increases, have been strong: 11.1% for annual cropland in 2021, according to NCREIF farmland indexwhich tracks investor holdings, including Gladstone, TIAA and Prudential.

In the U.S. Midwest, the nation’s most mature and liquid farmland market, investors are paying high land prices at a time when the cost of agricultural inputs such as fertilizer and diesel has risen, said Craig Wichner, founder of Farmland LP. Over $200 million in land and raised over $130 million in funding in March.

“The worry is that they were investing in office buildings before Covid,” Wichner said.

About 70 percent of U.S. farmland will change hands over the next 20 years, according to the U.S. Department of Agriculture, and institutional investors are expected to gain a larger share as older farmers retire.

John Robinson, a fourth-generation soybean and corn grower in central Illinois, said more investor participation could prove valuable.

“I’m not going to buy $20,000 an acre of farmland, God,” he said. “Land prices have gone up in the past two years. If there are investors willing to do it, that’s perfect. Let them take the risk.”