Farmland from Iowa to Argentina is rising faster in price than apartments in Manhattan and London for the first time in 30 years.

Demand for corn used in ethanol increased the value of crop land 16% in Indiana and 35% in Idaho in 2006, as average American farm prices increased by 15% last year, according to government data. The value of New York State farmland increased about 7%, according to the department of agriculture. The price of a SoHo loft appreciated only 12%, while a pied-a-terre near London’s financial district gained 11%, according to realtors.

Farmland returns “will take a quantum leap over the next 18 months,” after corn prices surged to a 10-year high in February, the chairman of Westchester Group Inc. in Champaign, Ill., Murray Wise, said. Mr. Wise, who oversees $460 million in land investments, said prices in the Midwest may gain 12% a year through 2017. The returns are attracting hedge funds and investment brokers.

“Three years ago people were skeptical about investing in farmland,” the founder of Pergam Finance, a Paris-based investment company, Olivier Combastet, said. “It’s become much more sexy.”

The demand for corn used in ethanol got a boost from President 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% more than was harvested last year in America, 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,” the chief executive officer at Farmers National Co. in Omaha, Neb., Jim Farrell, said. “Midwest farmland is predicated by the strength or weakness of corn prices.”

Corn futures have jumped 82% on the Chicago Board of Trade in the last year.

Hedge fund manager Jim Rogers, 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 Australia earlier this month. “I am extremely bullish on agriculture.”

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% annually in Iowa, when the cost of fuel surged during the 1973 Arab oil embargo and the former Soviet Union bought record amounts of American corn and wheat to make up for domestic crop losses. American 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% in 1980 and again in 1981 to curb inflation, farmland prices plunged more than 60% from 1981 to 1986.

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 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,” The president and managing director for Hancock Agricultural, Jeff Conrad, said. “The supply side is the big unknown because we know demand is rising.”

American farmland declined by 9.6 million acres, or 2.8%, in the two decades ending in 2001, according to the most recent data available from the government.

“Sharp interest-rate increases are a risk to farmland appreciation” by boosting the value of the dollar and hurting American crop exports, Mr. 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,” the head of research at Knight Frank LLP, a real estate agent in London that handles about 25% of British farmland sales, Liam Bailey, said.

“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% 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% each year, while the return from the Lehman Government Bond Index was 6.3%.

Home prices fell in half of the cities in America last quarter, the National Association of Realtors said last week. Prices in 70 American cities including Las Vegas and Washington may drop 10% or more between now and 2009 on higher borrowing costs, according to a study by Economy.com, a unit of Moody’s Corp.