Figures from Knight Frank show that the price of farmland in December 2007 averaged £4,129 an acre, an increase of 25 per cent on the previous year. Carter Jonas, the property consultants, are forecasting rises of between 10 and 15 per cent this year.

Institutional investors are paying attention. “The likes of Blackrock, F&C and Merrill Lynch are becoming interested in UK farmland,” says Mark Duschenes, managing director of Braemar, the property company which recently launched two agricultural land funds aimed at the small investor.

Agricultural land prices are being driven by three main factors. One is increased demand from non-farmers. “The market has been largely driven by non-agricultural money,” says Clive Hopkins, head of farms and estates at Knight Frank. Lifestyle buyers (people purchasing farms as country estates and second homes rather than as businesses), investors and developers account for more than half of all farm purchases.

Demand from foreign buyers is also pushing up the price of land. “Land in Denmark and Ireland is at a substantial premium to the UK, so we are now seeing Danish and Irish farmers buying up UK land,” explains Mr Duschenes. “Danish land costs around £10,000 an acre and Irish land is even more expensive than that. UK land costs £5,000 an acre. We are likely to see some convergence.”

Rising commodity prices will also affect the price of land. “What has tripled in value over the past year. It makes sense that the value of the wheat field should also start to rise,” Mr Duschenes says. ‘Soft’ commodities – things like wheat, sugar and soybeans – have soared in value in recent years. Over the nine years to March 2008, a weighted commodity basket has risen 209 per cent, driven by factors such as the growth of interest in bio-fuels and the adoption of western diets by developing countries. China is now a net importer of wheat, while both the Chinese and Indian populations are now eating more meat that feeds off grain.

Over the past 12 months, commodity prices have been fuelled by intense financial speculation, too. Prices have risen so rapidly that some investors, notably Charlie Morris, manager of HSBC Investment’s Absolute Return Service, a $2.5 billion managed portfolio, are now forecasting a short-term correction in the sector. But while fluctuations in commodity prices are to be expected, land is much less volatile asset. “It is a nice, steady asset to own,” says Mr Duschenes. “It’s not going to set your portfolio alight, but you’re not going to go bust either.”

At a time in which markets are so volatile, a steadily appreciating asset looks increasingly attractive. There are two ways of getting exposure to agricultural land. One is simply to buy land which you can then lease to a farmer. Mark Ashbridge of Savills Private Finance says: “If you are buying bare land [land without a farmhouse or other buildings on it] which you then plan to rent out, there is no minimum size. You could do it on as little as 50 acres.” But you will still need a considerable sum to invest. Mr Ashbridge gives the example of a 70 acre plot on the market in Oxfordshire which is advertised at £320,000, but which is likely to sell for significantly more than the asking price - £400,000 would not be an unrealistic figure.

It is of course possible to borrow to buy the land, but if you want to gear your investment, you would need to take out a commercial mortgage which usually have rates a percentage point or two more than residential mortgages. If there is a farmhouse on the land, you could do a combination loan, purchasing the farmhouse with a residential mortgage and the land with a commercial loan.

Those who have smaller amounts to invest could do so through a fund such as the Braemar UK Agricultural Land, an investment trust, or its offshore fund, the UK Agricultural Land Oeic. The minimum investment in both funds is £10,000. Although the funds are managed by Braemar, the firm will be relying on estate agents and property consultants to source and value the land. “Knight Frank and Humberts will be wearing the wellies,” Mr Duschenes says.

In addition to the potential for steady capital growth, agricultural land is attractive because of the tax benefits: specifically, its exemption from inheritance tax. Agricultural relief is available on the agricultural value of the land – that is, the value the property would have if it could be used for agriculture and nothing else – and is due at 100 per cent after two years of ownership. You are eligible for full agricultural relief whether or not you farm the property yourself: however, if the land is leased to another farmer, relief only applies after seven years of ownership.