(Bloomberg) -- Shrinking water supplies are creating a two-tiered market in farmland investing, lifting values for properties with access to groundwater or aquifers.

“We’re ultimately acquiring water first,” said Carter Malloy, founder and chief executive officer of AcreTrader, a Fayetteville, Arkansas-based platform for investing in agricultural land. If the land “happens to have some trees on it growing citrus, that’s great news.” 

Much of the land in California’s Central Valley, which accounts for about a quarter of US food production, is idle this year as a megadrought forces unprecedented cuts to water supplies. Crops are also withering from Nebraska to Maine in the latest example of how climate change is wreaking havoc on farming. 

Food and fuel prices have soared since Russia invaded Ukraine, keeping vital grain supplies off the world market. With inflation the highest in four decades, rising farmland values can be a hedge for agricultural investors. But not all acres are created equal. In California some farmers are removing almond trees due to a lack of water reserves. 

“There are large swathes of California that we won’t touch,” Malloy said.

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