(FORTUNE Magazine) – At the Minneapolis Grain Exchange on Sept. 9, in a crowded, octagonal trading pit that is just slightly larger than a very big Jacuzzi, the price of the December contract of hard red spring wheat hit its high point for the month--and the year, and the past six years--at $5.21 1/2, up 71% since late May, when the U.S. wheat harvest was just about to begin.

It was the top of the wheat bubble. For the 11 days prior, the December contract, known in the pit as the "Deece," had set new contract highs at each close, a record run. In August the exchange, which was founded in 1881 and looks it, posted an all-time record for wheat futures trading volume. The price of wheat spiraled into what traders called a "feeding frenzy" on the floor. Several brokers made more money this year than in the four previous years combined, and some began sporting buttons that read the trend is your friend.

"Remember the tech bubble?" says Marc Chiodo, a broker with HTC Commodities in Minneapolis. "This was like that."

If, perchance, you missed the hoopla--the sheer moneymaking euphoria--you're not the only one. The U.S. wheat business, after all, is relatively tiny, representing annual farm sales of just $5.5 billion. The Nordstrom department store chain (and 313 other companies on the FORTUNE 500) has higher revenues. Michael Dell could swallow the whole industry, and his net worth would hardly hiccup. Wheat isn't even the largest crop, by sales, in the U.S. Or the second largest. (Corn and soybeans are Nos. 1 and 2.) But in a sense it is the quintessential commodity--precisely because it is so easily taken for granted. Even ignored. Wheat is sown, harvested, bought, sold, moved, milled, demanded, and eaten in nearly every country in the world. All of which makes what happened this summer at the Minneapolis Grain Exchange--as well as the larger exchanges in Kansas City and Chicago, which also saw record-breaking action--so illuminating.

Like a flare, the surge in wheat prices signaled a global sprawl of economic activity far from Wall Street or Silicon Valley. It is filled with just-in-time buyers, from Kansas to Egypt, panicking over dwindling supplies; detached commodities funds trying to get rich playing the tricky futures market; older-than-old-school open-outcry exchanges; as well as small towns, cattle auctions, and no-menu restaurants that serve salad (cottage cheese) and then "hot food" (fried chicken).

The wheat bubble is also instructive as a bubble. The dot-com phenomenon dressed up in overalls this is not. The people in this story know better than to get uppity. It is noncoastal. It is aggressively antihype. And it demonstrates that even now, in this post-bubble economy, in an industry backed by 100 years of data--from grain-yielding models to weather pattern cycles to their market-moving reactions--people are still susceptible to frenzy.

Yes, it has been a big year in wheat. And one more thing: After a free-for-all buying spree that gobbled up supply months before the new growing season even begins, this bubble might not be over.

Merlin Boxwell, who is 60 and has arthritis in his feet, is running. From pickup to combine, combine to loading truck, loading truck to unloading pit, and back to the pickup; he stops running only when he is moving very fast by some other means of transportation.

Boxwell is a wheat and barley farmer in Sunburst, Mont., a little blink-and-you'll-miss-it town in the so-called Golden Triangle between Cutbank, Havre, and Great Falls, where 60% of the state's wheat is grown. The northern portion of the triangle is marked by the "high line"--a narrow waistband of land between the Canadian border and U.S. Highway 2, which runs, like the Burlington Northern & Santa Fe Railway, between Havre and Cutbank and clear across the state. Boxwell's farmstead is on the northern edge of the high line. "It's not the end of the world," he says, "but you can see it from here."

It is early October, and his crop is extremely late; he is usually done reaping by Sept. 1. Now the forecast is calling for snow, and Boxwell has only a few weight-shifting moments to stop and chat. "There's a quarter-of-a-million dollars to be harvested out there," he says, nodding toward one particular straw-colored strip, where Hungarian partridge and sharptailed grouse toss around in the wind. A heavy snow could cut the value of his crop in half. The occasional car races by, trailing a coattail of dust. Canada is a cellphone tower in the distance. Hordes of grasshoppers, a sign of the dry summer, are unavoidable underfoot.

Boxwell is anxiously kneading the pockets of his Levi's with his knuckles. "It's not often that you get a price and a yield together," he says, holding up his callused hands to make two A-OK signs with thick and dirty fingers, "We're this close." Then he takes off running.

Despite the stress of the moment, Boxwell has been one of the lucky ones. Some of his neighbors--and many more in other states--have left withered crops on the ground. Indeed, this year has been a wheat grower's Perfect Storm. First a spate of dry weather in the U.S. took nearly everyone by surprise. The Great and High Plains are in the middle of a drought that in many states "rivals the Dust Bowl years of the 1930s," says USDA agricultural meteorologist Brad Rippey. The true extent of the crop damage, though, wasn't evident at the start. The wheat harvest in the U.S. develops in such a continuous process that, from June through September, fleets of combines travel up the country, from Texas to Oklahoma to Kansas, Nebraska, South Dakota, and North Dakota, freelance harvesting the entire way. It wasn't until the combines made it to the Dakotas this year that the fate of the American crop was clear.

Total wheat production in the U.S. is down for the fourth year, and off 17% from last year's harvest. (It's 36% lower than in 1998.) This year, for the first time ever, the U.S. will produce fewer bushels of wheat than Russia. (Though technically it's the first time since 1987, when statistics officially broke the Russian tally from that of the Soviet Union.)

Aggravating the shortfall have been sharply weaker harvests in other parts of the globe. Worldwide production is down for the fifth year in a row. Canada, the world's second-largest exporter, saw its production drop 25%--its worst crop in 30 years--and went so far as to announce that it was withdrawing from the international export market. Australian production fell 46%. Argentina's slipped 10%.

The lean harvests have created an "international food fight" for milling wheat supplies, according to Dan Basse, a grain analyst and president of AgResource in Chicago, an agricultural consulting firm. Egypt recently made the biggest single purchase of the year--420,000 metric tons of wheat--on credits from the U.S. government, which were at first assumed to be in exchange for help in a possible war on Iraq. If there's another jolt in either the supply or demand curve, says Mark Schultz, a grain analyst at brokerage firm Northstar Commodities, "it would be another panic session in the market."

When share prices of Internet startups doubled, Silicon Valley bought BMWs. A month after the wheat bubble's peak, the hot new thing in Abilene, Kan., is next year's crop insurance. Abilene, the boyhood home of Dwight Eisenhower, is a good place to look at the double-edged nature of the wheat bubble: Yields there were some of the best in the state, but this year was a disaster for Kansas overall. Kansas is usually the largest wheat producer in the country, but the drought has left even the yucca cactus dying. Despite the high prices, it's rare to find someone who is "sticking a fat hog," as they say.

That's partly a factor of timing. Most of the wheat growers in Abilene who did raise a decent crop still missed the party. During the mid-June harvest, when most farmers in central Kansas were selling their crop, the nationwide and worldwide supply problems were not yet apparent. Chris Faust, a manager at DeBruse Grain, a terminal grain elevator that ships wheat and other crops out on the Union Pacific Railroad, estimates that 80% of local wheat stocks were sold by early July, when the price for hard red winter wheat was nearing $3.50 at the Kansas City Board of Trade. It looked good at the time--a full $1.44 before the peak. "A lot of money got left on the table, so there is some resentment and bitterness," says Faust. "Still, if someone held on for a big sale, he's going to be the king of the coffee shop."

The local coffee shop of the moment is DeDee's, a gas station with three seating booths across from health and beauty aids and automotive products. A crowd of farmers meets there around 7:30 most mornings to talk business. Clad in flannel, hooded jackets, mesh hats, and jeans, they are almost uniformly middle-aged. One gentleman is 89. "We're the younger generation of farmers," says Kenny Kohman, "and we're 50." In other words, there is no youthful "paradigm-shifting" new-economy rhetoric here. "I run my kid off," says Gene Vandecre. "Told him to go to school and get a job. There's just not enough income here to support a family." Someone in the back says that the golden rule is "Tell your wife, don't give up her day job." Everyone laughs.

If there is a king of this coffee shop, he isn't eager to crown himself. That's part discretion and part reality. Farming is a cash-intensive operation, and while costs--of land, equipment, gas, fertilizer, employees, and health insurance--have skyrocketed, the price of a bushel of wheat has stayed fairly constant over time.

"The old idea of 'paying off the farm' in one good year is basically nonexistent," says Bill Tierney, an agricultural economist at Kansas State University in Manhattan. "Even for those who had a good year, running out and buying a new pickup is the last thing on earth they'd do. You're not supposed to talk about your good fortune, and you're certainly not supposed to live ostentatiously."

Those in Abilene who are in a position to make a good profit, like Keith Lauer--who is still holding half his crop and has his land and debt fully paid off--could not be more underwhelming on the topic. "This year you just kinda knew," says Lauer, sitting at his kitchen table. And that's as far as he'll go on the subject of his risky, optimistic, and potentially very lucrative speculation. The only possible sign that he's been making real money is the satellite-linked DTN terminal--a kind of agricultural "Bloomberg machine"--in the corner by a window.

On that DTN, Lauer can also track spot and futures prices for corn and beans, both of which have been weak crops for him this year. And next year could be worse. On top of the eternal climactic uncertainty, there are other macro forces at work: Disaster-payment legislation pending in the Senate and a potential war with Iraq could affect his business. But there's another, more localized reason for his reluctance to gloat. This isn't Silicon Valley or Wall Street. This is Kansas, where folks buy thousands of dollars' worth of cattle at auction by raising an eyebrow.

A quick check around town seems to confirm the cautious mood: At Shouse Implement, the local John Deere dealer is quick to point out that sales of new equipment--combines and tractors--are down 50%. (As it happens, five people had warned him that a reporter would be stopping by.) One gets a similar tale of woe at the Abilene Ford dealership. A salesman there claims he hasn't sold a new car or pickup to a farmer in a year.

There are subtle signs, however, that producers are more optimistic than they let on: Kevin Harris, a local crop insurance agent, expects to see a nearly 20% increase in wheat planted this year, a direct result of the sky-high price.

Some of that wheat will be sowed today by the farmers at DeDee's. It's getting near 9 A.M.--a late start caused by an early tease of rain. The crowd gets up from the vinyl booths to go to work. John Mayes takes a pull from a tall, white Styrofoam cup and says, "Make sure you write down that we're the biggest gamblers in the United States of America."

If even the most successful wheat growers are reluctant to express any cheer, the emotions of wheat buyers are less carefully hedged. They were on the other side of the rally--the losers in this bubble. "It was flat-out, peeing-down-your-pants-leg fear," says Dan Treinen, the merchandiser at Columbia Grain, which runs most of the grain elevators in Montana.

Grain elevators are local facilities that buy stocks from producers, store the grain in large silos, and then resell it and ship it out for delivery or export by train. Most of the wheat in the country is sold and delivered through an elevator. The elevators make money on margins--small differences between the futures price and the cash price. If crop volume is down and the price is up, the elevator is busy in the frantic short term but does less business overall.

A typical wheat user--from flour mills to bread, cookie, cracker, and pasta makers--will buy grain from an elevator facility 30 to 90 days before it's needed, Treinen says. Some of the biggest companies, like General Mills, are hedged, or "covered," months and even years in advance. Hedging is like taking out an insurance policy on your supply.

For Treinen's buyers, four years of surpluses have made it easy to live without that insurance. The flush times have created an easy reliance on just-in-time, hand-to-mouth delivery. When wheat stocks got tight this summer, that trend shifted dramatically back to hedging, which served only to push prices for wheat--especially the quality grains like hard red spring and specialty wheats like durum, which is mainly used for pasta--even higher.

In the process, businesses like American Italian Pasta Co., which buys wheat on the spot (read: cash) market, got pinched. AIPC, the largest manufacturer of dry pasta in the U.S.--under the brand names Mueller's, Ronco, and Pennsylvania Dutch, among others--explained in a recent conference call that it would not meet expectations because of "higher durum wheat prices and uncertainty about future price increases." The stock dropped $6 during the call, and since June has fallen $18, to its current $34 a share.

AIPC, which hadn't locked in contracts for its future supplies, was forced to pay exorbitant cash prices on the spot market. Other big buyers, which had already scrambled for coverage, had driven up the price. "It was a herd mentality," Treinen says. "Buyers came in and covered 30 days, 60 days, 90 days out in front. Through the end of the year. Through the first quarter of next year."

Farmers were calling Treinen asking what was going on. "It was pure, unabated fear," he told them.

The only players in a position to gamble on wheat by playing the market long--free from the restrictions of hedging a physical crop, that is--are the big commodities-trading funds. Funds rarely disclose their positions, but commodity fund investments in the wheat market are tracked by the Commitment of Traders Report. The report lists sales of 100 contracts or more (at 5,000 bushels per contract) and is released every Friday. As the market grew more volatile over the summer, the Commitment of Traders showed near historic levels of activity.

The wheat bubble, in fact, has brought in speculators of all kinds. "We started to see money gravitate from poor-performing stock exchanges to wheat," says Shawn McCambridge, a senior grains analyst with Prudential Securities. It makes sense: During the past three decades the S&P 500 has finished down for the year eight times; commodity returns were positive in six of those eight years, according to Kevin Baum, manager of the Oppenheimer Real Assets fund. In the seven years that the bond market has been down, commodities have been up every year. This year the Real Assets fund--which is tied to the movement of commodity prices and benchmarked to the Goldman Sachs Commodity Index--is up 20%. Agriculture makes up a fifth of the portfolio.

Others haven't been so lucky. "I've been doing a terrible job of trading," says David Bell of Bell Fundamental Futures, a fund that trades only "ag." "Knowing what I know now, I would have put much more weight into wheat. Things just kept happening to make it a good trade."

The big question now is how long the bull market in wheat will continue. Prices have already started to flag based on good indicators for the crop of winter wheat now being planted. But many analysts aren't convinced. Most of the domestic stocks have already been raided, and no more wheat will be harvested until early next summer. That could mean another supply pinch coming soon. "I expect to see new contract highs by the end of the year," says Minneapolis broker Marc Chiodo.

The real volatility might be even further around the bend. "The only thing keeping the market sane is the prospect of a good crop next year," says Louise Gartner, owner of and a market analyst at Spectrum Commodities in Dayton.

So far prices for the consumer (make that "eater") have drifted higher, but Bill Tierney at Kansas State calls the general effect of supply on shelf price "almost imperceptible." If next year is anywhere near as bad as this one, though, look out. "It would provide a trading environment much like the Nasdaq stocks of old," says Chris Haverkamp of Paragon Investments in Topeka. "How high is high? Who knows? What would you be willing to pay for a piece of bread?"

Back in Sunburst, Mont., a wall of asphalt-colored clouds is pushing down from Canada. Across town from Merlin Boxwell, Herb Karst, 54, is mid-harvest. Karst's 23-year-old daughter, Kristin, and her husband, Andy, 24, are home from Billings to help out. "My aptitude is more toward agriculture than business," says Karst, behind the wheel of his combine, discussing the difficulties of marketing his wheat on top of producing it. "But now I have to be a producer, an accountant, a mechanic, an agronomist, an economist--I'm kinda like a mini-CEO."

This year that balance has been particularly difficult. "I've never seen my friends so discouraged," he says. "Not just about the weather. About the career." This part of Montana has seen four consecutive years of drought. As in the rest of the country, a young farmer is a needle in a haystack. The inconsistent income and the difficult realities of the rural lifestyle--schools, stores, churches, and grain elevators are closing all along the high line--are driving many out of business, to the cities. Or worse.

The suicide rate among farmers in the U.S. is roughly double the national average, and more than four times the rate for workers in the financial services industry. "The hardest thing is the factors you can't control," he says. "The weather, the politics. Consecutive years without a harvest. It cuts deeper than hopelessness. I would say 'impotent' more describes the feeling. It cuts right to your manhood."

The snow began falling in Sunburst late Thursday night, at around 11 p.m. Merlin Boxwell and Herb Karst were both still working, the powerful headlights on their respective combines shining their way in the dark. Boxwell got his standing crop out, but left a hefty amount swathed and piled in the field, where it was susceptible to moisture damage. Karst and his daughter Kristin finished cutting just as it started to mist. It has been snowing in Montana almost every weekend since.

Some crops there and in Canada have still not been harvested, and are largely worthless. It is a truism that the weather never comes when you need it, but this year has been particularly bad. Producers from Sunburst to Abilene didn't have crops worth the gas it would cost them to run a combine.

The great wheat bubble of 2002 has been anything but predictable--at least for the farmers caught in the middle of it. And the uncertainty, always tied to tomorrow's weather, is bound to continue. "If it doesn't rain in Kansas, you're going to see another frenzy," says Alan Lee, a producer in Berthol, N.D. (pop. 460), who is still holding on to his crop in expectation that prices will soar even higher. "Prices could go up another dollar. For a farmer, that's the same as the Internet thing." At least for the ones who get lucky.

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