It's a good time to be a Washington farmer. The past year has seen record high prices for Washington wheat, and higher-than-average prices for the state's signature apples. And while prices for the state's two biggest crops are soaring, the markets for a wide range of secondary crops - asparagus and hay, for example - also are strong.

Let's look at wheat in particular. Prices here have never been even close to this high. January's average market price in Portland - where most Northwest wheat is sold - was $14.33 a bushel. That's nearly $10 a bushel greater than what it was the year before, and more than four times the going price ($3.46 a bushel) back in January 2006.

There are three fundamental reasons:

• Ethanol - Huge amounts of corn are being used for ethanol. With corn prices also high, more farmers are converting crop acreage to corn, thus lowering the amount of land available to grow wheat (and hay too).
• Asia - The new middle classes in China and India have more money to spend on food. They want meat and dairy, and both kinds of livestock require grain for feed. They've also got more money to buy wheat products. Lucky for us, they prefer the soft white wheat grown here in the Northwest, which is used for ramen-style noodles and Middle Eastern flatbreads.
• Crop shortages - Australia in particular has been hampered by persistent drought, and prices have spiked in 2008 because of worries about below-average crops in Argentina and India (which is a significant wheat producer as well as importer).

But along with those fundamentals, it also appears that some speculators are driving up the market. As stock market values fall, more investors are switching to commodities plays. That means more money chasing limited opportunity - just like during the overheated tech and real estate booms. In fact, some analysts are starting to warn of a pending bubble in commodities markets in general, and wheat in particular.

What's it mean here in Washington? Wheat growers had good paydays last fall, which helped the economy east of the Cascades. Most sold well before prices hit their current record levels, but even at $5 a bushel last fall, that was a higher price than I ever saw in a decade covering farming on the Palouse. On the west side, strong exports also mean business for Washington's ports - Kalama and Tacoma in particular handle a lot of wheat.

This situation also gives growers a chance to lock in a $13-a-bushel price today for a portion of the wheat they'll harvest in August. But definitely talk with my old pal, Gary Hofer, or another financial advisor before playing the commodities market like that.

A bubble seems plausible, and I won't be surprised if we see a correction - particularly if this year's U.S. and Canadian crops are big. However, I don't think we'll see prices fall back to $3.50 a bushel. The new Asian markets and ethanol demand are fundamental drivers that should keep wheat prices higher for Washington farmers - just not this high.