It is difficult to explain current wheat prices by traditional supply and demand measures. In data just issued, the U.S. Department of Agriculture projected the 2010 U.S. wheat carryover at 885 million bus, up 20 million bus from the October forecast, up 35% from 2009 and nearly three times larger than the 306 million bus carried over in 2008.

At 885 million bus, the carryover is the largest in 10 years, or since a carryover of 950 million bus in 1999-2000. While the supply/demand picture appears comparable to the period at the turn of the last decade (carryovers of 876 million, 950 million and 946 million, beginning in 1999), the price picture could hardly be more different.

In the earlier period, average farm prices were $2.86 a bu, $2.60 and $2.27 in the three years beginning in 1998-99. By contrast, wheat futures prices closed last week well above $5 a bu on all major exchanges, and the U.S.D.A. is forecasting average farm prices in 2009-10 at $4.65 to $5.05.

A number of influences account for the difference in the price picture, but none is apparently more important than the diminished value of the U.S. dollar. Reflecting historically low interest rates in the United States and fears that inflation is on the horizon, the U.S. dollar has fallen sharply in recent months, fueling strength in grain and all commodity prices.

For the grain-based foods industry, the current price picture demonstrates that exogenous factors, such as currency markets, have risen from the role of incidental influencers of ingredient prices to what is truly a center stage role.