Wheat's best hope may lie with inflation. The grain's vital statistics don't tick many boxes on the commodity buyers' checklist. If wheat is going to move significantly higher, it may need some help from investors wanting to keep pace with a broad rise in prices.

The latest estimates on the crop's fundamentals haven't done it any favours. The world's supply cushion will be even more comfortable than had been thought, data from the US Department of Agriculture shows, pegging stocks at nearly 182m tonnes at the end of next May, up 8.5% year on year.

Sure, that's not a record. Stocks topped 201m tonnes in 2002. What's more, demand for wheat was lower then, signalling a far looser market.

But that should give investors only limited solace. Today's market is slacker on a stocks-to-use basis than it has been for the last seven years. Yet, at $6 a bushel or so in Chicago, it is priced like a tight one.

Falling trade

Nor do keen state buyers look likely to come to the market's aid.

In fact, wheat crops are looking best in countries such as Iran and Morocco which are normally big importers. Pakistan is on course to balance its books.

Global imports will tumble nearly 10% in 2009-10, the USDA believes.

Funds to the rescue

So why buy it? The best reason for investors to hold on appears to be that others might come and join them.

And it's easy to see why funds might keep trotting in. Spreading risk has become a touchpoint for fund managers after this decade's equities debacle. That should keep commodities in favour.

Meanwhile, retail investors are getting in on the game too, now that exchange traded funds have put alternative assets in easy reach.

A flow of money into commodities will lift a range of crop cargoes. And wheat, as such an important grain, looks unlikely to miss out.

Indeed, Wednesday's USDA crop report just about said as much, raising price forecasts for wheat on grounds that it will be pulled up by other food commodities. 

Back to the future?

But that will only get wheat so far. The USDA still thinks wheat farmers won't get more than $5.90 a bushel for this year's crop.

What looks necessary to secure a much bigger rise is the return of generous inflation. Such as that in the early 1970s, when wheat prices near-quintupled in less than two years as investors sought assets likely to keep abreast of price rises.

Such conditions don't appear currently to be on the radar, although expectations of deflation have certainly weakened.

But wheat investors might see some benefit if oil prices keep rising, and Western countries fluff the removal of emergency economic stimuli - the kind of factors which will put  accelerating price rises could be back on the agenda.