When baking ingredient prices climbed to record highs in 2007-08, there was no shortage of fundamental factors in wheat markets credited with fostering the run-up. A surge in export demand and crop problems around the world accounted for the year ending with an extraordinarily small carryover of 306 million bus, down 33% from the year before. No such tightness rules in the crop year that began on June 2.

Beginning stocks of 669 million bus were more than double the year before and were the largest since 777.2 million bus in 2002. The U.S. Department of Agriculture as of May projected ending stocks in 2010 to tighten only slightly, to 637 million bus.

Against this relatively comfortable supply situation, it’s difficult to understand why wheat and flour prices have been holding at the second highest levels ever (exceeded only by last year). Flour is $6.50 per cwt above its 20-year average price of $11.80. While wheat supply and demand factors don’t jump to the fore as an explanation, many exogenous influences do, including several that also prevailed in 2007-08.

Commodity funds, which had backed away during the stock market meltdown, have been coming back into markets strongly. Crude oil prices have more than doubled in a three-month period. The dollar has declined to five-month lows, and corn crop conditions have been nearly as worrisome in 2009 as they were in 2008.

Whether these factors will sustain wheat prices above $7 a bu remains to be seen, but for purchasing executives looking for cost relief, the wheat crop year has not begun auspiciously.