(FORTUNE Magazine) – When inflation is around the corner, commodities traders are usually the first to smell it. They apparently picked up a scent in May when prices on the commodities markets soared. Fueled primarily by inflation fears, the Commodity Research Bureau's futures index of 26 commodities rose 2.7% in one day to 235.4, its highest point in two years and the fourth-largest rise in 20 years. Though prices of almost all commodities rose, they were led by grain prices, which jumped because of dry, hot weather in U.S. farmlands. Despite a near glut of most raw materials, prices have been going up since February. The last time commodities prices took off was in 1983, when a severe drought drove up prices. But the drought was followed by a bumper crop in 1984, and inflation never came. Though the Labor Department reported a 0.7% jump in the producer price index for April, the sharpest rise in 18 months, no one's really worried about wild inflation. The betting is that interest rates will stay low while the dollar steadies. But Geoffrey H. Moore, director of Columbia University's Center for International Business Cycle Research, says that inflationary signs in the past year look like those in the six previous periods of inflation between 1949 and 1980. In a recent report to the Conference Board, Moore said that the consumer price index is rising faster than it did on average during the previous six inflation cycles. He figures that the CPI will hit just under 5% this year. Though that's not near the double-digit inflation that last appeared in 1980, says Moore, ''it's halfway there.''

CHART: NOT AVAILABLE CREDIT: SOURCE: COMMODITY RESEARCH BUREAU CAPTION: FUTURES PRICES Is This the Road to Inflation? DESCRIPTION: Grains and commodities futures prices, annually, 1977-1986, monthly, January-May 1987