Before 2021 the commodity sector had witnessed nearly half a decade of ample supply with most futures as a result trading in contango, the opposite of backwardation where the front month contract trades the cheapest. During this period investors had often suffered losses with the contango structure favoring those holding short positions instead of long.
This situation culminated in March 2020 when prices of many key commodities, most notably crude oil collapsed as global demand fell off a cliff as the pandemic led to lockdowns and reduced economic activity. Since then, however, the global recovery accelerated with central banks and government ending up overstimulating the global economy, thereby adding considerable strain on producers and their ability to supply the raw materials needed.
The fundamental turnaround seen during the past year can be seen below with rising backwardation seen across most sectors, most notably energy, agriculture and some industrial metals. The energy space has seen the one-year average carry on WTI, Brent, gasoline and diesel rise to around 12% while recently the soybeans complex has also been tightening with dry weather in South America diminishing the harvest at a time of rising demand for plant-based fuels like soybean and palm oil. Out in front we find cotton where supply chain problems and not supply shortages as such have driven prices higher due to a lack of cotton at mills around the world.