Key Takeaways
- Trends persist because supply and demand shifts take years to correct — not a single season.
- Cyclical trends self-correct (cattle herds rebuild). Structural ones don’t (aging trees, shifting climate). Mistaking one for the other is costly.
- Palm oil shows trends can stack — drought, biofuel mandates, and labour shortages combined to reset prices higher each cycle.
- The real question isn’t “are prices rising” — it’s whether the imbalance has a credible resolution in sight.
- Expana’s Technical Analysis and Expana IQ pinpoint where a trend sits now and where it’s headed next.
What drives long-term price movements in commodity markets, and why the trend component matters for procurement decisions.
Cocoa prices tripled in twelve months. Arabica coffee hit multi-decade highs. US beef prices held near record highs for three straight years as the cattle herd fell to its smallest in seven decades. These are trends: sustained directional moves that persist because the supply and demand fundamentals behind them are slow to correct. That’s what separates them from seasonal price patterns, which recur predictably within a year rather than building, and eventually breaking, over several.
A trend forms when supply and demand diverge in a way that can’t be fixed in a single growing season. New orchards, new farms, new herds all take years to come online, and that lag sustains the move on the supply side. Demand can move just as slowly: rising global protein consumption, biofuel mandates that pull vegetable oils out of the food supply, and shifting diets in fast-growing economies can all pull a market in one direction for years at a time. Layered on top of both is the broader economy, where a wider expansion or downturn can lift or drag demand across an entire commodity complex at once.
None of these forces show up in real time. A shrinking herd count, a capped planting permit, a mandate phased in a percentage point at a time all move too slowly and too quietly to make headlines on their own. The price trend is usually the clearest evidence available that they’re shifting, well before the underlying data catches up to confirm it. And once a direction is established, speculative positioning and procurement coverage decisions begin to reinforce it, carrying prices further and longer than the underlying imbalance would justify on its own.
Cyclical or structural: the distinction that determines everything
Not all trends resolve the same way. Some are cyclical. High prices eventually attract new supply, the gap closes, and the old price range returns. Cattle markets follow this pattern: herd liquidation creates years of tight supply, but herds rebuild as economics improve. The trend is real while it lasts; it also ends.
Others are structural. A producing region that declines due to aging trees, soil depletion, or a shifting climate may not recover on any relevant timeline. When that’s the case, the old price level isn’t coming back. Treating a structural shift as a temporary one is one of the more expensive mistakes in commodity procurement.
Malaysian palm oil shows both dynamics at once, and together they’ve produced a trend that keeps resetting higher with each cycle. In 2015/16, El Niño – the periodic warming of Pacific waters that brings drought to Southeast Asia – crippled production, pushing prices higher. Indonesia’s biodiesel mandate raised the minimum blend share from 20% in 2016 to 30% in 2020 to 35% by 2023, diverting palm oil into fuel at the expense of food, feed, and export markets. Malaysia’s 2022 migrant-labor shortage curtailed production, adding further drag. None of this corrects on a seasonal basis, yet buyers who treated each new peak as just another swing kept anchoring budgets to prices the market had already left behind.
What this means for procurement
Trend is the component procurement teams tend to notice last, because it doesn’t announce itself the way a single bad harvest or a spot shortage does. It builds gradually, as a slow shift in the underlying fundamentals, and by the time the move looks extreme, it has often already reset the budget baseline well above where earlier action could have locked it in. The right question isn’t whether prices are rising. It’s whether the underlying imbalance has a credible resolution in sight. A confirmed upward trend with no supply response materialising narrows the window in which coverage can be secured at current prices. Waiting for the dip that history suggests is coming may mean waiting for a dip that arrives at a higher absolute level than the one you passed on.
How Expana approaches this
Reading a trend well means knowing two things at once: whether it’s still building, and whether the price has already run ahead of what the fundamentals support. That’s what Expana’s Technical Analysis, part of our core forecasts, is built to answer, showing where the current price sits relative to the trend and whether the move may continue or could be due to turn. That same read feeds indirectly into our algorithmic forecasts.
In Expana IQ, the models learn each market’s own trend patterns, including how long its swings typically run and how structural breaks in that market tend to resolve, and use that understanding to shape how future prices are forecast, not just reflecting the trend to date, but suggesting where it could be headed next.
For a procurement team, that changes the question from “is this a good time to buy” to something sharper: how much of this move is structural and may not reverse, how much room is left in the current swing, and where the trend could point six months out, not just where the price sits today.
For more information on Expana’s forecasting methodologies and insights, request a demo.
This commentary is prepared by Expana and its group of companies, neither of which is an investment firm. We have no positions in the commodities or derivatives referenced. The views expressed are for information only. See our disclaimer for more information: https://www.expanamarkets.com/disclaimer/
Image source: Getty
Written by Andrei Rjedkin
