Commodity Prices — Long-Run
Real (inflation-adjusted) commodity prices have followed long cycles since 1900 — three roughly 30-year 'supercycles' driven by industrialisation waves. The price of most agricultural commodities has declined slightly in real terms over the past century; metals have been roughly flat; energy has been more volatile. The pattern is consistent with the Prebisch-Singer hypothesis that commodity exporters face long-run deteriorating terms of trade, though weakly.
Key insights
Supercycles, not steady state
Commodity prices follow long cycles of ~30 years rather than steady-state trends. Three peaks since 1900: World War I (industrialisation + war demand), the early 1970s (post-war rebuild + OPEC), and 2008–14 (China industrialisation). Each cycle has rising and falling phases of ~15 years. The current phase since ~2014 has been broadly flat in real terms, with the 2022 commodity shock representing a partial break upward.
Agricultural prices show the slowest decline
Real agricultural commodity prices have declined roughly 0.5–0.7% per year over the past century as productivity gains (mechanisation, fertilizer, hybrid seeds, genetic improvement) outpaced demand growth. The decline has been masked by short-term volatility — droughts, supply shocks, biofuel mandates — but the trend is robust. Coffee, cocoa, sugar and grains all show similar patterns.
Metals defy the Prebisch-Singer thesis
Copper, aluminium, lead, zinc and tin real prices in 2024 are roughly where they were in 1900 — defying both the Prebisch-Singer 'declining trend' prediction and the Malthusian 'rising scarcity' prediction. Technological improvements in extraction and recycling have offset depletion of high-grade ores. The Hotelling principle (extraction should produce rising prices over time) has not held empirically over the past century.
Real commodity price index 1900–2024
Inflation-adjusted, 1900 = 100, simple averages
Key Finding: Long cycles around a flat-to-declining trend. The 2008–14 peak was the strongest in real terms since the 1970s.
Major commodities — 2024 prices relative to 2010 (real)
Real-price index, 2010 = 100
Key Finding: Energy and grains rebased downward from their early-2010s peaks; copper holds firm on energy-transition demand.
Methodology & caveats
Prebisch-Singer hypothesis
Raúl Prebisch (1950) and Hans Singer (1950) independently argued that primary commodity exporters face deteriorating terms of trade against manufactures exporters. Reasoning: manufactures have income-elastic demand (more growth → more demand); primaries don't. Empirically, the hypothesis holds weakly for agricultural commodities and not at all for metals over the long run.
Real vs nominal
Real commodity prices deflate nominal series by a price index — usually the US CPI or a manufactured-goods index. Choice of deflator affects results meaningfully over long horizons. Most long-run commodity series use the US CPI; the Grilli-Yang and the World Bank Pink Sheet both apply a manufactures-export deflator that produces somewhat more negative trends.
Supercycle drivers
The 2000s–2014 supercycle is almost entirely attributable to Chinese industrial demand for metals and energy. The 1960s–70s cycle reflected post-war rebuild plus OPEC. Pre-1914 reflected US and Western European industrialisation. Each cycle ends when supply catches up (mining capacity, oil drilling) and demand growth slows. Predicting the next peak requires identifying the next great industrialisation wave.