The futures price of a commodity is set at the spot price plus the funding cost and the storage cost, minus the value of holding the physical commodity (the convenience yield). Backwardation appears when the value of holding the physical commodity exceeds the sum of the funding cost and the storage cost. It tends to appear when supply and demand are tight, such as when spot prices are high and inventories are low.
The opposite shape, in which prices are higher for more distant months, is called contango.