Barley As a Commodity: Why It’s A Vital Grain


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Why Is Barley Valuable?

Barley serves as an important food source for humans and animals and a key ingredient in some alcoholic beverages. This versatility makes it a vital grain commodity in international markets.

Here we'll give you all the details about barley as a commodity including how it's grown, what it's used for, which countries are most important to barley trading, and what factors affect its market price.

What Is Barley?

Barley is a cereal grain that contains many important nutrients and vitamins. It is characterized by its rich nutty flavor and chewy consistency.

Barley is one of the oldest grown cereal grains. Historians believe its origins trace to Egypt, Ethiopia, the Near East or Tibet, but the exact location is debatable. Middle Eastern farmers grew barley prior to 10,000 BC, and China began cultivating the crop around 1,000 BC. 

How Is Barley Grown?

Barley grows best in environments with cool ground temperatures.

Barley farmers plant their crop in two growing seasons – winter and spring. October is the ideal month to plant winter barley, while January is the best month for the spring variety.

Barley requires well-drained soil and full sunlight to grow. Farmers grow crops in rows about 10 to 12 inches apart. Spring barley ripens in about 60 to 70 days, while fall barley ripens about 60 days after spring growth begins.

This relatively quick ripening process makes barley ideally suited for crop rotations with other grains such as wheat.

Where Is Barley From?

World's Biggest Barley Producing Regions

The European Union is the largest producer of barley. It grows nearly three times the amount of barley as Russia, which is the second largest producer.

Top 10 Barley Producing Countries

The largest barley producers include: 

RankFlagCountryThousands of Metric Tons
#1Flag of European UnionEuropean Union58,765
#2Flag of RussiaRussia20,500
#3Flag of UkraineUkraine8,700
#4Flag of AustraliaAustralia8,000
#5Flag of CanadaCanada7,250
#6Flag of TurkeyTurkey7,000
#7Flag of IranIran3,100
#8Flag of USAUnited States3,090
#9Argentina FlagArgentina2,750
#10Flag of Kazakhstan Kazakhstan2,700

The European Union, Russia and Australia top the list of countries that export barley.

Top 5 Barley Importing Countries

RankFlagCountryThousands of Metric Tons
#1Flag of Saudi ArabiaSaudi Arabia9,000
#2Flag of ChinaChina5,500
#3Flag of IranIran1,300
#4Flag of LibyaLibya1,300
#5Flag of JapanJapan1,100

Barley has many health benefits, which account for its popularity as a food source in many parts of the world. In addition to containing many nutrients including manganese, molybdenum, selenium and B vitamins, barley consumption provides specific benefits: 

  1. Lowers Cholesterol
  2. Provides intestinal protection
  3. Protects against atherosclerosis
  4. Provides cardiovascular benefits
  5. Substantially lowers risk of type 2 diabetes
  6. Prevents gallstones
  7. Protects women against postmenopausal breast cancer

Top 3 Uses of Barley

Uses of BarleyDescription
Human Food Source
Food Icon
Barley can be prepared a number of different ways:

  1. Cooked in soups, stews, casseroles and breakfast items such as cereals, waffles and pancakes

  2. Added as an ingredient in salads

  3. Barley meal is used in porridges in Scotland

  4. Barley flour is used for baking

Beverages
Beer Icon
Barley is a key ingredient in whiskey and beer production. Barley is also used to make flavored waters and teas.
Animal Feed
Livestock Icon
Barley is used as feed for livestock. In northern climates such as Canada, parts of Europe and the northern United States, barley is more popular than corn as animal feed. Barley is also used to make high-protein fish food.

What Drives the Price of Barley?

The price of barley is usually highly correlated with the price of other grains such as corn and wheat. Many of the supply and demand factors that move barley prices affect agricultural commodities in general including:

  1. Global Production
  2. The US Dollar
  3. Emerging Market Demand
  4. Substitution Effect
  5. Weather
  6. Health News

Global Production

The global supply of barley is a key determinant of its price. Political factors, such as crop subsidies in certain countries can have a significant effect on prices.

If governments in key suppliers such as the European Union decide to end subsidies of major agricultural commodities, then farmers will shift their production accordingly.

The US Dollar

The US currency is the world’s reserve currency. As a result, barley and other agricultural commodities are quoted in US dollars.

Barley producers receive fewer dollars for their product when the US currency is strong and more dollars when the currency is weak.

Factors such as US interest rates, trade surpluses/deficits, unemployment and GDP can all impact the value of the dollar versus other currencies.

Emerging Market Demand

A substantial amount of import demand for barley comes from China and Middle Eastern countries. As the Chinese economy expands, its demand for agricultural commodities will grow.

Similarly, India and emerging countries in Africa and the Middle East will require more food to feed their people as their economies grow.

As emerging market countries grow wealthier, their consumption of meat will likely increase. Since barley is used as livestock feed, its price should respond favorably.

Of course, if emerging economies suffer economic setbacks, then barley prices could decline.

Substitution Effect

Barley competes with other grains such as wheat and corn as dietary staples. If the price of barley rises significantly higher than these other grains, then consumer preferences might shift toward consuming lower priced alternatives.

Of course, if barley prices are significantly lower than competing grains, then consumers might increase their barley consumption. These changes in demand can impact barley prices.  

Weather

Weather patterns can have a significant effect on crop prices, and barley is no exception.  Barley grows best in cool, dry regions. Extreme heat, extreme cold or excessive rainfall could limit production and potentially send prices for barley much higher.

Dry Land Caused by Extreme Weather
Extreme weather can disrupt barley production – via Pixabay

Health News

Barley has received considerable positive attention for its health benefits. Unlike other agricultural commodities such as soybeans, barley has remained free from negative publicity from the medical community.

As consumers continue to become more health conscious, barley consumption could rise in many regions throughout the world.

What Do Experts Think About Barley? 

Experts see mostly positive news for the agriculture sector including barley in the years ahead.

The USDA recently raised its Chinese import expectations for barley citing increased demand for feedstuffs. 

Barley Experts

Jim Rogers, co-founder of the Quantum Fund and creator of the Rogers International Commodity Index, advocates trading in the agricultural commodity sector and believes it will make significant gains in the coming years.

You can open a chain of restaurants in the agricultural areas of the world because the farmers are going to be much more successful in the next 30 years than in the last 30 years.

– Jim Rogers, founder of Quantum Fund

Further Reading

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