How and Where to Trade Barley: A Newbie-Friendly Trading Guide

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Barley is an agricultural commodity that's used as food for humans and livestock. Traders can speculate on the price of barley in different ways. We’ll explain how to trade this important crop and where you can find a trusted broker in .

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3 Reasons You Might Trade Barley

Traders purchase agricultural commodities such as barley for many reasons, but the most important ones include:

  1. Inflation and Weak US Dollar Hedge
  2. Speculate on Demand Growth
  3. Portfolio Diversification

Inflation and Weak US Dollar Hedge

Trading in barley is a way to bet on a weak US dollar and higher inflation. Agricultural commodities such as barley are priced in US dollars, so the performance of the world’s largest economy plays a crucial role in their pricing.

The US Federal Reserve Bank has kept interest rates low and the US dollar weak. US central bankers are likely to continue these policies to support consumer borrowing and spending. A weak dollar could stoke inflation concerns and bolster barley prices

Speculate on Demand Growth

Barley is poised to benefit from strong global growth, especially in emerging market economies. The demand for barley in livestock feed, beer production and healthy foods should grow as the developing world becomes richer.

Demand in the European Union and other Western economies could also outstrip supply in the coming years. Factors such as healthy eating could drive this demand.

Portfolio Diversification

Most traders have the vast majority of their assets in stocks and bonds. Commodities such as barley provide traders with a way to diversify and reduce the overall risk of their portfolios.

How Can I Speculate on Barley?

Barley traders have limited ways to trade in the commodity, the most common being futures, options and CFDs. Additionally, agricultural shares and grain ETFs are other options.

Barley Trading Methods Compared

MethodComplexity Rating (1 = easy, 5 = hard)Storage Costs?Security Costs?Expiration Dates?Mgmt Costs?Leverage?Regulated Exchange?
Barley Futures5NNYNYY
Barley Options5NNYNYY
Barley Shares2NNNNN/AY

Barley Futures

The Intercontinental Exchange (ICE) Futures Canada trades a barley futures contract. The barley contract settles into 20 metric tons of No. 1 Canada Western barley and is quoted in Canadian dollars and cents.

The ICE contract has delivery months of March, May, July, October and December.

Futures are a derivative instrument that allows traders to make leveraged bets on commodity prices. If prices decline, traders must deposit additional margin in order to maintain their positions.

At expiration, traders must either accept physical delivery of barley or roll their positions forward to the next trading month.

Trading in futures requires a high level of sophistication since factors such as storage costs and interest rates affect pricing.

Barley Options on Futures

The ICE also offers an options contract on the barley futures contract. The contract months for regular options are March, May, July, October and December.

Serial options contract months are January, February, April, June, August, September and November.

Options are also a derivative instrument that employs leverage to speculate commodities prices. As with futures, options have an expiration date. However, options also have a strike price, which is the price above which the option finishes in the money.

Options buyers pay a price known as a premium to purchase contracts.

An options bet succeeds only if the price of barley futures rises above the strike price by an amount greater than the premium paid for the contract.

Therefore, options traders must be right about the size and timing of the move in barley futures to profit from their trades.

Barley ETFs

These financial instruments trade as shares on exchanges in the same way that stocks do. There are no ETFs that are a pure play trade in barley. However, there are three ETFs that trade generally in the grains sector:

3 Leading Grain ETFs

iPath Dow Jones –UBS Grains ETNMLCX Grains ETNiPath Pure Beta Grains ETN

This screenshot is only an illustration. Current market prices can be found on the broker website.

Other ETFs, including the PowerShares DB Agriculture Fund and the UBS ETRACS CMCI Agriculture Total Return ETNtrade generally in the agricultural sector.

Shares of Barley Companies

There are no pure-play public companies engaged exclusively in the production and sale of barley. However, there are three publicly traded agribusinesses that control the grain trade globally.

Public Grain Companies

CompanyOverviewExchangeInteresting Fact
Archer Daniels Midland
Archer Daniels Midland Logo
Operates facilities that convert agricultural commodities into food, animal feed and energyNew York (NYSE)Serves 160 countries
Bunge Limited
Bunge Limited Logo
Processes oilseeds, wheat, corn and sugarcaneNew York (NYSE)
Company was founded in the Netherlands
Glencore plc
Glencore Logo
International commodity trading and mining companyLondon (LSE)Company began as a metals and oil company

Please note, this is an example trade – not a recommendation.

Agricultural CFDs

A popular way to trade in agricultural commodities, such as corn and wheat, is through the use of a contract for difference (CFD) derivative instrument.

CFDs allow traders to speculate on the price of agricultural company shares. The value of a CFD is the difference between the share price of the company at the time of purchase and the current price.

Many regulated brokers worldwide offer CFDs on agricultural companies. Customers deposit funds with the broker, which serve as margin.

The advantage of CFDs is that traders can have exposure to grain prices without having to purchase shares, ETFs, futures or options.

IMPORTANT: CFDs are not available in the USA due to local regulation, and regulated brokers do not accept US citizens or US residents as clients.

Where Can You Trade Barley?

If you are looking to start trading barley and other agricultural commodities, here's a list of regulated commodity brokers available in to consider.

Top Brokers Available in

If you want to trade barley and other agricultural commodities, you can start your research here:

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CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Between 73.0%-89.0% of retail investor accounts lose money when trading CFDs. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

Should I Trade Barley?

Traders who want exposure to barley should consider purchasing a basket of commodities that includes other agricultural staples such as wheat, corn, soybeans and sugar.

For additional diversification, they should also consider trading precious metals and energy commodities.

Purchasing a basket of commodities helps protect traders from the volatility of any individual commodity.

Barley also adds overall diversification to a stock and bond portfolio.

There are two specific trends that could raise barley prices in the years ahead:

Emerging Market Demand

The development of emerging economies could boost barley demand. Middle Eastern countries and China already import a significant amount of barley, and this demand could grow. Demand for livestock feed, beer, and healthy food could be the catalysts for this growth.

Climate Change

Global warming trends have the potential to wreak havoc on the production of many different crops including barley.

If recent weather patterns continue, the world’s supply of food may not be able to meet demand in the years ahead. Speculating on agricultural commodities is a way to benefit from this trend.

However, traders should also consider the risks of trading in barley:

  1. Strength in the US dollar could be a negative for barley prices.
  2. Overproduction by large suppliers could depress prices.
  3. Economic or political turmoil in emerging markets could weaken the demand for agricultural commodities.

Further Reading

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