Risk Warning: Your Capital is at Risk.
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 .
In a hurry? If you want to get started trading agricultural commodities like barley, here are brokers available in to consider:
Disclaimer: Availability subject to regulations.
Between 74-89% of retail investor accounts lose money when trading CFDs.
Contents
Read on to learn about the opportunities and potentials pitfalls in barley trading.
Reasons You Might Trade Barley
Traders purchase agricultural commodities such as barley for many reasons, but the most important ones include:
- Inflation and Weak US Dollar Hedge
- Speculate on Demand Growth
- Portfolio Diversification
Inflation And Weak US Dollar Hedge
Trading 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.
Important: This is not investment advice. We present a number of common arguments for and against investing in this commodity. Please seek professional advice before making investment decisions.
Speculate On Growing Barley Demand
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.
Barley For Portfolio Diversification
Most traders have the vast majority of their assets in stocks and bonds.
Commodities like barley provide traders with a way to diversify and reduce the overall risk of their portfolios.
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.
CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. Between 74%-89% of retail investor accounts lose money when trading CFDs. You should consider whether you can afford to take the high risk of losing your money.
Ways To Trade 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 tradable instruments.
| Method | Complexity Rating (1 = easy, 5 = hard) | Storage Costs? | Security Costs? | Expiration Dates? | Mgmt Costs? | Leverage? | Regulated Exchange? |
|---|---|---|---|---|---|---|---|
| Barley Futures | 5 | N | N | Y | N | Y | Y |
| Barley Options | 5 | N | N | Y | N | Y | Y |
| Barley Shares | 2 | N | N | N | N | N/A | Y |
| Barley CFDs | 3 | N | N | N | N | Y | Y |
How Do Barley Futures Work?
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 futures requires a high level of sophistication since factors such as storage costs and interest rates affect pricing.
What Are 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. To learn more about how options work, see our Options Trading Guide.
Are Barley Options Similar To Futures?
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.
Types Of Barley ETFs
These financial instruments trade as shares on exchanges in the same way that stocks do. However, there are no ETFs that are a pure-play trade in barley.
Top grain ETFs that include barley prices are:
- iPath Dow Jones –UBS Grains ETN
- MLCX Grains ETN
- iPath Pure Beta Grains ETN
- PowerShares DB Agriculture Fund
- UBS ETRACS CMCI Agriculture Total Return ETN
Trading Barley Company Shares
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.
| Company | Overview | Exchange | Interesting Fact |
|---|---|---|---|
Archer Daniels Midland | Operates facilities that convert agricultural commodities into food, animal feed and energy | New York (NYSE) | Serves 160 countries |
Bunge Limited | Processes oilseeds, wheat, corn and sugarcane | New York (NYSE) | Company was founded in the Netherlands |
Glencore plc | International commodity trading and mining company | London (LSE) | Company began as a metals and oil company |
Please note, this is an example – not a recommendation.
What Are 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 company shares. Customers deposit funds with the broker, which serve as margin.
The advantage of CFDs is that traders can have exposure to barley 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.
Why Should You Trade Barley?
Traders who want exposure to barley might consider purchasing a basket of commodities that includes other agricultural staples such as wheat, corn, soybeans, and sugar.
For additional diversification, they may also consider trading precious metals and energy commodities.
Purchasing a basket of commodities is a strategy used by some traders to protect from the volatility of any individual commodity.
There are two specific trends that could raise barley prices in the years ahead.
Emerging Market Demand For Barley
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 Impact On Barley Farming
Climate change 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.
What Are The Risks Of Trading Barley?
However, traders should also consider the risks of trading in barley:
- Strength in the US dollar could be negative for barley prices.
- Overproduction by large suppliers could depress prices.
- Economic or political turmoil in emerging markets could weaken the demand for agricultural commodities.
Further Reading
To learn more about barley as a commodity, namely, how it’s produced and which nations lead the global barley market, see this Guide To Barley As A Commodity.
Fancy considering other agricultural commodities to trade? See:
- How to trade canola
- Ways to trade oats and rough rice
- All about livestock trading (like cattle and hogs)
