Barley is a type of grain crop with a long and illustrious history. It is estimated to have been cultivated for in excess of 10,000 years, originating in the Middle East and quickly spreading outwards. Many great cultures of antiquity understood the useful qualities of barley: the ancient Greeks used it as an energy providing staple food, while the Egyptians used barley in the brewing of alcoholic beverages. Barley is also known to have been in use in China, where it was used for much the same reasons, as well as acting as a symbolic representation of male strength and virility. That barley as a crop has endured for so long and in such different parts of the world owes to the fact that it is itself very hardy, while simultaneously being able to adapt to climates that are tropical, and those that are temperate.
Barley is traded at a number of commodity exchanges: the Winnipeg arm of the Intercontinental Exchange (ICE), the Australian Securities Exchange (ASX), India’s Multi Commodity Exchange (MCX), the Sofia Commodity Exchange (SCE) in Bulgaria, and NYSE Liffe (LIFFE). On the ICE Futures Exchange, barley is traded under the ticker symbol of AB, in the form of Western Canadian feed barley. On the SCE, barley futures are available as forage barley, or malting barley.
Barley futures when traded as a commodity have several features that make them an appealing prospect for traders, commodity brokers and speculators on the market. After corn, wheat and rice, barley is the fourth most consumed cereal grain crop in the world. This makes it likely that barley prices will always appear attractive, simply due to the sheer demand for the product. Barley is a staple foodstuff in many locations around the globe, and so the market base is always massive, as is the potential for profit for the shrewd trader. Another feature of barley that makes it an appealing prospect for traders is the fact that it is incredibly resilient, and so can survive many adverse weather conditions where other crops may perish. This helps to limit the danger of making sudden and substantial losses due to unpredictable and uncontrollable weather patterns, as may be the case with other agricultural commodities.
The main consumer and business markets for barley are mainly centred around the food and drinks industry, as has been the case for thousands of years. Barley is an important ingredient in the production of both bread and beer in many countries, and obviously both of these products have significant commercial appeal. Aside from human use though, barley most likely has its greatest demand from the animal and livestock feed markets, as well as being useful in the creation of malt.
In terms of production, it is estimated that Russia is the current leader of the worldwide barley market, with Canada and Germany coming close behind. France is also known as a prolific producer of barley. In terms of consumption, the European Union is the clear leader, with Russia trailing at a distant second.
Factors that affect barley prices on the market are similar to those that affect all agricultural commodities. The barley price can be affected by the fluctuation levels of consumption across the globe. Demand is currently believed to be at an all time high for grains generally on account of increased revenue available in developing countries, and production has not increased to quite the same level. This means that barley futures are a potential source of great income for traders.
Weather can also play a part in affecting spot prices and shifting futures trading. Yields of crops generally are affected by adverse weather, and although barley is one of the more resilient crops, it can still suffer if the weather conditions become extreme enough. This could also mean that as other crops suffer in harsh weather, barley may survive on account of its resilience, increasing its demand.
Lastly, the price of ethanol is a factor to consider, as increased demand for ethanol may encourage farmers to dedicate their land to producing corn. This could subsequently decrease the supply of barley and drive up the price of barley futures.
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