China and Australia are set to review barley sanctions, giving a positive boost to markets.

The two-step agreement will see China initiate an expedited review of duties on Australian barley over three months - which will include an option to extend, and also time to implement the review's findings.

In return, Australia will temporarily suspend their World Trade Organisation (WTO) dispute until the end of the agreed review period, and reserve the right to resume the dispute if the duties are not lifted.

Federal Trade Minister Don Farrell and Foreign Minister Penny Wong made the announcement in Adelaide, South Australia, on Tuesday.

Since 2020, China's 80.5 per cent duties on Australian barley have effectively blocked exports to that market, worth about $916 million in 2018-19.

Australia's barley exports to China peaked at 6.3 million tonnes in 2016-17 before falling to miniscule levels once the duties were imposed in 2020.

Ms Wong said the Australian Government believed there was "no justification" for the barley restrictions, but pressed that they were encouraging positive conversation between the two countries.

"Obviously, stabilisation and the resolution of trade issues will take time, but we are pleased that constructive dialogue has resumed," Ms Wong said.

The Australian Government has decided to undertake these discussions, rather than the WTO dispute process, as it believes there will be a quicker resolution for Australian growers.

"Since I took over this job almost 11 months ago, I made it very clear that although we've got these disputes with the World Trade Organisation, our preferred method of resolving these sort of trade disputes is to discuss and to negotiate with our trading partners," Mr Farrell said.

While other export markets have purchased Australian barley over the past two years, and trade for other important Australian grains such as wheat have continued with China, growers would welcome the return of the China market, said Grain Producers Australia chairman, Barry Large, Miling.

He said the re-opening of the Australian barley exports to China would be a win for consumers and industry in China and for Australian grain producers and exporters.

"We welcome this new process and look forward to a positive outcome," Mr Large said.

"Barley is an important rotation crop for Australian growers and any optimism on the future outlook is good.

"We welcome the Labor government's constructive dialogue and positive progress towards stabilising the relationship with China, and creating this process and opportunity to recommence the barley trade."

Australian barley prices are expected to jump with the news, and a more significant jump is expected if China and Australia reach an official agreement ending trade restrictions in the next three months.

This will benefit Western Australian farmers, who still have a large amount of barley unsold after a record harvest.

However, Rural Bank senior insights manager James Maxwell said holding onto barley for a higher price wasn't a "great marketing strategy".

"You just don't know, it's going to be another three months now (until they reach an agreement), and it could be another three months after that," Mr Maxwell said.

In reaction to whispers that Australia and China were meeting to discuss resuming barley exports, French barley prices dropped.

Mr Maxwell expected French and Argentinian prices to slump if trade did resume.

If Australian barley prices jump too high, he expected China to get some of their supply from the Black Sea - where barley was cheaper.

However, with Australia's malt barley being some of the best in the world, the price spike would have to be significant for this to happen.

In the past three years, when Australia has been forced to diversify, they have managed to reach an array of different markets.

Australia has established a foothold in the Central and South American market, increased supply to Vietnam and is working hard on the Indian market.

There are concerns that this diversification may be lost if China reopens for trade, as the Chinese market is often more lucrative for exporters.

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"I think it will be really interesting to see what the market will do, are these growing markets going to be honoured?" Mr Maxwell said.

"Or are they just going to go straight back to China because they pay the most?"

Mr Maxwell said it was important to continue to foster these emerging markets, in case of imposed tariffs in the future.

With China often being a volatile trading partner, it would be beneficial for Australia not to solely rely on China for barley exports - the way they did in 2017.

"It's pretty basic business practice that you need to diversify, if you're 100 per cent devoted to one customer or stream and that goes down, then you're done."

Grain Trade Australia (GTA) chief executive officer Pat O'Shannassy said the announcement was an important step forward in seeking resolution of this issue and congratulated both the Australian and Chinese Governments for their work to reach this agreement.

"China was historically a very important export market for barley from Australia over many decades, with very strong customer relationships and considerable co-operation between industry partners in plant breeding and technical support to meet China's needs," Mr O'Shannassy said.

"We very much hope this process over the next few months will enable our trade relationships to see exports resume.

"GTA looks forward to participating in the review process if and when appropriate."

A CBH spokesperson said they welcomed the development and looked forward to the review's findings and outcome in the coming months.