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Halftime: Ag Trade Topping Out, or Scorching Higher?

The S&P edged lower on Wednesday as investors booked profits after stocks hit new 2 1/2-year highs.

However the Fast Money traders were more focused on the imbalance in the ag space after a series of catalysts put rising food prices under the microscope, once again.

- On Wednesday the latest crops report from the USDA showed reserves of corn were at their lowest levels in 15 years.

- Agrium reported a 90 percent rise in quarterly gross profit on Wednesday, as high grain prices fueled demand for its fertilizers, seeds and other farm products.

- Syngenta reported that farmers are investing in more of its weed and bug killers to boost harvests.

The ag trade has been on fire lately with demand for grains rising while supply falls as drought and floods cut into the world's harvest of crops.

However, with escalating food prices partly to blame for unrest around the world, some investors worry that the supply and demand dynamic could change quickly and dramatically .

What’s the trade? How should you position now?

Instant Insights with the Fast Money traders

Although he’s been bullish, Joe Terranova does not think fertilizer stocks have more room to run. “The price action in Potash suggests it’s topping out. If you’ve been playing the fertilizer stocks you’ve been rewarded and I’d take profits.”

Pete Najarian agrees that the fertilizer trade may be ahead of itself. However he does think the rails or some chemicals names remain in play.

“I’d look at DuPont or Dow,” he says, “chemical companies that have exposure (to ag) but it’s not their entire revenue stream. That way you don’t have all of your eggs in one basket.”

Steve Cortes suggests trading the space slightly downstream. He’s bullish Kellogg as well as some other consumer names such as Tyson .

“In the last week or two I’ve seen some pretty sharp rallies and gaps up in names such as Tyson and Kellogg,” he explains. “The fact that these names are rallying in the face of soaring corn suggests consumer staples are to be bought.” (He also thinks lower oil prices are bullish for these stocks because they translates into lower prices at the pump; more money in the wallet.)

Brian Kelly isn’t quite as enthusiastic but he does see some opportunity. “If I had to buy in the space, I’d buy Monsanto,” he says. "They supply the seeds. That's your supply response. And I’d still look at the Andersons.”

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TOPPING THE TAPE: COCA-COLA

Coca Cola was one of the big Dow winners on Wednesday after the soft drink giant reported better than expected revenues on strong sales growth in its North America businesses unit; overcoming rising commodity prices.

What’s the trade?

In the space I prefer Pepsi , says Pete Najarian, though I’d keep both on the radar.

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DISNEY TOPPING THE DOW

Disney shares hit new highs on Wednesday after the company beat on EPS and revenue, helped by ad growth at ESPN as well as strength at its parks and resorts.

What’s the trade?

Disney earnings were phenomenal, says Joe Terranova. I think the Street has underestimated the potential for this stock.

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WELLS FARGO DOWN AFTER MYSTERIOUS CFO DEPARTURE

Shares of Wells Fargo traded lower on Wednesday after thebank said its chief financial officer Howard Atkins will retire in August after an unpaid leave of absence.

According to the Wall Street Journal, “the company's sparse explanation, left analysts puzzled about the implications for the bank.”

Stifel Nicolaus analyst Christopher Mutascio wrote, "we would be remiss not to at least question the sudden and surprising departure and somewhat oddly or awkwardly worded statement" from the nation's second-largest bank by deposits.

Atkins, who had been with Wells Fargo since 2001, is retiring for personal reasons, the bank said.

What’s the trade?

I think the stock being down so much is absurd, says Brian Kelly. They said the retirement had nothing to do with the bank’s financial position.

Historically sudden CFO departures are a problem, counters Steve Cortes. I don’t know if there’s fire here but I think there’s smoke.

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NYSE EURONEXT to MERGE WITH DEUTSCHE BOERSE

Deutsche Boerse and NYSE Euronext , two of the world's largest exchange operators, said on Wednesday they were in "advanced merger discussions," but no agreement had been reached.

What’s the trade?

I’m seeing options explode in the NYX, says Pete Najarian. I’m also seeing speculation trickle down in the rest of the exchanges such as CBOE.


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Trader disclosure: On Feb. 9, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Pete Najarian owns (F) bonds and calls. Pete Najarian owns (GM). Pete Najarian owns (AXP). Pete Najarian owns (V) call spreads. Pete Najarian owns (YHOO). Pete Najarian owns (MS). Pete Najarian owns (JPM) call spreads. Pete Najarian owns (C). Pete Najarian owns (BAC) call spreads. Pete Najarian owns (GE). Pete Najarian owns (MU) calls. Steve Cortes owns (SWY), (K), (SVU), (MO) and (PM). Steve Cortes is short (LVS). Steve Cortes is short (XLE) vs. S&P. Steve Cortes is short Crude. Joe Terranova owns (VRTS), (C), (UPL), (GM), (PEP), (LTD), (CVI), (SU) and (CNQ). Joe Terranova owns (POT) puts.

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JOE TERRANOVA
Terranova is Chief Market Strategist of Virtus Investment Partners, LTD
Virtus Investment Partners Owns More Than 1% Of (ABAX)
Virtus Investment Partners Owns More Than 1% Of (AMKR)
Virtus Investment Partners Owns More Than 1% Of (CCG)
Virtus Investment Partners Owns More Than 1% Of (CASS)
Virtus Investment Partners Owns More Than 1% Of (CSVI)
Virtus Investment Partners Owns More Than 1% Of (EXR)
Virtus Investment Partners Owns More Than 1% Of (FCFS)
Virtus Investment Partners Owns More Than 1% Of (IGE)
Virtus Investment Partners Owns More Than 1% Of (KRC)
Virtus Investment Partners Owns More Than 1% Of (LDR)
Virtus Investment Partners Owns More Than 1% Of (LPHI)
Virtus Investment Partners Owns More Than 1% Of (NRCI)
Virtus Investment Partners Owns More Than 1% Of (DBV)
Virtus Investment Partners Owns More Than 1% Of (XLB)
Virtus Investment Partners Owns More Than 1% Of (XLV)
Virtus Investment Partners Owns More Than 1% Of (XLP)
Virtus Investment Partners Owns More Than 1% Of (XLY)
Virtus Investment Partners Owns More Than 1% Of (XLE)
Virtus Investment Partners Owns More Than 1% Of (XLF)
Virtus Investment Partners Owns More Than 1% Of (XLI)
Virtus Investment Partners Owns More Than 1% Of (XLK)
Virtus Investment Partners Owns More Than 1% Of (XLU)
Virtus Investment Partners Owns More Than 1% Of (SUBK)
Virtus Investment Partners Owns More Than 1% Of (WDFC)
Virtus Investment Partners Owns More Than 1% Of (YDNT)
Virtus Investment Partners Owns More Than 1% Of (DPUKF)

BRIAN KELLY
Accounts Managed By Kanundrum Capital Own (BAC)
Accounts Managed By Kanundrum Capital Own (JEF)
Accounts Managed By Kanundrum Capital Own (MS)
Accounts Managed By Kanundrum Capital Own (DBA)
Accounts Managed By Kanundrum Capital Own (JJG)
Accounts Managed By Kanundrum Capital Own (IAU)
Accounts Managed By Kanundrum Capital Own (SLV)
Accounts Managed By Kanundrum Capital Own (DRYS)
Accounts Managed By Kanundrum Capital Are Long The US Dollar
Accounts Managed By Kanundrum Capital Are Short The Yen
Accounts Managed By Kanundrum Capital Are Short The Australian Dollar

CNBC.com with wires.

Symbol
Price
 
Change
%Change
S&P 500
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AGU
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ANDE
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CBOE
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DD
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DIS
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DOW
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K
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KO
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MO
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PEP
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POT
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SYNN
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TSN
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WFC
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NYX
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