How to Trade the Volatile Grain Sector: Analyst

Grain prices are going to take almost two years to rebuild, so there's going to be a period of elevated costs, said Farha Aslam, food analyst at Stephens.

A forecast of the U.S. wheat stockpile was revised higher in a government report earlier Thursday, which noted that higher wheat costs have trimmed demand around the world.

“The traders are calling today’s report neutral to bearish for grain stocks,” Aslam told CNBC. “But we have the planting season ahead, so we’re still looking for more volatility in the grain sector.”

Aslam Likes:

Darling International—"Our price target’s $17 so you have another 20 percent upside in this name."

Smithfield Foods—"[It's a] phenomenal company and we think that earnings are going to go up," she said. "It's well positioned to supply the global demand for protein."

Tyson Foods—"Tyson has reported eight quarters of earnings outperformance in a row, and increasingly, you’ll see the company’s earnings power recognized."

______________________________
Scorecard—What She Said:

• Aslam's Previous Appearance on CNBC (Dec. 14, 2010)

______________________________
More Market Intelligence:

• Has the Commodities Boom Come to an End?

• 7 Stocks for This Value Market: Pros

• S&P Best & Worst Stocks—What to Buy/Avoid: Analysts

______________________________
CNBC Data Pages:

• Dow 30 Stocks—In Real Time
• Oil, Gold, Natural Gas Prices Now
• Where's the US Dollar Today?

______________________________
CNBC Slideshows—FYI:

• The World's Coolest Jobs 2011

______________________________

______________________________
Disclosures:

Aslam does not own shares of DAR, SFD or TSN.

Aslam has investment banking clients who own shares of DAR.

______________________________

Disclaimer