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Pros: Corn Shortfall Points to Higher Food Prices, and Ag Trades

You might call this the Green Acres play! Ag stocks were on fire Thursday after the latest crop report showed the wet spring will likely cut the corn harvest.

The United States corn surplus in 2012 is estimated to be just 695 million bushels, far less than the 900 million estimated last month. On the news corn futures climbed sharply.

What does that mean for investors?

More expensive corn will likely trigger food price increases this year. That could ultimately make everything from meat to cereal and soft drinks more expensive at the supermarket.

For all 2011, the USDA predicts food prices will rise 3% to 4%.

What’s the trade?

Trader Zach Karabell says these developments are bullish for fertilizer makers such as CF Industries. “The world needs corn and the ground needs nitrogen to grow the corn,” he says. He’d also look at Monsanto or Dupont as a play on seeds. “Demand for food isn’t going anywhere and Mother Nature is creating supply constraints.”

Steve Grasso adds that his play is “short the cereal makers.”

Trader Stephen Weiss is cautious of the meat companies such as Smithfield and Tyson. “30% of those companies costs are related to feed – and that’s corn!”

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CALL TO THE FLOOR: BGC PARTNERS CEO HOWARD LUTNICK


Shares of BGC Partners have whipped the rest of Wall Street over the last 12 months but they've fallen prey to the same uncertainties around the rest of the financial services industry recently regarding regulation and trading volumes.

For clarity on that situation the Fast Money gang turned to BGC Partners' CEO Howard Lutnick. It's a conversation you won't want to miss. Watch the video now!





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Trader disclosure: On June 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; Karabell owns (AAPL); Karabell owns (GS); Karabell owns (GOOG); Karabell owns (RIMM); Weiss owns (UUP); Weiss owns (QCOM); Weiss owns (MSFT); Weiss owns (COP); Weiss owns (DVN); Weiss owns (HK); Weiss owns (EMC); Weiss owns (NS); Weiss owns (ETP); Weiss owns (MDRX); Weiss owns (TEVA); Weiss owns (BRCM); Weiss owns (KEY); Weiss owns (VZ); Weiss owns (MRK); Grasso owns (AKS); Grasso owns (AMD); Grasso owns (ASTM); Grasso owns (BA); Grasso owns (BAC); Grasso owns (C); Grasso owns (D); Grasso owns (HOV); Grasso owns (JPM); Grasso owns (LIT); Grasso owns (LPX); Grasso owns (MHY); Grasso owns (NDAQ); Grasso owns (PFE); Grasso owns (PRST)

For Zachary Karabell
River Twice Capital is short (SPY)
River Twice Capital is short (CAT)

For Steve Grasso:
Stuart Frankel & Co and it’s partners own(CSCO)
Stuart Frankel & Co and it’s partners own (CUBA)
Stuart Frankel & Co and it’s partners own (GERN)
Stuart Frankel & Co and it’s partners own (HPQ)
Stuart Frankel & Co and it’s partners own (HSPO)
Stuart Frankel & Co and it’s partners own (MU)
Stuart Frankel & Co and it’s partners own (MSFT)
Stuart Frankel & Co and it’s partners own (NYX)
Stuart Frankel & Co and it’s partners own (PFE)
Stuart Frankel & Co and it’s partners own (PRST)
Stuart Frankel & Co and it’s partners own RDC
Stuart Frankel & Co and it’s partners own (SDS)
Stuart Frankel & Co and it’s partners own UAL
Stuart Frankel & Co and it’s partners own (XRX)
Stuart Frankel & Co and it’s partners are SHORTS (QQQQ)
Stuart Frankel & Co and it’s partners own (AAPL)
Stuart Frankel & Co and its partners Are Short (AAPL)


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