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.”