Halftime: Russia Wheat Shortage To Ripple Across US Markets?

On Tuesday investors were attempting to gauge the future of food prices, after Russia said it would temporarily halt grain exports.

Russia's worst drought on record has devastated crops in parts of the country and sent international grain prices soaring as markets have speculated on restricted supply from one of the world's leading exporters.

Prime Minister Vladimir Putin told a government meeting on Thursday that a temporary ban on grain exports was needed, with a spokesman later saying this would come into force from August 15 and would apply to contracts that had been already signed.

On the news wheat markets immediately jumped to nearly two year highs.

How should you trade?

Instant Insights with the Fast Money traders

I think this is a pretty big story, says Brian Kelly. Investors need to think about what the ramifications will be. As you establish new trades think about whether companies are going to be able to obtain wheat supplies and what their contingency plans may be. I suggest really watching the space.

Archer Daniels, Bunge , Agrium and Potash may all be ways to play this story, says Steve Grasso, but I can’t help but wonder if it’s more a one-day wonder than anything else.

For what it's worth, my clients are shorting food and beverage regardless of this development.

Investors have doubted the Russia story largely because the US crop is so substantial, explains Steve Cortes. It’s going to be record. But what I think they don’t see is that this is just a part of a massive emerging markets demand for resources, he says. I think we start to see a grab for resources broadly.

I’ve done some research on these developments, says host Melissa Lee, and Robert Moskow of Credit Suisse says "In past years, this is where ADM and Bunge have stepped in to fill the void for livestock producers in the eastern hemisphere and make outsized profits."

I’d ask myself who’s already hedged, says Patty Edwards. I believe Dominos is hedged through the end of the year. That may bode well.

That's another point to consider, food producers have said they can’t pass along the costs to the consumer, adds Brian Kelly. They can’t pass it on or they lose their competitive edge.

If you want to play the space, my clients are bullish on Caterpillar and Deere ; the companies that supply equipment to farmers, adds Grasso.

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TEENS ON TARGET

Target traded sharply higher on Thursday after reporting a 2% rise in July same-store sales.

Meanwhile, teen apparel retailers suffered some of the worst disappointments as a large build-up in inventory led to discounting as shoppers waited to see what back-to-school discounts they can get in August.

Hot Topic sold fewer higher-ticket items and increased promotional spending, reporting a 9 percent decline in same-store sales, while analysts had expected a 2.6 percent drop. It also forecast a bigger quarterly loss than Wall Street was expecting.

What should you make of it?

Teens don’t have money to shop at specialty retailers; instead they’re shopping at Target, says Patty Edwards. You have to be careful playing back-to-school.

My clients are bullish on Target as well as Kohl’s, adds Steve Grasso and they're selling Gap.

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BP, RIG HIGHER...RIG EARNINGS

BP moved higher on Thursday on reports ‘killing’ the well is going according to plan.

How should you play the space?

I’m playing the oil services names long OIH, says Brian Kelly, but I plan on getting out when the government announces the moratorium is lifted.

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RIO TINTO PROFIT TRIPLES

Also topping the tape, Rio Tinto tripled profit on iron ore demand.

How should you trade it?

I’d be long Rio Tinto on China demand, says Steve Cortes.

US Steel has the own iron ore, that’s the name I like in this space, adds Steve Grasso.

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SMARTPHONE WARS

Secretary of State Hillary Clinton stepped into the smartphone wars announcing the US will hold talks with Mideast countries regarding the looming BlackBerry bans.

What’s the play?

If you’re looking at the move in RIM , I think that’s much more about the success of rivals such as the Android than it is politics, says Brian Kelly.

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CHANGE ON MORTGAGE POLICIES

On Thursday the Treasury denied reports circulating Wall Street that the Obama administration would push to have Freddie and Fannie forgive some mortgage debt of Americans who are underwater.

According to CNBC’s Rick Santelli the chatter began on July 29^th when Morgan Stanley economist David Greenlaw published a report titled “Slam Dunk Stimulus.”

In it he said relaxing refinancing requirements for some 37 million loans already owned or backed by Fannie Mae, Freddie Mac, and the Federal Housing Administration could lead to $46 billion in savings for millions of American homeowners.

What’s the take away?

”Even with the denials Treasury prices are being pushed higher,” says Santelli. “Every trader that I talked with knew about the denials but said hypothetically it could happen and they’re trading on this.”

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ANALYZE THIS: DEPARTMENT STORES IMPRESS

Retailers reported a challenging July Thursday morning, raising the stakes for back to school.

However a few department stores beat expectations, benefiting from efforts to ramp up higher-margin exclusive lines.

Macy's reported a 7.3 percent increase in same-store sales, crediting a strong performance by its upscale Bloomingdale's chain and its program that allows stores to choose merchandise to cater to local tastes.

What’s the play?

In the space I like Nordstrom , says Patty Edwards.

Find out which stock top ranked analyst Deborah Weinswig of Citi likes best in the space. Watch the video now!

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CALL TO THE FLOOR: OPEN TABLE

The traders are keeping a close eye on OpenTable after shares surged about 92% since the beginning of the year.

What's behind the success for this online restaurant reservation company?

Find out from OpenTable's CEO, Jeffrey Jordan. Watch the video now!

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CALL THE CLOSE

Brian Kelly: I’m a buyer of the larger rally.
Steve Grasso: I’d stay on the sidelines until the jobs reports gives the market some guidance.
Steve Cortes: I’d sell Treasuries into the jobs number.
Patty Edwards: I’d stay on the sidelines.

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Trader disclosure: On Aug 5, 2010, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Cortes owns Oil; Cortes is short gold; Cortes is short treasuries; Cortes owns (CIB); Cortes owns (OAS); Cortes owns (FCX); Grasso owns (ASTM), (ABK), (BA), (BAC), (BGP), (C), (CSCO), (DYN), (JPM), (LPX), (MO), (MOT), (NDAQ), (PFE), (PRST)

For Brian Kelly:
Accounts managed by Kanundrum Capital own (RIMM)
Accounts managed by Kanundrum Capital own (INTC)
Accounts managed by Kanundrum Capital own (XBI)
Accounts managed by Kanundrum Capital own (GLD)
Accounts managed by Kanundrum Capital own (GDXJ)
Accounts managed by Kanundrum Capital own (JPM)
Accounts managed by Kanundrum Capital own (CM)
Accounts managed by Kanundrum Capital own (BMO)

For Patty Edwards:
Edwards owns (FCX) for clients
Edwards owns (AAPL) for clients
Edwards owns (GOOG) for clients
Edwards owns (COST) for clients
Edwards owns (RTP) for clients
Edwards owns (RIMM)

For Steve Grasso:
Stuart Frankel & Co and it’s partners own (BAX)
Stuart Frankel & Co and it’s partners own (COG)
Stuart Frankel & Co and it’s partners own (CUBA)
Stuart Frankel & Co and it’s partners own (DHR)
Stuart Frankel & Co and it’s partners own (DYN)
Stuart Frankel & Co and it’s partners own (GERN)
Stuart Frankel & Co and it’s partners own (HSPO)
Stuart Frankel & Co and it’s partners own (MERC)
Stuart Frankel & Co and it’s partners own (NWS.A)
Stuart Frankel & Co and it’s partners own (NYX)
Stuart Frankel & Co and it’s partners own (PDE)
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 (TBT)
Stuart Frankel & Co and it’s partners own (TLM)
Stuart Frankel & Co and it’s partners own (TRV)
Stuart Frankel & Co and it’s partners own (XRX)
Stuart Frankel & Co and it’s partners own (SDS)
Stuart Frankel & Co and it’s partners are short (QQQQ)

For Deborah Weinswig
Citigroup Global Markets Inc. or its affiliates beneficially owns 1% or more of any class of common equity securities of Saks Inc. This position reflects information available as of the prior business day.

Within the past 12 months, Citigroup Global Markets Inc. or its affiliates has acted as manager or co-manager of an offering of securities of Dollar General Corp., Kroger Co, Target Corp, Wal-Mart Stores Inc.

Citigroup Global Markets Inc. or its affiliates has received compensation for investment banking services provided within the past 12 months from Dollar General Corp., Kroger Co, Saks Inc, SUPERVALU INC, Target Corp, Wal-Mart Stores Inc.

Citigroup Global Markets Inc. or its affiliates expects to receive or intends to seek, within the next three months, compensation for investment banking services from Kroger Co, Wal-Mart Stores Inc.

Citigroup Global Markets Inc. or an affiliate received compensation for products and services other than investment banking services from Home Depot Inc, JC Penney Co Inc, Kohl's Corp, Kroger Co, Macys Inc, Safeway Inc, SUPERVALU INC, Target Corp, Walgreen Co, Wal-Mart Stores Inc, Costco Wholesale Corp, Great Atlantic & Pacific Tea Co. in the past 12 months.

Citigroup Global Markets Inc. currently has, or had within the past 12 months, the following as investment banking client(s): Dollar General Corp., Kroger Co, Saks Inc, SUPERVALU INC, Target Corp, Wal-Mart Stores Inc.

Citigroup Global Markets Inc. currently has, or had within the past 12 months, the following as clients, and the services provided were non-investment-banking, securities-related: CVS Caremark Corp, Dollar General Corp., Home Depot Inc, JC Penney Co Inc, Kohl's Corp, Kroger Co, Macys Inc, Safeway Inc, Saks Inc, SUPERVALU INC, Target Corp, Walgreen Co, Wal-Mart Stores Inc, Costco Wholesale Corp, Great Atlantic & Pacific Tea Co..

Citigroup Global Markets Inc. currently has, or had within the past 12 months, the following as clients, and the services provided were non-investment-banking, non-securities-related: Home Depot Inc, JC Penney Co Inc, Kohl's Corp, Kroger Co, Macys Inc, Safeway Inc, SUPERVALU INC, Target Corp, Walgreen Co, Wal-Mart Stores Inc, Costco Wholesale Corp, Great Atlantic & Pacific Tea Co..

Citigroup Global Markets Inc. or an affiliate received compensation in the past 12 months from Dollar General Corp..

The Firm is a market maker in the publicly traded equity securities of CVS Caremark Corp, Macys Inc, Costco Wholesale Corp.


CNBC.com with wires.