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Farm Fast Money: Trading Sky-High Softs

The S&P traded in positive territory Thursday with bulls driving the market despite a slew of new signs that suggest the price of almost everything would be creeping higher.

Inflation fears have thrust all commodities into the spotlight but perhaps nothing is more noteworthy than the sky high softs.

With cotton hitting limit up and topping $2 for the first time ever in New York investors are starting to wonder what can be passed along and what can't; and which gains are not sustainable?

What must you know? How should you position now?

Instant Insights with the Fast Money traders

Rich Ilczyszyn, Lind-Waldock Senior Market Strategist tells us that, "The scuttlebutt on the floor is that the move in cotton is a big short squeeze. If you’re long cotton it’s time to get out. When it turns around it will be wicked to the down side.”

And he adds that chatter on the floor suggests that the next short squeeze could be in silver . However if you’re a trader it’s not too late to play it. “At $30 silver may get a short squeeze into the expiration of the market contract. If silver breaks out I’d go long up to $35,” Ilczyszyn says.

If trading the next move in cotton or silver is a little too treacherous for your tastes, Guy Adami still thinks there's opportunity for you. He suggests stepping back and looking at the theme. And that theme is “commodities across the board are on fire,” he says. "Every pullback has been an opportunity. My favorite way to play the space is with Deere.

Jon Najarian agrees. ”Deere is in the center of all of it,” he says. "Even if farmers convert from one crop to another, Deere still wins."

Stephen Weiss of Short Hills Capital is also on board. “Populations around the world are growing and more people are eating better.” But rather than going long Deere he likes to play the theme with fertilizer names.

Tim Seymour is concerned about the run in fertilizer stocks. "At 45 times earnings Potash is twice as expensive as it should be," he says. "Valuations matter and I think they're getting ahead of themselves."

"I'd play it long Monsanto, says Brian Kelly. It's not a terribly high valuation and they provide seeds. That's how to play the supply response."

And if you're worried that retailers will take a hit from higher cotton prices, Jon Najarian says don't be. The latest 13F filings show “the smart money is buying into retailers on the belief they can pass along price increases. I wouldn’t run for the hills. Also there’s not as much cotton in some apparel as you might think,” he says.

* Few people know more about the impact of soaring commodity prices than farmers in America’s heartland. Watch the video and check out our conversation with Ohio farmer Mike Haley of Haley Farms.

** comments above were compiled from both Halftime and Fast at 5.


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Trader disclosure: On Feb 17, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Seymour Owns (AAPL); Seymour Owns (BAC); Seymour Owns (F); Seymour Owns (FCX); Seymour Owns (FXI); Seymour Owns (INTC); Seymour Owns (SBUX); Adami Owns (AGU); Adami Owns (C); Adami Owns (GS); Adami Owns (INTC); Adami Owns (MSFT); Adami Owns (NUE); Adami Owns (BTU); Terranova Owns (VRTS); Terranova Owns (C); Terranova Owns (UPL); Terranova Owns (GM); Terranova Owns (MS); Terranova Owns (SLXP); Terranova Owns (BAX); Terranova Owns (TEVA); Terranova Owns (CVI); Terranova Owns (RSX); Terranova Owns (SU)’ Terranova Owns (CNQ); Jon Najarian Owns (AMD), Is Short (AMD) Calls; Jon Najarian Owns (AKAM), Is Short (AKAM) Calls; Jon Najarian Owns (CLF), Is Short (CLF) Calls; Jon Najarian Owns (JOYG), Is Short (JOYG) Calls; Jon Najarian Owns (NVDA), Is Short (NVDA) Calls; Jon Najarian Owns (SPWR), Is Short (SPWR) Calls; Jon Najarian Owns (WMB), Is Short (WMB) Calls; Jon Najarian Owns (AKS), Is Short (AKS) Calls; Jon Najarian Owns (ANF), Is Short (ANF) Calls; Jon Najarian Owns (CSTR), Is Short (CSTR) Calls; Jon Najarian Owns (JNPR), Is Short (JNPR) Calls; Jon Najarian Owns (RAX), Is Short (RAX) Calls; Jon Najarian Owns (X), Is Short (X) Calls; Jon Najarian Owns (APA), Is Short (APA) Calls; Jon Najarian Owns (NBR), Is Short (NBR) Calls; Jon Najarian Owns (AKS), Is Short (AKS) Calls

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