Sometimes the fallout from a particular event sets up an obvious trade. For example, Japan's March earthquake, tsunami and the subsequent Fukishima nuclear reactor meltdown crimped production - and therefore sales - from Japanese automakers Toyota (NYSE:TM) and Honda (NYSE:HMC). Both stocks struggled in the meantime.

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Other times, however, a major event requires connecting some dots that aren't readily obvious. A weak crop yield for the 2011 growing season is one of those scenarios where the effect isn't crystal clear, but rather, has to be pieced together. Here's how a few of those pieces are falling into place.

Corn Yields Go From Bad to Worse
If anyone thought rising corn prices were going to ease up, guess again. As it turns out, this year's crop in the U.S. will be about 3.2% smaller than forecasted last month. The semi-good news is that the output is better than last year's, though it was also the second-biggest planting in six decades. The total reserve supply, however, will be down about 6% by mid-2012.

The impact will be felt most by the likes of Archer-Daniels Midland (NYSE:ADM) and Sanderson Farms (Nasdaq:SAFM).

Archer-Daniels Midland is the world's second-largest ethanol producer, almost all of which is made using corn. With ethanol priced at $2.60 per gallon, corn priced anywhere above $7.50/bushel makes ethanol production unprofitable. The problem is, some forecasts suggest corn could reach $8/bushlel before the worst is over. Sanderson Farms has posted three straight quarters of losses (last quarter's was a record-breaking per-share loss) stemming from swelling costs of corn, which it used to feed chickens.

Soybean Yields Improve
While the hot, dry summer put the kibosh on expected corn yields and will likely drive prices upward, this year's soybean crops will be a little stronger than expected. Soybean yields are on pace to exceed estimates by 0.9%, even though that's still 7.3% shy of last year's output. Better still, reserve supplies are on pace to be higher than first assumed.

The impact of the better-than-expected 2011 soybean crop isn't as readily identifiable as it is for corn. Who really does anything with soybeans? The answer is, quite a few companies, with Bunge (NYSE: BG) being one of them. Strong supplies and falling soybean prices may end up giving the oilseed processor a quarter or two of higher-than-expected margins.

The Real Winners
While the 2011 growing season meant some areas dodged a bullet (soybeans) while other areas took a direct hit (corn), the biggest beneficiary of a poor 2011 yield is actually a group few are talking about yet - fertilizer companies.

Despite massive plantings, productivity this year was weakened not just by adverse weather, but by a calculated decrease in fertilizer usage. After the 2007-2008 fertilizer price spike, farmers recognized that bumper crops could still be reaped without using as much fertilizers such as phosphate or nitrogen. That is, until 2011's reality hit, and farmers produced less, yet planted more. That in itself should rekindle heavy usage of fertilizer again after the 2009 plunge.

At the same time, though food/crop prices have soared (corn's up 69% since mid-2008, while wheat's up 11%), fertilizer prices haven't made that trip yet. In fact, nitrogen fertilizer prices are down 33% for the same time frame, while potash prices are 36% lower than in 2008. The implication is, since crop prices merit it, since it's affordable, and since the demand is outpacing the supply, it would behoove farms to ramp up production by ramping up usage of fertilizers.

The Bottom Line
That's good news for all fertilizer companies, and especially for the likes of Agrium (NYSE:AGU), which pairs its fertilizer production with a strong - and fairly independent - retail operation. (For addtional reading, see Harvesting Crop Production Reports.)

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Tickers in this Article: AGU, BG, SAFM, ADM, HMC, TM

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