The U.S. Department of Agriculture released its latest grain harvest forecasts on Wednesday. Even though the USDA lowered its estimate on the drought-damaged corn crop, this wasnt enough to support prices that withered in advance of the report, as investors expected even-worse news.

Just four months ago, corn was trading below $6 a bushel and prices were trending downward. Back then, government analysts were forecasting a record U.S. corn crop in the area of 15 billion bushels.

Then weekly reports of parched fields across the U.S. South America and Russia pushed crop prices to record highs.

Now, the tough reality is that U.S farmers will bring in the smallest corn crop in six years and the smallest soybean crop in nine years.

And ranchers, too, will feel the impact. Thats because the still-high feed costs are pushing them to send animals to slaughter sooner temporarily boosting supplies of meat, poultry and fish.

While these conditions may bring a mixed bag at the supermarket for consumers, there are several companies and even countries that are likely salivating over the opportunity to make money as several U.S. grain suppliers start coming up short, and meat suppliers cant move their product quickly enough.

Who Are the Winners Now?

Expect exporters to fill in any supply gaps. For example, this leaves Brazil as the top soybean supplier for the first time. The country will send 38.5 million tons overseas next marketing year, nine times more than in 1993.

Expect food processing companies to benefit from higher prices, especially those that may have hedged against grain costs.

And thats already happening. According to the Food and Agriculture Organization of the United Nations World Food Price Index, the whopping 35% surge in corn spot prices has already begun to drive global food inflation higher.

How to Play Higher Food Prices

Now we come to the part investors can sink their teeth into.

There are some food stocks out there that have been beaten down so badly by the drought that they may, in fact, be attractive at these distressed levels.

The chart below shows the price action on five food-producing stocks over the last three months: Tyson Foods (TSN). Smithfield Foods (SFD). Pilgrims Pride Corp. (PPC). Brasil Foods (BRFS) and Industrias Bachoco (IBA) .

Heres a brief summary on each

Tyson Foods (shown in red on the chart) produces, distributes and markets chicken, beef, pork, prepared foods and related products.

This is truly a global company with a market capitalization of $5.8 billion. For example, in China, it produces about 2 million birds per week and plans to reach 3 million a week in 2014. In Brazil, it raises 1.3 million birds, with plans for 2 million. In India, it will grow from 280,000 to 450,000. And in Mexico, it intends to maintain production at around 2.7 million birds per week.

The drought-reduced corn crop is definitely a negative for meat and poultry companies in general, dragging TSN stock down 18% in the last 90 days.

Smithfield Foods (shown in dark blue) processes pork and produces hogs. The company also produces and markets a range of branded food products such as frozen barbecues and chilies, peanuts, and pork products. The next few quarters will be difficult for the swine production industry in general with predicted industry break-evens as high as the mid-$70s per pig.

This stock has fared better than others over the last few months, as positive hog production in Eastern Europe helped lift international segment profits.

Pilgrims Pride (shown in green) is a much smaller, $1.4 billion market value stock. It produces prepared and fresh chicken products in the United States and Mexico. The company filed for protection from creditors under Chapter 11 of the federal Bankruptcy Code in 2008, so investors wasted no time in exiting this stock recently. Its down by 35% in three months.

From my days investing in junk bonds I really should not be afraid of this one. Brazil meat packer JBS S.A. (JBSAY). the worlds largest beef producer, owns a 67% stake in this company, after adding $200 million last March. But it is clearly a higher-risk situation.

Speaking of Brazil

Brasil Foods (shown in purple) is a food processor in Latin America that raises chickens to produce poultry products. The company also processes frozen pastas, soybeans and their derivatives, and distributes frozen vegetables. Its core business is chilled and frozen food.

This $14 billion stock has been down 15% over that last year and has the potential for $500 million in cost savings from the recent merger that formed this company. It has been effective in pushing through price increases in its domestic market.

And closer to the U.S is a smaller stock that normally doesnt hit the stock-screening radars

Industrias Bachoco (shown in light blue) is a Mexico-based holding company primarily engaged in poultry production. The companys main product lines include chickens, table eggs, pork, turkey and other poultry-related products. Through its production facilities established in Mexico and the United States, the stock has been flat over that last year, though it has recovered from a 25% drop.

With the recent acquisitions in the U.S. this one might be one of the names I add to my Emerging Market Winners service someday.

My take on all this is that if you are a fearless, long-term investor, there are some real buys on this list. For more value plays, however, be sure to check out all the current holdings in my Emerging Market Winners service. Find out how you can sign up for a trial offer today !

Best wishes,

Rudy

Rudy Martin, editor of Global Trend Trader. is the President at Acamar Global Investments, with 25 years of experience serving institutions and high net-worth individuals.

Rudy started his investment career in 1983, co-managing a $2 billion private investment portfolio for Transamerica. Later, he went on to Wall Street as an equity analyst for Dean Witter and traveled globally, serving major institutional equity investors. In 1995, he joined Fidelity Investments as a Senior Investment Analyst for a series of multibillion-dollar fund portfolios.

During his career, Rudy has received awards for institutional investing and is widely quoted in the financial press and on television about topics related to global investing and emerging markets. For more information on Global Trend Trader click here.