Agribusiness giant and Wildcatter Portfolio recommendation Bunge (NYSE: BG) has slipped during the past few weeks after warning that its first quarter profits would miss Wall Street expectations.

At first glance, Bunge may seem to have little to do with energy. But it’s actually a key player in the biofuels market. Bunge is the largest fertilizer supplier in Brazil and is a world leader in crushing oilseeds, such as soybeans, to make edible oils; crushing oilseeds is the first step in making biodiesel.

In addition, Bunge benefits from general strength in the global agriculture market caused both by a rising market for biofuels and surging food demand from rapidly growing Asian economies.

A little more than a year ago, when I first recommended the stock, Bunge was still reeling from a weak agribusiness market in Brazil, one of its largest markets. Brazilian farmers were suffering from weak agricultural commodity prices and a strong Brazilian real.

Because most agricultural commodities are priced in US dollars, a strong real tends to hit farmers. But this doesn’t appear to be the problem this time around; commodity prices have improved significantly, improving the health of Brazilian farmers and helping to offset the strong local currency.

Although the real remains strong, the primary problem last year was the speed at which it gained against the dollar. Lately, the currency has been more stable. And a farmer support package from the Brazilian government also helped to shore up finances.

The problem for Bunge in the first quarter and the basis for the warning were losses in futures hedges. Bunge buys soybeans from farmers using what are known as forward contracts–contracts to have beans delivered at some preset date at a prearranged price. The company uses these beans to feed its crushing operations.

But by buying beans forward, Bunge is essentially long soybeans; the value of this inventory will rise and fall with the soybean market. Therefore, the company hedges itself by shorting soybean futures contracts traded on the Chicago Board of Trade. This way, when soybean prices drop, the gains in the short futures can help to offset the declining value of the company’s soybean inventories back in Brazil.

Usually, this system works well. However, this year there’s been considerable speculation in the US soybean futures market. Traders have been betting that farmers in the US would plant more corn to take advantage of sky-high prices in that market. Planting corn takes acreage away from soybeans; therefore, the supply of soybeans should be lower and prices higher.

The result: The value of the futures contracts Bunge is short have risen more rapidly than the value of the soybean inventory Bunge holds in Brazil. Futures prices have risen far more quickly than “cash” soybean prices.

This widening mismatch has left Bunge holding an unrealized loss on its futures hedge contracts. Because Bunge marks these hedges to market each quarter, that unrealized loss will show up in the first quarter, producing near “breakeven” results according to management.

Management didn’t reduce its full-year guidance, however, because eventually the spread between cash and futures prices will likely narrow to more normal levels. Therefore, hedge gains in future quarters should offset this first quarter unrealized loss.

I see this as primarily a nonevent. The stock has slipped mainly because Bunge reports earnings on the April 26 and there’s still some nervousness about the exact size of these trading losses.

Wall Street will want to hear from management that the recovery for Brazilian farmers is on track. My take: The basic business remains strong, and this hedging problem will fade away in the next few quarters as futures and cash prices converge.

Bunge is currently showing a profit of around 30 percent from my original recommendation, and I still rate it a buy.

That said, I do see that 30 percent gain as a profit worth protecting. In the February 21 issue of The Energy Strategist, All Eyes On Gas, and again in the March 5 Flash Alert, The Selloff, I recommended either taking some cash off the table to lock in gains or using put options insurance strategies.

This isn’t a reflection of any concerns I have about the stock; rather, whenever a recommendation rises by 30 percent or 40 percent, there’s a danger that your portfolio is becoming too overweight that stock. It’s only prudent to rebalance your portfolio and take some cash off the table.

Bunge isn’t out only play on agriculture that has performed well so far. Fertilizer makers Potash Corp (NYSE: POT) and Mosaic (NYSE: MOS) are up roughly 90 percent and 75 percent, respectively, from my September recommendation. Both stocks are part of my biofuels field bet; I updated these recommendations in the March 7 issue of TES, When Asia Sneezes.

Fertilizer prices have been strong in recent months. With prices for corn and soybeans remaining firm, farmers are increasing their intended plantings of these fertilizer-intensive crops. I see this as a powerful trend supporting the fertilizer companies.

In addition, years of weak prices have left only a handful of major players; with production capacity under control, I see plenty of scope for these companies to boost pricing.

But just as with Bunge, if you have large gains in these names, look to either employ options hedging strategies or reduce exposure by selling a third of your position in both stocks. I recommended this strategy in the February 21 and March 7 issues of TES.

If you haven’t already taken some cash off the table in Potash Corp and Mosaic, it’s not too late to do so now.

It’s also worth noting that the May-June period is seasonally weak for fertilizer firms because it immediately follows the spring planting season. I’m not convinced fertilizer prices will drop as they have in prior years because of this year’s raging demand; however, it’s another reason to take some gains.

Finally, for the same reasons, I recommend taking a third of your position in both Monsanto (NYSE: MON) and Syngenta (NYSE: SYT) off the table if you haven’t done so already.

The stocks are up by more than 50 percent and 35 percent, respectively. Both stocks make genetically modified seeds that benefit from strong agricultural commodity prices.