Food Stocks That Will Weather the Drought

But Kozey notes that in the past, slumps in Tyson's stock have represented buying opportunities. "Except during the 2008 financial crisis, every spike upward in the price of corn in the last five years gave investors the opportunity to jump into Tyson's common stock a few months later, and to pay lower prices each time -- and generating healthy gains each time. In each instance, a key ingredient was a recovery in the grain markets."

There have also been some worthwhile long-term plays in the packaged-foods industry among its stalwarts, so a dip on price may represent a good buy. Over the past five years, packaged-foods maker Kraft Foods(KFT) has a total return of 44% and cereal industry leader General Mills(GIS) has a 58% return.

"The largest food-processing companies, such as Kraft and General Mills, boast the industry's highest operating margins and balance sheets that are (mostly) stronger than those of their peers, (and so) seem to be better positioned to cope with the soaring cost of corn," as their scale and skill in hedging helps smooth out the price bumps and preserve margins, Kozey's report said.

Mid-sized firms such as packaged-foods and meats maker Hormel(HRL) and synthesized corn-products maker Ingredion(INGR) , both with operating margins a bit lower than their larger peers, have offered competitive returns to the market and the biggest companies, and may be appropriate for active investors willing to take on risk, he said.

Hormel's and Ingredion's stocks "have trounced the S&P 500 over the past five years, while Hormel's total return topped even that of industry heavyweight Kraft," Kozey said. Hormel's shares have an average annual return of 13% over five years, versus the S&P 500's 2.2%, while Ingredion's shares have returned 5.7% annually in the period.

The reason may be that "both firms have operating margins that are in the high single digits or low double digits, within shouting distance of those boasted by their largest peers," Kozey said. "A little extra margin, it seems, can go a long way in helping to generate returns."

A relative stand-alone in its niche in the food processing industry is the nation's biggest dairy products producer Dean Foods(DF) . It has so far been little impacted by the prospect of higher feed prices for cows, as second-quarter earnings were strong because its scale has given it the power to pass on higher costs to consumers. Its shares are up 47% this year.