Markets unPACKed: Possible to be Bullish Right Now?

Possible to be Bullish Right Now?


In the last blog, we prepared the book for the WASDE report on Dec 10. The day before the report we saw soybeans close up 12’6 at 1158’6 and corn 4 cents at 423’6. This strength was attributed to the anticipated cut in soybean production in Brazil and Argentina. However, the USDA did not change its prediction for Brazil from its October projection of 133 MMT. Beans had a 28c range on Thursday and closed down 4’2 at 1150’2. Corn closed down 2’4 at 421’2.

At Pack Creek, we were positioned for a move in either direction; we decided to let the report hit, then act. As we know, the USDA didn’t change any numbers that would cause trading to make any big swings.

After some discussion, we decided to trade out of our 1180-1140 1×2 put backspread (refer to Backspreads into December for the details on this trade) and trimmed our position size in some Jan 1130 puts we owned. The backspread was beginning to work against us, and while we wanted to maintain some protection to the downside, we didn’t feel that we needed to own that many 1130 puts for our book. We still have the call spread on above 1200 should we see beans grind higher and see those options gain in value.

In the corn book, we also lifted the Feb 425-410 1×2 put backspread we had on. We kept some puts on below 410 and calls on above 430 for some protection on each side.

While we have positions on each side of the market, I want to point out what our team is now looking at for the rest of the year. This year we have looked back to the year 2010 for our comparative price action. I wrote about this in an earlier newsletter, but essentially, we saw a very similar harvest rally in the fall of 2010. This price strength in both corn and beans was due to record demand from China, corn stocks-to-use-ratio was below 10%, at levels we hadn’t seen since 1972/73 and 1994/95, and crop production issues in South America (they also had dry and hot weather in December 2010). On December 23, 2010 Bloomberg published an article stating that soybeans rallied to a 28-month high, corn extended gains, and wheat was steady. Below is chart of March 11 beans during the month of December 2010.


Source: Pack Creek Capital


On the WASDE report day, December 10, 2010, March futures closed at 1282.50. On December 31, 2010, March contract closed at 1403. Looking at the chart, you’ll notice it was a grind higher with light volumes, allowing for a stair-stepping like pattern to form. On December 27, 2010 beans closed into new contract highs as the market still has its focus on Argentine weather. With light volume, the market was able to jump another 23-1/2 cents and pushed just above our objective of 1375. Export sales from China started to slow down throughout December, reporting soybean exports were down 9% from the prior four-week average on December 30, 2010 and corn sales fell 52% from prior four-week average.

If you think this is just a comparison for beans, look at the corn chart below that also demonstrates 2010 rind higher on light volumes.


Source: Pack Creek Capital


While we recognize that Brazil was not as grand to the global supply market as they are today, 2010 had similar fundamental news at play and beans managed to end the year at new contract highs. December 14, 2020 was a choppy trading session and yet the March contract closed up +9’2 cents to 1169’6 while corn March contract up +1c at 424’4. We found this strength to be noteworthy and possibly a good indicator that we could see 2020 mimic the price action of 2010. We will maintain protection to the downside regardless.

For questions around this trade or other trades, feel free to reach us at


Disclosure: The risk of loss in trading futures and/or options is substantial. Past performance is not indicative of future results. The information in this message derived from third-party sources is believed to be accurate and reliable; PCC does not guarantee the accuracy or completeness of the information. Opinions expressed in this material are subject to change without notice. This report should not be interpreted as a request to engage in any transaction of futures, options, and/or OTC derivatives. The information contained in this material is not to be relied upon in substitution for the exercise of your independent judgment. Seek independent financial, tax, legal and accounting advice from your own professional advisers, based upon your particular circumstances.