Dive Brief:
- The U.S. Commodity Futures Trading Commission (CFTC) alleges that Kraft Foods Group and Mondelez Global manipulated wheat futures and cash wheat prices. The CFTC is aiming for "a permanent injunction from future violations by the two companies, as well as disgorgement and civil monetary penalties," Reuters reports.
- According to CNBC, the CFTC complaint claims "that Kraft and Mondelez 'developed, approved, and executed' in early December 2011 a strategy to buy a six-month supply of wheat for $90 million in futures."
- The CFTC press release continues, saying that, allegedly, the two companies "never intended to take delivery of this wheat and instead executed this strategy expecting that the market would react to their enormous long position by lowering cash wheat prices and strengthening the spread between December 2011 wheat and March 2012 wheat futures. Those price shifts did occur and, according to the CFTC Complaint, [the two companies] earned over $5.4 million in profits."
Dive Insight:
Kraft does not seem worried about the accusations. The company said that the complaint mainly involved trading that took place before Kraft spun off Mondelez and that Mondelez would take the brunt of the charges. Mondelez said that any fine imposed or settlement agreement would not significantly affect investors.
Aitan Goelman, the CFTC's director of enforcement, said in a press release, "This case goes to the core of the CFTC's mission: protecting market participants and the public from manipulation and abusive practices that undermine the integrity of the derivatives markets. A market participant who is not happy with cash prices available to it may not resort to manipulative trading strategies in an attempt to artificially lower that price."