Dive Brief:
- The Commodity Futures Trading Commission has launched an investigation into a unit of Mondelez International. At issue are trades in December 2011 wheat contracts.
- The timing of those contracts mean the CFTC is probing trades made prior to the spin off of Mondelez from Kraft.
- Kraft disclosed the probe in a regulatory filing last week. Mondelez has confirmed the investigation.
Dive Insight:
There's a lot that's unclear in the early news about the investigation. But it's clear is that Kraft says it does not expect the investigation to have a material effect on its finances. The weight of the investigation would, presumably, fall on Mondelez.
It's also worth noting that Kraft, like much of the food-processing industry, is a heavy user of commodity futures and similar tools. It's hard to imagine how a food processor could operate without hedging its costs with derivatives. Just last week Kraft announced that it had posted a profit for the first quarter, due in part to price hedging.
So the concern here is less what the CFTC might find happened a few years ago, and more about what new regulatory requirements, or new interpretations of existing requirements, could be spawned by the probe.