U.S. CFTC sues Kraft, Mondelez over alleged wheat price manipulation

Reuters — The U.S. Commodity Futures Trading Commission on Wednesday charged Kraft Foods Group and Mondelez International with manipulation of prices of wheat used in products such as Oreo and Chips Ahoy cookies.

The regulator alleged that Kraft and Mondelez bought $90 million of wheat futures, or a six-month supply, but never intended to take delivery of the grain (all figures US$).

The two then earned more than $5.4 million in profits as a result of market shifts in reaction to the enormous position, the CFTC said in its complaint.

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“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,” CFTC enforcement head Aitan Goelman said in a statement.

The regulator said it was seeking a permanent injunction from future violations by the two companies, as well as disgorgement and civil monetary penalties.

Kraft said it did not expect the matter to have a financially material impact and that Mondelez International would predominantly bear the costs of the matter.

The complaint focused primarily on trading that occurred before the two companies split in 2012, Kraft said.

Mondelez declined to comment. It has said in a previous regulatory filing that it was being investigated by the CFTC, and that it would seek to resolve the matter prior to any formal action being taken. It said at the time it expected to predominantly bear the cost of the probe, but that this would not have a material effect on results.

The CFTC said that the companies had also violated speculative position limits, and that they had engaged in numerous noncompetitive trades in wheat.

Reporting for Reuters by Douwe Miedema and Anjali Athavaley in Washington, D.C. and New York City.

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