Kraft, Mondelez Charged with Manipulating Wheat Market

A civil enforcement complaint filed in an Illinois court by the Commodity Futures Trading Commission (CFTC) alleges that Kraft Foods and Mondelez International manipulated the wheat market, pushing down prices and gaining a $5.4 million profit for the two companies.

The complaint charges that in 2011 the two companies bought wheat futures that exceeded the CFTC’s position limits with no valid hedge exemption or need, and proceeded to then carryout numerous competitive trades.

“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,” says Aitan Goelman, the CFTC’s enforcement director.

Court filings also indicate that in December 2011, Kraft Foods and Mondelez also held long positions on wheat that exceeded the permissible 600-contract speculative spot position limit for the month by as much as 2,110 contracts, and that the companies executed off-exchange futures transactions between two accounts that were not compliant with exchange rules for non-competitive off-exchange futures trades.

Since Kraft was spun off of Mondelez in October 2012, it would be Mondelez that would be responsible for all costs incurred through the case against the two companies and all possible penalties imposed. Mondelez has declined comment on the allegations.