WASHINGTON, April 1, 2015 – The Commodity Futures Trading Commission alleges that Kraft Foods and Mondelez made a $5.4 million profit by manipulating the wheat market to drive down prices.
A civil enforcement complaint filed in federal court in Illinois charges that Kraft and Mondelez bought wheat futures in 2011 in excess of the CFTC’s position limits without a valid hedge exemption or bona fide hedging needs and then engaged in numerous competitive trades.
“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, said Aitan Goelman, the CFTC’s enforcement director.
“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.”
The companies bought $90 million of December 2011 wheat futures, never intended to take delivery of what amounted to a six-month supply of wheat. It was instead a successful move to get the market to react to their huge long position by pushing cash wheat prices down and increasing the spread between December 2011 and March 2012 wheat futures, the CFTC said.
The complaint also alleges that on five dates in early December 2011, Kraft and Mondelez held long positions in December 2011 wheat that exceeded the CBOT’s 600-contract speculative spot month position limit by as much as 2,110 contracts. The complaint also accuses the companies of conducting off-exchange futures transactions between two separate accounts that did not comply with exchange rules for noncompetitive, off-exchange futures trades.
The agency is seeking civil monetary penalties as well as a return of the profit and a permanent injunction from future violations of federal commodities laws.
Mondelez International declined to comment on the allegations.