Futures & Commodities

CFTC charges Kraft Foods and Mondelez with manipulation of wheat futures

CFTC sues Kraft & Mondelez on wheat futures manipulation

The U.S. Commodity Futures Trading Commission charged Kraft Foods Group and Mondelez Global with manipulating wheat futures and cash wheat prices, the agency announced Wednesday.

The regulator said it was seeking a permanent injunction from future violations by the two companies, as well as disgorgement and civil monetary penalties. Both companies' stocks were largely unchanged after the announcement.

The CFTC suit alleges 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 complaint charges that the 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."

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Those price changes did take place, according to the CFTC, and Kraft and Mondelez allegedly gained more than $5.4 million on the move.

"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," Aitan Goelman, the CFTC's director of enforcement, said in a press release.

"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," he added.

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 Kraft spun off Mondelez, Kraft said.

Meanwhile, Mondelez said that any fine issued by a court, or the result of any settlement agreement, "will not be material to investors."

—Reuters contributed to this report.