Kraft Foods Group has played down the possible impact of any penalties that could be imposed for allegedly manipulating wheat prices after charges were brought in the US against the company and Mondelez International.
The two companies have been accused of rigging wheat futures and cash wheat prices. The US Commodity Futures Trading Commission alleged the two companies bought US$90m of wheat futures in 2011 – an agreement in which the buyer agrees to pay the seller for a product at a predetermined future date and price.
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However, speaking to just-food today (2 April), Kraft said it did not expect to feel a "financially material impact" should the CFTC choose to penalise the businesses.
"While Kraft is named in the CFTC complaint, the transaction at issue occurred before our spin-off from Mondelez International in October 2012, and it involved the business now owned and operated by Mondelez or its affiliates," the company said.
"The CFTC complaint primarily focuses on the trading of wheat futures contracts in December 2011. More specifically, the type of wheat involved in the transaction is used in products such as cookies and crackers, which are not made by Kraft Foods Group.
"Mondelez International will predominantly bear the costs of this matter and any monetary penalties or other payments that the CFTC may impose. We do not expect this matter to have a financially material impact on Kraft."
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By GlobalDataIn its civil complaint, the CFTC said Kraft and Mondelez had acted to spark a fall in wheat prices. "Kraft and Mondelez 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," the CFTC said.
The actions allegedly earned them a profit of US$5.4m. The CFTC is seeking a permanent injunction from future violations by the two firms as well as fines.
Aitan Goelman, the CFTC’s director of enforcement, added: "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. 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."
Officials at Mondelez had not responded to a request for comment at the time of writing.
