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CFTC files suit against Kraft and Mondelez

The Commodity Futures Trading Commission (CFTC) has filed suit against Kraft Foods and Mondelez International charging attempted manipulation of wheat prices.  The two companies were operating as Kraft Foods at the time, Mondelez was spun-off in 2012.

The suit, filed in U.S. District Court, Northern District of Illinois, on Wednesday alleges Kraft bought $90 million in wheat futures in December of 2011 with no intention of taking delivery.  The lawsuit claims that Kraft hoped the company’s long position would push prices lower on the cash market.  The move also left Kraft holding derivatives in excess of Chicago Board of Trade limits without exemptions.  The CFTC says senior executives at the company, including the chief financial officer, were in on the plan.  The plan worked, the price of wheat slipped and Kraft made more than $5 million on the deal. 

Kraft Foods Group says the transaction involved the portion of the business which is now owned and operated by Mondelez International and, therefore, Mondelez would bear the bulk of any penalties which may be levied.  Kraft also says it does not expect the development to have any impact on the planned merger with H.J. Heinz Company announced last week.