Food manufacturers fined £13.2m for wheat market manipulation

Two global food manufacturers have been fined £13.2m (US$16m) for manipulating wheat prices in 2011.

The US Commodity Futures Trading Commission (CFTC) imposed the penalty on Thursday (14 August) along with an injunction preventing any further such action on Kraft Food Group and Mondelez Global.

Kraft’s and Mondelēz’s actions caused an artificial price that ultimately earned them more than £4m (US$5m) in profit, said the CFTC.

At the time of the alleged manipulation, both were under the ownership of Kraft.  

“America is the breadbasket of the world; wheat markets are its heart,” said CFTC chairman Heath P Tarbert.

See also: Business Clinic – expert advice on farmers’ legal, management, insurance and tax questions 

“Market manipulation inflicts real pain on farmers by denying them the fair value of their hard work and crops. 

“It also hurts American families by raising the costs of putting food on the table. Instances of market manipulation are precisely the kinds of cases the CFTC was founded to pursue.”

The CFTC complaint alleged that in response to high cash wheat prices in late summer 2011, Kraft and Mondelēz developed, approved, and executed a manipulative strategy to purchase and stand for delivery on more than 3,000 futures contracts (worth approximately US$90m) of soft red winter wheat expiring in December 2011.

It was alleged that this was to send the market a false signal that the defendants had demand for and would use futures wheat to source their wheat supply requirements in their Toledo mill, in Ohio.

The complaint alleged that, in fact, Kraft and Mondelēz had no intention of sourcing wheat from the futures market, and the US$90m of futures far exceeded their actual sourcing needs. 

A statement from the CFTC said that Kraft’s and Mondelēz’s true goal was to narrow the price spread between the December 2011 and deferred-month wheat futures contracts, causing the market to sell cash wheat to Kraft and Mondelēz at lower prices, while earning Kraft and Mondelēz a profit on their speculative futures positions. 

Upcoming Webinar

AUGUST
19

How to best plan your farming retirement and pension

With BPS being phased out and new schemes being put in place in the next few years, it’s an important time for farmers to start planning retirement and the best way to secure their pensions. Whether you are considering a succession process or would like to retire from the industry outright, our panel of experts will go through all the options you need to consider no matter what your life plan looks like. Join the session at 17.00 - 18:15 on Thursday 19 August 2021.
Register

Online grain trading made easy with Farmers Weekly Graindex

It takes just a couple of minutes to create a listing on Farmers Weekly Graindex and you’ll get a range of prices to compare from active buyers who want your grain.
Visit Farmers Weekly Graindex

Online grain trading made easy with Farmers Weekly Graindex

It takes just a couple of minutes to create a listing on Farmers Weekly Graindex and you’ll get a range of prices to compare from active buyers who want your grain.
Visit Farmers Weekly Graindex