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Kraft, Mondelz wheat price manipulation hurt traders: US lawsuit

Saturday, April 11, 2015 - 07:03
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Kraft Foods Group and Mondelz International are being sued in a proposed class action on behalf of wheat futures and options traders for allegedly manipulating the grain's price.

[NEW YORK] Kraft Foods Group and Mondelz International are being sued in a proposed class action on behalf of wheat futures and options traders for allegedly manipulating the grain's price.

The lawsuit was filed on Thursday by futures trader Richard Dennis in the federal court in Chicago, eight days after the US Commodity Futures Trading Commission sued both companies.

In that case, the CFTC alleged that the former Kraft Foods in late 2011 bought US$90 million of wheat futures despite never intending to take possession of the grain.

The regulator said it did this to depress prices in the cash wheat market, where sellers might believe the companies needed less wheat, and inflate futures prices. Kraft's strategy led to more than US$5.4 million of illegal gains, the CFTC said.

In Thursday's complaint, Mr Dennis raised similar claims, and accused Kraft and Mondelz of manipulating prices of cash wheat and wheat futures contracts on the Chicago Board of Trade from 2003 to January 2014, boosting revenue and trading profit. "While these illicit profits benefited defendants' bottom line, they caused harm to class members who transacted in CBOT wheat futures contracts at artificial prices," Mr Dennis said.

Kraft had no immediate comment. Mondelz spokeswoman Valérie Moens declined to comment. Both companies have indicated that Mondelz would bear most costs of the CFTC case, and that the outcome would not be material to either's results.

A lawyer for Mr Dennis did not immediately respond to requests for additional comment.

The companies are defendants in both lawsuits because the alleged suspicious trades occurred before Kraft Foods in 2012 split in two.

Mondelz now houses snack foods such as Oreos, Wheat Thins and Ritz crackers, while Kraft sells its namesake cheese products, Oscar Mayer deli meats and Maxwell House coffee.

Last month, Kraft agreed to sell itself to HJ Heinz Co, which is owned by Brazilian firm 3G Capital and Warren Buffett's Berkshire Hathaway.

The case is Dennis v. Kraft Foods Group Inc et al, U.S. District Court, Northern District of Illinois, No. 15-03155.

REUTERS