Milling & Baking News - August 27, 2019 - 14

Business

Fine levied in Kraft, Mondelez
wheat manipulation case
WASHINGTON - The U.S. Commodity Futures Trading Commission
(C.F.T.C.) on Aug. 15 said it obtained
a $16 million penalty and injunction
pursuant to a federal court's entry of
a consent order against defendants
Kraft Foods Group, Inc. and Mondelez Global L.L.C. The order, entered on Aug. 14 by Judge John Robert Blakey of the U.S. District Court
for the Northern District of Illinois,
resolves the C.F.T.C.'s complaint alleging, among other things, manipulation of the wheat market in 2011.
"The C.F.T.C. and defendants have
reached a resolution and are settling this action in accordance with
the terms arising from the Court's
settlement conference on March 22,
2019," the consent order said. "Defendant Mondelez Global shall pay a
civil monetary penalty (C.M.P.) in the
amount of $16 million within 90 days
of the date of entry of the consent order. Defendants are jointly and severally liable for the C.M.P. obligation."
The $16 million penalty is approximately three times defendants' alleged gain. The order also enjoins
Kraft and Mondelez from engaging in
future violations of the manipulation,
wash trade, and position limit provisions of the Commodity Exchange
Act and C.F.T.C. regulations charged
in the complaint.
"America is the breadbasket of the
world; wheat markets are its heart,"
said Heath P. Tarbert, chairman of the
C.F.T.C. "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 C.F.T.C. was founded to
pursue."
In response, a Mondelez spokesman, in an emailed statement, said,
"We can't comment on the settlement
per se, but we strongly disagree with
the C.F.T.C.'s statements, which blatantly violate and misrepresent
the terms and spirit of the
consent order, and will be
seeking immediate relief
from the court."
Kraft had a similar
response in an emailed
statement, saying, "We
strongly disagree with
the C.F.T.C.'s statements, which blatantly
violate and misrepresent
the terms and spirit of the
consent order, and will be seeking
immediate relief from the court."
The order stated that neither party
was to make a public statement about
the case except to refer to terms of the
settlement agreement or public documents.
The C.F.T.C., in an Aug. 15 statement, acknowledged that the consent
order limited what the C.F.T.C. could
say about the litigation but "it does
not restrict individual commissioners from speaking in their personal
capacities."
The C.F.T.C. filed a complaint for

Western Foods expands in rice
with American Sunny Foods
WOODLAND, CALIF. - Rice and
ancient grain provider Western Foods,
L.L.C. has acquired American Sunny
Foods, Inc., a Stockton, Calif.based rice flour manufacturer.
Located in the center of
California's medium rice
growing region, Western
Foods provides a variety
of gluten- and allergen-free
products to food processors around
the world. As part of the acquisition,
the company obtained Japanese-style
processing capabilities and technical
expertise found at American Sunny
14 / August 27, 2019

Milling & Baking News

Foods' processing facility, which gives
rice flours high-quality whiteness,
low-micro standards and consistent
viscosities, according to the
company. By coupling the
company's technologies with
rice varieties grown in California, Western Foods said
it will begin selling specialty
rice flours in Japan, Europe
and North America.
In addition to medium grain and
glutinous rice flours from California,
the full product range will include long
grain and medium grain rice flours
from the southern United States. MBN

injunctive relief, civil monetary
penalties and other equitable relief
against Kraft and Mondelez on April
1, 2015.
The C.F.T.C. complaint alleged
that in response to high cash wheat
prices in late summer 2011, Kraft and
Mondelez developed, approved and
executed a manipulative strategy
to purchase and stand for delivery
on more than 3,000 December 2011
futures contracts (worth about $90
million) of soft red winter wheat to
send the market a false signal that the
defendants had demand for - and
would use - futures wheat to source
the defendants' wheat supply requirements in their
Toledo, Ohio, mill. The
complaint alleged that,
in fact, Kraft and Mondelez had no intention of sourcing wheat
from the futures market, and the $90 million of wheat futures at
issue far exceeded their
actual sourcing needs.
The C.F.T.C. alleged that
Kraft's and Mondelez's true goal was
to narrow the price spread between
the December 2011 and deferredmonth wheat futures contracts, thereby causing the market to sell cash
wheat to Kraft and Mondelez at lower
prices, while earning a profit on their
speculative futures positions. The
complaint further alleged that Kraft's
and Mondelez's actions caused an
artificial price that ultimately earned
them more than $5 million in profits.
The defendants filed their answer
on Jan. 15, 2016, "and have denied
that they (1) used or attempted to use
a manipulative or deceptive device in
connection with the December 2011
wheat futures contract ... as alleged
by the C.F.T.C.; (2) manipulated or
attempted the price of the December
2011 wheat futures contract and of
cash wheat as alleged by the C.F.T.C.;
(3) unlawfully held December 2011
wheat futures positions in excess of
speculative position limits as alleged
by the C.F.T.C.; and (4) engaged in
wash sales or fictitious sales by trading both sides of E.F.P. contracts as alleged by the C.F.T.C."
Since fiscal year 2017, the C.F.T.C.'s
Division of Enforcement's prosecution of manipulation-related cases
has increased by more than 40% relative to the total number of such cases
brought during the preceding six fiscal years. MBN

bakingbusiness.com / world-grain.com

http://www.bakingbusiness.com http://www.world-grain.com

Milling & Baking News - August 27, 2019

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