What it means to say Kraft manipulated the wheat market

Stan Alcorn Apr 3, 2015
HTML EMBED:
COPY

What it means to say Kraft manipulated the wheat market

Stan Alcorn Apr 3, 2015
HTML EMBED:
COPY

Regulators at the Commodities Futures Trading Commissions have accused the Kraft and Mondelez International – the renamed company that now owns what was Kraft’s cookie and cracker businesses – of manipulating and excessively speculating on the price of wheat.

Commodities broker and analyst Jack Scoville says buyers typically avoid sudden price hikes in wheat, a key ingredient for crackers and cookies, by using futures contracts. But the CFTC alleges that in 2011, the maker of Oreos, Chips Ahoy and Ritz Crackers purchased far more wheat futures than it needed.

“Reading the allegations in the complaint, it looks like a traditional corner or squeeze,” says Craig Pirrong, finance professor at the University of Houston. That would mean the large order pushed up the price, allowing the company to then sell the excess for a profit.

But proving this in a court of law will be difficult, according to former CFTC lawyer Jerry Markham.

Both the CFTC and Mondelez declined to comment while litigation is pending.

 

We’re here to help you navigate this changed world and economy.

Our mission at Marketplace is to raise the economic intelligence of the country. It’s a tough task, but it’s never been more important.

In the past year, we’ve seen record unemployment, stimulus bills, and reddit users influencing the stock market. Marketplace helps you understand it all, will fact-based, approachable, and unbiased reporting.

Generous support from listeners and readers is what powers our nonprofit news—and your donation today will help provide this essential service. For just $5/month, you can sustain independent journalism that keeps you and thousands of others informed.