Kraft, Mondelez Probed by Regulators Over 2011 Wheat Futures

May 03, 2014 12:01 am ET

May 3 (Bloomberg) -- Kraft Foods Group Inc., the maker of Velveeta cheese and Oscar Mayer hot dogs, is being investigated by the Commodity Futures Trading Commission over trading of December 2011 wheat futures contracts.

The business involved in the trading is now owned by Mondelez International Inc., which separated from Kraft in 2012, according to a regulatory filing yesterday. Kraft said it’s cooperating with investigators and working with Mondelez to reach an agreement with the commission.

“While the staff has advised us that they are prepared to recommend that the commission consider commencing a formal action, we and Mondelez International are seeking to resolve this matter prior to any formal action being taken,” the company said in the filing.

If there are legal penalties, Mondelez will bear most of the costs, Kraft said. The Northfield, Illinois-based company doesn’t expect the matter to have a material effect on its results or operations.

Mondelez, the maker of snacks such as Oreo cookies and Ritz crackers, said it also was cooperating with the commission’s staff. The company declined to go into detail, saying the probe is ongoing.

“Overall, we share the same views as what Kraft Foods Group detailed in their filings,” Valerie Moens, a spokeswoman for Deerfield, Illinois-based Mondelez, said in an e-mail. “We do not expect this matter to have a material impact.”

Basil Maglaris, a spokesman for Kraft, declined to elaborate beyond the statement in the filing. Steve Adamske, a CFTC spokesman, also declined to comment.

2012 Breakup

The companies’ 2012 breakup spun off the North American grocery business, which became Kraft Foods, letting the new Mondelez snack division more easily target overseas markets. Mondelez had more than $35 billion in revenue last year, compared with $18.2 billion for Kraft Foods.

Wheat is a key ingredient in Mondelez’s snacks, which include Wheat Thins and Triscuits. Wheat traded in Chicago has climbed 18 percent this year. Cold, dry weather reduced the outlook for winter crops in the U.S., the top exporter, just as a rail backlog delayed supplies from Canada.

Escalating tension in Eastern Europe has threatened to disrupt grains shipments. Russia is set to be the fifth-largest wheat exporter this year, ahead of Ukraine, according to U.S. Department of Agriculture data.

--With assistance from Silla Brush in Washington.