Third Annual Mid-South Agricultural and Environmental Law Conference, April 21-22

Posted February 18, 2016

Agriculture in the Mid-South is uniquely impacted by changes and developments in state, federal, and international laws and policies. Hosted by the Agricultural & Food Law Consortium, the Third Annual Mid-South Agricultural and Environmental Law Conference, April 21-22 in Memphis, TN, is part of a long-term effort to provide relevant and timely agricultural and environmental legal research and information to attorneys, lenders, accountants, tax consultants, students and other agricultural professionals involved in the agriculture and aquaculture industries in the southern U.S.   

Conference highlights and panel discussions include:

- Agricultural & Environmental Law Updates

- Managing Risk in a Faltering Ag Economy

- Handling an Ag Bankruptcy

- Navigating Wetlands Issues

- Legal Issues & Liability in Agricultural Nutrient Management

This year's program is approved for six hours of CLE credit in Alabama, Mississippi, and Tennessee, including one hour of ethics. Further, it has been submitted for CLE credit in Arkansas and for real estate continuing education in Arkansas.

The conference kicks off Thursday, April 21, with a “BBQ & Beer” reception at Memphis' famous Rendezvous barbecue restaurant. 

To register for the conference, please click here. 

Nebraska law allows meatpackers to own hogs

Posted February 16, 2016

Per nationalhogfarmer.com, Nebraska meatpackers can now own hogs.

Under LB176, passed February 5, a person who owns, leases or holds a legal interest in a swine production operation can enter into a contract to produce swine for a packer. The producer, or contract grower, will own the land and facilities used to raise the livestock while the packer owns the swine.

State Senator Ken Schilz said Nebraska was the only state that prohibited packers from directly or indirectly owning hogs. Because packers in other states are not subject to that restriction, packers who process Nebraska hogs could move to neighboring states.

In an editorial in the Schuyler Sun, Senator Jerry Johnson observed, “Supporters of LB176 argued that passage of this measure would give the Nebraska farmer another tool to compete in today's economy. It was said that young farmers would be helped by this bill as providing a source of income in an otherwise volatile industry with less risk. It was also said Nebraska farmers contract now with big corporations like Smithfield or Tyson, but ship their animals out of state for processing. Under this bill, processing will take place in the state. Jobs will be created and economic advantages will result.”

Opponents of the bill argued it would negatively impact family farms. Senator Al Davis of Hyannis told Fortune magazine that contract farming has become more prevalent in livestock states where packer bans have been overturned and that the contract model can be dangerous for farmers. Davis contends that many farmers who sign such contracts take on huge loans to pay for the infrastructure required to meet packers’ demands for large herds, leaving them unable to negotiate higher prices.

A copy of the approved bill may be viewed here. 

Spending on farm subsidies to spike over the next three years

Posted February 2, 2016

According to new government spending projections released by the Congressional Budget Office, spending on farm subsidies will soar in the next three years. 

Subsidies in the 2014 Farm Bill will cost a lot more than initially projected, according to the Environmental Working Group, an advocacy group opposed to farm subsidies. 

Although Congress eliminated direct payments to farmers a few years ago, they replaced them with two subsidy programs known as Agriculture Risk Coverage (ARC County) and Price Loss Coverage (PLC). The 2014 Farm Bill authorized both programs. The Congressional Budget Office believed this change would save taxpayers billions of dollars over the life of the Farm Bill. 

However, the Environmental Working Group’s analysis of the CBO's projections contends that government payments for the Agricultural Risk Coverage and Price Loss Coverage subsidies will cost an additional $8 billion over the next three years -- 70 percent more than originally estimated by CBO when Congress passed the Farm Bill in January 2014.

Similarly, Agriculture.com’s farm subsidy analysis finds that the government faces three high-cost years, beginning with $5.8 billion in 2016. Low commodity prices will likely increase the cost of programs that help stabilize crop revenue. Furthermore, the CBO’s latest budget forecasts that crop subsidies will cost a total of $22 billion for fiscal 2016, 2017, and 2018 -- a 9% increase from the estimate it made a year ago of $20.1 billion for those years.

The main recipients would be corn, soybean, wheat, and peanut growers. Corn, soybeans, and wheat are the three most widely planted crops in the country, grown on 225 million acres while peanuts are planted on about 1.6 to 1.7 million acres annually. Corn farmers were projected to get $10.5 billion from 2016 to 2018, soybean growers $3.5 billion, wheat growers $2.9 billion, and peanuts $1.7 billion, per agriculture.com.

The Congressional Budget Office's newest estimates for Farm Bill spending may be viewed here.

USDA to determine whether cottonseed can be designated an “other oilseed”

Posted on January 26, 2016

A decision on whether USDA can make cottonseed an “other oilseed” is coming soon, according to USDA Secretary Tom Vilsack.

Supporters believe listing cottonseed as a commodity under the 2014 Farm Bill would help troubled farmers. US cotton producers, lawmakers and even soybean producers have pushed for cottonseed to be considered an “other oilseed” under provisions of the bill. Such a designation could make cottonseed eligible for safety net programs like Ag Risk Coverage (ARC) and Price Loss Coverage (PLC).

Several USDA agencies are involved in the process. At issue is whether USDA has the authority to do so and whether such a move would be WTO compliant. Vilsack told USDA Radio, “The General Counsel’s office is involved, the Foreign Ag Service is involved, the Farm Service Agency is involved, so that I get a 360-degree review of this issue so we can try to figure out what we can do to be as helpful as we can be within the confines of the law.”

The oilseed category includes other commodities such as canola and flaxseed.

Some believe budget issues are a major question regarding a decision, an issue reportedly raised by the Office of Management and Budget (OMB).

Earlier this month, 100 representatives in the U.S. House signed a letter to Vilsack supporting the designation. 

More information is available here. 

Ag committee rejects crop insurance cuts

Posted October 29, 2015

House Agriculture Committee members state there will be no cuts to the crop insurance program in the upcoming budget, according to an AgWeb article available here. High Plains Journal also published an article available here.

“Leadership has heeded our concerns by agreeing to completely reverse this disastrous provision in the upcoming omnibus,” said Michael Conaway in a prepared statement. “Crop insurance is working as intended, and private industry deserves to be lauded, not thrown under the bus.”

The budget proposal called for capping the rate of return on earned premiums at 8.9% for crop insurers for 2017-2016. It would have saved the federal government an estimated $3 billion, but potentially hurt the viability of the federal crop insurance program and the financial health of the crop insurance industry.

Agriculture Committee Chairmen Sen. Pat Roberts, R-Kansas, and Rep. K. Michael Conaway, R-Texas, and Ranking Members Sen. Debbie Stabenow, D-Michigan, and Rep. Collin Peterson, D-Minnesota, stood united against reopening the 2014 farm bill to further cuts, according to High Plains Journal.

“Farmers and ranchers have done more than their fair share to reduce government spending,” said Chairman Roberts.

“To target the No. 1 priority for producers with additional cuts will undermine the delivery of this important protection for agriculture. While congressional leaders may sell this package as providing budget stability, it is anything but stable for farmers and ranchers. It took years to negotiate and pass a new farm bill. Producers have signed contracts and purchased policies. These proposals to make further cuts to the crop insurance program were not included in the House or Senate passed budgets, in any appropriations bills or in the president’s budget request. Once again, our leaders are attempting to govern by backroom deals where the devil is in the details. I will continue to oppose any attempts to cut crop insurance funding or to change crop insurance program policies.” 

After the House, the spending bill goes to the Senate, where the Senate Agriculture Committee leaders have also vowed to protect the crop insurance program, according to AgWeb.

"We hope Senate Leadership finds a path forward soon to ensure these cuts are not realized," said the Crop Insurance Reinsurance Bureau, National Crop Insurance Service and American Association of Crop Insurers said in a joint statement.

"Today's action shows that crop insurance is truly the centerpiece of agricultural risk management and rural America is willing to fight to maintain the crop insurance program. Crop insurers remain committed to providing superior service to our customers--America's farmers--who desperately need risk management tools to deal with today's extreme weather and falling crop prices."

For more information on crop insurance programs, please visit the National Agricultural Law Center’s website here.

Missouri sues USDA over crop insurance deadlines

Posted July 22, 2015

 
Missouri filed a lawsuit pushing the federal government to extend a key agricultural deadline, which is necessary to keep many of the state's farmers eligible for crop insurance, according to a News Leader article available here. Insurance Journal also published an article available here and KSPR here.

Attorney General Chris Koster filed the federal lawsuit against Tom Vilsack, U.S. Secretary of Agriculture.

"Missouri farmers rely on the availability of insurance to guard their crops against events beyond their control," Koster said a press release. "The USDA should not punish farmers whose planting was delayed by unexpected rain and flooding by enforcing an arbitrary deadline. Millions of dollars in Missouri agriculture is at risk, and we will fight to make sure these resources are protected."

Sixty percent of Missouri farmers could be ineligible for crop insurance this year, because heavy rainfalls and floods will prevent them from meeting the reporting deadline.

The USDA requires farmers to report their planted acreage each year by a fixed deadline, which is July 15 for farmers in northwest Missouri. Rainfall over the past two months caused severe flooding so severe that the Governor declared a state of emergency. Many farmers were unable to plant their crops in time to get accurate acreage reports filed, even with the five-day grace period normally allowed by the USDA, according to KSPR.

His lawsuit asks a federal court to require that the agriculture agency give farmers 15 additional days to file reports, according to Insurance Journal.

The federal agriculture department says by law it cannot extend the deadline, but said it will work with farmers to help them maintain coverage.

For more information on crop insurance programs, please visit the National Agricultural Law Center’s website here.

Grain storage bins not taxable as property

Posted July 22, 2015

The Ohio Supreme Court ruled that grain storage bins are personal property pursuant to state law and may not be taxed as real property, according to a Court News Ohio article available here. Toledo Blade also published an article here.

The court’s unanimous decision confirmed a ruling of the Board of Tax Appeals (BTA), which determined that the actual value of property owned by Metamora Elevator Company in Fulton County was $738,240 instead of the auditor’s assessed value of more than $1.8 million that included the storage bins.

The court observed that historically the distinction between fixtures that were real property and those that were personal property was elusive. But, in 1992, the General Assembly clarified that storage bins are personal property.

Justice O’Donnell wrote that the General Assembly amended the definitions of “real property” and “personal property.”

“In promulgating R.C. 5701.03, the General Assembly has expressly defined the term ‘business fixture’ to include storage bins, and therefore, they are personal property not subject to real property tax,” Justice O’Donnell explained.

Metamora Elevator Company successfully argued that the bins were temporary business fixtures and not part of the permanent property subject to local real estate taxation, according to Toledo Blade.

How the county taxes the bins has historically been a minor issue, but in 2005, the state began to phase out its tangible personal property tax, an unpopular tax that targeted business equipment, inventory and fixtures. That tax is now gone for nearly all businesses in the state.

For more information on agricultural finance and credit, please visit the National Agricultural Law Center’s website here.

Senators Introduce Bill to Ease Ag Sales in Cuba

Posted April 24, 2015

Sens. Heidi Heitkamp, D-N.D., and John Boozman, R-Ark., introduced a bill today that would allow banks to finance agricultural exports sent to Cuba, helping to open up Cuban markets to American farmers and ranchers, according to an Agri-Pulse article available here. National Miami Herald also published an article available here and McClatchy DC here.

“While farmers in North Dakota and all across the country dedicate their lives to feeding folks around the world, we have to make sure our producers have the opportunities they need to get their products to market,” said Heitkamp. “The biggest obstacle in that effort involves private companies and banks not being able to provide credit to export agricultural commodities to Cuba, where these crops are in high demand.”

The bill seeks to remove one of the main barriers to open agricultural trade with Cuba: the prohibition on credit sales. The Agricultural Export Expansion Act, would lift the current ban on private banks and companies from offering credit for agricultural exports to Cuba, according to McClatchy DC.

Overall, Cuba imports more than $2 billion a year in food and agricultural products. The U.S. share of that has been several hundred million dollars in recent years, but it has been trending down and totaled less than $300 million in 2014. Agricultural experts see the potential for U.S. sales to exceed $1.2 billion annually within five years, according to Miami Herald.

The U.S. farm lobby is pushing hard for a full repeal of the trade embargo, and while there is bipartisan support for such a move, it remains very controversial in Congress and experts say a full repeal is very unlikely this Congress.

For more information on international law and organizations, please visit the National Agricultural Law Center’s website here.

Two Indicted in Organic Tomato Farm Case, Multiple Fraud Charges

Posted December 17, 2014

The Alabama Securities Commission has indicted James Albert Lawhorne and Jacqueline Wilson in multiple counts of stock fraud, according to an article by Alabama Media Group available here. WAFF also published an article available here.

Lawhorne was arrested in Tennessee, and his bond has been set at $600,000.

Wilson turned herself in to authorities, and she was released after posting an $80,000 bond.

James Lawhorne faces 24 charges, including theft by deception, misrepresentation of sale, and sale of unregistered securities, according to WAFF.

The pair attempted to attract investors to the business, Cypress Creek Organic Farms, with a claim that the farm would provide all testing, materials, supplies, equipment, training, and support for growing organic tomatoes. Additionally, Lawhorne would provide “USDA organic certification and a guaranteed buyback of the produce," according to Alabama Media Group.

Lawhorne and Wilson previously defend their Better Business Bureau F-rating in an interview available on WAFF’s site here.

The pair is also tied to another business in North Carolina known as Wormz Organic.

For more information on agricultural finance and credit, please visit the National Agricultural Law Center’s website here.

CoBank Partners with USDA to Create Infrastructure Investment Fund

Posted July 25, 2014

CoBank announced that it has joined with the U.S. Department of Agriculture (USDA) to create a new public-private partnership focused on infrastructure investment in rural America, according to a press release. The New York Times also publishes an article available here, Agri-Pulse here, and Farm Futures here.

The new “U.S. Rural Infrastructure Opportunity Fund” will serve as a private-sector capital source to partner with USDA on various infrastructure projects in rural communities. CoBank will serve as anchor investor and has committed $10 billion of balance sheet capacity to co-lend with the fund.

“We’re the eHarmony.com of infrastructure and business investment,” the agriculture secretary, Tom Vilsack, said, referencing the online dating service. “We’re going to be a connector,” he added. “This is a new role for the [USDA],” according to The New York Times.

The funds will distribute loans to improve infrastructure in rural communities such as wastewater treatment, roads and bridges, rural broadband and conservation projects. Capitol Peak Asset Management Company is also managing the fund, and loans will be distributed and repaid with the intent of creating an ongoing fund for rural infrastructure improvements, according to Agri-Pulse.

The loans will be offered with market conditions and will be implemented in the similar ways that USDA and CoBank already independently operate, but Vilsack and CoBank CEO Robert Engel both said the partnership will allow the companies to “break down the silos” that previously stood in the way of collaboration.

The goal is "building a network that reaches and expands our reach and resources more effectively," said Engel. The need and profit opportunity are out there, but investors have to be aware of it, he added, according to Farm Futures.

“The continued success of the U.S. rural economy and the improvement of rural communities depend on the strength of our infrastructure,” Engel said. “To remain competitive, we must develop innovative financing strategies that will ensure infrastructure investment keeps pace with the needs of agriculture and other key rural industries. We strongly believe this public-private partnership will facilitate the flow of capital to deserving projects and promote the health of rural America,” according to
The New York Times.

For more information on agricultural finance and credit, please visit the National Agricultural Law Center here.
  
 

DFA Agreed to Pay $50 Million Settlement

Posted July 15, 2014

The cooperative Dairy Farmers of America (DFA) have agreed to pay $50 million settlement to thousands of Northeast dairy farmers from a 2009 class-action lawsuit, according to an article on MSN by Lisa Rathke available here. The Portland Press Herald also published the article here and The Wall Street Journal here.

The lawsuit charged the cooperative, its marketing agency, Dairy Marketing Services (DMA), and dairy processor Dean Foods with monopolizing the market for raw milk in the area that drove down prices paid to dairy farmers.

DFA did not admit to any wrongful actions under the settlement terms.

“While we believe the allegations against us were without merit and the activities of DFA, Dairy Marketing Service (DMS) and other affiliated milk marketing cooperatives in the Northeast benefited cooperative members and independent producers alike, the cost to continue to defend ourselves has become too great," DFA said.

The settlement must be reviewed and approved by a judge.

In 2011, Dean Foods Co. agreed to a settlement of $30 million, but also did not admit to any wrongful actions.

For more information on agricultural cooperatives, please visit the National Agricultural Law Center’s website here.

Cargill Transitions to Crate Free by 2017

Posted June 10, 2014

Cargill facilities will be 100 percent group housing by the end of 2015, according to a press release available here. The Star Tribune also published an article available here, The Des Moines Register here, and Politico here.

Contract hog farms, containing Cargill-owned sows, will transition to group housing by the end of 2017. Cargill has maintained 50 percent group housing for company owned sows in the U.S. over the past few years. As a result of the company’s 2011 acquisition of an idled hog farm complex in the Texas Panhandle, Cargill is able to achieve 100 percent group housing for gestating sows. Cargill has invested more than $60 million in the purchase and improvement of the 22,000-acre property in Dalhart, Texas over the last three years.

“While Cargill was a pioneer in the use of group housing for gestating sows dating back more than a decade, in the past few years growing public interest in the welfare related to animals raised for food has been expressed to our customers and the pork industry,” stated Mike Luker, president of Wichita-based Cargill Pork.

Cargill’s transition to group sow housing represents an important shift in animal welfare. Consumers are increasingly interested in how their food is produced, including how animals are treated, which has created pressure on the food industry, according to The Star Tribune.

Therefore, restaurant chains, supermarkets, and other pork buyers are requiring suppliers such as Cargill to transition to sow group housing, as opposed to gestation crates. At least 60 major U.S. companies have announced plans for the transition such as General Mills, Target, and Supervalu.

McDonalds and Costco are also among the 60 companies making the transition, according to The Des Moines Register.

The transition is estimated to cost $2 billion or more throughout the industry, which could pose problems for small-scale hog producers, according to The Star Tribune.

“Without really knowing how their costs will be recovered, it’s very difficult for farmers to be willing to make the change,” said Dave Preisler, executive director of the Minnesota Pork Producers Association.

Cargill admits it will be a costly decision but feel it is the right decision for the pork industry, said Luker in a statement.

“While an industry change of this magnitude is challenging and costly, we believe it is the right thing to do for the long term future of pork production in the U.S., and our customers agree with us and support our decision. Nevertheless, we need to be mindful that many family farms involved with raising hogs have their life savings invested in their operations and it will require time and other resources if they choose to make a conversion to group housing,” said Luker.

Paul Shapiro, a vice president at the Humane Society of the United States, expressed support for Cargill’s transition, according to The Des Moines Register.

"Cargill's decision brings us closer to the day when gestation crates will be relics of the past in the pork industry. Americans simply don't support locking animals in cages barely larger than their bodies, and Cargill is right to be leading its industry away from the practice," said Shapiro.

Based upon Cargill’s timeline, the company will be able to support “early adopter” customers seeking products from alternative sow housing in the next few years, according to Cargill’s press release.

For more information on animal welfare, please visit the National Agricultural Law Center’s website here.

U.S. 2014 Agricultural Exports Expected to Reach Record High

Posted June 4, 2014

Agricultural exports will reach a record high of $149.5 billion in 2014, according to an article on Southeast Farm Press available here. Reuters also published an article available here and Farm Futures here.

The Outlook for U.S. Agricultural Trade report states the growth is a result of rising prices, but will also be from an increase in volume of U.S. agricultural exports, which is expected to increase by 31 percent over 2013.

It would be a second straight year of record U.S. agricultural exports, which totaled $140.9 billion last year, according to Reuters.

Tom Vilsack U. S. Agriculture Secretary applauded the “increasing global appetite for high-quality, American-grown product.”

“USDA will continue to focus its efforts on tapping into new markets for what is grown and made in rural America. Today, only one percent of U.S. companies export, and yet 95 percent of the world's consumers live outside the borders of the United States, creating significant opportunities for U.S. food and agriculture. Thanks to resources in the 2014 Farm Bill, USDA is able to continue support for trade promotion and market expansion for U.S. agricultural products overseas—programs that return $35 in economic benefits for every dollar invested,” Vilsack said according to Southeast Farm Press.

Vilsack highlighted recent progress on trade issues with Mexico after a panel discussion with Mexico's Secretary of Agriculture Enrique Martínez y Martínez at the Global Forum on Agro Food Expectations in Mexico City, according to Farm Futures.

“Mexico is an important strategic ally and a critical economic partner to the United States. In recent months, we have made progress on a number of issues that will help increase economic opportunity for both of our countries,” Vilsack shared in a USDA statement.

Funding additions in the farm bill such as the Market Access Program and the Foreign Market Development Program, will help expand exports by creating ad maintaining long-term markets for U.S. agricultural products.

For more information on international trade, please visit the National Agricultural Law Center’s website here.

Congress Reaches Final Deal on Water Resources Reform and Development Act

Posted May 16, 2014

Lawmakers recently announced a final deal on the $8.2 billion Water Resources Reform and Development Act (WRRDA) and have filed a conference report, setting the bill for final passage next week, according to an article by The Hill available here.  Agri-Pulse also reported on the story here.

“This measure will strengthen our nation’s transportation network, keeping America competitive in the global marketplace, and reform and streamline the way we move forward with improvements to our ports, locks, dams, and other water resources infrastructure,” said House Transportation Committee chairman Rep. Bill Shuster (R-PA).

 

“The bipartisan, bicameral conference report on the Water Resources Reform and Development Act (WRRDA) authorizes 34 critical Army Corps projects,” Sens. Barbara Boxer (D-CA) and David Vitter (R-LA) added in a summary of the bill’s highlights.

The WRRDA, H.R. 3080, is a water resources bill that allows the U.S. Army Corps of Engineers to develop, maintain, and support a variety of water-related projects including infrastructure, flood protection and environmental restoration needs, according to an article by Water World available here.  The full conference report is available here.

Both Houses must now approve the Conference Report before sending to the President to sign into law.

For more information on water law, please visit the National Agricultural Law Center’s website here.

Farm Bureau Joins AgGateway Data Group

Posted May 14, 2014

The American Farm Bureau Federation (AFBF) has joined AgGateway, a nonprofit organization for data and eBusiness in agriculture, according to a press release available here.  AgProfessional also reported on the story here.

“Our farmers are continually seeking better tools to increase profitability, and there are multiple exciting projects at AgGateway designed to improve how farmers use data to meet that goal,” said AFBF director of Public Policy Mary Kay Thatcher.  “We look forward to participating in and supporting the efforts that will make it easier for farmers to use data, and in a secure and safe way.”

AgGateway Executive Vice President and COO Wendy Smith said that AgGateway is focusing on issues to improve the ability of systems and equipment to exchange data, data privacy, ownership, and security.

One project AgGateway is working on is the Standardized Precision Ag Data Exchange (SPADE) Project, to address “the problem of moving data from machine systems to farm management information systems (FMIS) and to other FMIS so that the farmer and ag retailer can improve decision-making and improve productivity.”

Agricultural data analysis and use has generated increasing interest by producers and companies and concerns over privacy and compatibility issues.  The American Soybean Association recently joined the Ag Data Working group in an effort to resolve some of those issues.

Monsanto Co. acquired Climate Corp., a data analytics company, in October 2013.  The Climate Corp. has formed an Open Agricultural Data Alliance (OADA) of providers and farmers to find a consensus on standards for farm data privacy, security, and interoperability.

For more information on biotechnology, please visit the National Agricultural Law Center’s website here.

Soybean Groups Join to Protect Ag Data

Posted May 7, 2014

Agricultural data analysis and use may the next big development in agricultural production, but it also has caused some privacy concerns among producers.  In response to those concerns, the American Soybean Association has joined with other soybean groups to form an “ag data working group” to help provide information to producers, according to an article by RFDTV available here.

The group had its first meeting recently on issues such as ownership of data, privacy, compatibility and interoperability, quality, compensation, managing, storing, security, and cost.

Monsanto Co., which acquired Climate Corp., a data analytics company, in October recently stated its support for industry-wide standards for managing farm data.  The Climate Corp. is forming an Open Agricultural Data Alliance (OADA) of providers and farmers to find a consensus on standards for farm data privacy, security, and interoperability. 

Many are embracing the benefits “big data” offers while also sharing those concerns of the soybean groups, according to an article by St. Louis Public Radio, available here.

Climate Corp.’s Director of Product Management, Tristan D’Orgeval, says giving farmers accurate weather information “takes huge amounts of data from many different sources, including radar, rain gauges, and satellites.”  This year, the company “launched a paid version of its service, called Climate Pro” to corn farmers in nine Midwestern states.  The quality of the data, however, is limited to the data people share with the system.

For more information on biotechnology, please visit the National Agricultural Law Center’s website here.

Kraft Investigated by Regulators over Wheat Trading

Posted May 6, 2014

Kraft Foods Group Inc. said that U.S. regulators were investigating wheat futures trading by parts of the business now owned and operated by Mondelez International, Inc., according to a Yahoo Finance article available here.  Reuters and Bloomberg also reported on the story here and here.

Kraft said the investigation by the Commodity Futures Trading Commission was centered on activities related to trading of December 2011 wheat futures contracts. 

“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,” Kraft said in the filing.

“We do not expect this matter to have a material adverse effect on our financial condition or results of operation,” said Kraft.

Wheat futures in the “second half of 2011 gain 12% as drought afflicted the U.S. southern Great Plains.  Production of the hard-red winter wheat, grown in the southern Plains and used to make bread, in the 12 months that started on June 1, 2011, totaled 780 million bushels, which was the lowest in five years, according to” USDA. 

In the past, Kraft has maintained trading operations that deal in “commodity futures, swaps and other derivatives to shield the company from shifts in the price of commodities, currencies and interest rates, according to notes from a meeting between Kraft officials and CFTC staff in February 2011.”

For more information on agricultural commercial transactions, please visit the National Agricultural Law Center’s website here.