Oat Trades Lead to CFTC Fines

Ceres Global Ag Agrees to Pay $3 Million in Civil Penalties Over Trades in Oat Contracts

Chris Clayton
By  Chris Clayton , DTN Ag Policy Editor
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Ceres Global Ag, a Minnesota company, agreed to pay $3 million in fines to the Commodity Futures Trading Commission (CFTC) over efforts in 2016 and 2017 to manipulate oat futures contracts in a way that allowed Ceres to buy higher-quality oats at below-market prices. (Image courtesy of CFTC)

OMAHA (DTN) -- A Minnesota grain company has agreed to pay a $3 million civil penalty to the Commodity Futures Trading Commission for trying to manipulate the price of oat futures contracts in 2016 and 2017.

Ceres Global Ag Corp., based in Minneapolis, said the company had been cooperating with the CFTC and Department of Justice since they began looking into the situation in 2021.

Ceres operates 11 grain elevators and oilseed facilities across Minnesota; North Dakota; Manitoba, Canada; and Saskatchewan, Canada. Ceres is one of the largest buyers and marketers of oats, including operating four warehouse facilities listed for oat deliveries under the CME.

The CFTC handed down an order Monday citing Ceres for attempts by a former senior officer at Ceres to exit short positions in oat contracts in June 2016 by attempting to establish long positions on 600 contracts, or 3 million bushels of oats, which is the CME speculative limit on the oats contract. CFTC noted at the time Ceres already held more than 6 million bushels in inventory.

The former Ceres executive then directed a grain trader at the company to buy back shipping certificates in a way that would not "tip (their) hand" about Ceres's market moves. The CFTC stated that increased the probability Ceres would be able to establish a long position at a lower cost and not reveal the company's intent to stand for delivery for the grain. The result was it potentially allowed Ceres to take delivery of higher-quality oats at lower prices.

By July 1, 2016, Ceres held 100% of the long open interest in the July 2016 oats contract.

Ceres made a similar move on the March 2017 oats futures contract. Ceres' moves left some short position holders struggling to meet delivery because they didn't have enough physical oats to meet their delivery obligations.

The result of Ceres' position moves was CFTC alleging Ceres intended to manipulate the price of the July 2016 and March 2017 oats futures contracts to benefit its derivative positions, as well as its physical positions in the market as Ceres acquired higher quality oats at below market prices.

Monday's order requires Ceres to pay $3 million in penalties over the next 12 months as well as cease and desist any further violations of the Commodity Exchange Act.

In a statement, Ceres said it did not expect any further charges or fines coming out of the 2016-17 situation.

"We are glad to have resolved the matter and appreciate the CFTC's acknowledgment of our cooperation related to these historical matters," said Carlos Paz, Ceres' CEO.

More information can be found at https://www.cftc.gov/…

Chris Clayton can be reached at Chris.Clayton@dtn.com

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Chris Clayton