Australia’s corporate watchdog, the Australian Securities and Investments Commission (ASIC), has accused two local subsidiaries of China’s COFCO Corp of manipulating domestic wheat futures prices. In a court filing, ASIC stated that an employee of COFCO International Australia placed orders to sell Eastern Australia Wheat Futures contracts below market value 34 times in 2022, just before the close of trading on the Australian Securities Exchange (ASX). This was allegedly done to influence the settlement price of the contracts.
Another COFCO unit, COFCO Resources, reportedly stood to benefit from these actions as it held a short position in the same futures contracts. A short position allows an investor to profit by buying back futures at a lower price, betting that the market for the commodity will decline.
This case marks a significant move for ASIC, which has primarily targeted domestic companies in recent years. It is the first time the commission has taken action against units of COFCO, a major state-owned food and grain trader in China.
ASIC’s filing emphasized that the defendants’ conduct could undermine the integrity and confidence in both the ASX 24 market for Eastern Australia wheat contracts and the broader Australian commodity derivatives markets. The actions could also have negatively impacted other market participants by increasing their margin payment liabilities.
A spokesperson for COFCO International stated that the company does not comment on ongoing court proceedings. The Australian office of COFCO and its legal representatives did not respond to requests for comment.
Nicholas McGaw, the COFCO wheat trader involved in the case, was noted for explaining his practice of selling futures below the highest possible price in an email to his broker, JP Morgan Securities. He claimed this strategy was to protect COFCO’s short position.
ASIC is seeking unspecified fines and declarations of wrongdoing against the accused parties. COFCO International, as one of the world’s largest agricultural commodity merchants, sold nearly 122 million metric tons of goods last year, generating $50.1 billion in revenue.