Bloomberg News

Louis Dreyfus Sued by Trader Over Cotton Futures Pricing

July 02, 2012

Three units of Louis Dreyfus Holdings BV of the Netherlands were sued by a trader who accused the company of manipulating the cotton-futures market.

Trader Mark Allen alleged in a lawsuit filed June 29 in federal court in Manhattan that he lost more than $57,000 because he was forced to pay artificially high prices for cotton. The defendants and their co-conspirators colluded to artificially fix the price of the futures, he said in the complaint.

The alleged monopoly involved “almost 100 percent of the relevant market,” Allen said.

The suit was filed as a proposed class action, or group suit, on behalf of all traders who may have lost money from the alleged manipulation. Other defendants include Allenberg Cotton Co., a merchant affiliated with one of the units, Louis Dreyfus Commodities Holdings BV. The other defendant units are Louis Dreyfus Commodities BV and Louis Dreyfus Commodities LLC.

Allen claims Dreyfus’s conspiracy to violate antitrust laws took place in two periods, from March 30, 2011, to May 6, 2011, and from June 7, 2011, to July 7, 2001.

Julie Hibon, a spokeswoman for Louis Dreyfus, didn’t immediately respond to an e-mail requesting comment on the suit. Joseph Nicosia, chief executive officer of Allenberg Cotton, didn’t immediately return a voice-mail message left at his office seeking comment.

Futures Prices

Cotton futures jumped to a record $2.197 a pound on March 7, 2011, after the worst drought in at least a century decimated crops in Texas, the biggest U.S. producer. Prices plunged 58 percent by the end of the year as demand tumbled in China, the world’s largest consumer. The fiber has fallen another 22 percent in 2012.

At issue in the lawsuit were futures contracts expiring in May 2011 and July 2011. The suit alleged Louis Dreyfus manipulated the prices by taking deliveries of millions of pounds of cotton.

In June 2011, the cotton market experienced a supply “squeeze,” with stockpiles plunging 73 percent in one day, according to consulting firm FCStone Fibers & Textiles.

Louis Dreyfus was founded in 1851 as a grain trading company and has since grown into a leader in the global agricultural processing and sales markets, according to its corporate website.

The group is closely held by the Louis-Dreyfus family, controlled by the Robert Louis-Dreyfus trust, according to the site.

The case is Allen v. Term Commodities Inc., 12-cv-5126, U.S. District Court, Southern District of New York (Manhattan).

To contact the reporter on this story: Christie Smythe in New York at csmythe1@bloomberg.net.

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net.


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