Page 1 

Commodity Futures Trading Commission 

CEA CASES 

NAME: CARGILL, INCORPORATED, AND ERWIN E. KELM 

DOCKET NUMBER: 58 

DATE: JUNE 11, 1953 

DOCUMENT TYPE: COMPLAINT 

UNITED STATES DEPARTMENT OF AGRICULTURE 

BEFORE THE SECRETARY OF AGRICULTURE 

In re Cargill, Incorporated, and Erwin E. Kelm, Respondents 

CE- A Docket No. 58 

Complaint and Notice of Hearing under Section 6(b) of the Commodity Exchange 

Act 

The Secretary of Agriculture has reason to believe that the respondents, 

Cargill, Incorporated, and Erwin E. Kelm, have attempted to manipulate and did 

manipulate the market price of a commodity in interstate commerce and for future 

delivery on or subject to the rules of a board of trade, and have otherwise 

violated the Commodity Exchange Act (7 U.S.C., Chapter 1) and the rules and 

regulations of the Secretary of Agriculture and the orders of the Commodity 

Exchange Commission promulgated thereunder. In accordance with the provisions 

of section 6(b) of the Commodity Exchange Act (7 U.S.C. 9), this complaint and 

notice of hearing is issued alleging as follows: 

I 

Respondent Cargill, Incorporated, is a corporation organised under the laws 

of the State of Delaware, with its principal office and place of business in 

Minneapolis, Minnesota, and branch offices throughout the United States. The 

said corporation conducts various commercial enterprises, including the business 

of grain importing and merchandising, 

and it engages in futures trading for its own account on boards of trade in the 

United States and Canada, including the Board of Trade of the City of Chicago, 

the Minneapolis Grain Exchange, Minneapolis, Minnesota, and the Winnipeg Grain 

Exchange, Winnipeg, Manitoba. Cargill Incorporated was at all times material to 

this complaint and is now a registered futures commission merchant under the 

provisions of the Commodity Exchange Act, and the holder of membership trading 

privileges on various boards of trade designated as contract markets under the 

said Act. 

II 

Respondent Erwin E. Kelm, an individual residing in Minneapolis, Minnesota, 

is vice president of Cargill, Incorporated. 

III 

Cargill Grain Company, Limited (hereinafter referred to as Cargill Limited), 

not a respondent herein, is a corporation organized under the laws of Canada and 

is a wholly owned subsidiary of Cargill, Incorporated. 

IV 

With respect to the transactions described in this complaint, Cargill Limited 

was controlled by its parent organization, Cargill, Incorporated. 
Page 2 

V 

The Board of Trade of the City of Chicago (hereinafter called the Chicago 

Board of Trade) was at all times material to this complaint a duly designated 

contract market under the Commodity Exchange Act. 

VI 

During June and July 1951, Cargill Incorporated held net short positions in 

oats futures on the Chicago Board of Trade of approximately 12,000,000 to 

17,000,000 bushels. Beginning in August 1951 and continuing throughout that 

year, Cargill Incorporated sold additional large quantities of oats futures on 

the Chicago Board of Trade and thereby increased its short positions in oats 

futures so that it was short more than 31,000,000 bushels during the latter part 

of October 1951. In November and December 1951 the short positions of Cargill 

Incorporated in oats futures on the Chicago Board of Trade ranged from 

approximately 28,000,000 to more than 31,000,000 bushels. 

VII 

Between July 1951 and January 1952, at the same time that Cargill 

Incorporated was selling large quantities of oats futures and increasing its 

short positions on the Chicago Board of Trade as described in paragraph VI, it 

was buying substantial quantities of oats futures on the Winnipeg Grain Exchange 

and thereby establishing long positions in that market. All such purchases were 

made through Cargill Limited, who entered them on its books in an account in the 

name of Cargill Incorporated. From time to time during this period, while the 

Chicago selling and Winnipeg buying operations were in progress, Cargill 

Limited, pursuant to an arrangement with its parent organization, transferred to 

an 

account carried in its own name on its own books varying quantities of the long 

Winnipeg oats futures which it had previously purchased and entered on its books 

in the account of Cargill Incorporated. In connection with each such transfer 

of long Winnipeg oats futures, Cargill Limited entered into an arrangement with 

Cargill Incorporated calling for the delivery by Cargill Limited to its parent 

organization of an equivalent quantity of cash oats, delivery to be made as and 

when determined by Cargill Incorporated. Cargill Incorporated then made entries 

on its books which, in effect, substituted forward purchases of cash oats from 

Cargill Limited for the equivalent quantity of long Winnipeg oats futures which 

had been transferred to the account of Cargill Limited as above described. The 

total quantity of Winnipeg oats futures purchased by Cargill Incorporated during 

this period and thus transferred to Cargill Limited was approximately 16,000,000 

bushels. These transfers were so arranged as to time and quantity that at all 

times during the said period the books and records of Cargill Incorporated and 

the reports which it submitted to the Commodity Exchange Authority showed less 

than 3,000,000 bushels of its short oats futures positions on the Chicago Board 

of Trade as representing speculative trading. In its reports to the Commodity 

Exchange Authority, Cargill Incorporated used the above described arrangement 

with its wholly owned subsidiary as the basis for showing its short oats futures 

positions on the Chicago Board of Trade as being hedges against forward 

purchases of cash oats. In November and December 1951, as a result of such 

arrangement and 

transfers of futures, Cargill Limited held long positions in oats futures on the 

Winnipeg Grain Exchange ranging from approximately 14,000,000 to 16,000,000 

bushels. 

VIII 
Page 3 

On January 3, 1952, as a result of the transactions described in paragraphs 

VI and VII, Cargill Incorporated had a net short position on the Chicago Board 

of Trade of approximately 11,500,000 bushels of March 1952 oats futures and 

approximately 18,500,000 bushels of May 1952 oats futures, while Cargill Limited 

had net long positions on the Winnipeg Grain Exchange totalling approximately 

16,000,000 bushels in May and July 1952 oats futures, such positions 

representing purchases originally made by Cargill Incorporated and then 

transferred to Cargill Limited, as described in paragraph VII. 

IX 

Between February 15 and March 13, 1952, Cargill Incorporated unloaded into 

its elevator at Chicago, in position for delivery in satisfaction of futures 

contracts sold on the Chicago Board of Trade, approximately 1,281,000 bushels of 

oats which it had previously imported from Canada and had been holding in winter 

storage in boats at Chicago. 

X 

During January and February and the first two business days of March 1952, 

Cargill Incorporated closed out its short position in 

March 1952 oats futures on the Chicago Board of Trade by purchases of 

approximately 7,500,000 bushels of March 1952 oats futures and deliveries of 

4,000,000 bushels of cash oats. On March 3, 1952, after closing out its short 

position in March 1952 oats futures, Cargill Incorporated continued to buy March 

1952 oats futures on the Chicago Board of Trade, and at the close of business on 

that day it held a long position in such future. Thereafter, throughout the 

remainder of that month, Cargill Incorporated continued to buy and hold for 

delivery substantial additional quantities of March 1952 oats futures with the 

result that, between March 4 and March 24, 1952, Cargill Incorporated received 

in satisfaction of its long March 1952 oats futures position approximately 

2,750,000 bushels of the oats which it had previously delivered during that 

month against its short position in such future, as described above. 

XI 

From time to time during April and May 1952, Cargill Incorporated called upon 

Cargill Limited for delivery of varying quantities of oats under the arrangement 

described in paragraph VII, whereupon Cargill Limited purchased oats in Canada 

and turned them over to Cargill Incorporated by whom they were imported into the 

United States. During April and May 1952, Cargill Incorporated imported 21 

cargoes or boatloads of Canadian oats in this manner, for a total of 

approximately 8,500,000 bushels. Cargill Limited purchased all or substantially 

all of such 

oats from the Canadian Wheat Board, and as each purchase was made Cargill 

Limited turned over to the Canadian Wheat Board a corresponding amount of the 

long Winnipeg oats futures which it had previously transferred from the account 

of Cargill Incorporated to its own account, as described in paragraph VII. 

XII 

The cats imported by Cargill Incorporated as described above were purchased 

by Cargill Limited at prices which, when adjusted for all pertinent factors, 

ranged from 4 to 14 cents per bushel higher than could have been realized by 

Cargill Incorporated from deliveries of such oats against sales of futures at 

current prices on the Chicago Board of Trade. Eleven cargoes, totaling 

approximately 4,840,000 bushels, were unloaded at Chicago into a grain elevator 

owned and operated by Cargill Incorporated, and thereby placed in position for 

delivery in satisfaction of futures sold on the Chicago Board of Trade. The 

remaining ten cargoes, totalling approximately 3,600,000 bushels were unloaded 

at Buffalo, N. Y. 
Page 4 

XIII 

On January 3, 1952, Cargill Incorporated had a net short position of 

approximately 18,500,000 bushels of May 1952 oats futures on the Chicago Board 

of Trade, During the next four months, Cargill Incorporated closed out or 

covered about two-thirds of this position by 

purchases of approximately 12,000,000 bushels of May 1952 oats futures, so that 

at the close of business on April 30, 1952 it held a net short position of 

approximately 6,500,000 bushels. On May 1, 1952 Cargill Incorporated again 

began to sell May 1952 oats futures, and between May 1, 1952 and May 15, 1952, 

it sold approximately 1,900,000 bushels, thereby increasing its short position 

in such future to approximately 8,400,000 bushels. On May 16, 1952 Cargill 

Incorporated resumed covering operations, and during the five trading days which 

remained in that month it bought approximately 4,600,000 bushels of futures and 

delivered approximately 4,900,000 bushels of oats against its short position. 

As a result of such purchases and deliveries, Cargill Incorporated closed out 

its short position in May 1952 oats futures on May 21, 1952, the last day of 

trading in such future, and at the close of business on that day held a long 

position of approximately 1,035,000 bushels. The next day Cargill Incorporated 

received, in satisfaction of this long position, 1,035,000 bushels of the oats 

which it had delivered during the five preceding business days against its short 

position in such future, as described above. 

XIV 

The transactions described in paragraphs VI to XIII, were initiated by and 

carried out under the direction of respondent Erwin E. Kelm, acting as an 

officer of the corporate respondent, Cargill Incorporated. 

XV 

The respondents, Cargill Incorporated and Erwin E. Kelm, entered into and 

consummated the transactions described in paragraphs VI to XIII for the purpose 

and with the intent of creating prices and price relationships which would 

enable the corporate respondent to realize a profit. Such transactions caused 

prices of cash oats and oats futures in the United States to be lower than they 

would have been otherwise, and brought about unwarranted changes in the spread 

or differential between the prices of different futures in the United States, 

and be-between prices in the United States and prices in Canada. By reason of 

such acts, the respondents, Cargill Incorporated and Erwin E. Kelm attempted to 

manipulate and did in fact manipulate the price of a commodity in interstate 

commerce and for future delivery on a board of trade, in violation of sections 

6(b) and 9 of the Commodity Exchange Act (7 U.S.C. 9, 13). 

XVI 

From June 1951 through May 1952, as a result of the transactions described in 

paragraphs VI to XIII, Cargill Incorporated had net short positions in oats 

futures on the Chicago Board of Trade ranging from approximately 9,500,000 to 

31,500,000 bushels. During most of this period, a substantial part of such 

positions, ranging from approximately 3,500,000 to 13,000,000 bushels, consisted 

of spreading in the same grain between markets and was speculative in nature. 

By reason thereof, 

the respondents, Cargill Incorporated and Erwin E. Kelm, willfully violated 

section 4a of the Commodity Exchange Act (7 U.S.C. 6a) and the order of the 

Commodity Exchange Commission establishing limits on speculative positions in 

oats for future delivery (17 CFR 150.1). 

XVII 
Page 5 

From June 1951 through May 1952, Cargill Incorporated submitted daily and 

weekly reports to the Commodity Exchange Authority pursuant to the requirements 

of section 4i of the Commodity Exchange Act (7 U.S.C. 6i) and sections 2.10, 

2.11, 2.16, 2.17, and 2.21 of the rules and regulations thereunder (17 CFR 2.10, 

2.11, 2.16, 2.17, 2.21). In its daily reports, Cargill Incorporated classified 

almost all of its net short positions in oats futures on the Chicago Board of 

Trade as hedging, whereas in truth and in fact, during most of this period a 

substantial part of such positions consisted of spreading in the same grain 

between markets and was speculative in nature, as set forth above. In its 

weekly reports Cargill Incorporated showed, as forward purchases of cash oats, 

quantities which actually represented long oats futures positions on the 

Winnipeg Grain Exchange held in the name of its wholly owned subsidiary, Cargill 

Limited, as described in paragraphs VII and VIII. Such long oats futures 

positions were not disclosed on either the daily or weekly reports submitted by 

Cargill Incorporated during the said period. By reason of such classifications 

and omissions, 

 

respondent Cargill Incorporated submitted false reports to the Commodity 

Exchange Authority, in willful violation of section 4i of the Commodity Exchange 

Act and sections 2.10, 2.11, 2.16, and 2.17 of the rules and regulations 

thereunder. 

Therefore, the said respondents, Cargill Incorporated and Erwin E. Kelm, are 

hereby notified to be and appear at a hearing to be held at 10:00 o'clock, a.m., 

Central Standard Time, on the 18th day of August, 1953, in Room 510, Grain 

Exchange Building, Minneapolis, Minnesota, before a referee designated to 

conduct such hearing and then and there show cause, if any there be, why an 

order should not be made directing that all contract markets refuse all trading 

privileges to the respondents until further notice by the Secretary of 

Agriculture. 

The respondents will have 20 days after the receipt of this notice of hearing 

in which to file with the hearing clerk, United States Department of 

Agriculture, in triplicate, an answer fully and completely stating the nature of 

the defense and admitting or denying specifically and in detail each material 

and relevant allegation of this complaint. Allegations that are not answered 

will be deemed admitted for the purpose of this proceeding. 

It is ordered that this complaint and notice of hearing be served on the 

respondents by delivery of a true copy thereof by an employee of 

 

the Department of Agriculture, or by registered mail, at least 20 days prior to 

the date set for hearing. 

Done at Washington, D. C., this 

11 day of June, 1953. 

/s/ True D. Morse 

Acting Secretary of Agriculture 

LOAD-DATE: June 12, 2008 
Page 6