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Fair Value Measurements | 12 Months Ended
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Jun. 30, 2012
Fair Value Measurements [Abstract] |
Fair Value Measurements | Note 3. Fair Value Measurements The following tables set forth, by level, the Company’s assets and liabilities that were accounted for at fair value on a recurring basis as of June 30, 2012 and 2011.
|  | Fair Value Measurements at June 30, 2012
|  | Quoted Prices in |  | Significant |  |  |  |  |  |
|  | Active Markets |  | Other |  | Significant |  |  |
|  | for Identical |  | Observable |  | Unobservable |  |  |
|  | Assets |  | Inputs |  | Inputs |  |  |
|  | (Level 1) |  | (Level 2) |  | (Level 3) |  | Total
|  |  |  |  | (In millions) |  |  |
Assets: |  |  |  |  |  |  |  |  |  |  |  |
Inventories carried at market |  | $ | - |  | $ | 5,297 |  | $ | 1,462 |  | $ | 6,759
Unrealized derivative gains: |  |  |  |  |  |  |  |  |  |  |  |
Commodity contracts |  |  | 1,275 |  |  | 1,397 |  |  | 171 |  |  | 2,843
Foreign exchange contracts |  |  | - |  |  | 219 |  |  | - |  |  | 219
Other contracts |  |  | - |  |  | 1 |  |  | - |  |  | 1
Marketable securities |  |  | 1,666 |  |  | 26 |  |  | - |  |  | 1,692
Deferred consideration |  |  | - |  |  | 629 |  |  | - |  |  | 629
Total Assets |  | $ | 2,941 |  | $ | 7,569 |  | $ | 1,633 |  | $ | 12,143
Liabilities: |  |  |  |  |  |  |  |  |  |  |  |
Unrealized derivative losses: |  |  |  |  |  |  |  |  |  |  |  |
Commodity contracts |  | $ | 1,487 |  | $ | 1,038 |  | $ | 179 |  | $ | 2,704
Foreign exchange contracts |  |  | 2 |  |  | 289 |  |  | - |  |  | 291
Inventory-related payables |  |  | - |  |  | 307 |  |  | 38 |  |  | 345
Total Liabilities |  | $ | 1,489 |  | $ | 1,634 |  | $ | 217 |  | $ | 3,340
|  | Fair Value Measurements at June 30, 2011
|  | Quoted Prices in |  | Significant |  |  |  |  |  |
|  | Active Markets |  | Other |  | Significant |  |  |
|  | for Identical |  | Observable |  | Unobservable |  |  |
|  | Assets |  | Inputs |  | Inputs |  |  |
|  | (Level 1) |  | (Level 2) |  | (Level 3) |  | Total
|  |  |  |  | (In millions) |  |  |
Assets: |  |  |  |  |  |  |  |  |  |  |  |
Inventories carried at market |  | $ | - |  | $ | 5,153 |  | $ | 762 |  | $ | 5,915
Unrealized derivative gains: |  |  |  |  |  |  |  |  |  |  |  |
Commodity contracts |  |  | 1,198 |  |  | 1,457 |  |  | 112 |  |  | 2,767
Foreign exchange contracts |  |  | - |  |  | 237 |  |  | - |  |  | 237
Interest rate contracts |  |  | - |  |  | 3 |  |  | - |  |  | 3
Marketable securities |  |  | 1,628 |  |  | 328 |  |  | - |  |  | 1,956
Total Assets |  | $ | 2,826 |  | $ | 7,178 |  | $ | 874 |  | $ | 10,878
Liabilities: |  |  |  |  |  |  |  |  |  |  |  |
Unrealized derivative losses: |  |  |  |  |  |  |  |  |  |  |  |
Commodity contracts |  | $ | 1,317 |  | $ | 1,193 |  | $ | 44 |  | $ | 2,554
Foreign exchange contracts |  |  | - |  |  | 178 |  |  | - |  |  | 178
Inventory-related payables |  |  | - |  |  | 278 |  |  | 45 |  |  | 323
Total Liabilities |  | $ | 1,317 |  | $ | 1,649 |  | $ | 89 |  | $ | 3,055
The Company determines fair value based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Three levels are established within the fair value hierarchy that may be used to report fair value: Level 1: Quoted prices (unadjusted) in active markets for identical assets or liabilities. Level 1 assets and liabilities include exchange-traded derivative contracts, U.S. treasury securities and certain publicly traded equity securities. Level 2: Observable inputs, including Level 1 prices that have been adjusted; quoted prices for similar assets or liabilities; quoted prices in markets that are less active than traded exchanges; and other inputs that are observable or can be substantially corroborated by observable market data. Level 3: Unobservable inputs that are supported by little or no market activity and that are a significant component of the fair value of the assets or liabilities. In evaluating the significance of fair value inputs, the Company generally classifies assets or liabilities as Level 3 when their fair value is determined using unobservable inputs that individually or when aggregated with other unobservable inputs, represent more than 10% of the fair value of the assets or liabilities. Judgment is required in evaluating both quantitative and qualitative factors in the determination of significance for purposes of fair value level classification. Level 3 amounts can include assets and liabilities whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as assets and liabilities for which the determination of fair value requires significant management judgment or estimation. In many cases, a valuation technique used to measure fair value includes inputs from multiple levels of the fair value hierarchy. The lowest level of input that is a significant component of the fair value measurement determines the placement of the entire fair value measurement in the hierarchy. The Company’s assessment of the significance of a particular input to the fair value measurement requires judgment, and may affect the classification of fair value assets and liabilities within the fair value hierarchy levels. The Company’s policy regarding the timing of transfers between levels, including both transfers into and transfers out of Level 3, is to measure and record the transfers at the end of the reporting period. For the period ended June 30, 2012, the Company had no transfers between Levels 1 and 2. Transfers into Level 3 of assets and liabilities previously classified in Level 2 were due to the relative value of unobservable inputs to the total fair value measurement of certain products and derivative contracts rising above the 10% threshold. Transfers out of Level 3 were primarily due to the relative value of unobservable inputs to the total fair value measurement of certain products and derivative contracts falling below the 10% threshold and thus permitting reclassification to Level 2. The Company uses the market approach valuation technique to measure the majority of its assets and liabilities carried at fair value. Estimated fair values for inventories carried at market are based on exchange-quoted prices, adjusted for differences in local markets, broker or dealer quotations or market transactions in either listed or over-the-counter (OTC) markets. Market valuations for the Company’s inventories are adjusted for location and quality because the exchange-quoted prices represent contracts that have standardized terms for commodity, quantity, future delivery period, delivery location, and commodity quality or grade. Generally, the valuations are based on price information that is observable by market participants, or rely only on insignificant unobservable information. In such cases, the inventory is classified in Level 2. Certain inventories may require management judgment or estimation for a more significant component of the fair value amount. For these inventories, the availability of sufficient third-party information is limited. In such cases, the inventory is classified as Level 3. Changes in the fair value of inventories are recognized in the consolidated statements of earnings as a component of cost of products sold. The Company’s derivative contracts are measured at fair value including forward commodity purchase and sale contracts, exchange-traded commodity futures and option contracts, and OTC instruments related primarily to agricultural commodities, ocean freight, energy, interest rates, and foreign currencies. Exchange-traded futures and options contracts are valued based on unadjusted quoted prices in active markets and are classified in Level 1. The majority of the Company’s exchange-traded futures and options contracts are cash-settled on a daily basis and, therefore, are not included in these tables. Fair value for forward commodity purchase and sale contracts is estimated based on exchange-quoted prices adjusted for differences in local markets. These differences are generally determined using inputs from broker or dealer quotations or market transactions in either the listed or OTC markets. When observable inputs are available for substantially the full term of the contract, it is classified in Level 2. When unobservable inputs have a significant impact on the measurement of fair value, the contract is classified in Level 3. Based on historical experience with the Company’s suppliers and customers, the Company’s own credit risk and knowledge of current market conditions, the Company does not view nonperformance risk to be a significant input to fair value for the majority of its forward commodity purchase and sale contracts. However, in certain cases, if the Company believes the nonperformance risk to be a significant input, the Company records estimated fair value adjustments, and classifies the contract in Level 3. Except for certain derivatives designated as cash flow hedges, changes in the fair value of commodity-related derivatives are recognized in the consolidated statements of earnings as a component of cost of products sold. Changes in the fair value of foreign currency-related derivatives are recognized in the consolidated statements of earnings as a component of net sales and other operating income, cost of products sold, and other (income) expense–net. The effective portions of changes in the fair value of derivatives designated as cash flow hedges are recognized in the consolidated balance sheets as a component of accumulated other comprehensive income (loss) until the hedged items are recorded in earnings or it is probable the hedged transaction will no longer occur. The Company’s marketable securities are comprised of U.S. Treasury securities, obligations of U.S. government agencies, corporate and municipal debt securities, and equity investments. U.S. Treasury securities and certain publicly traded equity investments are valued using quoted market prices and are classified in Level 1. U.S. government agency obligations, corporate and municipal debt securities and certain equity investments are valued using third-party pricing services and substantially all are classified in Level 2. Security values that are determined using pricing models are classified in Level 3. Unrealized changes in the fair value of available-for-sale marketable securities are recognized in the consolidated balance sheets as a component of accumulated other comprehensive income (loss) unless a decline in value is deemed to be other-than-temporary at which point the decline is recorded in earnings. The Company has deferred consideration under its accounts receivable securitization program (the “Program”) which represents a note receivable from the purchasers under the Program. This amount is reflected in other current assets on the consolidated balance sheet (see Note 20). The Company carries the deferred consideration at fair value determined by calculating the expected amount of cash to be received. The fair value is principally based on observable inputs (a Level 2 measurement) consisting mainly of the face amount of the receivables adjusted for anticipated credit losses and discounted at the appropriate market rate. Payment of deferred consideration is not subject to significant risks other than delinquencies and credit losses on accounts receivable transferred under the program which have historically been insignificant. The following tables present a rollforward of the activity of all assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the twelve months ended June 30, 2012 and 2011.
|  | Level 3 Fair Value Assets Measurements at June 30, 2012
|  |  |  |  | Commodity |  |  |
|  | Inventories |  | Derivative |  |  |
|  | Carried at |  | Contracts |  |  |
|  | Market |  | Gains |  | Total
|  | (In millions)
Balance, June 30, 2011 |  | $ | 762 |  | $ | 112 |  | $ | 874
Total increase (decrease) in unrealized |  |  |  |  |  |  |  |  |
gains included in cost of products sold |  |  | 88 |  |  | 592 |  |  | 680
Purchases |  |  | 7,036 |  |  | 2 |  |  | 7,038
Sales |  |  | (6,504) |  |  | - |  |  | (6,504)
Settlements |  |  | - |  |  | (490) |  |  | (490)
Transfers into Level 3 |  |  | 90 |  |  | 108 |  |  | 198
Transfers out of Level 3 |  |  | (10) |  |  | (153) |  |  | (163)
Ending balance, June 30, 2012 |  | $ | 1,462 |  | $ | 171 |  | $ | 1,633
|  | Level 3 Fair Value Liabilities Measurements at June 30, 2012
|  |  |  |  | Commodity |  |  |
|  | Inventory- |  | Derivative |  |  |
|  | related |  | Contracts |  |  |
|  | Payables |  | Losses |  | Total
|  | (In millions)
Balance, June 30, 2011 |  | $ | 45 |  | $ | 44 |  | $ | 89
Total increase (decrease) in unrealized |  |  |  |  |  |  |  |  |
losses included in cost of products sold |  |  | 1 |  |  | 555 |  |  | 556
Purchases |  |  | (8) |  |  | - |  |  | (8)
Settlements |  |  | - |  |  | (384) |  |  | (384)
Transfers into Level 3 |  |  | - |  |  | 72 |  |  | 72
Transfers out of Level 3 |  |  | - |  |  | (108) |  |  | (108)
Ending balance, June 30, 2012 |  | $ | 38 |  | $ | 179 |  | $ | 217
|  | Level 3 Fair Value Measurements at June 30, 2011
|  | Inventories |  | Derivative |  |  |
|  | Carried at |  | Contracts, |  |  |
|  | Market, Net |  | Net |  | Total
|  | (In millions)
Balance, June 30, 2010 |  | $ | 427 |  | $ | 13 |  | $ | 440
Total gains (losses), realized or |  |  |  |  |  |  |  |  |
unrealized, included in earnings |  |  |  |  |  |  |  |  |
before income taxes* |  |  | 171 |  |  | 79 |  |  | 250
Purchases, issuances and settlements |  |  | 254 |  |  | (2) |  |  | 252
Transfers into Level 3 |  |  | 300 |  |  | 23 |  |  | 323
Transfers out of Level 3 |  |  | (435) |  |  | (45) |  |  | (480)
Ending balance, June 30, 2011 |  | $ | 717 |  | $ | 68 |  | $ | 785
*Includes gains of $109 million that are attributable to the change in unrealized gains or losses relating to Level 3 assets and liabilities still held at June 30, 2011. Fair values for inventories and commodity purchase and sale contracts are generally estimated based on observable, exchange-quoted futures prices adjusted as needed to arrive at prices in local markets. Exchange-quoted futures prices represent quotes for contracts that have standardized terms for commodity, quantity, future delivery period, delivery location, and commodity quality or grade. In some cases, the price components that result in differences between the exchange-traded prices and the local prices are observable based upon available quotations for these pricing components, and in some cases, the differences are unobservable. These price components primarily include transportation costs and other adjustments required due to location, quality, or other contract terms. In the table below, these other adjustments will be referred to as Basis. The changes in unobservable price components are determined by specific local supply and demand characteristics at each facility and the overall market. Factors such as substitute products, weather, fuel costs, contract terms, and futures prices will also impact the movement of these unobservable price components. The following table sets forth the weighted average percentage of the unobservable price components included in the Company’s Level 3 valuations as of June 30, 2012. The Company’s Level 3 measurements may include Basis only, transportation cost only, or both price components. As an example, for Level 3 inventories with Basis, the unobservable component is a weighted average 8.8% of the total price for assets and 2.3% for liabilities.
|  | Weighted Average
|  | % of Total Price
Component Type |  | Assets |  | Liabilities
Inventories |  |  |  |  |  |
Basis |  | 8.8 | % |  | 2.3 | %
Transportation cost |  | 8.5 | % |  | 7.9 | %
Commodity Derivative Contracts |  |  |  |  |  |
Basis |  | 12.6 | % |  | 11.8 | %
Transportation cost |  | 12.6 | % |  | 14.0 | %
In certain of the Company’s principal markets, the Company relies on price quotes from third parties to value its inventories and physical commodity purchase and sale contracts. These price quotes are generally not further adjusted by the Company in determining the applicable market price. In some cases, availability of third-party quotes is limited to only one or two independent sources. In these situations, the Company considers these price quotes as 100 percent unobservable and, therefore, the fair value of these items is reported in Level 3.

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- Definition The entire disclosure for the fair value of financial instruments (as defined), including financial assets and financial liabilities (collectively, as defined), and the measurements of those instruments as well as disclosures related to the fair value of non-financial assets and liabilities. Such disclosures about the financial instruments, assets, and liabilities would include: (1) the fair value of the required items together with their carrying amounts (as appropriate); (2) for items for which it is not practicable to estimate fair value, disclosure would include: (a) information pertinent to estimating fair value (including, carrying amount, effective interest rate, and maturity, and (b) the reasons why it is not practicable to estimate fair value; (3) significant concentrations of credit risk including: (a) information about the activity, region, or economic characteristics identifying a concentration, (b) the maximum amount of loss the entity is exposed to based on the gross fair value of the related item, (c) policy for requiring collateral or other security and information as to accessing such collateral or security, and (d) the nature and brief description of such collateral or security; (4) quantitative information about market risks and how such risks are managed; (5) for items measured on both a recurring and nonrecurring basis information regarding the inputs used to develop the fair value measurement; and (6) for items presented in the financial statement for which fair value measurement is elected: (a) information necessary to understand the reasons for the election, (b) discussion of the effect of fair value changes on earnings, (c) a description of [similar groups] items for which the election is made and the relation thereof to the balance sheet, the aggregate carrying value of items included in the balance sheet that are not eligible for the election; (7) all other required (as defined) and desired information. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 16 -URI http://asc.fasb.org/extlink&oid=7491637&loc=d3e13504-108611 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 107 -Paragraph 15C, 15D -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 133 -Paragraph 44A, 44B -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 107 -Paragraph 15A -Subparagraph a-d -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. 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Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 10 -URI http://asc.fasb.org/extlink&oid=7491637&loc=d3e13433-108611 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 159 -Paragraph 17-22, 27, 28 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 825 -SubTopic 10 -Section 50 -Paragraph 21 -URI http://asc.fasb.org/extlink&oid=7491637&loc=d3e13537-108611 Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 107 -Paragraph 15B -Subparagraph a, b -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 10: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 157 -Paragraph 32, 33, 34 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. 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