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Derivative Instruments and Hedging Activities | 9 Months Ended
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Sep. 30, 2014
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Derivative Instruments and Hedging Activities | Derivative Instruments and Hedging Activities Within the Note 4 tables, zeros represent minimal amounts. Derivatives Not Designated as Hedging Instruments The majority of the Company’s derivative instruments have not been designated as hedging instruments. The Company uses exchange-traded futures and exchange-traded and OTC options contracts to manage its net position of merchandisable agricultural commodity inventories and forward cash purchase and sales contracts to reduce price risk caused by market fluctuations in agricultural commodities and foreign currencies. The Company also uses exchange-traded futures and exchange-traded and OTC options contracts as components of merchandising strategies designed to enhance margins. The results of these strategies can be significantly impacted by factors such as the correlation between the value of exchange-traded commodities futures contracts and the value of the underlying commodities, counterparty contract defaults, and volatility of freight markets. Derivatives, including exchange-traded contracts and physical purchase or sale contracts, are stated at market value. Inventories of certain merchandisable agricultural commodities, which include amounts acquired under deferred pricing contracts, are stated at market value. Inventory is not a derivative and therefore fair values of and changes in fair values of inventories are not included in the tables below. The following table sets forth the fair value of derivatives not designated as hedging instruments as of September 30, 2014 and December 31, 2013.
| September 30, 2014 |  | December 31, 2013
| Assets |  | Liabilities |  | Assets |  | Liabilities
| (In millions) |  | (In millions)
FX Contracts | $ | 239 |  |  | $ | 246 |  |  | $ | 118 |  |  | $ | 166 |
Interest Contracts | — |  |  | — |  |  | 1 |  |  | — |
Commodity Contracts | 1,289 |  |  | 1,065 |  |  | 850 |  |  | 649 |
Total | $ | 1,528 |  |  | $ | 1,311 |  |  | $ | 969 |  |  | $ | 815 |
The following tables set forth the pre-tax gains (losses) on derivatives not designated as hedging instruments that have been included in the consolidated statements of earnings for the three and nine months ended September 30, 2014 and 2013.
| Three months ended September 30,
| 2014 |  | 2013
| (In millions)
Interest Contracts |  |  |
Interest expense | $ | — |  |  | $ | 0 |
Other income (expense) – net | — |  |  | 1 |
FX Contracts |  |  |  |  |
Revenues | $ | 5 |  |  | $ | (3 | )
Cost of products sold | 17 |  |  | 29 |
Other income (expense) – net | (148 | ) |  | 85 |
Commodity Contracts |  |  |  |  |
Cost of products sold | $ | 720 |  |  | $ | (3 | )
Total gain (loss) recognized in earnings | $ | 594 |  |  | $ | 109 |
| Nine months ended September 30,
| 2014 |  | 2013
| (In millions)
Interest Contracts |  |  |
Interest expense | $ | — |  |  | $ | 0 |
Other income (expense) – net | 0 |  |  | 1 |
FX Contracts |  |  |  |  |
Revenues | $ | (3 | ) |  | $ | 106 |
Cost of products sold | 105 |  |  | (58 | )
Other income (expense) – net | (172 | ) |  | 30 |
Commodity Contracts |  |  |  |  |
Cost of products sold | $ | 213 |  |  | $ | 204 |
Total gain (loss) recognized in earnings | $ | 143 |  |  | $ | 283 |
Inventories of certain merchandisable agricultural commodities, which include amounts acquired under deferred pricing contracts, are stated at market value. Changes in the market value of inventories of certain merchandisable agricultural commodities, forward cash purchase and sales contracts, exchange-traded futures and exchange-traded and OTC options contracts are recognized in earnings immediately. Derivatives Designated as Cash Flow or Fair Value Hedging Strategies As of September 30, 2014 and December 31, 2013, the Company has certain derivatives designated as cash flow and fair value hedges. The Company uses interest rate swaps designated as fair value hedges to protect the fair value of fixed-rate debt due to changes in interest rates. The changes in the fair value of the interest rate swaps and the underlying fixed-rate debt are recorded in other (income) expense - net. The terms of the interest rate swaps match the terms of the underlying debt resulting in no ineffectiveness. At September 30, 2014, the Company has $3 million in other current assets and $4 million in accrued expenses and other payables representing the fair value of the interest rate swaps and corresponding increases and decreases in the underlying debt for the same amount with no impact to earnings. For each of the commodity hedge programs described below, the derivatives are designated as cash flow hedges. Assuming normal market conditions, the changes in the market value of such derivative contracts have historically been, and are expected to continue to be, highly effective at offsetting changes in price movements of the hedged item. Once the hedged item is recognized in earnings, the gains/losses arising from the hedge are reclassified from AOCI to either revenues or cost of products sold, as applicable. As of September 30, 2014, the Company has $9 million of after-tax gains in AOCI related to gains and losses from commodity cash flow hedge transactions. The Company expects to recognize all of these after-tax gains in its consolidated statement of earnings during the next 12 months. The Company, from time to time, uses futures or options contracts to fix the purchase price of anticipated volumes of corn to be purchased and processed in a future month. The objective of this hedging program is to reduce the variability of cash flows associated with the Company’s forecasted purchases of corn. The Company’s corn processing plants currently grind approximately 76 million bushels of corn per month. During the past 12 months, the Company hedged between 16% and 71% of its monthly anticipated grind. At September 30, 2014, the Company has designated hedges representing between 0.1% and 44% of its anticipated monthly grind of corn for the next 12 months. The Company, from time to time, also uses futures, options, and swaps to fix the sales price of certain ethanol sales contracts. The Company has established hedging programs for ethanol sales contracts that are indexed to unleaded gasoline prices and to various exchange-traded ethanol contracts. The objective of these hedging programs is to reduce the variability of cash flows associated with the Company’s sales of ethanol. During the past 12 months, the Company hedged between 9 million and 109 million gallons of ethanol sales per month under these programs. For the next 9 months, the Company has designated hedges representing between 1 million and 61 million gallons of ethanol sales per month. The following table sets forth the fair value of derivatives designated as hedging instruments as of September 30, 2014 and December 31, 2013.
| September 30, 2014 |  | December 31, 2013
| Assets |  | Liabilities |  | Assets |  | Liabilities
| (In millions) |  | (In millions)
Interest Contracts | $ | 3 |  |  | $ | 4 |  |  | $ | 0 |  |  | $ | 9 |
Total | $ | 3 |  |  | $ | 4 |  |  | $ | 0 |  |  | $ | 9 |
The following tables set forth the pre-tax gains (losses) on derivatives designated as hedging instruments that have been included in the consolidated statements of earnings for the three and nine months ended September 30, 2014 and 2013.
|  |  | Three months ended
| Consolidated Statement of Earnings Locations |  | September 30,
|  | 2014 |  | 2013
|  |  | (In millions)
Effective amounts recognized in earnings |  |  |  |  |
FX Contracts | Other income/expense – net |  | $ | 2 |  |  | $ | 0 |
Interest Contracts | Interest expense |  | 1 |  |  | 1 |
Commodity Contracts | Cost of products sold |  | (110 | ) |  | (2 | )
| Revenues |  | (1 | ) |  | (2 | )
Ineffective amount recognized in earnings |  |  |  |  |
Commodity Contracts | Revenues |  | (4 | ) |  | — |
| Cost of products sold |  | (12 | ) |  | (73 | )
Total amount recognized in earnings |  |  | $ | (124 | ) |  | $ | (76 | )
|  |  | Nine months ended
| Consolidated Statement of Earnings Locations |  | September 30,
|  | 2014 |  | 2013
|  |  | (In millions)
Effective amounts recognized in earnings |  |  |  |  |
FX Contracts | Other income/expense – net |  | $ | 2 |  |  | $ | 0 |
Interest Contracts | Interest expense |  | 1 |  |  | 1 |
Commodity Contracts | Cost of products sold |  | (103 | ) |  | (7 | )
| Revenues |  | (86 | ) |  | 3 |
Ineffective amount recognized in earnings |  |  |  |  |
Commodity Contracts | Revenues |  | (28 | ) |  | — |
| Cost of products sold |  | (19 | ) |  | (128 | )
Total amount recognized in earnings |  |  | $ | (233 | ) |  | $ | (131 | )
Hedge ineffectiveness for commodity contracts results when the change in the price of the underlying commodity in a specific cash market differs from the change in the price of the derivative financial instrument used to establish the hedging relationship. As an example, if the change in the price of a corn futures contract is strongly correlated to the change in cash price paid for corn, the gain or loss on the derivative instrument is deferred and recognized at the time the corn grind occurs. If the change in price of the derivative does not strongly correlate to the change in the cash price of corn, in the same example, some portion or all of the derivative gains or losses may be required to be recognized in earnings prior to the corn grind occurring. The following tables set forth the changes in AOCI related to derivatives gains (losses) for the three and nine months ended September 30, 2014 and 2013.
| Three months ended
| September 30,
| 2014 |  | 2013
| (In millions)
Balance at June 30, 2014 and 2013 | $ | (12 | ) |  | $ | 6 |
Unrealized gains (losses) | (49 | ) |  | 13 |
Losses (gains) reclassified to earnings | 108 |  |  | 3 |
Tax effect | (23 | ) |  | (7 | )
Balance at September 30, 2014 and 2013 | $ | 24 |  |  | $ | 15 |
| Nine months ended
| September 30,
| 2014 |  | 2013
| (In millions)
Balance at December 31, 2013 and 2012 | $ | 5 |  |  | $ | 4 |
Unrealized gains (losses) | (154 | ) |  | 15 |
Losses (gains) reclassified to earnings | 186 |  |  | 3 |
Tax effect | (13 | ) |  | (7 | )
Balance at September 30, 2014 and 2013 | $ | 24 |  |  | $ | 15 |

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- Definition The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 30 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=7668309&loc=d3e80748-113994 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=7476318&loc=d3e41635-113959 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4K -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5708775-113959 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 25 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6886632&loc=d3e76258-113986 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4A -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5618551-113959 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 30 -Section 45 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6441202&loc=d3e80720-113993 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08.(n)) -URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4H -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5624258-113959 Reference 9: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4B -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5624163-113959 Reference 10: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4E -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5624181-113959 Reference 11: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4J -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5708773-113959 Reference 12: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 30 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=7668309&loc=d3e80784-113994 Reference 13: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=7476318&loc=d3e41620-113959 Reference 14: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4D -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5624177-113959 Reference 15: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 1A -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5579245-113959 Reference 16: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 1B -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5580258-113959 Reference 17: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5579240-113959 Reference 18: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 5 -URI http://asc.fasb.org/extlink&oid=7476318&loc=d3e41641-113959 Reference 19: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=7476318&loc=d3e41638-113959 Reference 20: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 10 -Section 50 -Paragraph 4C -URI http://asc.fasb.org/extlink&oid=7476318&loc=SL5624171-113959 + Details
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