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Derivative Instruments and Hedging Activities | 3 Months Ended
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Mar. 31, 2020
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
Derivative Instruments and Hedging Activities | Derivative Instruments and Hedging Activities 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 product 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, and inventories of certain merchandisable agricultural product inventories, 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 March 31, 2020 and December 31, 2019.
| March 31, 2020 |  | December 31, 2019
| Assets |  | Liabilities |  | Assets |  | Liabilities
| (In millions)
Foreign Currency Contracts | $ | 340 |  |  | $ | 624 |  |  | $ | 125 |  |  | $ | 120 |
Commodity Contracts | 873 |  |  | 789 |  |  | 478 |  |  | 574 |
Total | $ | 1,213 |  |  | $ | 1,413 |  |  | $ | 603 |  |  | $ | 694 |
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 months ended March 31, 2020 and 2019.
|  |  |  |  | Other expense (income) - net |  |
|  |  | Cost of products sold |  |  |
(In millions) | Revenues |  |  |  |
Three Months Ended March 31, 2020 |  |  |  |  |  |  |
Consolidated Statement of Earnings | $ | 14,970 |  |  | $ | 14,019 |  |  | $ | (32 | ) |  |
Pre-tax gains (losses) on: |  |  |  |  |  |  |
Foreign Currency Contracts | $ | 35 |  |  | $ | (585 | ) |  | $ | 124 |  |  |
Commodity Contracts | — |  |  | 622 |  |  | 55 |  |  |
Total gain (loss) recognized in earnings | $ | 35 |  |  | $ | 37 |  |  | $ | 179 |  |  | $ | 251 |
Three Months Ended March 31, 2019 |  |  |  |  |  |  |
Consolidated Statement of Earnings | $ | 15,304 |  |  | $ | 14,376 |  |  | $ | (8 | ) |  |
Pre-tax gains (losses) on: |  |  |  |  |  |  |
Foreign Currency Contracts | $ | 8 |  |  | $ | — |  |  | $ | (30 | ) |  |
Commodity Contracts | — |  |  | 120 |  |  | — |  |  |
Total gain (loss) recognized in earnings | $ | 8 |  |  | $ | 120 |  |  | $ | (30 | ) |  | $ | 98 |
Changes in the market value of inventories of certain merchandisable agricultural product inventories, forward cash purchase and sales contracts, exchange-traded futures and exchange-traded and OTC options contracts are recognized in earnings immediately as a component of cost of products sold. Derivatives Designated as Cash Flow, Fair Value or Net Investment Hedging Strategies As of March 31, 2020 and December 31, 2019, the Company had certain derivatives designated as cash flow, fair value, and net investment hedges. For derivative instruments that are designated and qualify as fair value hedges, changes in the fair value of the hedging instrument and changes in the fair value of the hedged item are recognized in the consolidated statement of earnings during the period. The Company uses interest rate swaps designated as fair value hedges to protect the fair value of $496 million in fixed-rate debt due to changes in interest rates. The terms of the interest rate swaps match the terms of the underlying debt. At March 31, 2020 and December 31, 2019, the Company had $8 million and $3 million in other current assets, respectively, representing the fair value of the interest rate swaps and a corresponding increase in the underlying debt for the same amount with no net impact to earnings. For derivatives instruments that are designated and qualify as net investment hedges, foreign exchange gains and losses related to changes in foreign currency exchange rates are deferred in AOCI until the underlying investment is divested. The Company uses cross-currency swaps and foreign exchange forwards designated as net investment hedges to protect the Company’s investment in a foreign subsidiary against changes in foreign currency exchange rates. The Company executed USD-fixed to Euro-fixed cross-currency swaps with an aggregate notional amount of $1.2 billion as of March 31, 2020 and December 31, 2019 and foreign exchange forwards with an aggregate notional amount of $282 million as of March 31, 2020. As of March 31, 2020 and December 31, 2019, the Company had after-tax gains of $75 million and $6 million in AOCI, respectively, related to foreign exchange gains and losses from these net investment hedge transactions. The amount is deferred in AOCI until the underlying investment is divested. For derivative instruments that are designated and qualify as highly-effective cash flow hedges (i.e., hedging the exposure to variability in expected future cash flow that is attributable to a particular risk), the gain or loss on the derivative instrument is reported as a component of accumulated other comprehensive income (loss) (“AOCI”) and as an operating activity in the statement of cash flows and reclassified into earnings in the same line item affected by the hedged transaction and in the same period or periods during which the hedged transaction affects earnings. Hedge components excluded from the assessment of effectiveness and gains and losses related to discontinued hedges are recognized in the consolidated statement of earnings during the current period. The Company uses interest rate swaps designated as cash flow hedges to hedge the forecasted interest payments on certain letters of credit from banks. The terms of the interest rate swaps match the terms of the forecasted interest payments. The deferred gains and losses are recognized in other (income) expense - net over the period in which the related interest payments are paid to the banks. The Company also uses swap locks designated as cash flow hedges to hedge the changes in the forecasted interest payments due to changes in the benchmark rate leading up to future bond issuance dates. The terms of the swap locks match the terms of the forecasted interest payments. The deferred gains and losses will be recognized in interest expense over the period in which the related interest payments will be paid. During the quarter ended March 31, 2020, the Company executed swap locks maturing on various dates with an aggregate notional amount of $550 million. As of March 31, 2020 and December 31, 2019, the Company had after-tax losses of $50 million and $43 million in AOCI, respectively, related to the interest rate swaps and the swap locks. The Company expects to recognize this amount in its consolidated statement of earnings during the life of the instruments. For each of the hedge programs described below, the derivatives are designated as cash flow hedges. 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 and losses arising from the hedge are reclassified from AOCI to either revenues or cost of products sold, as applicable. As of March 31, 2020 and December 31, 2019, the Company had after-tax losses of $50 million and $5 million in AOCI, respectively, related to gains and losses from these programs. The Company expects to recognize $50 million of the March 31, 2020 after-tax losses in its consolidated statement of earnings during the next 12 months. The Company uses futures or options contracts to hedge 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 72 million bushels of corn per month. During the past 12 months, the Company hedged between 20% and 60% of its monthly anticipated grind. At March 31, 2020, the Company had designated hedges representing between 1% and 28% 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 hedge 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 0 million and 91 million gallons of ethanol sales per month under these programs. At March 31, 2020, the Company had designated hedges representing 1 million gallons of ethanol sales per month over the next 3 months. The Company uses futures and options contracts to hedge the purchase price of anticipated volumes of soybeans to be purchased and processed in a future month for certain of its U.S. soybean crush facilities. The Company also uses futures or options contracts to hedge the sales prices of anticipated soybean meal and soybean oil sales proportionate to the soybean crushing process at these facilities. During the past 12 months, the Company hedged between 79% and 100% of the anticipated monthly soybean crush for soybean purchases and soybean meal and oil sales at the designated facilities. At March 31, 2020, the Company had designated hedges representing between 1% and 100% of the anticipated monthly soybean crush for soybean purchases and soybean meal and oil sales at the designated facilities over the next 12 months. The following table sets forth the fair value of derivatives designated as hedging instruments as of March 31, 2020 and December 31, 2019.
| March 31, 2020 |  | December 31, 2019
| Assets |  | Liabilities |  | Assets |  | Liabilities
| (In millions)
Foreign Currency Contracts | $ | 99 |  |  | $ | — |  |  | $ | 13 |  |  | $ | 5 |
Interest Rate Contracts | 14 |  |  | 56 |  |  | 3 |  |  | 43 |
Total | $ | 113 |  |  | $ | 56 |  |  | $ | 16 |  |  | $ | 48 |
The following table sets 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 months ended March 31, 2020 and 2019.
|  |  | Cost of products sold |  | Interest expense |  | Other expense (income) - net |  |
(In millions) | Revenues |  |  |  |  |
Three Months Ended March 31, 2020 |  |  |  |  |  |  |
Consolidated Statement of Earnings | $ | 14,970 |  |  | $ | 14,019 |  |  | $ | 83 |  |  | $ | (32 | ) |  |
Effective amounts recognized in earnings |  |  |  |  |  |  |  |  |
Pre-tax gains (losses) on: |  |  |  |  |  |  |  |  |
Commodity Contracts | 5 |  |  | (24 | ) |  | — |  |  | — |  |  |
Interest Contracts | — |  |  | — |  |  | — |  |  | (25 | ) |  |
Total gain (loss) recognized in earnings | $ | 5 |  |  | $ | (24 | ) |  | $ | — |  |  | $ | (25 | ) |  | $ | (44 | )
Three Months Ended March 31, 2019 |  |  |  |  |  |  |  |  |
Consolidated Statement of Earnings | $ | 15,304 |  |  | $ | 14,376 |  |  | $ | 101 |  |  | $ | (8 | ) |  |
Effective amounts recognized in earnings |  |  |  |  |  |  |  |  |
Pre-tax gains (losses) on: |  |  |  |  |  |  |  |  |
Commodity Contracts | $ | (13 | ) |  | $ | 5 |  |  | $ | — |  |  | $ | — |  |  |
Total gain (loss) recognized in earnings | $ | (13 | ) |  | $ | 5 |  |  | $ | — |  |  | $ | — |  |  | $ | (8 | )
Other Net Investment Hedging Strategies The Company has designated €1.4 billion and €1.7 billion of its outstanding long-term debt and commercial paper borrowings at March 31, 2020 and December 31, 2019, respectively, as hedges of its net investment in a foreign subsidiary. As of March 31, 2020 and December 31, 2019, the Company had after-tax gains of $55 million and $7 million in AOCI, respectively, related to foreign exchange gains and losses from these net investment hedge transactions. The amount is deferred in AOCI until the underlying investment is divested.

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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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -URI http://asc.fasb.org/topic&trid=2229140 + Details
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