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Derivative Instruments and Hedging Activities | 9 Months Ended
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Sep. 30, 2022
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 forward commodity purchase or sale contracts, and inventories of certain merchandisable agricultural products, which include amounts acquired under deferred pricing contracts, are stated at fair value or 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, 2022 and December 31, 2021.
| September 30, 2022 |  | December 31, 2021
| Assets |  | Liabilities |  | Assets |  | Liabilities
| (In millions)
Foreign Currency Contracts | $ | 380 |  |  | $ | 337 |  |  | $ | 217 |  |  | $ | 116 |
Commodity Contracts | 1,373 |  |  | 1,390 |  |  | 1,276 |  |  | 1,759 |
Debt Conversion Option | — |  |  | 3 |  |  | — |  |  | 15 |
Total | $ | 1,753 |  |  | $ | 1,730 |  |  | $ | 1,493 |  |  | $ | 1,890 |
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, 2022 and 2021.
|  |  |  |  | Other expense (income) - net |  |  |  |
|  |  | Cost of |  |  | Interest |  |
(In millions) | Revenues |  | products sold |  |  | expense |  |
Three Months Ended September 30, 2022 |  |  |  |  |  |  |  |  |
Consolidated Statement of Earnings | $ | 24,683 |  |  | $ | 22,872 |  |  | $ | (67) |  |  | $ | 97 |  |  |
Pre-tax gains (losses) on: |  |  |  |  |  |  |  |  |
Foreign Currency Contracts | $ | (5) |  |  | $ | 6 |  |  | $ | 151 |  |  | $ | — |  |  |
Commodity Contracts | — |  |  | 134 |  |  | — |  |  | — |  |  |
Debt Conversion Option | — |  |  | — |  |  | — |  |  | 8 |  |  |
Total gain (loss) recognized in earnings | $ | (5) |  |  | $ | 140 |  |  | $ | 151 |  |  | $ | 8 |  |  | $ | 294 |
Three Months Ended September 30, 2021 |  |  |  |  |  |  |  |  |
Consolidated Statement of Earnings | $ | 20,340 |  |  | $ | 19,014 |  |  | $ | 20 |  |  | $ | 61 |  |  |
Pre-tax gains (losses) on: |  |  |  |  |  |  |  |  |
Foreign Currency Contracts | $ | 13 |  |  | $ | (92) |  |  | $ | 62 |  |  | $ | — |  |  |
Commodity Contracts | — |  |  | 214 |  |  | — |  |  | — |  |  |
Debt Conversion Option | — |  |  | — |  |  | — |  |  | 7 |  |  |
Total gain (loss) recognized in earnings | $ | 13 |  |  | $ | 122 |  |  | $ | 62 |  |  | $ | 7 |  |  | $ | 204 |
|  |  |  |  | Other expense (income) - net |  |  |  |
|  |  | Cost of |  |  | Interest |  |
(In millions) | Revenues |  | products sold |  |  | expense |  |
Nine Months Ended September 30, 2022 |  |  |  |  |  |  |  |  |
Consolidated Statement of Earnings | $ | 75,617 |  |  | $ | 69,809 |  |  | $ | (183) |  |  | $ | 262 |  |  |
Pre-tax gains (losses) on: |  |  |  |  |  |  |  |  |
Foreign Currency Contracts | $ | (30) |  |  | $ | 354 |  |  | $ | 414 |  |  | $ | — |  |  |
Commodity Contracts | — |  |  | 95 |  |  | — |  |  | — |  |  |
Debt Conversion Option | — |  |  | — |  |  | — |  |  | 12 |  |  |
Total gain (loss) recognized in earnings | $ | (30) |  |  | $ | 449 |  |  | $ | 414 |  |  | $ | 12 |  |  | $ | 845 |
Nine Months Ended September 30, 2021 |  |  |  |  |  |  |  |  |
Consolidated Statement of Earnings | $ | 62,159 |  |  | $ | 57,822 |  |  | $ | 36 |  |  | $ | 188 |  |  |
Pre-tax gains (losses) on: |  |  |  |  |  |  |  |  |
Foreign Currency Contracts | $ | — |  |  | $ | (140) |  |  | $ | 137 |  |  | $ | — |  |  |
Commodity Contracts | — |  |  | (1,241) |  |  | — |  |  | — |  |  |
Debt Conversion Option | — |  |  | — |  |  | — |  |  | 17 |  |  |
Total gain (loss) recognized in earnings | $ | — |  |  | $ | (1,381) |  |  | $ | 137 |  |  | $ | 17 |  |  | $ | (1,227) |
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 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 revenues, cost of products sold, and other (income) expense - net depending on the purpose of the contract. Derivatives Designated as Cash Flow and Net Investment Hedging Strategies The Company had certain derivatives designated as cash flow and net investment hedges as of September 30, 2022 and December 31, 2021. For derivative 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 $0.7 billion and $1.2 billion as of September 30, 2022 and December 31, 2021, respectively, and foreign exchange forwards with an aggregate notional amount of $2.3 billion and $2.6 billion as of September 30, 2022 and December 31, 2021, respectively. As of September 30, 2022 and December 31, 2021, the Company had after-tax gains of $283 million and after-tax losses of $44 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 AOCI and as an operating activity in the statement of cash flows, and is reclassified into earnings in the same line item affected by the hedged transaction 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’s structured trade finance programs use 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 revenues over the period in which the related interest payments are paid to the banks. The amounts are recorded in revenues as the related results are also recorded in revenues. As of September 30, 2022 and December 31, 2021, the Company had interest rate swaps maturing on various dates with aggregate notional amounts of $0.5 billion and $1.0 billion, respectively. 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. As of September 30, 2022 and December 31, 2021, the Company executed swap locks maturing on various dates with an aggregate notional amount of $400 million. As of September 30, 2022 and December 31, 2021, the Company had after-tax gains of $80 million and $35 million in AOCI, respectively, related to the interest rate swaps and swap locks. The Company expects to recognize amounts deferred in AOCI in its consolidated statement of earnings during the life of the debt 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 September 30, 2022 and December 31, 2021, the Company had after-tax gains of $270 million and $161 million in AOCI, respectively, related to gains and losses from these programs. The Company expects to recognize $270 million of the September 30, 2022 after-tax gains 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 normally grind approximately 65 million bushels of corn per month. During the past 12 months, the Company hedged between 17% and 32% of its monthly grind. At September 30, 2022, the Company had designated hedges representing between 5% and 33% 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 and as of September 30, 2022, the Company had no hedges related to ethanol sales under these programs. The Company uses futures and options contracts to hedge the purchase price of the anticipated volumes of soybeans to be purchased and processed in a future month for certain of its U.S. soybean crush facilities, subject to certain program limits. 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, subject to certain program limits. During the past 12 months, the Company hedged between 85% and 100% of the anticipated monthly soybean crush for soybean purchases and soybean meal and oil sales at the designated facilities. At September 30, 2022, the Company had designated hedges representing between 0% 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 Company uses futures and OTC swaps to hedge the purchase price of anticipated volumes of natural gas consumption in a future month for certain of its facilities in North America and Europe, subject to certain program limits. During the past 12 months, the Company hedged between 0% and 121% of the anticipated monthly natural gas consumption at the designated facilities. At September 30, 2022, the Company had designated hedges representing between 0% and 89% of the anticipated monthly natural gas consumption over the next 12 months. The following table sets forth the fair value of derivatives designated as hedging instruments as of September 30, 2022 and December 31, 2021.
| September 30, 2022 |  | December 31, 2021
| Assets |  | Liabilities |  | Assets |  | Liabilities
| (In millions)
Commodity Contracts | $ | 86 |  |  | $ | — |  |  | $ | 86 |  |  | $ | — |
Foreign Currency Contracts | 371 |  |  | — |  |  | 21 |  |  | $ | 75 |
Interest Rate Contracts | 105 |  |  | — |  |  | 46 |  |  | — |
Total | $ | 562 |  |  | $ | — |  |  | $ | 153 |  |  | $ | 75 |
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 and nine months ended September 30, 2022 and 2021.
|  |  | Cost of products sold |  |  |  |  |  |  |  |  |  |
(In millions) | Revenues |  |  |  |  |  |  |
Three Months Ended September 30, 2022 |  |  |  |  |  |  |  |  |  |  |  |  |
Consolidated Statement of Earnings | $ | 24,683 |  |  | $ | 22,872 |  |  |  |  |  |  |  |  |  |  |
Effective amounts recognized in earnings |  |  |  |  |  |  |  |  |  |  |  |  |
Pre-tax gains (losses) on: |  |  |  |  |  |  |  |  |  |  |  |  |
Commodity Contracts | $ | — |  |  | $ | 117 |  |  |  |  |  |  |  |  |  |  |
Interest Contracts | 1 |  |  | — |  |  |  |  |  |  |  |  |  |  |
Total gain (loss) recognized in earnings | $ | 1 |  |  | $ | 117 |  |  |  |  |  |  |  |  |  |  | $ | 118 |
Three Months Ended September 30, 2021 |  |  |  |  |  |  |  |  |  |  |  |  |
Consolidated Statement of Earnings | $ | 20,340 |  |  | $ | 19,014 |  |  |  |  |  |  |  |  |  |  |
Effective amounts recognized in earnings |  |  |  |  |  |  |  |  |  |  |  |  |
Pre-tax gains (losses) on: |  |  |  |  |  |  |  |  |  |  |  |  |
Commodity Contracts | $ | — |  |  | $ | 122 |  |  |  |  |  |  |  |  |  |  |
Interest Contracts | — |  |  | — |  |  |  |  |  |  |  |  |  |  |
Total gain (loss) recognized in earnings | $ | — |  |  | $ | 122 |  |  |  |  |  |  |  |  |  |  | $ | 122 |
|  |  | Cost of products sold |  |  |  |  |  |
(In millions) | Revenues |  |  |  |  |
Nine Months Ended September 30, 2022 |  |  |  |  |  |  |  |  |
Consolidated Statement of Earnings | $ | 75,617 |  |  | $ | 69,809 |  |  |  |  |  |  |
Effective amounts recognized in earnings |  |  |  |  |  |  |  |  |
Pre-tax gains (losses) on: |  |  |  |  |  |  |  |  |
Commodity Contracts | $ | — |  |  | $ | 365 |  |  |  |  |  |  |
Interest Contracts | 1 |  |  | — |  |  |  |  |  |  |
Total gain (loss) recognized in earnings | $ | 1 |  |  | $ | 365 |  |  |  |  |  |  | $ | 366 |
Nine Months Ended September 30, 2021 |  |  |  |  |  |  |  |  |
Consolidated Statement of Earnings | $ | 62,159 |  |  | $ | 57,822 |  |  |  |  |  |  |
Effective amounts recognized in earnings |  |  |  |  |  |  |  |  |
Pre-tax gains (losses) on: |  |  |  |  |  |  |  |  |
Commodity Contracts | $ | — |  |  | $ | 450 |  |  |  |  |  |  |
Interest Contracts | (15) |  |  | — |  |  |  |  |  |  |
Total gain (loss) recognized in earnings | $ | (15) |  |  | $ | 450 |  |  |  |  |  |  | $ | 435 |
Other Net Investment Hedging Strategies The Company has designated €1.3 billion and €1.8 billion of its outstanding long-term debt and commercial paper borrowings at September 30, 2022 and December 31, 2021, respectively, as hedges of its net investment in a foreign subsidiary. As of September 30, 2022 and December 31, 2021, the Company had after-tax gains of $311 million and $55 million in AOCI, respectively, related to foreign exchange gains and losses from 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 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 815 -SubTopic 40 -Section 50 -Paragraph 5 -Subparagraph (f) -URI http://asc.fasb.org/extlink&oid=123477628&loc=d3e90205-114008 + Details
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