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Derivative Financial Instruments

3 Months Ended

Apr. 30, 2016

Disclosure Text Block Supplement [Abstract]

Financial Instruments Disclosure [Text Block]

Note 10. Derivative Financial Instruments

The Company is exposed to various market risks, including changes in commodity prices (raw materials and finished goods). To manage risks associated with the volatility of these natural business exposures, the Company enters into commodity agreements and forward purchase (corn) and sale (ethanol, distillers grains and non-food grade corn oil) contracts. The Company does not purchase or sell derivative financial instruments for trading or speculative purposes. The Company does not purchase or sell derivative financial instruments for which a lack of marketplace quotations would require the use of fair value estimation techniques. The changes in fair value of these derivative financial instruments are recognized in current period earnings as the Company does not use hedge accounting.

The following table provides information about the fair values of the Company’s derivative financial instruments and the line items on the Consolidated Balance Sheets in which the fair values are reflected (in thousands):

		Asset Derivatives								Liability Derivatives
		Fair Value at April 30,								Fair Value at April 30,
		2016				2015				2016				2015

Commodity futures (1)		$	93			$	8			$	—			$	—
Forward purchase contracts (2)		$	—			$	—			$	3			$	—
Total

(1) Commodity futures are included in other prepaid expense and other current assets. These futures contracts are for approximately 2.5 million bushels of corn at April 30, 2016 and approximately 35,000 bushels of corn at April 30, 2015.

(2) Forward purchase contracts are included in accrued expenses and other current liabilities. These contracts are for purchases of approximately 0.6 million bushels of corn.

As of April 30, 2016, all of the derivative financial instruments held by the Company were subject to enforceable master netting arrangements. The Company’s accounting policy is to offset positions amounts owed or owing with the same counterparty. As of April 30, 2016, the gross positions of the enforceable master netting agreements are not significantly different from the net positions presented in the table above. Depending on the amount of an unrealized loss on a derivative contract held by the Company, the counterparty may require collateral to secure the Company’s derivative contract position. As of April 30, 2016, the Company was required to maintain collateral with the counterparty in the amount of approximately $520,000 to secure the Company’s derivative liability position.

See Note 4 which contains fair value information related to derivative financial instruments.

Gains of approximately $488,000 for the first quarter of fiscal year 2016 on the Company’s derivative financial instruments were included in cost of sales on the Consolidated Condensed Statements of Operations. There were no gains or losses for the first quarter of fiscal year 2015.