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Derivative Financial Instruments

9 Months Ended

Oct. 31, 2020

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments and Hedging Activities Disclosure [Text Block]

Note 8. 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 natural gas) 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 following table provides information about the fair values of the Company’s derivative financial instruments (that are not accounted for under the “normal purchases and normal sales” scope exemption of ASC 815) and the line items on the Consolidated Condensed Balance Sheets in which the fair values are reflected (in thousands):

	Asset Derivatives				Liability Derivatives
	Fair Value				Fair Value
	October 31, 2020		January 31, 2020		October 31, 2020		January 31, 2020

Commodity futures and swaps (1)	$	-	$	352	$	378	$	-
Forward purchase contracts (2)		351		-		-		230
Total	$	351	$	352	$	378	$	230

(1) Commodity futures and swaps assets are included in prepaid expenses and other current assets. These contracts are short/sell positions for approximately 3.7 million bushels of corn and long/buy positions for approximately 2.2 million bushels of corn at January 31, 2020. Commodity futures and swaps liabilities are included in accrued expenses and other current liabilities. These contracts are short/sell positions for approximately 4.6 million bushels of corn, long/buy positions for approximately 4.8 million bushels of corn and short/sell positions for approximately 4.2 million gallons of ethanol at October 31, 2020.

(2) Forward purchase contracts assets are included in prepaid expenses and other current assets. These contracts are for purchases of approximately 5.4 million bushels of corn at October 31, 2020. Forward purchase contracts liabilities are included in accrued expenses and other current liabilities. These contracts are for purchases of approximately 1.6 million bushels of corn at January 31, 2020.

As of October 31, 2020, and January 31, 2020, all the derivative financial instruments held by the Company were subject to enforceable master netting arrangements. The Company’s accounting policy is to offset positions and amounts owed or owing with the same counterparty. As of October 31, 2020, and January 31, 2020, 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. The Company was required to maintain collateral in the amount of approximately $884,000 and approximately $1,113,000 to secure the Company’s derivative position at October 31, 2020 and January 31, 2020, respectively.

See Note 5 which contains fair value information related to derivative financial instruments.

(Losses) gains on derivative financial instruments of approximately $(26,000) and approximately $248,000 for the third quarters of fiscal years 2020 and 2019, respectively, were included in cost of sales on the Consolidated Condensed Statements of Operations. (Losses) gains on derivative financial instruments of approximately $(1,785,000) and approximately $1,478,000 for the first nine months of fiscal years 2020 and 2019, respectively, were included in cost of sales on the Consolidated Condensed Statements of Operations.

Losses on derivative financial instruments of approximately $777,000 and $1,076,000 for the third quarter and first nine months, respectively, of fiscal year 2020 were included in net sales and revenue on the Consolidated Condensed Statements of Operations.