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Derivative Financial Instruments

9 Months Ended

Oct. 31, 2021

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 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 (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 Fair Value								Liability Derivatives Fair Value
		October 31, 2021				January 31, 2021				October 31, 2021				January 31, 2021

Commodity futures (1)		$	-			$	-			$	3,822			$	1,794
Forward purchase contracts (2)			430				2,144				687				-
Total		$	430			$	2,144			$	4,509			$	1,794

(1) Commodity futures liabilities are included in accrued expenses and other current liabilities. These contracts include short/sell positions for approximately 690,000 bushels of corn and 5.5 million gallons of ethanol at October 31, 2021. These contracts include short/sell positions for approximately 6.9 million bushels of corn at January 31, 2021. These contracts included long/buy positions for approximately 2.3 million bushels of corn at October 31, 2021. There were no long/buy positions at January 31, 2021. Commodity futures assets, had there been any at either October 31, 2021 or January 31, 2021 would be included in prepaid expenses and other assets.

(2) Forward purchase contracts assets are included in prepaid expenses and other current assets. These contracts are for purchases of approximately 5.7 million bushels of corn at October 31, 2021 and 6.4 million bushels of corn at January 31, 2021. Forward contract liabilities are included in accrued expenses and other current liabilities. These contracts are for purchases of approximately 6.7 million bushels of corn at October 31, 2021. There were no forward contract liabilities as of January 31, 2021.

As of October 31, 2021, and January 31, 2021, all of the derivative financial instruments held by the Company were subject to enforceable master netting arrangements with the counterparty. The Company’s accounting policy is to offset positions and amounts owed or owing with the same counterparty. As of October 31, 2021, and January 31, 2021, 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 $1,737,000 and approximately $1,657,000 to secure the Company’s derivative position at October 31, 2021 and January 31, 2021, respectively.

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

The Company recognized losses (included in net sales and revenue) on derivative financial instruments of approximately $2,144,000 and $777,000 for the third quarter of fiscal years 2021 and 2020, respectively. The Company recognized losses (included in net sales and revenue) on derivative financial instruments of approximately $4,907,000 and $1,076,000 for the first nine months of fiscal years 2021 and 2020, respectively.

The Company recognized gains (included in cost of sales) on derivative financial instruments of approximately $5,474,000 and losses of approximately $26,000 for the third quarter of fiscal years 2021 and 2020, respectively. The Company recognized losses (included in cost of sales) on derivative financial instruments of approximately $2,562,000 and approximately $1,785,000 for the first nine months of fiscal years 2021 and 2020, respectively.