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Derivative Financial Instruments

3 Months Ended

Apr. 30, 2022

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
		April 30, 2022				January 31, 2022				April 30, 2022				January 31, 2022

Commodity futures (1)		$	-			$	-			$	4,066			$	933
Forward purchase contracts (2)			4,432				993				-				-
Total		$	4,432			$	993			$	4,066			$	933

(1) Commodity futures liabilities are included in accrued expenses and other current liabilities. These contracts include short/sell positions for approximately 11.8 million bushels and 7.4 million bushels of corn at April 30, 2022 and January 31, 2022, respectively. Commodity futures assets, had there been any at either April 30, 2022 or January 31, 2022, would be included in “Prepaid expenses and other current assets” on the accompanying Consolidated Condensed Balance Sheets.

(2) Forward purchase contracts assets are included in prepaid expenses and other current assets. These contracts are for purchases of approximately 20.3 million bushels and 19.2 million bushels of corn at April 30, 2022 and January 31, 2022, respectively. Forward contract liabilities, had there been any at either April 30, 2022 or January 31, 2022, would be included in “Accrued expenses and other current liabilities” on the accompanying Consolidate Condensed Balance Sheets.

As of April 30, 2022, and January 31, 2022, 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 April 30, 2022, and January 31, 2022, 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 $4,920,000 and approximately $2,222,000 to secure the Company’s

derivative liability position at April 30, 2022 and January 31, 2022, respectively, which is recorded as “Restricted cash” on the accompanying Consolidated Condensed Balance Sheets.

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

The Company recognized gains (losses), which are included in “Net sales and revenue” in the accompanying Consolidated Condensed Statement of Operations, on derivative financial instruments of approximately $322,000 and $(1,126,000) for the first quarter of fiscal years 2022 and 2021, respectively.

The Company recognized losses, which are included in “ Cost of sales” in the accompanying Consolidated Condensed Statement of Operations, on derivative financial instruments of approximately $11,776,000 and approximately $1,894,000 for the first quarter of fiscal years 2022 and 2021, respectively.