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Derivative Financial Instruments

3 Months Ended

Apr. 30, 2023

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 distillers 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 Balance Sheets in which the fair values are reflected (in thousands):

		Asset Derivatives Fair Value								Liability Derivatives Fair Value
		April 30, 2023				January 31, 2023				April 30, 2023				January 31, 2023

Commodity futures (1)		$	2,366			$	80			$	554			$	67
Forward purchase contracts (2)			1,301				105				2,097				355
Total		$	3,667			$	185			$	2,651			$	422

(1) Commodity futures assets are included in “Prepaid expenses and other” on the accompanying Consolidated Balance Sheets. These contracts include short/sell positions and long/buy positions for

approximately 5.5 million bushels and 20,000 bushels of corn, respectively at April 30, 2023. These contracts included short/sell positions and long/buy positions for approximately 3.2 million bushels and 725,000 bushels of corn, respectively at January 31, 2023. Commodity futures liabilities are included in “Accrued expenses and other current liabilities” on the accompanying Consolidated Balance Sheets. These contracts included short/sell positions for approximately 3.9 million bushels and 1.4 million bushels of corn at April 30, 2023 and January 31, 2023, respectively.

(2) Forward purchase contracts assets are included in “Prepaid expenses and other” on the accompanying Consolidated Balance Sheets. These contracts were for purchases of approximately 9.3 million bushels and 5.2 million bushels of corn at April 30, 2023 and January 31, 2023, respectively. Forward contract liabilities are included in “Accrued expenses and other current liabilities” on the accompanying Consolidated Condensed Balance Sheets. These contracts were for purchases of approximately 9.8 million bushels and 12.8 million bushels of corn at April 30, 2023 and January 31, 2023, respectively.

As of April 30, 2023, and January 31, 2023, 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 with the same counterparty. As of April 30, 2023, and January 31, 2023, the gross positions of the enforceable master netting agreements were 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 $3,379,000 and approximately $1,735,000 to secure the Company’s derivative liability position at April 30, 2023 and January 31, 2023, respectively, which is recorded as “Restricted cash” on the accompanying Consolidated Balance Sheets.

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

The Company recognized gains, which are included in “Net sales and revenue” in the accompanying Consolidated Statement of Operations, on derivative financial instruments of approximately $730,000 and $322,000 for the first quarter of fiscal years 2023 and 2022, respectively.

The Company recognized gains (losses), which are included in “Cost of sales” in the accompanying Consolidated Statement of Operations, on derivative financial instruments of approximately $5,806,000 and of $(11,776,000) for the first quarter of fiscal years 2023 and 2022, respectively.