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Derivative Financial Instruments

3 Months Ended

Jul. 31, 2024

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments and Hedging Activities Disclosure [Text Block]

Note 9. 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 (exchange-traded futures contracts and swaps) 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
		July 31, 2024				January 31, 2024				July 31, 2024				January 31, 2024

Forward purchase contracts (1)		$	4			$	579			$	4,643			$	802

Cash collateral balance (3)		$	334			$	2,152			$	-			$	-
Commodity futures (2)			779				(297)				-				-
Net position with broker		$	1,113			$	1,855			$	-			$	-

Total		$	1,117			$	2,434			$	4,643			$	802

(1)

Forward purchase contracts assets are included in “Prepaid expenses and other” on the accompanying Consolidated Balance Sheets. These contracts are for purchases of approximately 0.9 million and 9.3 million bushels of corn at July 31, 2024 and January 31, 2024, respectively.

Forward purchase contracts liabilities are included in “Accrued expenses and other current liabilities” on the accompanying Consolidated Balance Sheets. These contracts are for purchases of approximately 14.1 million and 8.2 million bushels of corn at July 31, 2024 and January 31, 2024, respectively.

(2) Commodity futures assets and liabilities are included in “Prepaid expenses and other” on the accompanying Consolidated Balance Sheets. These contracts included short/sell positions and long/buy positions for approximately 2.0 million and 2.1 million bushels of corn, respectively, at July 31, 2024. These contracts also included short/sell positions for approximately 1.5 million gallons of ethanol at July 31, 2024. These contracts included short/sell positions and long/buy positions for approximately 255,000 and 6.9 million bushels of corn, respectively, at January 31, 2024. These contracts also included short/sell positions for approximately 210,000 gallons of ethanol at January 31, 2024.

(3) As of July 31, 2024 and January 31, 2024, 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 position amounts owed or owing with the same counterparty. Depending on the amount of unrealized gains and losses on derivative contracts held by the Company, the counterparty may require collateral to secure the Company’s derivative contract positions. As of July 31, 2024 and January 31, 2024, the Company was required to maintain collateral with the counterparty in the amount of approximately $0.3 million and $2.2 million, respectively, recorded within “Prepaid expenses and other” on the accompanying Consolidated Balance Sheets.

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

The Company recognized losses, which are included in “Cost of sales” in the accompanying Consolidated Statement of Operations, on derivative financial instruments related to corn purchase contracts of approximately $6.2 million and of $0.8 million for the second quarter of fiscal years 2024 and 2023, respectively. The Company recognized (losses) gains on derivative financial instruments related to corn purchase contracts of approximately $(6.1) million and $5.0 million for the first six months of fiscal years 2024 and 2023, respectively.

The Company recognized gains, which are recorded in “Net sales and revenue” in the accompanying Consolidated Statement of Operations, on derivative financial instruments related to ethanol sales contracts of approximately $0.4 million for both the three and six month period ended July 31, 2024. Gains or losses on derivates financials instruments related to ethanol sales contracts were insignificant in 2023.