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Derivative Financial Instruments
 3 Months Ended
Mar. 31, 2017
Derivative Financial Instruments [Abstract]  
Derivative Financial Instruments

7.  DERIVATIVE FINANCIAL INSTRUMENTS



At March 31, 2017, the company’s consolidated balance sheet reflected unrealized losses of $5.6 million, net of tax, in accumulated other comprehensive income (loss). The company expects these losses will be reclassified in operating income over the next 12 months as a result of hedged transactions that are forecasted to occur. The amount realized in operating income will differ as commodity prices change.



Fair Values of Derivative Instruments



The fair values of the company’s derivative financial instruments and the line items on the consolidated balance sheets where they are reported are as follows (in thousands):











 

 

 

 

 

 

 

 

 

 

 

 



 

Asset Derivatives'

 

Liability Derivatives'



 

Fair Value

 

Fair Value



 

March 31,

 

December 31,

 

March 31,

 

December 31,



 

2017

 

2016

 

2017

 

2016

Derivative financial instruments (1)

 

$

 5,040 

(2)

$

 14,818 

(3)

$

 -

 

$

 -

Other assets

 

 

 1 

 

 

 -

 

 

 -

 

 

 -

Accrued and other liabilities

 

 

 -

 

 

 -

 

 

 7,131 

 

 

 27,099 

Other liabilities

 

 

 -

 

 

 -

 

 

 59 

 

 

 81 

Total

 

$

 5,041 

 

$

 14,818 

 

$

 7,190 

 

$

 27,180 



(1) Derivative financial instruments as reflected on the consolidated balance sheets are net of related margin deposit assets of $28.9 million and $50.6 million at March 31, 2017 and December 31, 2016, respectively.

(2) Balance at March 31, 2017 includes $6.8 million of net unrealized losses on derivative financial instruments designated as cash flow hedging instruments.

(3)Balance at December 31, 2016 includes $17.0 million of net unrealized losses on derivative financial instruments designated as cash flow hedging instruments.





Refer to Note 3 - Fair Value Disclosures, which contains fair value information related to derivative financial instruments.



Effect of Derivative Instruments on Consolidated Statements of Operations and Consolidated Statements of Stockholders’ Equity and Comprehensive Income



The gains or losses recognized in income and other comprehensive income related to the company’s derivative financial instruments and the line items on the consolidated financial statements where they are reported are as follows (in thousands):





 

 

 

 

 

 

Gains (Losses) on Derivative Instruments Not

 

Three Months Ended
March 31,

 Designated in a Hedging Relationship

 

2017

 

2016

Revenues

 

$

 (5,048)

 

$

 (2,794)

Cost of goods sold

 

 

 11,936 

 

 

 (5,846)

Net increase (decrease) recognized in earnings before tax

 

$

 6,888 

 

$

 (8,640)







 

 

 

 

 

 

Gains (Losses) Due to Ineffectiveness

 

Three Months Ended
March 31,

of Cash Flow Hedges

 

2017

 

2016

Revenues

 

$

 (133)

 

$

 -

Cost of goods sold

 

 

 -

 

 

 -

Net decrease recognized in earnings before tax

 

$

 (133)

 

$

 -







 

 

 

 

 

 

Gains (Losses) Reclassified from Accumulated
Other Comprehensive Income (Loss)

 

Three Months Ended
March 31,

into Net Income

 

2017

 

2016

Revenues

 

$

 4,152 

 

$

 245 

Cost of goods sold

 

 

 830 

 

 

 1,889 

Net increase recognized in earnings before tax

 

$

 4,982 

 

$

 2,134 







 

 

 

 

 

 

Effective Portion of Cash Flow
Hedges Recognized in

 

Three Months Ended
March 31,

Other Comprehensive Income (Loss)

 

2017

 

2016

Commodity Contracts

 

$

 2,610 

 

$

 2,282 







 

 

 

 

 

 

Gains (Losses) from Fair Value

 

Three Months Ended
March 31,

Hedges of Inventory

 

2017

 

2016

Revenues (effect of change in inventory value)

 

$

 1,421 

 

$

 1,760 

Cost of goods sold (effect of change in inventory value)

 

 

 (1,928)

 

 

 (4,898)

Revenues (effect of fair value hedge)

 

 

 (1,095)

 

 

 (1,760)

Cost of goods sold (effect of fair value hedge)

 

 

 3,039 

 

 

 5,808 

Ineffectiveness recognized in earnings before tax

 

$

 1,437 

 

$

 910 



There were no gains or losses from discontinuing cash flow or fair value hedge treatment during the three months ended March 31, 2017 and 2016.  



The open commodity derivative positions as of March 31, 2017, are as follows (in thousands):







 

 

 

 

 

 

 

 

 

 

March 31, 2017



 

Exchange Traded

 

Non-Exchange Traded

 

 

 

 

Derivative
Instruments

 

Net Long &
(Short) (1)

 

Long (2)

 

(Short) (2)

 

Unit of
Measure

 

Commodity



 

 

 

 

 

 

 

 

 

 

Futures

 

 (72,350)

 

 

 

 

 

Bushels

 

Corn, Soybeans and Wheat

Futures

 

 340 

(3)

 

 

 

 

Bushels

 

Corn

Futures

 

 21,915 

(4)

 

 

 

 

Bushels

 

Corn

Futures

 

 164,112 

 

 

 

 

 

Gallons

 

Ethanol

Futures

 

 (5,880)

(3)

 

 

 

 

Gallons

 

Ethanol

Futures

 

 (12,390)

(4)

 

 

 

 

Gallons

 

Ethanol

Futures

 

 (1,470)

 

 

 

 

 

MmBTU

 

Natural Gas

Futures

 

 (6,660)

(4)

 

 

 

 

MmBTU

 

Natural Gas

Futures

 

 6,800 

 

 

 

 

 

Pounds

 

Livestock

Futures

 

 (123,240)

(3)

 

 

 

 

Pounds

 

Livestock

Futures

 

 (229)

 

 

 

 

 

Barrels

 

Crude Oil

Futures

 

 (43)

(4)

 

 

 

 

Barrels

 

Crude Oil

Futures

 

 3,444 

(3)

 

 

 

 

Gallons

 

Natural Gasoline

Options

 

 1,414 

 

 

 

 

 

Bushels

 

Corn, Soybeans and Wheat

Options

 

 (22,203)

 

 

 

 

 

Gallons

 

Ethanol

Options

 

 (4,718)

 

 

 

 

 

Pounds

 

Livestock

Options

 

 120 

 

 

 

 

 

Barrels

 

Crude Oil

Forwards

 

 

 

 18,298 

 

 (1,751)

 

Bushels

 

Corn and Soybeans

Forwards

 

 

 

 34,105 

 

 (337,535)

 

Gallons

 

Ethanol

Forwards

 

 

 

 105 

 

 (323)

 

Tons

 

Distillers Grains

Forwards

 

 

 

 30,437 

 

 (152,923)

 

Pounds

 

Corn Oil

Forwards

 

 

 

 18,246 

 

 (1,599)

 

MmBTU

 

Natural Gas

Forwards

 

 

 

 873 

 

 (670)

 

Barrels

 

Crude Oil



 

 

 

 

 

 

 

 

 

 



(1)

Exchange traded futures and options are presented on a net long and (short) position basis. Options are presented on a delta-adjusted basis.

(2)

Non-exchange traded forwards are presented on a gross long and (short) position basis including both fixed-price and basis contracts.

(3)

Futures used for cash flow hedges.

(4)

Futures or non-exchange traded forwards used for fair value hedges.





Energy trading contracts that do not involve physical delivery are presented net in revenues on the consolidated statements of operations. Included in revenues are net gains on energy trading contracts of $8.2 million and $3.4 million for the three months ended March 31, 2017, and 2016, respectively.