Derivative Financial Instruments

12 Months Ended

Dec. 31, 2020

Derivative Financial Instruments [Abstract]

11. DERIVATIVE FINANCIAL INSTRUMENTS

At December 31, 2020, the company’s consolidated balance sheet reflected unrealized losses of $2.2 million, net of tax, in accumulated other comprehensive loss. The company expects these items will be reclassified as 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 at December 31,						Fair Value at December 31,
	2020			2019			2020			2019
Derivative financial instruments	$	21,956	⁽¹⁾	$	14,515	⁽²⁾	$	10,997	⁽³⁾	$	7,771
Other assets		29			-			-			-
Total	$	21,985		$	14,515		$	10,997		$	7,771

(1)At December 31, 2020, derivative financial instruments, as reflected on the balance sheet, includes net unrealized gains on exchange traded futures and options contracts of $3.3 million, which include $2.8 million of net unrealized gains on derivative financial instruments designated as cash flow hedging instruments.

(2)At December 31, 2019, derivative financial instruments, as reflected on the balance sheet, includes net unrealized gains on exchange traded futures and options contracts of $3.4 million, which include $0.1 million of net unrealized gains on derivative financial instruments designated as cash flow hedging instruments.

(3)At December 31, 2020, derivative financial instruments, as reflected on the balance sheet, includes net unrealized losses on exchange traded futures and options contracts of $9.3 million, none of which were designated as cash flow hedging instruments.

Refer to Note 6 - Fair Value Disclosures, which contains fair value information related to derivative financial instruments.

Effect of Derivative Instruments on Consolidated Balance Sheets, Consolidated Statements of Operations and Consolidated Statements of 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):


	Amount of Gain (Loss) Reclassified from Accumulated Other Comprehensive Income into Income
Location of Gain (Loss) Reclassified from	Year Ended December 31,
Accumulated Other Comprehensive Income into Income	2020		2019		2018
Revenues	$	5,538	$	-	$	3,648
Cost of goods sold		(2,115)		-		1,258
Net income (loss) from discontinued operations, net of income taxes		-		48,797		(14,462)
Net gain (loss) recognized in loss before tax	$	3,423	$	48,797	$	(9,556)


	Amount of Gain (Loss) Recognized in Other Comprehensive Income on Derivatives
Gain (Loss) Recognized in	Year Ended December 31,
Other Comprehensive Income on Derivatives	2020		2019		2018
Commodity Contracts	$	(1,025)	$	70,404	$	(9,642)


	Location of Gain (Loss)	Amount of Gain (Loss) Recognized in Income on Derivatives
Derivatives Not Designated	Recognized in	Year Ended December 31,
as Hedging Instruments	Income on Derivatives	2020		2019		2018
Commodity contracts	Revenues	$	(10,813)	$	(10,202)	$	11,565
Commodity contracts	Costs of goods sold		32,914		(2,442)		21,101
Commodity contracts	Net income (loss) from discontinued operations, net of income taxes		-		(2,470)		(3,607)
		$	22,101	$	(15,114)	$	29,059

The following amounts were recorded on the consolidated balance sheets related to cumulative basis adjustments for the fair value hedged items (in thousands):


	December 31, 2020				December 31, 2019
Line Item in the Consolidated Balance Sheet in Which the Hedged Item is Included	Carrying Amount of the Hedged Assets		Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Assets		Carrying Amount of the Hedged Assets		Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Assets
Inventories	$	53,963	$	9,041	$	55,021	$	(2,808)

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Effect of Cash Flow and Fair Value Hedge Accounting on the Statements of Operations


	Location and Amount of Gain (Loss) Recognized in Income on Cash Flow and Fair Value Hedging Relationships for the Year Ended December 31, 2020
	Revenue		Cost of ‎Goods Sold		Net Income from Discontinued Operations, Net of Income Taxes
Gain (loss) on cash flow hedging relationships:

Commodity contracts:
Amount of gain (loss) reclassified from accumulated other comprehensive income into income	$	5,538	$	(2,115)	$	-

Gain (loss) on fair value hedging relationships:

Commodity contracts:
Hedged item		-		5,098		-
Derivatives designated as hedging instruments		-		(3,752)		-

Total amounts of income and expense line items presented in the consolidated statement of operations in which the effects of cash flow or fair value hedges are recorded	$	5,538	$	(769)	$	-


	Location and Amount of Gain Recognized in Income on Cash Flow and Fair Value Hedging Relationships for the Year Ended December 31, 2019
	Revenue		Cost of ‎Goods Sold		Net Income from Discontinued Operations, Net of Income Taxes
Gain on cash flow hedging relationships:

Commodity contracts:
Amount of gain reclassified from accumulated other comprehensive income into income	$	-	$	-	$	48,797

Gain (loss) on fair value hedging relationships:

Commodity contracts:
Hedged item		-		(844)		-
Derivatives designated as hedging instruments		-		4,254		-

Total amounts of income and expense line items presented in the consolidated statement of operations in which the effects of cash flow or fair value hedges are recorded	$	-	$	3,410	$	48,797

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	Location and Amount of Gain (Loss) Recognized in Income on Cash Flow and Fair Value Hedging Relationships for the Year Ended December 31, 2018
	Revenue		Cost of ‎Goods Sold		Net Income from Discontinued Operations, Net of Income Taxes
Gain (loss) on cash flow hedging relationships:

Commodity contracts:
Amount of gain (loss) reclassified from accumulated other comprehensive income into income	$	3,648	$	1,258	$	(14,462)

Gain (loss) on fair value hedging relationships:

Commodity contracts:
Hedged item		-		13,681		-
Derivatives designated as hedging instruments		-		(12,304)		-

Total amounts of income and expense line items presented in the consolidated statement of operations in which the effects of cash flow or fair value hedges are recorded	$	3,648	$	2,635	$	(14,462)

There were no gains or losses from discontinuing cash flow or fair value hedge treatment during the years ended December 31, 2020, 2019 and 2018.

The open commodity derivative positions as of December 31, 2020, are as follows (in thousands):


December 31, 2020
	Exchange Traded		Non-Exchange Traded
Derivative Instruments	Net Long & (Short)⁽¹⁾		Long ⁽²⁾	(Short) ⁽²⁾	Unit of Measure	Commodity
Futures	(27,245)				Bushels	Corn and Soybeans
Futures	45,520	⁽³⁾			Bushels	Corn
Futures	(7,430)	⁽⁴⁾			Bushels	Corn
Futures	(161,070)				Gallons	Ethanol
Futures	(134,946)	⁽³⁾			Gallons	Ethanol
Futures	(14,200)				mmBTU	Natural Gas
Futures	(6,888)	⁽⁴⁾			mmBTU	Natural Gas
Futures	69				Tons	Soybean Meal
Options	130				Tons	Soybean Meal
Options	73,973				Pounds	Soybean Oil
Options	6,168				Bushels	Corn
Options	105				Gallons	Ethanol
Options	238				mmBTU	Natural Gas
Forwards			41,357	(302)	Bushels	Corn and Soybeans
Forwards			-	(147,432)	Gallons	Ethanol
Forwards			156	(343)	Tons	Distillers Grains
Forwards			528	(47,057)	Pounds	Corn Oil
Forwards			11,242	(931)	mmBTU	Natural Gas

(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 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 of $3.0 million, $12.3 million, and $23.1 million for the years ended December 31, 2020, 2019, and 2018 respectively, on energy trading contracts.