XML 22 R12.htm IDEA: XBRL DOCUMENT

Note 5 - Derivative Instruments

9 Months Ended

Sep. 30, 2023

Notes to Financial Statements

Derivative Instruments and Hedging Activities Disclosure [Text Block]

5)	DERIVATIVE INSTRUMENTS

The Company records all derivative instruments at fair value. Fair value is determined by using the closing prices of the derivative instruments on the New York Mercantile Exchange at the end of an accounting period. Changes in the fair value of derivative instruments are recognized at the end of each accounting period and recorded in the statement of income as a component of cost of goods sold.

In order to manage commodity price risk caused by market fluctuations in biofuel prices, future purchases of feedstock used in biodiesel production, physical feedstock, finished product inventories attributed to the process, and other petroleum products purchased or sold, the Company may enter into exchange-traded commodity futures and options contracts. The Company accounts for these derivative instruments in accordance with ASC 815-20-25, Derivatives and Hedging. Under this standard, the accounting for changes in the fair value of a derivative instrument depends upon whether it has been designated as an accounting hedging relationship and, further, on the type of hedging relationship. To qualify for designation as an accounting hedging relationship, specific criteria must be met and appropriate documentation maintained. The Company had no derivative instruments that qualified under these rules as designated accounting hedges in 2023 or 2022. The Company has elected the normal purchase and normal sales exception for certain feedstock purchase contracts and supply agreements.

Realized gains and losses on derivative instruments and changes in fair value of the derivative instruments are recorded in the consolidated statements of operations as a component of cost of goods sold and amounted to a loss of $14,068 and $1,373 (realized loss of $7,286 and gain of $2,150) for the three and nine months ended September 30, 2023, respectively, and a gain of $4,688 and loss of $21,917 (realized gain of $4,023 and loss of $24,970) for the three and nine months ended September 30, 2022, respectively.

The volumes and carrying values of FutureFuel’s derivative instruments were as follows at:

		*Asset (Liability)*
		*September 30, 2023*								*December 31, 2022*
		*Contract Quantity*				*Fair Value*				*Contract Quantity*				*Fair Value*
Regulated fixed price future commitments, included in other current assets (in thousand barrels)			182			$	(3,665	)			305			$	(142	)

The margin account maintained with a broker to collateralize these derivative instruments carried an account balance of $5,079 and $2,088 at September 30, 2023 and December 31, 2022, respectively, and was classified as other current assets in the consolidated balance sheets. The carrying values of the margin account and of the derivative instruments are included net, in other current assets.