Note 3 - Derivative Instruments

9 Months Ended

Sep. 30, 2017

Notes to Financial Statements

Derivative Instruments and Hedging Activities Disclosure [Text Block]

3   ) DERIVATIVE INSTRUMENTS

FutureFuel is exposed to certain risks relating to its ongoing business operations. Commodity price risk is the primary risk managed by using derivative instruments. Regulated fixed price futures and option contracts are utilized to manage the price risk associated with future purchases of feedstock used in FutureFuel

’s biodiesel production along with physical feedstock and finished product inventories attributed to this process.

FutureFuel recognizes all derivative instruments as either assets or liabilities at fair value in its consolidated balance sheets. FutureFuel

’s derivative instruments do

not

qualify for hedge accounting under the specific guidelines of ASC

815

-

20

-

25,

Derivatives

and

Hedging

.

None

of the derivative instruments are designated and accounted for as hedges primarily as a result of the extensive record keeping requirements.

The fair value of FutureFuel

’s derivative instruments is determined based on the closing prices of the derivative instruments on relevant commodity exchanges at the end of an accounting period. Realized gains and losses on derivative instruments and changes in fair value of the derivative instruments are recorded in the statements of operations as a component of cost of goods sold, and amounted to a loss of

$3,314

 and a gain of

$803

for the

three

months ended

September 30, 2017

and

2016,

respectively, and losses of

$1,511

 and

$5,375

for the

nine

months ended

September 30, 2017

and

2016,

respectively.

The volumes and carrying values of FutureFuel

’s derivative instruments were as follows at:

	September 30, 2017				December 31, 2016
	Number of Contracts Short	Fair Value			Number of Contracts Short	Fair Value
Regulated options, included in other current assets	200	$	(162	)	-	$	-
Regulated fixed price future commitments, included in other current assets	182	$	(36	)	135	$	(258	)

The margin account maintained with a broker to collateralize these derivative instruments carried an account balance of $

1,518

and

$758

at

September 30, 2017

and

December 31, 2016,

respectively, and is 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.