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Derivative Instruments and Hedging Activities
 12 Months Ended
Dec. 31, 2019
Derivative Instruments and Hedging Activities Disclosure [Abstract]  
Derivative Instruments & Hedging Activities Derivative Instruments & Hedging Activities

Derivatives Not Designated as Hedging Instruments

The majority of the Company’s derivative instruments have not been designated as hedging instruments. The Company uses exchange-traded futures and exchange-traded and OTC options contracts to manage its net position of merchandisable agricultural product inventories and forward cash purchase and sales contracts to reduce price risk caused by market fluctuations in agricultural commodities and foreign currencies.  The Company also uses exchange-traded futures and exchange-traded and OTC options contracts as components of merchandising strategies designed to enhance margins.  The results of these strategies can be significantly impacted by factors such as the correlation between the value of exchange-traded commodities futures contracts and the value of the underlying commodities, counterparty contract defaults, and volatility of freight markets.  Derivatives, including exchange traded contracts and physical purchase or sale contracts, and inventories of certain merchandisable agricultural products, which include amounts acquired under deferred pricing contracts, are stated at market value.  Inventory is not a derivative and therefore fair values of and changes in fair values of inventories are not included in the tables below. 

The following table sets forth the fair value of derivatives not designated as hedging instruments as of December 31, 2019 and 2018.
 
 
December 31, 2019
 
December 31, 2018
 
Assets
 
Liabilities
 
Assets
 
Liabilities
 
(In millions)
Foreign Currency Contracts
$
125

 
$
120

 
$
175

 
$
152

Commodity Contracts
478

 
574

 
461

 
589

Total
$
603

 
$
694

 
$
636

 
$
741



The following table sets forth the pre-tax gains (losses) on derivatives not designated as hedging instruments that have been included in the consolidated statements of earnings for the years ended December 31, 2019, 2018, and 2017.
 
 
 
Cost of
 
Other expense (income) - net
 
 
 
 
 
products
 
 
 
(In millions) 
Revenues
 
sold
 
 
 
For the Year Ended December 31, 2019
 
 
 
 
 
 
 
Consolidated Statement of Earnings
$
64,656

 
$
60,509

 
$
7

 
 
 
 
 
 
 
 
 
 
Pre-tax gains (losses) on:
 
 
 
 
 
 
 
Foreign Currency Contracts
$
9

 
$
32

 
$
(21
)
 
 
Commodity Contracts
—

 
24

 
—

 
 
Total gain (loss) recognized in earnings
$
9

 
$
56

 
$
(21
)
 
$
44

 
 
 
 
 
 
 
 
For the Year Ended December 31, 2018
 
 
 
 
 
 
 
Consolidated Statement of Earnings
$
64,341

 
$
60,160

 
$
101

 
 
 
 
 
 
 
 
 
 
Pre-tax gains (losses) on:
 
 
 
 
 
 
 
Foreign Currency Contracts
$
5

 
$
(139
)
 
$
(177
)
 
 
Commodity Contracts
—

 
258

 
—

 
 
Total gain (loss) recognized in earnings
$
5

 
$
119

 
$
(177
)
 
$
(53
)
 
 
 
 
 
 
 
 
For the Year Ended December 31, 2017
 
 
 
 
 
 
 
Consolidated Statement of Earnings
$
60,828

 
$
57,310

 
$
(10
)
 
 
 
 
 
 
 
 
 
 
Pre-tax gains (losses) on:
 
 
 
 
 
 
 
Foreign Currency Contracts
$
(10
)
 
$
58

 
$
214

 
 
Commodity Contracts
—

 
375

 
—

 
 
Total gain (loss) recognized in earnings
$
(10
)
 
$
433

 
$
214

 
$
637

 
 
 
 
 
 
 
 

Changes in the market value of inventories of certain merchandisable agricultural commodities, forward cash purchase and sales contracts, exchange-traded futures, and exchange-traded and OTC options contracts are recognized in earnings immediately as a component of cost of products sold.

Derivatives Designated as Cash Flow, Fair Value or Net Investment Hedging Strategies

The Company had certain derivatives designated as cash flow, fair value, and net investment hedges as of December 31, 2019 and certain derivatives designated as cash flow and fair value hedges as of December 31, 2018.

The Company uses interest rate swaps designated as fair value hedges to protect the fair value of $496 million in fixed-rate debt due to changes in interest rates. The terms of the interest rate swaps match the terms of the underlying debt. At December 31, 2019 and 2018, the Company had $3 million in other current assets and $4 million in other current liabilities, respectively, representing the fair value of the interest rate swaps and a corresponding increase or decrease in the underlying debt for the same amount with no net impact to earnings.
The Company uses cross-currency swaps designated as net investment hedges to protect the Company’s investment in a foreign subsidiary against changes in foreign currency exchange rates. During the year ended December 31, 2019, the Company executed USD-fixed to Euro-fixed cross-currency swaps maturing on various dates with an aggregate notional amount of $1.2 billion. As of December 31, 2019, the Company had after-tax gains of $6 million in AOCI related to foreign exchange gains and losses from the net investment hedge transactions. The amount is deferred in AOCI until the underlying investment is divested.

The Company uses interest rate swaps designated as cash flow hedges to hedge the forecasted interest payments on certain letters of credit from banks. The terms of the interest rate swaps match the terms of the forecasted interest payments. The deferred gains and losses are recognized in other (income) expense - net over the period in which the related interest payments are paid to the banks. At December 31, 2019, the Company had $43 million of losses in AOCI related to these interest rate swaps. The Company expects to recognize this amount in its consolidated statement of earnings during the life of the instruments.

For each of the hedge programs described below, the derivatives are designated as cash flow hedges.  Assuming normal market conditions, the changes in the market value of such derivative contracts have historically been, and are expected to continue to be, highly effective at offsetting changes in price movements of the hedged item.  Once the hedged item is recognized in earnings, the gains/losses arising from the hedge are reclassified from AOCI to either revenues or cost of products sold, as applicable.  As of December 31, 2019 and 2018, the Company had $5 million of after-tax losses and $31 million of after-tax gains in AOCI, respectively, related to gains and losses from cash flow hedge transactions.  The Company expects to recognize $5 million of the 2019 after-tax losses in its consolidated statement of earnings during the next 12 months.

ADM uses futures or options contracts to hedge the purchase price of anticipated volumes of corn to be purchased and processed in a future month.  The objective of this hedging program is to reduce the variability of cash flows associated with the Company’s forecasted purchases of corn.  The Company’s corn processing plants currently grind approximately 72 million bushels of corn per month.  During the past 12 months, the Company hedged between 19% and 60% of its monthly anticipated grind.  At December 31, 2019, the Company had designated hedges representing between 4% to 38% of its anticipated monthly grind of corn for the next 12 months.

ADM, from time to time, also uses futures, options, and swaps to hedge the sales price of certain ethanol sales contracts.  The Company has established hedging programs for ethanol sales contracts that are indexed to unleaded gasoline prices and to various exchange-traded ethanol contracts. The objective of these hedging programs is to reduce the variability of cash flows associated with the Company’s sales of ethanol. During the past 12 months, the Company hedged between 0 million and 108 million gallons of ethanol sales per month under these programs.  At December 31, 2019, the Company had designated hedges representing between 1 million to 28 million gallons of ethanol sales per month over the next 12 months.

ADM uses futures and options contracts to hedge the purchase price of anticipated volumes of soybeans to be purchased and processed in a future month for certain of its U.S. soybean crush facilities. The Company also uses futures or options contracts to hedge the sales prices of anticipated soybean meal and soybean oil sales proportionate to the soybean crushing process at these facilities. During the past 12 months, the Company hedged between 79% and 100% of the anticipated monthly soybean crush for soybean purchases and soybean meal and oil sales at the designated facilities. The Company has designated hedges representing between 0% and 100% of the anticipated monthly soybean crush for soybean purchases and soybean meal and oil sales at the designated facilities over the next 12 months.

The following table sets forth the fair value of derivatives designated as hedging instruments as of December 31, 2019 and 2018.
 
December 31, 2019
 
December 31, 2018
 
Assets
 
Liabilities
 
Assets
 
Liabilities
 
(In millions)
Foreign Currency Contracts
$
13

 
$
5

 
$
—

 
$
—

Interest Rate Contracts
3

 
43

 
—

 
20

Total
$
16

 
$
48

 
$
—

 
$
20



The following table sets forth the pre-tax gains (losses) on derivatives designated as hedging instruments that have been included in the consolidated statement of earnings for the years ended December 31, 2019, 2018, and 2017.
 
 
 
Cost of products sold
 
Interest expense
 
Other expense (income) - net
 
 
(In millions)
Revenues
 
 
 
 
 
For the Year Ended December 31, 2019
 
 
 
 
 
 
 
 
 
Consolidated Statement of Earnings
$
64,656

 
$
60,509

 
$
402

 
$
7

 
 
 
 
 
 
 
 
 
 
 
 
Effective amounts recognized in earnings
 
 
 
 
 
 
 
 
 
Pre-tax gains (losses) on:
 
 
 
 
 
 
 
 
 
Interest Contracts
$
—

 
$
—

 
$
1

 
$
(46
)
 
 
Commodity Contracts
(44
)
 
(11
)
 
—

 
—

 
 
Total gain (loss) recognized in earnings
$
(44
)
 
$
(11
)
 
$
1

 
$
(46
)
 
$
(100
)
 
 
 
 
 
 
 
 
 
 
For the Year Ended December 31, 2018
 
 
 
 
 
 
 
 
 
Consolidated Statement of Earnings
$
64,341

 
$
60,160

 
364

 
$
101

 
 
 
 
 
 
 
 
 
 
 
 
Effective amounts recognized in earnings
 
 
 
 
 
 
 
 
 
Pre-tax gains (losses) on:
 
 
 
 
 
 
 
 
 
Interest Rate Contracts
$
—

 
$
—

 
$
1

 
$
—

 
 
Commodity Contracts
36

 
(113
)
 
—

 
—

 
 
Total gain (loss) recognized in earnings
$
36

 
$
(113
)
 
$
1

 
$
—

 
$
(76
)
 
 
 
 
 
 
 
 
 
 
For the Year Ended December 31, 2017
 
 
 
 
 
 
 
 
 
Consolidated Statement of Earnings
$
60,828

 
$
57,310

 
$
330

 
$
(10
)
 
 
 
 
 
 
 
 
 
 
 
 
Effective amounts recognized in earnings
 
 
 
 
 
 
 
 
 
Pre-tax gains (losses) on:
 
 
 
 
 
 
 
 
 
Foreign Currency Contracts
$
—

 
$
—

 
$
—

 
$
(2
)
 
 
Interest Rate Contracts
—

 
—

 
1

 
—

 
 
Commodity Contracts
(1
)
 
(45
)
 
—

 
—

 
 
Total gain (loss) recognized in earnings
$
(1
)
 
$
(45
)
 
$
1

 
$
(2
)
 
$
(47
)
 
 
 
 
 
 
 
 
 
 



Other Net Investment Hedging Strategies

The Company has designated €1.7 billion of its outstanding long-term debt and commercial paper borrowings and €1.1 billion of its outstanding long-term debt at December 31, 2019 and 2018, respectively, as hedges of its net investment in a foreign subsidiary. As of December 31, 2019 and 2018, the Company had after-tax gains of $7 million and losses of $26 million, respectively, in AOCI related to foreign exchange gains and losses from the net investment hedge transactions. The amount is deferred in AOCI until the underlying investment is divested.