Derivative Financial Instruments

6 Months Ended

Jul. 31, 2020

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments and Hedging Activities Disclosure [Text Block]

Note 8. Derivative Financial Instruments

The Company is exposed to various market risks, including changes in commodity prices (raw materials and finished goods). To manage risks associated with the volatility of these natural business exposures, the Company enters into commodity agreements and forward purchase (corn and natural gas) and sale (ethanol, distillers grains and non-food grade corn oil) contracts. The Company does not purchase or sell derivative financial instruments for trading or speculative purposes. The Company does not purchase or sell derivative financial instruments for which a lack of marketplace quotations would require the use of fair value estimation techniques.

The following table provides information about the fair values of the Company’s derivative financial instruments (that are not accounted for under the “normal purchases and normal sales” scope exemption of ASC 815) and the line items on the Consolidated Condensed Balance Sheets in which the fair values are reflected (in thousands):

	Asset Derivatives Fair Value				Liability Derivatives Fair Value
	July 31, 2020		January 31, 2020		July 31, 2020		January 31, 2020
Commodity futures (1)	$	416	$	352	$	197	$	-
Forward purchase contracts (2)		13		-		558		230
Total	$	429	$	352	$	755	$	230

(1) Commodity futures assets are included in prepaid expenses and other current assets. These contracts are short/sell positions for approximately 4.5 million bushels of corn and approximately 5.5 million gallons of ethanol at July 31, 2020. These contracts are short/sell positions for approximately 3.7 million bushels of corn and long/buy positions for approximately 2.2 million bushels of corn at January 31, 2020. Commodity futures liabilities are included in accrued expenses and other current liabilities. These contracts are short/sell positions for approximately 2.8 million bushels of corn at July 31, 2020.

(2) Forward purchase contracts assets are included in prepaid expenses and other current assets. These contracts are for purchases of approximately 1.3 million bushels of corn at July 31, 2020. Forward purchase contracts liabilities are included in accrued expenses and other current liabilities. These contracts are for purchases of approximately 1.9 million bushels of corn at July 31, 2020 and 1.6 million bushels of corn at January 31, 2020.

As of July 31, 2020, and January 31, 2020, all the derivative financial instruments held by the Company were subject to enforceable master netting arrangements. The Company’s accounting policy is to offset positions and amounts owed or owing with the same counterparty. As of July 31, 2020, and January 31, 2020, the gross positions of the enforceable master netting agreements are not significantly different from the net positions presented in the table above. Depending on the amount of an unrealized loss on a derivative contract held by the Company, the counterparty may require collateral to secure the Company’s derivative contract position. The Company was required to maintain collateral in the amount of approximately $950,000 and approximately $1,113,000 to secure the Company’s derivative position at July 31, 2020 and January 31, 2020, respectively.

See Note 5 which contains fair value information related to derivative financial instruments.

(Losses) gains on the Company’s derivative financial instruments of approximately $(4,613,000) and approximately $537,000 for the second quarter of fiscal years 2020 and 2019, respectively, were included in cost of sales on the Consolidated Condensed Statements of Operations. (Losses) gains on the Company’s derivative financial instruments of approximately $(1,758,000) and approximately $1,230,000 for the first six months of fiscal years 2020 and 2019, respectively, were included in cost of sales on the Consolidated Condensed Statements of Operations.

Losses on the Company’s derivative financial instruments of approximately $298,000 for the second quarter and first six months of fiscal year 2020 were included in net sales and revenue on the Consolidated Condensed Statements of Operations.