DERIVATIVE FINANCIAL INSTRUMENTS |
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Jan. 31, 2022 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Instruments and Hedging Activities Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Derivative Instruments and Hedging Activities Disclosure [Text Block] |
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 (exchange-traded futures contracts and swaps) and forward purchase (corn) 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 changes in fair value of these derivative financial instruments are recognized in current period earnings as the Company does not use hedge accounting. The following table provides information about the fair values of the Company’s derivative financial instruments and the line items on the Consolidated Balance Sheets in which the fair values are reflected (in thousands):
As of January 31, 2022, and 2021, all of the derivative financial instruments held by the Company were subject to enforceable master netting arrangements with the counterparty. The Company’s accounting policy is to offset positions owed or owing with the same counterparty. As of January 31, 2022, and 2021 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 unrealized gains and losses on derivative contracts held by the Company, the counterparty may require collateral to secure the Company’s derivative contract positions. As of January 31, 2022, and 2021, the Company was required to maintain collateral with the counterparty in the amount of approximately $2,222,000 and $1,657,000, respectively, to secure the Company’s derivative liability position, which has been recorded on the balance sheet as restricted cash. See Note 4 which contains fair value information related to derivative financial instruments.
The Company recognized gains (losses) (included in cost of sales) on corn and natural gas derivative financial instruments of approximately $(3,427,000), $(5,552,000), and $2,201,000 in fiscal years 2021, 2020 and 2019, respectively.
The Company recognized losses (included in net sales and revenue) on ethanol derivative financial instruments of $12,109,000 and $1,167,000 in fiscal years 2021 and 2020, respectively. There were no derivative financial instruments gains or losses included in net sales and revenue in fiscal year 2019. |