Derivatives

The Company’s operating results are affected by changes to commodity prices. The Grain and Ethanol businesses have established “unhedged” position limits (the amount of a commodity, either owned or contracted for, that does not have an offsetting derivative contract to lock in the price). To reduce the exposure to market price risk on commodities owned and forward grain and ethanol purchase and sale contracts, the Company enters into exchange traded commodity futures and options contracts and over the counter forward and option contracts with various counterparties. The exchange traded contracts are primarily via the regulated Chicago Mercantile Exchange ("CME"). The Company’s forward purchase and sales contracts are for physical delivery of the commodity in a future period. Contracts to purchase commodities from producers generally relate to the current or future crop years for delivery periods quoted by regulated commodity exchanges. Contracts for the sale of commodities to processors or other commercial consumers generally do not extend beyond one year.

All of these contracts meet the definition of derivatives. While the Company considers its commodity contracts to be effective economic hedges, the Company does not designate or account for its commodity contracts as hedges as defined under current accounting standards. The Company accounts for its commodity derivatives at estimated fair value. The estimated fair value of the commodity derivative contracts that require the receipt or posting of cash collateral is recorded on a net basis (offset against cash collateral posted or received, also known as margin deposits) within commodity derivative assets or liabilities. Management determines fair value based on exchange-quoted prices and in the case of its forward purchase and sale contracts, estimated fair value is adjusted for differences in local markets and non-performance risk. For contracts for which physical delivery occurs, balance sheet classification is based on estimated delivery date. For futures, options and over-the-counter contracts in which physical delivery is not expected to occur but, rather, the contract is expected to be net settled, the Company classifies these contracts as current or noncurrent assets or liabilities, as appropriate, based on the Company’s expectations as to when such contracts will be settled.

Realized and unrealized gains and losses in the value of commodity contracts (whether due to changes in commodity prices, changes in performance or credit risk, or due to sale, maturity or extinguishment of the commodity contract) and grain inventories are included in cost of sales and merchandising revenues. These amounts were previously classified in sales and merchandising revenues but were reclassified starting in the fourth quarter of 2015.

Generally accepted accounting principles permit a party to a master netting arrangement to offset fair value amounts recognized for derivative instruments against the right to reclaim cash collateral or obligation to return cash collateral under the same master netting arrangement. The Company has master netting arrangements for its exchange traded futures and options contracts and certain over-the-counter contracts. When the Company enters into a future, option or an over-the-counter contract, an initial margin deposit may be required by the counterparty. The amount of the margin deposit varies by commodity. If the market price of a future, option or an over-the-counter contract moves in a direction that is adverse to the Company’s position, an additional margin deposit, called a maintenance margin, is required. The margin deposit assets and liabilities are included in short-term commodity derivative assets or liabilities, as appropriate, in the Condensed Consolidated Balance Sheets.

The following table presents at March 31, 2016, December 31, 2015 and March 31, 2015, a summary of the estimated fair value of the Company’s commodity derivative instruments that require cash collateral and the associated cash posted/received as collateral. The net asset or liability positions of these derivatives (net of their cash collateral) are determined on a counterparty-by-counterparty basis and are included within current or noncurrent commodity derivative assets (or liabilities) on the Condensed Consolidated Balance Sheets:



	March 31, 2016				December 31, 2015				March 31, 2015
(in thousands)	Net derivative asset position		Net derivative liability position		Net derivative asset position		Net derivative liability position		Net derivative asset position		Net derivative liability position
Collateral paid (received)	$	27,498	$	—	$	3,008	$	—	$	39,521	$	—
Fair value of derivatives	11,389		—		25,356		—		21,327		—
Balance at end of period	$	38,887	$	—	$	28,364	$	—	$	60,848	$	—

The following table presents, on a gross basis, current and noncurrent commodity derivative assets and liabilities:



	March 31, 2016
(in thousands)	Commodity derivative assets - current			Commodity derivative assets - noncurrent			Commodity derivative liabilities - current			Commodity derivative liabilities - noncurrent			Total
Commodity derivative assets	$	46,999		$	382		$	1,219		$	5		$	48,605
Commodity derivative liabilities	(13,181		)	(11		)	(34,613		)	(879		)	(48,684		)
Cash collateral	27,498			—			—			—			27,498
Balance sheet line item totals	$	61,316		$	371		$	(33,394	)	$	(874	)	$	27,419



	December 31, 2015
(in thousands)	Commodity derivative assets - current			Commodity derivative assets - noncurrent		Commodity derivative liabilities - current			Commodity derivative liabilities - noncurrent			Total
Commodity derivative assets	$	51,647		$	412	$	371		$	2		$	52,432
Commodity derivative liabilities	(4,829		)	—		(37,758		)	(1,065		)	(43,652		)
Cash collateral	3,008			—		—			—			3,008
Balance sheet line item totals	$	49,826		$	412	$	(37,387	)	$	(1,063	)	$	11,788



	March 31, 2015
(in thousands)	Commodity derivative assets - current			Commodity derivative assets - noncurrent			Commodity derivative liabilities - current			Commodity derivative liabilities - noncurrent			Total
Commodity derivative assets	$	60,071		$	254		$	1,615		$	29		$	61,969
Commodity derivative liabilities	(12,768		)	(11		)	(57,016		)	(2,113		)	(71,908		)
Cash collateral	39,521			—			—			—			39,521
Balance sheet line item totals	$	86,824		$	243		$	(55,401	)	$	(2,084	)	$	29,582

The gains (losses) included in the Company’s Condensed Consolidated Statements of Operations and the line items in which they are located for the three months ended March 31, 2016 and 2015 are as follows:



	Three months ended March 31,
(in thousands)	2016			2015
Gains (losses) on commodity derivatives included in cost of sales and merchandising revenues	$	(8,859	)	$	43,822

The Company had the following volume of commodity derivative contracts outstanding (on a gross basis) at March 31, 2016, December 31, 2015 and March 31, 2015:



	March 31, 2016
Commodity	Number of bushels (in thousands)	Number of gallons (in thousands)	Number of pounds (in thousands)	Number of tons (in thousands)
Non-exchange traded:
Corn	235,426	—	—	—
Soybeans	21,509	—	—	—
Wheat	12,654	—	—	—
Oats	32,136	—	—	—
Ethanol	—	149,374	—	—
Corn oil	—	—	3,850	—
Other	18	—	6,234	85
Subtotal	301,743	149,374	10,084	85
Exchange traded:
Corn	129,465	—	—	—
Soybeans	34,315	—	—	—
Wheat	20,950	—	—	—
Oats	3,225	—	—	—
Ethanol	—	1,470	—	—
Other	—	—	—	—
Subtotal	187,955	1,470	—	—
Total	489,698	150,844	10,084	85



	December 31, 2015
Commodity	Number of bushels (in thousands)	Number of gallons (in thousands)	Number of pounds (in thousands)	Number of tons (in thousands)
Non-exchange traded:
Corn	227,248	—	—	—
Soybeans	13,357	—	—	—
Wheat	13,710	—	—	—
Oats	15,019	—	—	—
Ethanol	—	138,660	—	—
Corn oil	—	—	11,532	—
Other	297	—	—	116
Subtotal	269,631	138,660	11,532	116
Exchange traded:
Corn	106,260	—	—	—
Soybeans	17,255	—	—	—
Wheat	28,135	—	—	—
Oats	3,480	—	—	—
Ethanol	—	840	—	—
Other	—	840	—	—
Subtotal	155,130	1,680	—	—
Total	424,761	140,340	11,532	116



	March 31, 2015
Commodity	Number of bushels (in thousands)	Number of gallons (in thousands)	Number of pounds (in thousands)	Number of tons (in thousands)
Non-exchange traded:
Corn	276,158	—	—	—
Soybeans	29,646	—	—	—
Wheat	13,232	—	—	—
Oats	29,883	—	—	—
Ethanol	—	197,961	—	—
Corn oil	—	—	5,651	—
Other	339	—	—	116
Subtotal	349,258	197,961	5,651	116
Exchange traded:
Corn	143,320	—	—	—
Soybeans	38,555	—	—	—
Wheat	26,675	—	—	—
Oats	6,390	—	—	—
Ethanol	—	26,334	—	—
Bean Oil	—	—	60,240	—
Other	—	—	—	10
Subtotal	214,940	26,334	60,240	10
Total	564,198	224,295	65,891	126

At March 31, 2016, December 31, 2015 and March 31, 2015, the Company had recorded the following amounts for the fair value of the Company's interest rate derivates:



	March 31,			December 31,			March 31,
(in thousands)	2016			2015			2015
Derivatives not designated as hedging instruments
Interest rate contracts included in other long term liabilities	(4,618		)	(3,133		)	—
Total fair value of interest rate derivatives not designated as hedging instruments	$	(4,618	)	$	(3,133	)	$	—
Derivatives designated as hedging instruments
Interest rate contract included in other short term liabilities	(96		)	(191		)	—
Total fair value of interest rate derivatives designated as hedging instruments	$	(96	)	$	(191	)	$	—

The losses included in the Company's Consolidated Statements of Operations and the line item in which they are located for interest rate derivatives not designated as hedging instruments are as follows:



	Three months ended March 31,
(in thousands)	2016			2015
Interest expense	$	(1,600	)	$	—

The Company also has foreign currency derivatives which are considered effective economic hedges of specified economic risks but which are not designated as accounting hedges. At March 31, 2016, December 31, 2015 and March 31, 2015, the Company had recorded the following amounts for the fair value of the Company's foreign currency derivatives:



	March 31,		December 31,		March 31,
(in thousands)	2016		2015		2015
Derivatives not designated as hedging instruments
Foreign currency contracts included in short term assets	1,478		—		—
Total fair value of foreign currency contract derivatives not designated as hedging instruments	$	1,478	$	—	$	—

The losses included in the Company's Consolidated Statements of Operations and the line item in which they are located for foreign currency contract derivatives not designated as hedging instruments are as follows:



	Three months ended March 31,
(in thousands)	2016		2015
Foreign currency derivative gains included in Other income, net	$	1,478	$	—