Fair Value Measurements

9 Months Ended

Sep. 30, 2011

Fair Value Measurements [Abstract]

Fair Value Measurements

9. Fair Value Measurements

The following table presents the Company’s assets and liabilities measured at fair value on a recurring basis at September 30, 2011, December 31, 2010 and September 30, 2010:

		0000000		0000000			0000000			0000000
(in thousands)	September 30, 2011
Assets (liabilities)	Level 1		Level 2			Level 3			Total
Cash equivalents	$	21,481	$	—		$	—		$	21,481
Commodity derivatives, net		84,365		(2,988	)		3,283			84,660
Convertible preferred securities (b)		—		—			15,790			15,790
Other assets and liabilities (a)		17,668		—			(2,238	)		15,430
Total	$	123,514	$	(2,988	)	$	16,835		$	137,361

		0000000		0000000		0000000			0000000
(in thousands)	December 31, 2010
Assets (liabilities)	Level 1		Level 2		Level 3			Total
Cash equivalents	$	213	$	—	$	—		$	213
Commodity derivatives, net		61,559		129,723		12,406			203,688
Convertible preferred securities (b)		—		—		15,790			15,790
Other assets and liabilities (a)		17,983		—		(2,156	)		15,827
Total	$	79,755	$	129,723	$	26,040		$	235,518

		0000000		0000000		0000000			0000000
(in thousands)	September 30, 2010
Assets (liabilities)	Level 1		Level 2		Level 3			Total
Cash equivalents	$	252	$	—	$	—		$	252
Commodity derivatives, net		78,345		57,480		1,222			137,047
Convertible preferred securities (b)		—		—		13,100			13,100
Other assets and liabilities (a)		8,315		—		(2,615	)		5,700
Total	$	86,912	$	57,480	$	11,707		$	156,099

(a) Included in other assets and liabilities is restricted cash, interest rate and foreign currency derivatives, swaptions and deferred compensation assets.

(b) Recorded in “Other noncurrent assets” on the Company’s balance sheet

Level 1 commodity derivatives reflect the fair value of the futures and options contracts that the Company holds, net of the cash collateral that the Company has in its margin account.

A reconciliation of beginning and ending balances for the Company’s fair value measurements using Level 3 inputs is as follows:

	2011								2010
(in thousands)	Interest rate derivatives and swaptions			Convertible preferred securities		Commodity derivatives, net			Interest rate derivatives			Convertible preferred securities		Commodity derivatives, net
Asset (liability) at December 31,	$	(2,156	)	$	15,790	$	12,406		$	(1,763	)	$	—	$	1,948
Gains (losses) included in earnings		(2	)		—		77			(72	)		—		(1,926	)
Unrealized gains (losses) included in other comprehensive income		149			—		—			(126	)		—		—
New contracts entered into		507			—		—			36			—		—
Transfers from level 2		—			—		2,500			—			—		—
Asset (liability) at March 31,	$	(1,502	)	$	15,790	$	14,983		$	(1,925	)	$	—	$	22
Investment in debt securities		—			—		—			—			13,100		—
Gains (losses) included in earnings		(310	)		—		(6,398	)		(99	)		—		(15	)
Unrealized gains (losses) included in other comprehensive income		(120	)		—		—			(253	)		—		—
New contracts entered into		49			—		—			—			—		—
Transfers from level 2		—			—		209			—			—		—
Asset (liability) at June 30,	$	(1,883	)	$	15,790	$	8,794		$	(2,277	)	$	13,100	$	7
Gains (losses) included in earnings		(234	)		—		(5,581	)		(54	)		—		589
Unrealized gains (losses) included in other comprehensive income		(165	)		—		—			(284	)		—		—
New contracts entered into		44			—		—			—			—		—
Transfers from level 2		—			—		70			—			—		626
Asset (liability) at September 30,	$	(2,238	)		15,790		3,283		$	(2,615	)	$	13,100	$	1,222

The majority of the Company’s assets and liabilities measured at fair value are based on the market approach valuation technique. With the market approach, fair value is derived using prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities.

The Company’s net commodity derivatives primarily consist of futures or options contracts via regulated exchanges and contracts with producers or customers under which the future settlement date and bushels (or gallons in the case of ethanol contracts) of commodities to be delivered (primarily wheat, corn, soybeans and ethanol) are fixed and under which the price may or may not be fixed. Depending on the specifics of the individual contracts, the fair value is derived from the futures or options prices on the Chicago Mercantile Exchange (“CME”) or the New York Mercantile Exchange (“NYMEX”) for similar commodities and delivery dates as well as observable quotes for local basis adjustments (the difference, which is attributable to local market conditions, between the quoted futures price and the local cash price). Although nonperformance risk, both of the Company and the counterparty, is present in each of these commodity contracts and is a component of the estimated fair values, based on the Company’s historical experience with its producers and customers and the Company’s knowledge of their businesses, the Company does not view nonperformance risk to be a significant input to fair value for the majority of these commodity contracts. However, in situations where the Company believes that nonperformance risk exists, based on past or present experience with a customer or knowledge of the customer’s operations or financial condition, the Company classifies these commodity contracts as “level 3” in the fair value hierarchy and, accordingly, records estimated fair value adjustments based on internal projections and views of these contracts.

During the second quarter of 2010, the Company invested in cumulative convertible preferred shares of Iowa Northern Railway Corporation. These shares are carried at estimated fair value in “Other noncurrent assets” on the Company’s balance sheet. Changes in estimated fair value are recorded within “other comprehensive income”. See Note 8 for further information.

Fair Value of Financial Instruments

The fair value of the Company’s long-term debt is estimated using quoted market prices or discounted future cash flows based on the Company’s current incremental borrowing rates for similar types of borrowing arrangements.

(in thousands)	September 30, 2011		December 31, 2010
Fair value of long-term debt	$	288,331	$	305,708
Fair value in excess of carrying value		7,431		4,359

The fair value of the Company’s cash equivalents, accounts receivable and accounts payable approximate their carrying value as they are close to maturity.