9. Fair Value Measurements

The following table presents the Company's assets and liabilities measured at fair value on a recurring basis at March 31, 2012, December 31, 2011 and March 31, 2011:

$112,0860

(in thousands)

March 31, 2012

Assets (liabilities)

Level 1

Level 2

Level 3

Total

Cash equivalents

10,623

—

10,623

Restricted cash

18,785

—

18,785

Short term investments

19,996

—

19,996

Commodity derivatives, net

(12,280

)

10,849

—

(1,431

)

Convertible preferred securities (b)

—

20,360

Other assets and liabilities (a)

7,211

(2,085

)

—

5,126

Total

44,335

8,764

20,360

73,459

		$112,0860		$112,0860		$112,0860			$112,0860
(in thousands)	December 31, 2011
Assets (liabilities)	Level 1		Level 2		Level 3			Total
Cash equivalents	$	183	$	—	$	—		$	183
Restricted cash		18,651		—		—			18,651
Commodity derivatives, net		43,503		22,876		2,467			68,846
Convertible preferred securities (b)		—		—		20,360			20,360
Other assets and liabilities (a)		6,224		—		(2,178	)		4,046

Total	$	68,561	$	22,876	$	20,649		$	112,086

		$112,0860			$112,0860		$112,0860			$112,0860
(in thousands)	March 31, 2011
Assets (liabilities)	Level 1			Level 2		Level 3			Total
Cash equivalents	$	10,597		$	—	$	—		$	10,597
Restricted cash		12,353			—		—			12,353
Commodity derivatives, net		(13,486	)		122,287		14,983			123,784
Convertible preferred securities (b)		—			—		15,790			15,790
Other assets and liabilities (a)		6,291			—		(1,502	)		4,789

Total	$	15,755		$	122,287	$	29,271		$	167,313

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

(b)	Recorded in "Other noncurrent assets" on the Company's Consolidated Balance Sheets

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 CME or the New York Mercantile Exchange 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). Because "basis" for a particular commodity and location typically has multiple quoted prices from other agribusinesses in the same geographical vicinity and is used as a common pricing mechanism in the Agribusiness industry, we have concluded that "basis" is a "Level 2" fair value input for purposes of the fair value disclosure requirements related to our commodity derivatives. 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.

The Company's convertible preferred securities are measured at fair value using a combination of the income and market approaches on an annual basis. Specifically, the income approach incorporates the use of the Discounted Cash Flow method, whereas the Market Approach incorporates the use of the Guideline Public Company method. Application of the Discounted Cash Flow method requires estimating the annual cash flows that the business enterprise is expected to generate in the future. The assumptions input into this method are estimated annual cash flows for a specified estimation period, the discount rate, and the terminal value at the end of the estimation period. In the Guideline Public Company method, valuation multiples, including total invested capital, are calculated based on financial statements and stock price data from selected guideline publicly traded companies. A comparative analysis is then performed for factors including, but not limited to size, profitability and growth to determine fair value.

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


	2012								2011
(in thousands)	Interest rate derivatives and swaptions			Convertible preferred securities		Commodity derivatives, net			Interest rate derivatives and swaptions			Convertible preferred securities		Commodity derivatives, net
Asset (liability) at December 31,	$	(2,178	)	$	20,360	$	2,467		$	(2,156	)	$	15,790	$	12,406
Gains (losses) included in earnings:
New contracts		—			—		—			—			—		442
Change in market prices		—			—		—			(2	)		—		1,877
Settled contracts		—			—		—			—			—		(2,242	)
Unrealized gains (losses) included in other comprehensive income		—			—		—			149			—		—
New contracts entered into		—			—		—			507			—		—
Transfers to level 2		2,178			—		(2,467	)		—			—		—
Transfers from level 2		—			—		—			—			—		2,500
Asset (liability) at March 31,	$	—		$	20,360	$	—		$	(1,502	)	$	15,790	$	14,983

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. As such, the Company has concluded that the fair value of long-term debt is considered "Level 2" in the fair value hierarchy.


(in thousands)	March 31, 2012		December 31, 2011
Fair value of long-term debt	$	259,280	$	279,001
Fair value in excess of carrying value		8,520		7,908

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