Derivative Financial Instruments and Hedging Activities

9 Months Ended

May. 31, 2015

Derivative Financial Instruments and Hedging Activities [Abstract]

Derivative Instruments and Hedging Activities Disclosure [Text Block]

Derivative Financial Instruments and Hedging Activities

Our derivative instruments primarily consist of commodity and freight futures and forward contracts and, to a minor degree, may include foreign currency and interest rate swap contracts. These contracts are economic hedges of price risk, but are not designated or accounted for as hedging instruments for accounting purposes, with the exception of certain interest rate swap contracts which are accounted for as cash flow or fair value hedges. Derivative instruments are recorded on our Consolidated Balance Sheets at fair value as described in Note 13, Fair Value Measurements.

The following tables present the gross fair values of derivative assets, derivative liabilities, and margin deposits (cash collateral) recorded on the Consolidated Balance Sheets along with the related amounts permitted to be offset in accordance with GAAP. We have elected not to offset derivative assets and liabilities when we have the right of offset under ASC Topic 210-20, Balance Sheet - Offsetting; or when the instruments are subject to master netting arrangements under ASC Topic 815-10-45, Derivatives and Hedging - Overall.

	May 31, 2015
			Amounts Not Offset on the Consolidated Balance Sheet but Eligible for Offsetting
	Gross Amounts Recognized		Cash Collateral		Derivative Instruments		Net Amounts
	(Dollars in thousands)
Derivative Assets:
Commodity and freight derivatives	$	573,592	$	—	$	79,969	$	493,623
Foreign exchange derivatives	16,783		—		7,156		9,627
Interest rate derivatives - hedge	14,649		—		—		14,649
Total	$	605,024	$	—	$	87,125	$	517,899
Derivative Liabilities:
Commodity and freight derivatives	$	500,137	$	16,829	$	79,969	$	403,339
Foreign exchange derivatives	22,887		—		7,156		15,731
Interest rate derivatives - hedge	6,064		—		—		6,064
Interest rate derivatives - non-hedge	84		—		—		84
Total	$	529,172	$	16,829	$	87,125	$	425,218

	August 31, 2014
			Amounts Not Offset on the Consolidated Balance Sheet but Eligible for Offsetting
	Gross Amounts Recognized		Cash Collateral		Derivative Instruments		Net Amounts
	(Dollars in thousands)
Derivative Assets:
Commodity and freight derivatives	$	597,210	$	—	$	42,229	$	554,981
Foreign exchange derivatives	2,523		—		1,174		1,349
Interest rate derivatives - hedge	4,200		—		—		4,200
Total	$	603,933	$	—	$	43,403	$	560,530
Derivative Liabilities:
Commodity and freight derivatives	$	597,612	$	2,504	$	42,229	$	552,879
Foreign exchange derivatives	2,248		—		1,174		1,074
Interest rate derivatives - non-hedge	130		—		—		130
Total	$	599,990	$	2,504	$	43,403	$	554,083

Derivatives Not Designated as Hedging Instruments

The majority of our derivative instruments have not been designated as hedging instruments. The following table sets forth the pretax gains (losses) on derivatives not accounted for as hedging instruments that have been included in our Consolidated Statements of Operations for the three and nine months endedMay 31, 2015 and 2014. We have revised the information that we have historically included in this table below to correct for errors in the previously disclosed amounts. Although such gains and losses have been and continue to be appropriately recorded in the Consolidated Statements of Operations, the previous disclosures did not accurately reflect the derivative gains and losses in each period. These revisions did not materially impact our consolidated financial statements.

		For the Three Months Ended May 31,					For the Nine Months Ended May 31,
	Location of Gain (Loss)	2015		2014			2015		2014
		(Dollars in thousands)
Commodity and freight derivatives	Cost of goods sold	$	113,554	$	28,051		$	327,745	$	178,278
Foreign exchange derivatives	Cost of goods sold	4,211		(6,487		)	12,401		(6,681		)
Interest rate derivatives	Interest, net	10		24			84		75
Total		$	117,775	$	21,588		$	340,230	$	171,672

Commodity and Freight Contracts:

As of May 31, 2015 and August 31, 2014, we had outstanding commodity and freight futures that were used as economic hedges, as well as fixed-price forward contracts related to physical purchases and sales of commodities. The table below presents the notional volumes for all outstanding commodity and freight contracts accounted for as derivative instruments. We have made revisions to the information that we have historically included in this table below to correct for errors in the previously disclosed amounts. We previously disclosed volume information for physically-settled forward purchase and sale contracts, including some contracts not accounted for as derivatives. As a result, we have corrected the derivative volume disclosure presented below to include information on the notional amounts for contracts accounted for as derivatives in accordance with ASC Topic 815, Derivatives and Hedging. These revisions did not materially impact our previously issued consolidated financial statements.

	May 31, 2015		August 31, 2014
	Long	Short	Long	Short
	(Units in thousands)
Grain and oilseed - bushels	614,214	819,346	655,799	802,479
Energy products - barrels	21,777	15,569	20,191	16,431
Processed grain and oilseed- tons	906	3,939	749	3,047
Crop nutrients - tons	84	191	59	126
Ocean and barge freight - metric tons	5,643	1,829	5,727	4,250
Rail freight - rail cars	354	175	364	186
Livestock - pounds	13,800	35,680	11,960	46,520

Foreign Exchange Contracts:

We conduct a substantial portion of our business in U.S. dollars, but we are exposed to some risk relating to foreign currency fluctuations primarily due to grain marketing transactions in South America and Europe and purchases of products from Canada. We use foreign currency derivative instruments to mitigate the impact of exchange rate fluctuations. Although our overall risk relating to foreign currency transactions is not significant, exchange rate fluctuations do, however, impact the ability of foreign buyers to purchase U.S. agricultural products and the competitiveness of U.S. agricultural products compared to the same products offered by alternative sources of world supply. The notional amounts of our foreign exchange derivative contracts were $912.4 million and $784.4 million as of May 31, 2015 and August 31, 2014, respectively.

Interest Rate Contracts:

CHS Capital, our wholly-owned finance subsidiary, has interest rate swaps that lock the interest rates of underlying loans with a combined notional amount of $3.4 million expiring at various times through fiscal 2018, with $0.1 million of the notional amount expiring during fiscal 2015. None of CHS Capital’s interest rate swaps qualify for hedge accounting, and as a result, changes in fair value are recorded in earnings within interest, net in our Consolidated Statements of Operations.

Derivatives Designated as Cash Flow or Fair Value Hedging Strategies

As of May 31, 2015 and August 31, 2014, we had certain derivatives designated as cash flow and fair value hedges.

Interest Rate Contracts:

We have outstanding interest rate swaps with an aggregate notional amount of $420.0 million designated as fair value hedges of portions of our fixed-rate debt. Our objective in entering into these transactions is to offset changes in the fair value of the debt associated with the risk of variability in the 3-month U.S. dollar LIBOR interest rate, in essence converting the fixed-rate debt to variable-rate debt. Offsetting changes in the fair values of both the swap instruments and the hedged debt are recorded contemporaneously each period and only create an impact to earnings to the extent that the hedge is ineffective. During the nine months endedMay 31, 2015, we recorded offsetting fair value adjustments of $8.3 million, with no ineffectiveness recorded in earnings.

During the nine months endedMay 31, 2015, we entered into interest rate swaps with an aggregate notional amount of $300.0 million designated as cash flow hedges of the expected variability of future interest payments on our anticipated issuance of fixed-rate debt. The swaps expire in fiscal 2016 with no amounts expected to be included in earnings during the next 12 months.

In fiscal 2013, we entered into interest rate swaps designated as cash flow hedges of the expected variability of future interest payments on the forecasted issuance of fixed-rate debt. Gains and losses related to these swaps were initially recorded in accumulated other comprehensive income. In February 2014, the swaps were terminated as the issuance of the underlying debt was no longer probable and, as a result, a $13.5 million pre-tax gain was reclassified into net income in that period.

The following table presents the pretax gains (losses) recorded in other comprehensive income relating to cash flow hedges for the three and nine months endedMay 31, 2015 and 2014.

	For the Three Months Ended May 31,				For the Nine Months Ended May 31,
	2015		2014		2015			2014
	(Dollars in thousands)
Interest rate derivatives	$	389	$	—	$	(3,907	)	$	(10,580	)

The following table presents the pretax gains (losses) relating to cash flow hedges that were reclassified from accumulated other comprehensive loss into income for the three and nine months endedMay 31, 2015 and 2014.

		For the Three Months Ended May 31,						For the Nine Months Ended May 31,
	Location of Gain (Loss)	2015			2014			2015			2014
		(Dollars in thousands)
Interest rate derivatives	Interest income (expense)	$	(197	)	$	(210	)	$	(598	)	$	12,933