Fair Value Measurements

9 Months Ended

May 31, 2012

Fair Value Measurements [Abstract]

Fair Value Measurements

Note 11.    Fair Value Measurements

The following table presents assets and liabilities included in our Consolidated Balance Sheets that are recognized at fair value on a recurring basis, and indicates the fair value hierarchy utilized to determine such fair value. As required by accounting standards, assets and liabilities are classified, in their entirety, based on the lowest level of input that is a significant component of the fair value measurement. The lowest level of input is considered Level 3. Our assessment of the significance of a particular input to the fair value measurement requires judgment, and may affect the classification of fair value assets and liabilities within the fair value hierarchy levels. Fair value measurements at May 31, 2012, August 31, 2011 and May 31, 2011 were as follows:

	Fair Value Measurements at May 31, 2012
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
Assets:
Readily marketable inventories			$	1,324,367			$	1,324,367
Commodity and freight derivatives	$	74,982		280,277				355,259
Foreign currency derivatives		3,843						3,843
Other assets		72,439						72,439
Total Assets	$	151,264	$	1,604,644			$	1,755,908
Liabilities:
Commodity and freight derivatives	$	32,222	$	260,906			$	293,128
Interest rate swap derivatives				535				535
Foreign currency derivatives		3,379						3,379
Accrued liability for contingent crack spread payments related to purchase of noncontrolling interests					$	98,447		98,447
Total Liabilities	$	35,601	$	261,441	$	98,447	$	395,489

	Fair Value Measurements at August 31, 2011
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)	Total
Assets:
Readily marketable inventories			$	1,288,049		$	1,288,049
Commodity and freight derivatives	$	85,082		549,056			634,138
Foreign currency derivatives		1,508					1,508
Other assets		68,246					68,246
Total Assets	$	154,836	$	1,837,105		$	1,991,941
Liabilities:
Commodity and freight derivatives	$	191,607	$	290,256		$	481,863
Interest rate swap derivatives				750			750
Total Liabilities	$	191,607	$	291,006		$	482,613

	Fair Value Measurements at May 31, 2011
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)	Total
Assets:
Readily marketable inventories			$	1,580,567		$	1,580,567
Commodity and freight derivatives	$	79,353		674,867			754,220
Foreign currency derivatives		1,798					1,798
Other assets		72,562					72,562
Total Assets	$	153,713	$	2,255,434		$	2,409,147
Liabilities:
Commodity and freight derivatives	$	87,018	$	390,662		$	477,680
Foreign currency derivatives		769					769
Interest rate swap derivatives				641			641
Total Liabilities	$	87,787	$	391,303		$	479,090

Readily marketable inventories — Our readily marketable inventories primarily include our grain, oilseed, and minimally processed soy-based inventories that are stated at fair values. These commodities are readily marketable, have quoted market prices and may be sold without significant additional processing. We estimate the fair market values of these inventories included in Level 2 primarily based on exchange quoted prices, adjusted for differences in local markets. Changes in the fair market values of these inventories are recognized in our Consolidated Statements of Operations as a component of cost of goods sold.

Commodity, freight and foreign currency derivatives — Exchange traded futures and options contracts are valued based on unadjusted quoted prices in active markets and are classified within Level 1. Our forward commodity purchase and sales contracts, flat price or basis fixed derivative contracts, ocean freight contracts and other OTC derivatives are determined using inputs that are generally based on exchange traded prices and/or recent market bids and offers, adjusted for location specific inputs, and are classified within Level 2. The location specific inputs are generally broker or dealer quotations, or market transactions in either the listed or OTC markets. Changes in the fair values of these contracts are recognized in our Consolidated Statements of Operations as a component of cost of goods sold.

Other assets — Our available-for-sale investments in common stock of other companies and our Rabbi Trust assets are valued based on unadjusted quoted prices on active exchanges and are classified within Level 1. Changes in the fair values of these other assets are primarily recognized in our Consolidated Statements of Operations as a component of marketing, general and administrative expenses.

Interest rate swap derivatives — Fair values of our interest rate swap liabilities are determined utilizing valuation models that are widely accepted in the market to value such OTC derivative contracts. The specific terms of the contracts, as well as market observable inputs, such as interest rates and credit risk assumptions, are factored into the models. As all significant inputs are market observable, all interest rate swaps are classified within Level 2. Changes in the fair values of contracts not designated as hedging instruments for accounting purposes are recognized in our Consolidated Statements of Operations as a component of interest, net. Changes in the fair values of contracts designated as hedging instruments are deferred to accumulated other comprehensive loss in the equity section of our Consolidated Balance Sheets and are amortized into earnings within interest, net over the term of the agreements.

Accrued liability for contingent crack spread payment related to purchase of noncontrolling interests — The fair value of the accrued liability was calculated utilizing an average price option model, an adjusted Black-Scholes pricing model commonly used in the energy industry to value options. The model uses market observable inputs and unobservable inputs. Due to significant unobservable inputs used in the pricing model, the liability is classified within Level 3.

Mandatorily redeemable noncontrolling interests — The fair value was calculated at inception by discounting each future redemption payment to its present value as of the balance sheet date. Our long-term borrowing rates were used as the discount rates for the present value calculations. We believe the discount rates that are used are commensurate with the risk inherent in our cash flows. The inputs are significant unobservable inputs, and the liability is a nonrecurring fair value measurement classified within Level 3.

Quantitative Information about Level 3 Fair Value Measurements
Item	Fair Value May 31, 2012		Valuation Technique	Unobservable Input	Range (Weighted Average)
Accrued liability for contingent crack spread payments related to purchase of noncontrolling interests	$	98,447	Adjusted Black Scholes option pricing model	Forward crack spread margin on May 31 (a) Contractual target crack spread margin (b) Expected volatility (c) Risk-free interest rate (d) Expected life (years) (e)		$11.00-$18.00 (13.06) $17.50 88.66% 0.18-0.67% (0.49%) 1.25-5.25 (3.55)
Mandatorily redeemable noncontrolling interests	$	332,692	Discounted cash flows	Own credit risk (f)		2.16-2.56% (2.40%)

(a) Represents forward crack spread margin quotes and management estimates based on future settlement dates

(b) Represents the minimum contractual threshold that would require settlement with the counterparties

(c) Represents quarterly adjusted volatility estimates derived from daily historical market data

(d) Represents yield curves for U.S. Treasury securities

(e) Represents the range in the number of years remaining related to each contingent payment

(f) Represents the range of company-specific risk adjustments commensurate with typical long-term borrowing rates available to us at inception of the contract

Valuation Processes for level 3 measurements — Management is responsible for determining the fair value of our level 3 financial instruments. Depending on the instrument, option pricing methods or present value methods are utilized, as indicated above. Inputs used in the option pricing models are based on quotes obtained from third party vendors as well as management estimates for periods in which quotes cannot be obtained. Each reporting period, we review the unobservable inputs provided by third-party vendors for reasonableness utilizing relevant information available to us. Management also takes into consideration current and expected market trends and compares the liability’s fair value to hypothetical payments using known historical market data to assess reasonableness of the resulting fair value.

Sensitivity Analysis of level 3 measurements — The significant unobservable inputs that are susceptible to periodic fluctuations used in the fair value measurement of the accrued liability for contingent crack spread payments related to the purchase of noncontrolling interests are the forward crack spread margin and the expected volatility. Significant increases (decreases) in either of these inputs in isolation would result in a significantly higher (lower) fair value measurement. Although changes in the expected volatility are driven by fluctuations in the underlying crack spread margin, changes in expected volatility are not necessarily accompanied by a directionally similar change in the forward crack spread margin. Directional changes in the expected volatility can be affected by a multitude of factors including the magnitude of daily fluctuations in the underlying market data, market trends, timing of fluctuations, and other factors.

The following table represents a reconciliation of liabilities measured at fair value using significant unobservable inputs (Level 3) for the three months ended May 31, 2012:

	Level 3 Liabilities
	Accrued liability for contingent crack spread payments related to purchase of noncontrolling interests			Mandatorily redeemable noncontrolling interests
Balances, March 1, 2012	$	101,003		$	330,689
Total gains included in cost of goods sold		(2,556	)
Total losses included in interest, net					2,003
Balances, May 31, 2012	$	98,447		$	332,692

The following table represents a reconciliation of liabilities measured at fair value using significant unobservable inputs (Level 3) for the nine months ended May 31, 2012:

	Level 3 Liabilities
	Accrued liability for contingent crack spread payments related to purchase of noncontrolling interests			Mandatorily redeemable noncontrolling interests
Balances, September 1, 2011	$	—		$	—
Purchases		105,188			328,676
Total gains included in cost of goods sold		(6,741	)
Total losses included in interest, net					4,016
Balances, May 31, 2012	$	98,447		$	332,692

There were no significant transfers between Level 1, Level 2, and Level 3 assets and liabilities.