Note 5 - Derivative Instruments

3 Months Ended

Mar. 31, 2013

Derivative Instruments and Hedging Activities Disclosure [Text Block]

Note 5.  Derivative Instruments.

Derivative Instruments.  Certain commodities the Company uses in its production process are exposed to market price risk due to volatility in the prices for those commodities.  The Company used financial derivative instruments to reduce exposure to market risk in commodity prices, primarily corn, through a combination of forward purchases, long-term contracts with suppliers and exchange traded commodity futures and option contracts.  Specifically, the Company sold put options on commodity futures at exercise prices that were deemed attractive to the Company and use the premiums received to reduce the overall cost of inputs utilized in the production process.  Between July 2011 and February 2012, management elected to restart hedge accounting for qualifying derivative contracts entered into on and after July 1, 2011.

During 2012, the Company entered into a supply contract to purchase corn for delivery up to 12 months in the future, at negotiated prices.  The pricing for these contracts is based on a formula using several factors.  The Company has determined that the firm commitments to purchase corn under the terms of these new contracts meet the normal purchases and sales exception and has excluded the fair value of these commitments from recognition within its condensed consolidated financial statements until the actual contracts are physically settled.  Accordingly, given the supply contract to purchase corn, in February 2012, the Company made the decision to close out of the corn futures contracts designated as cash flow hedges prior to their scheduled delivery and simultaneously de-designated 100 percent of these cash flow hedges at that time.  As of March 31, 2013, the Company has no derivative contracts designated as cash flow hedges.

Derivatives Not Designated as Hedging Instruments

The Company’s production process involves the use of natural gas and raw materials, including corn and flour.  The contracts for raw materials and natural gas range from monthly contracts to multi-year supply arrangements; however, because the quantities involved have always been for amounts to be consumed within the normal production process, the Company has determined that these contracts meet the normal purchases and sales exceptionand have excluded the fair value of these commitments from recognition within its financial statements until the actual contracts are physically settled.  See Note 4. Commitments and Contingencies for discussion on the Company’s corn, flour and natural gas purchase commitments.

The following table provides the gain or (loss) for the Company’s commodity derivatives not designated as hedging instruments and where it was recognized in the Condensed Consolidated Statements of Comprehensive Income.

		Quarter Ended
	Classified	March 31, 2013		March 31, 2012
Commodity derivatives	Cost of sales	$	63	$	(827	)

The Company used corn futures contracts for the purchase of corn and also uses call and put options in order to mitigate the impact of potential changes in market conditions.  Beginning July 1, 2011, the Company began to buy and sell derivative instruments to manage market risk associated with ethanol purchases, including ethanol futures and option contracts, in order to mitigate risks associated with the Company’s investment in ICP.  At March 31, 2013, the Company had no ethanol derivative contracts outstanding.

Derivatives Designated as Cash Flow Hedges

	Amount of Gains (Losses) Recognized in Other Comprehensive Income on Derivatives						Amount of Gains (Losses) Reclassified from Accumulated Other Comprehensive Income into Earnings
Derivatives in Cash Flow Hedging Relationship	Quarter Ended March 31, 2013		Quarter Ended March 31, 2012			Location of Losses Reclassified from AOCI into Income	Quarter Ended March 31, 2013		Quarter Ended March 31, 2012
Commodity derivatives		-	$	(286	)	Cost of sales		-	$	(413	)