Commodities Held at Broker

9 Months Ended

Jul. 31, 2011

Notes to Financial Statements

Commodities Held at Broker

NOTE   8  - COMMODITIES HELD AT BROKER:

The commodities held at the broker represent the market value of the Company’s trading account, which consists of future contracts for coffee held with Morgan Stanley Smith Barney.  The Company uses options and futures contracts, which are not designated or qualifying as hedging instruments, to partially hedge the effects of fluctuations in the price of green coffee beans.  Options and futures contracts are marked to market based on market data of similar instruments that are in observable markets with current recognition of gains and losses on such positions.  The Company’s accounting for options and futures contracts may increase earnings volatility in any particular period. The Company acquires options and futures contracts primarily for the purpose of guaranteeing an adequate supply of green coffee.  The Company has open position contracts held by the broker, which includes cash and commodities for futures and options summarized as follows:

	July 31, 2011 (unaudited)			October 31, 2010
Option Contracts		(293,115	)		(323,002	)
Future Contracts		(585,943	)		598,501
Total Commodities		(879,058	)		275,499

The Company classifies its options and future contracts as trading securities and accordingly, unrealized holding gains and losses are included in earnings.

At July 31, 2011, the Company held 100 options (generally with terms of two months or less) covering an aggregate of 3,750,000 pounds of green coffee beans at $2.40 per pound.  The fair market value of these options, which was obtained from observable market data of similar instruments, was $240,000.  At July 31, 2011, the Company did not hold any futures contracts.

At July 31, 2010, the Company held 60 options (generally with terms of two months or less) covering an aggregate of 2,250,000 pounds of green coffee beans at $1.55 per pound.  The fair market value of these options, which was obtained from observable market data of similar instruments, was $462,712 at July 31, 2010.  At July 31, 2010, the Company did not hold any futures contracts.

Included in cost of sales for the three and nine months ended July 31, 2011 and 2010, the Company recorded realized and unrealized gains and losses on these contracts as follows:

	Three Months Ended July 31,
	2011 (unaudited)			2010   (unaudited)
Gross realized gains	$	611,696		$	313,814
Gross realized losses		(855,906	)		(53,513	)
Unrealized (losses) gains		(1,202,443	)		71,570
Total	$	(1,446,653	)	$	331,871

	Nine Months Ended July 31,
	2011 (unaudited)			2010 (unaudited)
Gross realized gains	$	2,464,269		$	965,829
Gross realized losses		(861,140	)		(182,379	)
Unrealized (losses) gains		(1,154,558	)		109,673
Total	$	448,571		$	893,123