Commodities Held by Broker

9 Months Ended

Jul. 31, 2017

Commodities Held By Broker

Commodities Held by Broker

NOTE 8 - COMMODITIES HELD BY BROKER:

The Company has used, and intends to continue to use in a limited capacity, short term coffee futures and options contracts primarily for the purpose of partially hedging and minimizing the effects of changing green coffee prices and to reduce our cost of sales. The commodities held at broker represent the market value of the Company’s trading account, which consists of options and future contracts for coffee held with a brokerage firm. 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 recognized at fair value in the condensed consolidated financial statements 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 has open position contracts held by the broker, which are summarized as follows:

	July 31, 2017		October 31, 2016
Option Contracts	$	227,250	$	(83,753	)
Future Contracts		551,306		218,475
Total Commodities	$	778,556	$	134,722

The Company classifies its options and future contracts as trading securities and accordingly, unrealized holding gains and losses are included in earnings and not reflected as a net amount as a separate component of stockholders’ equity.

At July 31, 2017, the Company held 116 futures contracts (generally with terms of three to four months) for the purchase of 4,350,000 pounds of green coffee at a weighted average price of $1.27 per pound. The fair market value of coffee applicable to such contracts was $1.39 per pound at that date. At July 31, 2017, the Company did not have any options.

At October 31, 2016, the Company held 22 futures contracts (generally with terms of three to four months) for the purchase of 825,000 pounds of green coffee at a weighted average price of $1.45 per pound. The fair market value of coffee applicable to such contracts was $1.64 per pound at that date. At October 31, 2016, the Company did not have any options.

The Company recorded realized and unrealized gains and losses respectively, on these contracts as follows:

	Three Months Ended July 31,
	2017			2016
Gross realized gains	$	323,196		$	681,200
Gross realized losses		(1,129,690	)		(23,379	)
Unrealized (loss) gain		1,379,165			(97,521	)
Total	$	572,671		$	560,300

	Nine Months Ended July 31,
	2017			2016
Gross realized gains	$	1,050,844		$	1,247,113
Gross realized losses		(1,630,591	)		(924,507	)
Unrealized (loss) gain		643,834			591,566
Total	$	64,087		$	914,172