Commodities Held by Broker

9 Months Ended

Jul. 31, 2018

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, 2018			October 31, 2017
Option Contracts	$	56,768		$	166,945
Future Contracts		(584,805	)		(377,807	)
Total Commodities	$	(528,038	)	$	(210,862	)

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, 2018, the Company held 131 futures contracts (generally with terms of three to four months) for the purchase of 4,912,500 pounds of green coffee at a weighted average price of $1.159 per pound. The fair market value of coffee applicable to such contracts was $1.099 per pound at that date. At July 31, 2018, the Company did not have any options.

At October 31, 2017, the Company held 145 futures contracts (generally with terms of three to four months) for the purchase of 5,437,500 pounds of green coffee at a weighted average price of $1.31 per pound. The fair market value of coffee applicable to such contracts was $1.25 per pound at that date. At October 31, 2017, 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,
	2018			2017
Gross realized gains	$	369,233		$	323,196
Gross realized losses		(414,476	)		(1,129,690	)
Unrealized gain (loss)		(1,170,086	)		1,379,165
Total	$	(1,215,329	)	$	572,671

	Nine Months Ended July 31,
	2018			2017
Gross realized gains	$	635,029		$	1,050,844
Gross realized losses		(1,373,107	)		(1,630,591	)
Unrealized gain (loss)		(317,177	)		643,834
Total	$	(1,055,255	)	$	64,087