COMMODITIES HELD BY BROKER

3 Months Ended

Jan. 31, 2021

Brokers and Dealers [Abstract]

COMMODITIES HELD BY BROKER

NOTE 5 - 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:

	January 31, 2021			October 31, 2020
Option Contracts	$	(4,444	)	$	(164,475	)
Future Contracts		(32,806	)		(287,850	)
Total Commodities	$	(37,250	)	$	(452,325	)

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 January 31, 2021, the Company held 16 futures contracts (generally with terms of three to four months) for the purchase of 600,000 pounds of green coffee at a weighted average price of $1.235. The fair market value of coffee applicable to such contracts was $1.23 per pound at that date. The Company also held 10 options covering an aggregate of 375,000 pounds of green coffee beans. The fair market value of these options, which was obtained from observable market data of similar instruments was $16,650.

At October 31, 2020, the Company held 48 futures contracts (generally with terms of three to four months) for the purchase of 1,800,000 pounds of green coffee at a weighted average price of $1.158 per pound. The fair market value of coffee applicable to such contracts was $1.044 per pound at that date.

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

	Three Months Ended January 31,
	2021			2020
Gross realized gains	$	261,987		$	356,559
Gross realized losses		(76	)		(126,811	)
Unrealized gain (loss)		415,075			(985,837	)
Total	$	676,986		$	(756,089	)

COFFEE HOLDING CO., INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JANUARY 31, 2021

(UNAUDITED)