Derivative Financial Instruments

12 Months Ended

Dec. 31, 2019

Derivative Financial Instruments [Abstract]

11. DERIVATIVE FINANCIAL INSTRUMENTS

At December 31, 2019, the company’s consolidated balance sheet reflected unrealized losses of $11.1 million, net of tax, in accumulated other comprehensive loss, which included its share of equity method investee’s other comprehensive income arising during the period. The company expects these losses will be reclassified as operating income over the next 12 months as a result of hedged transactions that are forecasted to occur. The amount realized in operating income will differ as commodity prices change.

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Fair Values of Derivative Instruments

The fair values of the company’s derivative financial instruments and the line items on the consolidated balance sheets where they are reported are as follows (in thousands):


	Asset Derivatives'						Liability Derivatives'
	Fair Value at December 31,						Fair Value at December 31,
	2019			2018			2019		2018
Derivative financial instruments	$	14,515	⁽¹⁾	$	9,976	⁽²⁾	$	7,771	$	7,852
Other assets		-			1			-		-
Other liabilities		-			-			-		2
Total	$	14,515		$	9,977		$	7,771	$	7,854

(1)At December 31, 2019, derivative financial instruments, as reflected on the balance sheet, includes net unrealized gains on exchange traded futures and options contracts of $3.4 million, which include $0.1 million of net unrealized gains on derivative financial instruments designated as cash flow hedging instruments.

(2)At December 31, 2018, derivative financial instruments, as reflected on the balance sheet, includes net unrealized gains on exchange traded futures and options contracts of $16.3 million.

Refer to Note 6 - Fair Value Disclosures, which contains fair value information related to derivative financial instruments.

Effect of Derivative Instruments on Consolidated Balance Sheets, Consolidated Statements of Operations and Consolidated Statements of Comprehensive Income

The gains or losses recognized in income and other comprehensive income related to the company’s derivative financial instruments and the line items on the consolidated financial statements where they are reported are as follows (in thousands):


	Amount of Gain or (Loss) Reclassified from Accumulated Other Comprehensive Income into Income
Location of Gain or (Loss) Reclassified from	Year Ended December 31,
Accumulated Other Comprehensive Income into Income	2019		2018		2017
Revenues	$	-	$	3,648	$	42,710
Cost of goods sold		-		1,258		(11,765)
Net income (loss) from discontinued operations, net of income taxes		48,797		(14,462)		(24,714)
Net gain (loss) recognized in loss before tax	$	48,797	$	(9,556)	$	6,231


	Amount of Gain or (Loss) Recognized in Other Comprehensive Income on Derivatives
Gain or (Loss) Recognized in	Year Ended December 31,
Other Comprehensive Income on Derivatives	2019		2018		2017
Commodity Contracts	$	70,404	$	(9,642)	$	(8,015)


	Location of Gain or	Amount of Gain or (Loss) Recognized in Income on Derivatives
Derivatives Not Designated	(Loss) Recognized in	Year Ended December 31,
as Hedging Instruments	Income on Derivatives	2019		2018		2017
Commodity contracts	Revenues	$	(10,202)	$	11,565	$	(12,588)
Commodity contracts	Costs of goods sold		(2,442)		21,101		25,825
Commodity contracts	Net income (loss) from discontinued operations, net of income taxes		(2,470)		(3,607)		1,258
		$	(15,114)	$	29,059	$	14,495

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The following amounts were recorded on the consolidated balance sheets related to cumulative basis adjustments for the fair value hedged items (in thousands):


	December 31, 2019				December 31, 2018
Line Item in the Consolidated Balance Sheet in Which the Hedged Item is Included	Carrying Amount of the Hedged Assets		Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Assets		Carrying Amount of the Hedged Assets		Cumulative Amount of Fair Value Hedging Adjustment Included in the Carrying Amount of the Hedged Assets
Inventories	$	55,021	$	(2,808)	$	89,188	$	2,430

Effect of Cash Flow and Fair Value Hedge Accounting on the Statements of Operations


	Location and Amount of Gain Recognized in Income on Cash Flow and Fair Value Hedging Relationships for the Year Ended December 31, 2019
	Revenue		Cost of ‎Goods Sold		Net Income (Loss) from Discontinued Operations, Net of Income Taxes
Gain on cash flow hedging relationships:

Commodity contracts:
Amount of gain (loss) reclassified from accumulated other comprehensive income into income	$	-	$	-	$	48,797

Gain (loss) on fair value hedging relationships:

Commodity contracts:
Hedged item		-		(844)		-
Derivatives designated as hedging instruments		-		4,254		-

Total amounts of income and expense line items presented in the consolidated statement of operations in which the effects of cash flow or fair value hedges are recorded	$	-	$	3,410	$	48,797

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	Location and Amount of Gain or (Loss) Recognized in Income on Cash Flow and Fair Value Hedging Relationships for the Year Ended December 31, 2018
	Revenue		Cost of ‎Goods Sold		Net Income (Loss) from Discontinued Operations, Net of Income Taxes
Gain (loss) on cash flow hedging relationships:

Commodity contracts:
Amount of gain (loss) reclassified from accumulated other comprehensive income into income	$	3,648	$	1,258	$	(14,462)

Gain (loss) on fair value hedging relationships:

Commodity contracts:
Hedged item		-		13,681		-
Derivatives designated as hedging instruments		-		(12,304)		-

Total amounts of income and expense line items presented in the consolidated statement of operations in which the effects of cash flow or fair value hedges are recorded	$	3,648	$	2,635	$	(14,462)


	Location and Amount of Gain or (Loss) Recognized in Income on Cash Flow and Fair Value Hedging Relationships for the Year Ended December 31, 2017
	Revenue		Cost of ‎Goods Sold		Net Income (Loss) from Discontinued Operations, Net of Income Taxes
Gain (loss) on cash flow hedging relationships:

Commodity contracts:
Amount of gain (loss) reclassified from accumulated other comprehensive income into income	$	42,710	$	(11,765)	$	(24,714)

Gain (loss) on fair value hedging relationships:

Commodity contracts:
Hedged item		1,451		(6,229)		-
Derivatives designated as hedging instruments		(1,734)		8,530		-

Total amounts of income and expense line items presented in the consolidated statement of operations in which the effects of cash flow or fair value hedges are recorded	$	42,427	$	(9,464)	$	(24,714)

There were no gains or losses from discontinuing cash flow or fair value hedge treatment during the years ended December 31, 2019, 2018 and 2017.

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The open commodity derivative positions as of December 31, 2019, are as follows (in thousands):


December 31, 2019
	Exchange Traded		Non-Exchange Traded
Derivative Instruments	Net Long & (Short)⁽¹⁾		Long ⁽²⁾	(Short) ⁽²⁾	Unit of Measure	Commodity
Futures	22,445				Bushels	Corn and Soybeans
Futures	(7,000)	⁽³⁾			Bushels	Corn
Futures	(9,702)				Gallons	Ethanol
Futures	(41,664)	⁽⁴⁾			Gallons	Ethanol
Futures	(8,428)				mmBTU	Natural Gas
Futures	(9,088)	⁽³⁾			mmBTU	Natural Gas
Options	(201)				Bushels	Corn
Options	(20,954)				Gallons	Ethanol
Forwards			29,511	(1,374)	Bushels	Corn and Soybeans
Forwards			26,208	(389,298)	Gallons	Ethanol
Forwards			137	(592)	Tons	Distillers Grains
Forwards			3,840	(131,616)	Pounds	Corn Oil
Forwards			12,539	(1,736)	mmBTU	Natural Gas

(1)Exchange traded futures and options are presented on a net long and (short) position basis. Options are presented on a delta-adjusted basis.

(2)Non-exchange traded forwards are presented on a gross long and (short) position basis including both fixed-price and basis contracts.

(3)Futures or non-exchange traded forwards used for fair value hedges.

(4)Futures used for cash flow hedges.

Energy trading contracts that do not involve physical delivery are presented net in revenues on the consolidated statements of operations. Included in revenues are net gains of $12.3 million, $23.1 million, and $35.4 million for the years ended December 31, 2019, 2018, and 2017 respectively, on energy trading contracts.