| DERIVATIVE FINANCIAL INSTRUMENTS |
| 9. | DERIVATIVE FINANCIAL INSTRUMENTS |
The Company is exposed to various
market risks, including changes in commodity prices (raw materials and finished goods). To manage risks associated with the volatility
of these natural business exposures, the Company enters into commodity agreements (exchange-traded futures contracts and swaps) and forward
purchase (corn) and sale (ethanol, distillers grains and distillers corn oil) contracts. The Company does not purchase or sell derivative
financial instruments for trading or speculative purposes. The Company does not purchase or sell derivative financial instruments for
which a lack of marketplace quotations would require the use of fair value estimation techniques. The changes in fair value of these derivative
financial instruments are recognized in current period earnings as the Company does not use hedge accounting.
The following table provides information
about the fair values of the Company’s derivative financial instruments and the line items on the Consolidated Balance Sheets in
which the fair values are reflected (amounts in thousands):
| | |
|
Asset Derivatives | | |
|
Liability Derivatives | |
| | |
|
Fair Value at January 31, | | |
|
Fair Value at January 31, | |
| | |
2026 | | |
2025 | | |
2026 | | |
2025 | |
| | |
|
| | |
|
| | |
|
| | |
|
| |
| Forward purchase contracts (1) | |
|
$ | 280 | | |
|
$ | 1,253 | | |
|
$ | 529 | | |
|
$ | 378 | |
| | |
|
| | | |
|
| | | |
|
| | | |
|
| | |
| Cash collateral balance (2) | |
|
$ | 180 | | |
|
$ | 2,523 | | |
|
| - | | |
|
| - | |
| Commodity futures (3) | |
|
| 433 | | |
|
| (1,291) | | |
|
| - | | |
|
| - | |
| Net position with broker | |
|
$ | 613 | | |
|
$ | 1,232 | | |
|
| - | | |
|
| - | |
| | |
|
| | | |
|
| | | |
|
| | | |
|
| | |
| Total | |
|
$ | 893 | | |
|
$ | 2,485 | | |
|
$ | 529 | | |
|
$ | 378 | |
| (1) | Forward purchase contracts assets are included in “Prepaid expenses and other” on the accompanying
Consolidated Balance Sheets. These contracts are for purchases of approximately 8.8 million and 16.8 million bushels of corn at January
31, 2026 and 2025, respectively. |
Forward purchase contracts liabilities
are included in “Accrued expenses and other current liabilities” on the accompanying Consolidated Balance Sheets. These contracts
are for purchases of approximately 9.6 million and 7.6 million bushels of corn at January 31, 2026 and 2025, respectively.
| (2) | As of January 31, 2026, and 2025, all of the derivative financial instruments held by the Company were
subject to enforceable master netting arrangements. The Company’s accounting policy is to offset position amounts owed or owing
with the same counterparty. Depending on the amount of unrealized gains and losses on derivative contracts held by the Company, the counterparty
may require collateral to secure the Company’s derivative contract positions. As of January 31, 2026 and 2025, the Company was required
to maintain collateral with the counterparty in the amount of approximately $180,000 and $2,523,000, respectively, recorded within “Prepaid
expenses and other” on the accompanying Consolidated Balance Sheets. |
| (3) | Commodity futures assets and liabilities are included in “Prepaid expenses and other” on the
accompanying Consolidated Balance Sheets. These contracts included short/sell positions and long/buy positions for approximately 2.4 million
and 1.8 million bushels of corn, respectively at January 31, 2026. These contracts also included short/sell positions for approximately
3.6 million gallons of ethanol at January 31, 2026. These contracts included short/sell positions and long/buy positions for approximately
6.3 million and 575,000 bushels of corn, respectively at January 31, 2025. These contracts also included short/sell positions for approximately
4.2 million gallons of ethanol at January 31, 2025. |
See Note 4 which contains fair value
information related to derivative financial instruments.
The following table provides information
about (losses) gains recognized in income on the Company’s derivative financial instruments and the line items on the accompanying
Consolidated Statements of Operations in which the fair values are reflected for the years ended January 31, 2026, 2025, and 2024 (amounts
in thousands):
| | |
Year Ended January 31, | |
| | |
2026 | | |
2025 | | |
2024 | |
| | |
| | |
| | |
| |
| Net sales | |
$ | (254) | | |
$ | 424 | | |
$ | (37) | |
| | |
| | | |
| | | |
| | |
| Cost of sales | |
$ | 5,375 | | |
$ | (2,739) | | |
$ | 15,023 | |
| | |
| | | |
| | | |
| | |
|