| Derivative Financial Instruments |
Note 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 (that are not accounted for under the “normal purchases
and normal sales” scope exemption of ASC 815) and the line items on the Consolidated Balance Sheets in which the fair values
are reflected (amounts in table in thousands):
| | |
Asset Derivatives | | |
Liability Derivatives | |
| | |
Fair Value | | |
Fair Value | |
| | |
April 30,
2026 | | |
January 31,
2026 | | |
April 30,
2026 | | |
January 31,
2026 | |
| | |
| | |
| | |
| | |
| |
| Forward purchase contracts (1) | |
$ | 708 | | |
$ | 280 | | |
$ | 625 | | |
$ | 529 | |
| | |
| | | |
| | | |
| | | |
| | |
| Cash collateral balance (2) | |
$ | 2,026 | | |
$ | 180 | | |
$ | - | | |
$ | - | |
| Commodity futures (3) | |
| (650) | | |
| 433 | | |
| - | | |
| - | |
| Net position with broker | |
$ | 1,376 | | |
$ | 613 | | |
$ | - | | |
$ | - | |
| | |
| | | |
| | | |
| | | |
| | |
| Total | |
$ | 2,084 | | |
$ | 893 | | |
$ | 625 | | |
$ | 529 | |
| | (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 10.6 million and 8.8 million bushels of corn at April 30, 2026 and January 31, 2026, 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 13.1 million and 9.6 million bushels of corn at April 30, 2026 and January 31, 2026, respectively. |
| | | |
| | (2) | As of April 30, 2026 and January 31, 2026, 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 April 30, 2026 and January 31, 2026, the Company recorded this collateral balance 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 6.9 million and 5.7 million bushels of corn, respectively, at April 30, 2026. These contracts also included short/sell positions for approximately 630,000 gallons of ethanol at April 30, 2026. 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. |
See Note 5 which contains fair value information
related to derivative financial instruments.
The following table provides information
about (losses) gains recognized in income from 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 three months ended April 30, 2026 and 2025 (amounts in thousands):
| | |
Three Months Ended
April 30, | |
| | |
2026 | | |
2025 | |
| | |
| | |
| |
| Net sales | |
$ | (1,576) | | |
$ | 17 | |
| | |
| | | |
| | |
| Cost of sales | |
$ | (360) | | |
$ | 1,968 | |
|