| 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
Fair Value | | |
Liability Derivatives
Fair Value | |
| | |
July 31,
2026 | | |
January 31, 2026 | | |
July 31,
2026 | | |
January 31, 2026 | |
| | |
| | | |
| | | |
| | | |
| | |
| Forward purchase contracts (1) | |
$ | 487 | | |
$ | 280 | | |
$ | 2,540 | | |
$ | 529 | |
| | |
| | | |
| | | |
| | | |
| | |
| Cash collateral balance (2) | |
$ | 46 | | |
$ | 180 | | |
$ | - | | |
$ | - | |
| Commodity futures (3) | |
| 1,339 | | |
| 433 | | |
| - | | |
| - | |
| Net position with broker | |
$ | 1,385 | | |
$ | 613 | | |
$ | - | | |
$ | - | |
| | |
| | | |
| | | |
| | | |
| | |
| Total | |
$ | 1,872 | | |
$ | 893 | | |
$ | 2,540 | | |
$ | 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 3.4 million and 8.8 million bushels of corn at July 31, 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 12.1 million and 9.6 million bushels of corn at July 31, 2026 and January 31, 2026, respectively. | | | | | | | (2) | As of July 31, 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 July 31, 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 4.6 million and 0.6 million bushels of corn, respectively, at July 31, 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 gains
(losses) 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 and six months ended July 31, 2026 and 2025 (amounts in
thousands):
| | |
Three Months Ended
July 31, | | |
Six Months Ended
July 31, | |
| | |
2026 | | |
2025 | | |
2026 | | |
2025 | |
| | |
| | | |
| | | |
| | | |
| | |
| Net sales | |
$ | 62 | | |
$ | 201 | | |
$ | (1,513) | | |
$ | 218 | |
| | |
| | | |
| | | |
| | | |
| | |
| Cost of sales | |
$ | (119) | | |
$ | 317 | | |
$ | (478) | | |
$ | 2,285 | |
|