Archer Daniels Midland 2009 Annual Report Download - page 56

Download and view the complete annual report

Please find page 56 of the 2009 Archer Daniels Midland annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 96

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96

50
Archer Daniels Midland Company
Notes to Consolidated Financial Statements (Continued)
Note 4.
Inventories, Derivative Instruments & Hedging Activities (Continued)
The following table sets forth the pre-tax gains (losses) on derivatives not designated as hedging instruments under
SFAS 133 that have been included in the consolidated statement of earnings for the six months ended June 30,
2009, following adoption of SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities – an
amendment of FASB Statement No. 133 (SFAS 161) on January 1, 2009.
(in millions)
Interest Contracts
Other income (expense) – net
$ 2
FX Contracts
Net sales and other operating income
$ (22)
Cost of products sold
21
Other income (expense) - net
(15)
$ (16)
Commodity Contracts
Cost of products sold
$ (922)
Derivatives Designated as Cash Flow Hedging Strategies
For derivative instruments that are designated and qualify as cash flow hedges (i.e., hedging the exposure to
variability in expected future cash flows that is attributable to a particular risk), the effective portion of the gain or
loss on the derivative instrument is reported as a component of other comprehensive income (OCI) and reclassified
into earnings in the same line item affected by the hedged transaction and in the same period or periods during
which the hedged transaction affects earnings. The remaining gain or loss on the derivative instrument that is in
excess of the cumulative change in the cash flows of the hedged item, if any (i.e., the ineffective portion), hedge
components excluded from the assessment of effectiveness, and gains and losses related to discontinued hedges are
recognized in the consolidated statement of earnings during the current period.
For each of the hedging programs described below, the derivatives are designated as cash flow hedges. The
changes in the market value of such derivative contracts have historically been, and are expected to continue to be,
highly effective at offsetting changes in price movements of the hedged item. Once the hedged item is recognized
in earnings, the gains/losses arising from the hedge will be reclassified from accumulated other comprehensive
income (AOCI) to either net sales and other operating income, or cost of products sold. As of June 30, 2009, the
Company has $25 million of after-tax losses in AOCI related to gains and losses from commodity cash flow hedge
transactions. The Company expects to recognize all of these after-tax losses in the statement of earnings during the
next 18 months. During the current period the Company had no amounts recognized in earnings from cash flow
hedges that were discontinued.