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Agribusiness Segment
The availability and price of agricultural commodities are subject to wide fluctuations due to unpredictable factors such
as weather, plantings, foreign and domestic government farm programs and policies, changes in global demand created by
population changes and changes in standards of living, and global production of similar and competitive crops. To reduce
price risk caused by market fluctuations in purchase and sale commitments for grain and grain held in inventory, we enter
into exchange-traded futures and options contracts that function as economic hedges. The market value of exchange-traded
futures and options used for economic hedging has a high, but not perfect correlation, to the underlying market value of grain
inventories and related purchase and sale contracts. The less correlated portion of inventory and purchase and sale contract
market value, known as basis, is much less volatile than the overall market value of exchange-traded futures and tends to
follow historical patterns. We manage this less volatile risk by constantly monitoring our position relative to the price
changes in the market. In addition, inventory values are affected by the month-to-month spread relationships in the regulated
futures markets, as we carry inventories over time. These spread relationships are also less volatile than the overall market
value and tend to follow historical patterns, but also represent a risk that cannot be directly offset. Our accounting policy for
our futures and options, as well as the underlying inventory positions and purchase and sale contracts, is to mark them to the
market and include gains and losses in the consolidated statement of operations in sales and merchandising revenues.
A sensitivity analysis has been prepared to estimate agribusiness segment exposure to market risk of our commodity
position (exclusive of basis risk). Our daily net commodity position consists of inventories related to purchase and sale
contracts and exchange-traded contracts. The fair value of our position, which is a summation of the fair values calculated for
each commodity by valuing each net position at quoted futures market prices, is approximately $484 thousand at December
31, 2011. Market risk at that date, based on the estimated net income effect resulting from a hypothetical 10% change in such
prices, was approximately $30 thousand.
Item 8. Financial Statements and Supplementary Data.
The required consolidated financial statements and notes thereto are included in this report and are listed in Part IV, Item
15.
Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.
None.
Item 9A. Controls and Procedures.
Evaluation of Disclosure Controls and Procedures
We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in
the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time
periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the
Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely
decisions regarding required financial disclosure.
As of the end of the period covered by this report, our management carried out an evaluation, under the supervision of
and with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and
operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act).
Our disclosure controls and procedures are designed to ensure that information required to be disclosed in the reports that we
file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in
SEC rules and forms. These disclosure controls and procedures are designed to ensure that information required to be
disclosed by us in the reports that we file or submit under the Exchange Act is accumulated and communicated to our
management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions
regarding required financial disclosure. Based upon that evaluation, our management, including the Chief Executive Officer
and the Chief Financial Officer, concluded that our disclosure controls and procedures were effective.
Management’s Annual Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining effective internal control over financial reporting, as
defined in Exchange Act Rule 13a-15(f). Our internal control system is designed to provide reasonable assurance regarding