MGP Ingredients (MGPI)

Cash flow hedges

Cash flow hedges include readily marketable exchange-traded commodity futures contracts and option contracts related to the Company’s purchase of raw materials, principally corn and wheat, for anticipated operating requirements to reduce the risk of future grain price volatility.  Additionally, the Company hedges, through the use of exchange-traded futures contracts, the purchase price of natural gas used in the distilling process.  In certain situations, the Company will also enter into exchange-traded futures contracts for the sale of fuel grade alcohol to hedge the selling price of fuel grade alcohol to its customers.  These derivatives typically hedge transactions forecasted within 18 months from the date of entry into the contract.

Cash flow hedges

Cash flow hedges include readily marketable exchange-traded commodity futures contracts and option contracts related to the Company’s purchase of raw materials, principally corn and wheat, for anticipated operating requirements to reduce the risk of future grain price volatility.  Additionally, the Company hedges, through the use of exchange-traded futures contracts, the purchase price of natural gas used in the distilling process.  In certain situations, the Company will also enter into exchange-traded futures contracts for the sale of fuel grade alcohol to hedge the selling price of fuel grade alcohol to its customers.  These derivatives typically hedge transactions forecasted within 18 months from the date of entry into the contract.

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