Derivative Instruments and Hedging Activities

6 Months Ended

Jun. 30, 2011

Derivative Instruments and Hedging Activities [Abstract]

DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

NOTE 9 — DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES

The Company adopted ASC Topic 815, Derivatives and Hedging. This guidance was intended to improve financial reporting about derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity’s financial position, financial performance, and cash flows.

Objectives and Strategies for Holding Derivative Instruments

In the ordinary course of business, the company enters into contractual arrangements (derivatives) as a means of managing exposure to changes in biodiesel prices and feedstock costs under established procedures and controls. The company has established a variety of approved derivative instruments to be utilized in each risk management program, as well as varying levels of exposure coverage and time horizons based on an assessment of risk factors related to each hedging program. As part of its trading activity, the Company uses option and swap contracts offered through regulated commodity exchanges to reduce risk and is exposed to risk of loss in the market value of biodiesel inventories and input costs.

Commodity Risk Management

Commodity price risk management programs serve to reduce exposure to price fluctuations on purchases of feedstocks and biodiesel prices. The company enters into over-the-counter and exchange-traded derivative commodity instruments to hedge the commodity price risk associated with feedstocks and commodity exposures. There were no derivative commodity instruments open at June 30, 2011 or December 31, 2010.

Accounting for Derivative Instruments and Hedging Activities

All derivatives are designated as non-hedge derivatives. Although the contracts may be effective economic hedges of specified risks, they do not meet the hedge accounting criteria of ASC 815. At June 30, 2011 and December 31, 2010, the Company had no net derivative liabilities or assets related to these instruments.

During the three months ended June 30, 2011 and 2010, net realized and unrealized losses on derivative transactions were recognized in the statement of operations as follows:

Derivative (Gain) Loss

Three Months Ended

June 30, 2011

June 30, 2010

Statement of

Operations Location

(Gain) Loss

Operations Location

(Gain) Loss

Commodity contracts - Heat oil swaps

Cost of sales

-0-

Cost of sales

(524,603

)

Derivative (Gain) Loss

Six Months Ended

June 30, 2011

June 30, 2010

Statement of

Operations Location

(Gain) Loss

Operations Location

(Gain) Loss

Commodity contracts - Heat oil swaps

Cost of sales

-0-

Cost of sales

(355,692

)

- Definition

The entire disclosure for the entity's entire derivative instruments and hedging activities. Describes an entity's risk management strategies, derivatives in hedging activities and non-hedging derivative instruments, the assets, obligations, liabilities, revenues and expenses arising therefrom, and the amounts of and methodologies and assumptions used in determining the amounts of such items.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 133
-Paragraph 44
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

Reference 2: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
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-Section 50
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Reference 3: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
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Reference 20: http://www.xbrl.org/2003/role/presentationRef
-Publisher FASB
-Name Statement of Financial Accounting Standard (FAS)
-Number 133
-Paragraph 45
-LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy.

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+ Details

Western Dubuque Biodiesel, LLC 10-Q/A