to hedge firm and highly anticipated foreign currency cash fl ows, with an objective of balancing currency risk to provide adequate protection from signifi cant fluctuations in the currency markets. 

The primary currency movements for which we have exchange-rate exposure are the U.S. dollar versus the euro, the U.S. dollar versus the Chinese yuan and the U.S. dollar versus the Brazilian real. 

Hedge ineffectiveness related to our outstanding foreign currency exchange cash flow hedges recorded to earnings during the years ended December 31, 2010 and 2009 was a gain (loss) of $0.3 million and $(0.1) million, respectively. There was no such activity in 2008. 

We hold certain forward contracts that have not been designated as hedging instruments. Contracts used to hedge the exposure to foreign currency fluctuations associated with certain monetary assets and liabilities are not designated as hedging instruments, and changes in the fair value of these items are recorded in earnings. The net pre-tax gains (losses) recorded in earnings for contracts not designated as hedging instruments in 2010, 2009 and 2008 were $(3.0) million, $(36.9) million and $18.5 million, respectively. 

## Commodity Price Risk 

We are exposed to risks in energy costs due to fl uctuations in energy prices, particularly natural gas. We attempt to mitigate our exposure to increasing energy costs by hedging the cost of future deliveries of natural gas and entering into fixed-price contracts for the purchase of coal and fuel oil. 

There was no hedge ineffectiveness, related to our outstanding commodity cash flow hedges for the year ended December 31, 2010. Hedge ineffectiveness, related to our outstanding commodity cash fl ow hedges recorded to earnings for the years ended December 31, 2009 and 2008 were losses of $(0.6) million and $(0.2) million, respectively. The net pre-tax (loss) recorded in earnings for commodity contracts not designated as hedging instruments in 2010, 2009 and 2008 was $(0.8)million, $(0.2) million and $(0.5) million, respectively. 

In the second quarter of 2010, our Agricultural Products segment began entering into contracts with certain customers in Brazil to exchange our products for future physical delivery of soybeans. To mitigate the price risk associated with these barter contracts, we enter into off setting derivatives to hedge our exposure. As of December 31, 2010, we had no such contracts in place. 

## Interest Rate Risk 

We use various strategies to manage our interest rate exposure, including entering into interest rate swap agreements to achieve a targeted mix of fixed and variable-rate debt. In the agreements, we exchange, at specifi ed intervals, the difference between fi xed and variable-interest amounts calculated on an agreed-upon notional principal amount. As of December 31, 2010 and 2009, we have no such swap agreements in place. 

## Concentration of Credit Risk 

Our counterparties to derivative contracts are limited to major fi nancial institutions and organized exchanges. We limit the dollar amount of contracts entered into with any one financial institution and monitor counterparties’ credit ratings. We also enter into master netting agreements with each financial institution, where possible, which 

helps mitigate the credit risk associated with our fi nancial instruments. While we may be exposed to credit losses due to the nonperformance of counterparties, we consider this risk remote. 

## Financial Guarantees and Letter-of-Credit Commitments 

We enter into various financial instruments with off-balance-sheet risk as part of the normal course of business. Th  ese off-balance sheet instruments include financial guarantees and contractual commitments to extend financial guarantees under letters of credit, and other assistance to customers (Notes 1 and 18). Decisions to extend fi nancial guarantees to customers, and the amount of collateral required under these guarantees is based on our evaluation of creditworthiness on a case-by-case basis. 

## Accounting for Derivative Instruments and Hedging Activities 

## Cash Flow Hedges 

We recognize all derivatives on the balance sheet at fair value. On the date the derivative instrument is entered into, we generally designate the derivative as a hedge of the variability of cash flows to be received or paid related to a forecasted transaction (cash flow hedge). We record in accumulated other comprehensive income or loss (“AOCI”) changes in the fair value of derivatives that are designated as and meet all the required criteria for a cash flow hedge. We then reclassify these amounts into earnings as the underlying hedged item affects earnings. We record immediately in earnings changes in the fair value of derivatives that are not designated as cash fl ow hedges. 

As of December 31, 2010, we had open foreign currency forward contracts in AOCI in a net gain position of $0.4 million, before-tax, designated as cash flow hedges of underlying forecasted sales and purchases. Current open contracts hedge forecasted transactions until December 2011. The net gain from the foreign currency hedges included in AOCI at December 31, 2010, was $0.2 million after-tax. At December 31, 2010, the Company had open forward contracts with various expiration dates to buy, sell or exchange foreign currencies with a U.S. dollar equivalent of approximately $625.0 million. 

As of December 31, 2010, we had current open commodity contracts in AOCI in a net loss position of $5.9 million, before-tax, designated as cash flow hedges of underlying forecasted purchases, primarily natural gas. Current open commodity contracts hedge forecasted transactions until December 2011. The net loss from the open commodity contracts included in AOCI at December 31, 2010, was $3.7 million after-tax. At December 31, 2010, we had 6.3 million mmBTUs (millions of British Thermal Units) in aggregate notional volume of outstanding natural gas commodity forward contracts to hedge forecasted purchases. 

Of the $3.5 million of net losses after-tax, representing both, open foreign currency exchange contracts and open commodity contracts, $3.5 million of net losses would be realized in earnings during the twelve months ending December 31, 2011, if spot rates in the future are consistent with forward rates as of December 31, 2010. Immaterial amounts of net gains would be realized at various times, subsequent to December 31, 2011. The actual effect on earnings will be dependent on actual spot rates when the forecasted transactions occur. We recognize derivative gains and losses in the “Costs of sales and services” line in the consolidated statements of income. 

