Derivative Instruments and Hedging Activities
 6 Months Ended
Jan. 31, 2016
Derivative Instruments and Hedging Activities
Derivative instruments and hedging activities
 
Ferrellgas is exposed to certain market risks related to its ongoing business operations. These risks include exposure to changing commodity prices as well as fluctuations in interest rates. Ferrellgas utilizes derivative instruments to manage its exposure to fluctuations in commodity prices. Of these, the propane commodity derivative instruments are designated as cash flow hedges. All other commodity derivative instruments do not qualify or are not designated as cash flow hedges, therefore, the change in their fair value are recorded currently in earnings. Ferrellgas also periodically utilizes derivative instruments to manage its exposure to fluctuations in interest rates.
 
Derivative instruments and hedging activity
 
During the six months ended January 31, 2016, Ferrellgas did not recognize any gain or loss in earnings related to hedge ineffectiveness and did not exclude any component of financial derivative contract gains or losses from the assessment of hedge effectiveness related to commodity cash flow hedges. During the six months ended January 31, 2015, Ferrellgas recognized a $0.2 million loss related to hedge ineffectiveness and did not exclude any component of financial derivative contract gains or losses from the assessment of hedge effectiveness related to commodity cash flow hedges.
 
The following tables provide a summary of the fair value of derivatives in Ferrellgas’ condensed consolidated balance sheets as of January 31, 2016 and July 31, 2015:  
 
 
January 31, 2016
 
 
Asset Derivatives
 
Liability Derivatives
Derivative Instrument
 
Location
 
 Fair value
 
Location
 
 Fair value
Derivatives designated as hedging instruments
 
 
 
 
 
 
 
 
  Commodity derivatives-propane
 
Prepaid expenses and other current assets
 
$
4,330

 
Other current liabilities
 
$
25,956

  Commodity derivatives-propane
 
Other assets, net
 
415

 
Other liabilities
 
8,011

  Interest rate swap agreements
 
Prepaid expenses and other current assets
 
1,723

 
Other current liabilities
 
2,374

  Interest rate swap agreements
 
Other assets, net
 
2,167

 
Other liabilities
 
1,836

Derivatives not designated as hedging instruments
 
 
 
 
 
 
 
 
  Commodity derivatives-vehicle fuel
 
Prepaid expenses and other current assets
 
—

 
Other current liabilities
 
4,945

  Commodity derivatives-vehicle fuel
 
Other assets, net
 
—

 
Other liabilities
 
2,201

  Commodity derivatives- crude oil linefill
 
Prepaid expenses and other current assets
 
2,212

 
Other current liabilities
 
1,632

 
 
Total
 
$
10,847

 
Total
 
$
46,955

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
July 31, 2015
 
 
Asset Derivatives
 
Liability Derivatives
Derivative Instrument
 
Location
 
 Fair value
 
Location
 
 Fair value
Derivatives designated as hedging instruments
 
 
 
 
 
 
 
 
  Commodity derivatives-propane
 
Prepaid expenses and other current assets
 
$
3,614

 
Other current liabilities
 
$
27,929

  Commodity derivatives-propane
 
Other assets, net
 
1,041

 
Other liabilities
 
12,034

  Interest rate swap agreements
 
Prepaid expenses and other current assets
 
1,828

 
Other current liabilities
 
2,241

  Interest rate swap agreements
 
Other assets, net
 
—

 
Other liabilities
 
2,507

Derivatives not designated as hedging instruments
 
 
 
 
 
 
 
 
  Commodity derivatives-vehicle fuel
 
Prepaid expenses and other current assets
 
—

 
Other current liabilities
 
1,280

  Commodity derivatives-vehicle fuel
 
Other assets, net
 
—

 
Other liabilities
 
1,132


 
Total
 
$
6,483

 
Total
 
$
47,123



Ferrellgas' exchange traded commodity derivative contracts require cash margin deposit as collateral for contracts that are in a negative mark-to-market position. These cash margin deposits will be returned if mark-to-market conditions improve or will be applied against cash settlement when the contracts are settled. The following tables provide a summary of cash margin deposit balances as of January 31, 2016 and July 31, 2015, respectively:

 
 
January 31, 2016
 
 
Assets
 
Liabilities
Description
 
Location
 
Amount
 
Location
 
Amount
Margin Deposits
 
Prepaid expenses and other current assets
 
$
18,786

 
Other current liabilities
 
$
—

 
 
Other assets, net
 
12,483

 
Other liabilities
 
—

 
 
 
 
$
31,269

 
 
 
$
—

 
 
July 31, 2015
 
 
Assets
 
Liabilities
Description
 
Location
 
Amount
 
Location
 
Amount
Margin Deposits
 
Prepaid expenses and other current assets
 
$
18,009

 
Other current liabilities
 
$
15

 
 
Other assets, net
 
11,786

 
Other liabilities
 
—

 
 
 
 
$
29,795

 
 
 
$
15




The following tables provide a summary of the effect on Ferrellgas' condensed consolidated statements of earnings for the three and six months ended January 31, 2016 and 2015 due to derivatives designated as fair value hedging instruments:  
 
 
 
 
Amount of Gain Recognized on Derivative
 
Amount of Interest Expense Recognized on Fixed-Rated Debt (Related Hedged Item)
Derivative Instrument
 
Location of Gain Recognized on Derivative
 
For the three months ended January 31,
 
For the three months ended January 31,
 
 
 
 
2016
 
2015
 
2016
 
2015
Interest rate swap agreements
 
Interest expense
 
$
505

 
$
587

 
$
(2,275
)
 
$
(2,275
)
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Amount of Gain Recognized on Derivative
 
Amount of Interest Expense Recognized on Fixed-Rated Debt (Related Hedged Item)
Derivative Instrument
 
Location of Gain Recognized on Derivative
 
For the six months ended January 31,
 
For the six months ended January 31,
 
 
 
 
2016
 
2015
 
2016
 
2015
Interest rate swap agreements
 
Interest expense
 
$
1,042

 
$
1,043

 
$
(4,550
)
 
$
(4,550
)
 
 
 
 
 
 
 
 
 
 
 



The following tables provide a summary of the effect on Ferrellgas’ condensed consolidated statements of comprehensive income for the three and six months ended January 31, 2016 and 2015 due to derivatives designated as cash flow hedging instruments:
 
 
For the three months ended January 31, 2016
 
 
Derivative Instrument
 
Amount of Gain (Loss) Recognized in AOCI
 
Location of Gain (Loss) Reclassified from AOCI into Income
 
Amount of Gain (Loss) Reclassified from AOCI into Income
 
 
 
Effective portion
 
Ineffective portion
Commodity derivatives
 
$
(10,760
)
 
Cost of sales-propane and other gas liquids sales
 
$
(7,813
)
 
$
—

Interest rate swap agreements
 
(744
)
 
Interest expense
 
(754
)
 
—

 
 
$
(11,504
)
 
 
 
$
(8,567
)
 
$
—

 
 
 
 
 
 
 
 
 
 
 
For the three months ended January 31, 2015
 
 
Derivative Instrument
 
Amount of Gain (Loss) Recognized in AOCI
 
Location of Gain (Loss) Reclassified from AOCI into Income
 
Amount of Gain (Loss) Reclassified from AOCI into Income
 
 
 
Effective portion
 
Ineffective portion
Commodity derivatives
 
$
(42,910
)
 
Cost of sales-propane and other gas liquids sales
 
$
(7,360
)
 
$
—

Interest rate swap agreements
 
(2,217
)
 
Interest expense
 
—

 
(199
)
 
 
$
(45,127
)
 
 
 
$
(7,360
)
 
$
(199
)

 
 
For the six months ended January 31, 2016
 
 
Derivative Instrument
 
Amount of Gain (Loss) Recognized in AOCI
 
Location of Gain (Loss) Reclassified from AOCI into Income
 
Amount of Gain (Loss) Reclassified from AOCI into Income
 
 
 
Effective portion
 
Ineffective portion
Commodity derivatives
 
$
(9,175
)
 
Cost of sales-propane and other gas liquids sales
 
$
(15,262
)
 
$
—

Interest rate swap agreements
 
(1,945
)
 
Interest expense
 
(1,531
)
 
—

 
 
$
(11,120
)
 
 
 
$
(16,793
)
 
$
—

 
 
 
 
 
 
 
 
 
 
 
For the six months ended January 31, 2015
 
 
Derivative Instrument
 
Amount of Gain (Loss) Recognized in AOCI
 
Location of Gain (Loss) Reclassified from AOCI into Income
 
Amount of Gain (Loss) Reclassified from AOCI into Income
 
 
 
Effective portion
 
Ineffective portion
Commodity derivatives
 
$
(55,668
)
 
Cost of sales-propane and other gas liquids sales
 
$
(6,232
)
 
$
—

Interest rate swap agreements
 
(3,356
)
 
Interest expense
 
—

 
(199
)
 
 
$
(59,024
)
 
 
 
$
(6,232
)
 
$
(199
)


The following tables provide a summary of the effect on Ferrellgas' condensed consolidated statements of earnings for the three and six months ended January 31, 2016 due to the change in fair value of derivatives not designated as hedging instruments:

 
 
For the three months ended January 31, 2016
Derivatives Not Designated as Hedging Instruments
 
Amount of Gain (Loss) Recognized in Income
 
Location of Gain (Loss) Recognized in Income
Commodity derivatives - crude oil linefill
 
$
2,992

 
Cost of sales - midstream operations
Commodity derivatives - vehicle fuel
 
$
(3,696
)
 
Operating expense
 
 
 
 
 
 
 
For the six months ended January 31, 2016
Derivatives Not Designated as Hedging Instruments
 
Amount of Gain (Loss) Recognized in Income
 
Location of Gain (Loss) Recognized in Income
Commodity derivatives - crude oil linefill
 
$
4,020

 
Cost of sales - midstream operations
Commodity derivatives - vehicle fuel
 
$
(4,734
)
 
Operating expense

Ferrellgas did not hold derivatives not designated as hedging instruments for the three and six months ended January 31, 2015.

The changes in derivatives included in AOCI for the six months ended January 31, 2016 and 2015 were as follows:  

 
 
For the six months ended January 31,
Gains and losses on derivatives included in AOCI
 
2016
 
2015
Beginning balance
 
$
(38,906
)
 
$
6,483

Change in value of risk management commodity derivatives
 
(9,175
)
 
(55,668
)
Reclassification of gains and losses on commodity hedges to cost of sales - propane and other gas liquids sales, net
 
15,262

 
6,232

Change in value of risk management interest rate derivatives
 
(1,945
)
 
(3,356
)
Reclassification of gains and losses on interest rate hedges to interest expense
 
$
1,531

 
$
199

Ending balance
 
$
(33,233
)
 
$
(46,110
)


Ferrellgas expects to reclassify net losses related to the risk management commodity derivatives of approximately $21.6 million to earnings during the next 12 months. These net losses are expected to be offset by increased margins on propane sales commitments Ferrellgas has with its customers that qualify for the normal purchase normal sales exception.
 
During the six months ended January 31, 2016 and 2015, Ferrellgas had no reclassifications to earnings resulting from the discontinuance of any cash flow hedges arising from the probability of the original forecasted transactions not occurring within the originally specified period of time defined within the hedging relationship.
 
As of January 31, 2016, Ferrellgas had financial derivative contracts covering 3.1 million barrels of propane that were entered into as cash flow hedges of forward and forecasted purchases of propane.

As of January 31, 2016, Ferrellgas had financial derivative contracts covering 0.2 million barrels of diesel and 41 thousand barrels of unleaded gasoline related to fuel hedges in transportation of propane.

As of January 31, 2016, Ferrellgas had financial derivative contracts covering 0.4 million barrels of crude oil related to the hedging of crude oil line fill and inventory.

Derivative financial instruments credit risk
 
Ferrellgas is exposed to credit loss in the event of nonperformance by counterparties to derivative financial and commodity instruments. Ferrellgas’ counterparties principally consist of major energy companies and major U.S. financial institutions. Ferrellgas maintains credit policies with regard to its counterparties that it believes reduce its overall credit risk. These policies include evaluating and monitoring its counterparties’ financial condition, including their credit ratings, and entering into agreements with counterparties that govern credit limits. Certain of these agreements call for the posting of collateral by the counterparty or by Ferrellgas in the forms of letters of credit, parental guarantees or cash. Ferrellgas has concentrations of credit risk associated with derivative financial instruments held by certain derivative financial instrument counterparties. If these counterparties that make up the concentration failed to perform according to the terms of their contracts at January 31, 2016, the maximum amount of loss due to credit risk that, based upon the gross fair values of the derivative financial instruments, Ferrellgas would incur is zero.
 
Ferrellgas holds certain derivative contracts that have credit-risk-related contingent features which dictate credit limits based upon the Ferrellgas' debt rating. As of January 31, 2016, a downgrade in Ferrellgas' debt rating could trigger a reduction in credit limit and would result in an additional collateral requirement of zero. There were no derivatives with credit-risk-related contingent features in a liability position on January 31, 2016 and Ferrellgas had posted no collateral in the normal course of business related to such derivatives.
Ferrellgas, L.P. [Member]  
Derivative Instruments and Hedging Activities
Derivative instruments and hedging activities
 
Ferrellgas, L.P. is exposed to certain market risks related to its ongoing business operations. These risks include exposure to changing commodity prices as well as fluctuations in interest rates. Ferrellgas, L.P. utilizes derivative instruments to manage its exposure to fluctuations in commodity prices. Of these, the propane commodity derivative instruments are designated as cash flow hedges. All other commodity derivative instruments do not qualify or are not designated as cash flow hedges, therefore, the change in their fair value are recorded currently in earnings. Ferrellgas, L.P. also periodically utilizes derivative instruments to manage its exposure to fluctuations in interest rates.
 
Derivative instruments and hedging activities  
 
During the six months ended January 31, 2016 Ferrellgas, L.P. did not recognize any gain or loss in earnings related to hedge ineffectiveness and did not exclude any component of financial derivative contract gains or losses from the assessment of hedge effectiveness related to commodity cash flow hedges. During the six months ended January 31, 2015, Ferrellgas, L.P. recognized a $0.2 million loss related to hedge ineffectiveness and did not exclude any component of financial derivative contract gains or losses from the assessment of hedge effectiveness related to commodity cash flow hedges.
 
The following tables provide a summary of the fair value of derivatives in Ferrellgas, L.P.’s condensed consolidated balance sheets as of January 31, 2016 and July 31, 2015: 
 
 
January 31, 2016
 
 
Asset Derivatives
 
Liability Derivatives
Derivative Instrument
 
Location
 
 Fair value
 
Location
 
 Fair value
Derivatives designated as hedging instruments
 
 
 
 
 
 
 
 
  Commodity derivatives-propane
 
Prepaid expenses and other current assets
 
$
4,330

 
Other current liabilities
 
$
25,956

  Commodity derivatives-propane
 
Other assets, net
 
415

 
Other liabilities
 
8,011

  Interest rate swap agreements
 
Prepaid expenses and other current assets
 
1,723

 
Other current liabilities
 
2,374

  Interest rate swap agreements
 
Other assets, net
 
2,167

 
Other liabilities
 
1,836

Derivatives not designated as hedging instruments
 
 
 
 
 
 
 
 
  Commodity derivatives-vehicle fuel
 
Prepaid expenses and other current assets
 
—

 
Other current liabilities
 
4,945

  Commodity derivatives-vehicle fuel
 
Other assets, net
 
—

 
Other liabilities
 
2,201

  Commodity derivatives- crude oil line-fill
 
Prepaid expenses and other current assets
 
2,212

 
Other current liabilities
 
1,632

 
 
Total
 
$
10,847

 
Total
 
$
46,955

 
 
 
 
 
 
 
 
 
 
 
July 31, 2015
 
 
Asset Derivatives
 
Liability Derivatives
Derivative Instrument
 
Location
 
 Fair value
 
Location
 
 Fair value
Derivatives designated as hedging instruments
 
 
 
 
 
 
 
 
  Commodity derivatives
 
Prepaid expenses and other current assets
 
$
3,614

 
Other current liabilities
 
$
27,929

  Commodity derivatives
 
Other assets, net
 
1,041

 
Other liabilities
 
12,034

  Interest rate swap agreements
 
Prepaid expenses and other current assets
 
1,828

 
Other current liabilities
 
2,241

  Interest rate swap agreements
 
Other assets, net
 
—

 
Other liabilities
 
2,507

Derivatives not designated as hedging instruments
 
 
 
 
 
 
 
 
  Commodity derivatives - vehicle fuel
 
Prepaid expenses and other current assets
 
—

 
Other current liabilities
 
1,280

  Commodity derivatives - vehicle fuel
 
Other assets, net
 
—

 
Other liabilities
 
1,132

 
 
Total
 
$
6,483

 
Total
 
$
47,123



Ferrellgas, L.P.'s exchange traded commodity derivative contracts require cash margin deposit as collateral for contracts that are in a negative mark-to-market position. These cash margin deposits will be returned if mark-to-market conditions improve or will be applied against cash settlement when the contracts are settled. The following tables provide a summary of cash margin deposit balances as of January 31, 2016 and July 31, 2015, respectively:

 
 
January 31, 2016
 
 
Assets
 
Liabilities
Description
 
Location
 
Amount
 
Location
 
Amount
Margin Deposits
 
Prepaid expenses and other current assets
 
$
18,786

 
Other current liabilities
 
$
—

 
 
Other assets, net
 
12,483

 
Other liabilities
 
—

 
 
 
 
$
31,269

 
 
 
$
—

 
 
July 31, 2015
 
 
Assets
 
Liabilities
Description
 
Location
 
Amount
 
Location
 
Amount
Margin Deposits
 
Prepaid expenses and other current assets
 
$
18,009

 
Other current liabilities
 
$
15

 
 
Other assets, net
 
11,786

 
Other liabilities
 
—

 
 
 
 
$
29,795

 
 
 
$
15



The following table provides a summary of the effect on Ferrellgas, L.P.’s condensed consolidated statements of earnings for the three and six months ended January 31, 2016 and 2015 due to derivatives designated as fair value hedging instruments:

 
 
 
 
Amount of Gain Recognized on Derivative

Amount of Interest Expense Recognized on Fixed-Rated Debt (Related Hedged Item)
Derivative Instrument
 
Location of Gain Recognized on Derivative
 
For the three months ended January 31,
 
For the three months ended January 31,
 
 
 
 
2016
 
2015
 
2016
 
2015
Interest rate swap agreements
 
Interest expense
 
$
505

 
$
587

 
$
(2,275
)
 
$
(2,275
)


 
 
 
 
Amount of Gain Recognized on Derivative
 
Amount of Interest Expense Recognized on Fixed-Rated Debt (Related Hedged Item)
Derivative Instrument
 
Location of Gain Recognized on Derivative
 
For the six months ended January 31,
 
For the six months ended January 31,
 
 
 
 
2016
 
2015
 
2016
 
2015
Interest rate swap agreements
 
Interest expense
 
$
1,042

 
$
1,043

 
$
(4,550
)
 
$
(4,550
)


The following tables provide a summary of the effect on Ferrellgas, L.P.’s condensed consolidated statements of comprehensive income for the three and six months ended January 31, 2016 and 2015 due to derivatives designated as cash flow hedging instruments:  
 
 
For the three months ended January 31, 2016
 
 
Derivative Instrument
 
Amount of Gain (Loss) Recognized in AOCI
 
Location of Gain (Loss) Reclassified from AOCL into Income
 
Amount of Gain (Loss) Reclassified from AOCL into Income
 
 
 
Effective portion
 
Ineffective portion
Commodity derivatives
 
$
(10,760
)
 
Cost of sales-propane and other gas liquids sales
 
$
(7,813
)
 
$
—

Interest rate swap agreements
 
(744
)
 
Interest expense
 
(754
)
 
—

 
 
$
(11,504
)
 
 
 
$
(8,567
)
 
$
—


 
 
For the three months ended January 31, 2015
 
 
Derivative Instrument
 
Amount of Gain (Loss) Recognized in AOCI
 
Location of Gain (Loss) Reclassified from AOCL into Income
 
Amount of Gain (Loss) Reclassified from AOCL into Income
 
 
 
Effective portion
 
Ineffective portion
Commodity derivatives
 
$
(42,910
)
 
Cost of sales-propane and other gas liquids sales
 
$
(7,360
)
 
$
—

Interest rate swap agreements
 
(2,217
)
 
Interest expense
 
—

 
(199
)
 
 
$
(45,127
)
 
 
 
$
(7,360
)
 
$
(199
)


 
 
For the six months ended January 31, 2016
 
 
Derivative Instrument
 
Amount of Gain (Loss) Recognized in AOCI
 
Location of Gain (Loss) Reclassified from AOCL into Income
 
Amount of Gain (Loss) Reclassified from AOCL into Income
 
 
 
Effective portion
 
Ineffective portion
Commodity derivatives
 
$
(9,175
)
 
Cost of sales-propane and other gas liquids sales
 
$
(15,262
)
 
$
—

Interest rate swap agreements
 
(1,945
)
 
Interest expense
 
(1,531
)
 
—

 
 
$
(11,120
)
 
 
 
$
(16,793
)
 
$
—



 
 
For the six months ended January 31, 2015
 
 
Derivative Instrument
 
Amount of Gain (Loss) Recognized in AOCI
 
Location of Gain (Loss) Reclassified from AOCL into Income
 
Amount of Gain (Loss) Reclassified from AOCL into Income
 
 
 
Effective portion
 
Ineffective portion
Commodity derivatives
 
$
(55,668
)
 
Cost of sales-propane and other gas liquids sales
 
$
(6,232
)
 
$
—

Interest rate swap agreements
 
(3,356
)
 
Interest expense
 
—

 
(199
)
 
 
$
(59,024
)
 
 
 
$
(6,232
)
 
$
(199
)


The following tables provide a summary of the effect on Ferrellgas, L.P.'s condensed consolidated statements of earnings for the three and six months ended January 31, 2016 due to the change in fair value of derivatives not designated as hedging instruments:

 
 
For the three months ended January 31, 2016
Derivatives Not Designated as Hedging Instruments
 
Amount of Gain (Loss) Recognized in Income
 
Location of Gain (Loss) Recognized in Income
Commodity derivatives - crude oil linefill
 
$
2,992

 
Cost of sales - midstream operations
Commodity derivatives - vehicle fuel
 
$
(3,696
)
 
Operating expense
 
 
 
 
 
 
 
For the six months ended January 31, 2016
Derivatives Not Designated as Hedging Instruments
 
Amount of Gain (Loss) Recognized in Income
 
Location of Gain (Loss) Recognized in Income
Commodity derivatives - crude oil linefill
 
$
4,020

 
Cost of sales - midstream operations
Commodity derivatives - vehicle fuel
 
$
(4,734
)
 
Operating expense

Ferrellgas, L.P. did not hold derivatives not designated as hedging instruments for the three and six months ended January 31, 2015.

The changes in derivatives included in AOCI for the six months ended January 31, 2016 and 2015 were as follows: 
 
 
For the six months ended January 31,
Gains and losses on derivatives included in AOCI
 
2016
 
2015
Beginning balance
 
$
(38,906
)
 
$
6,483

Change in value of risk management commodity derivatives
 
(9,175
)
 
(55,668
)
Reclassification of gains and losses on commodity hedges to cost of sales - propane and other gas liquids sales, net
 
15,262

 
6,232

Change in value of risk management interest rate derivatives
 
(1,945
)
 
(3,356
)
Reclassification of gains and losses on interest rate hedges to interest expense
 
$
1,531

 
$
199

Ending balance
 
$
(33,233
)
 
$
(46,110
)


Ferrellgas expects to reclassify net losses related to the risk management commodity derivatives of approximately $21.6 million to earnings during the next 12 months. These net losses are expected to be offset by increased margins on propane sales commitments Ferrellgas, L.P. has with its customers that qualify for the normal purchase normal sales exception.
 
During the six months ended January 31, 2016 and 2015, Ferrellgas, L.P. had no reclassifications to earnings resulting from the discontinuance of any cash flow hedges arising from the probability of the original forecasted transactions not occurring within the originally specified period of time defined within the hedging relationship.
 
As of January 31, 2016, Ferrellgas, L.P. had financial derivative contracts covering 3.1 million barrels of propane that were entered into as cash flow hedges of forward and forecasted purchases of propane.

As of January 31, 2016, Ferrellgas, L.P. had financial derivative contracts covering 0.2 million barrels of diesel and 41 thousand barrels of unleaded gasoline related to fuel hedges in transportation of propane.

As of January 31, 2016, Ferrellgas, L.P. financial derivative contracts covering 0.4 million barrels of crude oil related to the hedging of crude oil line fill and inventory.
 
Derivative financial instruments credit risk
 
Ferrellgas, L.P. is exposed to credit loss in the event of nonperformance by counterparties to derivative financial and commodity instruments. Ferrellgas, L.P.’s counterparties principally consist of major energy companies and major U.S. financial institutions. Ferrellgas, L.P. maintains credit policies with regard to its counterparties that it believes reduces its overall credit risk. These policies include evaluating and monitoring its counterparties’ financial condition, including their credit ratings, and entering into agreements with counterparties that govern credit limits. Certain of these agreements call for the posting of collateral by the counterparty or by Ferrellgas, L.P. in the forms of letters of credit, parental guarantees or cash. Ferrellgas, L.P. has concentrations of credit risk associated with derivative financial instruments held by certain derivative financial instrument counterparties. If these counterparties that make up the concentration failed to perform according to the terms of their contracts at January 31, 2016, the maximum amount of loss due to credit risk that, based upon the gross fair values of the derivative financial instruments, Ferrellgas, L.P. would incur is zero.  
 
Ferrellgas, L.P. holds certain derivative contracts that have credit-risk-related contingent features which dictate credit limits based upon Ferrellgas, L.P.’s debt rating. As of January 31, 2016, a downgrade in Ferrellgas, L.P.'s debt rating could trigger a reduction in credit limit and would result in an additional collateral requirement of zero. There were no derivatives with credit-risk-related contingent features in a liability position on January 31, 2016 and Ferrellgas, L.P. had posted no collateral in the normal course of business related to such derivatives.