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. 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. PART II  NOTE 17 Financial Instruments, Risk Management and Fair Value Measurements 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. 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. 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. 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. 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. 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. 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. 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. 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. 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  64 FMC CORPORATION    2010 Form 10K Concentration of Credit Risk Interest Rate Risk Cash Flow Hedges Commodity Price Risk Accounting for Derivative Instruments  and Hedging Activities Financial Guarantees and Letter-of-Credit  Commitments