The company measures the fair value of its derivative portfolio by using the price that would be received to sell an asset or paid to transfer a liability in the principal market for that asset or liability. These measurements are classified into a hierarchy by the inputs used to perform the fair value calculation as follows:

The company enters into commodity derivatives designated as cash-flow hedges of existing or future exposure to changes in commodity prices. The company’s primary raw materials are flour, sweeteners and shortening, along with pulp, paper and petroleum-based packaging products. Natural gas, which is used as oven fuel, and diesel fuel are also important commodity inputs.

As of July 17, 2021, the company’s hedge portfolio contained commodity derivatives, which are recorded in the following accounts with fair values measured as indicated (amounts in thousands):

	Level 1		Level 2		Level 3		Total
Assets:
Other current	$	11,344	$	—	$	—	$	11,344
Other long-term		2,276		—		—		2,276
Total		13,620		—		—		13,620

Liabilities:
Other current		—		—		—		—
Other long-term		—		—		—		—
Total		—		—		—		—
Net Fair Value	$	13,620	$	—	$	—	$	13,620

As of January 2, 2021, the company’s hedge portfolio contained commodity derivatives, which are recorded in the following accounts with fair values measured as indicated (amounts in thousands):

	Level 1			Level 2		Level 3		Total
Assets:
Other current	$	16,684		$	—	$	—	$	16,684
Other long-term		731			—		—		731
Total		17,415			—		—		17,415

Liabilities:
Other current		(5	)		—		—		(5	)
Other long-term		(83	)		—		—		(83	)
Total		(88	)		—		—		(88	)
Net Fair Value	$	17,327		$	—	$	—	$	17,327

The positions held in the portfolio are used to hedge economic exposure to changes in various raw material prices and effectively fix, or limit increases in, prices for a period extending into Fiscal 2022. These instruments are designated as cash-flow hedges. The change in the fair value for these derivatives is reported in AOCI. All the company-held commodity derivatives at July 17, 2021 and January 2, 2021, respectively, qualified for hedge accounting.

During the first quarter of Fiscal 2021, the company entered into treasury locks to fix the interest rate for the 2031 notes issued on March 9, 2021. The derivative positions were closed when the debt was priced on March 2, 2021 with a cash settlement net receipt of $3.9 million that offset changes in the benchmark treasury rate between execution of the treasury rate locks and the debt pricing date. These rate locks were designated as a cash flow hedge and the deferred amount reported in AOCI is being reclassified to interest expense as interest payments are made on the notes through the maturity date.

The company previously entered into treasury rate locks at the time we executed the 2026 notes. These rate locks were designated as a cash flow hedge and the fair value at termination was deferred in AOCI. The deferred amount reported in AOCI is being reclassified to interest expense as interest payments are made on the related notes through the maturity date.

The company has the following derivative instruments located on the Condensed Consolidated Balance Sheets, which are utilized for the risk management purposes detailed above (amounts in thousands):

	Derivative Assets						Derivative Liabilities
	July 17, 2021			January 2, 2021			July 17, 2021			January 2, 2021
Derivatives Designated as Hedging Instruments	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Commodity contracts	Other current assets	$	11,344	Other current assets	$	16,684	Other accrued liabilities	$	—	Other accrued liabilities	$	5
Commodity contracts	Other assets		2,276	Other assets		731	Other long-term liabilities		—	Other long-term liabilities		83
Total		$	13,620		$	17,415		$	—		$	88

The company had the following derivative instruments for deferred gains and (losses) on closed contracts and the effective portion for changes in fair value recorded in AOCI (no amounts were excluded from the effectiveness test), all of which are utilized for the risk management purposes detailed above (amounts in thousands and net of tax):

	Amount of Gain or (Loss)							Amount of Gain or (Loss)
	Recognized in AOCI on Derivatives							Reclassified from AOCI
	(Effective Portion)						Location of Gain or (Loss)	into Income (Effective Portion)
Derivatives in Cash Flow	For the Twelve Weeks Ended						Reclassified from AOCI	For the Twelve Weeks Ended
Hedge Relationships(1)	July 17, 2021			July 11, 2020			into Income (Effective Portion)(2)	July 17, 2021		July 11, 2020
Interest rate contracts	$	—		$	—		Interest expense	$	86	$	(25	)
Commodity contracts		(4,342	)		(3,358	)	Production costs(3)		508		(639	)
Total	$	(4,342	)	$	(3,358	)		$	594	$	(664	)

	Amount of Gain or (Loss)							Amount of Gain or (Loss)
	Recognized in AOCI on Derivatives							Reclassified from AOCI
	(Effective Portion)						Location of Gain or (Loss)	into Income (Effective Portion)
Derivatives in Cash Flow	For the Twenty-Eight Weeks Ended						Reclassified from AOCI	For the Twenty-Eight Weeks Ended
Hedge Relationships(1)	July 17, 2021			July 11, 2020			into Income (Effective Portion)(2)	July 17, 2021			July 11, 2020
Interest rate contracts	$	2,927		$	—		Interest expense	$	(78	)	$	(58	)
Commodity contracts		(2,524	)		(7,207	)	Production costs(3)		452			(1,017	)
Total	$	403		$	(7,207	)		$	374		$	(1,075	)

There was no hedging ineffectiveness, and no amounts were excluded from the ineffectiveness testing, during the twelve and twenty-eight weeks ended July 17, 2021 and July 11, 2020, respectively, related to the company’s commodity risk hedges.

At July 17, 2021, the balance in AOCI related to commodity price risk and interest rate risk derivative transactions that closed or will expire over the following years are as follows (amounts in thousands and net of tax) (amounts in parenthesis indicate a debit balance):

	Commodity Price Risk Derivatives			Interest Rate Risk Derivatives		Totals
Closed contracts	$	(351	)	$	3,236	$	2,885
Expiring in 2021		6,682			—		6,682
Expiring in 2022		3,534			—		3,534
Total	$	9,865		$	3,236	$	13,101

As of July 17, 2021, the company had the following outstanding financial contracts that were entered to hedge commodity risk (amounts in thousands):

The company’s derivative instruments contain no credit-risk related contingent features at July 17, 2021. As of July 17, 2021 and January 2, 2021, the company had $1.2 million in other current assets representing collateral for hedged positions. At July 17, 2021 and January 2, 2021, the company had $10.9 million and $14.0 million, respectively, recorded in other accrued liabilities representing collateral from counterparties for hedged positions.