6. Derivative Financial Instruments and Fair Value Measurements

The following table presents for each of the fair value hierarchies, the assets and liabilities that are measured at fair value on a recurring basis as at December 28, 2019 and December 29, 2018:

	December 28, 2019
	Fair value
	asset (liability)		Level 1	Level 2		Level 3
	$		$	$		$
Commodity futures contracts(1)
Unrealized short-term derivative asset	284		284	—		—
Forward foreign currency contracts⁽²⁾
Not designated as hedging instruments	(73	)	—	(73	)	—

		December 29, 2018
		Fair value
		asset (liability)		Level 1		Level 2		Level 3
		$		$		$		$
Commodity futures and forward contracts⁽¹⁾
	Unrealized short-term derivative asset	620		—		620		—
	Unrealized long-term derivative asset	7		—		7		—
	Unrealized short-term derivative liability	(581	)	(94	)	(487	)	—
	Unrealized long-term derivative liability	(17	)	—		(17	)	—
Forward foreign currency contracts⁽²⁾
	Not designated as hedging instruments	583		—		583		—
Inventories carried at market(3)		3,239		—		3,239		—

(1) Commodity futures and forward contracts

As at December 28, 2019, outstanding contracts comprise exchange-traded commodity futures for cocoa and coffee. As at December 29, 2018, outstanding contracts included exchange-traded commodity futures and forward commodity purchase and sale contracts associated with the Company's sold soy and corn business, in addition to cocoa and coffee commodity futures. Exchange-traded futures are fair valued based on unadjusted quotes for identical assets priced in active markets and are classified as level 1. Fair value for forward commodity purchase and sale contracts was estimated based on exchange-quoted prices adjusted for differences in local markets and were classified as level 2.

Exchange-traded commodity futures for cocoa and coffee are used as part of the Company's risk management strategy and represent economic hedges to limit risk related to fluctuations in the price of these commodities. These contracts are not designated as hedges for accounting purposes. Gains and losses on changes in fair value of these contracts are included in cost of goods sold on the consolidated statement of operations. For the year ended December 28, 2019, the Company recognized a gain of $0.4 million (December 29, 2018 - loss of $0.6 million; December 30, 2017 - loss of $0.0 million) related to changes in the fair value of these derivatives. In addition, for the years ended December 29, 2018 and December 30, 2017, the Company recognized gains of $0.1 million and $0.6 million, respectively, related to changes in the fair value of soy and corn futures and forward contracts. On the consolidated balance sheets, unrealized gains on short-term and long-term contracts are included in other current assets and other assets, respectively, and unrealized losses on short-term and long-term contracts are included in other current liabilities and long-term liabilities, respectively.

As at December 28, 2019, the Company had net open futures contracts to sell 3,210 metric tons ("MT") of cocoa (December 29, 2018 - to sell 6,730 MT) and to sell 306 MT (December 29, 2018 - to purchase 85 MT) of coffee.

(2) Foreign forward currency contracts

As part of its risk management strategy, the Company enters into forward foreign exchange contracts to reduce its exposure to fluctuations in foreign currency exchange rates. For any open forward foreign exchange contracts at period end, the contract rate is compared to the forward rate, and a gain or loss is recorded. These contracts are included in level 2 of the fair value hierarchy, as the inputs used in making the fair value determination are derived from and are corroborated by observable market data. These contracts typically represent economic hedges that are not designated as hedging instruments; however, certain of these contracts may be designated as cash flow hedges for accounting purposes.

As at December 28, 2019, the Company had open forward foreign exchange contracts to sell euros to buy U.S. dollars with a notional value of €14.5 million ($16.4 million), to sell British pounds to buy euros with a notional value of £0.8 million (€0.9 million), and to sell Swiss francs to buy U.S. dollars with a notional value of CHF 1.2 million ($1.2 million). As these contracts were not designated as hedging instruments, gains and losses on changes in the fair value of the derivative instruments are included in foreign exchange loss or gain on the consolidated statement of operations. For the year ended December 28, 2019, the Company recognized a loss of $0.7 million (December 29, 2018 - gain of $1.6 million; December 30, 2017 - loss of $2.4 million) related to changes in the fair value of these derivatives. Unrealized gains and losses on these contracts are included in accounts receivable and accounts payable, respectively, on the consolidated balance sheets.

From time to time, the Company enters into forward foreign exchange contracts to sell U.S. dollars to buy Mexican pesos. As at December 28, 2019 and December 29, 2018, the Company had no open peso contracts. Prior to December 29, 2018, the Company had designated forward exchange contracts to sell U.S. dollars to buy Mexican pesos as hedging instruments. As a result, effective portion of the gains and losses on changes in the fair value of those contracts was included in other comprehensive earnings and reclassified to cost of goods sold in the same period the hedged transaction affected earnings. For the year ended December 29, 2018, the Company recognized a net gain of $0.5 million (December 30, 2017 - gain of $1.8 million) in other comprehensive earnings related to changes in the fair value of open contracts. For the year ended December 29, 2018, the Company reclassified from other comprehensive earnings to cost of goods sold a realized gain on closed contracts of $0.1 million (December 30, 2017 - gain of $1.4 million). In addition, for the year ended December 30, 2017, the Company reclassified to foreign exchange loss an unrealized gain of $0.9 million related to the ineffective portion of the hedge.

(3) Inventories carried at market

As at December 29, 2018, inventories carried at market represented inventories of commodity soy and corn associated with the Company's sold soy and corn business. The fair value of these inventories was determined using quoted market prices from the Chicago Board of Trade, as adjusted for differences in local markets, and broker or dealer quotes, and classified as level 2. Gains and losses on these inventories were included in cost of goods sold on the consolidated statements of operations. Inventories carried at market were included in inventories on the consolidated balance sheet as at December 29, 2018.