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Risk Management Activities
 3 Months Ended
Aug. 28, 2022
Risk Management Activities [Abstract]  
Risk Management Activities
(6) Risk Management Activities
 
Many commodities we
 
use in the
 
production and distribution
 
of our products
 
are exposed to
 
market price risks.
 
We
 
utilize derivatives
to manage price risk for our principal
 
ingredients and energy costs, including
 
grains (oats, wheat, and corn), oils
 
(principally soybean),
dairy products, natural
 
gas, and diesel fuel.
 
Our primary objective
 
when entering into
 
these derivative contracts
 
is to achieve
 
certainty
with
 
regard
 
to
 
the
 
future
 
price
 
of
 
commodities
 
purchased
 
for
 
use
 
in
 
our
 
supply
 
chain.
 
We
 
manage
 
our
 
exposures
 
through
 
a
combination of purchase orders, long-term
 
contracts with suppliers, exchange-traded
 
futures and options, and over-the-counter
 
options
and swaps.
 
We
 
offset
 
our exposures
 
based on
 
current and
 
projected market
 
conditions and
 
generally seek
 
to acquire
 
the inputs
 
at as
close as possible to or below our planned cost.
We
 
use derivatives
 
to manage
 
our exposure
 
to changes
 
in commodity
 
prices. We
 
do not
 
perform the
 
assessments required
 
to achieve
hedge
 
accounting
 
for
 
commodity
 
derivative
 
positions.
 
Accordingly,
 
the
 
changes
 
in
 
the
 
values
 
of
 
these
 
derivatives
 
are
 
recorded
currently in cost of sales in our Consolidated Statements of Earnings.
Although we do
 
not meet the
 
criteria for
 
cash flow hedge
 
accounting, we believe
 
that these instruments
 
are effective
 
in achieving our
objective of providing certainty
 
in the future price of commodities purchased
 
for use in our supply chain.
 
Accordingly, for
 
purposes of
measuring
 
segment
 
operating
 
performance,
 
these
 
gains
 
and
 
losses
 
are
 
reported
 
in
 
unallocated
 
corporate
 
items
 
outside
 
of
 
segment
operating results
 
until such
 
time that
 
the exposure
 
we are
 
managing affects
 
earnings. At
 
that time
 
we reclassify
 
the gain
 
or loss
 
from
unallocated
 
corporate
 
items
 
to
 
segment
 
operating
 
profit,
 
allowing
 
our
 
operating
 
segments
 
to
 
realize
 
the
 
economic
 
effects
 
of
 
the
derivative without experiencing any resulting mark-to-market volatility,
 
which remains in unallocated corporate items.
 
Unallocated corporate items for the quarters ended August 28, 2022, and
 
August 29, 2021, included:
Quarter Ended
In Millions
Aug. 28, 2022
Aug. 29, 2021
Net (loss) gain on mark-to-market valuation of certain
 
 
commodity positions
$
(72.3)
$
30.4
Net gain on commodity positions reclassified from
 
 
unallocated corporate items to segment operating profit
(43.0)
(34.7)
Net mark-to-market revaluation of certain grain inventories
(59.4)
28.4
Net mark-to-market valuation of certain commodity
 
 
positions recognized in unallocated corporate items
$
(174.7)
$
24.1
As of August 28, 2022,
 
the net notional value of commodity
 
derivatives was $
432.6
 
million, of which $
152.4
 
million related to energy
inputs and
 
$
280.2
 
million related
 
to agricultural
 
inputs. These
 
contracts relate
 
to inputs
 
that generally
 
will be
 
utilized within
 
the next
12
 
months.
The
 
fair
 
values
 
of
 
the
 
derivative
 
positions
 
used
 
in
 
our
 
risk
 
management
 
activities
 
and
 
other
 
assets
 
recorded
 
at
 
fair
 
value
 
were
 
not
material as
 
of August
 
28, 2022
 
and were
 
Level 1
 
or Level
 
2 assets
 
and liabilities
 
in the
 
fair value
 
hierarchy.
 
We
 
did not
 
significantly
change our valuation techniques from prior periods.
 
We
 
offer
 
certain
 
suppliers
 
access
 
to
 
third
 
party
 
services
 
that
 
allow
 
them
 
to
 
view
 
our
 
scheduled
 
payments
 
online.
 
The
 
third-party
services also
 
allow suppliers
 
to finance
 
advances on
 
our scheduled
 
payments at
 
the sole
 
discretion of
 
the supplier
 
and the third
 
party.
We
 
have no
 
economic interest
 
in these
 
financing arrangements
 
and no
 
direct relationship
 
with the
 
suppliers, the
 
third parties,
 
or any
financial
 
institutions
 
concerning
 
these
 
services.
 
All
 
of
 
our
 
accounts
 
payable
 
remain
 
as
 
obligations
 
to
 
our
 
suppliers
 
as
 
stated
 
in
 
our
supplier
 
agreements.
 
As
 
of
 
August
 
28,
 
2022,
 
$
1,413.3
 
million
 
of
 
our
 
total
 
accounts
 
payable
 
were
 
payable
 
to
 
suppliers
 
who
 
utilize
these third-party services. As
 
of August 29, 2021, $
1,312.8
 
million of our total accounts
 
payable were payable to suppliers
 
who utilize
these third-party services.