DERIVATIVES AND HEDGING (Tables)

9 Months Ended

Jul. 26, 2015

Schedule of fair values of derivative instruments

The fair values of the Company’s derivative instruments (in thousands) as of July 26, 2015, and October 26, 2014, were as follows:

		Fair Value (1)
	Location on Consolidated Statements of Financial Position	July 26, 2015	October 26, 2014
Asset Derivatives:
Derivatives Designated as Hedges:
Commodity contracts	Other current assets	$ 1,986	$ (7,124)

Derivatives Not Designated as Hedges:
Commodity contracts	Other current assets	652	(938)


Total Asset Derivatives		$ 2,638	$ (8,062)

(1)

Amounts represent the gross fair value of derivative assets and liabilities. The Company nets the derivative assets and liabilities for each of its hedging programs, including cash collateral, when a master netting arrangement exists between the Company and the counterparty to the derivative contract. The amount or timing of cash collateral balances may impact the classification of the derivative in the Consolidated Statements of Financial Position. See Note J “Fair Value Measurements” for a discussion of these net amounts as reported in the Consolidated Statements of Financial Position.

Schedule of gains or losses (before tax) related to derivative instruments

Gains or losses (before tax, in thousands) related to the Company’s derivative instruments for the third quarter ended July 26, 2015, and July 27, 2014, were as follows:

Gain/(Loss)
Recognized in AOCL
(Effective Portion) (1)

Location on
Consolidated
Statements

of Operations

Gain/(Loss)
Reclassified from
AOCL into Earnings
(Effective Portion) (1)

Gain/(Loss)
Recognized in
Earnings (Ineffective
Portion) (2) (4)

Three Months Ended

Cash Flow Hedges:

July 26,
2015

July 27,
2014

July 26,
2015

July 27,
2014

July 26,
2015

July 27,
2014

Commodity contracts

$ 8,184

$ (18,159)

Cost of products sold

$ (3,330

)

$ (1,028)

$ (6,127

)

$ (30)

Location on

Consolidated
Statements

of Operations

Gain/(Loss)

Recognized in Earnings
(Effective Portion) (3)

Gain/(Loss)

Recognized in
Earnings (Ineffective

Portion) (2) (5)

Three Months Ended

Fair Value Hedges:

July 26,
2015

July 27,
2014

July 26,
2015

July 27,
2014

Commodity contracts

Cost of products sold

$ (1,727

)

$ (6,685)

$ 2,221

$ 266

Location on

Consolidated

Statements

of Operations

Gain/(Loss)

Recognized

in Earnings

Three Months Ended

Derivatives Not
Designated as Hedges:

July 26,
2015

July 27,
2014

Commodity contracts

Cost of products sold

$ 310

$ (2,453)

Gains or losses (before tax, in thousands) related to the Company’s derivative instruments for the nine months ended July 26, 2015, and July 27, 2014, were as follows:

Gain/(Loss)
Recognized in
AOCL
(Effective Portion) (1)

Location on
Consolidated
Statements

of Operations

Gain/(Loss)
Reclassified from
AOCL into Earnings
(Effective Portion) (1)

Gain/(Loss)
Recognized in Earnings
(Ineffective
Portion) (2)(4)

Nine Months Ended

Cash Flow Hedges:

July 26,
2015

July 27,
2014

July 26,
2015

July 27,
2014

July 26,
2015

July 27,
2014

Commodity contracts

6,814

(13,854)

Cost of products sold

(10,414)

(7,144)

$ (6,127)

193

Location on
Consolidated
Statements

of Operations

Gain/(Loss)
Recognized in Earnings
(Effective Portion) (3)

Gain/(Loss)
Recognized in Earnings
(Ineffective
Portion) (2)(5)

Nine Months Ended

Fair Value Hedges:

July 26,
2015

July 27,
2014

July 26,
2015

July 27,
2014

Commodity contracts

Cost of products sold

(5,664)

(21,320)

2,314

(209)

Location on
Consolidated
Statements

of Operations

Gain/(Loss)
Recognized
in Earnings

Nine Months Ended

Derivatives Not
Designated as Hedges:

July 26,
2015

July 27,
2014

Commodity contracts

Cost of products sold

175

(1,764)

(1)

Amounts represent gains or losses in AOCL before tax. See Note G “Accumulated Other Comprehensive Loss” or the Consolidated Statements of Comprehensive Income for the after-tax impact of these gains or losses on net earnings.

(2)

There were no gains or losses excluded from the assessment of hedge effectiveness during the third quarter or first nine months. During the third quarter, due to market volatility the Company temporarily suspended hedge accounting for its Jennie-O Turkey Store corn futures contracts for a three week period of time. During the time of suspension, all gains or losses related to these contracts were recognized as ineffectiveness in earnings as incurred.

(3)

Amounts represent losses on commodity contracts designated as fair value hedges that were closed during the third quarter or first nine months, which were offset by a corresponding gain on the underlying hedged purchase commitment. Additional gains or losses related to changes in the fair value of open commodity contracts, along with the offsetting gain or loss on the hedged purchase commitment, are also marked-to-market through earnings with no impact on a net basis.

(4)

There were no gains or losses resulting from the discontinuance of cash flow hedges during the third quarter or first nine months.

(5)

There were no gains or losses recognized as a result of a hedged firm commitment no longer qualifying as a fair value hedge during the third quarter or first nine months.

Derivatives not designated as hedges

Derivatives and hedging

Schedule of outstanding commodity futures contracts

	Volume
Commodity	July 26, 2015	October 26, 2014
Corn	3.2 million bushels	2.9 million bushels

Cash Flow Hedges

Derivatives and hedging

Schedule of outstanding commodity futures contracts

	Volume
Commodity	July 26, 2015	October 26, 2014
Corn	20.5 million bushels	18.3 million bushels

Fair Value Hedges

Derivatives and hedging

Schedule of outstanding commodity futures contracts

	Volume
Commodity	July 26, 2015	October 26, 2014
Corn	8.0 million bushels	8.0 million bushels
Lean hogs	0.3 million cwt	0.7 million cwt