DERIVATIVES AND HEDGING (Tables)

9 Months Ended

Jul. 24, 2016

Schedule of fair values of derivative instruments

The fair values of the Company’s derivative instruments (in thousands) as of July 24, 2016, and October 25, 2015, were as follows:

		Fair Value (1)
	Location on Consolidated Statements of Financial Position	July 24, 2016		October 25, 2015
Asset Derivatives:
Derivatives Designated as Hedges:
Commodity contracts	Other current assets	$	(2,495)	$	305

Derivatives Not Designated as Hedges:
Commodity contracts	Other current assets	(93)		248


Total Asset Derivatives		$	(2,588)	$	553

(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 L “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 24, 2016, and July 26, 2015, 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					Three Months Ended				Three Months Ended
Cash Flow Hedges:	July 24, 2016		July 26, 2015			July 24, 2016		July 26, 2015		July 24, 2016		July 26, 2015
Commodity contracts	$	7,702	$	8,184	Cost of products sold	$	(346)	$	(3,330)	$	(14,277)	$	(6,127)

					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				Three Months Ended
						July 24,		July 26,		July 24,		July 26,
Fair Value Hedges:						2016		2015		2016		2015
Commodity contracts					Cost of products sold	$	(1)	$	(1,727)	$	4,658	$	2,221

					Location on Consolidated Statements of Operations	Gain/(Loss) Recognized in Earnings
						Three Months Ended
Derivatives Not Designated as Hedges:						July 24, 2016		July 26, 2015
Commodity contracts					Cost of products sold	$	(244)	$	310

Gains or losses (before tax, in thousands) related to the Company’s derivative instruments for the nine months ended July 24, 2016, and July 26, 2015, 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					Nine Months Ended				Nine Months Ended
Cash Flow Hedges:	July 24, 2016		July 26, 2015			July 24, 2016		July 26, 2015		July 24, 2016		July 26, 2015
Commodity contracts	$	3,234	$	6,814	Cost of products sold	$	(1,690)	$	(10,414)	$	(14,255)	$	(6,127)
					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				Nine Months Ended
Fair Value Hedges:						July 24, 2016		July 26, 2015		July 24, 2016		July 26, 2015
Commodity contracts					Cost of products sold	$	1,905	$	(5,664)	$	4,419	$	2,314

					Location on Consolidated Statements of Operations	Gain/(Loss) Recognized in Earnings
						Nine Months Ended
Derivatives Not Designated as Hedges:						July 24, 2016		July 26, 2015
Commodity contracts					Cost of products sold	$	(674)	$	175

(1)

Amounts represent gains or losses in AOCL before tax. See Note I “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 the use of the special hedge accounting exemption for its Jennie-O Turkey Store corn futures contracts. 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 24, 2016	October 25, 2015
Corn	4.8 million bushels	2.6 million bushels
Soybean meal	15,200 tons	11,500 tons

Cash Flow Hedges

DERIVATIVES AND HEDGING

Schedule of outstanding commodity futures contracts

	Volume
Commodity	July 24, 2016	October 25, 2015
Corn	23.2 million bushels	20.1 million bushels

Fair Value Hedges

DERIVATIVES AND HEDGING

Schedule of outstanding commodity futures contracts

	Volume
Commodity	July 24, 2016	October 25, 2015
Corn	5.9 million bushels	5.3 million bushels
Lean hogs	0.3 million cwt	0.4 million cwt