DERIVATIVE FINANCIAL INSTRUMENTS

9 Months Ended

Sep. 29, 2013

DERIVATIVE FINANCIAL INSTRUMENTS [Abstract]

DERIVATIVE FINANCIAL INSTRUMENTS

5. DERIVATIVE FINANCIAL INSTRUMENTS

     The Company utilizes various raw materials in its operations, including corn, soybean meal, soybean oil, sorghum, natural gas, electricity and diesel fuel, which are all considered commodities. The Company considers these raw materials generally available from a number of different sources and believes it can obtain them to meet its requirements. These commodities are subject to price fluctuations and related price risk due to factors beyond our control, such as economic and political conditions, supply and demand, weather, governmental regulation and other circumstances. Generally, the Company purchases derivative financial instruments, specifically exchange-traded futures and options, in an attempt to mitigate price risk related to its anticipated consumption of commodity inputs for approximately the next 12 months. The Company may purchase longer-term derivative financial instruments on particular commodities if deemed appropriate. The Company will sometimes take a short position on a derivative instrument to minimize the impact of a commodity's price volatility on its operating results. The Company will also occasionally purchase derivative financial instruments in an attempt to mitigate currency exchange rate exposure related to the financial statements of its Mexico operations that are denominated in Mexican pesos. The fair value of derivative assets is included in the line item Prepaid expenses and other current assets on the Condensed Consolidated Balance Sheets while the fair value of derivative liabilities is included in the line item Accrued expenses and other current liabilities on the same statements. Our counterparties require that we post cash collateral for changes in the net fair value of the derivative contracts.

We have not designated the derivative financial instruments that we have purchased to mitigate commodity purchase transaction exposures or fluctuations in foreign currency as cash flow hedges. Therefore, we recognized changes in the fair value of these derivative financial instruments immediately in earnings. Gains or losses related to these derivative financial instruments are included in the line item Cost of sales in the Condensed Consolidated Statements of Income. The Company recognized net gains of $8.0 million and $5.9 million related to changes in the fair value of its derivative financial instruments during the thirteen weeks ended September 29, 2013 and September 23, 2012, respectively. We also recognized net gains of $21.9 million and $3.7 million related to changes in the fair value of our derivative financial instruments during the thirty-nine weeks ended September 29, 2013 and September 23, 2012, respectively. Information regarding the Company's outstanding derivative instruments and cash collateral posted with (owed to) brokers are included in the following table:

	September 29, 2013			December 30, 2012
	(Fair values in thousands)
Fair values:
Commodity derivative assets, gross	$	3,216		$	1,821
Commodity derivative liabilities, gross		(3,545	)		(1,530	)
Cash collateral posted with (owed to) brokers		9,423			(166	)
Foreign currency derivative assets, gross		238			-
Derivatives Coverage(a):
Corn		(0.3	)%		-	%
Soybean meal		(2.4	)%		-	%
Period through which stated percent of needs are covered:
Corn		December 2014			December 2013
Soybean meal		March 2014			December 2013

(a) Derivatives coverage is the percent of anticipated commodity needs covered by outstanding derivative instruments through a specified date.