Hormel Foods 2014 Annual Report Download - page 58

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56
Other Derivatives: During fiscal years 2014 and 2013, the
Company held certain futures and options contract positions
as part of a merchandising program and to manage the
Company’s exposure to fluctuations in commodity markets
and foreign currencies. The Company did not apply hedge
accounting to these positions. All foreign exchange contracts
were closed as of the end of fiscal year 2013.
During fiscal year 2013, the Company dedesignated its corn
futures contracts held for its hog operations that were pre-
viously designated as cash flow hedges, as these contracts
were no longer highly effective. Hedge accounting is no longer
being applied to these contracts, and gains or losses occur-
ring after the date of dedesignation have been recognized in
earnings as incurred.
As of October 26, 2014, and October 27, 2013, the Company
had the following outstanding futures and options contracts
related to these programs:
Volume
Commodity October 26, 2014 October 27, 2013
Corn 2.9 million bushels 1.7 million bushels
for as fair value hedges, and the Company measures the
effectiveness of the hedges at least quarterly. Changes in the
fair value of the futures contracts, along with the gain or loss
on the hedged purchase commitment, are marked-to-market
through earnings and are recorded on the Consolidated
Statement of Financial Position as a current asset and liabil-
ity, respectively. Effective gains or losses related to these fair
value hedges are recognized through cost of products sold in
the period or periods in which the hedged transactions affect
earnings. Any gains or losses related to hedge ineffectiveness
are recognized in the current period cost of products sold. As
of October 26, 2014, and October 27, 2013, the Company had
the following outstanding commodity futures contracts desig-
nated as fair value hedges:
Volume
Commodity October 26, 2014 October 27, 2013
Corn 8.0 million bushels 5.8 million bushels
Lean hogs 0.7 million cwt 1.4 million cwt
Fair Values: The fair values of the Company’s derivative instruments as of October 26, 2014, and October 27, 2013, were
as follows:
Fair Value(1)
Location on Consolidated October 26, October 27,
(in thousands) Statements of Financial Position 2014 2013
Asset Derivatives:
Derivatives Designated as Hedges:
Commodity contracts Other current assets $ (7,124) $ (17,947)
Derivatives Not Designated as Hedges:
Commodity contracts Other current assets (938) (1,757)
Total Asset Derivatives $ (8,062) $ (19,704)
(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 deriv-
ative contract. The amount or timing of cash collateral balances may impact the classification of the derivative in the Consolidated Statement of
Financial Position. See Note N for a discussion of these net amounts as reported in the Consolidated Statements of Financial Position.