The Company uses hedging programs to manage risk associated with commodity purchases and interest rates. These programs utilize futures, swaps, and options contracts to manage the Company’s exposure to market fluctuations. The Company has determined its designated hedging programs to be highly effective in offsetting the changes in fair value or cash flows generated by the items hedged. Effectiveness testing is performed on a quarterly basis to ascertain a high level of effectiveness for cash flow and fair value hedging programs. If the requirements of hedge accounting are no longer met, hedge accounting is discontinued immediately and any future changes to fair value are recorded directly through earnings.

Cash Flow Commodity Hedges: The Company uses futures, swaps, and options contracts to offset price fluctuations in the Company’s future purchases of grain, lean hogs, natural gas, and diesel fuel. These contracts are designated as cash flow hedges; therefore, effective gains or losses related to these cash flow hedges are reported in Accumulated Other Comprehensive Loss (AOCL) and reclassified into earnings, through Cost of Products Sold, in the periods in which the hedged transactions affect earnings. The Company typically does not hedge its grain, natural gas, or diesel fuel exposure beyond the next two upcoming fiscal years and its lean hog exposure beyond the next fiscal year.

Fair Value Commodity Hedges: The Company designates the futures it uses to minimize the price risk assumed when fixed forward priced contracts are offered to the Company’s lean hog and grain suppliers as fair value hedges. The programs are intended to make the forward priced commodities cost nearly the same as cash market purchases at the date of delivery. Changes in the fair value of the futures contracts and the gain or loss on the hedged purchase commitment are marked-to-market through earnings and recorded on the Consolidated Condensed Statements of Financial Position as a Current Asset and Current Liability, respectively. Gains or losses related to these fair value hedges are recognized through Cost of Products Sold in the periods in which the hedged transactions affect earnings.

Cash Flow Interest Rate Hedges: In the second quarter of fiscal 2021, the Company designated two separate interest rate locks as cash flow hedges to manage interest rate risk associated with the anticipated debt transactions required to fund the acquisition of the Planters® snack nuts business. The total notional amount of the Company’s locks was $1.25 billion. In the third quarter of fiscal 2021, the associated unsecured senior notes were issued with a tenor of seven and thirty years and both locks were lifted (See Note J - Long-Term Debt and Other Borrowing Arrangements). Mark-to-market gains and losses on these instruments were deferred as a component of AOCL. The resulting gain in AOCL is reclassified to Interest Expense in the period in which the hedged transactions affect earnings.

Fair Value Interest Rate Hedge: In the first quarter of fiscal 2022, the Company entered into an interest rate swap to protect against changes in the fair value of a portion of previously issued senior unsecured notes attributable to the change in the benchmark interest rate. The hedge specifically designated the last $450 million of the notes due June 2024 (the 2024 Notes). The Company terminated the swap in the fourth quarter of fiscal 2022. The loss related to the swap was recorded as a fair value hedging adjustment to the hedged debt and will be amortized through earnings over the remaining life of the debt.

Other Derivatives: The Company holds certain futures and swap contracts to manage the Company’s exposure to fluctuations in grain and pork commodity markets. The Company has not applied hedge accounting to these positions. Activity related to derivatives not designated as hedges is immaterial to the consolidated financial statements.

(1) Amounts represent the gross fair value of commodity derivative assets and liabilities. The Company nets the derivative assets and liabilities for each of its commodity 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 commodity derivative on the Consolidated Condensed Statements of Financial Position. The gross asset position as of April 28, 2024 excludes the right to reclaim net cash collateral of $11.5 million contained within the master netting arrangement. The gross liability position as of October 29, 2023 is offset by the right to reclaim net cash collateral of $32.2 million. See Note H - Fair Value Measurements for a discussion of these net amounts as reported on the Consolidated Condensed Statements of Financial Position.


In thousands	Location on Consolidated Condensed Statements of Financial Position	April 28, 2024		October 29, 2023
Commodity Contracts	Accounts Payable(1)	$	(1,785)	$	(4,914)
Interest Rate Contracts	Current Maturities of Long-term Debt(2)	(448,798)		(442,549)

(2) Represents the carrying amount of the hedged portion of the 2024 Notes. As of April 28, 2024, the carrying amount of the 2024 Notes included a cumulative fair value hedging adjustment of $1.2 million from discontinued hedges.

Accumulated Other Comprehensive Loss Impact: As of April 28, 2024, the Company included in AOCL hedging losses (before tax) of $1.2 million on commodity contracts and gains (before tax) of $12.0 million related to interest rate settled positions. The Company expects to recognize the majority of the losses on commodity contracts over the next twelve months. Gains on interest rate contracts offset the hedged interest payments over the tenor of the associated debt instruments.


	Gain/(Loss) Recognized in AOCL(1)				Gain/(Loss) Reclassified from AOCL into Earnings(1)				Location on Consolidated Statements of Operations
	Quarter Ended				Quarter Ended
In thousands	April 28, 2024		April 30, 2023		April 28, 2024		April 30, 2023
Cash Flow Hedges
Commodity Contracts	$	7,299	$	(23,161)	$	(8,155)	$	732	Cost of Products Sold
Excluded Component(2)	657		(1,036)		—		—
Interest Rate Contracts	—		—		247		247		Interest Expense

	Gain/(Loss) Recognized in AOCL (1)				Gain/(Loss) Reclassified from AOCL into Earnings (1)				Location on Consolidated Statements of Operations
	Six Months Ended				Six Months Ended
in thousands	April 28, 2024		April 30, 2023		April 28, 2024		April 30, 2023
Cash Flow Hedges
Commodity Contracts	$	1,685	$	(31,551)	$	(19,756)	$	11,591	Cost of Products Sold
Excluded Component (2)	1,813		(691)		—		—
Interest Rate Contracts	—		—		494		494		Interest Expense

(2) Represents the time value of commodity options excluded from the assessment of effectiveness for which the difference between changes in fair value and periodic amortization is recorded in AOCL.

Consolidated Statements of Operations Impact: The effect on the Consolidated Statements of Operations for gains or losses (before tax) related to the Company’s derivative instruments are:


	Quarter Ended				Six Months Ended
In thousands	April 28, 2024		April 30, 2023		April 28, 2024		April 30, 2023
Net Earnings Attributable to Hormel Foods Corporation	$	189,278	$	217,239	$	408,140	$	434,958

Cash Flow Hedges - Commodity Contracts
Gain (Loss) Reclassified from AOCL	(8,155)		732		(19,756)		11,591
Amortization of Excluded Component from Options	(850)		(1,497)		(2,006)		(2,909)

Fair Value Hedges - Commodity Contracts
Gain (Loss) on Commodity Futures(1)	1,033		1,563		4,628		(1,459)
Total Gain (Loss) on Commodity Contracts(2)	(7,972)		798		(17,134)		7,223

Cash Flow Hedges - Interest Rate Contracts
Gain (Loss) Reclassified from AOCL	247		247		494		494
Fair Value Hedge - Interest Rate Contracts

Amortization of Loss Due to Discontinuance of Fair Value Hedge(3)	(3,125)		(3,125)		(6,250)		(6,250)
Total Gain (Loss) on Interest Rate Contracts(4)	(2,878)		(2,878)		(5,755)		(5,755)

Total Gain (Loss) Recognized in Earnings	$	(10,849)	$	(2,080)	$	(22,890)	$	1,468

(1) Represents gains or losses on commodity contracts designated as fair value hedges that were closed during the quarter and six months ended April 28, 2024, and April 30, 2023, which were offset by a corresponding gain or loss 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.