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Risk Management Activities | 6 Months Ended
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Nov. 27, 2022
Risk Management Activities [Abstract] |
Risk Management Activities | (6) Risk Management Activities Many commodities we use in the production and distribution of our products are exposed to market price risks. We utilize derivatives to manage price risk for our principal ingredients and energy costs, including grains (oats, wheat, and corn), oils (principally soybean), dairy products, natural gas, and diesel fuel. Our primary objective when entering into these derivative contracts is to achieve certainty with regard to the future price of commodities purchased for use in our supply chain. We manage our exposures through a combination of purchase orders, long-term contracts with suppliers, exchange-traded futures and options, and over-the-counter options and swaps. We offset our exposures based on current and projected market conditions and generally seek to acquire the inputs at as close as possible to or below our planned cost. We use derivatives to manage our exposure to changes in commodity prices. We do not perform the assessments required to achieve hedge accounting for commodity derivative positions. Accordingly, the changes in the values of these derivatives are recorded currently in cost of sales in our Consolidated Statements of Earnings. Although we do not meet the criteria for cash flow hedge accounting, we believe that these instruments are effective in achieving our objective of providing certainty in the future price of commodities purchased for use in our supply chain. Accordingly, for purposes of measuring segment operating performance, these gains and losses are reported in unallocated corporate items outside of segment operating results until such time that the exposure we are managing affects earnings. At that time we reclassify the gain or loss from unallocated corporate items to segment operating profit, allowing our operating segments to realize the economic effects of the derivative without experiencing any resulting mark-to-market volatility, which remains in unallocated corporate items. Unallocated corporate items for the quarters and six-month periods ended November 27, 2022, and November 28, 2021, included: Quarter Ended Six-Month Period Ended In Millions Nov. 27, 2022 Nov. 28, 2021 Nov. 27, 2022 Nov. 28, 2021 Net (loss) gain on mark-to-market valuation of certain commodity positions $ (20.9) $ 16.6 $ (93.2) $ 47.0 Net gain on commodity positions reclassified from unallocated corporate items to segment operating profit (20.5) (35.9) (63.5) (70.6) Net mark-to-market revaluation of certain grain inventories 16.3 31.4 (43.1) 59.8 Net mark-to-market valuation of certain commodity positions recognized in unallocated corporate items $ (25.1) $ 12.1 $ (199.8) $ 36.2 As of November 27, 2022, the net notional value of commodity derivatives was $ 429.4 million, of which $ 158.1 million related to energy inputs and $ 271.3 million related to agricultural inputs. These contracts relate to inputs that generally will be utilized within the next 12 months. The fair values of the derivative positions used in our risk management activities and other assets recorded at fair value were not material as of November 27, 2022 and were Level 1 or Level 2 assets and liabilities in the fair value hierarchy. We did not significantly change our valuation techniques from prior periods. We offer certain suppliers access to third party services that allow them to view our scheduled payments online. The third-party services also allow suppliers to finance advances on our scheduled payments at the sole discretion of the supplier and the third party. We have no economic interest in these financing arrangements and no direct relationship with the suppliers, the third parties, or any financial institutions concerning these services. All of our accounts payable remain as obligations to our suppliers as stated in our supplier agreements. As of November 27, 2022, $ 1,477.4 million of our total accounts payable were payable to suppliers who utilize these third-party services. As of November 28, 2021, $ 1,378.1 million of our total accounts payable were payable to suppliers who utilize these third-party services. During the second quarter of fiscal 2023, we entered into a $ 500.0 million notional amount interest rate swap to convert our $ 500.0 million fixed rate notes due November 18, 2025 , to a floating rate.

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- Definition The entire disclosure for financial instruments. This disclosure includes, but is not limited to, fair value measurements of short and long term marketable securities, international currencies forward contracts, and auction rate securities. Financial instruments may include hedging and non-hedging currency exchange instruments, derivatives, securitizations and securities available for sale at fair value. Also included are investment results, realized and unrealized gains and losses as well as impairments and risk management disclosures. + References No definition available. + Details
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