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DERIVATIVES AND HEDGING (Tables) | 9 Months Ended
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Jul. 24, 2016
DERIVATIVES AND HEDGING |
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

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