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DERIVATIVES AND HEDGING | 3 Months Ended
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Jan. 26, 2025
Derivative Instruments and Hedging Activities Disclosure [Abstract] |
DERIVATIVES AND HEDGING | NOTE F - DERIVATIVES AND HEDGING The Company uses hedging programs to manage risk associated with various commodity purchases and interest rates. These programs utilize futures, swaps, and options contracts to manage the Company’s exposure to market fluctuations. 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, the related gains or losses 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 two fiscal years and its lean hog exposure beyond one 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 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 anticipated debt transactions. 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 K - 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 $950 million aggregate principal amount of its 0.650% 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 amortized through earnings over the remaining life of the debt. In the third quarter of fiscal 2024, the fair value hedging adjustment was completely amortized to correspond with the payment of the 2024 Notes upon maturity. Other Derivatives: The Company holds certain futures and swap contracts to manage the Company’s exposure to fluctuations in grain and pork commodity markets for which it has not applied hedge accounting. Activity related to derivatives not designated for hedge accounting was immaterial to the consolidated financial statements during the quarters ended January 26, 2025, and January 28, 2024. Volume: The Company’s outstanding contracts related to its commodity hedging programs include:
In millions | January 26, 2025 |  | October 27, 2024
Corn | 33.5 |  | bushels |  | 29.2 |  | bushels
Lean Hogs | 194.0 |  | pounds |  | 175.6 |  | pounds
Natural Gas | 3.2 |  | MMBtu |  | 4.2 |  | MMBtu
Diesel Fuel | 4.7 |  | gallons |  | 4.0 |  | gallons
Fair Value of Derivatives: The gross fair values of the Company’s derivative instruments designated as hedges are:
| January 26, 2025 | October 27, 2024
In thousands |  | Assets |  | Liabilities |  | Assets |  | Liabilities
Gross Fair Value of Commodity Contracts |  | $ | 16,678 |  |  | $ | (3,507) |  |  | $ | 9,851 |  |  | $ | (12,638) |
Counterparty and Collateral Netting Offset(1) |  | (4,154) |  |  | 3,507 |  |  | (1,785) |  |  | 12,638 |
Amounts Recognized on Consolidated Statements of Financial Position(2) |  | $ | 12,524 |  |  | $ | — |  |  | $ | 8,066 |  |  | $ | — |
(1) Per the terms of the Company's master netting arrangements, the gross fair value of the Company's commodity contracts was offset by the obligation to return net cash collateral of $0.6 million (including cash of $0.4 million and $0.3 million of realized loss) as of January 26, 2025 and the right to reclaim net cash collateral of $10.9 million (including cash of $26.5 million and $15.6 million of realized loss) as of October 27, 2024. (2) The Company's commodity contracts are reflected in Prepaid Expenses and Other Current Assets. Fair Value Hedge - Assets (Liabilities): The carrying amount of the Company’s fair value hedged assets (liabilities) are:
In thousands | Location on Consolidated Statements of Financial Position | January 26, 2025 |  | October 27, 2024
Commodity Contracts | Accounts Payable(1) | $ | 2,217 |  |  | $ | (2,902) |
(1) Represents the carrying amount of fair value hedged assets and liabilities, which are offset by other assets included in master netting arrangements described above. Accumulated Other Comprehensive Loss Impact: As of January 26, 2025, the Company included in AOCL pre-tax hedging gains of $12.4 million on commodity contracts and gains of $11.3 million related to interest rate settled positions. The Company expects to recognize the majority of the gains 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. The pre-tax gains (losses) recognized in AOCL related to the Company’s derivative instruments are:
| Quarter Ended |  |
In thousands |  | January 26, 2025 |  | January 28, 2024 |  |  |  |
Commodity Contracts |  | $ | 19,134 |  |  | $ | (5,613) |  |  |  |  |
Excluded Component(1) |  | (87) |  |  | 1,156 |  |  |  |  |
(1) 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. The pre-tax gains (losses) reclassified from AOCL into earnings related to the Company’s derivative instruments are:
| Location on Consolidated Statements of Operations | Quarter Ended
In thousands |  | January 26, 2025 |  | January 28, 2024
Commodity Contracts | Cost of Products Sold |  | $ | (2,141) |  |  | $ | (11,601) |
Interest Rate Contracts | Interest Expense |  | 247 |  |  | 247 |
See Note H - Accumulated Other Comprehensive Loss for the after-tax impact of these gains or losses on Net Earnings. Consolidated Statements of Operations Impact: The effect on the Consolidated Statements of Operations for pre-tax gains (losses) related to the Company’s derivative instruments are:
| Quarter Ended |  |
In thousands | January 26, 2025 |  | January 28, 2024 |  |  |  |
Net Earnings Attributable to Hormel Foods Corporation | $ | 170,575 |  |  | $ | 218,863 |  |  |  |  |
Cash Flow Hedges - Commodity Contracts |  |  |  |  |  |  |
Gain (Loss) Reclassified from AOCL | (2,141) |  |  | (11,601) |  |  |  |  |
Amortization of Excluded Component from Options | (208) |  |  | (1,156) |  |  |  |  |
Fair Value Hedges - Commodity Contracts |  |  |  |  |  |  |
Gain (Loss) on Commodity Futures(1) | 1,704 |  |  | 3,595 |  |  |  |  |
Total Gain (Loss) on Commodity Contracts(2) | (645) |  |  | (9,163) |  |  |  |  |
Cash Flow Hedges - Interest Rate Contracts |  |  |  |  |  |  |
Gain (Loss) Reclassified from AOCL | 247 |  |  | 247 |  |  |  |  |
Fair Value Hedge - Interest Rate Contracts |  |  |  |  |  |  |
Amortization of Loss Due to Discontinuance of Fair Value Hedge(3) | — |  |  | (3,125) |  |  |  |  |
Total Gain (Loss) on Interest Rate Contracts(4) | 247 |  |  | (2,878) |  |  |  |  |
Total Gain (Loss) Recognized in Earnings | $ | (398) |  |  | $ | (12,040) |  |  |  |  |
(1) Represents gains or losses on commodity contracts designated as fair value hedges that were closed during the quarters ended January 26, 2025, and January 28, 2024, 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. (2) Total Gain (Loss) on Commodity Contracts is recognized in earnings through Cost of Products Sold. (3) Represents the fair value hedging adjustment amortized through earnings. (4) Total Gain (Loss) on Interest Rate Contracts is recognized in earnings through Interest Expense.

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- Definition The entire disclosure for derivative instruments and hedging activities including, but not limited to, risk management strategies, non-hedging derivative instruments, assets, liabilities, revenue and expenses, and methodologies and assumptions used in determining the amounts. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Topic 815 -SubTopic 40 -Name Accounting Standards Codification -Section 50 -Paragraph 5 -Subparagraph (f) -Publisher FASB -URI https://asc.fasb.org/1943274/2147480237/815-40-50-5 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Topic 815 -SubTopic 10 -Name Accounting Standards Codification -Section 50 -Paragraph 5C -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org/1943274/2147480434/815-10-50-5C Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 815 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/815/tableOfContent + Details
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