Our pork production operations use various raw materials, primarily live hogs, corn, soybean meal and wheat, which are actively traded on commodity exchanges. We also use fuel and other energy commodities in our operations. We hedge these commodities when we determine conditions are appropriate to mitigate price risk. While this hedging may limit our ability to participate in gains from favorable commodity fluctuations, it also reduces the risk of loss from adverse changes in raw material prices. We attempt to closely match the commodity contract terms with the hedged item. We also periodically enter into interest rate swaps to hedge exposure to changes in interest rates on certain financial instruments and foreign exchange forward contracts to hedge certain exposures to fluctuating foreign currency rates.

Changes in commodity prices could have a significant impact on cash deposit requirements under our broker and counterparty agreements. Additionally, certain of our derivative contracts contain credit risk-related contingent features, which would require us to post additional cash collateral to cover net losses on open derivative instruments if our credit rating were sufficiently downgraded. As of December 29, 2024, the net liability position of our open derivative instruments that are subject to credit risk-related contingent features was not material.

Although our counterparties primarily consist of financial institutions that are investment grade, we would be exposed to losses in the event of nonperformance or nonpayment by our counterparties. However, a portion of our

financial instruments are exchange traded derivative contracts held with brokers and counterparties with whom we maintain margin accounts that are settled on a daily basis, thereby limiting our credit exposure to non-exchange traded derivatives. Determination of the credit quality of our counterparties is based upon a number of factors, including credit ratings and our evaluation of their financial condition. As of December 29, 2024, we had gross credit exposure of $4 million on non-exchange traded derivative contracts. After taking into account the effect of netting arrangements, we had no credit exposure on non-exchange traded derivative contracts.

The size and mix of our derivative portfolio vary from time to time based upon our analysis of current and future market conditions. The following table presents the fair values of our open derivative financial instruments on a gross basis.


	Assets				Liabilities
	December 29, 2024		December 31, 2023		December 29, 2024		December 31, 2023
	(in millions)				(in millions)
Derivatives using the “hedge accounting” method:
Commodity contracts	$	13	$	37	$	37	$	29

Foreign exchange contracts	—		1		—		—
Total	13		38		37		29
Derivatives using the “mark-to-market” method:
Commodity contracts	2		13		7		13


Total fair value of derivative instruments	$	15	$	51	$	44	$	42

The following tables reconcile the gross amounts of derivative assets and liabilities to the net amounts presented in our consolidated balance sheets and the related effects of cash collateral under netting arrangements that provide a legal right of offset of assets and liabilities.


	December 29, 2024
	Gross Amount of Derivative Assets/ Liabilities		Netting of Derivative Assets/ Liabilities		Net Derivative Assets/Liabilities		Netting of Derivative and Cash Collateral		Net Amount Presented in the Consolidated Balance Sheet (1)
	(in millions)
Assets:
Commodities	$	15	$	(13)	$	2	$	37	$	39



Liabilities:
Commodities	44		(13)		31		(23)		8

(1)Net derivative assets are recorded in prepaid expenses and other current assets. Net derivative liabilities are recorded in accrued expenses and other current liabilities. These balances include $60 million in cash collateral paid to and held by one of our brokers, $37 million of which represents the initial margin and exceeded the related open derivative liability position.


	December 31, 2023
	Gross Amount of Derivative Assets/ Liabilities		Netting of Derivative Assets/ Liabilities		Net Derivative Assets/Liabilities		Netting of Derivative and Cash Collateral		Net Amount Presented in the Consolidated Balance Sheet (1)
	(in millions)
Assets:
Commodities	$	50	$	(25)	$	25	$	(1)	$	24

Foreign exchange contracts	1		—		1		—		1
Total	$	51	$	(25)	$	26	$	(1)	$	26
Liabilities:
Commodities	42		(25)		18		1		19

(1)We recorded $25 million of net assets in prepaid expenses and other current assets with the remaining $1 million in current assets of discontinued operations. We recorded $14 million of the net liabilities in accrued expenses and other current liabilities with the remaining $5 million in other liabilities.

We enter into derivative instruments, such as futures, swaps and options contracts, to manage our exposure to the variability in expected future cash flows attributable to commodity price risk associated with the forecasted sale of fresh pork and the forecasted purchase of grains, hogs, and energy. In addition, we enter into interest rate swaps to manage our exposure to changes in interest rates associated with our variable interest rate debt and the forecasted issuance of fixed rate debt. Lastly, we enter into foreign exchange contracts to manage our exposure to the variability in expected future cash flows attributable to changes in foreign exchange rates associated with the forecasted purchase or sale of assets denominated in foreign currencies. As of December 29, 2024, substantially all of our commodity-related cash flow hedges were for transactions forecasted through December 2025.

The following table presents the effects on our consolidated financial statements of pre-tax gains and losses on derivative instruments designated in cash flow hedging relationships for the periods indicated:


	Gains (Losses) Recognized in Other Comprehensive Income (Loss) on Derivative						Gains (Losses) Reclassified from Accumulated Other Comprehensive Loss into Earnings
	Fiscal Year						Fiscal Year
	2024		2023		2022		2024		2023		2022
	(in millions)						(in millions)

Commodity contracts	$	(56)	$	10	$	58	(10)		13		97
Interest rate swaps	—		—		—		(2)		(2)		(1)
Foreign exchange contracts	1		2		—		1		1		(1)
Total	$	(55)	$	11	$	58	$	(11)	$	13	$	94

In fiscal years 2024 and 2023, we recognized a total of $110 million and $53 million, respectively, in expenses for option premiums, which are excluded from the assessment of hedge effectiveness. As of December 29, 2024 and December 31, 2023, accumulated other comprehensive income included $2 million of net losses and $29 million of net gains, respectively, associated with options for which the underlying hedged transactions had not yet impacted earnings. This amount represents the difference between the change in the fair value of the options and the amount of option premiums amortized through earnings.

We expect to reclassify $5 million ($3 million net of tax) of deferred gains on closed commodity and interest rate contracts into earnings within the next twelve months. We are unable to estimate the amount of deferred gains or losses related to open contracts to be reclassified into earnings within the next twelve months as their values are subject to change.

We enter into derivative instruments (primarily futures contracts) that are designed to hedge changes in the fair value of firm commitments to buy grains and hogs. As of December 29, 2024, the notional volumes associated with open derivative instruments designated in fair value hedging relationships were as follows:

The carrying values of hedged firm commitments designated in fair value hedge relationships as of December 29, 2024 and December 31, 2023 were not material. When the underlying inventories are acquired, the hedge relationship is discontinued and the fair value hedge adjustment is reclassified to inventories. The amount of fair value hedge gains remaining in inventories for which hedge accounting has been discontinued was $3 million and $7 million as of December 29, 2024 and December 31, 2023, respectively.


	Fiscal Year
	2024		2023		2022
	(in millions)
Sales
Cash flow hedging - commodity contracts	$	18	$	12	$	(30)
Mark to market - commodity contracts	(16)		30		(35)
Total derivative gain (loss) recognized sales	2		42		(65)

Cost of Sales
Cash flow hedging - commodity contracts	(28)		—		127

Fair value hedging - commodity contracts
Change in fair value of open derivatives	4		17		(24)
Change in fair value of related hedged items	(5)		(17)		24
Gain (loss) on closed derivatives (1)	10		5		(28)

Mark to market - commodity contracts	(10)		(14)		20
Total derivative gain (loss) recognized in cost of sales	(28)		(9)		119

Selling, general and administrative expenses
Mark to market - foreign exchange contracts	(2)		—		1

Interest expense
Cash flow hedging - interest rate contracts	(2)		(2)		(1)


Discontinued operations
Cash flow hedging - foreign exchange contracts	1		1		(1)
Mark to market - foreign exchange contracts	3		2		4
Total derivative gain (loss) recognized in discontinued operations	4		3		3

Total derivative gain (loss)	$	(25)	$	36	$	56

(1)Represents the amount of fair value hedge adjustment applied to the carrying amount of hedged assets that is recognized in cost of sales as the underlying hedged assets are relieved from inventories and charged to cost of sales.