The company measures the fair value of its derivative portfolio by using the price that would be received to sell an asset or paid to transfer a liability in the principal market for that asset or liability. These measurements are classified into a hierarchy by the inputs used to perform the fair value calculation as follows:

Level 1: Fair value based on unadjusted quoted prices for identical assets or liabilities at the measurement date

Level 2: Modeled fair value with model inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly

Level 3: Modeled fair value with unobservable model inputs that are used to estimate the fair value of the asset or liability

The company enters into commodity derivatives, designated as cash-flow hedges of existing or future exposure to changes in commodity prices. The company’s primary raw materials are flour, sweeteners, yeast, and shortening, along with pulp, paper, and petroleum-based packaging products. Natural gas, which is used as oven fuel, is also an important commodity used for production.

As of January 2, 2021, the company’s commodity hedge portfolio contained derivatives which are recorded in the following accounts with fair values measured as indicated (amounts in thousands):

	Level 1			Level 2		Level 3		Total
Assets:
Other current assets	$	16,684		$	—	$	—	$	16,684
Other long-term assets		731			—		—		731
Total	$	17,415		$	—	$	—	$	17,415
Liabilities:
Other current liabilities	$	(5	)	$	—	$	—	$	(5	)
Other long-term liabilities		(83	)		—		—		(83	)
Total	$	(88	)	$	—	$	—	$	(88	)
Net Fair Value	$	17,327		$	—	$	—	$	17,327

As of December 28, 2019, the company’s commodity hedge portfolio contained derivatives which are recorded in the following accounts with fair values measured as indicated (amounts in thousands):

	Level 1			Level 2		Level 3		Total
Assets:
Other current assets	$	3,191		$	—	$	—	$	3,191
Other long-term assets		589			—		—		589
Total	$	3,780		$	—	$	—	$	3,780
Liabilities:
Other current liabilities	$	(814	)	$	—	$	—	$	(814	)
Other long-term liabilities		(792	)		—		—		(792	)
Total		(1,606	)		—		—		(1,606	)
Net Fair Value	$	2,174		$	—	$	—	$	2,174

The positions held in the portfolio are used to hedge economic exposure to changes in various raw materials and production input prices and effectively fixes the price, or limits increases in prices, for a period of time extending into Fiscal 2022. These instruments are designated as cash-flow hedges. See Note 2, Summary of Significant Accounting Policies, for the accounting treatment of these hedged transactions.

The company previously entered into treasury rate locks at the time we executed the 2022 and 2026 notes. These rate locks were designated as a cash flow hedge and the fair value at termination was deferred in AOCI. The deferred amount reported in AOCI is being reclassified to interest expense as interest payments are made on the related notes through the maturity date.

The company had the following derivative instruments recorded on the Consolidated Balance Sheets, all of which are utilized for the risk management purposes detailed above (amounts in thousands):

	Derivative Assets
	January 2, 2021			December 28, 2019
Derivatives Designated as Hedging Instruments	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Commodity contracts	Other current assets	$	16,684	Other current assets	$	3,191
Commodity contracts	Other long-term assets		731	Other long-term assets		589
Total		$	17,415		$	3,780

	Derivative Liabilities
	January 2, 2021			December 28, 2019
Derivatives Designated as Hedging Instruments	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Commodity contracts	Other current liabilities	$	5	Other current liabilities	$	814
Commodity contracts	Other long-term liabilities		83	Other long-term liabilities		792
Total		$	88		$	1,606

The company had the following derivative instruments for deferred gains and (losses) on closed contracts and the effective portion for changes in fair value recorded in AOCI (no amounts were excluded from the effectiveness test), all of which are utilized for the risk management purposes detailed above (amounts in thousands and net of tax):

	Amount of Gain or (Loss) Recognized in OCI on Derivatives (Effective Portion) (Net of tax)
Derivatives in Cash Flow Hedging Relationships	Fiscal 2020		Fiscal 2019		Fiscal 2018
Commodity contracts	$	9,298	$	8,457	$	2,978
Total	$	9,298	$	8,457	$	2,978

	Amount of Gain or (Loss) Reclassified from AOCI into Income (Effective Portion)(Net of tax)									Location of Gain or (Loss) Reclassified from AOCI into Income
Derivatives in Cash Flow Hedging Relationships	Fiscal 2020			Fiscal 2019			Fiscal 2018			(Effective Portion)
Interest rate contracts	$	(109	)	$	(107	)	$	(107	)	Interest (expense) income
Commodity contracts		(2,007	)		2,771			(972	)	Production costs (1)
Total	$	(2,116	)	$	2,664		$	(1,079	)

The balance (credit or (debit) balance) in AOCI related to commodity price risk and interest rate risk derivative transactions that are closed or will expire over the next three years are as follows (amounts in thousands and net of tax) at January 2, 2021:

	Commodity Price Risk Derivatives			Interest Rate Risk Derivatives		Totals
Closed contracts	$	(154	)	$	231	$	77
Expiring in 2021		12,510			—		12,510
Expiring in 2022		485			—		485
Total	$	12,841		$	231	$	13,072

See Note 2, Summary of Significant Accounting Policies, for the accounting treatment of OCI for these hedged transactions.

As of January 2, 2021, the company had entered into the following financial contracts to hedge commodity risks (amounts in thousands):

The company’s derivative instruments contained no credit-risk-related contingent features at January 2, 2021. As of January 2, 2021 and December 28, 2019, the company had $1.2 million and $7.0 million, respectively, recorded in other current assets representing collateral to counterparties for hedged positions. As of January 2, 2021 and December 28, 2019, the company had $14.0 million and $1.2 million, respectively, recorded in other accrued liabilities representing collateral from counterparties for hedged positions.