DERIVATIVE FINANCIAL INSTRUMENTS

12 Months Ended

Dec. 28, 2025

Derivative Instruments and Hedging Activities Disclosure [Abstract]

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 28, 2025, the net liability position of our open derivative instruments subject to credit risk-related contingent features was not material.

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 28, 2025		December 29, 2024		December 28, 2025		December 29, 2024
	(in millions)
Derivatives using the “hedge accounting” method:
Commodity contracts	$	26	$	13	$	2	$	37



Derivatives using the “mark-to-market” method:
Commodity contracts	2		2		1		7


Total fair value of derivative instruments	$	28	$	15	$	3	$	44

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 28, 2025
	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:
Commodity contracts	$	28	$	(3)	$	25	$	3	$	28



Liabilities:
Commodity contracts	$	3	$	(3)	$	—	$	—	$	—

________________

(1)Net derivative assets are recorded in prepaid expenses and other current assets and include $7 million in excess collateral paid to and held by our brokers, which represents the initial margin that exceeded the related open derivative position. Net derivative liabilities are recorded in accrued expenses and other current 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:
Commodity contracts	$	15	$	(13)	$	2	$	37	$	39



Liabilities:
Commodity contracts	$	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 of 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.

Hedge Accounting Method

Cash Flow Hedges

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 28, 2025, substantially all of our commodity-related cash flow hedges were for transactions forecasted through June 2026.

As of December 28, 2025, the notional volumes associated with open derivative instruments designated in cash flow hedging relationships were as follows:


	Volume	Metric
Lean hogs	722,560,000	Pounds
Corn	15,090,000	Bushels
Soybean meal	114,000	Tons
Natural Gas	1,200,000	Million BTU
Diesel	504,000	Gallons

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
	2025		2024		2023		2025		2024		2023
	(in millions)
Commodity contracts	$	(8)	$	(56)	$	10	$	(58)	$	(10)	13
Interest rate contracts	—		—		—		(2)		(2)		(2)
Foreign currency contracts	—		1		2		—		1		1
Total	$	(8)	$	(55)	$	11	$	(59)	$	(11)	$	13

As of December 28, 2025, there were deferred gains of $13 million, net of tax of $4 million, in accumulated other comprehensive loss. We expect to reclassify $3 million ($2 million net of tax) of deferred losses on closed derivative contracts into earnings within the next twelve months. We are unable to estimate the amount of deferred gains or losses related to open derivative contracts to be reclassified into earnings within the next twelve months as their values are subject to change.

Fair Value Hedges

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 28, 2025, the notional volumes associated with open derivative instruments designated in fair value hedging relationships were as follows:


	Volume	Metric

Lean hogs	127,960,000	Pounds
Corn	2,550,000	Bushels
Soybeans	205,000	Bushels

The carrying values of hedged firm commitments designated in fair value hedge relationships as of December 28, 2025 and December 29, 2024 were immaterial. 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 were immaterial as of December 28, 2025 and December 29, 2024.

Mark-to-Market Method

As of December 28, 2025, the notional volumes associated with open derivative instruments using the “mark-to-market” method were as follows:


	Volume	Metric
Commodity contracts:

Corn	12,710,000	Bushels
Soybean meal	124,000	Tons
Soybeans	1,825,000	Bushels







Natural gas	112,000	Million BTU

Diesel	1,008,000	Gallons



Foreign currency contracts	35,692,918	U.S. Dollars

Derivative Impact on the Consolidated Statements of Income

The following table presents the effect of derivatives on the consolidated statements of income for the periods indicated.


	Fiscal Year
	2025		2024		2023
	(in millions)
Sales:
Cash flow hedging—commodity contracts	$	(56)	$	18	$	12
Mark-to-market—commodity contracts	5		(16)		30
Total derivative gain (loss) recognized in sales	(51)		2		42

Cost of sales:
Cash flow hedging—commodity contracts	(2)		(28)		—

Fair value hedging—commodity contracts:
Change in fair value of derivatives	(2)		4		17
Change in fair value of related hedged items	2		(5)		(17)
Gain (loss) on closed derivatives (1)	(1)		10		5

Mark-to-market—commodity contracts	3		(10)		(14)
Total derivative loss recognized in cost of sales	—		(28)		(9)

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

Interest expense:
Cash flow hedging—interest rate contracts	(2)		(2)		(2)


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

Total derivative gain (loss)	$	(53)	$	(25)	$	36

________________

(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.

- 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.

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+ Details

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