CONAGRA BRANDS INC. 10-Q

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK The principal market risks affecting us are exposures to price fluctuations of commodity and energy inputs, interest rates, and foreign currencies. Other than the changes noted below, there have been no material changes in our market risk during the thirty-nine weeks ended February 25, 2024. For additional information, refer to the "Quantitative and Qualitative Disclosures About Market Risk" section in Part II, Item 7A of our Annual Report on Form 10-K for the fiscal year ended May 28, 2023. Commodity Market Risk We purchase commodity inputs such as wheat, corn, vegetable oils, pork, dairy products, and energy to be used in our operations. These commodities are subject to price fluctuations that may create price risk. We enter into commodity hedges to manage this price risk using physical forward contracts or derivative instruments. We have policies governing the hedging instruments our businesses may use. These policies include limiting the dollar risk exposure for each of our businesses. We also monitor the amount of associated counter-party credit risk for all non-exchange-traded transactions. Interest Rate Risk We may use interest rate swaps to manage the effect of interest rate changes on the fair value of our existing debt as well as the forecasted interest payments for the anticipated issuance of debt. The carrying amount of long-term debt (including current installments) was $8.51 billion as of February 25, 2024. Based on current market rates, the fair value of this debt at February 25, 2024 was estimated at $8.29 billion. As of February 25, 2024, a 1% increase in the interest rates would decrease the fair value of our fixed rate debt by approximately $372.1 million, while a 1% decrease in interest rates would increase the fair value of our fixed rate debt by approximately $417.8 million. Foreign Currency Risk In order to reduce exposures for our processing activities related to changes in foreign currency exchange rates, we may enter into forward exchange or option contracts for transactions denominated in a currency other than the functional currency for certain of our operations. This activity primarily relates to economically hedging against foreign currency risk in purchasing inventory and capital equipment, sales of finished goods, and future settlement of foreign denominated assets and liabilities. Effect of Hypothetical 10% Fluctuation The potential gain or loss on the fair value of our outstanding commodity and foreign exchange contracts, assuming a hypothetical 10% fluctuation in commodity prices and foreign currency exchange rates, would have been (in millions): Fair Value Impact In Millions February 25, 2024 February 26, 2023 Energy commodities $ 2.6 $ 4.3 Agriculture commodities 6.0 6.4 Foreign exchange 9.2 9.1 It should be noted that any change in the fair value of our derivative contracts, real or hypothetical, would be significantly offset by an inverse change in the value of the underlying hedged items. In relation to foreign currency contracts, this hypothetical calculation assumes that each exchange rate would change in the same direction relative to the U.S. dollar.