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:

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 and shortening, along with pulp, paper and petroleum-based packaging products. Natural gas, which is used as oven fuel, and diesel fuel are also important commodity inputs.

As of October 3, 2020, the company’s hedge portfolio contained commodity 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	$	7,372		$	—	$	—	$	7,372
Other long-term		454			—		—		454
Total		7,826			—		—		7,826

Liabilities:
Other current		(159	)		—		—		(159	)
Other long-term		—			—		—		—
Total		(159	)		—		—		(159	)
Net Fair Value	$	7,667		$	—	$	—	$	7,667

As of December 28, 2019, the company’s hedge portfolio contained commodity 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	$	3,191		$	—	$	—	$	3,191
Other long-term		589			—		—		589
Total		3,780			—		—		3,780

Liabilities:
Other current		(814	)		—		—		(814	)
Other long-term		(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 material prices and effectively fix, or limit increases in, prices for a period extending into fiscal 2022. These instruments are designated as cash-flow hedges. The change in the fair value for these derivatives is reported in AOCI. All the company-held commodity derivatives at October 3, 2020 and December 28, 2019, respectively, qualified for hedge accounting.

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 has the following derivative instruments located on the Condensed Consolidated Balance Sheets, which are utilized for the risk management purposes detailed above (amounts in thousands):

	Derivative Assets						Derivative Liabilities
	October 3, 2020			December 28, 2019			October 3, 2020			December 28, 2019
Derivatives Designated as Hedging Instruments	Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value		Balance Sheet Location	Fair Value
Commodity contracts	Other current assets	$	7,372	Other current assets	$	3,191	Other accrued liabilities	$	159	Other accrued liabilities	$	814
Commodity contracts	Other assets		454	Other assets		589	Other long-term liabilities		—	Other long-term liabilities		792
Total		$	7,826		$	3,780		$	159		$	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)						Amount of (Loss)
	Recognized in AOCI on Derivatives						Reclassified from AOCI
	(Effective Portion)					Location of Gain or (Loss)	into Income (Effective Portion)
Derivatives in Cash Flow	For the Twelve Weeks Ended					Reclassified from AOCI	For the Twelve Weeks Ended
Hedge Relationships(1)	October 3, 2020		October 5, 2019			into Income (Effective Portion)(2)	October 3, 2020			October 5, 2019
Interest rate contracts	$	—	$	—		Interest expense	$	(25	)	$	(25	)
Commodity contracts		9,409		(7,124	)	Production costs(3)		(652	)		(234	)
Total	$	9,409	$	(7,124	)		$	(677	)	$	(259	)

	Amount of Gain or (Loss)						Amount of Gain or (Loss)
	Recognized in AOCI on Derivatives						Reclassified from AOCI
	(Effective Portion)					Location of Gain or (Loss)	into Income (Effective Portion)
Derivatives in Cash Flow	For the Forty Weeks Ended					Reclassified from AOCI	For the Forty Weeks Ended
Hedge Relationships(1)	October 3, 2020		October 5, 2019			into Income (Effective Portion)(2)	October 3, 2020			October 5, 2019
Interest rate contracts	$	—	$	—		Interest expense	$	(83	)	$	(83	)
Commodity contracts		2,202		(4,577	)	Production costs(3)		(1,669	)		2,947
Total	$	2,202	$	(4,577	)		$	(1,752	)	$	2,864

There was no hedging ineffectiveness, and no amounts were excluded from the ineffectiveness testing, during the twelve and forty weeks ended October 3, 2020 and October 5, 2019, respectively, related to the company’s commodity risk hedges.

At October 3, 2020, the balance in AOCI related to commodity price risk and interest rate risk derivative transactions that closed or will expire over the following years are as follows (amounts in thousands and net of tax) (amounts in parenthesis indicate a debit balance):

	Commodity Price Risk Derivatives			Interest Rate Risk Derivatives		Totals
Closed contracts	$	(345	)	$	205	$	(140	)
Expiring in 2020		—			—		—
Expiring in 2021		5,775			—		5,775
Expiring in 2022		(23	)		—		(23	)
Total	$	5,407		$	205	$	5,612

As of October 3, 2020, the company had the following outstanding financial contracts that were entered to hedge commodity risk (amounts in thousands):

The company’s derivative instruments contain no credit-risk related contingent features at October 3, 2020. As of October 3, 2020 and December 28, 2019, the company had $1.2 million and $7.0 million, respectively, in other current assets representing collateral for hedged positions. At October 3, 2020 and December 28, 2019, the company had $4.1 million and $1.2 million, respectively, recorded in other accrued liabilities representing collateral from counterparties for hedged positions.