costs of labor; (iii) market conditions for finished products, includ- ing the supply and pricing of alternative proteins; (iv) effectiveness of advertising and marketing programs; (v) changes in consumer purchasing behavior; (vi) the ability of the company to successfully integrate newly acquired businesses into existing operations; (vii) risks associated with leverage, including cost increases due to  rising interest rates; (viii) changes in domestic or foreign regulations and laws, including changes in accounting standards, environ- mental laws, occupational, health, and safety laws; (ix) issues related to food safety, including costs resulting from product recalls, regulatory compliance, and any related claims or litigation; (x) adverse results from ongoing litigation; (xi) access to foreign markets together with foreign economic conditions, including  currency fluctuations; and (xii) the effect of, or changes in, general economic conditions. Please refer to Exhibit 99.1 attached to  the company’s Annual Report on Form 10-K for fiscal year ending October 30, 2004, for further information on the company’s  position regarding “forward-looking” information.  Hog Markets: The company’s earnings are affected by fluctu- ations in the live hog market. To minimize the impact on earnings, the company has entered into contracts with producers for the purchase of hogs at formula-based prices over periods of up to  15 years. Contract formulas are based on hog production costs, hog futures, or hog primal values. Purchased hogs under contract accounted for 67 percent and 79 percent of the total hogs pur- chased by the company in fiscal 2004 and 2003, respectively. A hypothetical 10 percent change in the cash market would have impacted approximately 33 percent and 21 percent of the hogs purchased in fiscal 2004 and 2003, respectively, and would have had an immaterial effect on the company’s results of operations. The contracts reduce volatility in hog prices and ensure a steady supply of quality hogs. Certain procurement contracts allow for future hog deliveries  (firm commitments) to be forward priced. The company generally hedges these firm commitments by purchasing hog futures con- tracts. These futures contracts are designated and accounted  for as fair value hedges. The change in the market value of such futures contracts has historically been, and is expected to continue to be, highly effective at offsetting changes in price movements of the hedged item. Changes in the fair value of the futures contracts, along with the gain or loss on the firm commitment, are marked- to-market through earnings and are recorded on the consolidated statement of financial position as a current asset and liability, respectively. The fair value of the company’s open futures contracts as of October 30, 2004, was $(662). The company measures its market risk exposure on its October 30, 2004, hog futures contracts using a sensitivity analysis, which considers a hypothetical 10 percent change in market prices. A 10 percent increase in market prices would have negatively impacted The company measures its foreign currency exchange risk by using a 10 percent sensitivity analysis on the company’s primary foreign net asset position, the Philippine peso, as of October 30, 2004. A 10 percent strengthening in the value of the peso relative to the U.S. dollar would result in other comprehensive income of $3,554, pre-tax. A 10 percent weakening in the value of the peso relative to the U.S. dollar would result in other comprehensive loss of the same amount. International: The fair values of certain company assets are  subject to fluctuations in foreign currencies. The majority of these assets were eliminated in the second quarter of fiscal 2004 when the company sold its remaining equity interest in the Spanish food company Campofrio Alimentacion, S.A. The company’s remaining net asset position in foreign currencies as of October 30, 2004, was $65,420, with most of the exposure existing in Philippine pesos and Chinese yuan. Changes in currency exchange rates impact the fair values of company assets either currently through the consolidated statement of operations as currency gains/ losses, or by affecting other comprehensive income/loss.  Long-Term Debt: A principal market risk affecting the company  is the exposure to changes in interest rates on the company’s fixed-rate, long-term debt. As of October 30, 2004, fixed-rate  debt totaled $372,570 at rates ranging from 6.625 to 8.16 per- cent. Market risk for fixed-rate, long-term debt is estimated as  the potential increase in fair value resulting from a hypothetical  10 percent decrease in interest rates, and amounts to approx- imately $10,288. The fair values of the company’s long-term debt were estimated using discounted future cash flows based on the company’s incremental borrowing rates for similar types of borrow- ing arrangements. The company measures its market risk exposure on its grain futures contracts using a sensitivity analysis, which considers a hypothetical 10 percent change in the market prices for grain. A 10 percent decrease in the market price for grain would have neg- atively impacted the fair value of the company’s October 30, 2004, open grain contracts by $(3,003), which in turn would have lowered the company’s cost on purchased grain by a similar amount. Turkey Markets: The company raises or contracts on a yearly basis for live turkeys. Production costs in raising turkeys are sub- ject primarily to fluctuations in feed grain prices and, to a lesser extent, fuel costs. To reduce the company’s exposure to changes in grain prices, the company utilizes a hedge program to offset the fluctuation in the company’s future direct grain purchases. This program utilizes corn and soybean meal futures, and these con- tracts are accounted for under cash flow hedge accounting. The open contracts are reported at their fair value of $(638), before  tax, on the consolidated statement of financial position as of October 30, 2004. the fair value of the company’s October 30, 2004, open contracts by $(1,747), which in turn would have lowered the company’s cost of purchased hogs by a similar amount.  Quantitative and Qualitative Disclosure  About Market Risks 2004 Annual Report 29