Foreign Currency Exchange Rate Risk
We are exposed to currency fluctuations related to manufacturing or selling products in currencies other than the U.S.
dollar. We may enter into foreign currency forward exchange contracts to reduce fluctuations in our long or short
currency positions relating primarily to purchase commitments or forecasted purchases for equipment, raw materials
and finished goods denominated in foreign currencies. We also may hedge payment of forecasted intercompany
transactions with our subsidiaries outside of the United States. We generally hedge foreign currency price risks for
periods from 3 to 12 months.
A summary of foreign currency forward exchange contracts and the corresponding amounts at contracted forward rates
is as follows:
Contract
Amount
Primary
Currencies
Contract
Amount
Primary
Currencies
In millions of dollars
Foreign currency forward exchange
contracts to purchase foreign currencies $88.8
Euros
Malaysian ringgit
British pound $58.3
Euros
Malaysian ringgit
Foreign currency forward exchange
contracts to sell foreign currencies $155.3
Canadian dollars
Brazilian reals
Japanese yen $119.6
Canadian dollars
Brazilian reals
Japanese yen
Mexican pesos
December 31, 2023 2022
The fair value of foreign currency forward exchange contracts represents the difference between the contracted and
current market foreign currency exchange rates at the end of the period. We estimate the fair value of foreign currency
forward exchange contracts on a quarterly basis by obtaining market quotes of spot and forward rates for contracts
with similar terms, adjusted where necessary for maturity differences. At December 31, 2023 and 2022, the net fair
value of these instruments was an asset of $0.7 million and an asset of $3.9 million, respectively. In addition,
assuming an unfavorable 10% change in year-end foreign currency exchange rates, the fair value of these instruments
would have declined by $20.2 million and $18.4 million, respectively, generally offset by a reduction in foreign
exchange associated with our transactional activities.
Commodities—Price Risk Management and Futures Contracts
Our most significant raw material requirements include cocoa products, sugar, corn products, dairy products, wheat,
peanuts and almonds. The cost of cocoa products and prices for related futures contracts and costs for certain other raw
materials historically have been subject to wide fluctuations attributable to a variety of factors. These factors include:
• Commodity market fluctuations;
• Currency exchange rates;
• Imbalances between supply and demand;
• Rising levels of inflation and interest rates related to domestic and global economic conditions or supply
chain issues;
• The effects of climate change and extreme weather on crop yield and quality;
• Speculative influences;
• Trade agreements among producing and consuming nations;
• Supplier compliance with commitments;
• Import/export requirements for raw materials and finished goods;
• Political unrest in producing countries;
• Introduction of living income premiums or similar requirements;
• Changes in governmental agricultural programs and energy policies; and
• Other events beyond our control such as the impacts on the business or supply chain arising from the ongoing
conflict between Russia and Ukraine.
The Hershey Company | 2023 Form 10-K | Page 44
