Hedging and key risk management principles have become mainstream financial tools for many pork producers as they look to manage the risks associated with buying grain and selling hogs. Hedging is an investment to reduce the risk of adverse price movements in an asset. Derivative contracts, such as futures, forwards, puts and calls are now a part of everyday operations as lenders encourage producers to implement risk management strategies. From a financial reporting perspective, these cash flow hedges are accounted for as purchase commitments, derivative contracts not electing hedge accounting and derivative contracts electing hedge accounting. Each of which are summarized in the article. However, make sure you discuss your strategy with your broker, accountant and those who utilize your financial statements to ensure you have considered all issues that may arise from the selection of these methods.