## 9. FINANCIAL INSTRUMENTS (CONTINUED): 

## Risks (continued): 

## (e) Commodity price risk (continued): 

Except for the beet pre-hedge, management believes that the above is not representative, as the Company has physical raw sugar purchases and refined sugar selling contracts that would offset most gains or losses realized from such decrease or increase in the commodity value, when such contracts are liquidated.The Company has no beet pre-hedge contracts as at September 28, 2013. However, if, on September 29, 2012, the price of raw sugar would have increased by US$0.05 per pound, net earnings would have decreased by approximately $0.8 million. A decrease in raw sugar value of US$0.03 per pound would have increased net earnings by approximately $0.5 million. 

 If, on September 28, 2013, the natural gas market price would have increased by US$1.00, and all other variables remained constant, net earnings would have decreased by $2.7 million (September 29, 2012 - decrease of $2.7 million). If the natural gas value would have decreased by US $1.00, and all other variables remained constant, net earnings would have increased by $2.7 million (September 29, 2012 - increase of $2.7 million). 

Management believes that this impact for natural gas is not representative, as this variance will mostly offset when the actual natural gas is purchased and used; at such time a gain or loss on the liquidation of the natural gas contracts would mostly offset the same increase or decrease in the actual physical transaction. 

## Fair values of financial instruments 

 The fair value of derivative instruments is the estimated amount that the Company would receive or pay to terminate the instruments at the reporting date.The fair values have been determined by reference to prices available from the markets on which the instruments trade, subject to credit adjustments as applicable. The fair values of all derivative instruments approximate their carrying value and are recorded as separate line items on the consolidated statement of financial position. 

The following describes the fair value determinations of financial instruments: 

(i)  Cash and cash equivalents: Due to the short-term maturity of these instruments, the carrying amount approximates fair value. 

(ii) Trade and other receivables and trade and other payables:The carrying amount approximates fair value due to the short-term maturity of these. 

(iii) Borrowings under the revolving credit facility: The carrying amount approximates fair value as the borrowings bear interest at variable rates. 

(iv) The fair values for the derivative assets and liabilities are estimated using industry standard valuation models. Where applicable, these models project future cash flows and discount the future amounts to a present value using market-based observable inputs including interest rate curves, credit spreads, foreign exchange rates, and forward and spot prices for currencies. 

