I have same the problem, on Safari 10 and MacOS Sierra. Many people in this thread don't understand the original post and their replies are not helpful. Let me try to explain more clearly.
Favorites are the bookmarks Safari shows in the browser above the tab bar. Nobody uses Favorites for all their bookmarks! It would create too much clutter. The majority of bookmarks are filed *outside* of the Favorites folder. If you select "Show Bookmarks", a window allows you to edit and organize bookmarks and to create folders separate from Favorites. You can even drag individual bookmarks to the top-level, not inside any folder. Bookmarks and Favorites are not the same thing.
If you don't want a new bookmark to be filed in Favorites or in any other *folder* in the bookmarks, that means you want to file it as an unsorted bookmark. For many years this was easily accomplished by selecting the "Bookmark Folder" in the Add Bookmark dialog. The new bookmark would be added at the top level, not in any folder. The new bookmark could then be easily re-selected by clicking once on the Bookmarks Menu and navigating to the botton without traversing any subdirectories. "Bookmark Folder" was a misleading name because it was not a folder, it put the new bookmark at the top level as shown in the Bookmarks List. Despite the misleading name it was very useful and the only way to get new bookmarks added to the top level from the Add Bookmark dialog.
In the recent Safari 10 release, the "Bookmark Folder" option disappeared from the Add Bookmarks dialog. This makes it impossible to use the Add Bookmark dialog to create an unsorted bookmark at the top level.
If you select Show Bookmarks and display the bookmarks list, you can still manually move any bookmarks out of the subfolders and into this unsorted bookmark area. Safari still supports it. The problem has to do with the Add Bookmark dialog leaving out the option for this.
I'm glad somebody filed a bug report and I hope they fix it.
In the mean time, I found a work-around. I never like to use the sidebar feature of Safari, but if I select Show Bookmarks Sidebar under the View menu, I can click in the URL location box and manually drag that to the sidebar. This allows me to create a bookmark at the top level without using the Add Bookmark dialog.
I hope this workaround is helpful.