|TEV||5,717||TEV/EBIT||40||TTM 2019-09-28, in MM, except price, ratios|
|Item 1B. Unresolved Staff Comments|
|Item 2. Properties|
|Item 4. Mine Safety Disclosures|
|Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities|
|Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations|
|Item 7A. Quantitative and Qualitative Disclosures About Market Risk|
|Note 1 - Summary of Significant Accounting Policies|
|Note 2 - Acquisitions|
|Note 3 - Investments|
|Note 4 - Inventories|
|Note 5 - Net Property, Plant and Equipment|
|Note 6 - Leases|
|Note 7 - Equity Method Investments|
|Note 8 - Debt|
|Note 9 - Commitments and Contingencies|
|Note 10 - Employee Benefits|
|Note 11 - Derivatives and Fair Value of Financial Instruments|
|Note 12 - Stockholders' Equity and Accumulated Other Comprehensive Loss|
|Note 13 - Revenue Recognition|
|Note 14 - Income Taxes|
|Note 15 - Segment Information|
|Note 16 - Quarterly Financial Data (Unaudited) Adjusted|
|Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure|
|Item 9A. Controls and Procedures|
|Item 9B. Other Information|
|Item 10. Directors, Executive Officers and Corporate Governance|
|Item 15. Exhibit and Financial Statement Schedules|
|Item 16. Form 10 - K Summary|
|Balance Sheet||Income Statement||Cash Flow|
Rev, G Profit, Net Income
Ops, Inv, Fin
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
For the fiscal year ended
For the transition period from _______________ to ____________________
Commission file number:
(Exact Name of Registrant as Specified in Its Charter)
(State or Other Jurisdiction of
(I.R.S. Employer Identification No.)
Incorporation or Organization)
(Address of Principal Executive Offices)
Registrant’s telephone number, including area code (
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Name of each exchange on which registered
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ◻
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ◻
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Accelerated filer ◻
Non-accelerated filer ◻
Smaller reporting company
Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ◻
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report.
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes
The aggregate market value of the 251,270 shares of Seaboard common stock held by nonaffiliates was approximately $
DOCUMENTS INCORPORATED BY REFERENCE
Part III incorporates information by reference to the registrant’s definitive proxy statement, to be filed with the Securities and Exchange Commission within 120 days after the close of the fiscal year ended December 31, 2020.
YEAR ENDED DECEMBER 31, 2020
TABLE OF CONTENTS
This report, including information included or incorporated by reference in this report, contains certain “forward-looking statements” within the meaning of the U.S. Private Securities Litigation Reform Act of 1995, including with respect to the financial condition, results of operations, plans, objectives, future performance and business of Seaboard Corporation and its subsidiaries (“Seaboard”). Forward-looking statements generally may be identified as statements that are not historical in nature and statements preceded by, followed by or that include the words “believes,” “expects,” “may,” “will,” “should,” “could,” “anticipates,” “estimates,” “intends” or similar expressions.
In more specific terms, forward-looking statements include, without limitation:
|●||statements concerning the projection of revenues, income or loss, capital expenditures, capital structure or other financial items;|
|●||statements regarding the plans and objectives of management for future operations;|
|●||statements of future economic performance;|
|●||statements regarding the intent, belief or current expectations of Seaboard and its management with respect to:|
|(i)||Seaboard’s ability to obtain adequate financing and liquidity;|
|(ii)||the price of feed stocks and other materials used by Seaboard;|
|(iii)||the sale price or market conditions for pork, agricultural commodities, sugar, alcohol, turkey and other products and services;|
|(iv)||the recorded tax effects under certain circumstances and changes in tax laws;|
|(v)||the volume of business and working capital requirements associated with the competitive trading environment for the Commodity Trading and Milling (“CT&M”) segment;|
|(vi)||the charter hire rates and fuel prices for vessels;|
|(vii)||the fuel costs and related spot market prices for electricity in the Dominican Republic;|
|(viii)||the effect of the fluctuation in foreign currency exchange rates;|
|(ix)||the profitability or sales volume of any of Seaboard’s segments;|
|(x)||the anticipated costs and completion timetables for Seaboard’s scheduled capital improvements, acquisitions and dispositions;|
|(xi)||the productive capacity of facilities that are planned or under construction, and the timing of the commencement of operations at such facilities;|
|(xii)||the impact of pandemics or other public health emergencies, such as the COVID-19 pandemic;|
|(xiii)||potential future impact on Seaboard’s business of new legislation, rules or policies;|
|(xiv)||adverse results in pending litigation matters; or|
|(xv)||other trends affecting Seaboard’s financial condition or results of operations, and statements of the assumptions underlying or relating to any of the foregoing statements.|
This list of forward-looking statements is not exclusive. Forward-looking statements are based only on Seaboard’s current beliefs, expectations and assumptions regarding its future financial condition, results of operations, plans, objectives, performance and business. Seaboard undertakes no obligation to publicly update or revise any forward-looking statement, whether as a result of new information, future events, changes in assumptions or otherwise, except as required by law. Forward-looking statements are not guarantees of future performance or results. They involve risks, uncertainties and assumptions. Actual results may differ materially from those contemplated by the forward-looking statements due to a variety of factors. The information contained in this Form 10-K and in other filings Seaboard makes with the Securities and Exchange Commission (the “SEC”), including without limitation, the information under the items “Risk Factors” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Form 10-K, identifies important factors which could cause such differences.
Item 1. Business
General Development of Business
Seaboard Corporation and its subsidiaries (collectively, “Seaboard”) together comprise a diverse group of integrated companies with a broad global presence. Seaboard is primarily engaged in hog production and pork processing in the United States (“U.S.”); commodity trading and grain processing in Africa and South America; cargo shipping services in the U.S., Caribbean and Central and South America; sugar and alcohol production in Argentina; and electric power generation in the Dominican Republic. Seaboard also has an equity method investment in Butterball, LLC (“Butterball”), a producer and processor of turkey products.
During 2020, Seaboard had unexpected leadership changes. In July 2020, Seaboard’s President, Chief Executive Officer (“CEO”) and Chairman of the Board of Directors, Steven J. Bresky, passed away. The presiding Executive Vice President, Chief Financial Officer (“CFO”), Robert L. Steer, was appointed President, and CEO and Ellen S. Bresky, was appointed a director and Chairwoman of the Board of Directors, in each case, to fill the vacant positions previously held by Mr. Bresky. Mr. Steer continued to serve as CFO until December 2020, at which time David H. Rankin was appointed as Executive Vice President, CFO. Approximately 77% of the outstanding common stock of Seaboard is collectively owned by Seaboard Flour LLC and SFC Preferred, LLC. Ms. Bresky and other members of the Bresky family, including trusts created for their benefit, own the equity interests of Seaboard Flour LLC and SFC Preferred, LLC, which are Delaware limited liability companies.
All of Seaboard’s segments, which provide food, transportation and power, are considered “essential businesses” as defined by the respective governments and have continued to operate during the COVID-19 pandemic. Seaboard’s operations have been directly and indirectly impacted by the COVID-19 pandemic primarily by governmental actions taken to stop or slow the spread of COVID-19 and changes in customer behavior, and there still remains uncertainty about the expected duration and severity of the impact that the COVID-19 pandemic will have on Seaboard’s operations and the global economy. Seaboard continues to promote the safety and security of all of its employees by providing masks and sanitizers, expanding cleaning, making improvements to air exchangers, promoting social distancing, and limiting travel and visitors, among many other precautions.
Description of Business
Principal Products and Services and Any Dependency
Pork Segment – Seaboard, through its subsidiary Seaboard Foods LLC, is a vertically integrated pork producer that primarily produces and sells fresh and frozen pork products to further processors, foodservice operators, distributors and grocery stores. This segment sells to U.S. customers and exports to Japan, Mexico, China and numerous other foreign markets. Seaboard raises approximately 85% of the hogs processed at its processing plant in Guymon, Oklahoma, with the remaining hog requirements purchased primarily under contracts from independent producers. Seaboard’s hog production facilities consist of genetic and commercial breeding, farrowing, nursery and finishing buildings. In November of 2020, Seaboard acquired a business, that was previously a supplier of hogs. See Note 2 to the consolidated financial statements for further discussion of this acquisition.
The Pork segment also produces biodiesel at facilities in Oklahoma and Missouri. Biodiesel is produced from pork fat supplied by the Oklahoma pork processing plant and from other animal fats and vegetable oils purchased from third parties. The biodiesel is sold to fuel blenders for distribution. In 2019, the Pork segment purchased and began modifying an idle ethanol plant in Hugoton, Kansas, to produce renewable diesel with operations currently expected to begin in 2022.
Seaboard has a 50% noncontrolling interest in Seaboard Triumph Foods, LLC (“STF”), which operates a pork processing plant located in Sioux City, Iowa. STF began single-shift operations in September 2017 and a second shift commenced in October 2018. STF’s plant is designed to process approximately six million market hogs annually when operating at full capacity. Seaboard has agreements with STF and Triumph Foods, LLC (“Triumph”), an independent pork processor, to market substantially all pork products produced at STF’s and Triumph’s pork processing plants. Seaboard and Triumph supply a portion of the hogs processed at the STF plant. Seaboard’s revenues for its pork products are primarily based on a margin sharing arrangement that considers the average sales price, standard costs and the mix of products sold from the Seaboard and Triumph pork processing plants. The Pork segment also has a 50% noncontrolling interest in Daily’s Premium Meats, LLC, which produces and markets raw and pre-cooked bacon using pork bellies sourced from Seaboard, Triumph and STF.
CT&M Segment – Seaboard’s CT&M segment, which is managed under the name of Seaboard Overseas and Trading Group, is an integrated agricultural commodity trading, processing and logistics company. Overall, the CT&M segment has facilities in 29 countries, primarily in Africa and South America. This segment sources, transports and markets
approximately 14 million metric tons per year of wheat, corn, soybeans, soybean meal and other commodities. Also, Seaboard and its affiliates produce approximately six million metric tons of wheat flour, maize meal, manufactured feed and oilseed crush commodities per year in addition to other related grain-based products. This segment owns three vessels, but the majority of the trading business is transacted with chartered ships.
Marine Segment – Seaboard, through its subsidiary, Seaboard Marine Ltd., and various foreign affiliated companies and third-party agents, provides cargo shipping services in the U.S. and 26 countries in the Caribbean and Central and South America. The Marine segment’s primary operations are at PortMiami and include a marine terminal and an off-port warehouse for cargo consolidation and temporary storage. Seaboard also makes scheduled vessel calls in Brooklyn, Houston, New Orleans, Philadelphia, Savannah and various ports in the Caribbean and Central and South America. The Marine segment uses a network of offices and agents to sell freight services. Seaboard’s capabilities allow transport by truck or rail of import and export cargo to and from various U.S. and foreign ports. This segment’s fleet consists of approximately 21 chartered and three owned vessels, as well as dry, refrigerated and specialized containers.
Sugar and Alcohol Segment – Seaboard, through its subsidiary, Seaboard Energías Renovables y Alimentos S.R.L., operates a vertically integrated sugar and alcohol production facility in Argentina. Seaboard supplies most of the raw material processed in this facility with sugarcane grown on land that it owns. The sugar is primarily marketed locally, with some exports to other countries. The alcohol is primarily marketed to industrial users or sold as dehydrated alcohol to certain oil companies under the Argentine governmental bioethanol program, which requires alcohol to be blended with gasoline. The Sugar and Alcohol segment had two bioethanol customers that collectively represented approximately 35%-48% of its sales in each of the last three years. This segment also owns a 51-megawatt cogeneration power plant, which is fueled by the burning of sugarcane by-products, natural gas and other biomass when available.
Power Segment – Seaboard, through its subsidiary, Transcontinental Capital Corp. (Bermuda) Ltd., is an independent power producer generating electricity for the Dominican Republic power grid. Seaboard’s Power segment sells the electricity it generates primarily on the spot market to government-owned distribution companies. It is not directly involved in the transmission or distribution of electricity and is exempt from regulations under the Public Utility Holding Company Act of 1938, as amended. Seaboard’s Power segment owns and operates a power generating barge that contains a system of engines capable of using natural gas or heavy fuel oil to produce up to 108 megawatts of electricity. Seaboard’s Power segment is currently constructing a new floating power barge with capacity to generate approximately 146 megawatts of electricity using gaseous fuels, including natural gas. Operations are currently expected to begin by the end of 2021. Seaboard is exploring strategic alternatives for the existing barge, including selling, relocating or operating in conjunction with the new barge at the current site.
Turkey Segment – Seaboard has a 50% noncontrolling interest in Butterball, LLC (“Butterball”), a vertically integrated producer and processor of conventional, antibiotic-free and organic turkey products. Butterball is a national supplier to retail stores, foodservice outlets and industrial entities, and to a lesser extent, exports products to Mexico and other foreign markets. The Turkey segment had two retail customers that collectively represented approximately 27% of its sales in each of the last three years.
Other Businesses – Seaboard, through its subsidiary, Mount Dora Farms Inc., processes jalapeño peppers at its plant in Honduras, which are primarily shipped to and sold in the U.S.
See Note 13 to the consolidated financial statements for total revenue contributed by any class of similar products or services.
Competition in Seaboard’s Pork segment comes from a variety of regional, national and international producers and processors and is based primarily on product quality, customer service and price. According to the trade publications Successful Farming and Informa Economics, Seaboard was ranked number three in hog production (based on sows in production) and number four in pork processing in the U.S. in 2020 (based on daily processing capacity, including Triumph’s and STF’s capacity).
Seaboard’s CT&M segment faces competition from numerous traders around the world. Most of the grain processing and related businesses face competition from either imported products or other local producers in the same industries.
Seaboard’s Marine segment faces competition based on price, reliable sailing frequencies and customer service.
Seaboard’s Sugar and Alcohol segment owns one of the largest sugar mills in Argentina and faces significant competition for sugar sales in the local Argentine market. Sugar and alcohol prices in Argentina can fluctuate compared to world markets due to Argentine government price controls and protection policies.
Seaboard’s Power segment sells the power it generates to the spot market or to contract customers at prices based on market conditions and cost-based rates. The Dominican government sets a cap on the electricity spot market prices and establishes the dispatch order of who sells into the power grid. To sell to the power grid, Seaboard competes with producers utilizing various types of fuel and generation technologies, including hydro, solar, wind, natural gas, heavy fuel oil or coal. Producers who have lower variable costs to operate may receive dispatch preference from the Dominican government. The new power barge is expected to be more efficient than Seaboard’s dual-fueled barge due to the latest technologies and use of gas turbines instead of engines.
Competition for the Turkey segment comes from a variety of regional and national producers and processors and is based primarily on product quality, customer service and price.
Resources Material to Business
The Power segment and Turkey segment utilize material amounts of raw materials that are dependent on purchases from one supplier or a small group of dominant suppliers. The Power segment has one primary supplier of natural gas, but the existing barge can run on other types of fuel. The Turkey segment purchases a significant portion of its feed and grain used in the manufacturing of feed for its turkeys in North Carolina from Seaboard’s 50% partner in Butterball.
Also, Seaboard believes there is significant recognition of the trademarks identified below in the various industries Seaboard serves and by many of its customers. The Pork segment uses registered trademarks including, but not limited to, Seaboard Foods®, Seaboard Farms®, Seaboard EnergyTM, Prairie Fresh®, Prairie Fresh USA Prime®, Our Farms, Our Commitment®, St. Joe Pork®, and Cook-in Bag®. The CT&M segment uses registered trademarks including, but not limited to, Mothers Pride® and Zambia’s Pride® in Zambia, Thunderbolt Flour® and Maid Marian® in Guyana, GMA® and Top Pain® in Ivory Coast, and GMD® and Jarga® in Senegal. The Marine segment uses the registered trademarks of Seaboard Marine® and Seaboard Solutions®. The Sugar and Alcohol segment markets sugar under the Chango® brand. The Turkey segment uses registered trademarks including, but not limited to, Butterball®, Carolina Turkey® and Farm to Family Butterball®. While Seaboard considers all of its intellectual and proprietary rights important, Seaboard believes its business as a whole is not materially dependent on any particular patent, trademark, license or other intellectual property right.
The Turkey business is seasonal for whole birds and related products with the holiday season driving the majority of those sales. Seaboard’s other segments are not seasonally dependent to any material extent.
Seaboard’s Pork segment and Turkey segment are subject to numerous federal, state and local laws and regulations relating to the environment that require the expenditure of funds in the ordinary course of business. Seaboard’s Pork and Turkey segments do not anticipate making expenditures for these purposes that, in the aggregate, would have a material effect on Seaboard’s financial condition or results of operations. Also, Seaboard’s Marine and CT&M segments’ vessels are subject to environment regulations related to global sulfur emissions requirements.
As a company with global operations, Seaboard is subject to complex foreign and U.S. laws and regulations, including trade regulations, tariffs, import and export regulations and anti-bribery and corruption laws. Seaboard has policies and procedures in place to promote compliance with these laws and regulations. To date, Seaboard’s compliance actions and costs relating to these laws, rules and regulations have not resulted in a material effect on Seaboard’s financial condition or results of operations. Governmental regulations are subject to change, and accordingly, Seaboard is unable to assess the possible effect of compliance with future requirements or whether compliance with such regulations will materially impact Seaboard’s business in the future.
Human Capital Resources
Employees are critical to the operation of all Seaboard’s essential businesses and Seaboard is committed to the safety and wellbeing of all employees. Seaboard’s human capital management strategies include a focus on the following areas: (i) physical wellness – Seaboard offers competitive healthcare benefits, including wellness and employee assistance programs; (ii) financial wellness – Seaboard offers competitive compensation and bonus packages, as well as life and
disability insurance benefits; (iii) work/life wellness – Seaboard provides paid time off and paid holidays, as well as professional development opportunities and support, including tuition reimbursement programs; (iv) community wellness – Seaboard believes in supporting the communities in which it operates and provides matching gift programs, volunteer time off and sponsors charitable activities and events; and (v) additional benefits – Seaboard provides other benefits designed to engage and retain employees, including hosting employee events designed to maintain morale and foster teamwork and providing an employee meat purchase program at wholesale prices. Seaboard also recognizes that diversity is the key to its successful operations and seeks to design human capital management strategies to meet the diverse needs of its employees.
As of December 31, 2020, Seaboard had approximately 13,100 employees, of whom approximately 6,600 were in the U.S. Of Seaboard’s total U.S. employees, approximately 83% were Pork segment employees. Substantially all of Seaboard’s Pork segment’s hourly employees at its processing plant are covered by a collective bargaining agreement that expires in 2024. The Pork segment has had challenges recruiting and retaining employees due to the remote locations, restrictive domestic policies on immigration and unique operating environments, among other factors. Currently between 30% and 60% of the Pork segment’s workforce is dependent upon employment visas in different production areas.
Internationally, Seaboard operates facilities globally, including in developing countries, where at times, inherent challenges associated with safety and political stability may exist, primarily in the CT&M segment. The CT&M segment is dependent on identifying and retaining qualified expatriate personnel at many of its locations. Recruiting and developing talent in these locations remains a priority for this segment.
Seaboard’s annual reports on Form 10-K, quarterly reports on 10-Q, current reports on 8-K and all amendments to those reports are available free of charge on its website at www.seaboardcorp.com as soon as reasonably practicable after such material is electronically filed with, or furnished to, the Securities and Exchange Commission (“SEC”). In addition, copies of Seaboard’s SEC filings will be made available, free of charge, on written request. Seaboard does not intend for information contained in its website to be part of this Form 10-K.
Information About Seaboard’s Executive Officers
The following table lists the executive officers of Seaboard. Generally, executive officers are elected at the annual meeting of the Board of Directors following the Annual Meeting of Stockholders and hold office until the next such annual meeting or until their respective successors are duly chosen and qualified. There are no arrangements or understandings pursuant to which any executive officer was elected.
Positions and Offices
Robert L. Steer (61)
President and Chief Executive Officer
David M. Becker (59)
Executive Vice President, General Counsel and Secretary
David H. Rankin (49)
Executive Vice President, Chief Financial Officer
James L. Gutsch (67)
Senior Vice President, Engineering
Michael D. Trollinger (52)
Senior Vice President, Corporate Controller and Chief Accounting Officer
Ty A. Tywater (51)
Senior Vice President, Audit Services
Jacob A. Bresky (33)
Vice President, International
Benjamin R. Hodes (35)
Vice President, Finance
Adriana N. Hoskins (51)
Vice President and Treasurer
Elizabeth A. Loudon (56)
Vice President, Tax
Brad Warner (53)
Vice President, Human Resources
James T. Hubler (42)
Associate General Counsel and Assistant Secretary
Zachery J. Holden (53)
Emma A. Vacas Jacques (43)
Peter B. Brown (58)
President, Seaboard Foods LLC
David M. Dannov (59)
President, Seaboard Overseas and Trading Group
Edward A. Gonzalez (55)
President, Seaboard Marine Ltd.
Mr. Steer has served as President and Chief Executive Officer since July 2020. Prior to that, he served as Executive Vice President, Chief Financial Officer from April 2011 to December 2020.
Mr. Becker has served as Executive Vice President, General Counsel and Secretary since December 2020 and previously as Senior Vice President, General Counsel and Secretary since April 2011.
Mr. Rankin has served as Executive Vice President, Chief Financial Officer since December 2020. Prior to that, he served as Senior Vice President, Taxation and Business Development since April 2015.
Mr. Gutsch has served as Senior Vice President, Engineering since April 2011.
Mr. Trollinger has served as Senior Vice President, Corporate Controller and Chief Accounting Officer since December 2020 and previously as Vice President, Corporate Controller and Chief Accounting Officer since March 2015.
Mr. Tywater has served as Senior Vice President, Audit Services since December 2020 and previously as Vice President, Audit Services since November 2008.
Mr. Bresky has served as Vice President, International since July 2020. Prior to that, he served in various roles with the Seaboard Overseas and Trading Group for more than seven years.
Mr. Hodes has served as Vice President, Finance since December 2020 and previously as Finance Director since December 2019. Prior to that, he served as Finance Manager since 2015.
Ms. Hoskins has served as Vice President and Treasurer since December 2020 and previously as Assistant Treasurer since 2006.
Ms. Loudon has served as Vice President, Tax since December 2020 and previously as Tax Director since January 2017. Prior to that, she served as Tax Manager since 2006.
Mr. Warner has served as Vice President, Human Resources since December 2020 and previously as Director of Human Resources since April 2019. Prior to that, he served as Director of Human Resources with the Seaboard Overseas and Trading Group for more than 12 years.
Mr. Hubler has served as Associate General Counsel since October 2018 and Assistant Secretary since April 2019. Prior to joining Seaboard Corporation, Mr. Hubler was Assistant Vice President, Legal at Dairy Farmers of America, Inc. for over two years and prior to that, Director and Senior Corporate Counsel at VeriSign, Inc. from July 2008 to March 2016.
Mr. Holden has served as Assistant Secretary since June 2010, and also serves as Vice President and General Counsel with the Seaboard Overseas and Trading Group.
Ms. Vacas Jacques has served as Assistant Treasurer since January 2021 and previously as Treasury Director since July 2014.
Mr. Brown has served as President of Seaboard Foods LLC since January 2021. Prior to joining Seaboard Foods LLC, Mr. Brown was the Chief Operating Officer of Butterball, LLC for almost two years and President and Chief Operating Officer at High Liner Foods from 2014 to 2018.
Mr. Dannov has served as President of Seaboard Overseas and Trading Group since August 2006.
Mr. Gonzalez has served as President of Seaboard Marine Ltd. since January 2005.
Item 1A. Risk Factors
A description of factors that could materially affect Seaboard’s business, results of operations or financial condition is provided below.
|(1)||Seaboard’s Operations Are Subject to the General Risks of the Food Industry. The food products manufacturing industry is subject to the risks posed by:|
|●||food contamination, including contamination caused by disease-producing organisms or pathogens, such as Listeria monocytogenes, Salmonella, pathogenic E coli and aflatoxin;|
|●||evolving consumer preferences and nutritional and health-related concerns;|
|●||international, federal, state and local food processing regulations;|
|●||consumer product liability claims;|
|●||product tampering; and|
|●||public perception of food production practices, including handling of production and live animals.|
Pathogens which may cause food contamination are found generally in livestock and in the environment and therefore may be present in Seaboard’s products. These pathogens also can be introduced to its products as a result of improper
handling by customers or consumers. Seaboard does not have control over handling procedures once products have been shipped for distribution. If one or more of these risks were to materialize, Seaboard’s revenues could decrease, costs of doing business could increase, and Seaboard’s operating results could be adversely affected.
|(2)||Ocean Transportation Has Inherent Risks. Seaboard’s owned and chartered vessels along with related cargoes are at risk of being damaged, lost or incurring excess cost because of events such as:|
|●||grounding, fire, explosions and collisions;|
|●||war, piracy and terrorism; and|
Any of these hazards could result in death or injury to persons, loss of property, environmental damages, delays or rerouting. If one of Seaboard’s vessels were involved in an incident, the resulting negative public perception could have a material adverse effect on Seaboard’s business, financial condition and results of operations. Also, many aspects of the shipping industry are subject to extensive governmental regulations. Compliance with applicable laws, regulations and standards may require installation of costly equipment or operational changes, while the failure to comply may result in administrative and civil penalties, criminal sanctions, the suspension or termination of Seaboard’s operations or detention of its vessels.
|(3)||Fluctuations in Fuel Costs Could Adversely Affect Operating Margins. Fuel expenses are a large expense for the Marine segment and also impacts the CT&M segment’s results. Fuel prices can vary greatly from year to year. While such fluctuations may be offset through fuel surcharges or other mechanisms, such mechanisms do not act with precision in terms of timing and amount and may not adjust revenues enough to offset the increase in costs.|
Macro Operation Risks
|(1)||International Operations Subject Seaboard to Risks That Could Have a Significant Impact on Seaboard’s Business. Seaboard is a diverse agribusiness and transportation company with global operations in several industries. Most of the sales and costs of Seaboard’s segments are significantly influenced by worldwide fluctuations in commodity prices or changes in foreign political and economic conditions. Accordingly, revenues, operating income and cash flows could fluctuate significantly from year to year. In addition, Seaboard’s international activities pose risks not faced by companies that limit themselves to U.S. markets. These risks include:|
|●||changes in foreign currency exchange rates;|
|●||foreign currency exchange controls;|
|●||changes in a specific country’s or region’s political or economic conditions, particularly in emerging markets;|
|●||heightened customer credit and execution risk;|
|●||border restrictions, tariffs, other trade protection measures and import or export licensing requirements;|
|●||closing of borders by foreign countries to the import of products due to animal disease or other perceived health or safety issues;|
|●||changes in tax laws;|
|●||legal and regulatory structures and unexpected changes in legal and regulatory requirements and any lawsuits that may arise;|
|●||negative perception within a foreign country of a U.S. company doing business in that foreign country;|
|●||compliance with laws and regulations for conducting international business such as Foreign Account Tax Compliance Act, Foreign Corrupt Practices Act and Office of Foreign Assets Control regulations;|
|●||expropriation, civil unrest and government instability; and|
|●||inconsistent application or enforcement of local laws, including tax laws.|
|(2)||Deterioration of Economic Conditions Could Negatively Impact Seaboard’s Business. Seaboard’s business may be adversely affected by changes in national or global economic conditions, including inflation, interest rates (including the LIBOR phase out), availability of capital markets, consumer spending rates, energy availability and costs, impacts caused by pandemics and other public health emergencies, including the COVID-19 pandemic, and the effects of governmental initiatives to manage economic conditions. Any such changes could adversely affect the demand for and production of Seaboard’s meat products, grains, shipping services and other products, or the cost and availability of needed raw materials and packaging materials, thereby negatively affecting Seaboard’s financial results. If economic or market conditions in key global markets deteriorate, Seaboard may experience material adverse effects on its business, financial condition and results of operations. For example, Seaboard is monitoring the continued impact of the COVID-19 pandemic, which has already caused significant disruption to global financial markets and supply chains in 2020. The significance of the operational and financial impact to Seaboard in 2021 and after will depend on future|
|developments, which are uncertain and cannot be predicted. The national and global economic conditions, could, among other things:|
|●||impair the financial condition of some of Seaboard’s customers and suppliers, thereby increasing customer bad debts or non-performance by customers and suppliers;|
|●||negatively impact global demand for protein and grain-based products, which could result in a reduction of revenues, operating income and cash flows;|
|●||decrease the value of Seaboard’s investments in equity and debt securities, including pension plan assets, causing losses that would adversely impact Seaboard’s net earnings; and|
|●||impair the financial viability of Seaboard’s insurers.|
Business and Operational Risks
|(1)||Seaboard’s Common Stock Is Thinly Traded and Subject to Daily Price Fluctuations. The common stock of Seaboard is closely held and thinly traded on a daily basis on the NYSE American. Seaboard Flour LLC and SFC Preferred, LLC, which are beneficially owned by the Bresky family, hold approximately 77% of Seaboard’s outstanding common stock. Accordingly, the price of a share of Seaboard common stock could fluctuate more significantly from day-to-day than that of a share of more widely held stock that is actively traded on a daily basis.|
|(2)||Decentralization May Present Certain Risks. Seaboard’s operations are relatively decentralized in comparison with its peers. While Seaboard executive management believes this practice enables it to remain responsive to risks, opportunities and to customers’ needs, it necessarily places significant control and decision-making powers in the hands of local management. This presents various risks, including the risk that executive management may be slower or less able to identify or react to problems affecting a key business than in a more centralized environment. In addition, it means that Seaboard may be slower to detect compliance related problems (e.g., a rogue employee undertaking activities that are prohibited by applicable law or Seaboard’s internal policies) and that “company-wide” business initiatives, such as the integration of disparate information technology systems, are often more challenging and costly to implement, and their risk of failure higher, than they would be in a more centralized environment. Depending on the nature of the problem or initiative in question, such failure could materially adversely affect Seaboard’s business, financial condition or results of operations.|
|(3)||Seaboard Has Investments in Non-Consolidated Affiliates That Are Managed by Third Parties. Seaboard has several equity method investments in which it owns 50% or less, with various third-party business partners owning the remaining equity. Due to the ownership structure of these affiliates, Seaboard does not control all of the decision making processes and could be exposed to various business risks if the business partners’ business decisions do not align with Seaboard’s best interests, which could adversely impact the results for Seaboard’s income (loss) from affiliates.|
|(4)||Seaboard Is Increasingly Dependent on Information Technology Systems to Manage and Support a Variety of Business Processes and Activities. Seaboard may be adversely impacted if it is unable to protect its information technology systems against, or effectively respond to, cyber-attacks or cybersecurity breaches. Seaboard may also be adversely impacted if third parties on whom Seaboard relies are unable to similarly protect their information technology systems. Attempted cyber-attacks and other cyber incidents are occurring more frequently and are being made by groups and individuals with a wide range of motives and expertise. Any significant penetration, invasion, destruction, or interruption of these systems could negatively impact operations and there is a risk of business interruption and reputational damage from the unauthorized disclosure of confidential information and a risk of loss to financial assets related to manipulated electronic communications. This includes additional costs for increased security, system remediation and breach detection. If Seaboard is unable to prevent such breaches or failures or if a third party on whom Seaboard relies is unable to prevent such breaches or failures, Seaboard’s operations could be disrupted or it could negatively impact Seaboard’s financial condition, results of operations and the market price of its common stock.|
|(5)||Seaboard’s Operations are Subject to the General Risks of Litigation. Seaboard is involved on an ongoing basis in litigation arising in the ordinary course of business. Trends in litigation may include class actions involving employees, consumers, competitors, suppliers, shareholders, or injured persons, and claims relating to product liability, contract disputes, antitrust regulations, intellectual property, advertising, labeling, wage and hour laws, employment practices or environmental matters. Neither litigation trends nor the outcomes of litigation can be predicted with certainty and adverse litigation trends and outcomes could negatively affect Seaboard’s financial results.|
Specific Pork Segment Risks
|(1)||Fluctuations in Commodity Pork Prices Could Adversely Affect the Results of Operations. Sales prices for this segment’s products are directly affected by both domestic and worldwide supply and demand for pork products and other proteins, all of which are determined by constantly changing market forces of supply and demand as well as other factors over which Seaboard has little to no control. Commodity pork prices demonstrate a cyclical nature over periods|
|of years, reflecting changes in the supply of fresh pork and competing proteins on the market, especially beef and chicken. This segment’s results of operations could be adversely affected by fluctuations in pork commodity prices.|
|(2)||Increases in Costs of This Segment’s Feed Components and Third-Party Hog Purchases Could Adversely Affect Costs and Operating Margins. Feed costs are the most significant single component of the cost of raising hogs and could be materially affected by commodity price fluctuations for corn and soybean meal. The results of this segment could be negatively affected by increased costs of its feed components. The increase in exports and continued operation of ethanol plants has elevated this risk as it has increased the demand for feed ingredients. Approximately 15% of this segment’s slaughtered hogs are purchased from third parties, and commodity price fluctuations for hogs could have an impact on this segment’s total costs. The cost and supply of feed components and the third-party hogs that this segment purchases are determined by constantly changing market forces of supply and demand, which are driven by matters over which Seaboard has no control, including weather, current and projected worldwide grain stocks and prices, grain export prices, subsidies and tariffs, and governmental agricultural policies. This segment attempts to manage certain of these risks through the use of commodity derivatives; however, this may also limit its ability to participate in gains from favorable commodity fluctuations. Unless wholesale pork prices correspondingly increase, increases in the prices of this segment’s feed components or in the cost of third-party hogs purchased would adversely affect Seaboard’s operating margins.|
|(3)||Seaboard May Be Unable to Obtain and Retain Appropriate Personnel. The nature of the work and remote locations of the pork processing plant and live hog operations, along with a more restrictive national policy on immigration, have affected and could continue to negatively affect the availability and cost of labor. This segment is dependent on having a sufficient number of properly trained operations personnel. Attracting and retaining qualified personnel is important to this segment’s success. The inability to acquire and retain the services of such personnel could have a material adverse effect on Seaboard’s operations.|
|(4)||The Loss of This Segment’s Oklahoma Pork Processing Plant or the STF Plant Could Adversely Affect the Business. This segment is largely dependent on the continued operation of its Oklahoma pork processing plant and the STF plant. The loss of or damage to either of these plants for any reason, including fire, tornado or earthquake, or the occurrence of adverse governmental action could adversely affect the business of this segment. Seaboard provides approximately one-third of STF’s hogs for processing and also markets substantially all pork products produced. The closure, even temporarily, loss of, or damage to these plants for any reason, including pandemic, fire, tornado, earthquake, or the occurrence of adverse governmental action could adversely affect the business of this segment and have a material adverse effect on Seaboard’s liquidity and financial results.|
|(5)||This Segment is Subject to Complex Laws and Regulations That May Adversely Affect the Revenues, Costs, Manner or Feasibility of Doing Business. Federal, state and local laws, and domestic and international regulations governing worker health and safety, environmental protection, food safety and animal health and welfare significantly affect this segment’s operations. Some requirements applicable to this segment may also be enforced by citizen groups. For example, operations and properties are subject to extensive and increasingly stringent laws and regulations pertaining to, among other things, odors, the discharge of materials into the environment and the handling and disposition of wastes (including solid and hazardous wastes) or otherwise relating to protection of the environment. In another example, the State of California enacted Proposition 12, the Farm Animal Confinement Initiative (“Proposition 12”), which will prohibit, after December 31, 2021, the sale within the State of California of uncooked pork produced from breeding sows or its offspring which have been confined in less than 24 square feet of usable floor space. The constitutionality of Proposition 12 is being challenged in two separate lawsuits pending in California. This segment is assessing Proposition 12 and the related costs of compliance, such as the additional capital expenditures that would be needed for construction of barns and pens provided for the requisite expanded animal spacing, in the event the constitutionality of Proposition 12 is upheld. If this segment is unable to comply with Proposition 12, Seaboard would not be able to sell uncooked pork products in California, which accounted for approximately 9% of its direct sales for the year ended December 31, 2020, in addition to indirect sales through further processor customers. If other pork processors similarly are unable to comply with Proposition 12 and cannot sell uncooked pork products in California, this could result in a significant oversupply of uncooked pork products being sold in locations other than California, which could result in a significant decline in the sales prices of such products. Failure to comply with these laws and regulations and any future changes to them could result in significant consequences to Seaboard, including civil and criminal penalties, liability for damages, negative publicity and the inability to do business in certain locales.|
|(6)||Health Risk to Livestock Could Adversely Affect Production, the Supply of Raw Materials and the Business. Seaboard is subject to risks relating to its ability to maintain animal health and control diseases. The general health of the hogs and the reproductive performance of the sows could have an adverse impact on production and production costs, the supply of raw material to this segment’s pork processing operations and consumer confidence. If this segment’s hogs are affected by disease, Seaboard could be required to destroy infected livestock, which could adversely affect this segment’s production or ability to sell or export its products. Moreover, the herd health of third-party suppliers could|
|adversely affect the supply and cost of hogs available for purchase. Adverse publicity concerning any disease or health concern could also cause customers to lose confidence in the safety and quality of this segment’s food products.|
|(7)||This Segment is Subject to Disruption of Operations at Suppliers. Disruption of operations at suppliers, including co-packers, may impact this segment’s product or raw material supply, which could have an adverse effect on Seaboard’s financial results. Additionally, actions taken to mitigate the impact of any potential disruption, including increasing inventory in anticipation of a potential production or supply interruption, may adversely affect Seaboard’s financial results.|
|(8)||International Trade Barriers Could Adversely Affect This Segment’s Operations. This segment realizes revenues from international markets, particularly Japan, Mexico and China. International sales are subject to risks related to general economic conditions, imposition of tariffs, quotas, trade barriers and other restrictions, enforcement of remedies in foreign jurisdictions and compliance with applicable foreign laws, and other economic and political uncertainties. These and other risks have resulted in, and in the future may result in, border closings or other international trade barriers that could have an adverse effect on Seaboard’s earnings.|
|(9)||The Operating Profit of the Biodiesel Production Facilities Could Be Adversely Impacted by Various Factors. The profitability of this segment’s biodiesel plants could be adversely affected by various factors, including the market price of pork fat, other animal fats and vegetable oils, all of which are utilized to produce biodiesel, and the market price for biodiesel, which is influenced by world oil prices and U.S. government mandates and incentives to use biofuels. Unfavorable changes in these prices over extended periods of time or adverse changes in U.S. government mandates and incentives to use biofuels could adversely affect this segment’s results of operations and could result in the potential impairment of the recorded value of the property, plant and equipment related to these facilities. Also, the federal blender’s credits are not permanent and may not be renewed beyond 2022.|
|(10)||Difficulties Could Be Experienced in the Conversion of the New Renewable Diesel Production Facility. In February 2019, the Pork segment purchased an idle ethanol plant in Kansas. Projected costs to convert the existing plant’s infrastructure to support the new renewable diesel production facility and the costs to construct the new portions of the renewable diesel plant are variable and could be higher than initially projected by the time the plant is operational. Also, significant construction delays could delay the expected timing of operations.|
Specific Commodity Trading and Milling Segment Risks
|(1)||This Segment Is Subject to Risks Associated with Foreign Operations. This segment principally operates in Africa, South America and the Caribbean and, in most cases, in what are generally regarded to be lesser-developed countries. Many of these foreign operations are subject to risks of doing business in lesser-developed countries, which are subject to potential civil unrest and government instability, increasing the exposure to potential expropriation, confiscation, war, insurrection, civil strife and revolution, corruption, currency inconvertibility and devaluation, and currency exchange controls. In addition, border restrictions and foreign government policies and regulations could restrict the purchase of various agricultural commodities and commodity products, reducing or limiting this segment’s ability to access materials or ports, or to limit this segment’s sales prices for products sold in local markets.|
|(2)||Fluctuations in Commodity Prices Could Adversely Affect the Business of This Segment. This segment’s sales are significantly affected by fluctuating worldwide prices for various commodities, such as wheat, corn, soybeans, soybean meal and, to a lesser degree, various other agricultural commodity products. These prices are determined by constantly changing market forces of supply and demand, as well as other factors over which Seaboard has little or no control. European flour exports, donated food aid, flour dumping practices and worldwide and local crop production could contribute to these fluctuating market conditions and could have a significant impact on this segment’s sales, value of commodities held in inventory and operating income.|
|(3)||This Segment Uses a Material Amount of Derivative Products to Manage Certain Market Risks. The commodity trading portion of this segment enters into various commodity derivative and foreign exchange derivative transactions to create what management believes is an economic hedge for commodity trades it executes or intends to execute with its customers. Failure to execute or improper execution of a derivative position, or a firmly committed sale or purchase contract, or a speculative transaction that closes without the desired result or exposure to counter party risk could have an adverse impact on the results of operations and liquidity.|
|(4)||This Segment Is Subject to Higher Than Normal Risks for Attracting and Retaining Key Personnel. In the commodity trading environment, loss of a key employee such as a commodity trader could have a negative impact resulting from the loss of revenues as personal customer relationships can be vital to obtaining and retaining business with various foreign customers. In the milling portion of this segment, employing and retaining qualified expatriate personnel are key elements to success given the difficult living conditions, the unique operating environments and the reliance on a relatively small number of executives to manage each individual location.|
|(5)||This Segment Faces Increasing Competition. This segment is experiencing increasing competition in certain foreign markets by well-capitalized originators, traders of commodities making sales directly to end-use customers and industrial-asset owners that compete in the same markets as this segment. If various competing raw-material originators refuse to sell commodities to Seaboard for sale in these foreign markets, it could be more challenging for this segment to purchase commodities for sale to its customers at competitive prices. Also, competition exists in the milling business with imported products or other local producers. This segment’s sales volume and sale prices for commodities to customers, as well as results of operations, could be adversely impacted by such increased competition.|
Specific Marine Segment Risks
|(1)||The Demand for This Segment’s Services Are Affected by International Trade and Fluctuating Freight Rates. This segment provides cargo shipping services in the U.S. and in many different countries in the Caribbean and Central and South America. In addition to the risks of overseas operations, fluctuations in economic conditions and unstable or hostile local political situations in the countries in which this segment operates could affect trade volumes and cargo freight rates, as well as adversely affect this segment’s results of operations.|
|(2)||Chartered Ships Are Subject to Fluctuating Rates. Time-charter expenses are one of this segment’s largest expenses. These costs can vary greatly due to a number of factors including the worldwide supply and demand for shipping. It is not possible to determine in advance whether a long-term charter contract will be favorable to this segment’s business. Accordingly, entering into either long-term charter hire contracts during periods of decreasing charter hire costs or short-term charter hire contracts during periods of increasing charter hire costs could have an adverse effect on this segment’s results of operations. In an effort to improve cargo services on higher frequency routes and use more capacity, this segment purchases space, also known as slots, on certain third-party operated vessels. It is expected that this segment will continue purchasing slots in the future, but these ship providers may not be reliable and cause shipment delays or other challenges.|
|(3)||Hurricanes May Disrupt Operations. This segment’s port operations can be subject to disruption due to hurricanes, which could have an adverse effect on this segment’s results of operations.|
|(4)||This Segment Is Subject to Complex Laws and Regulations That May Adversely Affect the Revenues, Costs, Manner or Feasibility of Doing Business. Regulations governing worker health and safety, environmental protection, port and terminal security, and the operation of vessels, including fuel regulations, significantly affect this segment’s operations, including rate discussions and other related arrangements. Many aspects of the shipping industry, including rate agreements and vessel cost sharing agreements, are subject to extensive governmental regulation by the Federal Maritime Commission, the U.S. Coast Guard, and U.S. Customs and Border Protection, as well as regulation by private industry organizations. Compliance with applicable laws, regulations and standards may require installation of costly equipment or operational changes, while the failure to comply may result in administrative and civil penalties, criminal sanctions, the suspension or termination of Seaboard’s operations or detention of its vessels. In addition, future changes in laws, regulations and standards, including allowed freight rate discussions and other related arrangements, may result in additional costs or a reduction in revenues.|
Specific Sugar and Alcohol Segment Risks
|(1)||The Success of This Segment Depends on the Condition of the Argentine Economy, Currency and Political Climate. This segment operates a sugar mill, alcohol production and power generation facility in Argentina. Fluctuations in economic conditions or changes in the Argentine political climate could have an impact on the costs of operations, the sales prices of products, export opportunities and the exchange rate of the Argentine peso to the U.S. dollar. In this regard, local sales prices for retail sugar and bioethanol are affected by government price controls and domestic prices for sugar are affected by import duties imposed by the Argentine government, impacting local volume sold, as well as imported and exported volumes to and from international markets. If import duties are changed, this could have a negative impact on the sales prices of this segment’s products. In addition, the majority of this segment’s sales are within Argentina, and any Argentine government attempts to control inflation through retail price controls on mass consumption products, including sugar, could adversely impact the local sales prices of this segment’s products and the results of operations for this segment. In the second quarter of 2018, Argentina was determined to be a highly inflationary economy. A devaluation of the Argentine peso would have a negative impact on this segment’s financial position and results of operations.|
|(2)||This Segment Is Subject to the Risks That Are Inherent in any Agricultural Business. Seaboard’s results of operations for this segment may be adversely affected by numerous factors over which Seaboard has little or no control and that are inherent in any agricultural business, including reductions in the market prices for this segment’s products, adverse weather and growing conditions, pest and disease problems, and new government regulations regarding agriculture and the marketing of agricultural products. Of these risks, weather particularly could adversely affect the amount and quality of the sugarcane produced by this segment and its competitors located in other regions of Argentina.|
|(3)||The Loss of This Segment’s Sole Processing Facility Would Adversely Affect the Business. This segment is largely dependent on the continued operation of a single sugar mill. The loss of or damage to this mill for any reason, including fire, tornado or earthquake, or the occurrence of adverse governmental action or labor unrest resulting in labor strikes could adversely affect the business of this segment.|
|(4)||Labor Relations Challenges Could Adversely Affect Operations. This segment is dependent on unionized labor at its single sugar mill in Argentina. The political and economic environment in Argentina makes normal labor relations very challenging. Contributing to the situation are the historical policies of Argentina’s government and the failure of the Argentine courts to enforce contractual obligations with unions and basic property rights. Interruptions in production as a result of labor unrest could adversely impact the quantity of sugarcane harvested and the amount of sugar, alcohol and power produced and could interfere with the distribution of products stored at the facility.|
|(5)||The Operating Profit of the Alcohol Production Facility Could Be Adversely Impacted by Government Regulations. The profitability of this segment’s alcohol production facility could be adversely affected by Argentine government regulations regarding production quotas, fuel blends and sales prices in the bioethanol market. In addition, corn alcohol producers in Argentina have increased competition in the bioethanol market. Adverse changes in the Argentine government’s regulations regarding bioethanol production quotas and fuel blends could adversely affect this segment’s results of operations.|
Specific Power Segment Risks
|(1)||The Success of This Segment Depends on the Condition of the Dominican Republic Economy, Currency and Political Climate. Fluctuations in economic conditions or changes in the Dominican Republic political climate could have an impact on the costs of operations, the sales prices of products and the exchange rate of the Dominican peso to the U.S. dollar. In addition to significant currency fluctuations and the other risks of overseas operations, this segment could experience difficulty in obtaining timely collections of trade receivables from the government-owned distribution companies or other companies that must also collect from the government in order to make payments on their accounts. Currently, the Dominican Republic does not allow a free market to enable prices to rise with demand as the supply is restricted due to insufficient cash flow from electric distributors and the subsidy the government provides, which could limit this segment’s profitability. As a result, the government has the ability to arbitrarily decide which power units will be able to operate, which can ultimately determine spot market prices for electricity generated and sold into the power grid and, therefore, could have adverse effects on results of operations.|
|(2)||Supply of Natural Gas Is Limited in the Dominican Republic. Supply of natural gas in the Dominican Republic is limited to one primary supplier. The current barge can run on other types of fuel, but the power barge under construction, will operate only on natural gas. Supply disruptions of natural gas could have a negative impact on this segment’s operating income.|
|(3)||The Demand for This Segment’s Services Are Affected by Competitors. This segment sells the power it generates primarily to government-owned distribution companies and the government has the ability to decide which power units will be able to operate. Typically, dispatch is done on the basis of a merit list with lower cost power plants dispatched before those with higher costs. More efficient power producer competitors, such as from renewable energy, including hydro, solar, and wind, or other nonrenewable energy sources like coal, are less costly to operate, and could cause the demand for this segment’s energy to decline and the spot market rates to decline as well, which will adversely affect this segment’s results of operations.|
|(4)||Difficulties Could Be Experienced in the Construction and Installation of the New Power Generating Barge. The new power generating barge is being constructed in Singapore. Installation and commissioning are anticipated to take several months, with commercial operations currently expected at the end of 2021. Significant construction delays or other difficulties encountered in the start-up of operations could have adverse effects on results of operations.|
Specific Turkey Segment Risks
|(1)||Fluctuations in Commodity Turkey Prices Could Adversely Affect the Results of Operations. Sales prices for turkey products are directly affected by both domestic and worldwide supply and demand for turkey products and other proteins, which are determined by constantly changing market forces of supply and demand as well as other factors over which Butterball has little or no control. Butterball’s results of operations and the value of Seaboard’s investment in Butterball could be adversely affected by fluctuations in turkey commodity prices.|
|(2)||Increases in Costs of Butterball’s Feed Components Could Adversely Affect Costs and Operating Margins. Feed costs are the most significant single component of the cost of raising turkeys and could be materially affected by commodity price fluctuations for corn, soybean meal and other commodity grain inputs. Butterball’s results may be negatively affected by increased costs of the feed components. Butterball attempts to manage some of these risks through the use of commodity derivatives; however, this may also limit its ability to participate in gains from favorable commodity fluctuations. Unless wholesale turkey prices correspondingly increase, increases in the prices of Butterball’s feed components would adversely affect Butterball’s results of operations and the value of Seaboard’s investment in Butterball.|
|(3)||Adverse Operating Results or Inability to Renew Financing Could Result in Need for Additional Investment. Butterball has third-party bank loan facilities, some of which are up for renewal in the next year, that are secured by substantially all of the assets of Butterball. Adverse operating results could cause Butterball to default on such loan facilities or cause lenders to not renew existing financing, which could result in a significant adverse impact on Butterball’s financial position or result in Seaboard needing to increase its investment or provide financing to Butterball.|
|(4)||Decreased Perception of Value in the Butterball Brand and Changes in Consumer Preferences Could Adversely Affect Sales Quantity and Price of Butterball Products. Butterball is a premium brand name, built on a long history of offering a quality product that has been differentiated in the market. The value of the Butterball brand allows for sales of a higher unit price than other turkey products. In order to maintain this advantage, Butterball must continue to support the brand with successful marketing efforts and develop new products. Consumer product preferences continue to evolve as a result of, among other things, shifting consumer demographics; changes in consumer lifestyles; digital shopping patterns; and competitive product and pricing pressures. If Butterball’s products fail to meet consumer preferences, or Butterball fails to introduce new products or product extensions on a timely basis, the brand value could diminish significantly. In addition, negative news reports for any reason related to Butterball or the turkey/poultry industry could negatively impact this brand perception, Butterball’s results of operations and the value of Seaboard’s investment in Butterball.|
|(5)||The Loss of Butterball’s Primary Further Processing Facility Could Adversely Affect Butterball’s Business. Although Butterball has four processing plants and two further processing plants, Butterball is disproportionately dependent on the continued operation of the processing plant in Mt. Olive, North Carolina, that handles a significant volume of the production of further processed turkey products. The closure, even temporarily, loss of or damage to this plant for any reason, including pandemic, fire, hurricane, tornado, or the occurrence of an adverse governmental action could adversely affect the results of operations and financial position for Butterball and the value of Seaboard’s investment in Butterball.|
|(6)||Health Risk to Poultry Could Adversely Affect Production, the Supply of Raw Materials and Butterball’s Business. Butterball is subject to risks relating to its ability to maintain animal health and control diseases, such as avian influenza. The general health of the turkeys and reproductive performance could have an adverse impact on production and production costs, the supply of raw material to Butterball’s processing operations and consumer confidence. If Butterball’s turkeys are affected by disease, Butterball may be required to destroy infected birds, which could adversely affect Butterball’s production or ability to sell or export its products. Adverse publicity concerning any disease or health concern could also cause customers to lose confidence in the safety and quality of Butterball products, resulting in an adverse effect on Butterball’s results of operations and the value of Seaboard’s investment in Butterball.|
|(7)||Butterball May Be Unable to Obtain and Retain Appropriate Personnel. The nature of the work and remote locations of some of Butterball’s processing plants and live turkey operations, along with a more restrictive national policy on immigration, have affected and could continue to negatively affect the availability and cost of labor. Butterball is dependent on having sufficient properly trained operations personnel. Attracting and retaining qualified personnel is important to Butterball’s success. The inability to acquire and retain the services of such personnel could have a material adverse effect on Butterball’s operations and the value of Seaboard’s investment in Butterball.|
|(8)||Butterball is Subject to Disruption of Operations at Co-packers or Other Suppliers. Disruption of operations at co‑packers or other suppliers may impact Butterball’s product or raw material supply, which could have an adverse effect on Butterball’s financial results. Additionally, actions taken to mitigate the impact of any potential disruption, including increasing inventory in anticipation of a potential production or supply interruption, may adversely affect Butterball’s financial results.|
Item 1B. Unresolved Staff Comments
Item 2. Properties
Management believes that Seaboard’s present facilities are adequate and suitable for its current purposes. Seaboard’s principal properties by segment are described below:
(1) Pork — Seaboard’s Pork segment owns a pork processing plant in Guymon, Oklahoma. It has a double-shift capacity to process approximately six million hogs annually and generally operates at capacity with additional weekend shifts depending on market conditions. Seaboard’s hog production operations consist of the breeding and raising of approximately eight million hogs annually at facilities it primarily owns or at facilities owned and operated by third parties with whom it has grower contracts. This segment owns and operates eight centrally located feed mills, which have a combined capacity to produce approximately three million tons of formulated feed annually. These feed mills are used primarily to support Seaboard’s existing hog production and have the capability of supporting additional hog production in the future. These facilities are located in Iowa, Oklahoma, Texas, Kansas and Colorado. The Pork segment also operates a ham-boning and processing plant in Mexico that has the capacity
to process 96 million pounds of ham annually. The Pork segment owns biodiesel plants in Oklahoma and Missouri, with the capacity to produce 46 million gallons and 30 million gallons, respectively, of biodiesel annually. In 2019, the Pork segment purchased and began modifying an idle ethanol plant in Hugoton, Kansas, to produce renewable diesel with operations currently expected to begin in 2022. The Kansas plant is currently expected to produce 85 million gallons of renewable diesel annually when operating at full capacity.
(2) Commodity Trading and Milling — Seaboard’s CT&M grain-processing business, which includes 10 consolidated and 17 non-consolidated affiliates, operates facilities at 41 locations in 23 countries. Seaboard and its affiliates produce approximately six million metric tons of wheat flour, maize meal, manufactured feed and oilseed crush commodities per year in addition to other related grain-based products. The grain-processing and related agribusiness operations located in Botswana, Brazil, Colombia, the Democratic Republic of Congo, Ecuador, Gambia, Ghana, Guyana, Haiti, Jamaica, Kenya, Lesotho, Mauritania, Morocco, Mozambique, Nigeria, Peru, Republic of Congo, South Africa, Turkey, and Zambia own their facilities; and in Ivory Coast, Kenya, Lesotho, Morocco, Mozambique, Nigeria, Republic of Congo, Senegal and Zambia, the land on which certain facilities are located is leased under long-term agreements. Certain foreign milling operations may operate at less than full capacity due to low demand, poor consumer purchasing power, excess milling capacity in their competitive environment or imported flour. The commodity trading business has 13 offices in 12 countries, in addition to two non-consolidated affiliates in two other countries. Seaboard’s CT&M segment owns three 18,900 metric ton deadweight dry bulk vessels and charters between 32 and 56 bulk vessels with deadweights ranging from 3,000 to 81,000 metric tons under short-term agreements.
(3) Marine — Seaboard’s Marine segment leases approximately 297,000 square feet of off-port warehouse space and approximately 86 acres of port terminal land and facilities in Miami, Florida, which are used in its containerized cargo operations. Seaboard’s Marine segment also leases an approximately 100-acre cargo handling and marine terminal facility in Houston, Texas, which includes several warehouses totaling approximately 690,000 square feet for cargo storage. The Marine segment owns three ocean cargo vessels with deadweights ranging from 7,700 to 11,000 metric tons. In addition, this segment charters approximately 21 vessels under contracts with a remaining average term of approximately eleven months with deadweights ranging from approximately 5,000 to 34,700 metric tons. Seaboard’s Marine segment owns or leases dry, refrigerated and specialized containers and other related equipment.
(4) Sugar and Alcohol — Seaboard’s Sugar and Alcohol segment owns nearly 70,000 acres of planted sugarcane and a sugar mill with an annual capacity to crush approximately three million metric tons of sugar cane. The facility, including an alcohol distillery, has an annual production capacity of approximately 250,000 metric tons of sugar and approximately 33 million gallons of alcohol. This capacity is sufficient to process all of the cane harvested by this segment and additional quantities purchased from third-party farmers in the region. The sugarcane fields, processing mill, distillery and 51-megawatt cogeneration power plant are located in northern Argentina in the Salta Province. This area experiences seasonal rainfalls that may limit the harvest season, which then affects the duration of mill operations and quantities of sugar and alcohol produced.
(5) Power — Seaboard’s Power segment owns one power generating barge with capacity to generate approximately 108 megawatts of electricity that is secured on the Ozama River in Santo Domingo, Dominican Republic. Seaboard’s Power segment is currently constructing a new floating power barge with capacity to generate approximately 146 megawatts of electricity that also will be secured nearby on the Ozama River.
(6) Turkey — Seaboard’s Turkey segment has a total of four processing plants, two further processing plants and numerous company and third-party live production facilities and feed milling operations, located in North Carolina, Arkansas, Missouri and Kansas. These facilities produce over one billion pounds of turkey each year. Although capacity to meet core further processing demand is sufficient, Butterball uses third-party copacker arrangements to supplement portions of its portfolio where it either does not maintain competencies, or to meet demand beyond its internal production capacity.
Item 3. Legal Proceedings
The information required by this item is included in Note 9 to the consolidated financial statements.
Item 4. Mine Safety Disclosures
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
Seaboard’s common stock is traded on the NYSE American under the symbol SEB. Seaboard had 2,873 stockholders of record of its common stock as of January 31, 2021.
Stock Performance Graph
The SEC requires a five-year comparison of stock performance for Seaboard with that of an appropriate broad equity market index and similar industry index. Since there is no single industry index to compare stock performance, the companies comprising the Dow Jones U.S. Food Products and Dow Jones U.S. Marine Transportation Industry indices (the “Peer Group”) were chosen as the second comparison.
The following line graph shows a five-year comparison of cumulative total return for Seaboard Corporation, the NYSE American Index and the companies comprising the Peer Group, weighted by market capitalization for the five fiscal years commencing December 31, 2015 and ending December 31, 2020.
The comparison of cumulative total returns presented in the above graph was plotted using the following index values and common stock price values:
In each of the four quarters of 2020 and 2019, Seaboard declared and paid quarterly dividends of $2.25 per share of common stock. In each of the four quarters of 2018, Seaboard declared and paid quarterly dividends of $1.50 per share of common stock. Seaboard’s Board of Directors intends that Seaboard will continue to pay quarterly dividends for the reasonably foreseeable future, with such future dividends and the amount of any such dividends being subject to the determination, declaration and discretion of Seaboard’s Board of Directors and dependent upon factors such as Seaboard’s financial condition, results of operations, and, current and anticipated cash needs, including capital requirements. As discussed in Note 8 to the consolidated financial statements, Seaboard’s ability to declare and pay dividends is subject to limitations imposed by debt agreements.
Seaboard has not established any equity compensation plans or individual agreements for its employees under which Seaboard common stock, or options, rights or warrants with respect to Seaboard common stock, may be granted.
Seaboard’s share repurchase program expired on October 31, 2020. There were no purchases made by or on behalf of Seaboard or any “affiliated purchaser” (as defined by applicable rules of the SEC) of shares of Seaboard’s common stock during the fourth quarter of the fiscal year covered by this report. See Note 12 to the consolidated financial statements for discussion of share repurchase activity during 2020.
Item 6. Selected Financial Data
Years ended December 31,
(Millions of dollars except per share amounts)
Other investment income (loss), net
Net earnings attributable to Seaboard
Basic earnings per common share
Long-term debt, less current maturities
Dividends declared per common share (d)
|(a)||During 2020, Seaboard elected to change its method for valuing its inventories that previously used the last-in, first-out (“LIFO”) method to the first-in, first-out (“FIFO”) method. The effects of the change in accounting principle from LIFO to FIFO have been retroactively applied to all periods presented.|
|(b)||Total assets increased $496 million with the adoption of new leasing guidance in 2019 that required the recognition of ROU assets for most operating leases.|
|(c)||In 2017, Seaboard recorded $65 million of additional income tax expense, or $55.31 per common share, as a result of the December 22, 2017 enactment of the Tax Cuts and Job Act (the “2017 Tax Act”). See Note 14 to the consolidated financial statements for further information on the 2017 Tax Act.|
|(d)||In 2017, Seaboard resumed declaring quarterly dividends. In December 2012, Seaboard declared and paid a dividend of $12.00 per common share. The amount of the dividend represented a prepayment of the annual 2013, 2014, 2015 and 2016 dividends ($3.00 per common share per year). Basic and diluted earnings per common share are the same for all periods presented.|
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Sales and costs of Seaboard’s segments are significantly influenced by worldwide fluctuations in commodity prices and changes in foreign political and economic conditions. Accordingly, sales, operating income and cash flows can fluctuate significantly from year to year. As each segment operates in a distinct industry and a different geographic location, management evaluates their operations separately. Seaboard’s reporting segments are based on information used by Seaboard’s CEO to determine allocation of resources and assess performance, in his capacity as chief operating decision maker.
Seaboard’s operations have been both directly and indirectly impacted by the COVID-19 pandemic. At the onset of the pandemic in March and April of 2020, Seaboard experienced a change in product mix, including a significant decline in volume and prices for food service business due to restaurant closings, less demand for transportation due to customers temporarily shut down due to government orders and capital market volatility. Seaboard saw improvement in its third and fourth quarter 2020 results though challenges remain. Seaboard continues to encounter partially staffed shifts, lock downs or curfews in some geographic regions and the impacts from commodity market volatility. The near and long-term impacts of COVID-19 on Seaboard’s operations and the global economy are unknown and impossible to predict with any level of certainty.
The Pork segment primarily produces hogs to process and sells fresh and frozen pork products throughout the U.S. and to foreign markets. Sales prices are directly affected by both domestic and worldwide supply and demand for pork products and other proteins. Feed accounts for the largest input cost in raising hogs and is materially affected by price changes for corn and soybean meal. Market prices for hogs purchased from third parties for processing at the plant also represent a major cost factor. Within the portfolio of Seaboard’s businesses, management believes profitability of the Pork segment is most susceptible to commodity price fluctuations. As a result, this segment’s operating income and cash flows can materially fluctuate from year to year, significantly affecting Seaboard’s consolidated operating income and cash flows. This segment is Seaboard’s most capital-intensive segment, representing approximately 58% of Seaboard’s total fixed assets, in addition to approximately 48% of total inventories, as of December 31, 2020. With the plant generally operating at capacity, Seaboard is continually looking for ways to enhance the plant’s operational efficiency, while also looking to increase margins by introducing new, higher value products. This segment also produces biodiesel for sale to third parties. Sales prices are affected by the supply and demand of diesel and environmental credit initiatives.
The CT&M segment provides integrated agricultural commodity trading, processing and logistics services. The majority of the CT&M segment’s sales are derived from sourcing agricultural commodities from multiple origins which are delivered to third-party and affiliate customers in various international locations. The execution of these purchase and delivery transactions have long cycles of completion, which may extend for several months with a high degree of price volatility. As a result, these factors can significantly affect sales volumes, operating income, working capital and related cash flows from period to period. This segment represents approximately 46% of Seaboard’s total inventories as of December 31, 2020. This segment owns three vessels, but the majority of the trading business is transacted with chartered ships. Consolidated and non-consolidated affiliates operate the grain processing business in foreign countries that are, in most cases, lesser developed. Foreign operations can be significantly impacted by changes in local crop production, political instability and local government policies, as well as fluctuations in economic and industry conditions and foreign currency exchange rates. This segment’s sales are also significantly affected by fluctuating prices of various commodities, such as wheat, corn and soybean meal. Exports from various countries can exacerbate volatile market conditions that may have a significant impact on this segment’s sales and operating income. Profit margins are sometimes protected by using commodity derivatives and other risk management practices. The CT&M segment has invested in several entities in recent years and continues to seek opportunities to expand its business.
The Marine segment provides cargo shipping services in the U.S., the Caribbean and Central and South America. Fluctuations in economic conditions and political instability in the regions or countries in which this segment operates may affect trade volumes and operating profits. In addition, cargo rates can fluctuate depending on regional supply and demand for shipping services. Since the Marine segment time-charters the majority of its ocean cargo vessels, it is affected by fluctuations in charter hire rates as well as fuel costs. This segment continues to explore ways to increase volumes on existing routes while seeking opportunities to broaden its route structure in the regions it serves.
Sugar and Alcohol Segment
The Sugar and Alcohol segment produces and processes sugar and alcohol in Argentina, primarily to be marketed locally. The Sugar and Alcohol segment’s sales and operating income are significantly affected by local and worldwide sugar and alcohol prices. Domestic sugar production levels in Argentina affect the local price. Global sugar price fluctuations, to a lesser extent, have an impact in Argentina as well. The currency exchange rate can have an impact on reported U.S. dollar sales, operating income and cash flows.
The Power segment is an independent power producer in the Dominican Republic. Spot market rates are impacted by fuel prices and the various producers supplying power to the grid. While fuel is this segment’s largest cost component and is subject to price fluctuations, higher fuel costs generally have been passed on to customers.
The Turkey segment, accounted for using the equity method, produces turkeys to process and sells turkey products. Sales prices are directly affected by both domestic and worldwide supply and demand for turkey products and other proteins. Feed accounts for the largest input cost in raising turkeys and is materially affected by price changes for corn and soybean meal. As a result, commodity price fluctuations can significantly affect the profitability and cash flows of Butterball.
LIQUIDITY AND CAPITAL RESOURCES
Summary of Sources and Uses of Cash
As of December 31, 2020, Seaboard had cash and short-term investments of $1.5 billion and additional total working capital of $737 million. Cash and short-term investments as of December 31, 2020 decreased $18 million from December 31, 2019. The decrease was primarily the result of $259 million of capital expenditures and $69 million of long-term debt payments, partially offset by $291 million of cash from operations. Cash from operating activities increased $120 million primarily due to higher adjusted earnings partially offset by uses of cash for working capital.
As of December 31, 2020, $52 million of the $1.5 billion of cash and short-term investments were held by Seaboard’s foreign subsidiaries. Historically, Seaboard has considered substantially all foreign profits as being permanently invested in its foreign operations, including all cash and short-term investments held by foreign subsidiaries. Seaboard intends to continue permanently reinvesting the majority of these funds outside the U.S. as current plans do not demonstrate a need to repatriate them to fund Seaboard’s U.S. operations. For any planned repatriation to the U.S., Seaboard would record applicable deferred taxes for state or foreign withholding taxes.
Capital Expenditures, Acquisitions and Other Investing Activities
During 2020, Seaboard invested $259 million in property, plant and equipment, of which $207 million was in the Pork segment and $27 million in the Power segment. The Pork segment expenditures were primarily for the expansion of the Oklahoma pork processing plant and the modifications of an idle ethanol plant and its related assets in Hugoton, Kansas. The Power segment expenditures were primarily for its power generating barge under construction. All other capital expenditures were primarily of a normal recurring nature such as replacements of machinery and equipment and general facility modernizations and upgrades.
The total budget for 2021 capital expenditures is approximately $456 million, with $340 million planned in the Pork segment and $25 million in the Power segment to complete the new barge and interconnection for existing barge at a different site. The Pork segment budgeted approximately $173 million to complete modifications to convert an acquired idle ethanol facility to a renewable diesel plant with operations currently expected to begin in 2022, and the remainder to new projects, including biogas recovery projects. Certain projects or purchases were delayed due to COVID-19, so overall capital expenditures are expected to be higher than last year. Management anticipates paying for these capital expenditures from a combination of available cash, the use of available short-term investments and Seaboard’s available borrowing capacity.
Seaboard has acquired businesses in 2020, 2019 and 2018, and intends to continue to look for opportunities to further grow and diversify its operations, but there are no definitive plans at this time. Also, from time to time, Seaboard may fund capital calls and issue borrowings for its equity method investments based on the specific facts and circumstances. During 2020, Seaboard contributed $8 million to non-consolidated affiliates for working capital needs.
The following table presents a summary of Seaboard’s available borrowing capacity. During 2020, Seaboard entered into a committed line of credit agreement for $250 million of additional liquidity for working capital and general corporate purposes.
(Millions of dollars)
Short-term uncommitted and committed lines
Amounts drawn against lines
Available borrowing capacity as of December 31, 2020
Seaboard has debt of $763 million, which includes term loans of $714 million and foreign subsidiary obligations of $49 million. Subsequent to year-end, Seaboard repaid $46 million of foreign subsidiary obligations. Seaboard has capacity under its debt covenants to undertake additional debt financings of approximately $1.3 billion as of December 31, 2020. See Note 8 to the consolidated financial statements for further discussion of debt.
Management intends to continue seeking opportunities for expansion in the industries in which Seaboard operates, utilizing existing liquidity, available borrowing capacity and other financing alternatives. The terms and availability of such financing may be impacted by economic and financial market conditions, as well as Seaboard's financial condition and results of operations at the time Seaboard seeks such financing, and there can be no assurances that Seaboard will be able to obtain such financing on terms that will be acceptable or advantageous. Accordingly, management believes Seaboard’s combination of internally generated cash, liquidity, capital resources and borrowing capabilities will be adequate for its existing operations and any currently known potential plans for expansion of existing operations for the next twelve months.
Contractual Obligations and Off-Balance Sheet Arrangements
Several of Seaboard’s segments have long-term contractual obligations, including non-cancelable lease agreements and purchase commitments. See Notes 6 and 9 to the consolidated financial statements for discussion on purchase commitments and leases, respectively.
The following table provides a summary of Seaboard’s long-term contractual obligations as of December 31, 2020:
Payments due by period
(Millions of dollars)
Operating lease obligations
Finance lease obligations
Interest payments on long-term debt (a)
Retirement benefit payments (b)
Mandatory deemed repatriation tax (c)
Total contractual cash obligations
|(a)||Interest payments in the table above include expected cash payments for interest on variable and fixed rate long term debt. Variable interest rates are based on interest rates as of December 31, 2020.|
|(b)||Retirement benefit payments in the table above represent expected benefit payments for various non-qualified pension plans and supplemental retirement arrangements as discussed in Note 10 to the consolidated financial statements, which are unfunded obligations that are deemed to be employer contributions. No contributions are planned at this time to the qualified pension plan.|
|(c)||U.S. federal income tax payable on mandatory deemed repatriation pursuant to the 2017 Tax Act.|
Deferred income taxes and certain other long-term liabilities in the consolidated balance sheets are not included in the table above as management is unable to reliably estimate the timing of the payments for these items.
RESULTS OF OPERATIONS
Prior period financial information included in this Form 10-K has been adjusted for the effect of a change in method in accounting for inventory in the Pork segment. See Note 1 to the consolidated financial statements for further discussion of this change in accounting principle and the related impact to the financial statements.
Net sales for the years ended December 31, 2020, 2019 and 2018 were $7.1 billion, $6.8 billion and $6.6 billion, respectively. The increase for 2020 compared to 2019 primarily reflected higher volumes of certain commodities in the CT&M segment and higher volumes for pork products and hogs sold in the Pork segment, partially offset by lower cargo volumes in the Marine segment and lower spot prices and generation in the Power segment. The increase for 2019 compared to 2018 primarily reflected higher volumes of certain commodities in the CT&M segment and higher prices for pork products sold in the Pork segment, partially offset by lower biodiesel revenue in the Pork segment and lower volumes and prices of sugar and alcohol sold in the Sugar and Alcohol segment.
Operating income for the years ended December 31, 2020, 2019 and 2018 was $245 million, $110 million and $236 million, respectively. The increase for 2020 compared to 2019 primarily reflected lower derivative contract losses and higher margins on pork product sales in the Pork segment and higher margins on third-party sales and derivative contract gains in the CT&M segment, partially offset by lower revenues in the Power segment. The decrease for 2019 compared to 2018 primarily reflected derivative contract losses and lower margins on biodiesel sales in the Pork segment, lower alcohol margins in the Sugar and Alcohol segment and higher voyage costs in the Marine segment.