SEABOARD CORP /DE/ - Annual Report: 2022 (Form 10-K)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

☒  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2022

or

☐  TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______________ to ____________________

Commission file number: 1-3390

SEABOARD CORPORATION

(Exact Name of Registrant as Specified in Its Charter)

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Registrant’s telephone number, including area code (913) 676-8928

Securities registered pursuant to Section 12(b) of the Act:

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 ⌧ No ◻

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.        Yes ◻ No ⌧

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.                                       Yes ⌧ No ◻

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).                                                                      Yes ⌧ No ◻

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.

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.                                                         ☒

If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the correction of an error to previously issued financial statements.                              ☐

Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant's executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).              Yes ☐ No ☒

The aggregate market value of the 253,186 shares of Seaboard common stock held by nonaffiliates was approximately $975,629,464, based on the closing price of $3,853.41 per share on July 2, 2022, the end of Seaboard’s most recently completed second fiscal quarter. As of January 31, 2023, the number of shares of common stock outstanding was 1,160,779.

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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, 2022.

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SEABOARD CORPORATION

FORM 10-K

YEAR ENDED DECEMBER 31, 2022

TABLE OF CONTENTS

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PART I

Forward-looking Statements

This report, including information included or incorporated by reference in this report, contains “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,” “plans,” “may,” “will,” “should,” “could,” “anticipates,” “estimates,” “intends” or similar expressions.

In more specific terms, forward-looking statements include, without limitation:

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.

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Item 1. Business

General Development of Business

Seaboard Corporation and its subsidiaries (collectively, “Seaboard”) together comprise a diversified group of companies that operate worldwide in agricultural and ocean transport businesses. 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.

Approximately 77% of the outstanding common stock of Seaboard is collectively owned by Seaboard Flour LLC and SFC Preferred, LLC, which are Delaware limited liability companies. Ellen Bresky, the Chairwoman of the Board of Directors, 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.

Seaboard’s diverse operations are relatively decentralized, with each segment having a management team that operates independently of the others. At certain segments, Seaboard uses vertical integration to increase its supply chain reliability. To achieve vertical integration, Seaboard has made acquisitions and invested in strategic joint ventures. All of Seaboard’s segments provide basic essential goods or services, including food, energy and transportation. Accordingly, most of Seaboard’s operations are heavily commodity-driven, resulting in high volatility to market prices and a cyclical nature of financial performance.

Seaboard has six reportable segments: Pork, CT&M, Marine, Sugar and Alcohol, Power and Turkey. Each segment’s contribution to net sales and operating income (loss), and its respective assets and capital expenditures are included in Note 13 to the consolidated financial statements. Seaboard operates in over 45 countries, with a concentration in the U.S. and countries in Central and South America and Africa. Additional information regarding sales and property, plant and equipment located in foreign locations is also included in Note 13 to the consolidated financial statements.

Description of Segments

Pork Segment - Seaboard, through its subsidiary Seaboard Foods LLC, is a vertically integrated pork producer that primarily produces and sells 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’s hog production facilities consist of genetic and commercial breeding, farrowing, nursery and finishing buildings.

Seaboard has a 50% noncontrolling interest in Seaboard Triumph Foods, LLC (“STF”), which operates a pork processing plant located in Iowa, with a capacity to process approximately six million market hogs annually. Seaboard and Triumph Foods, LLC (“Triumph”), an independent pork processor, supply a portion of the hogs processed at the STF plant. The Pork segment also has a 50% noncontrolling interest in Daily’s Premium Meats, LLC (“Daily’s”), which produces and markets raw and pre-cooked bacon using pork bellies primarily sourced from Seaboard, Triumph and STF, at its locations in Utah, Montana and Missouri. Seaboard has marketing agreements with STF, Daily’s and Triumph to market their products and has a margin-sharing arrangement with Triumph that considers the average sales price, standard costs and the mix of products sold from the Seaboard and Triumph pork processing plants. In 2022, Seaboard’s Pork segment sold to Triumph a 50% interest in Seaboard de Mexico USA LLC, its ham-boning and processing plant in Mexico.

The Pork segment produces biodiesel at facilities in Oklahoma and Missouri and renewable diesel at a facility in Kansas, which began operations during the third quarter of 2022. These products are produced from pork fat supplied by the Oklahoma pork processing plant and other animal fats and vegetable oils purchased from third parties and sold to fuel blenders for distribution.

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. Seaboard’s CT&M segment has ownership interests in several non-consolidated affiliates to further its business strategies. Overall, the CT&M segment, including its affiliates, has facilities in 27 countries, primarily in Africa and South America. The majority of the trading business is transacted with chartered ships or vessels this segment owns.

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. This segment’s primary operations are in Miami, Florida, and include a marine terminal and an off-port warehouse for cargo consolidation and temporary storage. Scheduled port calls are made in Brooklyn, New York; Houston, Texas; New Orleans, Louisiana; Philadelphia, Pennsylvania; Savannah, Georgia; and various foreign ports in the

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Caribbean and Central and South America. A network of offices and agents are used to sell freight services and this segment’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 17 chartered and six owned vessels as of December 31, 2022, 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 marketed to industrial users and sold as dehydrated alcohol to certain oil companies under the Argentine governmental bioethanol program, which requires alcohol to be blended with gasoline. 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, like woodchips.

Power Segment - Seaboard, through its subsidiary, Transcontinental Capital Corp. (Bermuda) Ltd., is an independent power producer generating electricity for the Dominican Republic power grid. 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 uses two power-generating barges for its current operations. The barge that began operations in 2012, named Estrella Del Mar II (“EDM II”), is capable of using natural gas or heavy fuel oil to produce up to 108 megawatts of electricity. The barge that began operations in 2022, named Estrella Del Mar III (“EDM III”), can generate approximately 148 megawatts of electricity using natural gas. While EDM II remains in operation in the Dominican Republic, Seaboard continues to explore strategic alternatives for this barge, including a sale or relocation.

Turkey Segment - Seaboard has a 52.5% noncontrolling interest in Butterball, a producer and processor of conventional and antibiotic-free 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.

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.

Customers

Seaboard does not have sales to any one customer equal to 10% or more of consolidated revenues. The Sugar and Alcohol segment had two bioethanol customers that collectively represented 35%-46% of its total sales in each of the last three years. The Power segment sells power in the Dominican Republic to wholly government-owned distribution companies and other spot-market customers. The Turkey segment had two retail customers that collectively represented approximately 27% of its total sales in each of the last three years.

Competitive Conditions

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 S&P Global in 2022, Seaboard Foods LLC was ranked number three in hog production in the U.S. based on only this segment’s sows in production and number four in pork processing in the U.S. 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 and imported grain-processed 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 and alcohol sales in the local Argentine market. Sugar and alcohol prices in Argentina can fluctuate compared to world markets due to foreign currency, Argentine government price controls and protection policies.

For Seaboard’s Power segment, the Dominican government sets a cap on the electricity spot market prices and establishes the dispatch order of who sells into the power grid based on a merit list. 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, diesel or coal. Renewable energy producers and producers who have lower variable operating costs to operate may receive dispatch preference from the Dominican government. EDM III, which was completed in 2022, uses gas turbines instead of engines and is more efficient than Seaboard’s dual-fueled barge, EDM II.

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Competition within specific product categories and sales channels for the Turkey segment comes from a variety of regional and national producers and processors and is based primarily on brand, product quality, customer service and price.

Seasonal Business

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.

Research and Development

The majority of Seaboard’s research and development occurs in the Pork segment. Within hog production operations, activities are directed at improving the genetics, health and feed efficiency of hogs. The plant processing operations focuses on increasing meat quality, as well as other manufacturing process improvements. Seaboard has also invested research and development resources in the development of biodiesel plants and a renewable diesel facility.

Raw Materials and Sources of Supply

During 2022, Seaboard raised approximately 90% of the hogs processed at its processing plant in Oklahoma, with the remaining hog requirements purchased primarily under contracts from independent producers. The CT&M segment sources, transports and markets approximately 14 million metric tons per year of wheat, corn, soybeans, soybean meal and other commodities, generally purchased from farmers, grain elevators and wholesale merchants. Changes in origination sources, weather patterns, planting forecasts and consumption patterns may impact supply and demand and related commodity prices in this segment. The Sugar segment supplied approximately 80% of the sugar cane processed in its facility.

Fuel is a significant raw material for the Power segment. EDM III only operates on natural gas and there is only one supplier in the Dominican Republic. The dispatch of EDM II is dependent on the effective sourcing of heavy fuel oil or natural gas at competitive prices. The Power segment has entered into a long-term fuel supply agreement to ensure natural gas is available for EDM III’s expected operations. The Turkey segment purchases a significant portion of its grain used in the manufacturing of feed for its turkeys in North Carolina from Seaboard’s partner in Butterball. Also, Butterball purchases poults for its operations from one supplier that has multiple locations.

Intellectual Property

Seaboard believes there is recognition of the registered trademarks identified below in the various industries Seaboard serves. 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 Pork segment uses trademarks, including Seaboard Foods®, Seaboard Farms®, Seaboard Energy^TM, Prairie Fresh®, Prairie Fresh USA Prime®, Our Farms, Our Commitment®, St. Joe Pork® and Cook-in Bag®. The CT&M segment uses trademarks, including Mothers Pride® and Zambia’s Pride® in Zambia, Thunderbolt Flour® and Maid Marian® in Guyana, GMA® and Top Pain® in Ivory Coast, GMD® and Jarga® in Senegal and Wayne® in Ecuador. The Marine segment uses trademarks, including Seaboard Marine® and Seaboard Solutions®. The Sugar and Alcohol segment uses trademarks, including Chango®, Chango Premium® and Tabacal®. The Turkey segment uses trademarks, including, Butterball®, Carolina Turkey® and Farm to Family Butterball®.

Human Capital Resources

Generally, Seaboard’s segments operate autonomously to implement the human capital strategies that best meet the diverse needs of the workforce, industry, competitive environment and legal requirements of the countries it operates in. This often includes developing location-specific employee benefits, policies, programs and practices. Although individual programs and benefits vary by location, all segments align with Seaboard’s core principles which emphasize health and safety, financial wellness, learning and development, and global diversity and acceptance.

As of December 31, 2022, Seaboard had approximately 13,000 total employees, of whom approximately 52% were in the U.S., 31% were in the Caribbean, Latin and South America and 17% were in Africa.

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The following is an approximate employee breakdown by segment as of December 31, 2022:

Substantially all of the Pork segment’s hourly employees at its processing plant are covered by a collective bargaining agreement that expires in 2026. In the CT&M segment, approximately 38% of employees at mills, primarily in Africa and South America, are subject to collective bargaining agreements with various unions under agreements that expire between 2023 and 2025. In the Sugar and Alcohol segment, substantially all of its hourly mill employees in Argentina are covered by a collective bargaining agreement that renews in April of each year. Seaboard believes it has good relationships with its employees and their representative labor organizations and experienced no work stoppages at any of its locations during 2022.

Seaboard’s employees are critical to operational success and their health and safety is a top priority. All full-time domestic employees are eligible to receive medical and dental benefits and participate in wellness programs. The Power segment subsidizes 85% of the employee’s and families’ medical coverage. Almost all Marine and CT&M foreign locations have either company-subsidized private health coverage or public health coverage as mandated by their local governments. All employees of the Sugar and Alcohol segment are eligible for subsidized health coverage either through the company or under a union medical program. The Pork, Sugar and Alcohol and Power segments have health clinics onsite at their respective principal locations.

At times, recruitment and retention can be a challenge for certain locations in the Pork and CT&M segments. In 2022, the Pork segment had a retention rate of approximately 75% primarily due to its nature of work and rural locations, and approximately 25% of the Pork segment’s workforce is dependent upon employment visas in different production areas. In the CT&M segment, which has operations in developing countries, challenges associated with safety and political instability exist from time to time, which may create challenges in identifying and retaining qualified local and expatriate personnel.

Flexible compensation and benefit strategies are developed by Seaboard’s segments to attract and retain employees and reduce turnover and associated costs. Seaboard provides competitive pay, paid time off, holidays and other benefits depending on location. All domestic employees that work over a certain number of hours are eligible to participate in the company-sponsored 401K retirement savings plan. At many of the foreign locations, Seaboard participates in government-required pension funds on behalf of its employees. Additional benefits are determined by the segment, but often include

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employee discounts on products produced such as meat and sugar in the Pork and Sugar and Alcohol segments, respectively, and back-to-school supply donations in the Power Segment.

Seaboard’s segments also provide on-the-job training and various professional development opportunities. For example, full time employees with at least one year of service in the Pork segment are eligible for tuition reimbursement, and the segment has developed a comprehensive training program to promote internal employees to management positions. In the Marine segment, employees are provided training courses through an online platform, including industry-specific, job-specific and general skills courses, and heavy equipment operators have a formal training program with a certain number of hours that must be met before promotion.

Because Seaboard operates around the world, global diversity and acceptance are critical for continued success, including at the highest levels, where 40% of Seaboard’s board of directors are female, including the chairwoman.

Governmental Regulations

Environmental Matters

Seaboard’s Pork segment and Turkey segment are subject to numerous federal, state and local laws and regulations relating to the environment, such as treatment of wastewater and air emissions, 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. Seaboard’s Marine and CT&M segments’ vessels are subject to environment regulations related to fuel efficiency, which may cause certain vessels to reduce their speed, potentially impacting voyage routes. Seaboard’s Power segment must receive permits from local authorities to operate, including environmental licenses, among others, and these permits may be canceled or not renewed. The environmental permits for both EDM II and EDM III run through September 2023. The renewal process has been initiated and it is expected that each barge will have its corresponding permit valid for a minimum of 2 years.

Other Regulations

As a company with global operations, Seaboard is subject to complex foreign and U.S. laws and regulations, including food safety, labor laws, trade regulations, tariffs, import and export regulations, foreign exchange regulations and anti-bribery and corruption laws. Seaboard has policies and procedures in place to require 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.

Available Information

Access to all Securities and Exchange Commission (“SEC”) filings, including 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/investors as soon as reasonably practicable after such material is electronically filed with, or furnished to, the SEC. Seaboard does not intend for information contained in its website to be part of this Form 10-K. The SEC also maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at www.sec.gov.

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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.

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. 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, concurrently while also serving as Vice President of Industrial Operations with the Seaboard Overseas and Trading Group (“SOTG”). Prior to that, he served in various roles with SOTG for more than seven years. On January 9, 2023, Mr. Bresky was appointed as President and Chief Executive Officer of SOTG.

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. Hubler has served as Assistant Secretary since April 2019, and also serves as Vice President and General Counsel with Seaboard Foods LLC. He was the Associate General Counsel at Seaboard Corporation from October 2018 until January 2022 when he was named General Counsel of Seaboard Foods LLC. Prior to joining Seaboard Corporation, Mr. Hubler was Assistant Vice President, Legal at Dairy Farmers of America, Inc.

Mr. Holden has served as Assistant Secretary since June 2010, and also serves as Vice President and General Counsel with SOTG.

Ms. Beltz-Vacas has served as Assistant Treasurer since January 2021 and previously as Treasury Director since July 2014.

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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 served as President of SOTG since August 2006. On January 9, 2023, Mr. Dannov resigned from this position, but will continue with SOTG and assist as needed.

Mr. Gonzalez has served as President of Seaboard Marine Ltd. since January 2005.

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Item 1A. Risk Factors

Business and Operational Risks

Accordingly, revenues, operating income and cash flows from international operations could fluctuate significantly from year to year. In addition, border restrictions and foreign government policies and regulations could restrict the purchase of various commodities, reducing Seaboard’s ability to access materials or ports, or limiting sales prices for products sold in local markets.

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Industry Risks

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Pathogens that 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 Seaboard’s 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 brand reputation could be harmed, revenues could decrease, costs of doing business could increase, and Seaboard’s operating results could be adversely affected.

These fluctuating market conditions could have a significant impact on Seaboard’s sales, value of commodities held in inventory and operating income.

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The geographic areas in which Seaboard operates have also experienced labor shortages resulting in higher labor costs. The inability to acquire and retain the services of such personnel, or increased costs associated with the acquisition and retention of such personnel, could have a material adverse effect on Seaboard’s operations.

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.

Legal and Regulatory Risks

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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. In addition, future changes in laws, regulations and standards may result in additional costs or a reduction in revenues.

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Specific Pork Segment Risks

Specific Commodity Trading and Milling Segment Risks

Specific Marine Segment Risks

Specific Sugar and Alcohol Segment Risks

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Specific Power Segment Risks

Specific Turkey Segment Risks

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Item 1B. Unresolved Staff Comments

None.

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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 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 can breed and raise 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 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 owns biodiesel plants in Oklahoma and Missouri, with the capacity to produce 46 million gallons and 30 million gallons, respectively, of biodiesel annually, and a renewable diesel plant in Kansas with capacity to produce 85 million gallons of renewable diesel annually. The renewable diesel plant began operations in the third quarter of 2022 and it is expected operations will reach capacity later in 2023. The Pork segment uses a terminal facility in California with a maximum throughput capacity to store and distribute approximately 300 million gallons of fuel per year.

(2)   Commodity Trading and Milling - Seaboard’s CT&M segment operates milling facilities at 13 locations in 9 countries and has 11 trading offices in 10 countries. The milling facilities located in Ecuador, Ghana, Guyana, Mozambique, Peru, Republic of Congo, and Zambia own the land and plants. There are additional milling facilities located in Ivory Coast, Republic of Congo, Senegal and Zambia where the land is leased under long-term agreements. These facilities produce approximately two million metric tons of wheat flour, maize meal, manufactured feed and oilseed crush commodities per year in addition to other related grain-based products. 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. Seaboard’s CT&M segment owns three 18,900 metric ton deadweight dry bulk vessels and charters between 26 to 55 bulk vessels with deadweights of up to 176,000 metric tons under short-term agreements.

(3)   Marine - Seaboard’s Marine segment leases approximately 297,000 square feet of off-port warehouse space and 87 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 approximate 77-acre cargo handling and marine terminal facility in Houston, Texas, which includes several warehouses totaling approximately 648,000 square feet for cargo storage. The Marine segment owns six ocean cargo vessels with deadweights of up to approximately 34,000 metric tons. Seaboard’s Marine segment has six new vessels under construction, with three vessels expected to be completed in 2024 and the other three vessels in 2025. Also, this segment charters 17 vessels under contracts with a remaining average term of 15 months with deadweights of up to approximately 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 cultivated land to grow 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 if maximizing sugar production, and approximately 33 million gallons of alcohol if maximizing alcohol production. Depending on the market conditions, this segment can produce more sugar and less alcohol, or vice versa. This capacity is sufficient to process all of the cane harvested by this segment and additional quantities purchased from third-party

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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, alcohol and power produced.

(5)   Power - Seaboard’s Power segment owns two power-generating barges that are secured on the Ozama River in Santo Domingo, Dominican Republic. EDM II and EDM III can generate approximately 108 megawatts and 148 megawatts, respectively, of electricity.

(6)   Turkey - Seaboard’s Turkey segment has a total of three processing plants, three 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 approximately 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.

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Item 3. Legal Proceedings

The information required by this item is included in Note 8 to the consolidated financial statements.

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Item 4. Mine Safety Disclosures

Not applicable.

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PART II

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 3,347 stockholders of record of its common stock as of January 31, 2023.

Stock Performance Graph

The SEC requires a five-year comparison of Seaboard’s stock performance 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, 2017 and ending December 31, 2022.

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 2022, 2021 and 2020, Seaboard declared and paid quarterly dividends of $2.25 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

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discussed in Note 7 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.

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Item 6. Reserved

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

This Management Discussion and Analysis is provided as a supplement to, and should be read in conjunction with, Seaboard’s consolidated financial statements and the accompanying notes in Item 8. Certain statements in this report contain forward-looking statements. See the introduction in Item 1 for more information on these forward-looking statements, including a discussion of the most significant factors that could cause actual results to differ materially from those in the forward-looking statements.

OVERVIEW

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.

Pork Segment

The Pork segment primarily produces hogs to process and sells 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. This segment’s profitability is susceptible to commodity price fluctuations and its 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 61% of Seaboard’s total fixed assets and approximately 50% of total inventories as of December 31, 2022. With the plant generally operating near capacity, Seaboard is continually looking for ways to enhance the plant’s operational efficiency, while also looking to increase margins by introducing new, higher margin value-added products. This segment also produces biodiesel and renewable diesel and related credits for sale to third parties. Sales prices are affected by the supply and demand of diesel and environmental credit initiatives.

CT&M Segment

The CT&M segment provides integrated agricultural commodity trading, processing and logistics services. The majority of its sales are derived from sourcing agricultural commodities from multiple origins which are delivered to third-party and affiliate customers in various international locations. 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 through commodity derivatives and other risk management practices. 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 44% of Seaboard’s total inventories as of December 31, 2022. Consolidated subsidiaries and non-consolidated affiliates operate the grain processing facilities in foreign countries that are, in most cases, lesser developed and 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 has invested in several entities in recent years and continues to seek opportunities to expand its business.

Marine Segment

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, freight rates can fluctuate depending on regional supply and demand for shipping services. Since this segment time-charters ocean cargo vessels, it is affected by fluctuations in charter

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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. This segment’s sales and operating income are significantly affected by local sugar and alcohol prices, and domestic sugar production levels and government regulations affect these local prices. The currency exchange rate can have an impact on reported U.S. dollar sales, operating income and cash flows.

Power Segment

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.

Turkey Segment

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 profitability and cash flows.

LIQUIDITY AND CAPITAL RESOURCES

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 in both the short-term and long-term.

Summary of Sources and Uses of Cash

Seaboard’s principal funding source is cash from operating activities and its principal cash requirements primarily include operating expenses and capital expenditures. As of December 31, 2022, Seaboard had cash and short-term investments of nearly $1.3 billion and additional total working capital of $1.2 billion. The following table presents a summary of Seaboard’s available borrowing capacity under lines of credit.

As of December 31, 2022, $183 million of the $1.3 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. During the fourth quarter of 2022, Seaboard reversed its indefinite reinvestment assertion in connection with certain previously-taxed undistributed earnings of its Seaboard Marine subsidiary due to the tax effectiveness of repatriating. As a result, Seaboard recorded a deferred tax liability of $13 million for federal and state incremental tax costs associated with the future potential repatriation of Seaboard Marine’s previously-taxed foreign undistributed earnings. For all other foreign subsidiaries, Seaboard intends to continue permanently reinvesting their funds outside the U.S. as they continue to demonstrate no need to repatriate them to fund Seaboard’s U.S. operations for the foreseeable future. Seaboard has not recorded deferred taxes for state or foreign withholding taxes that would result upon repatriation of these funds to the U.S. Determination of the tax that might be paid on unremitted earnings if eventually remitted is not practical due to the complexity of the multi-jurisdictional tax environment in which Seaboard operates.

Cash and short-term investments as of December 31, 2022 decreased $206 million from December 31, 2021. The decrease was primarily the result of $474 million for capital expenditures, $117 million for purchases of long-term investments, $58 million for the acquisition of a business, debt payments of $105 million, unrealized losses on short-term investments of $150 million due to capital market volatility, partially offset by higher net cash from operations of $680 million. Cash from operating activities increased $588 million, primarily due to higher cash earnings and less working capital investment, primarily related to inventories due to trade timing.

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Capital Expenditures, Acquisitions and Other Investing Activities

During 2022, Seaboard invested $474 million in property, plant and equipment, of which $315 million was in the Pork segment and $136 million was in the Marine segment. The Pork segment expenditures were primarily to fund biogas recovery projects, normal replacement of breeding herd and other investments. At certain hog farms, the Pork segment is constructing biogas recovery facilities to capture methane from its hog lagoons and inject it as renewable natural gas into the local pipeline infrastructure. The Marine segment expenditures primarily related to the purchase of two used vessels and installment payments on vessels under construction.

The total budget for 2023 capital expenditures is approximately $750 million, with $475 million planned in the Pork segment and $200 million in the Marine segment. The Pork segment’s budget primarily includes further investment in hog production assets, completion of certain biogas recovery projects, normal replacement of breeding herd and other investments. The Marine segment’s budget primarily includes continued installment payments on vessels under construction. During the third quarter of 2022, Seaboard’s Marine segment executed contracts to build three additional dual-fueled vessels that are estimated to cost $62 million each for a total cash outlay of approximately $186 million. The contracts executed in 2021 for the three initial vessels were estimated to cost $60 million each for a total cash outlay of approximately $180 million. The payments for all six vessels under construction are made in accordance with milestones achieved throughout construction. The three initial vessels are expected to be complete in 2024 and the three additional vessels are expected to be complete in 2025. As of December 31, 2022, long-term capital expenditure cash requirements included approximately $150 million in 2024 and $100 million in 2025 for these vessels under construction. Management anticipates paying for capital expenditures from a combination of available cash, the use of available short-term investments and Seaboard’s available borrowing capacity.

Seaboard acquired businesses in 2022, 2021 and 2020, and intends to continue to look for opportunities to further grow and diversify its operations, but there are no definitive plans for additional acquisitions at this time. Management intends to utilize existing liquidity, available borrowing capacity and other financing alternatives to fund these opportunities. 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. Seaboard may also fund capital calls and issue borrowings for its equity method investments based on specific facts and circumstances.

From time to time, proceeds from the sale of short-term investments may be used to fund capital expenditure purchases or working capital needs. Included in the $2 billion of gross cash flows related to both the sale and purchase of short-term investments in the consolidated statement of cash flows for the year ended December 31, 2021 was asset reallocation intended to reduce equity exposure. Seaboard continues to make long-term investments, with $117 million, $98 million and $47 million invested during the years ended December 31, 2022, 2021 and 2020, respectively. As of December 31, 2022, Seaboard is committed to invest approximately $15 million in certain long-term investments in 2023, primarily real-estate related.

Financing Activities

Seaboard believes it has adequate available borrowings to meet short-term and long-term operating needs. During 2022, there was a high volume of draws and repayments activity under lines of credit compared to prior years with the draws used to fund working capital and greater investments in capital expenditures. Seaboard had long-term debt of $710 million as of December 31, 2022, which includes a term loan due 2028 of $670 million. Current maturities on long-term debt were $7 million as of December 31, 2022, with expected annual interest payments of approximately $41 million based on interest rates as of year-end. During 2021, Seaboard repaid foreign subsidiary debt related to a 2018 acquisition of $46 million upon its maturity. See Note 7 to the consolidated financial statements for further discussion of debt.

Future Contractual Obligations

Other than those obligations discussed above, future obligations mostly include normal operating expenses. For operating and finance leases, Seaboard had a current undiscounted obligation of $236 million and a long-term undiscounted obligation of $550 million as of December 31, 2022 per Note 5 to the consolidated financial statements. The majority of Seaboard’s purchase commitments for materials or supplies are related to hog, grain, feedstock and fuel procurement contracts with a current obligation of approximately $1.6 billion and a long-term obligation of approximately $1.1 billion as of December 31, 2022, per Note 8 to the consolidated financial statements. Also, Seaboard is subject to obligations under its existing defined benefit pension plans. As of December 31, 2022, the unfunded status of all plans was $94 million. Anticipated employer payments related to the unfunded nonqualified executive plans in 2023 are $36 million. For additional information about Seaboard’s pension plans, see Note 9 to the consolidated financial statements.

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RESULTS OF OPERATIONS

Net sales for the years ended December 31, 2022, 2021 and 2020 were $11.2 billion, $9.2 billion and $7.1 billion, respectively. The increase for 2022 compared to 2021 primarily reflected higher sales prices of commodities sold in the CT&M segment, higher freight rates in the Marine segment, the commencement of operations of a second barge in the Power segment, and higher biodiesel sales, partially offset by lower volumes of pork products and market hogs sold in the Pork segment. The increase for 2021 compared to 2020 primarily reflected higher prices of commodities sold in the CT&M segment, higher prices for pork products, market hogs and biodiesel sold in the Pork segment and higher cargo volumes and rates in the Marine segment.

Operating income for the years ended December 31, 2022, 2021 and 2020 was $657 million, $458 million and $245 million, respectively. The increase for 2022 compared to 2021 primarily reflected higher voyage revenue in the Marine segment, higher margins on certain commodities in the CT&M segment and more power generation in the Power segment, partially offset by lower margins on pork product, market hog and biodiesel sales in the Pork segment. The increase for 2021 compared to 2020 primarily reflected higher voyage revenue in the Marine segment, increased margins on pork product and market hog sales in the Pork segment, and higher commodity prices, partially offset by derivative commodity contract losses and other operational costs in the CT&M segment.

Pork Segment

Net sales for the Pork segment increased $124 million for the year ended December 31, 2022 compared to 2021. The increase was primarily the result of higher biodiesel prices and increased sales of biofuel credits, and to a lesser extent, higher volumes of biodiesel sold and higher prices of pork products sold, largely offset by a decrease in volumes of pork products sold and lower volumes and prices of market hogs sold.

Operating income for the Pork segment decreased $323 million for the year ended December 31, 2022 compared to 2021. The decrease was primarily due to lower margins on pork product and market hog sales due to higher costs of hogs, including inventory adjustments, and higher feed and plant processing costs, biodiesel-related mark-to-market derivative contract losses, higher feedstock costs for biofuel operations and higher start-up costs for renewable diesel operations. During 2022, the Pork segment recorded lower of cost or market inventory valuation adjustments associated with a combination of factors, including the decline in quoted market hog prices and higher grain costs during the period. The renewable diesel plant in Hugoton, Kansas, began operations during the third quarter of 2022. Management is unable to predict market prices for pork products or biodiesel or the costs of feed or third-party hogs for future periods. Based on current conditions, management anticipates this segment will not be profitable in 2023.

Income from affiliates increased $21 million for the year ended December 31, 2022 compared to 2021 primarily due to improved operations at STF.

Net sales for the Pork segment increased $540 million for the year ended December 31, 2021 compared to 2020. The increase was primarily the result of higher prices of pork products sold, and to a lesser extent, higher prices and volumes of market hogs and higher biodiesel prices, partially offset by lower volumes of pork products sold.

Operating income for the Pork segment increased $96 million for the year ended December 31, 2021 compared to 2020. The increase was primarily due to higher margins on pork product sales and market hogs due to higher sales prices, partially offset by higher hog costs related to feed and higher selling, general and administrative expenses.

Income from affiliates increased $12 million for the year ended December 31, 2021 compared to 2020 due to improved results at both STF and Daily’s primarily related to the commodity markets and return of sales volumes post COVID-19 disruptions.

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CT&M Segment

Net sales for the CT&M segment increased $1.1 billion for the year ended December 31, 2022 compared to 2021. The increase primarily reflected higher sales prices of commodities, and to a lesser extent, higher volumes to third-party customers, partially offset by lower volumes to affiliates due to timing of shipments.

Operating income for the CT&M segment increased $90 million for the year ended December 31, 2022 compared to 2021. The increase primarily reflected higher margins on certain commodities, costs associated with operational changes recorded in 2021 not repeated in the current year, and derivative contract gains of $7 million related to the change in mark-to-market adjustments compared to losses of $7 million in 2021. Due to worldwide commodity price fluctuations, the uncertain political and economic conditions in the countries in which this segment operates and the volatility in the commodity markets, management is unable to predict sales and operating results for this segment for future periods. However, management anticipates positive operating income for this segment in 2023, excluding the effects of marking to market derivative contracts.

Had Seaboard not applied mark-to-market accounting to its derivative instruments, operating income for this segment would have been lower by $7 million and $15 million in 2022 and 2020, respectively, and higher by $7 million in 2021. While management believes its commodity futures, options and foreign exchange contracts are primarily economic hedges of its firm purchase and sales contracts or anticipated sales contracts, Seaboard does not perform the extensive record-keeping required to account for these transactions as hedges for accounting purposes. Accordingly, while the changes in fair value of the derivative instruments were marked to market, the changes in value of the firm purchase or sales contracts were not. As products are delivered to customers, these existing marked-to-market adjustments should be primarily offset by realized margins or losses as revenue is recognized over time and therefore, these marked-to-market adjustments could reverse in fiscal 2023. Management believes eliminating these marked-to-market adjustments provides a more reasonable presentation to compare and evaluate period-to-period financial results for this segment.

Net sales for the CT&M segment increased $1.2 billion for the year ended December 31, 2021 compared to 2020. The increase primarily reflected higher sales prices of most commodities, and to a lesser extent, higher volumes to third-party customers, partially offset by lower volumes to affiliates due to timing of shipments.

Operating income for the CT&M segment decreased $57 million for the year ended December 31, 2021 compared to 2020. The decrease primarily reflected derivative contract losses of $22 million related to the change in mark-to-market adjustments, $18 million of goodwill and property, plant and equipment impairment charges related to plans to dispose of immaterial businesses, and higher selling, general and administrative expenses.

Income from affiliates increased $20 million for year ended December 31, 2021 compared to 2020 primarily due to improved results from several of this segment’s affiliates related to a return of sales volumes post COVID-19 disruptions.

Marine Segment

Net sales for the Marine segment increased $647 million for the year ended December 31, 2022 compared to 2021. The increase was primarily the result of higher freight rates, partially offset by lower cargo volumes.

Operating income for the Marine segment increased $394 million for the year ended December 31, 2022 compared to 2021. The increase was primarily the result of higher voyage revenue, partially offset by higher voyage-related costs, including charter-hire costs, fuel costs and other operational costs primarily due to increased prices. Management cannot predict changes in fuel costs or other voyage costs, cargo volumes or freight rates for future periods; however, management anticipates this segment will be profitable in 2023.

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Net sales for the Marine segment increased $391 million for the year ended December 31, 2021 compared to 2020. The increase was primarily the result of an increase in average freight rates due to strong demand and the global shortage of vessels, and higher cargo volumes. In 2020, cargo volumes were lower due to many of Seaboard Marine’s customers temporarily shutting down due to government orders associated with the COVID-19 pandemic and the recovery of operations taking time.

Operating income for the Marine segment increased $176 million for the year ended December 31, 2021 compared to 2020. The increase was primarily the result of higher voyage revenue, partially offset by higher fuel costs due to the increase in both price and consumption, higher charter-hire costs due to increased rates, and higher terminal and intermodal trucking costs related to the increase in cargo volumes.

Sugar and Alcohol Segment

Net sales for the Sugar and Alcohol segment increased $6 million for the year ended December 31, 2022 compared to 2021. The increase primarily reflected higher prices of sugar and alcohol sold, partially offset by lower volumes of alcohol, sugar and energy sold as a result of low inventory levels from recent harvests. Sugar and alcohol sales are denominated in Argentine pesos, and an increase in local sales prices may be offset by exchange rate changes in the Argentine peso against the U.S. dollar.

Operating income for the Sugar and Alcohol segment increased $9 million for the year ended December 31, 2022 compared to 2021. The increase primarily reflected higher margins on sugar and alcohol sales, partially offset by lower volumes sold. Management cannot predict local sugar and alcohol prices or the volatility in the currency exchange rate for future periods. Based on these conditions, management cannot predict if this segment will be profitable in 2023.

Net sales for the Sugar and Alcohol segment increased $17 million for the year ended December 31, 2021 compared to 2020. The increase primarily reflected higher prices and volumes of alcohol sold related to strong demand post the COVID-19 pandemic lockdown, partially offset by lower sugar sales.

Operating income for the Sugar and Alcohol segment remained the same for the year ended December 31, 2021 compared to 2020. Higher margins on alcohol sales were primarily offset by lower sugar sales and higher sugar production costs.

Power Segment

Net sales for the Power segment increased $98 million for the year ended December 31, 2022 compared to 2021. The increase primarily reflected more power generation with EDM III also in operation, and to a lesser extent, higher spot market rates as a result of higher fuel prices. During the second quarter of 2022, EDM III was placed in service with capacity to generate 148 megawatts of electricity.

Operating income for the Power segment increased $23 million for the year ended December 31, 2022 compared to 2021, primarily due to higher revenues, partially offset by higher fuel and other operational costs. Management cannot predict fuel costs or the extent that spot market rates will fluctuate compared to fuel costs or other power producers for future periods; however, management anticipates this segment will be profitable in 2023. While EDM II remains in operation in the Dominican Republic, Seaboard continues to explore strategic alternatives for this barge, including a sale or relocation.

Net sales for the Power segment decreased $4 million for the year ended December 31, 2021 compared to 2020. The decrease primarily reflected lower production related to the installation of EDM III, temporary fuel constraints and more power generation from lower variable-cost producers, offset by an increase in spot market rates as a result of higher fuel prices. Typically, lower cost power plants are dispatched before those with higher costs.

Operating income for the Power segment decreased $12 million for the year ended December 31, 2021 compared to 2020 primarily due to lower revenues and higher operational costs related to increased fuel, maintenance and labor costs associated with the installation of EDM III.

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Turkey Segment

The Turkey segment, accounted for using the equity method, represents Seaboard’s investment in Butterball. The increase in income from affiliate for 2022 compared to 2021 was primarily the result of higher selling prices, partially offset by lower volumes of turkey products sold and higher feed and plant production costs. The decrease in income from affiliate for 2021 compared to 2020 was primarily the result of lower sales volumes and higher live and plant production costs due to increased feed and labor prices, partially offset by higher sales due to increased prices. Management is unable to predict market prices for turkey products or the cost of feed for future periods; however, management anticipates this segment will be profitable in 2023.

Selling, General and Administrative Expenses

Selling, general and administrative (“SG&A”) expenses for the year ended December 31, 2022 increased $13 million compared to 2021. The increase was primarily the result of higher consulting, travel and other office expenses, partially offset by lower costs associated with Seaboard’s deferred compensation program. Higher personnel costs related to wages and other benefits were offset with lower pension settlements. SG&A expenses for the year ended December 31, 2021 increased $31 million compared to 2020. The increase was primarily the result of higher personnel costs including annual raises and bonuses associated with improved financial performance, more consulting fees associated with legal and other advisory matters, an increase in travel costs as vaccinations became available and bad debt expense. The deferred compensation program costs are offset by the effect of the mark-to-market on investments recoded in other investment income (loss), net.

Interest Expense

Interest expense totaled $40 million, $13 million and $19 million for the years ended December 31, 2022, 2021 and 2020, respectively. The increase in interest expense for 2022 compared to 2021 primarily related to higher interest rates on outstanding debt and mark-to-market gains on interest rate swap agreements in the prior year. The decrease in interest expense for 2021 compared to 2020 primarily related to mark-to-market fluctuations on interest rate swap agreements and lower interest rates on outstanding debt, partially offset by less capitalized interest related to capital expenditure investments. During the third quarter of 2021, Seaboard terminated all of its interest rate swap agreements.

Interest Income

Interest income totaled $32 million, $22 million and $22 million for the years ended December 31, 2022, 2021 and 2020, respectively. Interest income primarily includes interest earned on debt securities.

Other Investment Income (Loss), Net

Other investment income (loss), net totaled ($239) million, $133 million and $84 million for the years ended December 31, 2022, 2021 and 2020, respectively. The decrease in other investment income for 2022 compared to 2021 primarily reflected mark-to-market losses on short-term investments and a $46 million charge recorded during 2022 related to a long-term solar energy investment discussed further in Note 12 to the consolidated financial statements. The charge on this long-term investment is offset with the benefit of the investment tax credits recorded in income tax benefit (expense). The increase in other investment income for 2021 compared to 2020 primarily reflected realized gains on short-term investments, partially offset by mark-to-market losses.

Foreign Currency Gains (Losses), Net

Foreign currency gains (losses), net totaled $5 million, $16 million and ($31) million for the years ended December 31, 2022, 2021 and 2020, respectively. The decrease in foreign currency gains for 2022 compared to 2021 primarily reflected fluctuations in the euro, among fluctuations of other currency exchange rates in several foreign countries. The increase in foreign currency gains for 2021 compared to 2020 primarily reflected gains in the euro, Zambian kwacha and South African rand, among fluctuations of other currency exchange rates in several foreign countries.

Income Tax Expense

The 2022 effective tax rate was lower than the 2021 effective tax rate primarily due to an increase in federal investment tax credits available in 2022 and a change in mix of foreign and domestic earnings, with foreign earnings generally taxed at lower rates. The 2021 effective tax rate was higher than the 2020 effective tax rate primarily due to increased earnings which decreased the proportional effect of tax credits available to offset the associated income tax. See Note 12 to the consolidated financial statements for further information on Seaboard’s income taxes.

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CRITICAL ACCOUNTING ESTIMATES

The preparation of Seaboard’s consolidated financial statements requires Seaboard to make estimates, judgments, and assumptions. See Note 1 to the consolidated financial statements for a discussion of significant accounting policies. Management has identified the accounting estimates believed to be the most important to the portrayal of Seaboard’s financial condition and results of operations, and those that require management’s most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of inherently uncertain matters. Management has reviewed these critical accounting estimates with the Audit Committee of the Board of Directors.

Accrued Pension Liability – The measurement of Seaboard’s pension liability and related expense is dependent on a variety of assumptions and estimates regarding future events. These assumptions include discount rates, assumed rate of return on plan assets, compensation increases, mortality rates and retirement rates. The discount rate and return on plan assets are important elements of liability and expense measurement and are reviewed on an annual basis. The effect of decreasing both the discount rate and assumed rate of return on plan assets by 50 basis points would be an increase in pension expense of approximately $1 million per year. The effects of actual results differing from the assumptions (i.e. gains or losses) are primarily accumulated in accrued pension liability and amortized over future periods if it exceeds the 10% corridor and, therefore, could affect Seaboard’s recognized pension expense in such future periods, as permitted under GAAP. See Note 9 to the consolidated financial statements for discussion of the pension rates and assumptions.

Income Taxes – Income taxes are determined by management based on current tax regulations in the various worldwide taxing jurisdictions in which Seaboard conducts its business. In various situations, accruals have been made for estimates of the tax effects for certain transactions, business structures, the estimated reversal of timing differences and future projected profitability of Seaboard’s various business units based on management’s interpretation of existing facts, circumstances and tax regulations. Should new evidence come to management’s attention that could alter previous conclusions, if tax laws change or if taxing authorities disagree with the positions taken by Seaboard, the change in estimate could result in a material adverse or favorable impact on the financial statements. An increase in the future U.S. federal income tax rate of 5% would decrease tax expense on the reversal of timing differences by approximately $3 million as a one-time adjustment, which would be fully reflected in the period of enactment.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Seaboard is exposed to various types of market risks in its day-to-day operations. Primary market risk exposures result from changing commodity prices, foreign currency exchange rates, interest rates and equity prices. Occasionally derivatives are used to manage these overall market risks; however, Seaboard does not perform the extensive record-keeping required to account for derivative transactions as hedges. Since these derivatives are not accounted for as hedges, fluctuations in the related prices could have a material impact on earnings in any given year. From time to time, Seaboard also enters into speculative derivative transactions related to its market risks.

Commodity price changes affect the cost of necessary raw materials and other inventories, finished product sales and firm sales commitments. Seaboard uses various grain, hog, oilseed and other commodity futures and options purchase contracts to manage certain risks of increasing prices of raw materials and firm sales commitments or anticipated sales contracts. Short sales contracts are used to offset the open purchase derivatives when the related commodity inventory is purchased in advance of the derivative maturity, effectively offsetting the initial futures or option purchase contract.

The political and economic conditions of the countries in which Seaboard does business, along with fluctuations in the value of the U.S. dollar, cause volatility in currency exchange rates, which exposes Seaboard to fluctuating foreign currency gains and losses that cannot be predicted. Since changes in foreign currency exchange rates affect the cash paid or received on foreign currency-denominated receivables and payables, Seaboard manages certain of these risks through the use of foreign currency exchange agreements.

The following table presents the sensitivity of the fair value of Seaboard’s derivatives to a hypothetical 10% change in market prices and foreign exchange rates as of December 31, 2022 and 2021. The fair value is calculated for each item by valuing each net position at quoted market prices as of the applicable date.

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Equity price risk is the risk that Seaboard may incur losses due to adverse changes in the market prices of the equity securities it holds in its short-term investment portfolio. Market prices for equity securities are subject to fluctuation and may result from perceived changes in the underlying economic characteristics of the investee, the relative price of alternative investments and general market conditions. As of December 31, 2022 and 2021, the fair value of Seaboard’s marketable equity securities was approximately $602 million and $665 million, respectively, and a hypothetical 10% change in market prices would impact the income statement by $60 million and $67 million, respectively.

As changes in interest rates affect the cash required to service variable-rate debt, Seaboard may use interest rate exchange agreements to manage risks of increasing interest rates. At December 31, 2022, Seaboard had variable-rate debt outstanding of $670 million with an interest rate of 6.01%. A hypothetical 10% change in interest rates effective at December 31, 2022, would have a minimal impact on interest expense. Long-term debt sensitive to changes in interest rates as of December 31, 2021 totaled $678 million with an interest rate of 1.73%

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Item 8. Financial Statements and Supplementary Data

Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors

Seaboard Corporation:

Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting

We have audited the accompanying consolidated balance sheets of Seaboard Corporation and subsidiaries (the Company) as of December 31, 2022 and 2021, the related consolidated statements of comprehensive income, changes in equity, and cash flows for each of the years in the three-year period ended December 31, 2022, and the related notes (collectively, the consolidated financial statements). We also have audited the Company’s internal control over financial reporting as of December 31, 2022, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2022, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2022 based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.

Basis for Opinions

The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matter

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Sufficiency of audit evidence over net sales

As described in Note 13 to the consolidated financial statements, the Company earned $11.2 billion of net sales in 2022. Net sales were primarily generated by the Company’s Pork, Commodity, Trading and Milling, Marine, Sugar and Alcohol, and Power operations, which were dispersed over numerous countries. We identified the evaluation of the sufficiency of audit evidence over net sales as a critical audit matter. Evaluating the sufficiency of audit evidence obtained required auditor judgment due to the geographical dispersion of net sales. Furthermore, given the disaggregation of local management and language differences between locations, our audit team consisted of auditors located in multiple countries around the world. The following are the primary procedures we performed to address this critical audit matter. We evaluated the nature and amounts of the Company’s net sales at its various locations and applied auditor judgement to determine the locations at which procedures were to be performed. We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s net sales process, including controls related to the recognition of global net sales amounts. We tested samples of individual net sales transactions by comparing the amounts recognized by the Company to relevant underlying documentation such as purchase orders, contractual arrangements, and delivery documents, as applicable. In addition, we evaluated the sufficiency of audit evidence obtained over net sales by assessing the results of procedures performed, including the appropriateness of the nature and extent of audit effort.

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We have served as the Company’s auditor since 1959.

Kansas City, Missouri

February 14, 2023

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SEABOARD CORPORATION

Consolidated Statements of Comprehensive Income

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SEABOARD CORPORATION

Consolidated Balance Sheets

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SEABOARD CORPORATION

Consolidated Statements of Changes in Equity

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