Net sales for the segment totaled $786 million, up 8% from $727 million in the same period a year ago. The increase primarily reflected higher sales prices for wheat sales to third parties and higher volumes of sales to affiliates and third parties, partially offset by lower corn and soybean meal sales prices and volumes to third parties.

“The decrease (in income) for the three-month period primarily reflected lower margins on affiliate and third-party sales, primarily on corn and rice commodities and higher selling, general and administrative costs,” Seaboard noted in a May 2 filing with the U.S. Securities and Exchange Commission. “The decrease was partially offset by fluctuations of $2 million of mark-to-market derivative contracts as discussed below.

“Due to worldwide commodity price fluctuations, the uncertain political and economic conditions in the countries in which this segment operates, and the current volatility in the commodity markets, management is unable to predict future sales and operating results for this segment. However, management anticipates positive operating income for this segment for the remainder of 2018, excluding the effects of marking to market derivative contracts.”

Seaboard said that if it had not applied mark-to-market accounting to its derivative instruments, operating income in the CT&M segment would have been lower by $6 million and $4 million for the three-month periods of 2018 and 2017, respectively.

“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,” the company said. “Accordingly, while the changes in 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 mark-to-market adjustments should be primarily offset by realized margins or losses as revenue is recognized over time, and these mark-to-market adjustments could reverse in 2018. Management believes eliminating these mark-to-market adjustments provides a more reasonable presentation to compare and evaluate period-to-period financial results for this segment.”

In the filing, Seaboard said it invested $36 million in property, plant and equipment during the first quarter of fiscal 2018, of which $5 million was for the CT&M segment. Seaboard said the CT&M investment primarily was of a normal recurring nature and included replacements of machinery and equipment, and general facility modernizations and upgrades.

During the first quarter, Seaboard said its CT&M segment acquired three flour mills and an associated grain trading business located in Senegal, Ivory Coast and Monaco for total consideration of $330 million. The acquisition was primarily funded using proceeds from Seaboard’s short-term investments and the incurrence of a note payable to the sellers, the company said.

“With this business, the CT&M segment expects to increase Seaboard’s flour and feed milling capacity and annual grain trading volumes,” the company noted in the filing. “Also during the first quarter, Seaboard’s CT&M segment invested total consideration of $18 million for a 50% noncontrolling interest in a grain trading and flour milling business in Mauritania.”

 Seaboard said in the filing it has budgeted capital expenditures totaling $202 million for the remainder of fiscal 2018, including $36 million for milling assets and other improvements to existing facilities and related equipment.

Overall, net income at Seaboard in the first quarter ended March 31 was $32 million, equal to $26.75 per share on the common stock, down 73% from $85 million, or $71.84 per share, in the same period a year ago. Net sales were $1.579 billion, up 13% from $1.399 billion.