CHS reports record first quarter earnings

Front loader empties crop nutrients in full warehouse

Higher margins across CHS Ag sector businesses resulted from strong global market conditions and robust demand for crop nutrients and other agronomy products, grains and oilseeds, soyoil and soymeal.

Strong global demand and improved supply chain efficiency generated $452.0 million in Fiscal 2022 first quarter net income

CHS Inc., the nation’s leading agribusiness cooperative, today released results for its first quarter ended Nov. 30, 2021. The company reported record quarterly net income of $452.0 million compared to $69.7 million in the first quarter of fiscal year 2021. The significant improvement in earnings was largely driven by strong global demand across key businesses compared with lower demand during the same period a year ago as a result of the COVID-19 pandemic.

Fiscal 2022 first quarter highlights include:

  • The Ag segment experienced robust global demand that drove commodity prices higher leading to a significant improvement in earnings compared to the same period during the prior year.
  • Strong demand and global market forces in the agronomy business resulted in improved earnings compared to the first quarter of 2021.
  • Refining margins were higher in our Energy segment and we also experienced more favorable pricing for Canadian crude oil which is processed by our refineries.
  • Equity earnings from the company’s CF Nitrogen investment improved as a result of increased urea and urea ammonium nitrate pricing due to favorable market conditions. 

“Our exceptionally strong financial performance in the first quarter of fiscal year 2022 reflects the support of local cooperatives and producers, as well as the hard work and dedication of our employees around the world, who remain focused on delivering superior value for our owners. That support and hard work, along with the investments we continue to make in critical assets and technology advancements are leading to operational improvements and stronger customer engagement, which are driving earnings momentum,” said Jay Debertin, president and CEO of CHS Inc.

“Our Energy segment continues to see both margin and volume expansion driven by increased global demand. I remain positive for the year ahead as we continue to improve the customer experience and create efficiency gains throughout our expansive network, all of which is leading to increased market access, added value and sustainable growth for our local cooperative and farmer owners.”

Energy

Pretax earnings of $69.2 million represent a $136.4 million increase versus the same period a year ago and reflect:

  • Improved market conditions in our refined fuels business led to increased earnings, driven by higher refining margins and more favorable pricing of heavy Canadian crude oil processed by our two CHS refineries.
  • Higher refining margins were partially offset by the higher cost of renewable energy credits compared to a year ago. Additionally, lower propane margins due to the reversal of unrealized hedging gains also impacted the first quarter of fiscal 2022. 

Ag

Pretax earnings of $286.4 million represent a $203.4 million increase versus the same period a year ago and reflect:

  • Higher margins across all our Ag segment businesses resulted from strong global market conditions and robust demand for agronomy products, grains and oilseeds, soyoil and soymeal.
  • Lower volumes in the quarter were attributable to a smaller overall wheat crop due to drought conditions in some parts of the United States and the impact from Hurricane Ida on the Gulf Coast.

Nitrogen Production

Pretax earnings of $96.6 million represents a $92.1 million increase versus the same period a year ago and reflect:

  • Higher equity method income attributed to strong demand and increased prices of urea and urea ammonium nitrate which are produced and sold by CF Nitrogen.

Corporate and Other

Pretax earnings of $14.5 million represent a $10.3 million decrease versus the same period a year ago and reflect:

  • Lower equity income from our investment in Ventura Foods, which experienced less favorable market conditions for edible oils.
FY2022 Quarter 1 CHS Earnings Table

This document and other CHS Inc. publicly available documents contain, and CHS officers and representatives may from time to time make, “forward-looking statements” within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as “anticipate,” “intend,“plan,“goal,“seek,“believe,“project,“estimate,“expect,“strategy,“future,” “likely,“may,“should,“will” and similar references to future periods. Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on CHS current beliefs, expectations and assumptions regarding the future of its businesses, financial condition and results of operations, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of CHS control. CHS actual results and financial condition may differ materially from those indicated in the forward-looking statements. Therefore, you should not place undue reliance on any of these forward-looking statements. Important factors that could cause CHS actual results and financial condition to differ materially from those indicated in the forward-looking statements are discussed or identified in CHS filings made with the U.S. Securities and Exchange Commission, including in the “Risk Factors” discussion in Item 1A of CHS Annual Report on Form 10-K for the fiscal year ended August 31, 2021. These factors may include: changes in commodity prices; the impact of government policies, mandates, regulations and trade agreements; global and regional political, economic, legal and other risks of doing business globally; the impact of the ongoing COVID-19 outbreak or other similar outbreaks; the impact of market acceptance of alternatives to refined petroleum products; consolidation among our suppliers and customers; nonperformance by contractual counterparties; changes in federal income tax laws or our tax status; the impact of compliance or noncompliance with applicable laws and regulations; the impact of any governmental investigations; the impact of environmental liabilities and litigation; actual or perceived quality, safety or health risks associated with our products; the impact of seasonality; the effectiveness of our risk management strategies; business interruptions and casualty losses; the impact of workforce factors; our funding needs and financing sources; financial institutions’ and other capital sources’ policies concerning energy-related businesses; uncertainty regarding the transition away from LIBOR and the replacement of LIBOR with an alternative reference rate; technological improvements that decrease the demand for our agronomy and energy products; our ability to complete, integrate and benefit from acquisitions, strategic alliances, joint ventures, divestitures and other nonordinary course-of-business events; security breaches or other disruptions to our information technology systems or assets; the impact of our environmental, social and governance practices; the impairment of long-lived assets; and other factors affecting our businesses generally. Any forward-looking statements made by CHS in this document are based only on information currently available to CHS and speak only as of the date on which the statement is made. CHS undertakes no obligation to update any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future developments or otherwise except as required by applicable law.

GROWMARK and CHS Announce – Cooperative Ventures

Aerial view of a tractor plowing a field with Ag Tech/Cooperative Ventures icons overlaid.

A New Capital Fund Aimed at Ag Tech Startups

GROWMARK and CHS today announced the formation of Cooperative Ventures, a new capital fund that will focus on creating advancements in breakthrough technologies for the agriculture industry. The fund will provide differentiated value to startups in the agricultural ecosystem by leveraging the expansive, connected networks, unparalleled access to the farmgate and proven success of the two agricultural cooperatives. Both companies will be equal partners in the $50 million fund, which will be established as its own separate legal entity.

The combined markets of the two companies cover millions of acres and thousands of farmers that will create an industry-leading test field for products and services within North America. The fund has identified three core investment areas, or “Fields of Play,” to maximize the impact of each investment:  crop production, supply chain, and sustainability.

“This is a terrific opportunity to act cooperatively by working together on a venture meaningful to agriculture and our corresponding supply chains,” said GROWMARK CEO Jim Spradlin. “Both GROWMARK and CHS have trusted relationships and expertise within our networks, which will provide tremendous value for technology startups and ultimately benefit our respective customers. This is a natural evolution of GROWMARK’s AgValidity trial and testing program.”

“This partnership will help accelerate technology solutions to existing and emerging challenges in agriculture and is yet another way CHS creates connections to empower agriculture,” said Jay Debertin, president and CEO of CHS Inc. “Our ongoing commitment to investment in growth and innovation for the benefit of CHS owners and the cooperative system further places CHS and GROWMARK at the forefront of cutting-edge technology solutions by leveraging our deep expertise and strong connections with farmer-owners.” 

GROWMARK and CHS will provide tech startups unprecedented access to robust distribution capabilities within multiple value chains, allowing for opportunities to test and refine at different scales. Having cooperative member-owners and customers within the same ecosystem will take these innovative ideas to a new level to create shareholder value and customer-focused solutions.

Special attention will be paid to the startup’s strategic fit with both GROWMARK and CHS. Other factors will be based on their drive to lead in the startup space, the ability to deliver value and quality, the experience of management, and ultimately the ability to take a product or service to market. Cooperative Ventures will be comprised of teams based out of Bloomington, Illinois, and St. Paul, Minnesota.

 About GROWMARK:

GROWMARK is an agricultural cooperative serving almost 400,000 customers across North America, providing agronomy, energy, facility engineering and construction, and logistics products and services, as well as grain marketing and risk management services. Headquartered in Bloomington, Illinois, GROWMARK owns the FS trademark, which is used by its member cooperatives. GROWMARK also owns and operates SEEDWAY, the largest full-line seed company in the United States. More information is available at growmark.com.

CHS reports fiscal year 2021 net income of $554.0 million

arvesting soybeans

31% increase in net income over prior fiscal year; Strong global demand for grains and oilseeds drive results

CHS Inc. reported net income of $554.0 million for the fiscal year ended Aug. 31, 2021, reflecting an increase of 31% or $131.5 million compared to fiscal year 2020.

Key financial drivers for fiscal year 2021 include:

  • Consolidated revenues of $38.4 billion for fiscal year 2021 compared to $28.4 billion for fiscal year 2020, a year-over-year increase of 35%. 
  • Significantly improved earnings across our Ag segment compared to the prior year driven by strong global demand for grains and oilseeds which drove commodity prices higher and a full year of improved trade relations between the United States and foreign trade partners. 
  • Equity earnings from investments, particularly from CF Nitrogen and Ventura Foods, were a significant source of earnings during fiscal year 2021.
  • While improved refining margins in our refined fuels business resulted in increased margins as demand shocks from the COVID-19 pandemic began to subside, the resulting margin improvements were more than offset by exceptionally high costs for renewable energy credits and less favorable pricing on heavy Canadian crude oil processed by our refineries, resulting in lower earnings.
(more…)

Co-op 101: What is a cooperative?

National Co-op Month graphic

October is National Co-op Month and a time to celebrate the cooperative model and the strength it brings to local communities.  

“CHS is proud to be part of the cooperative system and we’re driven by our purpose to create connections to empower agriculture,” says Jay Debertin, CHS president and CEO. “Our values of inclusion, integrity, cooperative spirit and safety guide us as we work together for shared success and to strengthen our communities.” 

Do you know what a co-op is? Here we break it down.  

  • What is a cooperative? A cooperative is defined by USDA as a user-owned and controlled business from which benefits are derived and distributed equitably on the basis of use or as a business owned and controlled by the people who use its services.  
  • Who determines policy? The CHS Board is made up of 17 member-owners, elected by the members.  
  • How are profits distributed? The business is operated for a profit; it’s how the profit is divided that makes a co-op unique. Unlike most corporations where the profits are distributed to stockholders, co-ops distribute profits to member-owners on a patronage basis. Patronage is a method of sharing profits among the members. It is based on how much they purchase and the profitability of the co-op.  
  • What kind of co-op system is CHS? CHS is a blended federated and centralized cooperative system. CHS is unique in that along with the federated system of member cooperatives, we also have Country Operations, made up of centralized retail locations dedicated to serve member-owners in their respective geographies. Along with member cooperatives, those member-owners of Country Operations locations vote for board members at the CHS annual meeting or are represented by delegates from their business unit at the annual meeting.  

Help us celebrate National Co-op Month by joining the conversation on social media using #CoopMonth. 

Plan Ahead for Your Fertilizer Needs

Fertilizer has been a hot topic for nearly a year. Last fall it all started as grain prices soared putting pressure on an already stressed supply chain. On top of that, last fall, an import duty was placed on phosphate products from multiple countries causing the domestic price of all phosphate-based products to skyrocket seemingly overnight. Next comes spring with the largest amount of optimism we have had in agriculture in several years. With optimism comes increased utilization of fertilizers, simple economics tell us that increased demand equates to increased prices. All these outside pressures affected prices for products bought in season this crop year. However, fortunately putting on fall fertilizer and prepaying early for spring products paid off massively this year. The last pressure on the market that really needs to be discussed is the potential duties on nitrogen.

Much like the duties we saw put on phosphates last fall (finalized last winter) there may be some duties on UAN from Russia and the Republic of Trinidad and Tobago. The claim is that product from Russia and the Republic of Trinidad and Tobago have hurt the US market by “dumping” product into the market to force prices down. These claims will go through a series of court hearings to see if there is validity to the claims. Weather or not these claims hold up in court, the uncertainty is being priced into the market. This claim is on UAN but that ultimately affects all nitrogen sources (UAN, Urea, Anhydrous ammonia). If you have more questions on these petitions filed, please reach out to your CHS agronomist.

With all the above pressures still impacting the fertilizer market today, locking in your fertilizer input needs early again and putting as much as possible down in the fall is looking to be the best option. Quite frankly there is some serious sticker shock when you are looking at fertilizer prices for this fall and coming spring compared to what you paid last fall and winter. This should not come as a surprise with the gain in the grain markets as well. I encourage you to sit down with your agronomists and do the math on the bushels of crop needed to cover the fertilizer bill for your crops individually. Even with the increase in prices, in most cases the actual bushels needed to pay for the fertilizer is similar to last year.

Overall, the fertilizer market is incredibly strong, much like the rain markets. Again, I encourage you to sit down and make a plan with your agronomist to get as much as possible out this fall as spring prices are likely going to be significantly higher than fall for P and K. Also, take a few minutes and read the article (linked below) about Levesol products and specifically Trivar for broadcast applications. With the investment you will be making on your farm for fertilizer, specifically phosphorus lets make sure it is protected and able to be utilized by the next crop. We have seen some incredible yield advantages with these products in both high and low yield environments. Talk to your agronomist to find out more on which of the Levesol products would work best for your operation.

Thank you for your continued support and business!

Written by Jordan Thiel, Agronomy Sales Manager

Supporting your Farm and Rural Lifestyle

The Kasson and Chatfield retail stores offer a wide range of products to support the farm and rural lifestyle.  We lead with bagged feed for almost any kind of livestock and companion animals.   But, we have so much more.  We carry a full-line of mineral and protein lick tubs.  New this year are tubs with garlic for fly control.  These have proven very effective bases on customer reports.  Loose mineral and blocks are also available.

A wide range of forage, turf and food plot seeds are available at your CHS stores. We also do seed quotes for CRP projects.  Bagged fertilizer and package herbicides are available to keep the homestead green and looking good throughout the growing season.

We have pest control products, quality Cenex lubricants, LP bottle fills, wild bird seeds, farm and home products and so much more to support the country lifestyle.

Stop in to meet our friendly staff and see all that your CHS retail stores have to offer.  Let us show you why we should be your first stop for the things you need to make the country life a little more rewarding.   

New Efficiencies in Energy

Exciting news in the energy department! We are moving all our fuel delivery and propane bobtails to a new in-truck software called Energy Force. Our old software was good but getting outdated. With this new software, we will be able to tie the tank monitors to the system and that will optimize the routes and plan our deliveries every day.

This will greatly improve our efficiencies and maybe even help the drivers schedule so they are home at night enjoying time with their families. Of course, as with any change, they are some bumps to work through, but it is starting off smoothly. Please be patient with us as we implement this new software but rest assured, we are doing our best to make the transition as smooth and seamless as possible for you, our patrons.

If you have any questions feel free to call our office: 507-289-4086

July 2021 Plot Update

Corn Aerial

Soybean Aerial

Plots are looking strong and have been helped by excellent planting conditions and timely rain. Timely rain will need to continue as we are roughly 5 inches of precipitation behind the 30 year average and as plant uptake increases during the reproductive (R) stages. For instance, corn uses 0.25 – 0.32 inches per day at R1 growth stage. Many plots were planted early and have accumulated 150 GDUs (or more) above than the 30 year average. This combination has pushed us a week or two ahead of where we would “normally” be at for corn and soybean growth stages. The most surprising is how far soybeans have come. In some plots, we flowered before the Summer Solstice! Currently, we are in the R3 growth stage in soybeans, which usually occurs late July or early August.

We just applied a foliar fungicide to the corn and soybeans. CHS Acuvant™ was helpful because we were early on the corn. Acuvant is NPE-free; therefore, it will not cause arrested ear syndrome in corn. We are seeing significantly better canopy penetration as well as leaf coverage with Acuvant.

Thank you,

Michael Gehling, Precision Ag Specialist

CHS reports $273.6 million in fiscal 2021 third-quarter net income

Closeup of green soybean rows

Strongest third-quarter net earnings since 2014; $50 million of additional owner equity redemptions authorized in 2021

CHS Inc. released results for its fiscal third quarter ended May 31, 2021. The company reported net income of $273.6 million compared to $97.6 million in the third quarter of fiscal year 2020, an increase of 180.2%. Significant year-over-year earnings growth in all business segments — Energy, Ag and Nitrogen Production — and Corporate and Other businesses each contributed to the increase.

Reflecting strong company performance, the CHS Board of Directors has approved $50 million in additional equity redemptions to member cooperatives and individual owners since the December 2020 CHS Annual Meeting. The increase is incremental to $33 million in approved equity redemptions announced at the 2020 annual meeting, for a total of $83 million in planned owner equity redemptions in fiscal 2021. A distribution of $30 million in cash patronage was also made to owners in early calendar 2021, based on business transacted with CHS in fiscal 2020.

“Robust performance across CHS resulted in a very strong third quarter,” said Jay Debertin, president and CEO of CHS Inc. “Strong global demand in agricultural markets and the hard work we have been doing to gain efficiencies across our supply chain led to higher volumes in nearly every business area, significantly improving our Ag segment earnings compared to the prior year’s third quarter.

“We also are seeing increasing momentum in pandemic recovery as restrictions ease and vaccination efforts progress, which has had a favorable impact on our Energy segment results and overall performance.”

Fiscal 2021 third-quarter highlights

  • Revenues of $10.9 billion grew 50.9% from $7.2 billion in the third quarter of fiscal 2020.
  • Earnings were up by more than 40% across all business segments (and Corporate and Other businesses) compared to both the second quarter of fiscal 2021 and the third quarter of the previous fiscal year.

Energy segment results

  • Improved refined fuels margins resulted in fiscal 2021 third quarter margin gains, as did the absence of a $42.0 million noncash charge to reduce refined fuels inventories to their market value that impacted the prior year’s third quarter, but did not reoccur in the third quarter of fiscal 2021.
  • Improved margins in the company’s refined fuels business were partially offset by significantly higher prices of renewable energy credits that had a negative impact on margins of approximately $82.0 million, less favorable pricing on heavy Canadian crude oil and lower propane margins due to the reversal of hedging gains recognized during the prior year.
  • Overall, revenues increased by 24.2% and earnings increased by $59.6 million over the fiscal 2021 second quarter, reflecting volume and margin recovery from the effects of the pandemic.

Ag segment results

  • Strong global demand drove commodity prices higher, and improved trade relations between the United States and foreign trade partners led to continued higher volumes for grain and oilseed, which significantly improved Ag segment earnings compared to the prior year’s third quarter.
  • Higher overall margins were partially offset by mark-to-market losses for certain processing and food ingredients products, which the company expects to reverse over time.
  • Lower volumes of feed and farm supplies were partially offset by increased volumes for agronomy products, stemming from stronger demand due to favorable weather conditions, compared with the previous year’s third quarter.

Other focus areas

  • Nitrogen Production segment earnings increased in the quarter due to higher income attributed to increased sale prices of urea and urea ammonium nitrate.
  • Favorable market conditions for edible oils and a recovery in sales volumes compared to earlier in the pandemic drove significantly increased income through the company’s investment in Ventura Foods, LLC.
  • Focused cost-reduction initiatives, launched in fiscal 2021, continued to gain traction in reducing year-to-date marketing, general and administrative expenses.
  • The company began to bring employees back to its global offices in full or hybrid capacities as pandemic restrictions lifted. The costs of these activities are not expected to be material.

For the nine months ended May 31, 2021, CHS reported net income of $305.0 million versus $401.0 million for the same period in fiscal 2020.

“We are encouraged by overall improvements in the global economy and the positive traction we’re gaining at CHS with initiatives focused on working more efficiently and effectively throughout the enterprise,” said Debertin. “We are optimistic conditions will continue to improve over the next 12 months. The resilience of our employees and their commitment to our owners and customers has been inspiring and we look forward to the future and continued shared success.”

FY2021 Quarter 3 CHS Inc. earnings statement by segment
*Earnings is defined as income (loss) before income taxes

This document and other CHS Inc. publicly available documents contain, and CHS officers and representatives may from time to time make, “forward-looking statements” within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as “anticipate,” “intend,” “plan,” “goal,” “seek,” “believe,” “project,” “estimate,” “expect,” “strategy,” “future,” “likely,” “may,” “should,” “will” and similar references to future periods. Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on CHS current beliefs, expectations and assumptions regarding the future of its businesses, financial condition and results of operations, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of CHS control. CHS actual results and financial condition may differ materially from those indicated in the forward-looking statements. Therefore, you should not place undue reliance on any of these forward-looking statements. Important factors that could cause CHS actual results and financial condition to differ materially from those indicated in the forward-looking statements are discussed or identified in CHS filings made with the U.S. Securities and Exchange Commission, including in the “Risk Factors” discussion in Item 1A of CHS Annual Report on Form 10-K for the fiscal year ended August 31, 2020, and Item 1A of Part II of CHS Quarterly Report on Form 10-Q for the quarterly period ended May 31, 2021. These factors may include: changes in commodity prices; the impact of government policies, mandates, regulations and trade agreements; global and regional political, economic, legal and other risks of doing business globally; the impact of the ongoing COVID-19 outbreak or other similar outbreaks; the impact of market acceptance of alternatives to refined petroleum products; consolidation among our suppliers and customers; nonperformance by contractual counterparties; changes in federal income tax laws or our tax status; the impact of compliance or noncompliance with applicable laws and regulations; the impact of any governmental investigations; the impact of environmental liabilities; actual or perceived quality, safety or health risks associated with our products; the impact of seasonality; the effectiveness of our risk management strategies; business interruptions and casualty losses; the impact of workforce factors; our funding needs and financing sources; changes in the method of determining, or the replacement of, LIBOR; technological improvements that decrease the demand for our agronomy and energy products; our ability to complete, integrate and benefit from acquisitions, strategic alliances, joint ventures, divestitures and other nonordinary course-of-business events; security breaches or other disruptions to our information technology systems or assets; the impact of our environmental, social and governance practices; the impairment of long-lived assets; and other factors affecting our businesses generally. Any forward-looking statements made by CHS in this document are based only on information currently available to CHS and speak only as of the date on which the statement is made. CHS undertakes no obligation to update any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future developments or otherwise except as required by applicable law.

Keep your rural road safe

June is National Safety Month. CHS and Nationwide are proud to share a partnership focused on safety. The following information is provided by Nationwide, the #1 farm and ranch writer in the U.S.*

Nationwide logo

Safely navigating large agricultural equipment over rural roads to and from the fields is a challenge for even the best drivers. Nationwide reminds farmers to consider the following rules on the safe operation of equipment to help reduce the risk of motor vehicle collisions.

(more…)

© 2022 CHS Inc.