CHS reports $177.9 million in first quarter net income

Truck delivering propane to residential home in winter

Significant increase in fall propane demand helped balance difficult market conditions

CHS reported net income of $177.9 million for the first quarter of fiscal year 2020 that ended Nov. 30, 2019. This compares to net income of $347.5 million in the first quarter of fiscal year 2019.

The results for the first quarter of fiscal year 2020 reflect:

  • Revenues of $7.6 billion compared to revenues of $8.5 billion for the first quarter of fiscal year 2019.
  • Strong supply chain performance in our propane business that was a positive contributor resulting from efficient sourcing of propane during significantly increased fall demand – brought on by unseasonably early cold and wet weather during harvest – for crop drying and home heating.
  • Less advantageous market conditions in our refined fuels business compared to the first quarter of fiscal year 2019, during which the company experienced historically wide pricing spreads between Canadian crude oil and crude oil from the United States. CHS processes Canadian crude oil at its refineries in Laurel, Montana, and McPherson, Kansas.
  • Poor weather conditions that occurred in fiscal year 2019 and the first quarter of fiscal year 2020 continued to negatively impact our Ag segment’s operations, resulting in lower crop yields, poor grain quality in some areas and lower fall crop nutrients sales.
  • Pressure on grain volume and margins due to slow movement of grain associated with unresolved trade issues between the United States and foreign trading partners.
  • Decreased fertilizer volumes compared to the first quarter of fiscal year 2019 due to a slow harvest in the first quarter of fiscal year 2020.

“We are not immune to the challenges of our industry, and our first quarter results reflect the difficulties brought on by fall weather and ongoing trade tensions,” said Jay Debertin, president and CEO of CHS Inc. “The cooperative system, however, provides CHS and its owners stability to withstand these difficult times. Our focus remains on building efficiencies in our supply chain and on operating in this challenging agricultural environment.

“During a cold and wet harvest, we leveraged our supply chain to meet the significant increase in propane needs of our owners and customers,” Debertin continued. “Our focus on meeting the needs of our owners helped deliver the successful launch of two products – Acuvant™ and Trivar™ – that will be available for spring planting.

“We know the remainder of fiscal year 2020 will continue to present challenges, and we are confident in our ability to find opportunities in those challenges, to help our owners grow their businesses and to continue to strengthen our company,” he said. “No one feels those challenges more than our owners. We remain committed to supporting communities and experts as they address the stress felt across rural America.”

First Quarter Fiscal 2020 Business Segment Results

The following segment results were reported for the first quarter of fiscal year 2020 as compared to the first quarter of fiscal year 2019.

Energy
Pretax earnings of $162.2 million in the first quarter of fiscal year 2020 compared to $232.5 million for the first quarter of fiscal year 2019 reflect:

  • Significantly less advantageous market conditions, driven primarily by decreased crude oil spreads on heavy Canadian crude oil processed at our refineries and, to a lesser extent, decreased crack spreads in our refined fuels business compared to the same period during fiscal year 2019. The decreased crude oil differentials and lower crack spreads were partially offset by favorable hedging activity in refined fuels.
  • The decrease in pretax income for refined fuels was partially offset by significantly improved propane margins from a late, wet crop combined with unseasonably cold weather across much of CHS service area that led to increased fall demand for crop drying and home heating compared to the first quarter of fiscal year 2019.

Ag
Pretax loss of $13.9 million compared to pretax earnings of $80.3 million in the first quarter of fiscal year 2019 reflects:

  • Poor weather conditions in fiscal year 2019 that culminated in a late and smaller fall harvest, resulting in decreased demand for farm supplies and crop nutrient products.
  • Ongoing global trade tensions between the United States and foreign trading partners continued to negatively impact grain volumes and margins.
  • Lower margins in our processing and food ingredients business.

Nitrogen Production
Pretax earnings of $16.5 million compared to pretax earnings of $23.7 million in the first quarter of fiscal year 2019 reflect:

  • Lower equity income from our investment in CF Nitrogen, of which CHS has partial ownership, attributable to decreased market pricing of urea and urea ammonium nitrate, which are produced and sold by CF Nitrogen.

Corporate and Other
Pretax earnings of $20.7 million compared to pretax earnings of $30.8 million in the first quarter of fiscal year 2019 reflect:

  • Results primarily from lower equity income from our investments in Ardent Mills and Ventura Foods and decreased income in our financing and hedging businesses due to market-driven interest rate reductions and lower trading activity, respectively.
CHS 1st quarter balance sheet

CHS Inc. owners elect five board members during annual meeting

Portrait of newly and re-elected CHS Board Members

CHS owners elected five board members to three-year terms during the cooperative’s 2019 Annual Meeting held Dec. 5-6 in Minneapolis. Pictured (l. to r.) are: Kevin Throener, Hal Clemesen, Mark Farrell, Alan Holm and Steve Riegel.

Officers of board also elected by board peers following Annual Meeting

CHS owners elected five board members to three-year terms during the cooperative’s 2019 Annual Meeting held Dec. 5-6 in Minneapolis. Newly elected to three-year terms are:

Hal Clemensen succeeds former director Randy Knecht, who retired from the CHS Board of Directors on Dec. 6. Clemensen represents Region 4, covering South Dakota, and has been the president of the board of directors of Agtegra Cooperative since its formation in 2018. He was president of the South Dakota Wheat Growers Association from 2005 until its merger with North Central Farmers Elevator in 2018. He is a past director and is an active member of the South Dakota Soybean Association and an active member of South Dakota Corn Growers. In 2015, the National Council of Farmer Cooperatives named him Farmer Cooperative Director of the year. He raises corn, soybeans and wheat near Conde, South Dakota. He holds a Bachelor of Science in Agricultural Economic and Agricultural Business from South Dakota State University. Clemensen was appointed to the CHS Board’s Government Relations and Corporate Risk committees.

Kevin Throener succeeds former director Dennis Carlson, who retired from the board on Dec. 6, and represents Region 3, which covers North Dakota. Throener has been a director of CHS Dakota Plains Ag since 2014 and served as vice president of the Sargent County Farmers Union Board of Directors since 2007. He has also served on the Cogswell, North Dakota, Volunteer Fire Department since 1997 and was its chief from 2010 to 2018. Throener raises corn, soybeans and alfalfa and operates a feedlot and cow/calf business near Cogswell, North Dakota. Throener and his wife Ronda are first-generation farmers who built their operation from the ground up. He studied Agricultural Systems Management at North Dakota State University. He was appointed to the CHS Board’s Governance Committee and the CHS Foundation Board of Trustees.

Reelected to three-year terms are:

  • Mark Farrell, who operates a corn, soybean and wheat farm in Dane County, Wisconsin, representing Region 5.
  • Alan Holm, who operates a corn, soybean, sweet corn, peas and hay operation and has a cow-calf herd near Sleepy Eye, Minnesota, representing Region 1.
  • Steve Riegel, who raises corn, soybeans, alfalfa, dryland wheat and milo near Ford, Kansas, representing Region 8.

Following the Annual Meeting, the board held its annual re-organization meeting. Each of the following board members was elected to one-year officer terms:

  • Dan Schurr, chair
  • C.J. Blew, first vice chair
  • Jon Erickson, second vice chair
  • Russ Kehl, secretary-treasurer
  • Steve Riegel, assistant secretary-treasurer

CHS Board announces fiscal 2019 equity management decisions

CHS will return $180 million in cash patronage and equity redemptions to its owners based on fiscal 2019 earnings.

Of that $180 million, $90 million will be distributed in cash patronage and $90 million will be distributed through equity redemptions.

  • Of the $90 million in equity redemptions, $63 million will be returned to member cooperatives and $27 million to individual members.
    • The $27 million in redemptions of individual producer member equity will be provided based on qualifying requests from individual members (estates and age 70+).
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4 essential lubricant tips for winterizing farm equipment

Farm equipment sitting in storage

By Jon Woetzel, Manager Technical Services, Energy Lubricants, CHS from the Cenexperts blog

Harvest is tough. Once you’ve made it through some of the hardest weeks of the year, both you and your equipment deserve some R&R. But before your machines take a long winter’s nap, it’s important to get them ready for sitting dormant in the cold.

Even when your equipment isn’t running, lubricants play an essential role in keeping it protected. That’s why, as part of your yearly winterizing routine, you’ll want to assess your equipment’s fluids. Use these four lubricant tasks to protect your rigs all the way to spring.

1. Get a used oil analysis

Throughout harvest, your machines work overtime to meet the grueling demands of a farm’s busiest time of year. By the end of the season, all that wear and tear can take a toll on an engine, and seemingly small issues at this point can lead to bigger problems come spring.

A used oil analysis is an easy way to catch early warning signs of major issues that could be brewing inside your engine. This is because oil is the lifeblood of your equipment, touching nearly every part inside the engine.

Used oil analysis works by detecting any trace elements present in a sample of used oil from inside your rig. Based on the elements that turn up, lab technicians can identify a number of issues that may be waiting to happen in specific areas of your engine. Fix any issues before putting your equipment away, and you’ll set yourself up for success come time for planting. To get started, you can purchase a used oil analysis kit from your local CHS energy specialist.

2. Replace the engine oil

Once you’ve performed a used oil analysis, you may also want to consider an oil change before you put your machines away for winter. This is especially true if the results of your analysis reveal any traces of wear. After you make any repairs recommended by your analysis, give your machines some fresh, clean oil so you don’t leave acids and contaminants festering inside your engine for months on end.

Even if your used oil analysis comes back clean, you may still want to consider replacing your oil before winter. Remember, the longer an oil has been used, the less effective it becomes at protecting against rust and corrosion.

If you’re getting close to your change interval, it’s best to replace oil this season instead of waiting until spring. Just be sure to run the engine for at least 10 minutes before storing your rig to allow the oil to circulate. For protection all winter long, try a high-quality engine oil from Cenex such as MAXTRON® ENVIRO-EDGE® synthetic diesel engine oil, engineered for maximum lifespan and excellent protection against corrosive wear.

3. Top off your hydraulic tank

Another lubricant tip for winterizing your equipment is to top off hydraulic tanks. To function properly, hydraulic systems need to breathe, but since they’re not airtight, they’re prone to letting in moisture as equipment sits all winter. Condensation inside a hydraulic system is bad news due to the harmful corrosion it may cause.

The best way to prevent condensation in your hydraulic system over the winter is to minimize the airspace inside. The less opportunity air has to get in, the lower the chance that moisture will collect. Check your hydraulic fluid level, and if it’s not full, go ahead and top off your tank. Be careful, though, not to overfill. To further minimize condensation, you may also want to consider switching to a hydraulic fluid designed to prolong the life of your system’s seals, like MAXTRON® THF+.

4. Grease up moving parts

Finally, once you’ve taken care of your machines’ other fluids, complete the job by greasing any moving parts. Even though they’ll be sitting still all winter, moving parts can still corrode.Not only will a fresh coat of grease keep your equipment from rusting through the winter but it will also get it moving again easier come spring. For superior protection against rust and corrosion, try a Cenex grease such as MAXTRON® FS.

When the hard work of harvest is over, it can be tempting to overlook details like winterizing your equipment. But the period right after harvest is a valuable opportunity to take care of maintenance tasks that can fall through the cracks during busier times of year. Give your machines some TLC now, and you can both kick back soon for some well-deserved hibernation.

Co-op ownership opens a world of opportunities

A farmer and CHS employee holding a tablet standing together in a wheat field discussing cooperative ownership

When you choose to do business with CHS, you are connected to a world of opportunities powered by local experts.

As the nation’s leading farmer-owned cooperative, CHS creates connections that help its owners build their operations and their communities.

In celebration of National Co-op Month, we dug deep into the cooperative model to reveal seven benefits of being an owner of CHS. Benefits that extend far past the field. Watch a video on the benefits of cooperative ownership.

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New app puts CHS activity at your fingertips

farmer loggin in to MyCHS

Time. We never seem to have enough of it.  And every new tech tool seems to just add another online destination with a singular purpose. But not for CHS patrons. With a simple single sign-on, producers can see their CHS business activity all in one place, even if they have multiple accounts. Contracts, bookings, prepays, scale tickets, payment history and more for agronomy, energy, grain and seed business can be viewed, sorted – even downloaded – from anywhere, anytime. All from one, web-based app: MyCHS.

The biggest advantage? Saving time. CHS transactions are a touch away – whether in front of a laptop in a farm office, on a tablet in the field or on a phone in the tractor cab.

“I can customize what I can see,” says Lucas Goodwin, Minnesota farmer and MyCHS user. “Filtering is easy. And navigating between all the separate components, like the contracts and the settlements, is logical and quick.”

Lucas was among a group of CHS customers picked to give app feedback in small focus groups and then as a beta user, comparing the new MyCHS with the former Customer Resources tool.  Getting customer feedback early and ongoing during the development process was critical to making sure the web-based app fit the way today’s farmer wants to use technology.

“It’s a nice upgrade,” he concludes of MyCHS. He was a user of the former application. The recent upgrade provides all producers doing business with CHS with the data they need to make timely, information-rich decisions.

“Our CHS producers have continued to advance and look for ways to become the best they can be in some of the toughest markets they’ve experienced,” says Megan Schmit, director, Grain Procurement for CHS Country Operations division. “Even our producers who may not have called themselves tech savvy are using more and more tools to better their operation and MyCHS is giving them access to their total business with us, not just grain.”

Megan was part of the CHS team helping connect with farmers and finding out what would serve their information needs.

“I’m excited that we’re not stopping here,” she adds. “We’re going to continually take feedback from our producers and employees to keep improving and enhancing this tool for years to come.”

MyCHS is a free web-based app, available to any farmer or rancher doing business with CHS. It’s easy to register here and start seeing what MyCHS can do to help you.

© 2020 CHS Inc.