CHS goes with the grain. The company is one of the nation's leading publicly traded cooperative marketers of grain, oilseed, and energy resources. It represents farmers, ranchers, and co-ops from the Great Lakes to Texas. CHS trades grain and sells farm supplies through its stores to members. The group processes soybeans for use in food and animal feeds and grinds wheat into flour. Through joint ventures and a variety of business segments, it sells soybean oil and crop nutrient products and markets grain. CHS also provides insurance, financial, and risk-management services and operates petroleum refineries to sell Cenex-brand fuels, lubricants, and other energy products.
The cooperative marketer serves more than 50,000 producer-owners across 15 states through nearly six dozen service centers that are either company owned or locally governed. Globally, CHS boasts operations in Israel, China, and the US (in Kansas, Nebraska, and Minnesota).
CHS's ability to survive and thrive depends significantly upon prices for its mainstay commodities -- grains, oilseeds, crop nutrients, and flour, as well as petroleum products and natural gas. Fluctuations in prices are mainly driven by weather conditions, crop yield, existing commodity supplies, government regulation, and the global economy.
CHS's broad product portfolio helps to mitigate price volatility. In its Ag Business, demand for crop nutrient products have improved. Grain marketing joint ventures reduce its exposure, as well. CHS holds joint ventures with Cargill (TEMPCO) and with United Grain Corporation (United Harvest), as subsidiary of Tokyo general trading firm Mitsui & Co. The partnerships operate grain terminals and export grain for the Pacific Northwest market, as well as customers in the Western US.
Building on the success of its joint ventures, in 2013 CHS formed a flouring-milling partnership with agri-giants Cargill and ConAgra called Ardent Mills. The newly-formed partnership is North America's largest flour miller with annual sales of more than $4 billion. CHS holds 12% of Ardent Mills, while ConAgra and Cargill each own 44%.
CHS's country operations -- one of the largest country elevator operators in North America, by sales -- have inched up, too, thanks to strengthening crop nutrients and grain margins.
CHS's energy segment, primarily driven by the National Cooperative Refinery Association (NCRA), a majority owned subsidiary, operates oil refineries, and sells wholesale propane and other petroleum products, as well as transports them.
Mergers and Acquisitions
Strengthening its foothold in the value-added soy protein market, CHS in 2012 acquired Ashdod, Israel-based Solbar, which specializes in soy proteins and soy isoflavones. The company provides soy protein ingredients to manufacturers in the meat, vegetarian, beverage, bars, crisps, confectionary, bakery, and pharmaceutical manufacturing markets. As part of the deal, CHS gained manufacturing and logistics facilities in Ashdod and Ashkelon, Israel, as well as in Nebraska, Minnesota, and China. The Solbar purchase follows CHS's 2011 acquisition of Creston Bean Processing to fold its Creston plant into its CHS oilseed processing unit within its Ag division.
Revenues for CHS rose 10% in fiscal 2012 as compared to 2011. Increases can be attributed to its a boost in revenue from the company's reportable segment driven by higher prices related to a boost in sales volumes. The energy segment logged a 12% increase and accounted for 31% of the consolidated revenues. The company's net income increased 31% during the same reporting period due in part to the increase in net sales partially offset by a 9% increase in the cost of sales. In the Ag segment, cost of sales jumped primarily from rising sales volumes for refined fuel products. The cost of grains and oilseed procured through the Ag segment rose 5% due to an increase in the average cost per bushel.
Beyond the US, the company was part of a grain marketing joint venture (Multigrain A.G.) with Brazilian commodities-company PMG Trading and Mitsui. In 2011 CHS sold a nearly 45% stake in Multigrain to the Japanese firm for ¥47 billion yen (roughly $510 million). Mitsui, which already owned about a 45% stake, also bought PMG's interest. The deal marked one of the largest overseas farming investments made by a Japanese trading house.