CHS goes with the grain. The company is a leading publicly traded cooperative marketer of grain, oilseed, and energy resources in the US. 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.
CHS operates through four segments -- Energy, Ag, Nitrogen Production, and Foods.
The Energy segment produces and provides primarily for the wholesale distribution of petroleum products and transportation of those products.
The Ag segment purchases and further processes or resells grains and oilseeds originated by the company’s country operations business, by its member cooperatives and by third parties. It also serves as a wholesaler and retailer of crop inputs and produces and markets ethanol.
The Nitrogen Production segment consists solely of the company’s equity method investment in CF Nitrogen, which was completed in February 2016. The investment allows CHS to purchase granular urea and UAN annually from CF Nitrogen to a specified annual quantity.
The Foods segment consists of the company’s equity method investment in Ventura Foods.
The cooperative marketer serves more than 75,000 producer-owners across 16 US states through more than 60 service centers. Globally, CHS has operations in more than 20 countries in North America; South America; Europe, the Middle East and Africa; and the Asia-Pacific region.
Sales and Marketing
CHS makes some 80% of its refined fuel sales to members. The cooperative sold about 1.5 billion gallons of gasoline and about 1.8 billion gallons of diesel fuel in 2016. Sales are made wholesale to member cooperatives and non-member producers, local cooperatives, elevators, grain dealers, grain processors and crop nutrient retailers and through independent retailers operating Cenex-branded Zip Trip convenience stores.
Ventura Foods sales are 60% in foodservice, while the remainder is split between retail and industrial customers who use edible oils as ingredients in products it manufactures for resale.
Ventura Foods' revenues have decreased over the last four years (2013–16).
In fiscal 2016 (August year end), net revenues decreased by 12% year-on-year to $30.35 billion due lower Energy segment sales.
Energy segment revenues decreased 34% to $5.4 billion after eliminating intersegment revenues.
Refined fuels and propane revenues decreased mainly due to lower selling price and sales volumes.
The selling price of refined fuels products decreased an average of $0.74 (30%) per gallon, and sales volumes decreased 7%, compared to the previous year.
Propane sales volume decreased 16% due to warmer temperatures in fiscal 2016 compared to fiscal 2015, and a lower propane price of $0.34 per gallon, 32% down on the previous year.
In fiscal 2016 net income decreased by 46% to $424.19 million primarily due to a drop in net revenues and an increase in interest expense.
Net interest increased $15 million (25%) compared to the previous year.
In fiscal 2016, net cash inflow increased by 122% to $1.26 billion.
CHS' 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. In 2014 the company acquired a 50% stake in Australian agricultural supply chain management firm Broadbent Grain, allowing it expanded access to the growing Asia/Pacific region.
In 2014 CHS partnered with Illinois-based agronomy retailer United Prairie. Through the partnership, CHS planned to bring additional services and new technologies to United Prairie's customers.
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.
The company is building a nitrogen fertilizer plant in North Dakota for an estimated $3 billion. The facility is expected to be operational by 2018 and will produce more than 2,400 tons of ammonia daily; the ammonia will be further converted to urea, urea ammonia nitrate, and diesel exhaust fuel.
In 2015 CHS sold its Solgen isoflavone brand and related business to Tradichem S.L., Madrid, Spain. Tradichem's core business is the development and supply of pharmaceutical and nutraceutical ingredients. The sale of the Solgen isoflavone brands followed CHS stopping the production of food-grade soy ingredients at its Ashdod, Israel plant.
Mergers and Acquisitions
During fiscal 2015, CHS acquired various businesses in the Ag segment for $321 million. It bought Patriot Holdings, LLC, which operates an ethanol plant, expanding CHS’s grain origination opportunities and increasing its renewable fuels capacity. It also bought Northstar Agri Industries, a canola processing and refining business, expanding CHS' oil product offerings to global food companies, and linking growers selling canola seed to CHS to an integrated supply chain.
In 2014 CHS bought Illinois River Energy, an ethanol plant that is capable of producing 133 millions of gallons of ethanol annually. Located in the heart of the Midwest, the plant allows CHS to expand its grain origination and related activities. In another transaction, that year the company agreed to buy some of the Canadian retail assets of Agrium subsidiary Crop Production Services (Canada). The deal included 16 retail agronomy locations in Alberta and Saskatchewan.