CHS INC

CHS Inc. is the nation's leading integrated agricultural cooperative, owned by farmers, ranchers, and member cooperatives across the United States. The company provides grain, food, agronomy, and energy resources to businesses and consumers globally. For the fiscal year ended August 31, 2025, CHS reported total revenues of $35.5 billion ¹ and net income attributable to CHS of $597.9 million ². A portion of its operations are conducted through equity investments and joint ventures, with their income or loss included in net income using the equity method of accounting. The company generates revenue through refining, wholesaling, and retailing petroleum products in its Energy segment; origination and marketing of grain, wholesale agronomy sales, processed soybean products, and renewable fuels in its Ag segment; and through financing and hedging businesses, and nonconsolidated food production and wheat milling joint ventures in Corporate and Other. Earnings from cooperative business are allocated to members and nonmembers on a patronage basis, in cash, capital equity certificates, or both, with patrons' equities redeemable over time at the Board's discretion.

The Energy segment's revenues, after elimination of intersegment revenues, were $7.6 billion ³ for fiscal 2025. This segment refines crude oil into products like gasoline, diesel fuel, asphalt, and petroleum coke at refineries in Laurel, Montana, and McPherson, Kansas. The Laurel refinery processes approximately 65,000 barrels of crude oil per day ⁴, yielding about 38% gasoline, 43% diesel fuel and other distillates, 12% asphalt, 6% petroleum coke, and 1% other products. The McPherson refinery processes approximately 115,000 barrels of crude oil per day ⁵, producing roughly 50% gasoline, 43% diesel fuel and other distillates, 5% petroleum coke, and 2% other products. Approximately 75% ⁶ of refined fuel products are marketed to members, with the remainder sold to nonmembers. In fiscal 2025, the segment sold approximately 1.5 billion gallons of gasoline ⁷ and 1.7 billion gallons of diesel fuel ⁸. About 75% ⁹ of refined petroleum products sold were produced internally, with 25% ¹⁰ obtained from third parties.

The Ag segment generated revenues of $27.7 billion ¹¹ in fiscal 2025, after elimination of intersegment revenues. This segment includes global grain and processing, ag retail, and wholesale agronomy businesses. Global grain marketing operations purchase grain and oilseed, with processing facilities crushing approximately 147 million bushels of soybeans and canola annually ¹², yielding about 3.1 million short tons of meal and flour ¹³ and 1.9 billion pounds of edible and inedible oil ¹⁴. The renewable fuels business produces 267 million gallons of fuel-grade ethanol ¹⁵, 71 million pounds of inedible corn oil ¹⁶, and 645,000 tons of dried distillers grains with solubles (DDGS) annually ¹⁷. The ag retail business operates approximately 400 agri-operations locations ¹⁸ through 28 business units. The wholesale agronomy business delivers crop nutrients and crop protection products through 11 warehouse terminals ¹⁹ and 28 distribution warehouses ²⁰.

The Nitrogen Production segment consists of an approximate 8.38% ²¹ membership interest in CF Industries Nitrogen, LLC ("CF Nitrogen"), a strategic venture with CF Industries Holdings, Inc. This investment was approximately $2.5 billion ²² as of August 31, 2025. CHS is entitled to purchase up to 1.1 million tons of granular urea ²³ and 580,000 tons of urea ammonium nitrate (UAN) ²⁴ annually from CF Nitrogen through fiscal 2096.

For the fiscal year ended August 31, 2025, total revenues were $35,462,608 thousand ²⁵, a decrease from $39,261,229 thousand ²⁶ in the prior year. Cost of goods sold was $34,325,794 thousand ²⁷, resulting in a gross profit of $1,136,814 thousand ²⁸ and a gross margin of 3.2% ²⁹. Marketing, general and administrative expenses were $1,046,059 thousand ³⁰. Operating earnings were $90,755 thousand ³¹, representing an operating margin of 0.3% ³². Interest expense increased to $146,079 thousand ³³. Equity income from investments was $569,665 thousand ³⁴. Income before income taxes was $614,772 thousand ³⁵. Net income was $597,995 thousand ³⁶, with net income attributable to CHS Inc. of $597,917 thousand ³⁷. Cash and cash equivalents were $327,826 thousand ³⁸, total notes payable were $1,152,457 thousand ³⁹, and long-term debt including current maturities was $1,835,833 thousand ⁴⁰. Total equities were $11,080,174 thousand ⁴¹. Working capital was $2,803,865 thousand ⁴², and the current ratio was 1.5 ⁴³.

Year-over-year, total revenues decreased by $3,798,621 thousand ⁴⁴ from $39,261,229 thousand in fiscal 2024 to $35,462,608 thousand in fiscal 2025. Gross profit decreased by $614,513 thousand ⁴⁵ from $1,751,327 thousand to $1,136,814 thousand, and gross margin contracted from 4.5% ⁴⁶ to 3.2% ⁴⁷. Operating earnings declined by $493,603 thousand ⁴⁸ from $584,358 thousand to $90,755 thousand. Net income attributable to CHS Inc. decreased by $504,402 thousand ⁴⁹ from $1,102,319 thousand to $597,917 thousand. Energy segment revenues decreased by $1,131,462 thousand ⁵⁰ (12.9% ⁵¹) primarily due to decreased selling prices for refined fuels. Ag segment revenues decreased by $2,668,378 thousand ⁵² (8.8% ⁵³), driven by decreased selling prices for grain and oilseed, oilseed processing, and renewable fuels, partially offset by increased volumes in wholesale and retail agronomy and grain and oilseed. The Energy segment's income before income taxes (IBIT) decreased by $436,095 thousand ⁵⁴ (101.6% ⁵⁵), mainly due to lower Western Canadian Select crude oil discounts and crack spreads, and decreased refined fuels production volumes from planned major maintenance, partially offset by a $90 million ⁵⁶ favorable impact from small refinery exemptions. The Ag segment's IBIT decreased by $97,017 thousand ⁵⁷ (28.3% ⁵⁸), primarily due to decreased margins for grain and oilseed and oilseed processing. Equity income from investments increased by $89,802 thousand ⁵⁹ (18.7% ⁶⁰), largely due to a gain on the sale of a business recognized by Ventura Foods.

During fiscal 2025, CHS acquired West Central Ag Services ("WCAS"), resulting in $59.5 million ⁶¹ in goodwill and $62.5 million ⁶² in intangible assets. The company also received notice from the EPA that its petitions for an extension of the small refinery exemption (SRE) for its Laurel, Montana, refinery were granted for compliance years 2019 through 2024, resulting in a benefit of approximately $90 million ⁶³ during the fourth quarter of fiscal 2025. CHS announced a mutual agreement with MKC on October 10, 2025, to begin the process of ending their joint venture in Producer Ag. The company incurred $271.4 million ⁶⁴ in major maintenance expenditures in fiscal 2025, primarily for a planned shutdown at its McPherson, Kansas, refinery.

CHS anticipates that various macroeconomic factors will continue to drive uncertainty and instability in global energy and agricultural commodity markets, as well as global financial markets, which could significantly impact each of its segments during fiscal 2026. These factors include the ongoing war between Russia and Ukraine, further conflict in the Middle East, shifts in global trade flows for commodities, a weak export market for U.S.-sourced agricultural products due to global competitiveness, potential changes in U.S. trade policy, increased or fluctuating tariffs, a changing interest rate environment, and continued pricing pressures impacting costs of labor, freight, and materials. The company currently expects global supply and demand factors impacting energy and agricultural commodities to be unfavorable for it in fiscal 2026, with a trend of reduced margins for energy and agricultural commodities expected to persist.

For fiscal 2026, CHS expects total capital expenditures to be approximately $575.1 million ⁶⁵, a decrease from $728.6 million ⁶⁶ in fiscal 2025. Major maintenance expenditures are projected to be approximately $53.3 million ⁶⁷ in fiscal 2026, significantly lower than $271.4 million ⁶⁸ in fiscal 2025, due to reduced turnaround activities at its refineries. The Board of Directors authorized approximately $30.0 million ⁶⁹ of fiscal 2025 patronage-sourced earnings to be paid to member-owners during fiscal 2026. Additionally, approximately $90.0 million ⁷⁰ of equity redemptions are authorized for distribution in fiscal 2026. The company expects to pay preferred stock dividends of approximately $168.7 million ⁷¹ during fiscal 2026.

CHS faces significant risks from changes in commodity prices for crude oil, natural gas, ethanol, fertilizer, grain, oilseed, and flour, which are influenced by factors beyond its control such as weather, plant disease, supply availability, transportation networks, inflation, government regulations, global trade disputes, and international conflicts. Geopolitical events like the wars in Ukraine and the Middle East create uncertainty, inflationary pressures, and impact global commodity markets and supply chains, potentially leading to increased costs, reduced demand, and inadvertent trading with sanctioned partners. The company is exposed to political, economic, and legal risks in its global operations, including changes in social, economic, or political conditions, labor and environmental regulations, expropriation of assets, currency exchange fluctuations, and price/export controls. Demand for products is highly dependent on global and regional demographics and macroeconomic conditions, with downturns potentially reducing demand and farm income, leading to members exiting agricultural activities. Fluctuations in freight and logistics costs, supply chain disruptions, and adverse weather conditions, including those due to climate change, could impact operations and costs. Inflation is expected to continue affecting labor, freight, natural gas, and materials costs, and while mitigation strategies are in place, they may not fully offset these increases. The company operates in highly competitive markets, and competitors may develop superior products or have more effective supply chains, potentially restricting pricing power and reducing margins. Nonperformance or nonpayment by counterparties, including customers and third-party warehouse operators, poses a risk to financial condition and cash flows, particularly if collateral values decline or are insufficient. The effectiveness of risk management strategies, including hedging, may be impacted by forecast accuracy, market volatility, and instrument availability. Actual or perceived quality, safety, or health risks associated with products could lead to significant liability, product recalls, and reputational damage. Business interruptions from natural disasters, cyberattacks, industrial accidents, or labor disputes could seriously harm operations. The ongoing multiyear implementation of an enterprise resource planning system (ERP) carries risks of exceeding cost estimates, implementation delays, or system failures. Cybersecurity threats, including sophisticated attacks and data breaches, could disrupt operations, compromise information, and expose the company to liability. Increasing scrutiny and changing expectations regarding environmental, social, and governance (ESG) practices, including climate change, human capital management, and diversity, may expose CHS to new risks, regulatory fines, reputational damage, and increased costs. Failures or delays in achieving climate change strategies or complying with evolving regulations, such as the EU deforestation-free regulation (EUDR) and new climate-related reporting requirements, could adversely affect business and operations. Environmental liabilities and litigation, including those related to agricultural chemicals, could result in significant expenditures and damages. The cooperative structure limits access to equity capital, as common stock cannot be sold, and preferred stock dividends are capped at 8% ⁷² per annum, potentially restricting competitiveness.

Management's overall tone emphasizes navigating challenging market conditions while focusing on strategic execution and maintaining financial strength. The company acknowledges significant unpredictability and volatility in global commodity markets and costs, and explicitly states that it currently expects global supply and demand factors impacting energy and agricultural commodities to be unfavorable for fiscal 2026, with the trend of reduced margins for energy and agricultural commodities expected to persist. Management's key strategic priorities for the period ahead include an enterprisewide effort to empower customers to make CHS their first choice, expand market access to add value for owners, and transform and evolve core businesses by capitalizing on changing market dynamics. To achieve these strategies, the company is focused on implementing agile, efficient, and sustainable technology platforms; building robust and efficient supply chains; hiring, developing, and retaining high-performing, diverse, and passionate teams; achieving operational excellence and continuous improvement; and maintaining a strong balance sheet. For fiscal 2026, total capital expenditures are expected to be approximately $575.1 million ⁷³, and major maintenance is projected at approximately $53.3 million ⁷⁴. The Board of Directors authorized approximately $30.0 million ⁷⁵ of fiscal 2025 patronage-sourced earnings and approximately $90.0 million ⁷⁶ of equity redemptions to be distributed in fiscal 2026. Preferred stock dividends of approximately $168.7 million ⁷⁷ are also expected to be paid during fiscal 2026.