Farmers’ Cooperative CHS Falls Into the Red Amid Cut in Demand for Grains and Fertilizer

12 Apr 2016 --- CHS, the farming cooperative, has fallen into the red in the second quarter, reporting a loss of $33.1 million compared to a profit of $92.8 million the year previous, as it was hit by a cut in demand for refined fuels, grains and fertilizer.

Revenues in the second quarter were $6.7 billion, down 20 percent compared with $8.4 billion the year previous but CHS boss Carl Casale said the business would ride out the tough economic challenges.

Minnesota-based CHS has been looking to bolster its core agriculture and energy business over the past few years. It has acquired two Illinois ethanol plants, a canola processor in Minnesota and an oil refinery in Kansas.

CHS presidents and chief executive Casale said: “Like others in our energy and agricultural space, CHS is experiencing the earnings impact of depressed global prices and reduced demand for refined fuels, grain and fertilizer.

“We’ve experienced these types of cycles throughout our more than 85-year history and will navigate this period by finding ways to run our business more efficiently and effectively while continuing to serve our owners’ and customers’ needs.”

The energy, grains and food company, reported net income of $235.5 million for the six months, which was also down 50 percent on the year.

CHS, like its rivals, has been hit by the downturn in the agriculture and energy sectors, which have led to reduced commodity prices.

Over the six months, operating income was hurt by lower profits across its energy and agriculture divisions.

In its agriculture division, which includes crop nutrients, renewable fuels, animal nutrition and sunflower processing and food ingredients, lower profits were down to soft market conditions across the agricultural sectors the company serves.

Earnings from its lubricants and transportations business were also hit by lower earnings but propane earnings were up.

These falls were partially offset by the performance of the company’s new Nitrogen Production unit.

CHS also took an impairment change in the six month period, as it re-assessed the value of its business.

However, there were some bright spots. Its investment in Ventura Foods appears to bearing dividends, with earnings increasing.