Income Tumbles at CHS Amid Depressed Commodity Prices

04 Nov 2016 --- CHS, the largest farmer cooperative in the US, has reported that its full-year income has tumbled 46 percent, as it suffers the impact of lower commodity prices amid a global downturn.

Net income was $424.2m for the year ending August 31 while revenues were down 12 percent to $30.3bn.

Years of bumper crops have driven commodity prices lower and undermined farmers' incomes at CHS, which is owned by around 600,000 famers and operates grain elevators, retail outlets and fuel operations.

“Like others in our core businesses of agriculture and energy, the ongoing global downturn continued to affect both our earnings and revenues in fiscal 2016,” said Carl Casale, CHS president and chief executive officer.

“Meeting the long-term needs of our owners and customers remains our priority as we continue to take prudent actions to ensure the company remains financially sound and positioned for future opportunities.”

In its Agriculture Division, which includes crop nutrients, renewable fuels, animal nutrition and sunflower processing and food ingredients, earnings were $30.9m, down 79 percent on the year. 

This included the impact of a $116.5m impairment charge after it axed the development of a $3.3bn nitrogen fertilizer plant in North Dakota and instead opted to invest $2.8 billion in a stake in fertilizer maker CF Industries.

Within its Agriculture Division, revenues in Food Ingredients and Processing were down by $56.6m compared to the year previous, partly down to lower margins in its soybean crushing business.

Across its Energy division, earnings were down 49 percent to $275.4m, due to lower margins at its two refineries while revenues across its Transportation Division were also down.

However, one bright spot for CHS was its Foods division, which reported a three percent uplift in income to $62.3m, as it benefited from its investment in Ventura Foods.

“As fiscal 2017 unfolds, CHS will sustain its focus on its financial and operational priorities. This includes always putting safety first and taking mindful steps to maintain balance sheet strength and profitability,” Casale added. 

“We'll continue to manage expenses and staffing prudently, while making investments in necessary maintenance and essential operational upgrades and ensuring assets deliver appropriate levels of return.”