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What changed in CHS INC's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of CHS INC's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+288 added−274 removedSource: 10-K (2023-11-08) vs 10-K (2022-11-02)

Top changes in CHS INC's 2023 10-K

288 paragraphs added · 274 removed · 237 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

61 edited+3 added−1 removed44 unchanged
Biggest changeSales and Marketing: Customers We market approximately 80% of our refined fuel products to members, with the balance sold to nonmembers. Sales are made wholesale to member cooperatives and through a network of independent retailers that operate convenience stores under the Cenex brand.
Biggest changeSales are made wholesale to member cooperatives and through a network of independent retailers that operate convenience stores under the Cenex brand. We sold approximately 1.5 billion gallons of gasoline and approximately 1.7 billion gallons of diesel fuel in fiscal 2023. We also blend, package and wholesale auto and farm equipment lubricants to members and nonmembers.
Our Energy segment generally experiences higher volumes and revenues in certain operating areas, such as refined products in the spring, summer and early fall when gasoline and diesel fuel usage by our agricultural customers is highest and is subject to domestic supply and demand forces.
Our Energy segment generally experiences higher volumes and revenues in certain operating areas, such as refined fuel products in the spring, summer and early fall when gasoline and diesel fuel usage by our agricultural customers is highest and is subject to domestic supply and demand forces.
To the east of the Midwest and Northern Plains is another unique marketing area. This area centers near Chicago, Illinois, and includes eastern Wisconsin, Illinois and Indiana. In this area, we principally compete with the major oil companies, as well as independent refiners and wholesale brokers and/or suppliers. Another market area includes Arkansas, Missouri and the northern part of Texas.
To the east of the Midwest and Northern Plains is another unique marketing area. This area centers near Chicago, Illinois, and includes Illinois, Indiana and eastern Wisconsin. In this area, we principally compete with the major oil companies, as well as independent refiners and wholesale brokers and/or suppliers. Another market area includes Arkansas, Missouri and the northern part of Texas.
Competition in this area includes the major oil companies and independent refiners. This area is principally supplied by the Gulf Coast refinery center and is also driven by a strong spot market that reacts quickly to changes in the international and national supply balance. Another geographic area includes Montana, western North Dakota, Wyoming, Utah, Idaho, Colorado and western South Dakota.
Competition in this area includes the major oil companies and independent refiners. This area is principally supplied by the Gulf Coast refinery center and is also driven by a strong spot market that reacts quickly to changes in the international and national supply balance. Another geographic area includes Colorado, Idaho, Montana, western North Dakota, western South Dakota, Utah and Wyoming.
Competition at the wholesale level in this area includes the major oil companies and independent refiners. The last area includes much of Washington and Oregon.
Competition at the wholesale level in this area includes the major oil companies and independent refiners. The last area includes much of Oregon and Washington.
For example, our country operations business generally experiences higher volumes and revenues during the fall harvest and spring planting seasons and our agronomy business generally experiences higher volumes and revenues during the spring planting season.
For example, our country operations business generally experiences higher volumes and revenues during the spring planting and fall harvest seasons and our agronomy business generally experiences higher volumes and revenues during the spring planting season.
These laws, regulations and rules govern, among other things, discharge of materials into the environment, including air and water; reporting storage of hazardous wastes and other hazardous materials; transportation, handling and disposal of wastes and other materials; labeling of pesticides and similar substances; and investigation and remediation of the release of hazardous materials.
These laws, regulations and rules govern, among other things, discharge of materials into the environment, including air and water; reporting storage of hazardous wastes and other hazardous materials; transportation, handling and disposal of wastes and other materials; labeling of pesticides and similar substances; and investigation and remediation of the release of hazardous materials.
CHS Hedging . Our wholly-owned commodity brokerage subsidiary, CHS Hedging, LLC ("CHS Hedging"), is a registered, CFTC-regulated futures commission merchant ("FCM") and a clearing member of the CBOT, CME, NYMEX and MGEX. CHS Hedging provides consulting services and commodity risk management services primarily in the grains, oilseeds, fertilizer, livestock, dairy and energy markets.
Our wholly-owned commodity brokerage subsidiary, CHS Hedging, LLC ("CHS Hedging"), is a registered, CFTC-regulated futures commission merchant ("FCM") and a clearing member of the CBOT, CME, NYMEX and MGEX. CHS Hedging provides consulting services and commodity risk management services primarily in the grains, oilseeds, fertilizer, livestock, dairy and energy markets.
CHS Hedging is also the FCM for the majority of our commodity futures trading. Foods. Ventura Foods is a joint venture between CHS and Mitsui & Co., with each company owning a 50% interest. Ventura Foods produces and distributes edible oil-based products.
CHS Hedging is also the FCM for the majority of our commodity futures trading. Foods. Ventura Foods is a joint venture between CHS and Mitsui & Co., with each company owning 50% interest. Ventura Foods produces and distributes edible oil-based products.
Our Energy segment processes crude oil into refined petroleum products at our refineries in Laurel, Montana, and McPherson, Kansas, and sells those products under the Cenex ® brand to member cooperatives and other independent retailers through a network of nearly 1,500 sites, the majority of which are convenience stores marketing Cenex-branded fuels and owned by our member cooperatives.
Our Energy segment processes crude oil into refined petroleum products at our refineries in Laurel, Montana, and McPherson, Kansas, and sells those products under the Cenex ® brand to member cooperatives and other independent retailers through a network of nearly 1,500 sites, the majority of which are convenience stores marketing Cenex brand fuels and owned by our member cooperatives.
The retail gasoline market is highly competitive, with competitors that are much larger than CHS and have greater brand recognition and distribution outlets throughout the country and the world than we do. We also are experiencing increased competition from regional and unbranded retailers. Our owned and nonowned retail outlets are located primarily in the northwestern, midwestern and southern United States.
The retail gasoline market is highly competitive, with competitors that are much larger than CHS and have greater brand recognition and distribution outlets throughout the country and world than we do. We also are experiencing increased competition from regional and unbranded retailers. Our owned and nonowned retail outlets are located primarily in the midwestern and northwestern United States.
Our Ag segment derives its revenues through origination and marketing of grain, including service activities conducted at export terminals; through wholesale agronomy sales of crop nutrient and crop protection products; from sales of soybean meal, soybean refined oil and soyflour products; through the production and marketing of renewable fuels; and through retail sales of petroleum and agronomy products, processed sunflowers, feed and farm supplies.
Our Ag segment derives its revenues through origination and marketing of grain, including service activities conducted at export terminals; through wholesale agronomy sales of crop nutrient and crop protection products; from sales of soybean meal, refined soy oil and soyflour products; through the production and marketing of renewable fuels; and through retail sales of petroleum and agronomy products, processed sunflowers, feed and farm supplies.
CF Nitrogen competes primarily on delivered price and, to a lesser extent, on customer service and product quality. CF Nitrogen competes domestically with a variety of large companies in the fertilizer industry. There is also significant competition from products sourced from other regions of the world. CORPORATE AND OTHER CHS Capital .
CF Nitrogen competes primarily on delivered price and, to a lesser extent, on customer service and product quality. CF Nitrogen competes domestically with large companies in the fertilizer industry. There is also significant competition from products sourced from other regions of the world. CORPORATE AND OTHER CHS Capital .
In addition, environmental laws impose a liability on owners and operators for investigation and remediation of contaminated property and on a party who sends hazardous materials to those contaminated properties for treatment, storage, disposal or recycling. In some instances, that liability exists regardless of fault.
In addition, environmental laws impose a liability on owners and operators for investigation and remediation of contaminated property and on a party that sends hazardous materials to those contaminated properties for treatment, storage, disposal or recycling. In some instances, that liability exists regardless of fault.
The information contained on our website is not part of, and is not incorporated in, this Annual Report on Form 10-K or any other report we file with or furnish to the Securities and Exchange Commission ("SEC"). 1 Table of Contents ENERGY Overview We are the nation's largest cooperative energy company based on revenues and identifiable assets, with operations that include petroleum refining and pipelines; supply, marketing and distribution of refined fuels (gasoline, diesel fuel and other energy products); blending, sale and distribution of lubricants; and wholesale supply of propane and other natural gas liquids.
The information contained on our website is not part of, and is not incorporated into, this Annual Report on Form 10-K or any other report we file with or furnish to the Securities and Exchange Commission ("SEC"). 1 Table of Contents ENERGY Overview We are the nation's largest cooperative energy company based on revenues and identifiable assets, with operations that include petroleum refining and pipelines; supply, marketing and distribution of refined fuels (gasoline, diesel fuel and other energy products); blending, sale and distribution of lubricants; and wholesale supply of propane and other natural gas liquids.
Beyond developing defined safety programs and training opportunities, we also monitor our incident rates in comparison to previous years and industry averages, as published by the Bureau of Labor Statistics.
Beyond developing defined safety programs and training opportunities, we monitor our incident rates in comparison to previous years and industry averages, as published by the Bureau of Labor Statistics.
In addition to 7 Table of Contents offering competitive compensation that includes annual variable pay linked to our performance, we also offer a wide array of benefits programs that include health insurance and wellness benefits; retirement benefits including a company-matched 401(k) contribution and a pension for qualifying employees; paid time off and family leave; and employee assistance programs, including adoption assistance.
In 7 Table of Contents addition to offering competitive compensation that includes annual variable pay linked to company and individual employee performance, we also offer a wide array of benefits programs that include health insurance and wellness benefits; retirement benefits, including a company-matched 401(k) contribution and a pension for qualifying employees; paid time off and family leave; and employee assistance programs, including adoption assistance.
We continue to sponsor and support employee resource groups made up of individuals who join together as allies and advocates to promote diversity and inclusion, while providing our employees from across the country the opportunity to strengthen relationships, learn through educational and networking opportunities that focus on development, help local communities and engage with people across CHS.
We sponsor and support employee resource groups made up of individuals who join together as allies and advocates to promote diversity and inclusion, while providing our employees across the country the opportunity to strengthen relationships, learn through educational and networking opportunities that focus on development, help local communities and engage with people across CHS.
Our Ag operations are subject to laws and related regulations and rules designed to protect the environment and that are administered by the EPA, the DOT and similar government agencies.
Regulation. Our Ag operations are subject to laws and related regulations and rules designed to protect the environment and that are administered by the EPA, the DOT and similar government agencies.
Our wholesale crop protection business operates out of our network of 28 warehouses from which we deliver products directly to our member cooperatives and independent retailers. We also operate a bulk chemical rail terminal in Brooten, Minnesota, where we handle and store bulk crop protection products for some of the crop protection industry's largest chemical manufacturers.
Our wholesale crop protection business operates out of our network of 27 warehouses from which we deliver products directly to our member cooperatives and independent retailers. We also operate a bulk chemical rail terminal in Brooten, Minnesota, where we handle and store bulk crop protection products for some of the crop protection industry's largest chemical manufacturers.
We compete with other large distributors of agricultural products, as well as other regional or local distributors, local cooperatives, retailers and manufacturers. NITROGEN PRODUCTION Overview Our Nitrogen Production segment consists of our approximate 8% membership interest (based on product tons) in CF Nitrogen, our strategic venture with CF Industries Holdings, Inc. ("CF Industries"), and allocated expenses.
We compete with other large distributors of agricultural products, as well as with other regional or local distributors, cooperatives, retailers and manufacturers. NITROGEN PRODUCTION Overview Our Nitrogen Production segment consists of our approximate 9% membership interest (based on product tons) in CF Nitrogen, our strategic venture with CF Industries Holdings, Inc. ("CF Industries"), and allocated expenses.
In our Ag segment, we have significant competition in the businesses in which we operate based principally on price, services, quality, patronage and alternative products. Our businesses depend on relationships with local cooperatives and private retailers, proximity to customers and producers, competitive pricing and safety of food, feed and grain products.
In our Ag segment, we have significant competition in the businesses in which we operate based principally on price, services, quality, patronage and alternative products. Our businesses depend on relationships with member cooperatives and private retailers; proximity to customers and producers; competitive pricing; and safety of food, feed and grain products.
Our Laurel refinery sources approximately 93% of its crude oil supply from Canada, with the remaining balance obtained from domestic sources, and we have access to Canadian and northwest Montana crude oil through our wholly-owned Front Range Pipeline, LLC, and other common carrier pipelines.
Our Laurel refinery sources approximately 96% of its crude oil supply from Canada, with the remaining balance obtained from domestic sources, and we have access to Canadian and northwest Montana crude oil through our wholly-owned Front Range Pipeline, LLC, and other common carrier pipelines.
Our wholly-owned financing subsidiary, CHS Capital, LLC ("CHS Capital"), provides member cooperatives with a variety of loans that meet commercial agriculture needs. These loans include operating, term, revolving and other short- and long-term options. CHS Capital also provides loans to individual producers for crop inputs, feed and hedging-related margin calls. Producer operating loans are also offered in strategic geographic regions.
Our wholly-owned financing subsidiary, CHS Capital, LLC ("CHS Capital"), provides member cooperatives with loans that meet commercial agriculture needs. These loans include operating, term, revolving and other short- and long-term options. CHS Capital also provides loans to individual producers for crop inputs, feed and hedging-related margin calls. Producer operating loans are also offered in strategic geographic regions. CHS Hedging .
Our goal is to foster a workplace where diverse thinking, voices and backgrounds yield better employee experiences, business performance and business outcomes. In addition to working on modeling inclusive behaviors that positively impact our communities, with the assistance of external experts, we developed and launched an enterprisewide three-year strategic plan during fiscal 2021 for improving inclusion and diversity at CHS.
Our goal is to foster a workplace where diverse thinking, voices and backgrounds yield better employee experiences, business performance and business outcomes. In addition to working on modeling inclusive behaviors that positively impact our communities, with the assistance of external experts, we developed and launched an enterprisewide three-year strategic plan in fiscal 2021 to improve inclusion and diversity at CHS.
In addition to defined safety programs designed specifically for individual facilities with operational hazards such as grain, feed, seed, agronomy, petroleum, warehouses and retail stores, we also provide certain employee groups with additional training opportunities such as a defensive driving program.
In addition to defined safety programs designed specifically for individual facilities with operational hazards related to grain, feed, seed, agronomy, petroleum, warehouses and retail operations, we also provide certain employee groups with additional training opportunities such as a defensive driving program.
On August 31, 2022, our investment was approximately $2.6 billion. See Note 6, Investments , of the notes to the consolidated financial statements that are included in this Annual Report on Form 10-K for additional information. Our investment in CF Nitrogen positions us and our members for long-term, dependable fertilizer supply, supply chain efficiency and production economics.
On August 31, 2023, our investment was approximately $2.6 billion. See Note 6, Investments , of the notes to the consolidated financial statements that are included in this Annual Report on Form 10-K for additional information. We believe that our investment in CF Nitrogen positions us and our members for long-term, dependable fertilizer supply, supply chain efficiency and production economics.
Industry: Competition Many of the business activities in our Ag segment are highly seasonal and, consequently, the operating results for our Ag segment will typically vary throughout the year.
Industry: Competition Most of the business activities in our Ag segment are highly seasonal and, consequently, the operating results for our Ag segment will typically vary throughout the year.
We value our employees and believe that employee passion for our work and employee engagement are key elements of our operating performance. Diversity and inclusion . The CHS value of inclusion helps us strive to create a work environment where excellence and growth stem from diverse thinking.
We value our employees and believe that employee passion for our work and employee engagement are key elements of our operating performance. Diversity and inclusion . The CHS value of inclusion compels us to create a work environment where excellence and growth stem from diverse thinking.
Our Laurel refinery also has access to Wyoming crude oil via common carrier pipelines from the south. Our Laurel refinery processes approximately 63,000 barrels of crude oil per day to produce refined products that consist of approximately 39% gasoline, 42% diesel fuel and other distillates, 10% asphalt, 6% petroleum coke and 3% other products.
Our Laurel refinery also has access to Wyoming crude oil via common carrier pipelines from the south. Our Laurel refinery processes approximately 63,000 barrels of crude oil per day to produce refined products that consist of approximately 37% gasoline, 42% diesel fuel and other distillates, 12% asphalt, 6% petroleum coke and 3% other products.
Demand may be affected by foreign governments and their programs, relationships of foreign countries with the United States, affluence of foreign countries, wars and civil unrest, currency exchange fluctuations and substitution of commodities. Demand may also be affected by changes in eating habits, population growth, per capita consumption of some products and renewable fuels production levels. Regulation.
Demand may be affected by foreign governments and their programs, relationships of foreign countries with the United States, affluence of foreign countries, wars and civil unrest, currency exchange fluctuations and substitution of commodities. Demand may also be affected by changes in eating habits, population growth, per capita consumption of some products, federal and state policies and renewable fuels production levels.
For fiscal 2022, our Energy revenues, after elimination of intersegment revenues, were $10.3 billion and were primarily from gasoline, diesel fuel and propane. Operations Laurel refinery. Our Laurel, Montana, refinery processes medium- and high-sulfur crude oil into refined petroleum products that primarily include gasoline, diesel fuel, asphalt and petroleum coke.
For fiscal 2023, our Energy revenues, after elimination of intersegment revenues, were $10.1 billion and were primarily from gasoline, diesel fuel and propane. Operations Laurel refinery. Our Laurel, Montana, refinery processes medium- and high-sulfur crude oil into refined petroleum products that primarily include gasoline, diesel fuel, asphalt and petroleum coke.
Community involvement . As a cooperative, we are committed to making a measurable impact in our communities through our giving investments. In addition to our charitable foundation and annual giving campaign, which provide financial support to our communities, eligible employees also receive paid time off to make a difference in our communities through volunteer activities. Compensation and benefits .
As a cooperative, we are committed to making a measurable impact in our communities through our giving investments. In addition to our charitable foundation and annual giving campaign, which provide financial support to our communities, eligible employees also receive paid time off to make a difference in our communities through volunteer activities.
These products are loaded into trucks at the McPherson refinery or shipped via common carrier pipelines to other markets. Other energy operations . We operate six propane terminals, four asphalt terminals, seven refined product terminals and three lubricants blending and packaging facilities.
These products are loaded into trucks at the McPherson refinery or shipped via common carrier pipelines to other markets. Other energy operations . We operate 11 propane terminals, four asphalt terminals, eight refined product terminals and three lubricants blending and packaging facilities.
These tools and opportunities include access to thousands of on-demand learning modules; various internal and external trainings that cover continuous improvement, public speaking, financial and accounting topics and other topics; tuition and professional certification reimbursement; as well as other opportunities focused on developing the future leaders of CHS. Health and safety . Safety is one of our core values.
These tools and opportunities include access to on-demand learning modules; internal and external trainings that cover continuous improvement, public speaking, finance and accounting topics and other subjects; tuition and professional certification reimbursement; as well as other opportunities focused on developing the future leaders of CHS. Health and safety . Safety is one of our core values.
Our McPherson, Kansas, refinery processes approximately 60% low- and medium-sulfur crude oil and approximately 40% heavy-sulfur crude oil into gasoline, diesel fuel and other distillates, petroleum coke and other products. The refinery sources its crude oil through its own pipelines, as well as through joint venture and common carrier pipelines.
Our McPherson, Kansas, refinery processes approximately 63% low- and medium-sulfur crude oil and approximately 37% heavy-sulfur crude oil into gasoline, diesel fuel and other distillates, petroleum coke and other products. The refinery sources its crude oil through its own pipelines, as well as through joint venture and common carrier pipelines.
Learning and development . We are committed to investing in our employees to help them grow and achieve their career goals. In addition to regular performance evaluations and annual development plans that provide employees with feedback and growth opportunities, employees at CHS have access to a variety of learning tools and other opportunities for growth.
Learning and development . We are committed to investing in our employees to help them build knowledge, develop skills and achieve their career goals. In addition to regular performance evaluations and annual development plans that provide employees with feedback and growth opportunities, employees at CHS have access to a variety of learning tools and other opportunities for growth.
We account for our investment in Ventura Foods using the equity method of accounting, and the investment balance was equal to $410.1 million on August 31, 2022. See Note 6, Investments , of the notes to the consolidated financial statements that are included in this Annual Report on Form 10-K for additional information. Wheat milling.
We account for our investment in Ventura Foods using the equity method of accounting, and the investment balance was equal to $519.2 million on August 31, 2023. See Note 6, Investments , of the notes to the consolidated financial statements that are included in this Annual Report on Form 10-K for additional information. Wheat milling.
We provide a wide variety of products and services, ranging from initial agricultural inputs such as fuels, farm supplies, crop nutrients and crop protection products to agricultural outputs that include grains and oilseeds, processed grains and oilseeds, renewable fuels and food products.
We provide a wide variety of products and services, ranging from initial agricultural inputs such as fuels, farm supplies, crop nutrients and crop protection products to agricultural outputs that include grain and oilseed, processed grain and oilseed, renewable fuels and food products.
These employee resource groups include Harvest Pride, which promotes a safe, connected and empowered LGBTQA+ community across CHS; Mozaiko, which promotes ethnic diversity and inclusion at CHS while creating an inclusive environment for all employees; VERG, which provides support, camaraderie and resources for employees formerly or currently serving in the military; Women in Leadership, which supports women in the workplace who are excited and energized to grow personally and professionally; and CultivateHER, a cohort within Women in Leadership, which supports women across our Ag segment.
These employee resource groups include Harvest Pride, which promotes a safe, connected and empowered LGBTQA+ community across CHS; Mozaiko, which promotes ethnic diversity and inclusion at CHS while supporting an inclusive environment for all employees; VERG, which provides support, camaraderie and resources for employees formerly or currently serving in the military and their families; Women in Leadership, which supports women in the workplace to grow personally and professionally; and CultivateHER, a cohort within Women in Leadership, which supports women across our Ag segment.
These businesses work together to facilitate the production, purchase, sale and eventual use of grain and other agricultural products within the United States, as well as internationally. In fiscal 2022, revenues in our Ag segment were $37.5 billion after elimination of intersegment revenues. Operations Global grain and processing.
These businesses work together to facilitate the production, purchase, sale and eventual use of grain and other agricultural products within the United States, as well as internationally. In fiscal 2023, revenues in our Ag segment were $35.4 billion after elimination of intersegment revenues. Operations Global grain and processing.
To supplement what is purchased domestically, our Galveston, Texas, deepwater port and terminal receives fertilizer by vessel from origins such as Asia and the Caribbean Basin where significant volumes of urea are produced. The fertilizer is then shipped by rail to destinations within crop-producing regions of the United States.
To supplement what is purchased domestically, our Galveston, Texas, deepwater port and terminal receives fertilizer by vessel from origins in Europe and Asia where significant volumes of urea are produced. The fertilizer is then shipped by rail to destinations within crop-producing regions of the United States.
We hold a 12% interest in Ardent Mills and account for our investment as an equity method investment due to our ability to exercise significant influence by appointing a member of the Board of Shareholders and Board of Managers of Ardent Mills. On August 31, 2022, our investment in Ardent Mills was $250.9 million.
We hold a 12% interest in Ardent Mills and account for our investment as an equity method investment due to our ability to exercise significant influence by appointing a member of the Board of Shareholders and Board of Managers of Ardent Mills. On August 31, 2023, our investment in Ardent Mills was $265.1 million.
This facility has approximately six million gallons of chemical storage capacity. Products and Services Our Ag segment provides local cooperatives and farmers with the inputs and services they need to produce grain and raise livestock. These include seed, crop nutrients, crop protection products, animal feed, animal health products, refined fuels and propane.
This facility has more than 6 million gallons of chemical storage capacity. Products and Services Our Ag segment provides member cooperatives and farmers with the inputs and services they need to produce grain and raise livestock. These include seed, crop nutrients, crop protection products, animal feed, animal health products, refined fuels and propane.
For the year ended August 31, 2022, our total revenues were $47.8 billion and net income attributable to CHS was $1.7 billion. We have aligned our segments based on an assessment of how our businesses operate and the products and services they sell. Our Energy segment derives its revenues through refining, wholesaling and retailing of petroleum products.
For the year ended August 31, 2023, our total revenues were $45.6 billion and net income attributable to CHS was $1.9 billion. We have aligned our segments based on an assessment of how our businesses operate and the products and services they sell. Our Energy segment derives its revenues through refining, wholesaling and retailing of petroleum products.
We purchase our oilseeds from members, other CHS businesses and third parties that have tightly integrated connections with our global grain marketing operations and country operations business. Our renewable fuels business produces 260 million gallons of fuel-grade ethanol, 70 million pounds of inedible corn oil and 640,000 tons of dried distillers grains with solubles ("DDGS") annually.
We purchase oilseeds to be processed from members, other CHS businesses and third parties that have tightly integrated connections with our global grain marketing operations and country operations business. Our renewable fuels business produces 255 million gallons of fuel-grade ethanol, 69 million pounds of inedible corn oil and 638,000 tons of dried distillers grains with solubles ("DDGS") annually.
As of August 31, 2022, we had 12 collective bargaining agreements with unions covering approximately 9% of our employees in the United States, with collective bargaining agreements expiring on various dates through August 31, 2026. We believe that our relations with our employees are strong.
As of August 31, 2023, we had 11 collective bargaining agreements with unions covering approximately 8% of our employees in the United States, with collective bargaining agreements expiring on various dates through August 31, 2026. We believe that our relations with our employees are strong.
Oilseed processing is conducted at facilities that crush approximately 132 million bushels of oilseeds on an annual basis, producing approximately 2.7 million short tons of meal and flour and 1.7 billion pounds of edible and inedible oil annually.
Oilseed processing is conducted at facilities that crush approximately 135 million bushels of soybeans and canola on an annual basis, producing approximately 3.1 million short tons of meal and flour and 1.7 billion pounds of edible and inedible oil annually.
Renewable fuels produced by our production plants are marketed by our global grain marketing business, along with more than 522 million gallons of ethanol and 3.8 million tons of DDGS annually under marketing agreements with ethanol production plants. Country operations. Our country operations business operates 379 agri-operations locations through 28 business units dispersed throughout the midwestern and western United States.
Renewable fuels produced by our production plants are marketed by our global grain marketing business, along with more than 713 million gallons of ethanol and 4.9 million tons of DDGS annually under marketing agreements with ethanol production plants. Country operations. Our country operations business operates 415 agri-operations locations through 27 business units dispersed throughout the midwestern and western United States.
On August 31, 2022, we had 10,014 full-time, part-time, temporary and seasonal employees, primarily in the United States. Of that total, 2,486 were employed in our Energy segment, 6,314 were employed in our Ag segment and 1,214 were employed in Corporate and Other.
On August 31, 2023, we had 10,609 full-time, part-time, temporary and seasonal employees, primarily in the United States. Of that total, 2,402 were employed in our Energy segment, 6,315 were employed in our Ag segment and 1,892 were employed in Corporate and Other.
ITEM 1. BUSINESS THE COMPANY CHS Inc. (referred to herein as "CHS," "we," "us" or "our") is the nation's leading integrated agricultural cooperative, providing grain, food, agronomy and energy resources to businesses and consumers on a global basis. As a cooperative, we are owned by farmers and ranchers and member cooperatives (referred to herein as "members") across the United States.
ITEM 1. BUSINESS THE COMPANY CHS Inc. (referred to herein as "CHS," "company," "we," "us" or "our") is the nation's leading integrated agricultural cooperative, providing grain, food, agronomy and energy resources to businesses and consumers on a global basis.
In addition to selling products refined at our Laurel and McPherson refineries, we purchase refined petroleum products from third parties. For fiscal 2022, we obtained approximately 82% of the refined petroleum products we sold from our Laurel and McPherson refineries and approximately 18% from third parties.
In addition to selling products refined at our Laurel and McPherson refineries, we purchase refined petroleum products from third parties as the need arises. For fiscal 2023, we obtained approximately 74% of the refined petroleum products we sold from our Laurel and McPherson refineries and approximately 26% from third parties.
We sell our edible oils and soyflour to food companies and our inedible oils may be sold to energy companies. The soybean meal we produce is sold to integrated livestock producers and feed mills. The ethanol and DDGS we produce are sold throughout the United States and to various international customers.
The soybean meal and canola meal we produce is sold to integrated livestock producers and feed mills. The ethanol and DDGS we produce are sold throughout the United States and to various international customers.
We also produce refined oils, meal and soyflour at our processing facilities. 4 Table of Contents Sales and Marketing: Customers Our Ag segment provides products and services to a wide range of customers, primarily in the United States. These customers include member and nonmember producers, local cooperatives, elevators, grain dealers, grain processors and crop nutrient and crop protection retailers.
We also produce refined soy and canola oils, soybean meal, canola meal and soyflour at our processing facilities. 4 Table of Contents Sales and Marketing: Customers Our Ag segment provides products and services to a wide range of customers, primarily in the United States.
During fiscal 2022, our Occupational Safety & Health Administration ("OSHA") incident rate was 2.9 incidents per 100 full-time workers, as compared to an average of 3.5 incidents per 100 full-time workers during the three previous years, a reduction of 17%, and our DOT crash rate was in the top 4% of all carriers in our industry segment for the entirety of fiscal 2022.
During fiscal 2023, our Occupational Safety and Health Administration ("OSHA") incident rate was 2.7 incidents per 100 full-time workers, as compared to an average of 3.2 incidents per 100 full-time workers during the three previous years, a reduction of 18%.
We have designed our compensation and benefits programs to attract and retain qualified employees and to motivate employees to optimize member-owner returns and to achieve our long-term strategies.
During fiscal 2023, our charitable foundation gave approximately $6.7 million in charitable donations. Compensation and benefits . We have designed our compensation and benefits programs to attract and retain qualified employees and to motivate employees to optimize member-owner returns and to achieve our short- and long-term strategies.
We put the well-being of our employees, customers and communities first every day. At CHS, safety isn’t just about following the rules, it is about doing things the right way and remembering that no job is so critical that it warrants safety risks.
At CHS, safety is about more than just following the rules, it is about doing things the right way and remembering that no job is so critical that it warrants safety risks.
Segment results and balances prior to fiscal 2022 have been recast to reflect Ventura Foods as a component of Corporate and Other. Our earnings from cooperative business are allocated to members and to a limited extent to nonmembers with which we have agreed to do business on a patronage basis based on the volume of business they do with us.
As required under our bylaws and Minnesota cooperative law, our earnings from cooperative business are required to be allocated to our members and to a limited extent to nonmembers with which we have agreed to do business on a patronage basis based on the volume of business they do with us.
Annual sales volumes of propane vary greatly depending on weather patterns and crop conditions. 2 Table of Contents Industry: Competition The petroleum business is highly cyclical.
We are one of the nation's largest propane wholesalers based on revenues. Most of the propane sold in rural areas is for heating and agricultural use. Annual sales volumes of propane vary greatly depending on weather patterns and crop conditions. 2 Table of Contents Industry: Competition The petroleum business is highly cyclical.
In addition, our nonconsolidated food production and distribution joint venture, Ventura Foods, LLC ("Ventura Foods"), and our nonconsolidated wheat milling joint venture, Ardent Mills, LLC ("Ardent Mills"), are included in Corporate and Other. For the year ended August 31, 2021, our equity method investment in Ventura Foods was reported separately as our Foods segment.
In addition, our nonconsolidated food production and distribution joint venture, Ventura Foods, LLC ("Ventura Foods"), and our nonconsolidated wheat milling joint venture, Ardent Mills, LLC ("Ardent Mills"), are included in Corporate and Other.
We also have preferred shareholders that own shares of our five series of preferred stock, all of which are listed and traded on the Global Select Market of The Nasdaq Stock Market LLC.
As a cooperative, we are owned by farmers and ranchers and member cooperatives (referred to herein as "members") across the United States. We also have preferred shareholders who own shares of our five series of preferred stock, all of which are listed and traded on the Global Select Market of The Nasdaq Stock Market LLC.
Removed
We sold approximately 1.5 billion gallons of gasoline and approximately 1.7 billion gallons of diesel fuel in fiscal 2022. We also blend, package and wholesale auto and farm equipment lubricants to members and nonmembers. We are one of the nation's largest propane wholesalers based on revenues. Most of the propane sold in rural areas is for heating and agricultural usage.
Added
The percentage of refined petroleum products that we obtain from third parties is dependent on refinery production volumes and will vary from year to year primarily based on our planned major maintenance schedule. Sales and Marketing: Customers We market approximately 77% of our refined fuel products to members, with the balance sold to nonmembers.
Added
These customers include member and nonmember producers, member cooperatives, elevators, grain dealers, grain processors and crop nutrient and crop protection retailers. We sell our edible soy and canola oils and soyflour to food companies and our inedible oils may be sold to energy companies.
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Additionally, our lost-time injury rate was 0.9 incidents per 100 full-time workers, a 20% reduction over our three-year average, and our DOT crash rate remained in the top 5% (most favorable) of all carriers in our industry segment for the third consecutive year. Community involvement .

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

100 edited+35 added−24 removed126 unchanged
Biggest changeAs a result, we were required to divert scheduled export shipments through other export locations, resulting in transportation delays and increased transportation costs. • Changes in weather patterns may shift periods of demand for products or regions in which our products are produced or distributed, which could require us to revise our procurement and distribution processes. • Significant changes in water levels (up or down, as a result of flooding, drought or otherwise) may cause changes in agricultural activity, which could require changes to our operating and distribution activities, as well as significant capital improvements to our facilities. • Climate change may cause changes in weather patterns and conditions, including changes in rainfall and storm patterns and intensities, water shortages, changes in sea levels and changes in temperature levels, all of which could adversely impact our costs and business operations; the location, cost and competitiveness of commodity agricultural production; related storage and processing facilities; and demand for agricultural commodities, and may result in incidents of stranded physical assets.
Biggest changeThe following are examples of factors that could impact our businesses: • Weather conditions during the spring planting season and early summer crop nutrient and crop protection application season affect agronomy product volumes and profitability. • Adverse weather conditions, such as drought, heavy snowfall or rainfall and any flooding that results, may cause transportation delays and increased transportation costs or damage physical assets, especially facilities in low-lying areas near coasts and riverbanks or situated in hurricane-prone and/or rain-susceptible regions. • Changes in weather patterns may shift periods of demand for products or regions in which our products are produced or distributed, which could require us to revise our procurement and distribution processes. • Significant changes in water levels (up or down, as a result of flooding, drought or otherwise) may cause changes in agricultural activity, which could require changes to our operating and distribution activities, as well as significant capital improvements to our facilities. • Climate change may cause changes in weather patterns and conditions, including changes in rainfall and storm patterns and intensities, water shortages, changes in sea levels and changes in temperature levels, all of which could adversely impact our costs and business operations; the location, cost and competitiveness of commodity agricultural production; related storage and processing facilities; and demand for agricultural commodities, and may result in incidents of stranded physical assets.
Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Our actual results and financial condition may differ materially from those indicated in the forward-looking statements. Therefore, you should not place undue reliance on any forward-looking statements.
Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside our control. Our actual results and financial condition may differ materially from those indicated in the forward-looking statements. Therefore, you should not place undue reliance on any forward-looking statements.
For example, fluctuations in commodity prices may result in significant noncash losses being incurred on our commodity-based derivatives, which may in turn materially and adversely 8 Table of Contents affect our operating results.
For example, fluctuations in commodity prices may result in significant noncash losses being incurred on our commodity-based derivatives, 8 Table of Contents which may in turn materially and adversely affect our operating results.
In addition, changes in market prices for commodities that we purchase without a corresponding change in the selling prices of those products can affect revenues and operating earnings. Similarly, increased or decreased sales volumes without a corresponding change in the purchase and selling prices of those products can affect revenues and operating earnings.
In addition, changes in market prices for commodities that we purchase without a corresponding change in the selling prices of those products can affect revenues and operating earnings. Similarly, increased or decreased sales volumes without a corresponding change in the purchase and/or selling prices of those products can affect revenues and operating earnings.
In our energy operations, profitability depends largely on the margin between the cost of crude oil that we refine and the selling prices that we obtain for our refined products. The prices for crude oil and for gasoline, diesel fuel and other refined petroleum products fluctuate widely.
In our energy operations, profitability depends largely on the margin between the cost of crude oil that we refine and the selling prices we obtain for our refined products. The prices for crude oil and for gasoline, diesel fuel and other refined petroleum products fluctuate widely.
If these cooperatives, distributors, brokers and retailers elect not to purchase our products, our revenues, results of operations and cash flows could be materially and adversely affected.
If these cooperatives, distributors, brokers and retailers elect to not purchase our products, our revenues, results of operations and cash flows could be materially and adversely affected.
These transactions typically take place on exchanges such as the CME. Our hedging transactions and activities are subject to the rules and regulations of the exchanges we use and governing bodies, including the CME, the NYMEX, the CBOT, the MGEX and the CFTC.
These transactions typically take place on exchanges such as the CME. Our hedging transactions and activities are subject to the rules and regulations of the exchanges we use and governing bodies, including the CME, NYMEX, CBOT, MGEX and CFTC.
Many of our current and former facilities have been in operation for many years, and over that time, we and other operators of those facilities have generated, used, stored and disposed of substances or wastes that are or might be considered hazardous under applicable or future enacted environmental laws, including liquid fertilizers, chemicals and fuels stored in underground and aboveground tanks.
Many of our current and former facilities have been in operation for many years. Over that time, we and other operators of those facilities have generated, used, stored and disposed of substances or wastes, including liquid fertilizers, chemicals and fuels stored in underground and aboveground tanks, that are or might be considered hazardous under applicable or future enacted environmental laws.
Examples of such factors include, but are not limited to, evolving regulatory and other standards, processes and assumptions; the pace of scientific and technological developments; increased costs and the availability of requisite financing; market trends that may alter business opportunities; the conduct of third-party counterparties; constraint or disruptions to our supply chain and changes in carbon markets.
Examples of such factors include, but are not limited to, evolving regulatory and other standards, processes and assumptions; the pace of scientific and technological developments; increased costs and the availability of requisite financing; market trends that may alter business opportunities; the conduct of third-party counterparties; constraint or disruptions to our supply chain and changes in carbon markets or carbon taxes.
Consolidation could allow producers to negotiate pricing, supply availability and other contract terms that are less favorable to us. In addition, consolidation also may increase the likelihood that consumers or end users of these products enter into supply relationships with a smaller number of producers, resulting in potentially higher prices for the products we purchase.
Consolidation could allow producers to negotiate pricing, supply availability and other contract terms that are less favorable to us. In addition, consolidation may increase the likelihood that consumers or end users of these products enter into supply relationships with a smaller number of producers, resulting in potentially higher prices for the products we purchase.
Emerging sustainability and other environmental priorities outside our control could also affect agricultural practices and future demand for agronomy products applied to crops and the volume of any such application. These priorities could also impact demand for our grain and may require us to incur additional costs for increased due diligence and reporting.
Emerging sustainability and other environmental priorities outside our control could also affect agricultural practices and future demand for agronomy products applied to crops and the volume of any such application. These priorities could also impact demand for our grain and energy products, and may require us to incur additional costs for increased due diligence and reporting.
In addition, such epidemics, pandemics, disease outbreaks or other public health developments may adversely affect economies and financial markets throughout the world, such as the effect that COVID-19 has had on world economies and financial markets, which may affect our ability to obtain additional financing for our businesses and demand for our products and services.
In addition, such epidemics, pandemics, disease outbreaks or other public health developments may adversely affect economies and financial markets throughout the world, such as the effect COVID-19 has had on world economies and financial markets, which may affect our ability to obtain additional financing for our businesses and demand for our products and services.
If any of our food or animal feed products were to become adulterated or misbranded, we would need to recall those items and could experience product liability claims if either consumers or customers' livestock were injured or were claimed to be injured as a result.
If any of our food or animal feed products were to become adulterated or misbranded, we would need to recall those items and could experience product liability claims if either consumers or customers' livestock or pets were injured or were claimed to be injured as a result.
If that deterioration occurs, the material adverse effects of third parties not performing their repayment obligations may be exacerbated if the collateral held by us cannot be realized or is liquidated at prices not sufficient to recover the full amount owed to us.
If deterioration occurs, the material adverse effects of third parties not performing their repayment obligations may be exacerbated if the collateral held by us cannot be realized or is liquidated at prices not sufficient to recover the full amount owed to us.
For example, government policies, mandates and regulations related to genetically modified organisms, traceability standards, sustainable practices, product safety and labeling, and renewable and low-carbon fuels could have an adverse effect on our operations or profitability by, among other things, influencing the planting of certain crops, the location and size of crop production, trade of processed and unprocessed commodity products, volumes and types of imports and exports, availability and competitiveness of feedstocks as raw materials, and viability and volume of certain of our products.
For example, government policies, mandates and regulations related to genetically modified organisms, traceability standards, sustainable practices, product safety and labeling, and renewable and low-carbon fuels could have an adverse effect on our operations or profitability by, among other things, influencing the planting of certain crops, the location and extent of crop production, trade of processed and unprocessed commodity products, volumes and types of imports and exports, availability and competitiveness of feedstocks as raw materials, and viability and volume of certain of our products.
Precautionary measures that we may take in the future intended to limit the impact of any epidemic, pandemic, disease outbreak or other public health development, may result in additional costs.
Precautionary measures we may take in the future intended to limit the impact of any epidemic, pandemic, disease outbreak or other public health development, may result in additional costs.
For example, certain loans and other financing arrangements we undertake with agricultural producers are typically secured by the counterparty's crops that are planted in the current year.
For example, certain loans and other financing arrangements we undertake with agricultural producers are typically secured by the counterparty's crops planted in the current year.
As another example, if any of our counterparties experience a cyber breach or system failure, or does not respond or perform effectively in connection with such cyber breach or system failure, their businesses could be negatively impacted, and it may result in disruption to our supply chain or distribution channels, which could have a material adverse effect on our business.
As another example, if any of our counterparties experience a cybersecurity breach or system failure, or does not respond or perform effectively in connection with such cybersecurity breach or system failure, their businesses could be negatively impacted, and it may result in disruption to our supply chain or distribution channels, which could have a material adverse effect on our business.
In addition, an owner or operator of contaminated property and a party who sends hazardous materials to such site for treatment, storage, disposal or recycling can be liable for the cost of investigation and remediation under environmental laws. In some instances, such liability exists regardless of fault.
In addition, an owner or operator of contaminated property and a party that sends hazardous materials to such site for treatment, storage, disposal or recycling can be liable for the cost of investigation and remediation under environmental laws. In some instances, such liability exists regardless of fault.
In addition, our renewable fuels business produces ethanol, which is closely related to, or may be substituted for, petroleum products, and may be blended into gasoline to increase octane content. Therefore, the selling price of ethanol can be impacted by the selling prices of gasoline, diesel fuel and other octane enhancers.
Our renewable fuels business produces ethanol, which is closely related to, or may be substituted for, petroleum products, and may be blended into gasoline to increase octane content. Therefore, the selling price of ethanol can be impacted by the selling prices of gasoline, diesel fuel and other octane enhancers.
In particular, restrictions on or disruptions of transportation, port closures or increased border controls or closures, or other impacts on domestic and global supply chains or distribution channels, could increase our costs for raw materials and commodity costs, increase demand for raw materials and commodities from competing purchasers, limit our ability to meet customer demand or otherwise have a material adverse effect on our business, financial condition and results of operations or cash flows.
In particular, restrictions on or disruptions of transportation, port closures or increased border controls or closures, or 14 Table of Contents other impacts on domestic and global supply chains or distribution channels could increase our costs for raw materials and commodity costs, increase demand for raw materials and commodities from competing purchasers, limit our ability to meet customer demand or otherwise have a material adverse effect on our business, financial condition and results of operations or cash flows.
Such developments may include ongoing spread of the virus; disease severity; outbreak duration; extent of any reoccurrence of the coronavirus or any evolutions or mutations of the virus; availability, administration and effectiveness of vaccines; development of therapeutic treatments that can restore consumer and business economic confidence; type and duration of actions that may be taken by governmental authorities in response to the outbreak; 11 Table of Contents and impact on the U.S. and the global economy.
Such developments may include ongoing spread of the virus; disease severity; outbreak duration; extent of any reoccurrence of the coronavirus or any evolutions or mutations of the virus; availability, administration and effectiveness of vaccines; development of therapeutic treatments that can restore consumer and business economic confidence; type and duration of actions that may be taken by governmental authorities in response to the outbreak; and impact on the U.S. and the global economy.
Additionally, planted acreage and consequently the volume of fertilizer and crop protection products applied is partially dependent on government programs, grain prices and the perception held by producers of demand for production, all of which are outside our control.
Additionally, planted acreage and consequently the volume of crop nutrient and crop protection products applied is partially dependent on government programs, grain prices and the perception held by producers of demand for production, all of which are outside our control.
If these counterparties do not pay us back, such that we experience significant defaults on their payment obligations to us, our financial condition, results of operations or cash flows could be materially and adversely affected.
If these counterparties do not pay us back and we experience significant defaults on their payment obligations to us, our financial condition, results of operations or cash flows could be materially and adversely affected.
While these phaseouts primarily impact light-duty vehicles outside our primary markets, they are expected to further accelerate the decline in demand for gasoline, diesel fuel and other refined petroleum products. Declining demand for our energy products, particularly diesel fuel sold for farming applications, could materially and adversely affect our revenues, results of operations and cash flows.
While these phaseouts primarily impact light-duty vehicles outside our primary markets, they are expected to accelerate the decline in demand for gasoline, diesel fuel and other refined petroleum products. Declining demand for our energy products, particularly diesel fuel sold for farming and other heavy-duty equipment applications, could materially and adversely affect our revenues, results of operations and cash flows.
Other energy products, such as propane, generally experience higher volumes and revenues during the winter-heating and crop-drying seasons. If any of our long-lived assets become impaired, we could be required to record a significant impairment charge, which would negatively impact our results of operations.
Other energy products, such as propane, generally experience higher volumes and revenues during the winter-heating and crop-drying seasons. 21 Table of Contents If any of our long-lived assets become impaired, we could be required to record a significant impairment charge, which would negatively impact our results of operations.
If we become a party to any such lawsuits, we could be required to pay damages or penalties or have other remedies imposed upon us, which could have a material and adverse effect on our results of operations and financial condition. 19 Table of Contents We face increased climate-change-related litigation risk with respect to our operations.
If we become a party to any such lawsuits, we could be required to pay damages or penalties or have other remedies imposed upon us, which could have a material and adverse effect on our results of operations and financial condition. We face increased climate-change-related litigation risk with respect to our operations.
Ongoing consolidation among distributors and brokers of food products and food retailers has altered the buying patterns of these businesses, as they have increasingly elected to work with product suppliers who can meet their needs nationwide rather than just regionally or locally.
Ongoing consolidation among distributors and brokers of food products and food retailers has altered the buying patterns of those businesses, as they have increasingly elected to work with product suppliers who can meet their needs nationwide or globally, rather than just regionally or locally.
Our operations are subject to business interruptions due to unanticipated events such as explosions, fires, other natural disasters, war, terrorism, cyber attacks, industrial accidents, pipeline interruptions, transportation delays, equipment failures, crude oil or refined product spills, adverse weather conditions and labor disputes.
Our operations are subject to business interruptions due to unanticipated events such as explosions, fires, other natural disasters, war, terrorism, cyberattacks, industrial accidents, pipeline interruptions, transportation delays, equipment failures, crude oil or refined product spills, adverse weather conditions and labor disputes.
A number of other factors may adversely affect the labor force available to us, including changes in the labor market as a result of the 14 Table of Contents COVID-19 pandemic and other socioeconomic and demographic changes, high employment levels, federal unemployment subsidies and other government regulations, unemployment programs and volatility in macroeconomic factors impacting the labor market.
A number of other factors may adversely affect the labor force available to us, including changes in the labor market as a result of the COVID-19 pandemic and other socioeconomic and demographic changes, high employment levels, federal unemployment subsidies and other government regulations, unemployment programs and volatility in macroeconomic factors impacting the labor market.
Changes in trade policy, withdrawals from or material modifications to relevant international trade agreements and continued uncertainty could depress economic activity and restrict our access to suppliers and customers, and we cannot predict the effects of future trade policies, disputes or agreements on our business.
Changes in trade policy, withdrawals from or material modifications to relevant international trade agreements and continued uncertainty could depress economic activity and restrict our access to suppliers and customers, and we cannot predict the effects of future 18 Table of Contents trade policies, disputes or agreements on our business.
Consolidation has also occurred among local cooperatives that are the primary wholesale customers of our products, which has resulted in a smaller wholesale and retail customer base for our products and has intensified the competition for these customers. It is highly likely that this consolidation will continue in the future.
Consolidation has occurred among member cooperatives that are the primary wholesale customers of our products, which has resulted in a smaller wholesale and retail customer base for our products and has intensified the competition for these customers. It is highly likely this consolidation will continue in the future.
If our controls and strategies are not successful in mitigating or preventing our financial exposure to losses due to the fluctuations or failures mentioned above, it could significantly and adversely affect our operating results. Actual or perceived quality, safety or health risks associated with our products could subject us to significant liability and damage our business and reputation.
If our controls and strategies are not successful in mitigating or preventing our financial exposure to losses due to the fluctuations or failures mentioned above, it could significantly and adversely affect our operating results. 13 Table of Contents Actual or perceived quality, safety or health risks associated with our products could subject us to significant liability and damage our business and reputation.
Commodity prices generally are affected by a wide range of factors beyond our control, including weather, plant disease, insect damage, drought, availability and adequacy of supply, availability of reliable rail and river transportation networks, industry labor availability, outbreaks of disease, inflation, government regulation and policies, global trade disputes, international conflicts, such as the ongoing war between Russia and Ukraine, and general political and economic conditions.
Commodity prices generally are affected by a wide range of factors beyond our control, including weather, plant disease, insect damage, drought, availability and adequacy of supply, availability of reliable rail and river transportation networks, industry labor availability, outbreaks of disease, inflation, government regulation and policies, global trade disputes, international conflicts, such as the ongoing war between Russia and Ukraine and escalation of conflict in the Middle East, and general political and economic conditions.
We operate in several highly competitive business segments and our competitors may succeed in developing new or enhanced products that are better than ours, may be more successful in marketing and selling their products than we are, or may have more effective supply chain capability than we have.
We operate in highly competitive business segments and our competitors may succeed in developing new or enhanced products that are better than ours, may be more successful in marketing and selling their products than we are, or may have more effective supply chain capabilities than we have.
There may be other challenges and risks to both our aging and current IT systems over time due to any number of causes, such as catastrophic events, availability of resources, power outages, security breaches or cyber attacks.
There may be other challenges and risks to both our aging and current IT systems over time due to any number of causes, such as catastrophic events, availability of resources, power outages, security breaches or cyberattacks.
In the seed, fertilizer and crop protection markets, consolidation at both the producer and wholesale customer levels has increased the potential for direct sales from input manufacturers to cooperative customers and/or individual agricultural 12 Table of Contents producers, which would remove us from the supply chain and could have a material and adverse effect on our revenues, results of operations and cash flows.
In the seed, crop nutrient and crop protection markets, consolidation at both the producer and wholesale customer levels has increased the potential for direct sales from input manufacturers to cooperative customers and/or individual agricultural producers, which would remove us from the supply chain and could have a material and adverse effect on our revenues, results of operations and cash flows.
Limiting energy-related businesses' access to capital could make it more difficult for us to secure external financing, which could in turn restrict our current operations and our growth opportunities, adversely affect our operating results and restrict our ability to repay our existing debts. 20 Table of Contents Our cooperative structure limits our ability to access equity capital.
Limiting energy-related businesses' access to capital could make it more difficult for us to secure external financing, which could in turn restrict our current operations and growth opportunities, adversely affect our operating results and restrict our ability to repay our existing debts. Our cooperative structure limits our ability to access equity capital.
Our co-venturers may take actions that are not within our control, which may expose our investments in joint ventures to the risk of lower values or returns. Joint venture investments may also lead to impasses.
Our co-venturers may take actions that are 17 Table of Contents not within our control, which may expose our investments in joint ventures to the risk of lower values or returns. Joint venture investments may also lead to impasses.
Consolidation among the producers of products we purchase and customers for products we sell could materially and adversely affect our revenues, results of operations and cash flows. Consolidation has occurred among the producers and manufacturers of products we sell and purchase, including crude oil, fertilizer and grain, and it is highly likely that this consolidation will continue in the future.
Consolidation among the producers of products we purchase and customers for products we sell could materially and adversely affect our revenues, results of operations and cash flows. Consolidation has occurred among the producers and manufacturers of products we sell and purchase, including crude oil, crop nutrients and grain, and it is highly likely this consolidation will continue in the future.
In addition, if we experience insurable events, our insurance premiums could increase or insurance relating thereto may become unavailable to us. We may also be impacted by supply chain issues, due to factors largely beyond our control, which could escalate in future periods.
In addition, our insurance premiums could increase or insurance coverage may become unavailable to us, particularly if we experience insurable events. We may also be impacted by supply chain issues, due to factors largely beyond our control, which could escalate in future periods.
In the event we experience significant nonperformance or nonpayment by counterparties, our financial condition, results of operations and cash flows could be materially and adversely affected.
In the 12 Table of Contents event we experience significant nonperformance or nonpayment by counterparties, our financial condition, results of operations and cash flows could be materially and adversely affected.
Conversely, if we comply with evolving investor, lender and stakeholder ESG expectations and standards, doing so could result in higher costs, disruption and diversion of management attention, an increased strain on our resources and heightened legal and regulatory risk, and could also threaten our credibility with other investors, lenders and stakeholders.
Conversely, if we comply with evolving investor, lender and stakeholder ESG expectations and standards, doing so could result in higher costs, disruption and diversion of management attention, increased strain on our resources and heightened legal and regulatory risk, and could also threaten our credibility with other investors, lenders, private litigants, government agencies and stakeholders.
For example, the compliance burden and 17 Table of Contents impact on our operations and profitability as a result of the enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act ("Dodd-Frank") and related regulations continue to evolve, as federal agencies have implemented and continue to implement its many provisions through regulation.
For example, the compliance burden and impact on our operations and profitability as a result of the enactment of the Dodd-Frank Wall Street Reform and Consumer Protection Act ("Dodd-Frank") and related regulations continue to evolve, as federal agencies have implemented and continue to implement the act's many provisions through regulation.
Furthermore, embargoes and sanctions imposed by the United States and other governments restricting or 18 Table of Contents prohibiting sales to specific persons or countries or based on product classification may expose us to potential criminal or civil sanctions.
Furthermore, embargoes and sanctions imposed by the United States and other governments restricting or prohibiting sales to specific persons or countries or based on product classification may expose us to potential criminal or civil sanctions.
For example: • Our oil refineries and other facilities are potential targets for terrorist attacks that could halt or discontinue production. • Our inability to negotiate acceptable contracts with unionized workers in our operations could result in strikes or work stoppages. • Our corporate headquarters, the facilities we own or the significant inventories we carry could be damaged or destroyed by catastrophic events, adverse weather conditions or contamination. • Someone may accidentally or intentionally introduce malware into our information technology systems or breach our computer systems or other cyber resources. • An occurrence of a pandemic or epidemic disease, such as the COVID-19 pandemic, affecting a substantial part of our workforce or our customers could interrupt our business operations.
The following statements are examples of potential interruptions or losses. • Our oil refineries and other facilities are potential targets for terrorist attacks that could halt or discontinue production. • Our inability to negotiate acceptable contracts with unionized workers in our operations could result in strikes or work stoppages. • Our corporate headquarters, the facilities we own and the inventories we carry could be damaged or destroyed by catastrophic events, adverse weather conditions or contamination. • Someone may accidentally or intentionally introduce malware into our information technology systems or breach our computer systems or other cybersecurity resources. • An occurrence of a pandemic or epidemic disease, such as the COVID-19 pandemic, could affect a substantial part of our workforce or our customers and interrupt our business operations.
Regardless of the industry, investors' and other stakeholders' increased focus and activism related to ESG and similar matters may hinder access to capital or financing, as investors or lenders may determine to reallocate capital or not commit capital as a result of their assessment of a company's ESG practices and disclosures.
Across industries, investors' and other stakeholders' increased focus and activism related to ESG and similar matters may hinder access to capital or financing, as investors or lenders may determine to reallocate capital or not commit capital as a result of their assessment of a company's ESG practices and disclosures.
If we do not adapt or comply with investor, lender or stakeholder ESG expectations and standards, which are evolving, or if we are perceived to have not responded appropriately to the growing focus on ESG issues, regardless of whether there is a legal requirement to do so, we may suffer from reputational damage and our business or financial condition could be materially and adversely affected.
If we do not adapt or comply with investor, lender, private litigants, government agencies or stakeholder ESG expectations and standards, which are evolving, or if we are perceived to have not responded appropriately to the growing focus 16 Table of Contents on ESG issues and the opposition to ESG issues, regardless of whether there is a legal requirement to do so, we may suffer from reputational damage and our business or financial condition could be materially and adversely affected.
We may also experience negative reactions from our members, shareholders, lenders, employees, customers or other stakeholders as a result of our action or inaction related to the war between Russia and Ukraine.
We may also experience negative reactions from our members, shareholders, lenders, employees, customers or other stakeholders as a result of our action or inaction related to the war between Russia and Ukraine or the escalation of conflict in the Middle East.
In response to global inflationary pressures, the U.S. Federal Reserve and foreign equivalents have started raising interest rates, which has resulted in uncertainty and volatility in global financial markets and increased borrowing costs under certain of our credit facilities, including our five-year revolving credit facility and our 10-year term loan facility.
In response to global inflationary pressures, the U.S. Federal Reserve and foreign equivalents have raised and appear poised to continue to raise interest rates, which has resulted in uncertainty and volatility in global financial markets and increased borrowing costs under certain of our credit facilities, including our five-year revolving credit facility and our 10-year term loan facility.
Moreover, claims or liabilities of this sort might not be covered by our insurance or by any rights of indemnity or contribution that we may have against others.
Moreover, product liability claims or liabilities might not be covered by our insurance or by any rights of indemnity or contribution that we may have against others.
Many of these factors, including the ongoing war between Russia and Ukraine, have resulted in significant volatility in crude oil, refined petroleum products and natural gas supplies and prices. We expect that volatility to continue in fiscal 2023.
Many of these factors, including the ongoing war between Russia and Ukraine and escalation of conflict in the Middle East, have resulted in significant volatility in crude oil, refined petroleum products and natural gas supplies and prices. We expect that volatility to continue in fiscal 2024.
Additionally, certain of the economic and other sanctions imposed, or that may be imposed, against Russia and its citizens and enterprises may continue for a period of time after any resolution has been reached.
Additionally, certain of the economic and other sanctions imposed, or that may be imposed, against participants in the war and global conflicts and its citizens and enterprises may continue for a period of time after any resolution has been reached.
The current war between Russia and Ukraine could also draw military or other intervention from additional countries, which could lead to a much larger war and/or additional sanctions imposed by the United States government and other governments that restrict business with specific persons, organizations or countries with respect to certain products or services.
The war between Russia and Ukraine and escalation of conflict in the Middle East could also draw military or other intervention from additional countries, which could lead to much larger wars, conflicts and/or additional sanctions imposed by the United States government and other governments that restrict business with specific persons, organizations or countries with respect to certain products or services.
Investor advocacy groups, certain institutional investors, lenders, investment funds and other influential investors are also increasingly focused on ESG practices and disclosures and in recent years have placed increasing importance on the implications and social cost of their investments.
Investor advocacy groups, private litigants, government agencies, certain institutional investors, lenders, investment funds and other influential investors are also increasingly focused on ESG practices and disclosures and in recent years have placed increasing importance on the implications and social cost of their investments and whether companies should engage in ESG activities.
These limitations may restrict our ability to raise equity capital and may adversely affect our ability to compete with enterprises that do not face similar restrictions.
These limitations may restrict our ability to raise equity capital and may adversely affect our ability to compete with enterprises that do not face similar restrictions. ITEM 1B. UNRESOLVED STAFF COMMENTS Not applicable.
The EPA generally establishes new annual renewable fuel percentage standards for each compliance year in the preceding year. We generate RINs through our blending activities, but we cannot generate enough RINs to meet the needs of our refining capacity and RINs must be purchased on the open market. In recent years, the price of RINs has been extremely volatile.
The EPA generally establishes new annual renewable fuel percentage standards for each compliance year in the preceding year, which affects the domestic market for ethanol. We generate RINs through our blending activities, but we cannot generate enough RINs to meet the needs of our refining capacity and RINs must be purchased on the open market.
The ongoing war could cause harm to our employees and otherwise impair their ability to work for extended periods of time, as well as disrupt telecommunications systems, banks and other critical infrastructure necessary to conduct business in Ukraine.
The ongoing war could cause harm to our employees and otherwise impair their ability to work for extended periods of time, as well as disrupt telecommunications systems, banks and other critical infrastructure necessary to conduct business in Ukraine. The risk of cybersecurity incidents has also increased in connection with the ongoing war between Russia and Ukraine.
Disputes between us and co-venturers may result in litigation or arbitration that would increase our expenses and prevent our officers and/or directors from focusing their time and efforts on our day-to-day business. 16 Table of Contents In addition, we may, in certain circumstances, be liable for the actions of our co-venturers.
Disputes between us and co-venturers may result in litigation or arbitration that would increase our expenses and prevent our officers and/or directors from focusing their time and efforts on our day-to-day business. In addition, we may, in certain circumstances, be liable for the actions of our co-venturers. Each of these matters could have a material adverse effect on us.
Current federal income tax laws, regulations and interpretations regarding the taxation of cooperatives allow us to exclude income generated through business with or for a member (patronage-sourced income) from our taxable income to the extent it is distributed back to our members.
Current federal income tax laws, regulations and interpretations, including those specific to the taxation of cooperatives, provide us certain income tax benefits such as allowing us to exclude income generated through business with or for a member (patronage-sourced income) from our taxable income to the extent it is distributed back to our members.
If our members were to sell their products to other purchasers or purchase products from other sellers, our revenues and margins would decline and our results of operations and cash flows could be materially and adversely affected.
Our members often have a variety of distribution outlets and product sources available to them. If our members were to sell their products to other purchasers or purchase products from other sellers, our revenues and margins would decline and our results of operations and cash flows could be materially and adversely affected.
As the market for renewable fuels becomes more competitive, or if there are changes in the regulations, policies or standards affecting the demand for renewable fuels, our renewable fuels business may experience increased volatility in product margins, which could adversely affect our operating earnings. We are subject to political, economic, legal and other risks of doing business globally.
As the market for renewable fuels becomes more competitive, or if there are changes in the regulations, policies or standards affecting the demand for renewable fuels, our renewable fuels business may experience increased volatility in product margins, which could adversely affect our operating earnings.
GAAP"), a general reserve is also maintained based on our best estimate of expected credit losses. For other forms of credit, we establish reserves as appropriate and consistent with U.S. GAAP. The reserves represent our best estimate based on current facts and circumstances.
Consistent with accounting principles generally accepted in the United States ("U.S. GAAP"), we maintain a general reserve based on our best estimate of expected credit losses. For other forms of credit, we establish reserves as appropriate and consistent with U.S. GAAP. The reserves represent our best estimate based on current facts and circumstances.
In addition, any investigation or proceeding by an exchange or the CFTC, whether successful or unsuccessful, could result in substantial costs, diversion of resources, including management time, and potential harm to our reputation, all of which could have a material adverse effect on our business financial condition, liquidity, results of operations and prospects.
In addition, any investigation or proceeding by an exchange or the CFTC, whether successful or unsuccessful, could result in substantial costs, diversion of resources, including management time, and potential harm to our reputation, all of which could have a material adverse effect on our business financial condition, liquidity, results of operations and prospects. 19 Table of Contents We are subject to extensive anti-corruption, anti-bribery, anti-kickback and trade laws and regulations, and any noncompliance with those laws and regulations could have a material adverse effect on our business, financial condition and results of operations.
This lack of legal certainty exposes our operations to increased risks, including increased difficulty in enforcing our agreements in those jurisdictions and increased risk of adverse actions by local government authorities, such as unilateral or forced renegotiation, modification or nullification of existing agreements or expropriations.
This lack of legal certainty exposes our operations to increased risks, including increased difficulty in enforcing our agreements in those jurisdictions and increased risk of adverse actions by local government authorities, such as unilateral or forced renegotiation, modification or nullification of existing agreements or expropriations. 9 Table of Contents Ongoing wars and global conflicts may adversely affect our business, financial condition and results of operations.
If any changes are made to such federal income tax laws, regulations or interpretations, or if in the future we were not eligible to be taxed as a cooperative, our tax liability would significantly increase and our net income would significantly decrease. We incur significant costs in complying with applicable laws and regulations.
If in the future, for example, we were to be subject to a corporate alternative minimum tax, or we were not eligible to be taxed as a cooperative, our tax liability would significantly increase and our net income would significantly decrease. We incur significant costs in complying with applicable laws and regulations.
Although our systems were not breached, no data was lost or exposed and our operations were not significantly interrupted by this incident, there is no guarantee that a future incident would not have a greater impact on our operations, our data or our reputation. We may incur significant costs protecting against or remediating cyber-based attacks or other cyber incidents.
Although our systems were not breached, no data was lost or exposed and our operations were not significantly interrupted by this incident, there is no guarantee that a future incident would not have a greater impact on our operations, our data or our reputation.
Our monitoring efforts may not be effective at detecting a significant risk exposure and our controls and strategies may not be effective in adequately managing against the occurrence of a significant loss relating to a risk exposure.
We monitor position limits, accounts receivables and other exposures and engage in other strategies and controls to manage these risks. Our monitoring efforts may not be effective at detecting a significant risk exposure and our controls and strategies may not be effective in adequately managing against the occurrence of a significant loss relating to a risk exposure.
Our business and operations have been, and may in the future, be adversely affected by epidemics, pandemics, outbreaks of disease and other adverse public health developments, including COVID-19. Epidemics, pandemics, outbreaks of novel diseases and other adverse public health developments in countries and states where we operate may arise at any time.
Epidemics, pandemics, outbreaks of novel diseases and other adverse public health developments in countries and states where we operate may arise at any time. Such developments, including the COVID-19 pandemic, have had, and in the future may have, an adverse effect on our business, financial condition and results of operations.
If our ability to purchase fertilizer in the global market continues to be impacted by those sanctions or by other factors, it could have a material adverse effect on our business and operations. In addition, such sanctions put us at an increased risk of inadvertently trading with a sanctioned partner.
Such sanctions have caused inflationary pressures and impacted our ability to purchase fertilizer in the global market. If our ability to purchase fertilizer in the global market continues to be impacted by those sanctions or by other factors, it could have a material adverse effect on our business and operations.
These assumptions were an integral part of the economics used to evaluate these joint venture investment opportunities prior to consummation. To the extent that actual market performance varies from our models, our ability to achieve projected returns on our joint venture investments may be impacted in a materially adverse manner.
To the extent that actual market performance varies from our models, our ability to achieve projected returns on our joint venture investments may be impacted in a materially adverse manner.
For example, Illinois has enacted comprehensive legislation that aims to phase out fossil fuels by 2045.
For example, California has passed legislation to ban new gasoline powered vehicles by 2035 and Illinois has enacted comprehensive legislation that aims to phase out fossil fuels by 2045.
Also, pursuant to the Energy Independence and Security Act of 2007, the EPA has promulgated the Renewable Fuel Standard ("RFS"), which requires refiners to blend renewable fuels, such as ethanol and biodiesel, with their petroleum fuels or purchase renewable energy credits, known as Renewable Identification Numbers ("RINs"), in lieu of blending.
In addition, new legislation, regulatory programs, or customer or other stakeholder expectations could require substantial expenditures for installation and operation of systems and equipment or for substantial modifications to existing equipment. 20 Table of Contents Pursuant to the Energy Independence and Security Act of 2007, the EPA has promulgated the Renewable Fuel Standard ("RFS"), which requires refiners to blend renewable fuels, such as ethanol and biodiesel, with their petroleum fuels or purchase renewable energy credits, known as Renewable Identification Numbers ("RINs"), in lieu of blending.
It is possible that these attacks could have collateral effects on additional critical infrastructure and financial institutions globally, which could adversely affect our operations. The proliferation of malware from the war into systems unrelated to the war, or cyberattacks against U.S. companies in retaliation for U.S. sanctions against Russia or U.S. support of Ukraine, could also adversely affect our operations.
The proliferation of malware from the war into systems unrelated to the war, or cyberattacks against U.S. companies in retaliation for U.S. sanctions against Russia or U.S. support of Ukraine, could also adversely affect our operations.
Each of these matters could have a material adverse effect on us. We made certain assumptions and projections regarding the future of the markets served by our joint venture investments that included projected raw materiality availability and pricing, production costs, market pricing and demand for the joint venture's products.
We have made certain assumptions and projections regarding the future of the markets served by our joint venture investments that included projected raw materiality availability and pricing, production costs, market pricing and demand for the joint venture's products. These assumptions were an integral part of the economics used to evaluate these joint venture investment opportunities prior to consummation.
As a result, we may not be able to continue to compete successfully, which could have a material adverse effect on our business, financial condition, liquidity, results of operations and prospects. Our revenues, margins, results of operations and cash flows could be materially and adversely affected if our members were to do business with others rather than with us.
As a result, we may not 11 Table of Contents be able to continue to compete successfully, which could have a material adverse effect on our business, financial condition, liquidity, results of operations and prospects.
For example, in fiscal 2022, prices for D6 ethanol RINs and D4 ethanol RINs rose by 15% and 21%, respectively, compared to the prior year. Continued RIN volatility could have a negative impact on our future refined fuels' margins, as experienced during fiscal 2022. Environmental liabilities and litigation could have a material adverse effect on us.
In recent years, the price of RINs has been extremely volatile. For example, in fiscal 2023, prices for D6 ethanol RINs and D4 ethanol RINs rose by 22% and 5%, respectively, compared to the prior year. Continued RIN volatility could have a negative impact on our future refined fuels margins, as experienced during fiscal 2023.
We monitor our business portfolio and organizational structure and have made and may continue to make acquisitions, strategic alliances, joint ventures, divestitures and changes to our organizational structure.
Acquisitions, strategic alliances, joint ventures, divestitures and other nonordinary course-of-business events resulting from portfolio management actions and other evolving business strategies could affect future results. We monitor our business portfolio and organizational structure and have made and may continue to make acquisitions, strategic alliances, joint ventures, divestitures and changes to our organizational structure.
The continuation of the war may trigger a series of additional economic and other sanctions enacted by the United States, other NATO member states and other 9 Table of Contents countries. In response, Russia announced export bans on various products, including agricultural commodities, through the end of calendar year 2022.
The continuation of the war may trigger a series of additional economic and other sanctions enacted by the United States, other NATO member states and other countries. In response, Russia has announced export bans on various products, including agricultural commodities. Although we do not maintain operations in Russia, it is a significant source of fertilizer for global markets.
With respect to our lending activity, we evaluate the collectability of both commercial and producer loans on a specific identification basis based on the amount and quality of the collateral obtained and record specific loan loss reserves when appropriate. Consistent with accounting principles generally accepted in the United States ("U.S.
Default rates, downgrades and disputes with counterparties as to the valuation of collateral increase significantly in times of market stress and illiquidity. With respect to our lending activity, we evaluate the collectability of commercial and producer loans on a specific identification basis based on the amount and quality of the collateral obtained and record specific loan loss reserves when appropriate.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeDescription Location(s) Energy Refineries Laurel, Montana, and McPherson, Kansas Propane terminals 10 locations in Iowa, Maine, Minnesota, Missouri, North Dakota, Washington and Wisconsin; the locations in Glenwood, Minnesota; Hannaford, North Dakota; and Yakima, Washington, are owned by CHS; the location in Rockville, Minnesota, is 50% owned by CHS; all other locations are either fully or partially leased Transportation terminals/repair facilities 12 locations in Iowa, Kansas, Minnesota, Montana, North Dakota, South Dakota, Washington and Wisconsin Petroleum and asphalt terminals/storage facilities 11 locations in Montana, North Dakota and Wisconsin Pipelines: Cenex Pipeline, LLC Laurel, Montana, to Fargo, North Dakota Front Range Pipeline, LLC Canadian border to Laurel, Montana Jayhawk Pipeline, LLC Throughout Kansas, with branches in Nebraska, Oklahoma and Texas Conway Pipeline McPherson, Kansas, to Conway, Kansas Kaw Pipe Line Company Locations throughout Kansas Osage Pipe Line Company, LLC Oklahoma to Kansas (50% owned by CHS) Zip Trip corporate headquarters Leased office space in Spokane, Washington Convenience stores/gas stations 40 locations in Colorado, Minnesota, Montana, Nebraska, North Dakota, South Dakota and Wyoming, six of which are leased Lubricant plants/warehouses Inver Grove Heights, Minnesota; Kenton, Ohio; and Amarillo, Texas; the location in Inver Grove Heights is leased Ag Global Grain & Processing Grain terminals 13 locations in the United States, including Iowa, Louisiana, Minnesota, Mississippi, Texas and Wisconsin 6 locations in Brazil 3 locations in Europe, including Hungary and Romania Fertilizer terminal Argentina Grain marketing offices 2 locations in the United States, including Minnesota and Nebraska 15 locations in South America, including Argentina, Brazil, Paraguay and Uruguay 8 locations in Europe, including Bulgaria, Hungary, Italy, Romania, Serbia, Spain, Switzerland and Ukraine 4 locations in Asia, including China, Singapore, South Korea and Taiwan All locations are leased other than the office in Rochester, Minnesota, which is owned Oilseed facilities Fairmont, Hallock and Mankato, Minnesota Sunflower processing plants Fargo and Grandin, North Dakota Storage and warehouse facilities Joliette, North Dakota; and a leased facility in Winkler, Canada Ethanol plants Annawan and Rochelle, Illinois 22 Table of Contents Description Location(s) Country Operations Agri-operations facilities Approximately 379 community locations (some of the facilities are on leased land) located in Colorado, Idaho, Illinois, Iowa, Kansas, Minnesota, Montana, Nebraska, North Dakota, Oklahoma, Oregon, South Dakota, Texas and Washington Feed manufacturing facilities Nine locations in Montana, North Dakota, Oregon and South Dakota Wholesale Agronomy Deep-water port Galveston, Texas Terminals 11 locations in Illinois, Iowa, Kentucky, Louisiana, Minnesota, South Dakota and Texas; facilities in Owensboro, Kentucky; and Galveston, Texas, are on leased land Bulk chemical rail terminal facility Brooten, Minnesota Distribution warehouses 28 locations in Arkansas, Idaho, Illinois, Iowa, Kansas, Michigan, Minnesota, Montana, Nebraska, North Dakota, Oklahoma, South Dakota, Texas, Washington and Wisconsin; all facilities are leased except those in Laurens, Iowa; Willmar, Minnesota (two locations); Fargo and Minot, North Dakota; and Black River Falls, Wisconsin Corporate and Other Corporate headquarters We lease a 24-acre campus in Inver Grove Heights, Minnesota, consisting of one building with approximately 320,000 square feet of office space, and we own an additional nine acres of land adjacent to the leased property on which we have two smaller buildings with approximately 13,400 and 9,000 square feet of space Office facilities Leased facilities in Eagan, Minnesota; Watertown and Sisseton, South Dakota; and Washington, District of Columbia Agricultural land and related improvements We own approximately 179 acres of agricultural land and related improvements in central Michigan
Biggest changeDescription Location(s) Energy Refineries Laurel, Montana, and McPherson, Kansas Propane terminals 11 locations in Colorado, Iowa, Maine, Minnesota, Missouri, North Dakota, Washington and Wisconsin; the locations in Yuma, Colorado; Glenwood, Minnesota; Hannaford, North Dakota; and Yakima, Washington, are owned by CHS; the location in Rockville, Minnesota, is 50% owned by CHS; all other locations are either fully or partially leased 22 Table of Contents Description Location(s) Transportation terminals/repair facilities 12 locations in Iowa, Kansas, Minnesota, Montana, North Dakota, South Dakota, Washington and Wisconsin Petroleum and asphalt terminals/storage facilities 12 locations in Kansas, Montana, North Dakota and Wisconsin Pipelines: Cenex Pipeline, LLC Laurel, Montana, to Fargo, North Dakota Front Range Pipeline, LLC Canadian border to Laurel, Montana Jayhawk Pipeline, LLC Throughout Kansas, with branches in Nebraska, Oklahoma and Texas Conway Pipeline McPherson, Kansas, to Conway, Kansas Kaw Pipe Line Company Locations throughout Kansas Osage Pipe Line Company, LLC Oklahoma to Kansas (50% owned by CHS) Zip Trip corporate headquarters Leased office space in Spokane, Washington Convenience stores/gas stations 39 locations in Colorado, Minnesota, Montana, Nebraska, North Dakota, South Dakota and Wyoming, five of which are leased Lubricant plants/warehouses Inver Grove Heights, Minnesota; Kenton, Ohio; and Amarillo, Texas; the location in Inver Grove Heights is leased Ag Global Grain and Processing Grain terminals 14 locations in the United States, including sites in Illinois, Iowa, Louisiana, Minnesota, Mississippi, Texas and Wisconsin 5 locations in Brazil 3 locations in Europe, including in Hungary and Romania Fertilizer terminal Argentina Grain marketing offices 2 locations in the United States, including in Minnesota and Nebraska 18 locations in South America, including in Argentina, Brazil, Paraguay and Uruguay 8 locations in Europe, including in Bulgaria, Hungary, Italy, Romania, Serbia, Spain, Switzerland and Ukraine 4 locations in Asia, including in China, Singapore, South Korea and Taiwan All locations are leased other than the office in Rochester, Minnesota, which is owned Oilseed facilities Fairmont, Hallock and Mankato, Minnesota Sunflower processing plants Fargo and Grandin, North Dakota Storage and warehouse facilities Joliette, North Dakota; and a leased facility in Winkler, Canada Ethanol plants Annawan and Rochelle, Illinois Country Operations Agri-operations facilities Approximately 415 community locations (some of the facilities are on leased land) located in Colorado, Idaho, Illinois, Iowa, Kansas, Minnesota, Montana, Nebraska, North Dakota, Oklahoma, Oregon, South Dakota, Texas and Washington Feed manufacturing facilities Nine locations in Iowa, Montana, North Dakota, Oregon and South Dakota 23 Table of Contents Description Location(s) Wholesale Agronomy Deepwater port Galveston, Texas Terminals 11 locations in Illinois, Iowa, Kentucky, Louisiana, Minnesota, South Dakota and Texas; facilities in Owensboro, Kentucky; and Galveston, Texas, are on leased land Bulk chemical rail terminal facility Brooten, Minnesota Distribution warehouses 27 locations in Arkansas, Idaho, Illinois, Iowa, Kansas, Michigan, Minnesota, Montana, Nebraska, North Dakota, Oklahoma, South Dakota, Texas, Washington and Wisconsin; all facilities are leased except those in Laurens, Iowa; Willmar, Minnesota (two locations); Fargo and Minot, North Dakota; and Black River Falls, Wisconsin Corporate and Other Corporate headquarters We lease a 24-acre campus in Inver Grove Heights, Minnesota, consisting of one building with approximately 320,000 square feet of office space; we own an additional nine acres of land adjacent to the leased property on which we have two smaller buildings with approximately 13,400 and 9,000 square feet of space Office facilities Leased facilities in Eagan, Minnesota; Kansas City, Missouri; Watertown, South Dakota; and Washington, District of Columbia

Item 4. Mine Safety Disclosures

Mine Safety Disclosures — required of mining issuers

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Biggest changeItem 4. Mine Safety Disclosures 23 PART II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 23 Item 6. [Reserved] 23 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 24 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 41 Item 8.
Biggest changeItem 4. Mine Safety Disclosures 24 PART II Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 24 Item 6. [Reserved] 24 Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations 25 Item 7A. Quantitative and Qualitative Disclosures About Market Risk 42 Item 8.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES As a cooperative, we do not have common stock that is traded or otherwise outstanding. We did not sell any equity securities during the three years ended August 31, 2022, that were not registered under the Securities Act of 1933.
Biggest changeITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES As a cooperative, we do not have common stock that is traded or otherwise outstanding. We did not sell any equity securities during the three years ended August 31, 2023, that were not registered under the Securities Act of 1933.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeCorporate and Other IBIT decreased due to a combination of factors, including decreased equity method income from our investment in Ventura Foods, as a result of less favorable market conditions for edible oils and investment gains during the prior year that did not reoccur during the current year. 31 Table of Contents Revenues by Segment Energy Years Ended August 31, Change 2022 2021 Dollars Percent (Dollars in thousands) Revenues $ 10,294,774 $ 6,375,261 $ 3,919,513 61.5 % The following waterfall analysis and commentary presents the changes in our Energy segment revenues for the year ended August 31, 2022, compared to the prior year: The change in Energy segment revenues for fiscal 2022 reflects the following: • Increased selling prices for refined fuels due to global market conditions contributed to $3.5 billion greater revenues. • Increased selling prices for propane as a result of global market conditions during fiscal 2022 also positively impacted revenues by $370.7 million. • Lower volumes of propane resulted from lower demand driven by warmer weather conditions and less crop-drying activity, which contributed to decreased revenues of $27.3 million. • Lower volumes of refined fuels resulted from lower demand due to high gasoline prices and contributed to decreased revenues of $19.6 million. 32 Table of Contents Ag Years Ended August 31, Change 2022 2021 Dollars Percent (Dollars in thousands) Revenues $ 37,460,211 $ 32,035,342 $ 5,424,869 16.9 % The following waterfall analysis and commentary presents the changes in our Ag segment revenues for the year ended August 31, 2022, compared to the prior year: The change in Ag segment revenues for fiscal 2022 reflects the following: • Higher pricing attributed to market-driven price increases across all of our Ag segment product categories, including: ◦ $6.4 billion increase in revenues for grain and oilseed driven by increased global demand; ◦ $1.5 billion increase for feed and farm supplies due to strong demand and constrained supply; ◦ $1.5 billion increase for wholesale agronomy products resulting from strong global market demand and global supply disruptions; ◦ $721.1 million increase for renewable fuels resulting from demand driven higher prices; and ◦ $541.0 million increase for oilseed processing due to strong meal and oil demand. • Lower volumes of grain and oilseed contributed to a $4.2 billion decrease in revenues.
Biggest changeThe remaining increase was mostly due to a larger cash balance earning a higher interest rate compared to the prior year. 32 Table of Contents Revenues by Segment Energy Years Ended August 31, Change 2023 2022 Dollars Percent (Dollars in thousands) Revenues $ 10,096,913 $ 10,294,774 $ (197,861) (1.9) % The following waterfall analysis and commentary presents the changes in our Energy segment revenues for the year ended August 31, 2023, compared to the prior year: The change in Energy segment revenues for fiscal 2023 reflects the following: • Decreased selling prices resulting from global market conditions contributed to $222.0 million and $185.6 million decreases in revenues for refined fuels and propane, respectively. • Higher refined fuels volumes driven by strong demand contributed to increased revenues of $215.4 million. 33 Table of Contents Ag Years Ended August 31, Change 2023 2022 Dollars Percent (Dollars in thousands) Revenues $ 35,425,204 $ 37,460,211 $ (2,035,007) (5.4) % The following waterfall analysis and commentary presents the changes in our Ag segment revenues for the year ended August 31, 2023, compared to the prior year: The change in Ag segment revenues for fiscal 2023 reflects the following: • Volumes decreased within our grain and oilseed products primarily as a result of lower global demand for U.S. grain, which contributed to a $1.5 billion decrease in revenues. • Wholesale and retail agronomy products experienced market-driven price decreases throughout fiscal 2023, resulting in decreased revenues of $844.6 million. • Lower prices for renewable fuels due to global market conditions contributed to decreased revenues of $292.8 million. • Higher pricing for grain and oilseed and oilseed processing products partially offset overall Ag segment price decreases, contributing $332.5 million and $80.0 million increases in revenues due to favorable global market conditions and strong meal and oil demand, respectively.
In addition to our internal operational reliability, the profitability of our Energy segment is largely driven by crack spreads (i.e., the price differential between refined products and inputs such as crude oil) and Western Canadian Select ("WCS") crude oil discounts (i.e., the price discount for WCS crude oil relative to West Texas Intermediate ("WTI") crude oil), which are driven by the supply and demand of refined products.
In addition to our internal operational reliability, the profitability of our Energy segment is largely driven by crack spreads (i.e., the price differential between refined products and inputs such as crude oil) and Western Canadian Select ("WCS") crude oil discounts (i.e., the price discount for WCS crude oil relative to West Texas Intermediate ("WTI") crude oil), which are driven by supply and demand of refined products.
We are also significantly impacted by the utilization of tax credits, some of which were passed to us from the McPherson refinery, related to refinery upgrades that enable us to produce ultra-low-sulfur fuels.
We are also significantly impacted by utilization of tax credits, some of which were passed to us from the McPherson refinery, related to refinery upgrades that enable us to produce ultra-low-sulfur fuels.
Tax benefits related to uncertain tax positions are recognized in our financial statements if it is more likely than not that the position would be sustained upon examination by a tax authority that has full knowledge of all relevant information. The benefits are measured using a cumulative probability approach.
Tax benefits related to uncertain tax positions are recognized in our financial statements if it is more likely than not the position would be sustained upon examination by a tax authority that has full knowledge of all relevant information. The benefits are measured using a cumulative probability approach.
The costs of certain energy inventories (wholesale refined products, crude oil and asphalt) are determined on the LIFO method; all other inventories of nongrain products purchased for resale are valued on the first-in, first-out ("FIFO") and average cost methods. Estimates are used in determining the net realizable values of grain and oilseed and processed grain and oilseed inventories.
The costs of certain energy inventories (wholesale refined products, crude oil and asphalt) are determined on the last-in, first-out ("LIFO") method; all other inventories of nongrain products purchased for resale are valued on the first-in, first-out ("FIFO") and average cost methods. Estimates are used in determining the net realizable values of grain and oilseed and processed grain and oilseed inventories.
Purchases and further processes or resells grain and oilseed originated by our country operations and global grain businesses, by our member cooperatives and by third parties. It also includes our renewable fuels business and serves as a wholesaler and retailer of agronomy products. • Nitrogen Production. Produces and distributes nitrogen fertilizer.
Purchases and further processes or resells grain and oilseed originated by our country operations and global grain and processing businesses, by our member cooperatives and by third parties. It also includes our renewable fuels business and serves as a wholesaler and retailer of agronomy products. • Nitrogen Production. Produces and distributes nitrogen fertilizer.
Profitability in our Ag segment is largely driven by throughput and production volumes, as well as commodity price spreads; however, revenues and cost of goods sold ("COGS") are largely affected by market-driven commodity prices that are outside our control.
Profitability in our Ag segment is largely driven by throughput and production volumes, as well as commodity price spreads; however, revenues and cost of goods sold ("COGS") are largely affected by market-driven commodity prices outside our control.
Our MD&A is presented in the following sections: • Overview • Business Strategy • Fiscal 2022 Highlights • Fiscal 2023 Outlook • Operating Metrics • Results of Operations • Liquidity and Capital Resources • Critical Accounting Policies • Recent Accounting Pronouncements Our MD&A should be read in conjunction with the accompanying audited financial statements and notes to those financial statements and the Cautionary Statement regarding forward-looking statements found in Part I, Item 1A of this Annual Report on Form 10-K.
Our MD&A is presented in the following sections: • Overview • Business Strategy • Fiscal 2023 Highlights • Fiscal 2024 Outlook • Operating Metrics • Results of Operations • Liquidity and Capital Resources • Critical Accounting Policies • Recent Accounting Pronouncements Our MD&A should be read in conjunction with the accompanying audited financial statements and notes to those financial statements and the Cautionary Statement regarding forward-looking statements found in Part I, Item 1A of this Annual Report on Form 10-K.
If estimates regarding the valuation of inventories are less favorable than management's assumptions, write-downs of inventories may be required. 39 Table of Contents Derivative Financial Instruments We enter into exchange-traded commodity futures and options contracts to hedge our exposure to price fluctuations on energy, grain and oilseed transactions to the extent considered practicable for minimizing risk.
If estimates regarding the valuation of inventories are less favorable than management's assumptions, write-downs of inventories may be required. 40 Table of Contents Derivative Financial Instruments We enter into exchange-traded commodity futures and options contracts to hedge our exposure to price fluctuations on energy, grain and oilseed transactions to the extent considered practicable for minimizing risk.
Corporate administrative expenses and interest are allocated to each reporting segment, and Corporate and Other, based on direct use of services, such as information technology and legal, and other factors or considerations relevant to the costs incurred. Management's Focus . When evaluating our operating performance, management focuses on gross profit and income before income taxes ("IBIT").
Corporate administrative expenses and interest are allocated to each reportable segment and Corporate and Other, based on direct use of services, such as information technology and legal, and other factors or considerations relevant to the costs incurred. Management's Focus . When evaluating our operating performance, management focuses on gross profit and income before income taxes ("IBIT").
For goodwill, our annual impairment testing occurs in our fourth quarter. An impaired asset is written down to its estimated fair value based on the best information available. Fair value is generally measured by discounting estimated future 40 Table of Contents cash flows.
For goodwill, our annual impairment testing occurs in our fourth quarter. An impaired asset is written down to its estimated fair value based on the best information available. Fair value is generally measured by discounting estimated future 41 Table of Contents cash flows.
In addition, our Board of Directors annually approves our cash patronage and equity redemptions to be paid in fiscal 2023, based on fiscal 2022 financial performance. The following is a summary of our primary cash requirements for fiscal 2023: • Capital expenditures.
In addition, our Board of Directors annually approves our cash patronage and equity redemptions to be paid in fiscal 2024, based on fiscal 2023 financial performance. The following is a summary of our primary cash requirements for fiscal 2024: • Capital expenditures.
Our fiscal 2023 capital expenditure priorities include maintaining our assets through maintenance; complying with environmental, health and safety requirements; enhancing information technology capabilities; improving productivity; and growth. Our refining business requires continued investment in our refining process to maintain its safety, operational reliability and profitability.
Our fiscal 2024 capital expenditure priorities include maintaining our assets through repairs and maintenance; complying with environmental, health and safety requirements; enhancing information technology capabilities; improving productivity; and growth. Our refining business requires continued investment in our refining process to maintain its safety, operational reliability and profitability.
We generate RINs through our blending activities, but we cannot generate enough RINs to meet the needs of our refining capacity and RINs must be purchased on the open market.
We generate RINs through our blending activities, but we cannot generate enough RINs to meet the needs of our refining capacity; therefore, RINs must be purchased on the open market.
Fiscal 2023 Outlook Our segments operate in cyclical environments in which market conditions can change rapidly with significant positive or negative impacts on our results.
Fiscal 2024 Outlook Our segments operate in cyclical environments in which market conditions can change rapidly with significant positive or negative impacts on our results.
Crack spreads and WCS crude oil discounts both increased in fiscal 2022, compared to the prior year, contributing to improved IBIT for the Energy segment.
Crack spreads and WCS crude oil discounts both increased in fiscal 2023, compared to the prior year, contributing to improved IBIT for the Energy segment.
Percentage subtotals may differ due to rounding. The charts below detail revenues, net of intersegment revenues, and IBIT by reportable segment for fiscal 2022.
Percentage subtotals may differ due to rounding. The charts below detail revenues, net of intersegment revenues, and IBIT by reportable segment for fiscal 2023.
Our Energy segment generally experiences higher volumes and revenues in certain operating areas, such as refined products, in the spring, summer and early fall when gasoline and diesel fuel use by agricultural producers is highest and is subject to global supply and demand forces.
Our Energy segment generally experiences higher volumes and revenues in 25 Table of Contents certain operating areas, such as refined products, in the spring, summer and early fall when gasoline and diesel fuel use by agricultural producers is highest and is subject to global supply and demand forces.
Our Board of Directors has authorized equity redemptions of up to $500.0 million to be distributed in fiscal 2023 in the form of redemptions of qualified and nonqualified equity owned by individual producer-members and association members.
Our Board of Directors has authorized equity redemptions of up to $365.0 million to be distributed in fiscal 2024 in the form of redemptions of qualified and nonqualified equity owned by individual producer-members and association members.
The consolidated financial statements include the accounts of CHS and all subsidiaries and limited liability companies in which we have a controlling interest. The effects of all significant intercompany transactions have been eliminated.
The consolidated financial statements include the accounts of CHS and all subsidiaries and limited liability companies in which we have control. The effects of all significant intercompany transactions have been eliminated.
Our global grain and processing operations are subject to fluctuations in volumes and revenues based on 24 Table of Contents producer harvests, world grain prices, demand and international trade relationships.
Our global grain and processing operations are subject to fluctuations in volumes and revenues based on producer harvests, world grain prices, global demand and international trade relationships.
Summary of Our Major Sources of Cash and Cash Equivalents We fund our current operations primarily through a combination of cash flows from operations supplemented with short-term borrowings through our committed and uncommitted revolving credit facilities, including our securitization facility with certain unaffiliated financial institutions ("Securitization Facility") and our repurchase facility relating thereto ("Repurchase Facility").
Summary of Our Major Sources of Cash and Cash Equivalents We fund our current operations primarily through our cash flows from operations and with short-term borrowings through our committed and uncommitted revolving credit facilities, including our securitization facility with certain unaffiliated financial institutions ("Securitization Facility").
The price of RINs can be volatile, with prices for D6 ethanol RINs and D4 ethanol RINs rising by 15% and 21%, respectively, during fiscal 2022 compared to the prior year, which negatively impacted our earnings. Estimates of our RIN expense are calculated using an average RIN price each month.
The price of RINs can be volatile, with prices for D6 ethanol RINs and D4 ethanol RINs rising by 22% and 5%, respectively, during fiscal 2023 compared to the prior year, which negatively impacted our earnings. Estimates of our RIN expenses are calculated using an average RIN price each month.
The EPA generally establishes new annual renewable fuel percentage standards for each compliance year in the preceding year. In June 2022, the EPA issued a final renewable volume obligation ("RVO") for calendar years 2020 through 2022.
Environmental Protection Agency ("EPA") generally establishes new annual renewable fuel percentage standards for each compliance year in the preceding year. In June 2023, the EPA issued a final renewable volume obligation ("RVO") for calendar years 2020 through 2025.
The table below provides information about average market reference prices and differentials that impacted our Energy segment: Years Ended August 31, 2022 2021 Market indicators WTI crude oil (dollars per barrel) $ 91.84 $ 56.62 WTI - WCS crude oil discount (dollars per barrel) $ 14.93 $ 11.52 Group 3 2:1:1 crack spread (dollars per barrel)* $ 30.67 $ 14.95 Group 3 5:3:2 crack spread (dollars per barrel)* $ 29.02 $ 14.86 D6 ethanol RIN (dollars per RIN) $ 1.2859 $ 1.1221 D4 ethanol RIN (dollars per RIN) $ 1.5560 $ 1.2856 *Group 3 refers to the oil refining and distribution system serving the Midwest markets from the Gulf Coast through the Plains states. 27 Table of Contents Ag Our Ag segment operations work together to facilitate production, purchase, sale and eventual use of grain and other agricultural commodities within the United States and internationally.
The table below provides information about average market reference prices and differentials that impacted our Energy segment: Years Ended August 31, 2023 2022 Market indicators WTI crude oil (dollars per barrel) $ 78.25 $ 91.84 WTI - WCS crude oil discount (dollars per barrel) $ 19.94 $ 14.93 Group 3 2:1:1 crack spread (dollars per barrel)* $ 36.17 $ 30.67 Group 3 5:3:2 crack spread (dollars per barrel)* $ 34.25 $ 29.02 D6 ethanol RIN (dollars per RIN) $ 1.5725 $ 1.2859 D4 ethanol RIN (dollars per RIN) $ 1.6380 $ 1.5560 *Group 3 refers to the oil refining and distribution system serving the Midwest markets from the Gulf Coast through the Plains states. 28 Table of Contents Ag Our Ag segment operations work together to facilitate the production, purchase, sale and eventual use of grain and other agricultural commodities within the United States and internationally.
Equity Income from Investments Years Ended August 31, Change 2022 2021 Dollars Percent (Dollars in thousands) Equity income from investments* $ 771,327 $ 354,529 $ 416,798 117.6 % *See Note 6, Investments, of the notes to the consolidated financial statements that are included in this Annual Report on Form 10-K for additional information.
Equity Income from Investments Years Ended August 31, Change 2023 2022 Dollars Percent (Dollars in thousands) Equity income from investments* $ 689,590 $ 771,327 $ (81,737) (10.6) % *See Note 6, Investments, of the notes to the consolidated financial statements that are included in this Annual Report on Form 10-K for additional information.
Our Nitrogen Production reportable segment represents an equity method investment that records earnings and allocated expenses, but not revenues. 29 Table of Contents Income (Loss) Before Income Taxes by Segment Energy Years Ended August 31, Change 2022 2021 Dollars Percent (Dollars in thousands) Income (loss) before income taxes $ 616,551 $ (10,596) $ 627,147 5,918.7 % The following waterfall analysis and commentary presents the changes in our Energy segment IBIT for the year ended August 31, 2022, compared to the prior year: *See commentary related to these changes in the marketing, general and administrative expenses, interest expense, other income and equity income from investments sections of this Results of Operations.
Our Nitrogen Production reportable segment represents an equity method investment that records earnings and allocated expenses, but not revenues. 30 Table of Contents Income Before Income Taxes by Segment Energy Years Ended August 31, Change 2023 2022 Dollars Percent (Dollars in thousands) Income before income taxes $ 1,075,443 $ 616,551 $ 458,892 74.4 % The following waterfall analysis and commentary presents the changes in our Energy segment IBIT for the year ended August 31, 2023, compared to the prior year: *See commentary related to these changes in the marketing, general and administrative expenses, interest expense, other income and equity income from investments sections of this Results of Operations.
We expect total capital expenditures for fiscal 2023 to be approximately $887.2 million, compared to capital expenditures of $354.4 million in fiscal 2022. Increased capital expenditures for fiscal 2023 are for investments in our infrastructure to meet the evolving needs of our owners and customers, enhance value for the cooperative system and propel sustainable growth.
We expect total capital expenditures for fiscal 2024 to be approximately $945.2 million, compared to capital expenditures of $564.5 million in fiscal 2023. Increased capital expenditures for fiscal 2024 are for investments in our infrastructure to meet the evolving needs of our owners and customers, enhance value for the cooperative system and propel sustainable growth. • Major maintenance .
The following financial information is used when assessing our liquidity and capital resources to meet our capital allocation priorities, which include maintaining the safety and compliance of our operations, paying interest on debt and preferred stock dividends, returning cash to our member-owners in the form of cash patronage and equity redemptions and taking advantage of strategic opportunities that benefit our member-owners: August 31, 2022 2021 (Dollars in thousands) Cash and cash equivalents $ 793,957 $ 413,159 Notes payable 606,719 1,740,859 Long-term debt including current maturities 1,958,814 1,618,361 Total equities 9,461,266 9,017,326 Working capital 2,425,878 1,672,938 Current ratio* 1.3 1.3 *Current ratio is defined as current assets divided by current liabilities.
The following financial information is used when assessing our liquidity and capital resources to meet our capital allocation priorities, which include maintaining the safety and compliance of our operations, paying interest on debt and preferred stock dividends, returning cash to our member-owners in the form of cash patronage and equity redemptions and taking advantage of strategic opportunities that benefit our member-owners: August 31, 2023 2022 (Dollars in thousands) Cash and cash equivalents $ 1,765,286 $ 793,957 Notes payable 547,923 606,719 Long-term debt including current maturities 1,827,658 1,958,814 Total equities 10,452,389 9,461,266 Working capital 3,229,455 2,425,878 Current ratio* 1.5 1.3 *Current ratio is defined as current assets divided by current liabilities.
Critical Accounting Policies Our consolidated financial statements are prepared in conformity with U.S. GAAP. Preparation of these consolidated financial statements requires use of estimates, as well as management's judgments and assumptions regarding matters that are subjective, uncertain or involve a high degree of complexity, all of which affect the results of operations and financial condition for the periods presented.
Preparation of these consolidated financial statements requires use of estimates, as well as management's judgments and assumptions regarding matters that are subjective, uncertain or involve a high degree of complexity, all of which affect the results of operations and financial condition for the periods presented.
Other energy products, such as propane, generally experience higher volumes and revenues during the winter heating and fall crop-drying seasons. The graphs below depict the seasonality inherent in our businesses. * The COVID-19 pandemic started during the second quarter of fiscal 2020. Pricing and Volumes .
Other energy products, such as propane, generally experience higher volumes and revenues during the winter heating and fall crop-drying seasons. The graphs below depict the seasonality inherent in our businesses. Pricing and Volumes .
We enter into purchase obligations that are legally binding and into enforceable agreements to purchase goods or services that specify all significant terms, including fixed or minimum quantities to be purchased and fixed or estimated prices to be paid at the time of settlement. Our current and long-term obligation for such arrangements is $9.1 billion and $1.1 billion, respectively.
We enter into purchase obligations that are legally binding and into enforceable agreements to purchase goods or services that specify all significant terms, including fixed or minimum quantities to be purchased and fixed or estimated prices to be paid at the time of settlement.
Working capital is not defined under U.S. GAAP and may not be computed the same as similarly titled measures used by other companies.
GAAP and may not be computed the same as similarly titled measures used by other companies.
Federal and state statutory rates applied to nonpatronage business activity were 24.4% and 24.5% for the years ended August 31, 2022 and 2021, respectively. Income taxes and effective tax rates vary each year based upon profitability and nonpatronage business activity, which resulted in effective tax rates of 7.3% and (7.4)% for the years ended August 31, 2022 and 2021, respectively.
Effective tax rates for the years ended August 31, 2023 and 2022, were 5.4% and 7.3%, respectively. Federal and state statutory rates of 24.5% and 24.4% were applied to nonpatronage business activity for the years ended August 31, 2023 and 2022, respectively.
The table below provides information about average market prices for agricultural commodities and our sales/throughput volumes that impacted our Ag segment for the years ended August 31, 2022 and 2021: Years Ended August 31, Market Source* 2022 2021 Commodity prices Corn (dollars per bushel) Chicago Board of Trade $ 6.45 $ 5.45 Soybeans (dollars per bushel) Chicago Board of Trade $ 14.65 $ 13.37 Wheat (dollars per bushel) Chicago Board of Trade $ 8.63 $ 6.52 Urea (dollars per ton) Green Markets NOLA $ 644.93 $ 330.00 Urea ammonium nitrate (dollars per ton) Green Markets NOLA $ 521.28 $ 216.00 Ethanol (dollars per gallon) Chicago Platts $ 2.62 $ 1.86 Volumes Grain and oilseed (thousands of bushels) 2,247,254 2,765,808 North American grain and oilseed port throughput (thousands of bushels) 674,350 867,880 Wholesale crop nutrients (thousands of tons) 6,589 8,088 Ethanol (thousands of gallons) 915,087 890,462 *Market source information represents the average month-end price during the period. 28 Table of Contents Results of Operations Consolidated Statements of Operations Years Ended August 31, 2022 2021 Dollars % of Revenues* Dollars % of Revenues* (In thousands) (In thousands) Revenues $ 47,791,666 100.0 % $ 38,448,033 100.0 % Cost of goods sold 45,664,745 95.5 37,496,634 97.5 Gross profit 2,126,921 4.5 951,399 2.5 Marketing, general and administrative expenses 997,835 2.1 745,602 1.9 Operating earnings 1,129,086 2.4 205,797 0.5 Interest expense 114,156 0.2 104,565 0.3 Other income (23,760) — (59,559) (0.2) Equity income from investments (771,327) (1.6) (354,529) (0.9) Income before income taxes 1,810,017 3.8 515,320 1.3 Income tax expense (benefit) 132,116 0.3 (38,249) (0.1) Net income 1,677,901 3.5 553,569 1.4 Net loss attributable to noncontrolling interests (861) — (383) — Net income attributable to CHS Inc. $ 1,678,762 3.5 % $ 553,952 1.4 % *Amounts less than 0.1% are shown as zero percent.
The table below provides information about average market prices for agricultural commodities and our sales/throughput volumes that impacted our Ag segment for the years ended August 31, 2023 and 2022: Years Ended August 31, Market Source* 2023 2022 Commodity prices Corn (dollars per bushel) Chicago Board of Trade $ 6.19 $ 6.45 Soybeans (dollars per bushel) Chicago Board of Trade $ 14.50 $ 14.65 Wheat (dollars per bushel) Chicago Board of Trade $ 7.17 $ 8.63 Urea (dollars per ton) Green Markets NOLA $ 420.06 $ 644.93 Urea ammonium nitrate (dollars per ton) Green Markets NOLA $ 349.87 $ 521.28 Ethanol (dollars per gallon) Chicago Platts $ 2.36 $ 2.62 Volumes Grain and oilseed (thousands of bushels) 2,108,183 2,247,254 North American grain and oilseed port throughput (thousands of bushels) 557,414 674,350 Wholesale crop nutrients (thousands of tons) 6,628 6,589 Ethanol (thousands of gallons) 968,516 915,087 *Market source information represents the average month-end price during the period. 29 Table of Contents Results of Operations Consolidated Statements of Operations Years Ended August 31, 2023 2022 Dollars % of Revenues* Dollars % of Revenues* (In thousands) (In thousands) Revenues $ 45,590,004 100.0 % $ 47,791,666 100.0 % Cost of goods sold 43,213,739 94.8 45,664,745 95.5 Gross profit 2,376,265 5.2 2,126,921 4.5 Marketing, general and administrative expenses 1,032,765 2.3 997,835 2.1 Operating earnings 1,343,500 2.9 1,129,086 2.4 Interest expense 137,442 0.3 114,156 0.2 Other income (112,131) (0.2) (23,760) — Equity income from investments (689,590) (1.5) (771,327) (1.6) Income before income taxes 2,007,779 4.4 1,810,017 3.8 Income tax expense 107,655 0.2 132,116 0.3 Net income 1,900,124 4.2 1,677,901 3.5 Net loss attributable to noncontrolling interests (314) — (861) — Net income attributable to CHS Inc. $ 1,900,438 4.2 % $ 1,678,762 3.5 % *Amounts less than 0.1% are shown as zero percent.
Comparison of Results of Operations for the Years Ended August 31, 2021 and 2020 For a discussion of results of operations for fiscal 2021 compared to fiscal 2020, please refer to Part II, Item 7 , Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended August 31, 2021, filed with the SEC on November 4, 2021.
Income taxes and effective tax rates vary each year based upon profitability and nonpatronage business activity. 37 Table of Contents Comparison of Results of Operations for the Years Ended August 31, 2022 and 2021 For a discussion of results of operations for fiscal 2022 compared to fiscal 2021, please refer to Part II, Item 7 , Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended August 31, 2022, filed with the SEC on November 2, 2022.
All Other Segments Years Ended August 31, Change 2022 2021 Dollars Percent (Dollars in thousands) Nitrogen Production IBIT* $ 477,985 $ 121,035 $ 356,950 294.9 % Corporate and Other IBIT $ 57,895 $ 106,785 $ (48,890) (45.8) % *See Note 6, Investments, of the notes to the consolidated financial statements included in this Annual Report on Form 10-K for additional information.
All Other Segments Years Ended August 31, Change 2023 2022 Dollars Percent (Dollars in thousands) Nitrogen Production IBIT* $ 260,760 $ 477,985 $ (217,225) (45.4) % Corporate and Other IBIT $ 259,768 $ 57,895 $ 201,873 348.7 % *See Note 6, Investments, of the notes to the consolidated financial statements included in this Annual Report on Form 10-K for additional information.
We anticipate that various macroeconomic factors, including the ongoing war between Russia and Ukraine, rising interest rates, and inflationary pressures increasing costs of labor, freight and materials, will continue to drive uncertainty and instability in global energy and agricultural commodity markets, as well as global financial markets, which could have a significant impact on each of our segments during fiscal 2023.
We anticipate 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 have a significant impact on each of our segments during fiscal 2024.
To execute these strategies, we are focused on implementing agile, efficient and sustainable new 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. 25 Table of Contents Fiscal 2022 Highlights • Robust global demand, coupled with increased market volatility, resulted in higher commodity prices and significantly improved earnings. • Higher refining margins drove significantly improved earnings in our Energy segment that resulted from supply and demand factors, including trade flow disruptions caused by the Russian invasion of Ukraine and higher global demand for energy products as consumption outpaced supply. • Equity method investments performed well, with our CF Nitrogen investment being the largest contributor due to improved earnings as a result of market conditions driven by strong global demand for urea and UAN and decreased global supply. • Our global grain and processing and wholesale agronomy businesses in our Ag segment benefited from strong global demand and increased margins.
To execute these strategies, we are 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. 26 Table of Contents Fiscal 2023 Highlights • Robust global demand and market volatility continued to result in higher commodity prices that are elevated from historical averages. • Our Energy segment delivered strong earnings as a result of favorable market conditions in our refined fuels business, including sustained high global demand for energy products, as consumption outpaced supply. • In our Ag segment, strong meal and oil demand resulted in improved crush margins that contributed to higher earnings in our oilseed processing business, which was partially offset by decreased prices for agronomy products. • Equity method investments performed well, with our CF Nitrogen and Ventura Foods investments being the largest contributors.
Equity income from investments increased during fiscal 2022 compared to the prior year, primarily due to increased income associated with our equity method investment in CF Nitrogen.
Equity income from investments decreased during fiscal 2023 compared to the prior year, primarily due to lower income associated with our equity method investment in CF Nitrogen, which was partially offset by higher income associated with our equity investment in Ventura Foods.
Refer to Item 1A of this Annual Report on Form 10-K for additional consideration these risks may have on our business operations and financial performance.
We are unable to predict how long the current environment will last or the severity of the financial and operational impacts in fiscal 2024. Refer to Item 1A of this Annual Report on Form 10-K for additional consideration these risks may have on our business operations and financial performance.
In addition to these broad macroeconomic factors, the cost of renewable energy credits remains higher than historical levels, which could continue to negatively impact our profitability, and regional factors, such as unpredictable weather conditions, including those due to climate change, could impact demand for agricultural inputs and outputs, as well as our ability to supply those inputs and outputs.
These include the cost of renewable energy credits, the prices of which remains volatile and could continue to negatively impact our profitability, and regional factors, such as unpredictable weather conditions, including those due to climate change. We currently expect the imbalance between global supply and strong global demand for energy and agricultural commodities to continue to moderate in fiscal 2024.
We finance our working capital needs through committed and uncommitted lines of credit with domestic and international banks.
We finance our working capital needs through committed and uncommitted lines of credit with domestic and international banks. We believe our current cash balances and available capacity on our committed and uncommitted lines of credit will provide adequate liquidity to meet our working capital needs.
We will continue to consider opportunities to further diversify and enhance our sources and amounts of liquidity.
We will continue to consider opportunities to further diversify and enhance our sources and amounts of liquidity. Summary of Our Major Uses of Cash and Cash Equivalents Annually, our Board of Directors approves our capital expenditure budget.
Our Nitrogen Production segment IBIT increased as a result of higher equity income attributed to increased sale prices of urea and UAN due to strong global demand and decreased global supply, which was partially offset by higher natural gas costs.
Our Nitrogen Production segment IBIT decreased from the prior year as a result of lower equity income attributed to significantly decreased selling prices of urea and UAN due to global supply and demand factors.
During fiscal 2023, we have a current obligation to repay $283.1 million of long-term debt, as well as $78.6 million of interest related to long-term debt. Beyond fiscal 2023, our long-term debt obligation is $1.6 billion and interest payments related to long-term debt of $378.9 million.
Contractual Obligations Our estimated future obligations as of August 31, 2023, include both current and long-term obligations. During fiscal 2024, we have a current obligation to repay $1.1 million of long-term debt, as well as $88.3 million of interest related to long-term debt.
Many of our business activities are highly seasonal and our operating results vary throughout the year. Our revenues generally trend lower during the second and fourth fiscal quarters and higher during the first and third fiscal quarters; however, our IBIT does not necessarily follow the same trend due to weather and other events that can impact profitability.
Many of our business activities are highly seasonal and our operating results vary throughout the year. Our revenues and IBIT generally trend lower during the second fiscal quarter and increase in the third fiscal quarter.
We fund certain of our long-term capital needs, primarily those related to acquisitions of property, plant and equipment, with cash flows from operations and by issuing long-term debt.
On April 21, 2023, we amended and restated our five-year unsecured revolving credit facility, which provides a committed amount of $2.8 billion. That facility now expires on April 21, 2028. We fund certain of our long-term capital needs, primarily those related to acquisitions of property, plant and equipment, with cash flows from operations and by issuing long-term debt.
Working capital as of August 31, 2022 and 2021, is as follows: 2022 2021 Change (Dollars in thousands) Current assets $ 9,377,847 $ 7,998,951 $ 1,378,896 Less current liabilities 6,951,969 6,326,013 625,956 Working capital $ 2,425,878 $ 1,672,938 $ 752,940 As of August 31, 2022, working capital increased by $752.9 million compared with August 31, 2021.
Working capital as of August 31, 2023 and 2022, was as follows: 2023 2022 Change (Dollars in thousands) Current assets $ 9,128,649 $ 9,377,847 $ (249,198) Less current liabilities 5,899,194 6,951,969 (1,052,775) Working capital $ 3,229,455 $ 2,425,878 $ 803,577 As of August 31, 2023, working capital increased by $803.6 million compared with August 31, 2022.
Our Board of Directors authorized approximately $500.0 million of our fiscal 2022 patronage-sourced earnings to be paid to our member-owners during fiscal 2023. • Equity redemptions .
We had approximately $2.3 billion of preferred stock outstanding as of August 31, 2023. We expect to pay dividends on our preferred stock of approximately $170.2 million during fiscal 2024. • Patronage . Our Board of Directors authorized approximately $365.0 million of our fiscal 2023 patronage-sourced earnings to be paid to our member-owners during fiscal 2024. • Equity redemptions .
Interest Expense Years Ended August 31, Change 2022 2021 Dollars Percent (Dollars in thousands) Interest expense $ 114,156 $ 104,565 $ 9,591 9.2 % Interest expense increased during fiscal 2022 as a result of higher interest rates compared to the prior year, particularly during the second half of fiscal 2022 as the U.S.
Interest Expense Years Ended August 31, Change 2023 2022 Dollars Percent (Dollars in thousands) Interest expense $ 137,442 $ 114,156 $ 23,286 20.4 % Interest expense increased during fiscal 2023 as a result of higher interest rates compared to the prior year, which was partially offset by decreased notes payable balances compared to the prior year.
Cash Flows Years Ended August 31, 2022 2021 Change (Dollars in thousands) Net cash provided by operating activities $ 1,946,518 $ 757,811 $ 1,188,707 Net cash used in investing activities (457,084) (101,672) (355,412) Net cash used in financing activities (1,113,688) (326,585) (787,103) Effect of exchange rate changes on cash and cash equivalents (14,756) (4,063) (10,693) Net increase in cash and cash equivalents and restricted cash $ 360,990 $ 325,491 $ 35,499 Cash flows from operating activities can fluctuate significantly from period to period as a result of various factors, including seasonality and timing differences associated with purchases, sales, taxes and other business decisions.
Our current and long-term obligation for such arrangements is $6.9 billion and $847.7 million, respectively. 39 Table of Contents Cash Flows Years Ended August 31, 2023 2022 Change (Dollars in thousands) Net cash provided by operating activities $ 3,284,182 $ 1,946,518 $ 1,337,664 Net cash used in investing activities (950,191) (457,084) (493,107) Net cash used in financing activities (1,395,468) (1,113,688) (281,780) Effect of exchange rate changes on cash and cash equivalents 2,590 (14,756) 17,346 Net increase in cash and cash equivalents and restricted cash $ 941,113 $ 360,990 $ 580,123 Cash flows from operating activities can fluctuate significantly from period to period as a result of various factors, including seasonality and timing differences associated with purchases, sales, taxes and other business decisions.
We were in compliance with all our debt covenants and restrictions as of August 31, 2022. Based on our current 2023 projections, we expect continued covenant compliance. Working Capital We measure working capital as current assets less current liabilities and believe this information is meaningful to investors as a measure of operational efficiency and short-term financial health.
Working Capital We measure working capital as current assets less current liabilities as each amount appears on our consolidated balance sheets. We believe this information is meaningful to investors as a measure of operational efficiency and short-term financial health. Working capital is not defined under U.S.
In addition to navigating market conditions that impact our businesses, we will continue to take actions in an effort to execute on our enterprise priorities throughout fiscal 2023, including empowering and supporting our people, advancing our operating model by transforming how we work and adopting new technologies, and strategically investing in our infrastructure to meet the evolving needs of our owners and customers, enhance value for the cooperative system and propel sustainable growth. 26 Table of Contents Operating Metrics Energy Our Energy segment operations primarily include our refineries in Laurel, Montana, and McPherson, Kansas, which process crude oil to produce refined products, including gasoline, distillates and other products.
We will continue to execute our enterprise priorities for fiscal 2024, including empowering and investing in our people, accelerating our operating model to better serve owners and customers, leveraging our financial strength to navigate dynamic and changing market conditions, and elevating sustainable growth through empowered teams, an integrated operating model and a solid financial foundation. 27 Table of Contents Operating Metrics Energy Our Energy segment operations primarily include our refineries in Laurel, Montana, and McPherson, Kansas, which process crude oil to produce refined products, including gasoline, distillates and other products.
The Board of Directors will continue to periodically evaluate the level of equity redemption activity throughout fiscal 2023 with respect to the amounts it has authorized for redemption during the fiscal year.
The Board of Directors will continue to periodically evaluate the level of equity redemption activity throughout fiscal 2024 with respect to the amounts it has authorized for redemption during the fiscal year. We believe cash generated by operating and investing activities, along with available borrowing capacity under our credit facilities, will be sufficient to support our short-term and long-term operations.
Cost of Goods Sold by Segment Energy Years Ended August 31, Change 2022 2021 Dollars Percent (Dollars in thousands) Cost of goods sold $ 9,358,627 $ 6,183,864 $ 3,174,763 51.3 % The following waterfall analysis and commentary presents the changes in our Energy segment COGS for the year ended August 31, 2022, compared to the prior year: The change in Energy segment COGS for fiscal 2022 reflects the following: • Increased costs for refined fuels resulting from global market conditions contributed to a $2.7 billion increase in COGS. • Higher costs for propane as a result of global market conditions, including the impact of hedging-related losses and reversals of prior unrealized gains, resulted in a $434.8 million increase in COGS. • Lower volumes of propane resulted from lower demand driven by warmer weather conditions and less crop-drying activity, which contributed to decreased COGS of $26.2 million. • Lower volumes of refined fuels resulted from lower demand due to high gasoline prices and contributed to decreased COGS of $19.3 million. 34 Table of Contents Ag Years Ended August 31, Change 2022 2021 Dollars Percent (Dollars in thousands) Cost of goods sold $ 36,308,514 $ 31,322,491 $ 4,986,023 15.9 % The following waterfall analysis and commentary presents the changes in our Ag segment COGS for the year ended August 31, 2022, compared to the prior year: The change in Ag segment COGS for fiscal 2022 reflects the following: • Higher costs attributed to market-driven price increases across all our Ag segment product categories, including: ◦ $6.3 billion increase for grain and oilseed driven by increased global demand; ◦ $1.4 billion increase for feed and farm supplies due to strong demand and constrained supply; ◦ $1.3 billion increase for wholesale agronomy products resulting from strong global market demand and global supply disruptions; ◦ $666.0 million increase for renewable fuels resulting from high demand driving higher prices; and ◦ $435.5 million increase for oilseed processing due to strong meal and oil demand. • Lower volumes of grain and oilseed contributed to a $4.2 billion decrease in COGS.
Corporate and Other revenues increased during fiscal 2023 compared to the prior year primarily as a result of increased interest income in our financing business due to higher interest rates and a larger notes receivable balance. 34 Table of Contents Cost of Goods Sold by Segment Energy Years Ended August 31, Change 2023 2022 Dollars Percent (Dollars in thousands) Cost of goods sold $ 8,718,224 $ 9,358,627 $ (640,403) (6.8) % The following waterfall analysis and commentary presents the changes in our Energy segment COGS for the year ended August 31, 2023, compared to the prior year: The change in Energy segment COGS for fiscal 2023 reflects the following: • Global market conditions contributed to decreased costs for refined fuels and propane that drove $584.3 million and $254.2 million decreases in COGS, respectively. • Higher volumes of refined fuels resulting from higher demand partially offset the overall COGS decrease and contributed to increased COGS of $193.5 million. 35 Table of Contents Ag Years Ended August 31, Change 2023 2022 Dollars Percent (Dollars in thousands) Cost of goods sold $ 34,501,163 $ 36,308,514 $ (1,807,351) (5.0) % The following waterfall analysis and commentary presents the changes in our Ag segment COGS for the year ended August 31, 2023, compared to the prior year: The change in Ag segment COGS for fiscal 2023 reflects the following: • Volumes decreased within our grain and oilseed products primarily as a result of lower global demand for U.S. grain, which contributed to a $1.5 billion decrease in COGS. • Wholesale and retail agronomy products experienced market-driven cost decreases throughout fiscal 2023, resulting in decreased COGS of $612.0 million. • Lower costs for renewable fuels resulted from decreased corn input costs, which contributed to decreased COGS of $241.3 million. • Higher costs for grain and oilseed products due to global market conditions partially offset the overall Ag segment COGS decrease, contributing to a $378.7 million increase in COGS.
For finance leases, we have a current and long-term obligation of $8.6 million and $48.5 million, respectively. For operating leases, we have a current and long-term obligation of $57.9 million and $227.2 million, respectively.
Beyond fiscal 2024, our long-term debt obligation is $1.8 billion and interest payments related to long-term debt of $367.5 million. For finance leases, we have a current and long-term obligation of $8.5 million and $50.6 million, respectively. For operating leases, we have a current and long-term obligation of $70.4 million and $228.4 million, respectively.
The change in Ag segment IBIT for fiscal 2022 reflects the following: • Increased margins across all our Ag segment product categories, including: ◦ $145.1 million increase for grain and oilseed that resulted primarily from strong global demand and mark-to-market changes associated with our commodity derivatives, including unrealized gains; ◦ $119.6 million increase for wholesale agronomy products, which resulted from strong global market demand and global supply disruptions; ◦ $105.6 million increase for oilseed processing as a result of strong meal and oil demand; and ◦ $103.9 million increase for feed and farm supplies due to strong demand and global supply disruptions. • Decreased volumes due to supply chain constraints and less favorable weather conditions during the planting and application season during fiscal 2022 resulted in a $106.3 million decrease for feed and farm supplies, which was partially offset by the net impact of other volume changes in other Ag segment product categories.
The change in Ag segment IBIT for fiscal 2023 reflects the following: • Decreased margins across most of our Ag segment product categories during the year, including: ◦ $232.6 million decrease for wholesale and retail agronomy products, which experienced market-driven price decreases throughout fiscal 2023 compared to historically high prices in the prior year; ◦ $51.5 million decrease for renewable fuels due to lower ethanol prices; and ◦ $46.2 million decrease for grain and oilseed as a result of the timing of the impact of mark-to-market adjustments associated with our commodity derivatives. • The margin decrease in our Ag segment was partially offset by $90.2 million of increased margins in our oilseed processing products due to strong meal and oil demand.
The following table provides information about our consolidated refinery operations: Years Ended August 31, 2022 2021 Refinery throughput volumes (Barrels per day) Heavy, high-sulfur crude oil 103,525 96,175 All other crude oil 73,171 64,277 Other feedstocks and blendstocks 14,179 14,839 Total refinery throughput volumes 190,875 175,291 Refined fuel yields Gasolines 89,084 86,860 Distillates 82,291 68,720 We are subject to the Renewable Fuel Standard that requires refiners to blend renewable fuels (e.g., ethanol and biodiesel) into their finished transportation fuels or purchase renewable energy credits, known as renewable identification numbers ("RINs"), in lieu of blending.
The following table provides information about our consolidated refinery operations: Years Ended August 31, 2023 2022 Refinery throughput volumes* (Barrels per day) Heavy, high-sulfur crude oil 94,692 103,525 All other crude oil 70,397 73,171 Other feedstocks and blendstocks 11,804 14,179 Total refinery throughput volumes 176,893 190,875 Refined fuel yields Gasolines 81,006 89,084 Distillates 76,613 82,291 *Lower refinery throughput volumes and refined fuel yields experienced during fiscal 2023 are primarily due to a planned shutdown to perform major maintenance at our Laurel, Montana, refinery during the third quarter of fiscal 2023.
The $787.1 million increase in cash used in financing activities in fiscal 2022 primarily reflects decreased net cash inflows associated with our notes payable during fiscal 2022. The increase is also partially due to higher amounts paid for cash patronage and equity redemptions in fiscal 2022 compared to the prior fiscal year.
The $281.8 million increase in cash used in financing activities in fiscal 2023 primarily reflects increased cash outflows for patronage paid and equity redemptions during fiscal 2023 compared to fiscal 2022. Critical Accounting Policies Our consolidated financial statements are prepared in conformity with U.S. GAAP.
The change in Energy segment IBIT for fiscal 2022 reflects the following: • Higher crack spreads and increased WCS crude oil discounts reflect improved market conditions in our refined fuels business and contributed to a $1.0 billion increase of IBIT. • Increased refinery production volumes also contributed to increased IBIT of approximately $81.0 million as a result of the increased sales mix of higher-margin produced refined fuels, compared to the lower-margin purchased refined fuels. • Increased margins due to higher crack spreads and WCS crude oil discounts were partially offset by hedging-related losses of $128.0 million and other increased costs for refined fuels, including higher RIN and natural gas prices due to market conditions that contributed to decreased earnings of $74.0 million and $26.0 million, respectively.
The change in Energy segment IBIT for fiscal 2023 reflects the following: • Higher crack spreads and increased WCS crude oil discounts reflect higher global demand and improved market conditions in our refined fuels business and contributed to a $533.2 million increase of IBIT. • Higher margins for refined fuels and propane attributable to hedging-related impacts due to global market conditions affecting the price of these products contributed $135.0 million and $68.2 million of increased IBIT, respectively. • Increased IBIT was partially offset by the impact of decreased refined fuels production volumes primarily due to planned major maintenance at our Laurel refinery that reduced the sales mix of higher-margin produced refined fuels products relative to lower-margin purchased refined fuels products and contributed to a $127.0 million decrease of IBIT. • Increased costs in our refined fuels business also partially offset increased IBIT, the most significant of which included $84.0 million related to higher market-driven RIN prices and $77.0 million of higher refinery expenses, the largest of which was repairs and maintenance, in the current year. 31 Table of Contents Ag Years Ended August 31, Change 2023 2022 Dollars Percent (Dollars in thousands) Income before income taxes $ 411,808 $ 657,586 $ (245,778) (37.4) % The following waterfall analysis and commentary presents the changes in our Ag segment IBIT for the year ended August 31, 2023, compared to the prior year: *See commentary related to these changes in the marketing, general and administrative expenses, interest expense, other income and equity income from investments sections of this Results of Operations.
Current asset balance changes increased working capital by $1.4 billion, primarily due to increases in receivables, which were driven by higher commodity prices. Current liabilities balance changes decreased working capital by $626.0 million, primarily due to an increase in our dividends and equities payable for our cash patronage and equity redemptions to be paid to owners in fiscal 2023.
Current asset balance changes decreased working capital by $249.2 million, primarily due to decreases in receivables and inventories, which were driven by lower commodity prices and volumes.
The $1.2 billion increase in cash provided by operating activities in fiscal 2022 is primarily the result of higher net income during fiscal 2022 compared to fiscal 2021, including a $424.8 million increase in cash distributions from our equity investment in CF Nitrogen during 2022 compared to the prior year.
The $1.3 billion increase in cash provided by operating activities in fiscal 2023 primarily reflects decreases in receivables and inventories, which resulted from a combination of reduced prices and volumes, as well as increased net income during fiscal 2023 compared to fiscal 2022.
We believe cash generated by operating and investing activities, along with available borrowing capacity under our credit facilities, will be sufficient to support our operations for the foreseeable future. Our notes payable and long-term debt are subject to various restrictive requirements for maintenance of minimum consolidated net worth and other financial ratios.
Our notes payable and long-term debt are subject to various restrictive requirements for maintenance of minimum consolidated net worth and other financial ratios. We were in compliance with all our debt covenants and restrictions as of August 31, 2023. Based on our current 2024 projections, we expect continued covenant compliance.
Excluded from the capital expenditures for fiscal 2023 is approximately $236.0 million for major maintenance at our Laurel and McPherson refineries. • Preferred stock dividends. We had approximately $2.3 billion of preferred stock outstanding as of August 31, 2022. We expect to pay dividends on our preferred stock of approximately $168.7 million during fiscal 2023. • Patronage .
We expect total major maintenance for fiscal 2024 to be approximately $31.0 million, compared to major maintenance of $217.4 million in fiscal 2023. Decreased major maintenance for fiscal 2024 is due to significantly reduced turnaround activities at our refineries compared to the turnaround at our Laurel refinery during fiscal 2023. 38 Table of Contents • Preferred stock dividends.
Marketing, General and Administrative Expenses Years Ended August 31, Change 2022 2021 Dollars Percent (Dollars in thousands) Marketing, general and administrative expenses $ 997,835 $ 745,602 $ 252,233 33.8 % Marketing, general and administrative expenses increased during fiscal 2022 primarily due to higher performance-based incentive compensation accruals driven by improved financial results in comparison to the prior year and, to a lesser extent, increased external consulting expenses for projects such as our enterprise resource planning system implementation and strategic adjustments to our operating model.
All Other Segments Years Ended August 31, Change 2023 2022 Dollars Percent (Dollars in thousands) Nitrogen Production COGS $ 1,693 $ 1,669 $ 24 1.4% Corporate and Other COGS $ (7,341) $ (4,065) $ (3,276) (80.6)% There were no significant changes to COGS for our Nitrogen Production segment or Corporate and Other during fiscal 2023 compared to the prior year. 36 Table of Contents Marketing, General and Administrative Expenses Years Ended August 31, Change 2023 2022 Dollars Percent (Dollars in thousands) Marketing, general and administrative expenses $ 1,032,765 $ 997,835 $ 34,930 3.5 % Marketing, general and administrative expenses increased during fiscal 2023 primarily due to increased compensation expenses and, to a lesser degree, higher consulting expenses primarily associated with our enterprise resource planning system implementation and other technologies to advance our operating model.
Other Income Years Ended August 31, Change 2022 2021 Dollars Percent (Dollars in thousands) Other income $ 23,760 $ 59,559 $ (35,799) (60.1) % Other income decreased during fiscal 2022, primarily due to investment gains during the prior year that did not reoccur during fiscal 2022, impairment of certain held-for-sale assets and fewer gains on the sale of businesses during fiscal 2022.
Other Income Years Ended August 31, Change 2023 2022 Dollars Percent (Dollars in thousands) Other income $ 112,131 $ 23,760 $ 88,371 371.9 % Other income increased during fiscal 2023 primarily a result of increased interest income due to higher interest rates and a larger cash balance earning interest compared to the prior year.
CF Nitrogen experienced increased sale prices of urea and UAN due to strong global demand and decreased global supply. 36 Table of Contents Income Tax Expense (Benefit) Years Ended August 31, Change 2022 2021 Dollars Percent (Dollars in thousands) Income tax expense (benefit) $ 132,116 $ (38,249) $ 170,365 445.4 % Increased income tax expense primarily resulted from increased nonpatronage earnings and other nondeductible items during fiscal 2022.
Income Tax Expense Years Ended August 31, Change 2023 2022 Dollars Percent (Dollars in thousands) Income tax expense $ 107,655 $ 132,116 $ (24,461) (18.5) % Decreased income tax expense resulted from additional Domestic Production Activities Deduction ("DPAD") benefit during fiscal 2023 and fewer nondeductible items compared to fiscal 2022.
Removed
Although challenges remain, the imbalance between global supply and strong global demand for agricultural commodities is currently expected to result in continued market volatility and favorable pricing in fiscal 2023. We are unable to predict how long the current environment will last or the severity of the financial and operational impacts in fiscal 2023.
Added
These factors include the ongoing war between Russia and Ukraine and escalation of conflict in the Middle East, shifts in global trade flows for commodities, a higher interest rate environment, and inflationary pressures increasing costs of labor, freight and materials.
Removed
The RVO for calendar year 2020 was lower than previously issued, and the RVO for calendar year 2021 was lower than anticipated as a result of lower demand for refined fuels that occurred during calendar year 2021 due to the COVID-19 pandemic.
Added
In addition to these broad macroeconomic factors, other factors could impact the demand and pricing for agricultural inputs and outputs, as well as our ability to supply those inputs and outputs while remaining profitable.
Removed
Additionally, the $35.3 million benefit associated with the liquidation of historical last-in, first out ("LIFO") layers for certain refined fuels inventories in the prior year did not reoccur in fiscal 2022. • Lower propane margins resulting from hedging-related losses and reversals of prior unrealized gains of $55.4 million during fiscal 2022 also partially offset the improved earnings in our refined fuels business. 30 Table of Contents Ag Years Ended August 31, Change 2022 2021 Dollars Percent (Dollars in thousands) Income before income taxes $ 657,586 $ 298,096 $ 359,490 120.6 % The following waterfall analysis and commentary presents the changes in our Ag segment IBIT for the year ended August 31, 2022, compared to the prior year: *See commentary related to these changes in the marketing, general and administrative expenses, interest expense, other income and equity income from investments sections of this Results of Operations.
Added
To ensure the reliability of our refineries, we perform major maintenance activities every two to five years, which require a temporary shutdown of operations. These planned shutdowns allow us to extend the life, increase the capacity and improve the safety and efficiency of our refinery processing assets.
Removed
Decreased volumes resulted from a combination of factors, including the prior year experiencing elevated volumes following the Phase One trade agreement with China, which have since plateaued; a business model change at our TEMCO equity method investment during the second quarter of fiscal 2021 that resulted in reduced revenues and COGS during fiscal 2022 on certain transactions associated with TEMCO; lower crop yields due to drought conditions experienced in portions of our North American trade territory; and the impact of Hurricane Ida on our grain export terminal in Myrtle Grove, Louisiana, during the first quarter of fiscal 2022. • The remaining volume decrease was experienced across most of our other Ag segment product categories, including an $843.1 million decrease for feed and farm supplies due to supply chain constraints and less favorable weather conditions during the spring planting and application season compared to the prior year. 33 Table of Contents All Other Segments* Years Ended August 31, Change 2022 2021 Dollars Percent (Dollars in thousands) Corporate and Other revenues $ 36,681 37,430 $ (749) (2.0) % *Our Nitrogen Production reportable segment represents an equity method investment that records earnings and allocated expenses, but not revenues.
Added
They also minimize unplanned business interruptions and are essential to the long-term reliability and profitability of our Energy segment. During periods of maintenance, utilization rates, throughput volumes and refined fuel yields are lower, and we may purchase refined petroleum products from third parties to meet the needs of our customers.
Removed
There were no significant changes to revenues for Corporate and Other during fiscal 2022 compared to the prior year.
Added
These third-party purchases may result in lower margins than for products produced by our refineries, which reduces our profitability.
Removed
The decreased volumes resulted from a combination of factors, including the prior year experiencing elevated volumes following the Phase One trade agreement with China, which has since plateaued; a business model change at our TEMCO equity method investment during the second quarter of fiscal 2021 that resulted in reduced revenues and COGS during fiscal 2022 on certain transactions associated with TEMCO; lower crop yields due to drought conditions experienced in portions of our North American trade territory; and the impact of Hurricane Ida on our grain export terminal in Myrtle Grove, Louisiana, during the first quarter of fiscal 2022. • The remaining volume decrease was experienced across most of our other Ag segment product categories, including a $736.8 million decrease for feed and farm supplies due to supply chain constraints and less favorable weather conditions during the spring planting and application season compared to the prior year. 35 Table of Contents All Other Segments Years Ended August 31, Change 2022 2021 Dollars Percent (Dollars in thousands) Nitrogen Production COGS $ 1,669 $ 1,650 $ 19 1.2% Corporate and Other COGS $ (4,065) $ (11,370) $ 7,305 64.2% There were no significant changes to COGS for our Nitrogen Production segment or Corporate and Other during fiscal 2022 compared to the prior year.
Added
We are subject to the Renewable Fuel Standard that requires refiners to blend renewable fuels (e.g., ethanol and biodiesel) into their finished transportation fuels or purchase renewable energy credits, known as renewable identification numbers ("RINs"), in lieu of blending. The U.S.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeExpected Maturity Date Total Fair Value Liability 2023 2024 2025 2026 2027 Thereafter (Dollars in thousands) Liabilities: Variable rate miscellaneous short-term notes payable $ 459,398 $ — $ — $ — $ — $ — $ 459,398 $ 459,398 Average interest rate 4.4 % — — — — — 4.4 % — Variable rate CHS Capital short-term notes payable $ 147,321 $ — $ — $ — $ — $ — $ 147,321 $ 147,321 Average interest rate 1.3 % — — — — — 1.3 % — Fixed rate long-term debt $ 283,066 $ 882 $ 330,344 $ 80,020 $ 58,021 $ 795,000 $ 1,547,333 $ 1,483,478 Average interest rate 4.5 % 6.7 % 4.2 % 4.8 % 4.7 % 4.3 % 4.4 % — Variable rate long-term debt $ — $ — $ — $ 366,000 $ — $ — $ 366,000 $ 341,078 Average interest rate (a) — — — 4.0 % — — 4.0 % — (a) Borrowings are variable under the agreement and bear interest at a base rate plus an applicable margin.
Biggest changeExpected Maturity Date Total Fair Value Liability 2024 2025 2026 2027 2028 Thereafter (Dollars in thousands) Liabilities: Variable rate miscellaneous short-term notes payable $ 375,932 $ — $ — $ — $ — $ — $ 375,932 $ 375,932 Average interest rate 5.4 % — — — — — 5.4 % — Variable rate CHS Capital short-term notes payable $ 171,991 $ — $ — $ — $ — $ — $ 171,991 $ 171,991 Average interest rate 4.2 % — — — — — 4.2 % — Fixed rate long-term debt $ 1,060 $ 330,187 $ 80,020 $ 58,021 $ 190,000 $ 755,000 $ 1,414,288 $ 1,290,308 Average interest rate 6.7 % 4.2 % 4.8 % 4.7 % 4.0 % 4.2 % 4.2 % — Variable rate long-term debt $ — $ — $ 366,000 $ — $ — $ — $ 366,000 $ 348,436 Average interest rate (a) — — 6.9 % — — — 6.9 % — (a) Borrowings are variable under the agreement and bear interest at a base rate plus an applicable margin.
The position limits are 41 Table of Contents reviewed at least annually with our senior leadership and the Board of Directors. We monitor current market conditions and may expand or reduce our net position limits or procedures in response to changes in those conditions. The use of hedging instruments does not protect against nonperformance by counterparties to cash contracts.
The position limits are 42 Table of Contents reviewed at least annually with our senior leadership and the Board of Directors. We monitor current market conditions and may expand or reduce our net position limits or procedures in response to changes in those conditions. The use of hedging instruments does not protect against nonperformance by counterparties to cash contracts.
Although we have established policies and procedures, we make no assurances that historical nonperformance experience will carry forward to future periods. Based on our net fair market value calculation as of August 31, 2022, a 10% adverse change in market prices would not materially affect our results of operations.
Although we have established policies and procedures, we make no assurances that historical nonperformance experience will carry forward to future periods. Based on our net fair market value calculation as of August 31, 2023, a 10% adverse change in market prices would not materially affect our results of operations.
Foreign Currency Risk We were exposed to risk regarding foreign currency fluctuations during fiscal 2022 and in prior years even though a substantial amount of our international sales were denominated in U.S. dollars.
Foreign Currency Risk We were exposed to risk regarding foreign currency fluctuations during fiscal 2023 and in prior years even though a substantial amount of our international sales were denominated in U.S. dollars.
From time to time, we enter into foreign currency hedge contracts to minimize the impact of currency fluctuations on our transactional exposures. The notional amount of our foreign exchange derivative contracts was $1.9 billion and $1.2 billion as of August 31, 2022 and 2021, respectively. 42 Table of Contents
From time to time, we enter into foreign currency hedge contracts to minimize the impact of currency fluctuations on our transactional exposures. The notional amount of our foreign exchange derivative contracts was $1.9 billion as of August 31, 2023 and 2022, respectively. 43 Table of Contents

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