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CHS INC

CHS INCCHSCPEarnings & Financial Report

Nasdaq · Consumer Staples · Wholesale-Farm Product Raw Materials

CHS Inc. is a Fortune 500 secondary cooperative owned by United States agricultural cooperatives, farmers, ranchers, and thousands of preferred stock holders. Based in Inver Grove Heights, Minnesota, CHS owns and operates various food processing and wholesale, farm supply, financial services and retail businesses. It also distributes Cenex brand fuel in 19 midwestern and western states as one of North America's largest c-store networks. It is a co-owner of Ventura Foods, a vegetable oil proce...

What changed in CHS INC's 10-K — 2023 vs 2024

Top changes in CHS INC's 2024 10-K

260 paragraphs added · 258 removed · 232 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

55 edited+4 added−2 removed51 unchanged
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.
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.
We value our employees and believe that employee passion for our work and employee engagement are key elements of our operating performance. Inclusion and diversity . The CHS value of inclusion compels us to create a work environment where excellence and growth stem from diverse thinking.
Ardent Mills, the largest flour miller in the United States, is a joint venture with CHS, Cargill and Conagra Brands, Inc. ("Conagra"). In connection with the Ardent Mills joint venture, CHS, Cargill and Conagra have various ancillary and noncompete agreements including, among other things, an agreement for us to supply Ardent Mills with certain wheat and durum products.
Ardent Mills, the largest flour miller in the United States, is a joint venture of CHS, Cargill and Conagra Brands, Inc. ("Conagra"). In connection with the Ardent Mills joint venture, CHS, Cargill and Conagra have various ancillary and noncompete agreements including, among other things, an agreement for us to supply Ardent Mills with certain wheat and durum products.
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.
In addition to 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.
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.
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 1,250 sites, the majority of which are convenience stores marketing Cenex brand fuels and owned by our member cooperatives.
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 Ag operations are subject to laws and related regulations and rules designed to protect the environment that are administered by the EPA, DOT and similar government agencies.
Sales 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.
Sales 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 2024. We also blend, package and wholesale auto and farm equipment lubricants to members and nonmembers.
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.
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 76% of our refined fuel products to members, with the balance sold to nonmembers.
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.
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 crop protection products for some of the crop protection industry's largest chemical manufacturers.
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 Laurel refinery sources approximately 95% 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 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.
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 use by our agricultural customers is highest and is subject to domestic supply and demand forces.
Commodity Futures Trading Commission ("CFTC"). Competition. The petroleum refining and wholesale fuels business is very competitive. Among our competitors are some of the world's largest integrated petroleum companies, which have their own crude oil supplies and distribution and marketing systems.
Commodity Futures Trading Commission ("CFTC"). Competition. The petroleum refining and wholesale fuels business is highly competitive. Among our competitors are some of the world's largest integrated petroleum companies, which have their own crude oil supplies and distribution and marketing systems.
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.
In 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.
In addition to these objectives, we also promote a culture focused on diversity and inclusion, provide learning and development opportunities, maintain the health and safety of our employees, encourage community involvement and offer competitive pay and benefits. Additional information regarding our employee population and human capital strategies is described below. Employee population .
In addition to these objectives, we also promote a culture focused on our value of inclusion, provide learning and development opportunities, help maintain the health and safety of our employees, encourage community involvement and offer competitive pay and benefits. Additional information regarding our employee population and human capital strategies is described below. Employee population .
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.
We compete with other large distributors of agricultural products, as well as with regional or local distributors, cooperatives, retailers and manufacturers. NITROGEN PRODUCTION Overview Our Nitrogen Production segment consists of our approximate 8.4% membership interest (based on product tons) in CF Nitrogen, our strategic venture with CF Industries Holdings, Inc. ("CF Industries"), and allocated expenses.
Sales and Marketing: Customers CF Nitrogen has three customers, including CHS and two consolidated subsidiaries of CF Industries. Industry: Competition Regulation . CF Nitrogen is subject to laws and related regulations and rules designed to protect the environment that are administered by the EPA and similar government agencies.
Sales and Marketing: Customers CF Nitrogen has three customers, which are CHS and two consolidated subsidiaries of CF Industries. Industry: Competition Regulation . CF Nitrogen is subject to laws and related regulations and rules designed to protect the environment administered by the EPA and similar government agencies.
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 account for our investment in Ventura Foods using the equity method of accounting, and the investment balance was equal to $511.2 million on August 31, 2024. 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.
Our global grain and processing and country operations businesses are also subject to laws and related regulations and rules administered by the U.S. Department of Agriculture, the U.S. Food and Drug Administration and other federal, state, local and foreign governmental agencies that govern processing, packaging, storage, distribution, advertising, labeling, and quality and safety of feed and grain products.
Our global grain and processing and ag retail businesses are also subject to laws and related regulations and rules administered by the U.S. Department of Agriculture, the U.S. Food and Drug Administration and other federal, state, local and foreign governmental agencies that govern processing, packaging, storage, distribution, advertising, labeling, and quality and safety of feed and grain products.
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.
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 learning tools, programs and other opportunities for growth.
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.
On August 31, 2024, our investment was approximately $2.5 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 our investment in CF Nitrogen positions CHS and our members for long-term, dependable fertilizer supply, supply chain efficiency and production economics.
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.
To supplement what is purchased domestically, our Galveston, Texas, deepwater port and terminal receives fertilizer from vessels originating 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.
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 products are loaded into trucks at the McPherson refinery or shipped via common carrier pipelines to other markets. Other energy operations . We operate nine propane terminals, four asphalt terminals, eight refined product terminals and two lubricants blending and packaging facilities.
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.
Our McPherson, Kansas, refinery processes approximately 58% low- and medium-sulfur crude oil and approximately 42% 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.
The hedging transactions and activities of our global grain and processing and country operations businesses are subject to the rules and regulations of the exchanges we use and to the governing bodies, such as the CME, the Chicago Board of Trade ("CBOT"), the Minneapolis Grain Exchange ("MGEX") and the CFTC. Competition.
The hedging transactions and activities of our global grain and processing and ag retail businesses are subject to the rules and regulations of the exchanges we use and to the governing bodies, such as the CME, the Chicago Board of Trade ("CBOT"), the Minneapolis Grain Exchange ("MGEX") and the CFTC. Competition.
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.
Oilseed processing is conducted at facilities that crush approximately 144 million bushels of soybeans and canola on an annual basis, producing approximately 3 million short tons of meal and flour and 1.9 billion pounds of edible and inedible oil annually.
Our wholesale agronomy business includes our wholesale crop nutrients and wholesale crop protection businesses. Our wholesale crop nutrients business delivers products directly to our customers and our country operations business from the manufacturer or through our 11 warehouse terminals and other nonowned storage facilities located throughout the United States.
Our wholesale agronomy business includes our wholesale crop nutrients and wholesale crop protection businesses. Our wholesale crop nutrients business delivers products directly to our customers and our ag retail business from the manufacturer or through our 11 warehouse terminals and other nonowned storage facilities located throughout the United States.
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.
For fiscal 2024, our Energy revenues, after elimination of intersegment revenues, were $8.8 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.
Low- and medium-sulfur crude oil is sourced from Kansas, Colorado, North Dakota, Oklahoma and Texas, and heavy-sulfur crude oil is sourced from Canada and Wyoming. Our McPherson refinery processes approximately 114,000 barrels of crude oil per day to produce refined products that consist of approximately 50% gasoline, 43% diesel fuel and other distillates, 5% petroleum coke and 2% other products.
Low- and medium-sulfur crude oil is sourced from Kansas, Colorado, North Dakota, Oklahoma and Texas, and heavy-sulfur crude oil is sourced from Canada and Wyoming. Our McPherson refinery processes approximately 114,000 barrels of crude oil per day to produce refined products that consist of approximately 49% gasoline, 45% diesel fuel and other distillates, 5% petroleum coke and 1% other 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.
For the year ended August 31, 2024, our total revenues were $39.3 billion and net income attributable to CHS was $1.1 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 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.
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, 2024, our investment in Ardent Mills was $234.0 million.
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%.
During fiscal 2024, our Occupational Safety and Health Administration ("OSHA") incident rate was 2.7 incidents per 100 full-time workers, as compared to an average of 2.9 incidents per 100 full-time workers during the three previous years, a reduction of 8%.
We compete with the major oil companies in this area, which is known for volatile prices and an active spot market. 3 Table of Contents AG Overview Our Ag segment includes global grain and processing, country operations and wholesale agronomy businesses.
We compete with the major oil companies in this region, which is known for volatile prices and an active spot market. 3 Table of Contents AG Overview Our Ag segment includes global grain and processing, ag retail (formerly referred to as country operations) and wholesale agronomy businesses.
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.
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 ag retail business. Our renewable fuels business produces 261 million gallons of fuel-grade ethanol, 70 million pounds of inedible corn oil and 658,000 tons of dried distillers grains with solubles ("DDGS") annually.
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.
Our Laurel refinery also has access to Wyoming crude oil via common carrier pipelines from the south. Our Laurel refinery processes approximately 65,000 barrels of crude oil per day to produce refined products that consist of approximately 38% gasoline, 43% diesel fuel and other distillates, 12% asphalt, 6% petroleum coke and 1% other products.
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.
We sponsor and support employee resource groups made up of individuals who join together to promote inclusion and diversity, while providing our employees opportunities to strengthen relationships, learn through educational and networking opportunities that focus on development, help local communities and engage with others across CHS.
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.
Safety is one of our core values. 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.
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.
For example, our ag retail 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.
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 .
Additionally, our lost-time injury rate was 0.9 incidents per 100 full-time workers, which matches our three-year average, and our DOT crash rate remained in the top 10% (most favorable) of all carriers in our industry segment for the third consecutive year. Community involvement .
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.
As of August 31, 2024, we had 11 collective bargaining agreements with unions covering approximately 8% of our employees in the United States and expiring on various dates through May 31, 2027. We believe our relations with our employees are strong.
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.
Renewable fuels produced by our production plants are marketed by our global grain marketing business, along with more than 450 million gallons of ethanol and 5 million tons of DDGS annually under marketing agreements with ethanol production plants. Ag retail. Our ag retail business operates 420 agri-operations locations through 27 business units dispersed throughout the midwestern and western United States.
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.
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 2024, we produced approximately 81% of the refined petroleum products we sold at our Laurel and McPherson refineries and obtained approximately 19% from third parties.
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.
During fiscal 2024, we gave approximately $7.3 million in charitable donations through our charitable foundation and corporate giving activities. 7 Table of Contents 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.
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.
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 workplace and communities, we follow our enterprisewide strategic plan to improve inclusion and diversity at CHS.
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.
These businesses work together to facilitate production, purchase, sale and eventual use of grain and other agricultural products within the United States and internationally. In fiscal 2024, revenues in our Ag segment were $30.4 billion after elimination of intersegment revenues. Operations Global grain and processing. We are the nation's largest cooperative marketer of grain and oilseed based on grain sales.
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.
On August 31, 2024, we had 10,730 full-time, part-time, temporary and seasonal employees, primarily in the United States. Of that total, 2,426 were employed in our Energy segment, 5,859 were employed in our Ag segment and 2,445 were employed in Corporate and Other.
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.
Another market region includes Arkansas, Missouri and northern Texas. Competition in this region includes the major oil companies and independent refiners. This region 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.
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.
The SEC website address is www.sec.gov. 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.
We are the nation's largest cooperative marketer of grain and oilseed based on grain sales. Our global grain marketing operations purchase grain directly from agricultural producers and elevator operators primarily in the midwestern and western United States and indirectly through our country operations business.
Our global grain marketing operations purchase grain directly from agricultural producers and elevator operators primarily in the midwestern and western United States and indirectly through our ag retail business.
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.
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.
We market refined fuel products in five principal geographic areas. The first area includes the Midwest and Northern Plains. Competition at the wholesale level in this area includes major oil companies, as well as independent refiners and wholesale brokers and/or suppliers. This area has a robust spot market and is influenced by the large refinery center along the Gulf Coast.
We also are experiencing increased competition from regional and unbranded retailers. We market refined fuel products in five principal geographic regions. The first region includes the Midwest and Northern Plains. Competition at the wholesale level in this area includes major oil companies, as well as independent refiners and wholesale brokers and/or suppliers.
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.
These include access to on-demand learning modules; internal and external training programs that cover topics such as continuous improvement, public speaking, professional sales skills and change management; participation in a mentoring program and development coaching; tuition and professional certification reimbursement; as well as other opportunities focused on developing current and future leaders of CHS. Health and safety .
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.
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 international customers. Industry: Competition Most of the business activities in our Ag segment are highly seasonal and, consequently, the operating results for our Ag segment vary throughout the year.
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.
Another geographic region includes Colorado, Idaho, Montana, western North Dakota, western South Dakota, Utah and Wyoming. Competition at the wholesale level in this region includes the major oil companies and independent refiners. The fifth region includes much of Oregon and Washington.
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.
This region has a robust spot market and is influenced by the large refinery center along the Gulf Coast. A second unique marketing region centers near Chicago, Illinois, and includes Illinois, Indiana and eastern Wisconsin. In this region, we principally compete with the major oil companies, as well as independent refiners and wholesale brokers and/or suppliers.
Given the commodity nature of the end products, profitability in the industry depends largely on margins, as well as operating efficiency, product mix and costs of product distribution and transportation.
Given the commodity nature of the end products, profitability in the industry depends largely on margins, operating efficiency, product mix and costs of product distribution and transportation. Our retail gasoline competitors are much larger than CHS and have greater brand recognition and distribution outlets throughout the country and world than we do.
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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.
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Our periodic and current reports on Form 10-K, 10-Q, 8-K and other filings, including exhibits and supplemental schedules filed therewith, and amendments to those reports, filed with the Securities and Exchange Commission ("SEC") are available on our website as soon as reasonably practicable after they are electronically filed with or furnished to the SEC, free of charge.
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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.
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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 SEC.
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In addition, the SEC maintains a website that contains reports and other information regarding issuers, where you may obtain a copy of all information we file publicly with the SEC.
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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 and state and federal incentives. Regulation.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

103 edited+17 added−17 removed141 unchanged
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.
For 8 Table of Contents 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 affect our operating results.
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.
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.
A significant downturn in global economic growth or recessionary conditions in major geographic regions may lead to a reduced demand for our products and services, which could have a material adverse effect on our business, financial condition, liquidity, results of operations and prospects.
A significant downturn in global economic growth or recessionary conditions in major geographic regions may lead to reduced demand for our products and services, which could have a material adverse effect on our business, financial condition, liquidity, results of operations and prospects.
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.
In seed, crop nutrient and crop protection markets, consolidation at both the producer and wholesale customer levels has increased 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.
While we maintain a cybersecurity insurance policy that provides coverage for security incidents, we cannot be certain that our coverage will be adequate for liabilities actually incurred, that insurance will continue to be available to us on financially reasonable terms, or at all, or that any insurer will not deny coverage as to any future claim.
While we maintain a cybersecurity insurance policy that provides coverage for security incidents, we cannot be certain our coverage will be adequate for liabilities actually incurred, that insurance will continue to be available to us on financially reasonable terms or at all, or that any insurer will not deny coverage as to any future claim.
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.
Current federal income tax laws, regulations and interpretations, including those specific to 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.
These efforts to change the regulation of financial markets subject users of derivatives, such as CHS, to extensive oversight and regulation by the CFTC.
These efforts to change regulation of financial markets subject users of derivatives, such as CHS, to extensive oversight and regulation by the CFTC.
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, an owner or operator of contaminated property and a party that sends hazardous materials to such a 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.
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.
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 planting of certain crops, 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.
Certain federal regulations addressing Dodd-Frank are still being implemented and others are being finalized. We will continue to monitor these developments. In addition, new laws and regulations that are applicable to us or our businesses may be adopted, and the change in the U.S. government's administration and its policies may increase the likelihood of such legal and regulatory developments.
Certain federal regulations addressing Dodd-Frank are still being implemented and others are being finalized. We will continue to monitor these developments. In addition, new laws and regulations that are applicable to us or our businesses may be adopted, and a change in the U.S. government's administration and its policies may increase the likelihood of such legal and regulatory developments.
New and current environmental and energy laws and regulations, including regulations relating to alternative energy sources and the risk of global climate change, new interpretations of existing environmental and energy laws and regulations, increased governmental enforcement of environmental and energy laws and regulations, or other developments in these areas could require us to make additional unforeseen expenditures on technologies and/or other assets to continue our operations or unforeseen changes to our operations, either of which could adversely affect us.
New and current environmental and energy laws and regulations, including regulations relating to alternative energy sources and the risk of global climate change, new interpretations of existing environmental and energy laws and regulations, increased governmental enforcement of environmental and energy laws and regulations, or other developments in these areas could require us to make additional unforeseen expenditures on technologies and/or other assets to continue our operations or cause unforeseen changes to our operations, either of which could adversely affect us.
Genetically engineered seeds that resist disease and insects, or that meet certain nutritional requirements, could affect the demand for our crop nutrients and crop protection products. Demand for fuel we sell could decline as technology allows for more efficient usage of equipment or should alternative energy sources become more viable due to technological advances.
Genetically engineered seeds that resist disease and insects, or that meet certain nutritional requirements, could affect the demand for our seed, crop nutrients and crop protection products. Demand for fuel we sell could decline as technology allows for more efficient usage of equipment or should alternative energy sources become more viable due to technological advances.
In addition, certain states have established proposed laws around low-carbon fuel standards that require refiners to sell fuel with carbon intensity values at certain established benchmarks, or else purchase a sufficient number of credits on the open market to meet the benchmark. Environmental liabilities and litigation could have a material adverse effect on us.
In addition, certain states have established proposed laws around low-carbon fuel standards that require refiners to sell fuel with carbon intensity values at certain established benchmarks or purchase a sufficient number of credits on the open market to meet the benchmark. Environmental liabilities and litigation could have a material adverse effect on us.
Changes we have experienced in the implementation timeline and the scope of the implementation likely have impacted the capital and operating expense amounts required to complete the implementation, and there can be no assurance that the actual costs for completing the ERP implementation will not exceed our current estimates or that the ERP will not take longer to implement than we currently expect.
Changes we have experienced in the implementation timeline and scope likely have impacted the capital and operating expense amounts required to complete the implementation, and there can be no assurance that the actual costs for completing the ERP implementation will not exceed our current estimates or that the ERP will not take longer to implement than we currently expect.
Furthermore, when we do hire new employees, lengthy training and orientation periods might be required before they are able to achieve necessary productivity levels, and we may be unable to successfully transfer our other employees' institutional knowledge and skills to them or fail to execute on internal succession plans.
Furthermore, when we hire new employees, lengthy training and orientation periods might be required before they are able to achieve necessary productivity levels, and we may be unable to successfully transfer our other employees' institutional knowledge and skills to them or fail to execute on internal succession plans.
These or other employee workforce factors could negatively impact our business, financial condition or results of operations. Technological improvements and sustainability initiatives could decrease the demand for our agronomy and energy products. Technological advances in agriculture, as well as sustainability initiatives and practices, could decrease the demand for crop nutrients, energy and other crop input products and services we provide.
These or other workforce factors could negatively impact our business, financial condition or results of operations. Technological improvements and sustainability initiatives could decrease demand for our agronomy and energy products. Technological advances in agriculture, as well as sustainability initiatives and practices, could decrease the demand for crop nutrients, energy and other crop input products and services we provide.
While we continue to take important steps toward mitigation of climate risk and impact on climate change, transitioning our business to adapt to and comply with evolving policy, legal, and regulatory changes may impose substantial operational and compliance burdens. As a result, climate change could negatively affect our business and operations.
While we continue to take steps toward mitigation of climate risk and impact on climate change, transitioning our business to adapt to and comply with evolving policy, legal, and regulatory changes may impose substantial operational and compliance burdens. As a result, climate change could negatively affect our business and operations.
Tariffs and trade restrictions that are implemented on products that we buy and/or sell could increase the cost of those products or adversely affect the availability of market access. These cost increases and market changes could adversely affect demand for our products and reduce margins, which could have a material adverse effect on our business and our earnings.
Tariffs and trade restrictions that are implemented on products that we buy and/or sell could increase the cost of those products or adversely affect market access. These cost increases and market changes could adversely affect demand for our products and reduce margins, which could have a material adverse effect on our business and our earnings.
However, these reserves may prove inadequate to meet our actual liability. Moreover, amended, new or more stringent requirements, stricter interpretations of existing requirements or the discovery of currently unknown compliance issues may require us to make material expenditures or subject us to liabilities that we currently do not anticipate.
However, these reserves may prove inadequate to meet our actual liability. Moreover, amended, new or more stringent requirements, stricter interpretations of existing requirements or discovery of currently unknown compliance issues may require us to make material expenditures or subject us to liabilities that we currently do not anticipate.
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.
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 occurrence of a significant loss relating to a risk exposure.
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.
Acquisitions, strategic alliances, joint ventures, mergers, 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, mergers, divestitures and changes to our organizational structure.
In particular, governmental and other entities in various U.S. states have filed lawsuits against companies in the coal, gas, oil and petroleum industries, alleging damages as a result of climate change, with the plaintiffs in such lawsuits seeking damages and abatement under various tort theories.
In particular, governmental and other entities in various U.S. states have filed lawsuits against companies in the coal, oil and gas industries, alleging damages as a result of climate change, with the plaintiffs in such lawsuits seeking damages and abatement under various tort theories.
For example, we store inventory in third-party warehouses, and the operators of these warehouses may not adequately store or secure our inventory, or they may improperly sell that inventory to someone else, which could expose us to a loss of the value of that inventory.
For example, we store inventory in third-party warehouses, and the operators of these warehouses may not adequately store or secure our inventory, or they may improperly sell that inventory to someone else, which could expose us to loss of the value of that inventory.
In response to the war, the United States and other North Atlantic Treaty Organization ("NATO") member states, as well as nonmember states, announced economic sanctions targeting Russia and certain Russian citizens and enterprises, including several large banks.
In response to the Russia-Ukraine war, the United States and other North Atlantic Treaty Organization ("NATO") member states, as well as nonmember states, announced economic sanctions targeting Russia and certain Russian citizens and enterprises, including several large banks.
Additionally, we may fail to consummate proposed acquisitions, divestitures, joint ventures or strategic alliances after incurring expenses and devoting substantial resources, including management time, to such transactions or foregoing other strategic opportunities.
Additionally, we may fail to consummate proposed acquisitions, mergers, divestitures, joint ventures or strategic alliances after incurring expenses and devoting substantial resources, including management time, to such transactions or foregoing other strategic opportunities.
Even if the war and global conflicts moderate or resolutions are reached, we expect that we will continue to experience ongoing financial and operational impacts resulting from the war and global conflicts for the foreseeable future.
Even if the war and global conflicts moderate or resolutions are reached, we expect that we will continue to experience ongoing financial and operational impacts resulting from these conflicts for the foreseeable future.
Participation in the Paris Agreement is subject to the concurrence of the United States Executive Branch Administration then in office. As a result, adherence to the Paris Agreement may vary by administration. The current administration is supportive of the Paris Agreement.
Participation in the Paris Agreement is subject to the concurrence of the United States government executive branch administration then in office. As a result, adherence to the Paris Agreement may vary by administration. The current administration is supportive of the Paris Agreement.
For example, the SEC recently adopted rule, "Cybersecurity Risk Management, Strategy, Governance and Incident Disclosure," that enhances and standardizes disclosures regarding cybersecurity risk management and governance, as well as material cybersecurity incidents.
For example, the SEC recently adopted the rule, "Cybersecurity Risk Management, Strategy, Governance and Incident Disclosure," enhances and standardizes disclosures regarding cybersecurity risk management and governance, as well as material cybersecurity incidents.
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.
We have made certain assumptions and projections regarding the future of the markets served by our joint venture investments that include 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.
Factors influencing these prices, many of which are beyond our control, include: • levels of worldwide and domestic supplies; • capacities of domestic and foreign refineries; • ability of members of the Organization of Petroleum Exporting Countries ("OPEC") and other countries that are significant producers of oil to agree to and maintain oil price and production controls, and the price and level of imports; • disruption in supply; • political instability or conflict in oil-producing regions; • level of demand from consumers, agricultural producers and other customers; • price and availability of alternative fuels; • availability of pipeline capacity; and • domestic and foreign governmental regulations and taxes.
Factors influencing these prices, many of which are beyond our control, include: • levels of worldwide and domestic supplies; • capacities of domestic and foreign refineries; • ability of members of the Organization of Petroleum Exporting Countries ("OPEC") and other countries that are significant producers of oil to agree to and maintain oil price and production controls, and the price and level of imports; • disruption in supply; • political instability or conflict in oil-producing regions; • levels of energy conservation efforts; • level of demand from consumers, agricultural producers and other customers; • price and availability of alternative fuels; • availability of pipeline capacity; and • domestic and foreign governmental regulations and taxes.
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.
Emerging sustainability, new regulations 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.
The challenge of hiring new employees is exacerbated by the rural nature of our business, which provides for a smaller pool of skilled employable candidates.
The challenge of hiring new employees is exacerbated by the rural nature of our business, which provides a smaller pool of skilled employable candidates.
These actions may, in part, mitigate these increased costs, but even by increasing our product prices and passing some or all of our increased costs to customers or implementing cost savings efforts, we may not be able to fully offset these increased costs. Additionally, increased prices may not be sustainable over time and may result in reduced sales volumes.
These actions may, in part, mitigate these increased costs, but even by increasing our product prices and passing some or all of our increased costs to customers or implementing cost saving efforts, we may not be able to fully offset these increased costs. Additionally, increased prices may not be sustainable over time and may result in reduced sales volumes.
Our business and operations and demand for our products are highly dependent on certain global and regional factors that are outside our control and could adversely impact our business. The level of demand for our products is affected by global and regional demographics and macroeconomic conditions, including population growth rates and changes in standards of living.
Our business and operations and demand for our products are highly dependent on certain global and regional factors that are outside our control and could adversely impact our business. Demand for our products is affected by global and regional demographics and macroeconomic conditions, including population growth rates and changes in standards of living.
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 any of our food or animal feed products were to become adulterated or misbranded, we may 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.
Investors, lenders and other stakeholders are also increasingly focusing on issues related to environmental justice. This may result in increased scrutiny, protests and negative publicity with respect to our business and operations, which in turn could adversely affect our reputation, business and financial performance.
Investors, lenders and other stakeholders are also increasingly focused on issues related to environmental justice. This may result in increased scrutiny, protests and negative publicity with respect to our business and operations, which in turn could adversely affect our reputation, business and financial performance.
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.
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.
Collecting, measuring and analyzing information relating to such matters can be costly, time-consuming, dependent on third-party cooperation and unreliable. Furthermore, methodologies for measuring, tracking and reporting on such matters continue to change over time, which requires our processes and controls for such data to evolve as well.
Collecting, measuring and analyzing information relating to such matters can be costly, time-consuming, dependent on third-party cooperation and unreliable. Furthermore, methodologies for measuring, tracking and reporting on such matters continue to change over time, which requires our processes and controls for such data to evolve.
The marketing of food products has come under increased regulatory scrutiny in recent years, and the food industry has been subject to an increasing number of proceedings and claims relating to alleged false or deceptive labeling and marketing under federal, state and foreign laws or regulations.
Food product marketing has come under increased regulatory scrutiny in recent years, and the food industry has been subject to an increasing number of proceedings and claims relating to alleged false or deceptive labeling and marketing under federal, state and foreign laws or regulations.
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.
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 social engineering and cyberattacks.
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.
Examples of such factors include, but are not limited to, evolving regulatory and other standards, processes and assumptions; the pace of scientific and technological 16 Table of Contents developments; increased costs and the availability of requisite financing; market trends that may alter business opportunities; conduct of third-party counterparties; constraint or disruptions to our supply chain; and changes in carbon markets or carbon taxes.
If such escalation should occur or such sanctions are imposed, supply chain, trade routes and markets currently served by us could be adversely affected, which in turn could materially adversely affect our business operations and financial performance.
If such escalation should occur or such sanctions are imposed, supply chains, trade routes and markets currently served by us could be adversely affected, which in turn could materially adversely affect our business operations and financial performance.
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.
As another example, if any of our counterparties experience a cybersecurity breach or system 12 Table of Contents 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.
New federal legislation or regulatory programs that restrict emissions of GHGs, such as cap and trade regimes, carbon taxes, restrictive permitting, increased fuel efficiency standards or mandates for renewable energy, or comparable new state legislation or programs or customer requirements in areas where we or our customers conduct business could adversely affect our operations and the demand for our energy products, which could have a material adverse effect on our business, financial condition, liquidity, results of operations and prospects.
New federal legislation or regulatory programs that restrict emissions of GHGs, such as cap and trade regimes, carbon taxes, windfall taxes, penalties on fossil fuel companies, restrictive permitting, increased fuel efficiency standards or mandates for renewable energy, or comparable new state legislation or programs or customer requirements in areas where we or our customers conduct business could adversely affect our operations and the demand for our energy products, which could have a material adverse effect on our business, financial condition, liquidity, results of operations and prospects.
To the extent that consumer preferences evolve away from products that our members or we produce for health or other reasons, such as the growing demand for organic food products and products that are sustainably grown and made, including low-carbon grain and oilseed, and we are unable to develop or procure products that satisfy new consumer preferences, there will be decreased demand for our products, which could have a material adverse effect on our business, financial condition, liquidity, results of operations and prospects.
To the extent that consumer preferences evolve away from products produced by CHS or our members for health or other reasons, such as the growing demand for organic food products and products that are sustainably grown and made, including low-carbon grain and oilseed, and we are unable to develop or procure products that satisfy new consumer preferences, there will be decreased demand for our products, which could have a material adverse effect on our business, financial condition, liquidity, results of operations and prospects.
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.
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.
Any such issues could result in higher costs or operational disruptions, which could have an adverse impact on our business, financial condition and results of operations. 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.
Any such issues could result in higher costs or operational disruptions, which could have an adverse impact on our business, financial condition and results of operations. 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.
Our working capital requirements are directly affected by the price of commodities, which may fluctuate significantly and quickly. We also require substantial capital to maintain and upgrade our extensive network of facilities to keep pace with competitive developments, technological advances, regulatory changes and changing safety standards.
Our working capital requirements are directly affected by the price of commodities, which may fluctuate significantly and quickly. We also require substantial capital to maintain and upgrade our extensive network of facilities to keep 21 Table of Contents pace with competitive developments, technological advances, regulatory changes and changing safety standards.
In addition, an increasingly competitive labor market may lead to increased turnover rates within our employee base. Increased employee turnover results in significant time and expense relating to identifying recruiting, hiring, relocating and integrating qualified individuals. High employee turnover of key personnel may further deplete our institutional knowledge base and erode our competitiveness.
In addition, a competitive labor market may lead to increased turnover rates within our employee base. Increased employee turnover results in significant time and expense relating to identifying recruiting, hiring, relocating and integrating qualified individuals. High employee turnover of key personnel may further deplete our institutional knowledge base and erode our competitiveness.
The growing use of social and digital media by consumers has greatly increased the speed and extent that information or misinformation and opinions can be shared. Negative posts or comments about us, our brands, or our products on social or digital media could seriously damage our brands and reputation.
The growing use of social and digital media by consumers has greatly increased the speed and extent that information or misinformation and opinions can be shared. Negative posts or comments 13 Table of Contents about us, our brands or our products on social or digital media could seriously damage our brands and reputation.
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.
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.
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.
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.
Moreover, our business and operations may be affected by fluctuations in freight and logistics costs, disruptions in supply channels between parties and locations that include our suppliers, production and storage facilities, 10 Table of Contents tolling and packaging partners, distributors and customers, and weather conditions, including those due to climate change, that are outside our control.
Moreover, our business and operations may be affected by fluctuations in freight and logistics costs, disruptions in supply channels between parties and locations that include our suppliers, production and storage facilities, tolling and packaging partners, distributors and customers, and weather conditions, including those due to climate change, that are outside our control.
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.
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. 18 Table of Contents We incur significant costs in complying with applicable laws and regulations.
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.
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.
Weak global economic conditions and adverse conditions in financial and capital markets may adversely impact the financial condition and liquidity of some of our customers, suppliers and other counterparties, which could have a material adverse effect on our customers' abilities to pay for our products and on our business, financial condition, liquidity, results of operations and prospects.
Weak global economic conditions and adverse conditions in financial and capital markets may adversely impact the financial condition and liquidity of some of our customers, suppliers, the financial institutions that serve as our lenders and other counterparties, which could have a material adverse effect on our customers' abilities to pay for our products and on our business, financial condition, liquidity, results of operations and prospects.
Additionally, we may face increased pressure from customers, consumers, investors, activists, lenders and other stakeholders to modify our products or operations away from ingredients or activities that are considered to have a higher impact on climate change.
Additionally, we may face increased pressure from customers, consumers, investors, activists, lenders and other stakeholders to modify our products or operations away from ingredients or activities that are considered to have greater negative impact on climate change.
With respect to acquisitions, future results will be affected by our ability to identify suitable acquisition candidates, to adequately finance any acquisitions and to integrate acquired businesses quickly and obtain the anticipated financial returns, including synergies.
With respect to acquisitions or mergers, future results will be affected by our ability to identify suitable acquisition or merger candidates, to adequately finance any acquisitions or mergers and to integrate acquired or merged businesses quickly and obtain the anticipated financial returns, including synergies.
Similar issues can also arise relating to aspirational statements such as net-zero or carbon neutrality targets that are made without an adequate basis to support such statements.
Similar issues can also arise relating to aspirational statements such as net-zero or carbon reduction targets that are made without adequate basis to support such statements.
For example, in our Ag segment, 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, in our Ag segment, our ag retail 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.
There is no assurance that the measures we have taken to protect our information systems will prevent or limit the impact of a future cybersecurity incident. We may incur significant costs protecting against or remediating cyber-based attacks or other cybersecurity incidents.
There is no assurance the measures we have taken to protect our information systems will prevent or limit the impact of a future cybersecurity incident. We may incur significant costs protecting against or remediating cyber-based attacks or other cybersecurity incidents and may suffer representational harm.
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.
If we do not adapt or comply with investor, lender, private litigant, government agency 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 and opposition to ESG issues, regardless of whether there is a legal requirement to do so, we may suffer reputational damage and our business or financial condition could be materially and adversely affected.
These restrictions and those of other governments could limit our ability to gain access to business opportunities in various countries. Changes in federal income tax laws or in our tax status could increase our tax liability and reduce our net income significantly.
These restrictions and those of other governments could limit our ability to gain access to business opportunities in various countries. Changes in federal income tax laws or in our tax status, or changes to tax rules in jurisdictions in which we operate, could increase our tax liability and reduce our net income significantly.
The 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.
The 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. 10 Table of Contents • 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), including recent low water levels in the U.S. river system and in the Panama Canal (which have delayed shipping in these locations resulting in an increase in shipping costs), 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; dock availability; and demand for agricultural commodities, and may result in incidents of stranded physical assets.
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.
Our co-venturers may take actions that are not within our control and that may expose our investments in joint ventures to the risk of lower values or returns. Joint venture investments may also lead to impasses.
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.
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. • Our transportation operations, equipment and services could experience disruptions such as adverse operating conditions on the inland waterway system or on the seas with respect to oceangoing vessels. • Someone may accidentally or intentionally introduce malware to our information technology systems or breach our computer systems or other cybersecurity resources. • 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.
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.
In response to global inflationary pressures, the U.S. Federal Reserve and foreign equivalents have maintained higher interest rates, which has resulted in continued 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.
The ongoing multiyear implementation of an enterprisewide resource planning system, reliance on multiple legacy business systems, security breaches or other disruptions to our information technology systems or assets could interfere with our operations, compromise the security of our customers' or suppliers' information and expose us to liability that could adversely impact our business and reputation.
The ongoing multiyear implementation of an enterprisewide resource planning system, reliance on multiple legacy business systems as well as third-party data management providers and other vendors, security breaches or other disruptions to our information technology systems or assets could interfere with our operations, compromise the security of our customers' or suppliers' information and expose us to liability that could adversely impact our business and reputation.
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.
In addition, such epidemics, pandemics, disease outbreaks or other public health developments may adversely affect economies and financial markets throughout the world, which may affect our ability to obtain additional financing for our businesses and demand for our products and services.
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.
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 could have an adverse effect on our business, financial condition and results of operations.
Like many companies, we continue to experience an increase in the number of sophisticated attempts by external parties to access and/or disrupt our networks without authorization, such as denial of service attacks, attempted malware infections, scanning activity and phishing e-mails. For example, in June 2021, we experienced a denial-of-service attack that impacted our network.
Like many companies, we continue to experience an increase in the number of sophisticated attempts by external parties to access and/or disrupt our networks without authorization, such as denial of service attacks, attempted malware infections, scanning activity and phishing e-mails.
Furthermore, our failure to comply with applicable laws and regulations could subject us to administrative penalties and injunctive relief, civil remedies, including fines and injunctions, criminal fines and penalties, and recalls of our products. For example, we regularly maintain hedges to manage the price risks associated with our commercial operations.
Furthermore, our failure to comply with applicable laws and regulations could subject us to administrative penalties and injunctive relief, civil remedies, including fines and injunctions, criminal fines and penalties, and recalls of our products. For example, we regularly maintain hedges to manage price risks associated with our commercial operations. These transactions typically take place on exchanges such as the CME.
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.
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 and general political and economic conditions.
Under this new rule, we will be required to make annual disclosures describing our processes for identifying and managing material cybersecurity risks, management's role in assessing and managing such risks and the Board of Directors' oversight of cybersecurity risks.
Under the new rule, we will be required to identify any material cybersecurity incidents on a Form 8-K and make annual disclosures describing our processes for identifying and managing material cybersecurity risks, management's role in assessing and managing such risks and the Board of Directors' oversight of cybersecurity risks.
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.
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.
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.
Over that time, we and other operators of those facilities have generated, used, stored and disposed of substances or wastes, including liquid fertilizers, 20 Table of Contents chemicals and fuels stored in underground and aboveground tanks, that are or might be considered hazardous under applicable or future environmental laws.
In February 2022, Russia invaded Ukraine (the "war") and in October 2023, conflict escalated in the Middle East between Israel and Hamas. The war between Russia and Ukraine and escalation of conflict in the Middle East have resulted in significant uncertainty and instability in the global commodities markets, including agricultural commodities and crude oil.
The war between Russia and Ukraine and escalation of conflict in the Middle East have resulted in significant uncertainty and instability in the global commodities markets, including agricultural commodities and crude oil.
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.
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.
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.
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.
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.
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.

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Item 2. Properties

Properties — owned and leased real estate

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ITEM 2. PROPERTIES We own or lease energy, agronomy, grain-handling and processing facilities and other real estate throughout the United States and internationally. Below is a summary of these locations by segment and related business. All facilities are owned except where indicated as leased.
ITEM 2. PROPERTIES We own or lease energy, agronomy, grain-handling and processing facilities and other real estate throughout the United States and internationally. Below is a summary of these locations by segment and related business, the majority of which are owned.
Description 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
Description Location(s) Energy Refineries Laurel, Montana, and McPherson, Kansas Propane terminals 9 locations in Colorado, Iowa, Minnesota, Missouri, North Dakota, Washington and Wisconsin 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 Spokane, Washington Convenience stores/gas stations 39 locations in Colorado, Minnesota, Montana, Nebraska, North Dakota, South Dakota and Wyoming Lubricant plants/warehouses 3 locations in Inver Grove Heights, Minnesota; Kenton, Ohio; and Amarillo, Texas 23 Table of Contents Description Location(s) 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 16 locations in South America, including in Argentina, Brazil 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 Oilseed facilities Fairmont, Hallock and Mankato, Minnesota Sunflower processing plants Fargo and Grandin, North Dakota Storage and warehouse facilities Joliette, North Dakota; and Winkler, Canada Ethanol plants Annawan and Rochelle, Illinois Ag Retail Agri-operations facilities Approximately 420 community locations located in Colorado, Idaho, Illinois, Iowa, Kansas, Minnesota, Montana, Nebraska, North Dakota, Oklahoma, Oregon, South Dakota, Texas, Washington and Wisconsin Feed manufacturing facilities 9 locations in Iowa, Montana, North Dakota, Oregon and South Dakota Wholesale Agronomy Deepwater port Galveston, Texas Terminals 11 locations in Illinois, Iowa, Kentucky, Louisiana, Minnesota, South Dakota and Texas 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 Research and development center Randolph, Minnesota Corporate and Other Corporate headquarters A 33-acre campus in Inver Grove Heights, Minnesota, consisting of a building with approximately 320,000 square feet of office space and two smaller buildings with approximately 13,400 and 9,000 square feet of space Office facilities Washington, District of Columbia

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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ITEM 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 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, 2024, 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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We also have preferred shareholders who own our five series of preferred stock, all of which are listed and traded on the Global Select Market of The Nasdaq Stock Market LLC. We operate in the following three reportable segments: • Energy. Produces and provides primarily for the wholesale distribution and transportation of petroleum products. • Ag.
We also have preferred shareholders who own our five series of preferred stock, all of which are listed and traded on the Global Select Market of The Nasdaq Stock Market LLC. We operate in the following three reportable segments: • Energy. Produces and provides primarily for wholesale distribution and transportation of petroleum products. • Ag.
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.
We enter into purchase obligations that are legally binding and enter 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 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.
Our MD&A is presented in the following sections: • Overview • Business Strategy • Fiscal 2024 Highlights • Fiscal 2025 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.
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.
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 crude oil inputs) 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.
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 Energy segment generally experiences higher volumes and revenues in 26 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 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.
Our fiscal 2025 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 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.
We anticipate 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 2025.
Risk of nonperformance by counterparties includes the inability to perform because of a counterparty's financial condition and a risk that the counterparty will refuse to perform on a contract during periods of price fluctuations where contract prices are significantly different from the current market prices.
Risk of nonperformance by counterparties includes the inability to perform because of a counterparty's financial condition and a risk that the counterparty will refuse to 41 Table of Contents perform on a contract during periods of price fluctuations where contract prices are significantly different from the current market prices.
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.
Fiscal 2025 Outlook Our segments operate in cyclical environments in which market conditions can change rapidly with significant positive or negative impacts on our results.
Percentage subtotals may differ due to rounding. The charts below detail revenues, net of intersegment revenues, and IBIT by reportable segment for fiscal 2023.
Percentage subtotals may differ due to rounding. The charts below detail revenues, net of intersegment revenues, and IBIT by reportable segment for fiscal 2024.
For example, in our Ag segment, our country operations business generally experiences higher volumes and revenues during the fall harvest and spring planting seasons, which generally correspond to our first and third fiscal quarters, respectively. Additionally, our agronomy business generally experiences higher volumes and revenues during the spring planting season.
For example, in our Ag segment, our ag retail business generally experiences higher volumes and revenues during the fall harvest and spring planting seasons, which generally correspond to our first and third fiscal quarters, respectively. Additionally, our agronomy business generally experiences higher volumes and revenues during the spring planting season.
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.
Purchases and further processes or resells grain and oilseed originated by our ag retail 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.
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.
Income taxes and effective tax rates vary each year based upon profitability and nonpatronage business activity. 38 Table of Contents Comparison of Results of Operations for the Years Ended August 31, 2023 and 2022 For a discussion of results of operations for fiscal 2023 compared to fiscal 2022, 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, 2023, filed with the SEC on November 8, 2023.
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.
In addition, our Board of Directors approved our cash patronage and equity redemptions to be paid in fiscal 2025, based on fiscal 2024 financial performance. The following is a summary of our primary expected cash requirements for fiscal 2025: • Capital expenditures.
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.
Our Nitrogen Production reportable segment represents an equity method investment that records earnings and allocated expenses, but not revenues. 31 Table of Contents Income Before Income Taxes by Segment Energy Years Ended August 31, Change 2024 2023 Dollars Percent (Dollars in thousands) Income before income taxes $ 429,053 $ 1,075,443 $ (646,390) (60.1) % The following waterfall analysis and commentary presents the changes in our Energy segment IBIT for the year ended August 31, 2024, 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.
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.
Crack spreads and WCS crude oil discounts both decreased in fiscal 2024, compared to the prior year, contributing to decreased IBIT for the Energy segment.
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.
Effective tax rates for the years ended August 31, 2024 and 2023, were (0.4)% and 5.4%, respectively. Federal and state statutory rate of 24.5% was applied to nonpatronage business activity for the years ended August 31, 2024 and 2023.
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.
Our Board of Directors authorized approximately $300.0 million of equity redemptions to be distributed in fiscal 2025 in the form of redemptions of qualified and nonqualified equity owned by individual producer-members and association members.
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.
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, 2024 2023 (Dollars in thousands) Cash and cash equivalents $ 794,865 $ 1,765,286 Notes payable 306,831 547,923 Long-term debt including current maturities 2,161,460 1,827,658 Total equities 10,761,924 10,452,389 Working capital 3,307,969 3,229,455 Current ratio* 1.6 1.5 *Current ratio is defined as current assets divided by current liabilities.
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 price of RINs can be volatile, with prices for D6 ethanol RINs and D4 biodiesel RINs decreasing by 57% and 58%, respectively, during fiscal 2024 compared to the prior year, which positively impacted our earnings. Estimates of our RIN expenses are calculated using an average RIN price each month.
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.
Equity Income from Investments Years Ended August 31, Change 2024 2023 Dollars Percent (Dollars in thousands) Equity income from investments* $ 479,863 $ 689,590 $ (209,727) (30.4) % *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 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.
Our Nitrogen Production segment IBIT decreased from the prior year as a result of lower equity income attributed to decreased selling prices of urea and UAN, which was partially offset by decreased natural gas costs, all due to global supply and demand factors.
All Other Segments* Years Ended August 31, Change 2023 2022 Dollars Percent (Dollars in thousands) Corporate and Other revenues $ 67,887 36,681 $ 31,206 85.1 % *Our Nitrogen Production reportable segment represents an equity method investment that records earnings and allocated expenses, but not revenues.
All Other Segments* Years Ended August 31, Change 2024 2023 Dollars Percent (Dollars in thousands) Corporate and Other revenues $ 77,875 $ 67,887 $ 9,988 14.7 % *Our Nitrogen Production reportable segment represents an equity method investment that records earnings and allocated expenses, but not revenues.
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.
Interest Expense Years Ended August 31, Change 2024 2023 Dollars Percent (Dollars in thousands) Interest expense $ 104,064 $ 137,442 $ (33,378) (24.3) % Interest expense decreased during fiscal 2024 as a result of decreased notes payable balances compared to the prior year, which was partially offset by higher interest rates compared to the prior 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 $581.2 million decrease in cash used in financing activities in fiscal 2024 primarily reflects increased net proceeds from long-term debt and decreased cash outflows for patronage paid and equity redemptions during fiscal 2024 compared to fiscal 2023. Critical Accounting Policies Our consolidated financial statements are prepared in conformity with U.S. GAAP.
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.
These factors, or any form of them, could cause significant margin pressure and lower profitability. In addition to these broad macroeconomic factors, other factors could impact demand and pricing for agricultural inputs and outputs, as well as our ability to supply those inputs and outputs while remaining profitable.
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 following table provides information about our consolidated refinery operations: Years Ended August 31, 2024 2023 Refinery throughput volumes* (Barrels per day) Heavy, high-sulfur crude oil 108,713 94,692 All other crude oil 69,137 70,397 Other feedstocks and blendstocks 11,574 11,804 Total refinery throughput volumes 189,424 176,893 Refined fuel yields Gasolines 85,210 81,006 Distillates 84,739 76,613 *Lower refinery throughput volumes and refined fuel yields experienced during fiscal 2023 were primarily due to a planned shutdown to perform major maintenance at our Laurel, Montana, refinery.
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.
The table below provides information about average market prices for agricultural commodities, as well as sales and throughput volumes that impacted our Ag segment for the years ended August 31, 2024 and 2023: Years Ended August 31, Market Source* 2024 2023 Commodity prices Corn (dollars per bushel) Chicago Board of Trade $ 4.37 $ 6.19 Soybeans (dollars per bushel) Chicago Board of Trade $ 11.88 $ 14.50 Wheat (dollars per bushel) Chicago Board of Trade $ 5.76 $ 7.17 Urea (dollars per ton) Green Markets NOLA $ 332.46 $ 420.06 Urea ammonium nitrate (dollars per ton) Green Markets NOLA $ 238.84 $ 349.87 Ethanol (dollars per gallon) Chicago Platts $ 1.83 $ 2.36 Volumes Grain and oilseed (thousands of bushels) 2,382,219 2,108,183 North American grain and oilseed port throughput (thousands of bushels) 664,025 557,414 Wholesale crop nutrients (thousands of tons) 7,245 6,628 Ethanol (thousands of gallons) 711,451 968,516 *Market source information represents the average week-end or month-end price during the period. 30 Table of Contents Results of Operations Consolidated Statements of Operations Years Ended August 31, 2024 2023 Dollars % of Revenues* Dollars % of Revenues* (In thousands) (In thousands) Revenues $ 39,261,229 100.0 % $ 45,590,004 100.0 % Cost of goods sold 37,509,902 95.5 43,213,739 94.8 Gross profit 1,751,327 4.5 2,376,265 5.2 Marketing, general and administrative expenses 1,166,969 3.0 1,032,765 2.3 Operating earnings 584,358 1.5 1,343,500 2.9 Interest expense 104,064 0.3 137,442 0.3 Other income (137,630) (0.4) (112,131) (0.2) Equity income from investments (479,863) (1.2) (689,590) (1.5) Income before income taxes 1,097,787 2.8 2,007,779 4.4 Income tax (benefit) expense (4,872) — 107,655 0.2 Net income 1,102,659 2.8 1,900,124 4.2 Net loss attributable to noncontrolling interests 340 — (314) — Net income attributable to CHS Inc. $ 1,102,319 2.8 % $ 1,900,438 4.2 % *Amounts less than 0.1% are shown as zero percent.
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.
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 cash flows. Considerable management judgment is necessary to estimate discounted future cash flows and our estimates may differ from actual results.
We have other assets that we may be obligated to dismantle at the end of corresponding lease terms subject to the lessor's discretion for which we have recorded asset retirement obligations. Based on our estimates of the timing, cost and probability of removal, these obligations are not material.
We have other assets that we may be obligated to dismantle at the end of corresponding lease terms subject to the lessor's discretion for which we have recorded asset retirement obligations.
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.
All Other Segments Years Ended August 31, Change 2024 2023 Dollars Percent (Dollars in thousands) Nitrogen Production IBIT* $ 151,235 $ 260,760 $ (109,525) (42.0) % Corporate and Other IBIT $ 174,822 $ 259,768 $ (84,946) (32.7) % *See Note 6, Investments, of the notes to the consolidated financial statements included in this Annual Report on Form 10-K for additional information.
Futures and options contracts used for hedging are purchased and sold through regulated commodity exchanges. We also use over-the-counter instruments to hedge our exposure on fixed-price contracts.
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. Futures and options contracts used for hedging are purchased and sold through regulated commodity exchanges. We also use over-the-counter instruments to hedge our exposure on fixed-price contracts.
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.
All Other Segments Years Ended August 31, Change 2024 2023 Dollars Percent (Dollars in thousands) Nitrogen Production COGS $ 138 $ 1,693 $ (1,555) (91.8)% Corporate and Other COGS $ (10,055) $ (7,341) $ (2,714) (37.0)% There were no significant changes on a dollar basis to COGS for our Nitrogen Production segment or Corporate and Other during fiscal 2024 compared to the prior year. 37 Table of Contents Marketing, General and Administrative Expenses Years Ended August 31, Change 2024 2023 Dollars Percent (Dollars in thousands) Marketing, general and administrative expenses $ 1,166,969 $ 1,032,765 $ 134,204 13.0 % Marketing, general and administrative expenses increased during fiscal 2024 primarily due to higher compensation and benefit expenses, as well as higher consulting expenses primarily associated with our enterprise resource planning system implementation and other technologies to advance our operating model.
The $493.1 million increase in cash used in investing activities in fiscal 2023 reflects larger expenditures for property, plant and equipment and major maintenance during fiscal 2023 compared to fiscal 2022.
The $481.4 million increase in cash used in investing activities in fiscal 2024 reflects increased investments and higher expenditures for property, plant and equipment during fiscal 2024 compared to fiscal 2023.
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.
Our current and long-term obligation for such arrangements is $4.8 billion and $569.8 million, respectively. 40 Table of Contents Cash Flows Years Ended August 31, 2024 2023 Change (Dollars in thousands) Net cash provided by operating activities $ 1,272,880 $ 3,284,182 $ (2,011,302) Net cash used in investing activities (1,431,588) (950,191) (481,397) Net cash used in financing activities (814,253) (1,395,468) 581,215 Effect of exchange rate changes on cash and cash equivalents 2,236 2,590 (354) Net (decrease) increase in cash and cash equivalents and restricted cash $ (970,725) $ 941,113 $ (1,911,838) 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 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 .
We expect to pay dividends on our preferred stock of approximately $168.7 million during fiscal 2025. 39 Table of Contents • Patronage . Our Board of Directors authorized approximately $300.0 million of our fiscal 2024 patronage-sourced earnings to be paid to our member-owners during fiscal 2025. • Equity redemptions .
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.
Corporate and Other revenues increased during fiscal 2024 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 average notes receivable balance. 35 Table of Contents Cost of Goods Sold by Segment Energy Years Ended August 31, Change 2024 2023 Dollars Percent (Dollars in thousands) Cost of goods sold $ 8,041,588 $ 8,718,224 $ (676,636) (7.8) % The following waterfall analysis and commentary presents the changes in our Energy segment COGS for the year ended August 31, 2024, compared to the prior year: The change in Energy segment COGS for fiscal 2024 reflects the following: • Global market conditions, including reduced RIN costs, contributed to decreased costs for refined fuels and propane that drove $368.1 million and $124.7 million decreases in COGS, respectively. • Lower propane and refined fuels volumes contributed to $90.5 million and $54.7 million decreases in COGS, respectively, primarily driven by lower demand as a result of unfavorable weather conditions across much of our trade territory. 36 Table of Contents Ag Years Ended August 31, Change 2024 2023 Dollars Percent (Dollars in thousands) Cost of goods sold $ 29,478,231 $ 34,501,163 $ (5,022,932) (14.6) % The following waterfall analysis and commentary presents the changes in our Ag segment COGS for the year ended August 31, 2024, compared to the prior year: The change in Ag segment COGS for fiscal 2024 reflects the following: • Lower costs across all of our Ag segment product categories due to global market conditions during fiscal 2024, including: ◦ $5.9 billion decrease for grain and oilseed; ◦ $1.3 billion decrease for wholesale and retail agronomy products; ◦ $376.1 million decrease for renewable fuels; and ◦ $363.8 million decrease for oilseed processing. • Increased volumes for grain and oilseed contributed to a $3.1 billion increase in COGS, primarily due to more favorable weather conditions in fiscal 2024.
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.
Other Income Years Ended August 31, Change 2024 2023 Dollars Percent (Dollars in thousands) Other income $ 137,630 $ 112,131 $ 25,499 22.7 % Other income increased during fiscal 2024 primarily as a result of increased interest income due to a larger average cash balance and higher interest rates.
These estimates include using inputs that are generally based on exchange-traded prices and/or recent market bids and offers, including location-specific adjustments.
These estimates include using inputs that are generally based on exchange-traded prices and/or recent market bids and offers, including location-specific adjustments. If estimates regarding the valuation of inventories are less favorable than management's assumptions, write-downs of inventories may be required.
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.
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 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 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. Contractual Obligations Our estimated future contractual obligations as of August 31, 2024, include both current and long-term obligations.
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.
We will continue to execute our enterprise priorities for fiscal 2025, including pursuing growth through strategic investments and cooperative connections and leveraging our financial strength and resilience as we navigate less favorable market conditions for energy and agricultural commodities. 28 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 gasolines, distillates and other products.
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.
The change in Energy segment IBIT for fiscal 2024 reflects the following: • Lower crack spreads and decreased WCS crude oil discounts resulted from global market conditions, which contributed to an $803.8 million decrease of IBIT. • Increased repairs and maintenance expense primarily due to unplanned maintenance at our Laurel, Montana, and McPherson, Kansas refineries contributed to $44.2 million of decreased IBIT. • Lower margins from premiums on seasonal refined fuels products contributed $28.0 million of decreased IBIT. • The overall IBIT decrease was partially offset by lower costs for RINs in our refined fuels business, which contributed to a $247.2 million cost reduction. 32 Table of Contents Ag Years Ended August 31, Change 2024 2023 Dollars Percent (Dollars in thousands) Income before income taxes $ 342,677 $ 411,808 $ (69,131) (16.8) % The following waterfall analysis and commentary presents the changes in our Ag segment IBIT for the year ended August 31, 2024, 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.
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.
During fiscal 2025, we have a current obligation to repay $330.6 million of long-term debt, as well as $101.7 million of interest related to long-term debt. Beyond fiscal 2025, our long-term debt obligation is $1.8 billion and interest payments related to long-term debt of $747.4 million.
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.
Working capital as of August 31, 2024 and 2023, was as follows: 2024 2023 Change (Dollars in thousands) Current assets $ 8,708,783 $ 9,128,649 $ (419,866) Less current liabilities (5,400,814) (5,899,194) 498,380 Working capital $ 3,307,969 $ 3,229,455 $ 78,514 As of August 31, 2024, working capital increased by $78.5 million compared with August 31, 2023.
Equity income decreased for CF Nitrogen as a result of lower selling prices for urea and UAN due to global supply and demand factors. Equity income increased for Ventura Foods as a result of more favorable market conditions for edible oils and a gain associated with the sale of certain assets.
Equity income from investments decreased during fiscal 2024 compared to the prior year, primarily due to lower income associated with our equity method investments in CF Nitrogen and Ventura Foods. Equity income decreased for CF Nitrogen as a result of lower selling prices for urea and UAN due to global supply and demand factors.
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 .
We expect total capital expenditures for fiscal 2025 to be approximately $837.3 million, compared to capital expenditures of $808.8 million in fiscal 2024, as we continue to invest in capital expenditures projects to meet the evolving needs of our owners and customers, enhance value for the cooperative system and unlock growth during fiscal 2025.
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.
Income Tax (Benefit) Expense Years Ended August 31, Change 2024 2023 Dollars Percent (Dollars in thousands) Income tax (benefit) expense $ (4,872) $ 107,655 $ (112,527) (104.5) % Lower income tax expense during fiscal 2024 resulted primarily from lower nonpatronage income compared to fiscal 2023, recognition of research and development tax credits during fiscal 2024 and increased Domestic Production Activities Deduction ("DPAD") benefit.
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.
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. 27 Table of Contents Fiscal 2024 Highlights • Financial performance remained solid across our segments, although down from historically strong results in the prior year. • Our Energy segment results declined from the prior year due to evolving market conditions, including the impact of less favorable refining margins. • In our Ag segment, earnings declined compared to the prior year as a result of softening oilseed crush margins and global market conditions that drove down margins for U.S. grain and oilseed exports. • Equity method investments continued to perform well, with our CF Nitrogen investment being the largest contributor.
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.
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.
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.
These include regional factors, such as unpredictable weather conditions, including those due to climate change. We currently expect global supply and demand factors impacting energy and agricultural commodities to be less favorable for us in fiscal 2025.
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.
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. GAAP and may not be computed the same as similarly titled measures used by other companies.
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.
These factors include, among others, the ongoing war between Russia and Ukraine and further escalation of conflict in the Middle East, shifts in global trade flows for commodities, including global competitiveness giving rise to a weak export market for U.S. sourced agricultural products, potential changes in U.S. trade policy following the U.S. general election in November, a changing interest rate environment, and continued pricing pressures impacting costs of labor, freight and materials.
In most cases, these assets can be used for extended and indeterminate periods of time, as long as they are properly maintained and/or upgraded. It is our practice and current intent to maintain refineries and related assets and to continue making improvements to those assets based on technological advances.
It is our practice and current intent to maintain refineries and related assets and to continue making improvements to those assets based on technological advances.
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.
The Board of Directors will continue to periodically evaluate the level of equity redemption activity throughout fiscal 2025 with respect to the amounts it has authorized for redemption during the fiscal year.
The 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.
Corporate and Other IBIT decreased primarily due to lower equity income from our Ventura Foods investment as a result of less favorable market conditions for oil-based food products experienced during the current year compared to the prior year and a gain associated with the sale of certain assets in the prior year that did not recur in the current year. 33 Table of Contents Revenues by Segment Energy Years Ended August 31, Change 2024 2023 Dollars Percent (Dollars in thousands) Revenues $ 8,766,495 $ 10,096,913 $ (1,330,418) (13.2) % The following waterfall analysis and commentary presents the changes in our Energy segment revenues for the year ended August 31, 2024, compared to the prior year: The change in Energy segment revenues for fiscal 2024 reflects the following: • Decreased selling prices resulting from global market conditions contributed to $1.0 billion and $121.3 million decreases in revenues for refined fuels and propane, respectively. • Lower propane and refined fuels volumes contributed to $93.9 million and $64.0 million decreases in revenues, respectively, primarily driven by lower demand as a result of unfavorable weather conditions across much of our trade territory. 34 Table of Contents Ag Years Ended August 31, Change 2024 2023 Dollars Percent (Dollars in thousands) Revenues $ 30,416,859 $ 35,425,204 $ (5,008,345) (14.1) % The following waterfall analysis and commentary presents the changes in our Ag segment revenues for the year ended August 31, 2024, compared to the prior year: The change in Ag segment revenues for fiscal 2024 reflects the following: • Decreased selling prices across all of our Ag segment product categories due to global market conditions during fiscal 2024, including: ◦ $6.0 billion decrease for grain and oilseed; ◦ $1.2 billion decrease for wholesale and retail agronomy products; ◦ $484.1 million decrease for oilseed processing; and ◦ $331.6 million decrease for renewable fuels. • Increased volumes for grain and oilseed contributed to a $3.1 billion increase in revenues, primarily due to more favorable weather conditions in fiscal 2024.
Considerable management judgment is necessary to estimate discounted future cash flows and our estimates may differ from actual results. We have asset retirement obligations with respect to certain of our refineries and other assets due to various legal obligations to clean and/or dispose of the component parts at the time they are retired.
We have asset retirement obligations with respect to certain of our refineries and other assets due to various legal obligations to clean and/or dispose of the component parts at the time they are retired. In most cases, these assets can be used for extended and indeterminate periods of time, as long as they are properly maintained and/or upgraded.
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.
The $2.0 billion decrease in cash provided by operating activities in fiscal 2024 primarily reflects decreased net income, as well as decreased cash provided by receivables and inventories during fiscal 2024.
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.
The table below provides information about average market reference prices and differentials that impacted our Energy segment: Years Ended August 31, 2024 2023 Market indicators* WTI crude oil (dollars per barrel) $ 79.41 $ 78.25 WTI - WCS crude oil discount (dollars per barrel) $ 17.24 $ 19.94 Group 3 2:1:1 crack spread (dollars per barrel) $ 21.97 $ 36.17 Group 3 5:3:2 crack spread (dollars per barrel) $ 20.60 $ 34.25 D6 ethanol RIN (dollars per RIN) $ 0.6801 $ 1.5725 D4 biodiesel RIN (dollars per RIN) $ 0.6829 $ 1.6380 *Market source information represents the average month-end price during the period.
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.
We were in compliance with all our debt covenants and restrictions as of August 31, 2024. Based on our current 2025 projections, we expect continued covenant compliance. Working Capital We measure working capital as current assets less current liabilities as each amount appears on our Consolidated Balance Sheets.
Corporate and Other IBIT increased primarily due to a $144.3 million increase of equity income from our Ventura Foods investment as a result of more favorable market conditions for edible oils experienced during the current year compared to the prior year and a gain associated with the sale of certain assets.
Equity income decreased for Ventura Foods as a result of less favorable market conditions for oil-based food products and a gain associated with the sale of certain assets in the prior year that did not reoccur in the current year.
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.
Increased major maintenance expectation for fiscal 2025 is due to a scheduled turnaround at our McPherson refinery during fiscal 2025 compared to minimal turnaround activities at our refineries during fiscal 2024. • Preferred stock dividends. We had approximately $2.3 billion of preferred stock outstanding as of August 31, 2024.
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 change in Ag segment IBIT for fiscal 2024 reflects the following: • Decreased margins of $120.2 million for oilseed processing due to a higher supply of canola and soybean meal and oil across global markets, resulting in lower crush margins and decreased margins of $34.1 million for grain and oilseed due to competitive global grain markets that compressed margins, compared to the prior year. • The margin decrease was partially offset by increased margins for wholesale and retail agronomy products driven by improved market conditions, which contributed to a $61.3 million increase of IBIT. • Higher volumes of wholesale and retail agronomy products contributed to a $27.2 million increase of IBIT due to increased demand as prices declined due to global market conditions. • Higher volumes for grain and oilseed and oilseed processing products collectively contributed to $52.2 million of increased IBIT as a result of favorable weather conditions and logistical and operational efficiencies at the oilseed crush plants.
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.
Current asset balance changes decreased working capital by $419.9 million, primarily driven by a decrease in our cash balance due to a decline in cash provided by operations from year end 2023, which was partially offset by increases in receivables.
Current liabilities balance changes increased working capital by $1.1 billion, primarily due to a decrease in the current portion of long-term debt due to lower scheduled debt maturities in fiscal 2024, as well as decreases in customer advance payments and accounts payable due to lower commodity prices and volumes.
Current liabilities balance changes increased working capital by $498.4 million, primarily due to a decrease in accounts and notes payable, which were driven by changes in working capital needs and lower commodity prices. We finance our working capital needs through committed and uncommitted lines of credit with domestic and international banks.
Removed
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.
Added
Further, in light of increasing uncertainty in the markets we serve, we are unable to predict how long the current environment will last or the significance of the financial and operational impacts to us; however, we currently expect the trend of reduced margins for energy and agricultural commodities to persist in fiscal 2025.
Removed
On January 24, 2023, we entered into a Note Purchase Agreement to borrow $150.0 million of debt in the form of a note.
Added
Group 3 refers to the oil refining and distribution system serving the Midwest markets from the Gulf Coast through the Plains states. 29 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.
Removed
The note matures on January 24, 2030, and interest accrues at a rate of 5.68%, subject to certain adjustments depending on our ratio of consolidated funded debt to consolidated cash flow, and the proceeds were used to retire maturing debt.
Added
On April 18, 2024, we entered into a Note Purchase Agreement to borrow $700.0 million of debt in the form of notes; the funding of these notes took place on July 16, 2024. On October 29, 2024, we amended our 10-year term loan facility reducing the size to $300.0 million and adding a converting revolver feature.
Removed
GAAP and may not be computed the same as similarly titled measures used by other companies.
Added
In addition, we expect over $200.0 million of incremental expenditures for potential business acquisitions during fiscal 2025. • Major maintenance . We expect total major maintenance for fiscal 2025 to be approximately $256.9 million, compared to major maintenance of $22.7 million in fiscal 2024.
Removed
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.
Added
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 (the next 12 months) and long-term operations (beyond the next 12 months). Our notes payable and long-term debt are subject to various restrictive requirements for maintenance of minimum consolidated net worth and other financial ratios.
Removed
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.
Added
For finance leases, we have a current and long-term obligation of $9.0 million and $49.3 million, respectively. For operating leases, we have a current and long-term obligation of $71.3 million and $176.0 million, respectively.
Removed
Recent Accounting Pronouncements No recent accounting pronouncements are expected to have a material impact on our consolidated financial statements.
Added
Based on our estimates of the timing, cost and probability of removal, these obligations are not material. 42 Table of Contents Recent Accounting Pronouncements See Note 1, Organization, Basis of Presentation and Significant Accounting Policies , of the notes to the consolidated financial statements that are included in this Annual Report on Form 10-K for information concerning new accounting standards and the impact of implementation of those standards on our financial statements.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

6 edited+0 added−0 removed21 unchanged
In addition to specific transactional exposure, foreign currency fluctuations can impact the ability of foreign buyers to purchase U.S. agricultural products and the competitiveness of U.S. agricultural products compared to the same products offered by alternative sources of world supply.
In addition to specific transactional exposure, foreign currency fluctuations can impact the ability of foreign buyers to purchase U.S. agricultural products and competitiveness of U.S. agricultural products compared to the same products offered by alternative sources of world supply.
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.
The position limits are reviewed at least annually with our senior leadership and 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.
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.
Foreign Currency Risk We were exposed to risk regarding foreign currency fluctuations during fiscal 2024 and in prior years even though a substantial amount of our international sales were denominated in U.S. dollars.
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.
Although we have established policies and procedures, we make no assurances that historical nonperformance experience will carry forward to future periods. 43 Table of Contents Based on our net fair market value calculation as of August 31, 2024, a 10% adverse change in market prices would not materially affect our results of operations.
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
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 $1.5 billion and $1.9 billion as of August 31, 2024 and 2023.
Expected 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.
Expected Maturity Date Total Fair Value Liability 2025 2026 2027 2028 2029 Thereafter (Dollars in thousands) Liabilities: Variable rate miscellaneous short-term notes payable $ 163,136 $ — $ — $ — $ — $ — $ 163,136 $ 163,136 Average interest rate 3.6 % — — — — — 3.6 % — Variable rate CHS Capital short-term notes payable $ 143,695 $ — $ — $ — $ — $ — $ 143,695 $ 143,695 Average interest rate 4.3 % — — — — — 4.3 % — Fixed rate long-term debt $ 330,620 $ 80,620 $ 58,621 $ 190,600 $ 150 $ 1,455,000 $ 2,115,611 $ 2,144,170 Average interest rate 4.2 % 4.8 % 4.7 % 4.0 % 3.9 % 5.3 % 5.0 % — Variable rate long-term debt $ — $ 1,000 $ — $ — $ — $ — $ 1,000 $ 1,016 Average interest rate (a) — 6.8 % — — — — 6.8 % — (a) Borrowings are variable under the agreement and bear interest at a base rate plus an applicable margin.

Other CHSCP 10-K year-over-year comparisons