CHS posts a loss after costs rise for fuel credits

CHS Inc., the nation's largest farmer-owned cooperative, posted a $38.2 million loss for its second quarter due to low refining margins in an oil industry still off-kilter due to the pandemic.

The Inver Grove Heights-based agribusiness posted significant growth in its agriculture and fertilizer businesses for the quarter ended Feb. 28, not enough to offset hits to its energy business.

By comparison, CHS netted $125.4 million during the same period a year ago, just before the coronavirus pandemic led to a shuttering of society.

Stay-at-home orders reduced consumer demand at the gas pump, rippling throughout the oil and gas industry. Crude oil production slowed and refineries closed. Oil demand is now rising, as are crude oil prices, squeezing margins for refineries.

"Our Energy segment, while showing improvement over the previous quarter, continues to experience unfavorable refined fuels market conditions related to the COVID-19 pandemic and exceptionally higher costs for renewable energy credits," Jay Debertin, chief executive of CHS, said in a statement Wednesday. "These factors resulted in volume and margin declines that significantly reduced earnings compared to the prior year."

CHS blends renewable fuels, such as ethanol or biodiesel, in with its finished fuel products but not enough to meet the federal standard, and so it must purchase additional credits.

The market price on corn-based ethanol credits rose by 350% during the quarter, CHS said in its federal filing, denting profits.

The company's smaller corporate segment saw profits surge 468% year-over-year due to cost-cutting efforts and increased equity income from its stake in Denver-based Ardent Mills, which is enjoying surging demand for its retail flour due to increased rates of at-home baking.

Kristen Leigh Painter • 612-673-4767