CHS was already feeling the squeeze of depressed grain prices amid bountiful worldwide harvests, and now its oil refining business is hurting from ample global production.
CHS profits plummet alongside lower global fuel, grain prices
Commodity markets are in a down cycle, and the Minnesota-based cooperative expects it to persist this year.
The Minnesota Star Tribune
January 8, 2025 at 8:12PM
The Inver Grove Heights-based cooperative saw profits cut in half, to $244.8 million, for its first fiscal quarter that ended Nov. 30.
The company, which owns the Cenex brand and two refineries, said boosted U.S. refinery capacity and global production is to blame for the plummeting profitability in its energy segment.
“The energy industry is experiencing compressed refinery margins at the same time that U.S. agriculture is seeing a weaker farm economy with a globally competitive marketplace for grains and oilseeds,” CHS Chief Executive Jay Debertin said in a statement Wednesday.
The company is coming off years of record profits and patronage payments to owners, making the decline a sharp contrast to the recent boom.
“We’re owned by farmers, and they have had to navigate the cycles of agriculture for their whole careers and through many generations,” CHS Chief Financial Officer Olivia Nelligan said last month during the cooperative’s annual meeting. “So it really is something in the DNA of the agricultural and cooperative system, managing through those economic cycles of agriculture that always come.”
The cooperative’s owners were well warned of the lean times ahead and know the business is often at the mercy of global commodity markets.
“Margins are always difficult in the commodity space,” Debertin said in a December interview. “There might be short windows where they grow, but by and large they are generally lower.”
CHS expects “the trend of significantly reduced margins for energy and agricultural commodities to persist or accelerate through the remainder of fiscal 2025,” according to Wednesday’s quarterly filing.
Down cycles in ag can last years. Energy tends to be more volatile.
CHS reported first-quarter revenue of $9.3 billion, an 18% decline from the year before.
Debertin said Wednesday the company “is leveraging our efficient global supply chain, strong relationships and expertise to navigate these changing markets, while strategically investing to meet our owners’ future needs.”
The cooperative recently closed on its $225 million acquisition of West Central Ag Services, now known as CHS West Central.
Commodity markets are in a down cycle, and the Minnesota-based cooperative expects it to persist this year.
