What changed in this filing

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Item 1. Business

2023-11-08 compared with 2022-11-02 · 56 added, 54 removed, 210 unchanged (34% of the section changed)

(referred to herein as "CHS," "we," "us" or "our") is the nation's leading integrated agricultural cooperative, providing grain, food, agronomy and energy resources to businesses and consumers on a global basis.

(referred to herein as "CHS," "company," "we," "us" or "our") is the nation's leading integrated agricultural cooperative, providing grain, food, agronomy and energy resources to businesses and consumers on a global basis.

As a cooperative, we are owned by farmers and ranchers and member cooperatives (referred to herein as "members") across the United States.

We also have preferred shareholders that own shares of our five series of preferred stock, all of which are listed and traded on the Global Select Market of The Nasdaq Stock Market LLC.

We also have preferred shareholders who own shares of our five series of preferred stock, all of which are listed and traded on the Global Select Market of The Nasdaq Stock Market LLC.

We buy commodities from and provide products and services to individual agricultural producers, local cooperatives and other companies (including our members and other nonmember customers), both domestically and internationally.

We provide a wide variety of products and services, ranging from initial agricultural inputs such as fuels, farm supplies, crop nutrients and crop protection products to agricultural outputs that include grains and oilseeds, processed grains and oilseeds, renewable fuels and food products.

We provide a wide variety of products and services, ranging from initial agricultural inputs such as fuels, farm supplies, crop nutrients and crop protection products to agricultural outputs that include grain and oilseed, processed grain and oilseed, renewable fuels and food products.

A portion of our operations are conducted through equity investments and joint ventures whose operating results are not fully consolidated with our results;

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through wholesale agronomy sales of crop nutrient and crop protection products;

from sales of soybean meal, soybean refined oil and soyflour products;

from sales of soybean meal, refined soy oil and soyflour products;

through the production and marketing of renewable fuels;

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In addition, our nonconsolidated food production and distribution joint venture, Ventura Foods, LLC ("Ventura Foods"), and our nonconsolidated wheat milling joint venture, Ardent Mills, LLC ("Ardent Mills"), are included in Corporate and Other.

For the year ended August 31, 2021, our equity method investment in Ventura Foods was reported separately as our Foods segment.

Segment results and balances prior to fiscal 2022 have been recast to reflect Ventura Foods as a component of Corporate and Other.

Our earnings from cooperative business are allocated to members and to a limited extent to nonmembers with which we have agreed to do business on a patronage basis based on the volume of business they do with us.

As required under our bylaws and Minnesota cooperative law, our earnings from cooperative business are required to be allocated to our members and to a limited extent to nonmembers with which we have agreed to do business on a patronage basis based on the volume of business they do with us.

We allocate these earnings to our patrons in the form of patronage refunds, which are also called patronage dividends, and which may be in cash, patrons' equities in the form of capital equity certificates or both.

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Our internet address is www.chsinc.com.

The information contained on our website is not part of, and is not incorporated in, this Annual Report on Form 10-K or any other report we file with or furnish to the Securities and Exchange Commission ("SEC").

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").

We are the nation's largest cooperative energy company based on revenues and identifiable assets, with operations that include petroleum refining and pipelines;

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and wholesale supply of propane and other natural gas liquids.

Our Energy segment processes crude oil into refined petroleum products at our refineries in Laurel, Montana, and McPherson, Kansas, and sells those products under the Cenex ® brand to member cooperatives and other independent retailers through a network of nearly 1,500 sites, the majority of which are convenience stores marketing Cenex-branded fuels and owned by our member cooperatives.

For fiscal 2023, our Energy revenues, after elimination of intersegment revenues, were $10.1 billion and were primarily from gasoline, diesel fuel and propane.

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Other energy operations .

We operate six propane terminals, four asphalt terminals, seven refined product terminals and three lubricants blending and packaging facilities.

We operate 11 propane terminals, four asphalt terminals, eight refined product terminals and three lubricants blending and packaging facilities.

We also own and lease a fleet of liquid and pressure trailers and tractors, which transport refined fuels, propane, anhydrous ammonia and other products.

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Our Energy segment produces and sells (primarily wholesale) gasoline, diesel fuel, propane, asphalt, lubricants and other related products, and also provides transportation services.

In addition to selling products refined at our Laurel and McPherson refineries, we purchase refined petroleum products from third parties.

In addition to selling products refined at our Laurel and McPherson refineries, we purchase refined petroleum products from third parties as the need arises.

For fiscal 2023, we obtained approximately 74% of the refined petroleum products we sold from our Laurel and McPherson refineries and approximately 26% from third parties.

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:

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We are one of the nation's largest propane wholesalers based on revenues.

Most of the propane sold in rural areas is for heating and agricultural usage.

Most of the propane sold in rural areas is for heating and agricultural use.

Annual sales volumes of propane vary greatly depending on weather patterns and crop conditions.

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Demand for crude oil and energy products is driven by the condition of local and worldwide economies, local and regional weather patterns and taxation relative to other energy sources, which can significantly affect the price of refined fuel products.

Our Energy segment generally experiences higher volumes and revenues in certain operating areas, such as refined products in the spring, summer and early fall when gasoline and diesel fuel usage by our agricultural customers is highest and is subject to domestic supply and demand forces.

Our Energy segment generally experiences higher volumes and revenues in certain operating areas, such as refined fuel products in the spring, summer and early fall when gasoline and diesel fuel usage by our agricultural customers is highest and is subject to domestic supply and demand forces.

Other energy products, such as propane, generally experience higher volumes and revenues during the winter heating and crop-drying seasons.

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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.

The retail gasoline market is highly competitive, with competitors that are much larger than CHS and have greater brand recognition and distribution outlets throughout the country and the world than we do.

We also are experiencing increased competition from regional and unbranded retailers.

Our owned and nonowned retail outlets are located primarily in the northwestern, midwestern and southern United States.

Our owned and nonowned retail outlets are located primarily in the midwestern and northwestern United States.

We market refined fuel products in five principal geographic areas.

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To the east of the Midwest and Northern Plains is another unique marketing area.

This area centers near Chicago, Illinois, and includes eastern Wisconsin, Illinois and Indiana.

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.

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This area is principally supplied by the Gulf Coast refinery center and is also driven by a strong spot market that reacts quickly to changes in the international and national supply balance.

Another geographic area includes Montana, western North Dakota, Wyoming, Utah, Idaho, Colorado and western South Dakota.

Another geographic area includes Colorado, Idaho, Montana, western North Dakota, western South Dakota, Utah and Wyoming.

Competition at the wholesale level in this area includes the major oil companies and independent refiners.

The last area includes much of Washington and Oregon.

The last area includes much of Oregon and Washington.

We compete with the major oil companies in this area, which is known for volatile prices and an active spot market.

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Our processing business includes our oilseed processing and renewable fuels production businesses.

Oilseed processing is conducted at facilities that crush approximately 132 million bushels of oilseeds on an annual basis, producing approximately 2.7 million short tons of meal and flour and 1.7 billion pounds of edible and inedible oil annually.

We purchase our oilseeds from members, other CHS businesses and third parties that have tightly integrated connections with our global grain marketing operations and country operations business.

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.

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.

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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.

To supplement what is purchased domestically, our Galveston, Texas, deepwater port and terminal receives fertilizer by vessel from origins such as Asia and the Caribbean Basin where significant volumes of urea are produced.

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.

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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.

This facility has approximately six million gallons of chemical storage capacity.

This facility has more than 6 million gallons of chemical storage capacity.

Products and Services

Our Ag segment provides local cooperatives and farmers with the inputs and services they need to produce grain and raise livestock.

Our Ag segment provides member cooperatives and farmers with the inputs and services they need to produce grain and raise livestock.

These include seed, crop nutrients, crop protection products, animal feed, animal health products, refined fuels and propane.

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With a portion of the grain we purchase, we produce renewable fuels, including ethanol and DDGS.

We also produce refined oils, meal and soyflour at our processing facilities.

We also produce refined soy and canola oils, soybean meal, canola meal and soyflour at our processing facilities.

Sales and Marketing:

Our Ag segment provides products and services to a wide range of customers, primarily in the United States.

These customers include member and nonmember producers, local cooperatives, elevators, grain dealers, grain processors and crop nutrient and crop protection retailers.

We sell our edible oils and soyflour to food companies and our inedible oils may be sold to energy companies.

The soybean meal we produce is sold to integrated livestock producers and feed mills.

These customers include member and nonmember producers, member cooperatives, elevators, grain dealers, grain processors and crop nutrient and crop protection retailers.

We sell our edible soy and canola oils and soyflour to food companies and our inedible oils may be sold to energy companies.

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.

Many of the business activities in our Ag segment are highly seasonal and, consequently, the operating results for our Ag segment will typically vary throughout the year.

For example, our country operations business generally experiences higher volumes and revenues during the fall harvest and spring planting seasons and our agronomy business generally experiences higher volumes and revenues during the spring planting season.

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.

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.

In addition, our Ag segment operations may be adversely affected by relative levels of supply and demand, both domestic and international, commodity price levels and transportation costs and conditions.

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Demand may be affected by foreign governments and their programs, relationships of foreign countries with the United States, affluence of foreign countries, wars and civil unrest, currency exchange fluctuations and substitution of commodities.

Demand may also be affected by changes in eating habits, population growth, per capita consumption of some products and renewable fuels production levels.

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.

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.

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and investigation and remediation of the release of hazardous materials.

In addition, environmental laws impose a liability on owners and operators for investigation and remediation of contaminated property and on a party who sends hazardous materials to those contaminated properties for treatment, storage, disposal or recycling.

In addition, environmental laws impose a liability on owners and operators for investigation and remediation of contaminated property and on a party that sends hazardous materials to those contaminated properties for treatment, storage, disposal or recycling.

In some instances, that liability exists regardless of fault.

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In our Ag segment, we have significant competition in the businesses in which we operate based principally on price, services, quality, patronage and alternative products.

Our businesses depend on relationships with local cooperatives and private retailers, proximity to customers and producers, competitive pricing and safety of food, feed and grain products.

We compete with other large distributors of agricultural products, as well as other regional or local distributors, local cooperatives, retailers and manufacturers.

Our businesses depend on relationships with member cooperatives and private retailers;

proximity to customers and producers;

competitive pricing;

and safety of food, feed and grain products.

We compete with other large distributors of agricultural products, as well as with other regional or local distributors, cooperatives, retailers and manufacturers.

NITROGEN PRODUCTION

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See Note 6, Investments , of the notes to the consolidated financial statements that are included in this Annual Report on Form 10-K for additional information.

Our investment in CF Nitrogen positions us and our members for long-term, dependable fertilizer supply, supply chain efficiency and production economics.

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.

In addition, the ability to source products from CF Nitrogen production facilities under our supply agreement benefits our members and customers through strategically positioned access to essential fertilizer products.

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CF Nitrogen competes primarily on delivered price and, to a lesser extent, on customer service and product quality.

CF Nitrogen competes domestically with a variety of large companies in the fertilizer industry.

CF Nitrogen competes domestically with large companies in the fertilizer industry.

There is also significant competition from products sourced from other regions of the world.

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CHS Capital .

Our wholly-owned financing subsidiary, CHS Capital, LLC ("CHS Capital"), provides member cooperatives with a variety of loans that meet commercial agriculture needs.

Our wholly-owned financing subsidiary, CHS Capital, LLC ("CHS Capital"), provides member cooperatives with loans that meet commercial agriculture needs.

These loans include operating, term, revolving and other short- and long-term options.

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CHS Hedging is also the FCM for the majority of our commodity futures trading.

Ventura Foods is a joint venture between CHS and Mitsui & Co., with each company owning a 50% interest.

Ventura Foods is a joint venture between CHS and Mitsui & Co., with each company owning 50% interest.

Ventura Foods produces and distributes edible oil-based products.

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Diversity and inclusion .

The CHS value of inclusion helps us strive to create a work environment where excellence and growth stem from diverse thinking.

The CHS value of inclusion compels us to create a work environment where excellence and growth stem from diverse thinking.

Our goal is to foster a workplace where diverse thinking, voices and backgrounds yield better employee experiences, business performance and business outcomes.

In addition to working on modeling inclusive behaviors that positively impact our communities, with the assistance of external experts, we developed and launched an enterprisewide three-year strategic plan during fiscal 2021 for improving inclusion and diversity at CHS.

We continue to sponsor and support employee resource groups made up of individuals who join together as allies and advocates to promote diversity and inclusion, while providing our employees from across the country the opportunity to strengthen relationships, learn through educational and networking opportunities that focus on development, help local communities and engage with people across CHS.

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.

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.

These employee resource groups include Harvest Pride, which promotes a safe, connected and empowered LGBTQA+ community across CHS;

Mozaiko, which promotes ethnic diversity and inclusion at CHS while creating an inclusive environment for all employees;

VERG, which provides support, camaraderie and resources for employees formerly or currently serving in the military;

Women in Leadership, which supports women in the workplace who are excited and energized to grow personally and professionally;

Mozaiko, which promotes ethnic diversity and inclusion at CHS while supporting an inclusive environment for all employees;

VERG, which provides support, camaraderie and resources for employees formerly or currently serving in the military and their families;

Women in Leadership, which supports women in the workplace to grow personally and professionally;

and CultivateHER, a cohort within Women in Leadership, which supports women across our Ag segment.

Learning and development .

We are committed to investing in our employees to help them grow and achieve their career goals.

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.

These tools and opportunities include access to thousands of on-demand learning modules;

various internal and external trainings that cover continuous improvement, public speaking, financial and accounting topics and other topics;

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;

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Safety is one of our core values.

We put the well-being of our employees, customers and communities first every day.

At CHS, safety isn’t just about following the rules, it is about doing things the right way and remembering that no job is so critical that it warrants safety risks.

In addition to defined safety programs designed specifically for individual facilities with operational hazards such as grain, feed, seed, agronomy, petroleum, warehouses and retail stores, we also provide certain employee groups with additional training opportunities such as a defensive driving program.

Beyond developing defined safety programs and training opportunities, we also monitor our incident rates in comparison to previous years and industry averages, as published by the Bureau of Labor Statistics.

During fiscal 2022, our Occupational Safety & Health Administration ("OSHA") incident rate was 2.9 incidents per 100 full-time workers, as compared to an average of 3.5 incidents per 100 full-time workers during the three previous years, a reduction of 17%, and our DOT crash rate was in the top 4% of all carriers in our industry segment for the entirety of fiscal 2022.

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.

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.

Beyond developing defined safety programs and training opportunities, we monitor our incident rates in comparison to previous years and industry averages, as published by the Bureau of Labor Statistics.

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%.

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 .

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In addition to our charitable foundation and annual giving campaign, which provide financial support to our communities, eligible employees also receive paid time off to make a difference in our communities through volunteer activities.

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 long-term strategies.

In addition to

offering competitive compensation that includes annual variable pay linked to our performance, we also offer a wide array of benefits programs that include health insurance and wellness benefits;

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.

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;

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Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 1. Business