CHS Inc., the nation’s most lucrative co-op, is returning a colossal $1 billion in patronage payments and stock buybacks to its member-owners – by far the largest annual payout in the history of the co-op. ‘company.
That’s four times the amount the SHC paid out to its owners last year. And well above the annual average of the previous decade, a period when CHS returned $3 billion to them.
The amount of the payment, announced Wednesday morning, reflects the manna garnered by the CHS over the past year.
After a tough 2021, market conditions have turned in the co-op’s favor over the past year, said Olivia Nelligan, chief financial officer.
“This will be the largest annual distribution to owners in CHS history,” Nelligan told the Star Tribune.
Farmers in Minnesota and much of the United States saw a surge in income last year, a second year of improved profitability after seven years of equilibrium.
CHS, based in Inver Grove Heights, has significant businesses in oil refining and agricultural commodities – two sectors which have seen prices surge last year, largely due to the invasion of Ukraine by Russia and the strong global demand for food and fuel.
“We certainly had a more favorable operating environment in 2022 than in 2021, from energy markets to the input and crop protection market, and very strong global demand for oil and grains,” said Nelligan.
That of the cooperative member-owners will be paid $500 million in cash over the coming year, with another $500 million to distribute in stock buybacks.
Specific payment amounts are based on the volume of business a member-owner, which may be small cooperatives or individual farmers, has done with CHS in the previous fiscal year. In addition to cash, member-owners can accumulate equity with CHS and receive payments in the form of equity redemptions.
Last year, the owners received $50 million in cash kickbacks and $100 million in stock buybacks. Another $100 million was distributed to association members and individual growers or their estates.
CHS is “committed to maintaining a strong balance sheet and being fiscally prudent,” Nelligan said. “But one of the main tenants of the cooperative system is the ability for our members to earn patronage to do business with the company.”
The Board of Directors considers several factors when determining patronage returns each year, including cash flow, the previous year’s results and the outlook for the following year. So far this year, Nelligan said, the company is in good financial shape.
For the first three quarters of fiscal 2022, CHS posted net income of $1.2 billion.
Nelligan said CHS leaders believe it’s important that members be rewarded for their loyalty as the co-op looks forward to a good year.