Mergers help farmers achieve $1bn income

The largest co-op in the US is unknown to most Americans — but it is a critical element of the country’s economy.

The largest co-op in the US is unknown to most Americans — but it is a critical element of the country’s economy.

CHS Inc. is a farmer-owned co-op headquartered in Inver Grove, Minnesota, just south of St Paul. It was formed in 1998 through a merger of Cenex and Harvest States, both date back to the 1930s. The co-op is owned by 325,000 farmer members – either directly or indirectly, via about 1,100 local co-ops across the US Midwest and Northwest.

In 2012, CHS will for the first time in its history achieve sales of over $40 billion. That places CHS as No.1 on the National Cooperative Bank (NCB) list of the top 100 
co-operatives in the USA. Net income for CHS in 2012 was $1.26bn, the first time any US co-op has earned over the $1bn net income mark. In 2012, CHS distributed $421 million in patronage to its co-operative owners. 

The history of CHS is an interesting one of multiple mergers of farmer-owned co-operatives over many decades. However, as CHS grew in size its corporate capacity grew in many directions. Today, CHS’s operations span the globe with numerous co-op and non-co-op partnerships in many of the countries where CHS is creating and building markets. Yet at its heart, CHS is still shaped by the original roles of Harvest States, by serving the supply needs and marketing efforts of its grain farmers, and Cenex, by supplying the fuel needs of its farmer members.

CHS is the third-largest US exporter of grain, moving more than one billion bushels of grain to more than 60 countries through its network of elevators and terminals in North and South America, Europe and Asia. The co-op is also a leader in soya bean crushing and refining and is a partner in the nation’s largest wheat milling and durum flour operations. Through its subsidiaries and partnerships, CHS plays a major role in sunflower processing, margarine manufacturing and other foodstuffs. In addition, CHS is engaged in the manufacture of many retail food products.

Cenex supplies 1,600 Cenex-branded gas stations. As the United States’ largest co-operative refiner, CHS produces fuels and lubricants for marketing under the Cenex brand as well as for other businesses. CHS also ranks as the third largest US propane retailer.

Cenex is now the 25th largest chain of convenience stores in the US. Many of the Cenex-branded stores are individually leased by franchisees. Cenex is the sole owner of a 55,000 barrel-a-day refinery in Montana and the majority owner of the 85,000 barrel-a-day National Co-operative Refinery Association in McPherson, Kansas. The McPherson refinery was formally opened in 1943 by a representative of the Co-operative Wholesale Society (CWS).  

CHS’s recent growth has been achieved through creating partnerships within and outside the co-operative sector. It directly employs about 7,000 people in 26 states. However, joint venture partners, franchises and the local member co-operatives account for another 55,000 employees.

To measure the recent growth of CHS, bear in mind that in 2002, the organisation’s revenues had just reached $7.85bn. Ten years later, revenues are at $40bn. Could this growth be a result of unifying disparate individual co-operatives into one strong market player? It is certainly important to study the dynamics of mergers as they impacted the growth of CHS. The creation of CHS as one entity in 2003 perfected the path and the streamlining that the various co-operative organisations had undergone.

Given its growth over the recent decades, CHS has increased influence over the US agricultural co-op sector. Its success has ensured that the farmer’s voice is being heard at the various tables where agricultural policy is discussed. Numerous Senators and Congress Members from “farm states” listen carefully to the issues raised by CHS. Given that CHS plays a daily role in the US rural economy, it is good to know that a strong regional co-operative is well respected for its work at the local and regional level.

Another aspect of CHS is the constructive role played by the CHS Foundation. This supports numerous activities in education and training. Here is its statement: “The CHS Foundation invests in the future of agriculture and rural America through a strong commitment to education and leadership development, rather than, for example, the arts, commercial interests or charity. Funding is program-orientated and is focused on five areas: University Partnerships, Rural Youth Leadership Development, Returning Value to Rural America, Cooperative Education and Farm and Agricultural Safety.”

Hundreds of scholarships are provided annually to high school and university students. Numerous grants support co-operative education and research and university programs that feature programs on co-ops. Throughout the Midwest there are a number of universities that have endowed chairs in co-operatives.

CHS is a unique co-operative that has united over 1,000 local co-ops and 325,000 farming families into a productive powerhouse in US agriculture. CHS’s strategy for success should be avidly studied by all other co-operatives.

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