chscp-20230531

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q


☑	Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
	For the quarterly period ended	May 31, 2023
or
☐	Transition Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from to

Commission file number: 001-36079

CHS Inc.

(Exact name of Registrant as specified in its charter)

Minnesota

41-0251095

(State or other jurisdiction of
incorporation or organization)

(I.R.S. Employer
Identification Number)

5500 Cenex Drive

Inver Grove Heights, Minnesota 55077

(Address of principal executive offices, including zip code)

(651) 355-6000

(Registrant's telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading symbol(s)	Name of each exchange on which registered
8% Cumulative Redeemable Preferred Stock	CHSCP	The Nasdaq Stock Market LLC
Class B Cumulative Redeemable Preferred Stock, Series 1	CHSCO	The Nasdaq Stock Market LLC
Class B Reset Rate Cumulative Redeemable Preferred Stock, Series 2	CHSCN	The Nasdaq Stock Market LLC
Class B Reset Rate Cumulative Redeemable Preferred Stock, Series 3	CHSCM	The Nasdaq Stock Market LLC
Class B Cumulative Redeemable Preferred Stock, Series 4	CHSCL	The Nasdaq Stock Market LLC

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes ☑ No ☐

Indicate by check mark whether the Registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the Registrant was required to submit such files).

Yes ☑ No ☐

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☑ Smaller reporting company ☐ Emerging growth company ☐

If an emerging growth company, indicate by check mark if the Registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes ☐ No ☑

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date:

The issuer has no common stock outstanding.

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	PART I. FINANCIAL INFORMATION	Page No.
Item 1.	Financial Statements (unaudited)	2
	Condensed Consolidated Balance Sheets as of May 31 , 2023, and August 31, 2022	2
	Condensed Consolidated Statements of Operations for the Three and Nine Months Ended May 31 , 2023 and 2022	3
	Condensed Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended May 31 , 2023 and 2022	4
	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended May 31 , 2023 and 2022	5
	Notes to Condensed Consolidated Financial Statements	6
Item 2.	Management's Discussion and Analysis of Financial Condition and Results of Operations	22
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	45
Item 4.	Controls and Procedures	46
	PART II. OTHER INFORMATION	46
Item 1.	Legal Proceedings	46
Item 1A.	Risk Factors	46
Item 5 .	Other Information	46
Item 6.	Exhibits	47
Signatures		48

Unless the context otherwise requires, for purposes of this Quarterly Report on Form 10-Q, the words "CHS," "we," "us" and "our" refer to CHS Inc., a Minnesota cooperative corporation, and its subsidiaries as of May 31, 2023.

FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains, and our other publicly available documents may contain, and our officers, directors and other representatives may from time to time make "forward-looking statements" within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Forward-looking statements can be identified by words such as "anticipate," "intend," "plan," "goal," "seek," "believe," "project," "estimate," "expect," "strategy," "future," "likely," "may," "should," "will" and similar references to future periods. Forward-looking statements are neither historical facts nor assurances of future performance. Instead, they are based only on our current beliefs, expectations and assumptions regarding the future of our businesses, financial condition and results of operations, future plans and strategies, projections, anticipated events and trends, the economy and other future conditions. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict and many of which are outside of our control. Our actual results and financial condition may differ materially from those indicated in the forward-looking statements. Therefore, you should not place undue reliance on any of these forward-looking statements. Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements are discussed or identified in our public filings made with the U.S. Securities and Exchange Commission, including in the "Risk Factors" discussion in Item 1A of our Annual Report on Form 10-K for the fiscal year ended August 31, 2022, in the Quarterly Report on Form 10-Q for the Quarter ended February 28, 2023, and in this Quarterly Report on Form 10-Q. These factors may include changes in commodity prices; the impact of government policies, mandates, regulations and trade agreements; global and regional political, economic, legal and other risks of doing business globally; the ongoing war between Russia and Ukraine; the impact of inflation; the impact of epidemics, pandemics, outbreaks of disease and other adverse public health developments, including COVID-19; the impact of market acceptance of alternatives to refined petroleum products; consolidation among our suppliers and customers; nonperformance by contractual counterparties; changes in federal income tax laws or our tax status; the impact of compliance or noncompliance with applicable laws and regulations; the impact of any governmental investigations; the impact of environmental liabilities and litigation; actual or perceived quality, safety or health risks associated with our products; the impact of seasonality; the effectiveness of our risk management strategies; business interruptions, casualty losses and supply chain issues; the impact of workforce factors; our funding needs and financing sources; financial institutions' and other capital sources' policies concerning energy-related businesses; uncertainty regarding the transition away from LIBOR and the replacement of LIBOR with an alternative reference rate; technological improvements that decrease the demand for our agronomy and energy products; our ability to complete, integrate and benefit from acquisitions, strategic alliances, joint ventures, divestitures and other nonordinary course-of-business events; security breaches or other disruptions to our information technology systems or assets; the impact of our environmental, social and governance practices, including failures or delays in achieving our strategies or expectations related to climate change or other environmental matters; the impairment of long-lived assets; the impact of bank failures; and other factors affecting our businesses generally. Any forward-looking statements made by us in this Quarterly Report on Form 10-Q are based only on information currently available to us and speak only as of the date on which the statement is made. We undertake no obligation to update any forward-looking statement, whether written or oral, that may be made from time to time, whether as a result of new information, future developments or otherwise, except as required by applicable law.

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CHS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)


	May 31, 2023		August 31, 2022
	(Dollars in thousands)
ASSETS
Current assets:
Cash and cash equivalents	$	997,323	$	793,957
Receivables	3,839,097		3,548,315
Inventories	3,280,822		3,652,871
Other current assets	1,269,049		1,382,704
Total current assets	9,386,291		9,377,847
Investments	3,905,734		3,728,006
Property, plant and equipment	4,757,169		4,744,959
Other assets	1,145,257		973,995
Total assets	$	19,194,451	$	18,824,807
LIABILITIES AND EQUITIES
Current liabilities:
Notes payable	$	605,955	$	606,719
Current portion of long-term debt	137,402		290,605
Accounts payable	3,145,954		3,063,310
Accrued expenses	863,298		784,317
Other current liabilities	1,868,361		2,207,018
Total current liabilities	6,620,970		6,951,969
Long-term debt	1,814,854		1,668,209
Other liabilities	675,249		743,363
Commitments and contingencies (Note 13)
Equities:
Preferred stock	2,264,038		2,264,038
Equity certificates	4,965,745		5,391,236
Accumulated other comprehensive loss	(260,271)		(255,335)
Capital reserves	3,108,946		2,055,682
Total CHS Inc. equities	10,078,458		9,455,621
Noncontrolling interests	4,920		5,645
Total equities	10,083,378		9,461,266
Total liabilities and equities	$	19,194,451	$	18,824,807

The accompanying notes are an integral part of the condensed consolidated financial statements (unaudited).

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CHS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)


	Three Months Ended May 31,				Nine Months Ended May 31,
	2023		2022		2023		2022
	(Dollars in thousands)
Revenues	$	12,026,051	$	13,137,724	$	36,098,738	$	34,351,069
Cost of goods sold	11,351,711		12,493,467		34,160,996		32,917,906
Gross profit	674,340		644,257		1,937,742		1,433,163
Marketing, general and administrative expenses	273,238		243,136		749,829		692,395
Operating earnings	401,102		401,121		1,187,913		740,768

Interest expense	36,949		32,099		106,166		80,705
Other income	(31,027)		(6,636)		(83,629)		(31,817)
Equity income from investments	(162,940)		(263,079)		(523,236)		(644,347)
Income before income taxes	558,120		638,737		1,688,612		1,336,227
Income tax expense	10,777		62,492		66,305		89,143
Net income	547,343		576,245		1,622,307		1,247,084
Net loss attributable to noncontrolling interests	(156)		(329)		(111)		(451)
Net income attributable to CHS Inc.	$	547,499	$	576,574	$	1,622,418	$	1,247,535

The accompanying notes are an integral part of the condensed consolidated financial statements (unaudited).

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CHS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)


	Three Months Ended May 31,				Nine Months Ended May 31,
	2023		2022		2023		2022
	(Dollars in thousands)
Net income	$	547,343	$	576,245	$	1,622,307	$	1,247,084
Other comprehensive income (loss), net of tax:
Pension and other postretirement benefits	130		4,485		4,681		12,834

Cash flow hedges	(2,531)		(25,257)		(7,595)		(34,951)
Foreign currency translation adjustment	(707)		2,551		(2,022)		(1,568)
Other comprehensive loss, net of tax	(3,108)		(18,221)		(4,936)		(23,685)
Comprehensive income	544,235		558,024		1,617,371		1,223,399
Comprehensive loss attributable to noncontrolling interests	(156)		(329)		(111)		(451)
Comprehensive income attributable to CHS Inc.	$	544,391	$	558,353	$	1,617,482	$	1,223,850

The accompanying notes are an integral part of the condensed consolidated financial statements (unaudited).

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CHS INC. AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)


	Nine Months Ended May 31,
	2023		2022
	(Dollars in thousands)
Cash flows from operating activities:
Net income	$	1,622,307	$	1,247,084
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization, including amortization of deferred major maintenance	400,474		399,562
Equity income from investments, net of distributions received	(167,940)		(345,846)
Provision for current expected credit losses	(10,592)		18,641
Deferred taxes	(65,839)		(51,522)
Other, net	(3,853)		(6,643)
Changes in operating assets and liabilities:
Receivables	(206,328)		(1,074,111)
Inventories	372,049		(1,117,020)
Accounts payable and accrued expenses	214,410		967,603
Other, net	(184,963)		(44,886)
Net cash provided by (used in) operating activities	1,969,725		(7,138)
Cash flows from investing activities:
Acquisition of property, plant and equipment	(374,230)		(207,455)
Proceeds from disposition of property, plant and equipment	22,823		8,127
Expenditures for major maintenance	(184,435)		(18,072)
Proceeds from sale of business	64		73,152
Changes in CHS Capital notes receivable, net	(120,657)		(200,380)
Financing extended to customers	(138,407)		(47,235)
Payments from customer financing	152,323		53,442

Other investing activities, net	(8,569)		(1,467)
Net cash used in investing activities	(651,088)		(339,888)
Cash flows from financing activities:
Proceeds from notes payable and long-term debt	6,124,177		19,077,600
Payments on notes payable, long-term debt and finance lease obligations	(6,104,543)		(18,401,162)
Preferred stock dividends paid	(126,501)		(126,501)
Redemptions of equities	(480,435)		(99,229)
Cash patronage dividends paid	(502,938)		(51,026)
Other financing activities, net	(56,924)		(43,736)
Net cash (used in) provided by financing activities	(1,147,164)		355,946
Effect of exchange rate changes on cash and cash equivalents	(16)		(11,311)
Increase (decrease) in cash and cash equivalents and restricted cash	171,457		(2,391)
Cash and cash equivalents and restricted cash at beginning of period	903,474		542,484
Cash and cash equivalents and restricted cash at end of period	$	1,074,931	$	540,093

The accompanying notes are an integral part of the condensed consolidated financial statements (unaudited).

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CHS INC. AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 1 Basis of Presentation and Significant Accounting Policies

Basis of Presentation

These unaudited condensed consolidated financial statements reflect, in the opinion of management, all normal recurring adjustments necessary for a fair statement of our financial position, results of operations and cash flows for the periods presented. The results of operations and cash flows for interim periods are not necessarily indicative of results for a full fiscal year because of the seasonal nature of our businesses, among other things. Our unaudited condensed consolidated financial statements and notes are presented as permitted by the requirements for Quarterly Reports on Form 10-Q and should be read in conjunction with the consolidated financial statements and notes thereto for the year ended August 31, 2022, included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission ("SEC").

Significant Accounting Policies

No significant accounting policies were updated or changed since our Annual Report on Form 10-K for the year ended August 31, 2022.

Recent Accounting Pronouncements

No recent accounting pronouncements are expected to have a material impact on our condensed consolidated financial statements.

Note 2 Revenues

The following table presents revenues recognized under Accounting Standards Codification ("ASC") Topic 606, Revenue from Contracts with Customers ("ASC Topic 606"), disaggregated by reportable segment, as well as the amount of revenues recognized under ASC Topic 815, Derivatives and Hedging ("ASC Topic 815"), and other applicable accounting guidance for the three and nine months ended May 31, 2023 and 2022. Other applicable accounting guidance primarily includes revenues recognized under ASC Topic 470, Debt, and ASC Topic 842, Leases, that fall outside the scope of ASC Topic 606.


	ASC Topic 606		ASC Topic 815		Other Guidance		Total Revenues
Three Months Ended May 31, 2023	(Dollars in thousands)
Energy	$	1,980,243	$	283,844	$	—	$	2,264,087
Ag	3,295,312		6,444,559		4,105		9,743,976
Corporate and Other	6,388		—		11,600		17,988
Total revenues	$	5,281,943	$	6,728,403	$	15,705	$	12,026,051

Three Months Ended May 31, 2022
Energy	$	2,529,311	$	246,631	$	—	$	2,775,942
Ag	3,460,390		6,883,785		8,194		10,352,369
Corporate and Other	4,205		—		5,208		9,413
Total revenues	$	5,993,906	$	7,130,416	$	13,402	$	13,137,724

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	ASC Topic 606		ASC Topic 815		Other Guidance		Total Revenues
Nine Months Ended May 31, 2023	(Dollars in thousands)
Energy	$	6,775,463	$	776,831	$	—	$	7,552,294
Ag	7,757,867		20,724,153		15,670		28,497,690
Corporate and Other	18,874		—		29,880		48,754
Total revenues	$	14,552,204	$	21,500,984	$	45,550	$	36,098,738

Nine Months Ended May 31, 2022
Energy	$	6,426,092	$	681,836	$	—	$	7,107,928
Ag	8,056,676		19,139,417		21,466		27,217,559
Corporate and Other	11,785		—		13,797		25,582
Total revenues	$	14,494,553	$	19,821,253	$	35,263	$	34,351,069

Less than 1% of revenues accounted for under ASC Topic 606 included within the tables above are recorded over time and relate primarily to service contracts.

Contract Assets and Contract Liabilities

Contract assets relate to unbilled amounts arising from goods that have already been transferred to the customer where the right to payment is not conditional on the passage of time. This results in recognition of an asset, as the amount of revenue recognized at a certain point in time exceeds the amount billed to customers. Contract assets are recorded in receivables within our Condensed Consolidated Balance Sheets and were $51.7 million and $17.2 million as of May 31, 2023, and August 31, 2022, respectively.

Contract liabilities relate to advance payments received from customers for goods and services that we have yet to provide. Contract liabilities of $318.0 million and $541.5 million as of May 31, 2023, and August 31, 2022, respectively, are recorded within other current liabilities on our Condensed Consolidated Balance Sheets. For the three months ended May 31, 2023 and 2022, we recognized revenues of $93.1 million and $48.1 million related to contract liabilities, respectively. For the nine months ended May 31, 2023 and 2022, we recognized revenues of $285.3 million and $213.9 million related to contract liabilities, respectively. These amounts were included in the other current liabilities balance at the beginning of the respective period.

Note 3 Receivables


	May 31, 2023		August 31, 2022
	(Dollars in thousands)
Trade accounts receivable	$	2,842,749	$	2,626,623
CHS Capital short-term notes receivable	724,334		644,875
Other	376,571		404,734
Gross receivables	3,943,654		3,676,232
Less: allowances and reserves	104,557		127,917
Total receivables	$	3,839,097	$	3,548,315

Receivables are composed of trade accounts receivable, short-term notes receivable in our wholly-owned subsidiary, CHS Capital, LLC ("CHS Capital"), and other receivables, less an allowance for expected credit losses. The allowance for expected credit losses is based on our best estimate of expected credit losses in existing receivable balances and is determined using historical write-off experience, adjusted for various industry and regional data and current expectations of future credit losses.

Notes receivable from commercial borrowers are collateralized by various combinations of mortgages, personal property, accounts and notes receivable, inventories and assignments of certain regional cooperatives' capital stock. These loans are primarily originated in the states of Minnesota, Montana and North Dakota. CHS Capital also has loans receivable from producer borrowers that are collateralized by various combinations of growing crops, livestock, inventories, accounts

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receivable, personal property and supplemental mortgages and are primarily originated in the same states as the commercial notes, as well as in South Dakota.

In addition to the short-term balances included in the table above, CHS Capital had long-term notes receivable, with durations of generally not more than 10 years, totaling $65.6 million and $54.3 million as of May 31, 2023, and August 31, 2022, respectively. The long-term notes receivable are included in other assets on our Condensed Consolidated Balance Sheets. As of May 31, 2023, and August 31, 2022, commercial notes represented 33% and 25%, respectively, and producer notes represented 67% and 75%, respectively, of total CHS Capital notes receivable.

CHS Capital has commitments to extend credit to customers if there are no violations of any contractually established conditions. As of May 31, 2023, CHS Capital customers had additional available credit of $1.2 billion. No significant troubled debt restructuring activity occurred, and no third-party customer or borrower accounted for more than 10% of the total receivables balance as of May 31, 2023, or August 31, 2022.

Note 4 Inventories


	May 31, 2023		August 31, 2022
	(Dollars in thousands)
Grain and oilseed	$	1,011,947	$	1,133,531
Energy	673,584		824,114
Agronomy	1,096,250		1,295,548
Processed grain and oilseed	292,254		292,992
Other	206,787		106,686
Total inventories	$	3,280,822	$	3,652,871

As of May 31, 2023, and August 31, 2022, we valued approximately 17% and 14%, respectively, of inventories, primarily crude oil and refined fuels within our Energy segment, using the lower of cost, determined on the last in, first out ("LIFO") method, or net realizable value. If the first in, first out ("FIFO") method of accounting had been used, inventories would have been higher than the reported amount by $477.8 million and $678.3 million as of May 31, 2023, and August 31, 2022, respectively. Actual valuation of inventory under the LIFO method can be made only at the end of each year based on inventory levels and costs at that time. Interim LIFO calculations are based on management's estimates of expected year-end inventory levels and values and are subject to final year-end LIFO inventory valuation.

Note 5 Investments


	May 31, 2023		August 31, 2022
	(Dollars in thousands)
Equity method investments:
CF Industries Nitrogen, LLC	$	2,717,704	$	2,641,604
Ventura Foods, LLC	459,906		410,093
Ardent Mills, LLC	258,539		250,857
TEMCO, LLC	47,377		32,809
Other equity method investments	286,810		265,913
Other investments	135,398		126,730
Total investments	$	3,905,734	$	3,728,006

Joint ventures and other investments in which we have significant ownership and influence, but not control, are accounted for in our condensed consolidated financial statements using the equity method of accounting. Our only significant equity method investment during the nine months ended May 31, 2023 and 2022, was CF Industries Nitrogen, LLC ("CF Nitrogen"), which is summarized below. In addition to recognition of our share of income from equity method investments, our equity method investments are evaluated for indicators of other-than-temporary impairment on an ongoing basis in accordance with accounting principles generally accepted in the United States ("U.S. GAAP"). Other investments consist primarily of investments in cooperatives without readily determinable fair values and are generally recorded at cost, unless an impairment or other observable market price change occurs requiring an adjustment. We have approximately $756.7 million in cumulative undistributed earnings from our equity method investees included in the investments balance as of May 31, 2023.

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CF Nitrogen

We have a $2.7 billion investment in CF Nitrogen, a strategic venture with CF Industries Holdings, Inc. ("CF Industries"). The investment consists of an approximate 8% membership interest (based on product tons) in CF Nitrogen. We account for this investment using the hypothetical liquidation at book value method, recognizing our share of the earnings and losses of CF Nitrogen as equity income from investments in our Nitrogen Production segment based on our contractual claims on the entity's net assets pursuant to the liquidation provisions of CF Nitrogen's Limited Liability Company Agreement, adjusted for semiannual cash distributions.

The following table provides summarized unaudited financial information for our equity method investment in CF Nitrogen for the nine months ended May 31, 2023 and 2022:


	Nine Months Ended May 31,
	2023		2022
	(Dollars in thousands)
Net sales	$	4,200,120	$	4,972,383
Gross profit	1,898,265		2,682,653
Net earnings	1,884,666		2,641,425
Earnings attributable to CHS Inc.	330,855		497,289

Our investments in other equity method investees are not significant in relation to our condensed consolidated financial statements, either individually or in aggregate.

Note 6 Notes Payable and Long-Term Debt

Our notes payable and long-term debt are subject to various restrictive requirements for maintenance of minimum consolidated net worth and other financial ratios. We were in compliance with all debt covenants as of May 31, 2023. Notes payable as of May 31, 2023, and August 31, 2022, consisted of the following:


	May 31, 2023		August 31, 2022
	(Dollars in thousands)
Notes payable	$	504,376	$	459,398
CHS Capital notes payable	101,579		147,321
Total notes payable	$	605,955	$	606,719

On April 21, 2023, we amended and restated our primary line of credit, which is a five-year unsecured revolving credit facility with a syndicate of domestic and international banks. The credit facility provides a committed amount of $2.8 billion that expires on April 21, 2028. There were no borrowings outstanding on this facility as of May 31, 2023, or August 31, 2022. We also maintain certain uncommitted bilateral facilities to support our working capital needs.

We have a receivables and loans securitization facility ("Securitization Facility") with certain unaffiliated financial institutions ("Purchasers"). Under the Securitization Facility, we and certain of our subsidiaries ("Originators") sell trade accounts and notes receivable ("Receivables") to Cofina Funding, LLC ("Cofina"), a wholly-owned, bankruptcy-remote, indirect subsidiary of CHS. Cofina in turn transfers the Receivables to the Purchasers, and this arrangement is accounted for as secured financing. We use the proceeds from the sale of Receivables under the Securitization Facility for general corporate purposes, and settlements are made on a monthly basis. The amount available under the Securitization Facility fluctuates over time based on the total amount of eligible Receivables generated during the normal course of business. The Securitization Facility consists of a committed portion with a maximum availability of $850.0 million and an uncommitted portion with a maximum availability of $250.0 million. As of May 31, 2023, total availability under the Securitization Facility was $1.0 billion, of which no amount was utilized.

We also have a repurchase facility ("Repurchase Facility") related to the Securitization Facility. Under the Repurchase Facility, we can obtain repurchase agreement financing in an amount up to $150.0 million for subordinated notes issued by Cofina in favor of the Originators and representing a portion of the outstanding balance of the Receivables sold by the Originators to Cofina under the Securitization Facility. No balance was outstanding under the Repurchase Facility as of May 31, 2023, or August 31, 2022.

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On July 11, 2023, we amended the Securitization Facility and entered into an additional repurchase facility, under which we can obtain repurchase agreement financing up to $200.0 million for certain eligible receivables of the Originators. The amendments to the Securitization Facility were designed to remove from the securitization certain receivables and loans to permit them to be sold under the new repurchase facility.

On January 24, 2023, we entered into a Note Purchase Agreement to borrow $150.0 million of debt in the form of a note. The note matures on January 24, 2030, and interest accrues at a rate of 5.68%, subject to certain adjustments depending on our ratio of consolidated funded debt to consolidated cash flow.

The following table presents summarized long-term debt (including the current portion) as of May 31, 2023, and August 31, 2022:


	May 31, 2023		August 31, 2022
	(Dollars in thousands)
Private placement debt	$	1,543,000	$	1,545,000
Term loan	366,000		366,000
Finance lease obligations	43,476		44,773
Deferred financing costs	(3,259)		(3,535)
Other	3,039		6,576
Total long-term debt	1,952,256		1,958,814
Less current portion	137,402		290,605
Long-term portion	$	1,814,854	$	1,668,209

Interest expense for the three months ended May 31, 2023 and 2022, was $36.9 million and $32.1 million, respectively, net of capitalized interest of $4.1 million and $0.9 million, respectively. Interest expense for the nine months ended May 31, 2023 and 2022, was $106.2 million and $80.7 million, respectively, net of capitalized interest of $9.8 million and $4.7 million, respectively.

Note 7 Income Taxes

Our effective tax rate for the three months ended May 31, 2023, was 1.9%, compared to 9.8% for the three months ended May 31, 2022. Our effective tax rate for the nine months ended May 31, 2023, was 3.9%, compared to 6.7% for the nine months ended May 31, 2022. Our income tax expense reflects the mix of full-year earnings projected across business units and current equity management assumptions. Income taxes and effective tax rates vary each year based on profitability and nonpatronage business activity during the year.

Our uncertain tax positions are affected by the tax years that are under audit or remain subject to examination by the relevant taxing authorities. Reserves are recorded against unrecognized tax benefits when we believe certain fully supportable tax return positions are likely to be challenged, and we may not prevail. If we were to prevail on all positions taken in relation to uncertain tax positions, $115.7 million and $115.1 million of the unrecognized tax benefits would ultimately benefit our effective tax rate as of May 31, 2023, and August 31, 2022, respectively. It is reasonably possible that the total amount of unrecognized tax benefits could significantly change in the next 12 months.

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Note 8 Equities

Changes in Equities

Changes in equities for the three months ended May 31, 2023 and 2022, are as follows:


	Equity Certificates								Accumulated Other Comprehensive Loss
	Capital Equity Certificates		Nonpatronage Equity Certificates		Nonqualified Equity Certificates		Preferred Stock				Capital Reserves		Noncontrolling Interests		Total Equities
	(Dollars in thousands)
Balances, February 28, 2023	$	3,307,140	$	27,861	$	1,771,844	$	2,264,038	$	(257,163)	$	2,710,507	$	5,092	$	9,829,319
Reversal of prior year patronage and redemption estimates	462,690		—		—		—		—		119,360		—		582,050
Distribution of 2022 patronage refunds	2,615		—		1,226		—		—		(124,889)		—		(121,048)
Redemptions of equities	(457,679)		(112)		(4,898)		—		—		—		—		(462,689)

Other, net	(678)		(44)		(115)		—		—		574		(16)		(279)
Net income (loss)	—		—		—		—		—		547,499		(156)		547,343
Other comprehensive loss, net of tax	—		—		—		—		(3,108)		—		—		(3,108)
Estimated 2023 cash patronage refunds	—		—		—		—		—		(144,105)		—		(144,105)
Estimated 2023 equity redemptions	(144,105)		—		—		—		—		—		—		(144,105)
Balances, May 31, 2023	$	3,169,983	$	27,705	$	1,768,057	$	2,264,038	$	(260,271)	$	3,108,946	$	4,920	$	10,083,378


	Equity Certificates								Accumulated Other Comprehensive Loss
	Capital Equity Certificates		Nonpatronage Equity Certificates		Nonqualified Equity Certificates		Preferred Stock				Capital Reserves		Noncontrolling Interests		Total Equities
	(Dollars in thousands)
Balances, February 28, 2022	$	3,462,002	$	28,110	$	1,632,818	$	2,264,038	$	(221,855)	$	2,196,428	$	6,903	$	9,368,444
Reversal of prior year patronage and redemption estimates	81,731		—		—		—		—		20,170		—		101,901
Distribution of 2021 patronage refunds	—		—		4,205		—		—		(25,188)		—		(20,983)
Redemptions of equities	(78,616)		(90)		(3,038)		—		—		—		—		(81,744)

Other, net	(2,228)		(1)		(6,809)		—		—		1,105		(295)		(8,228)
Net income (loss)	—		—		—		—		—		576,574		(329)		576,245
Other comprehensive loss, net of tax	—		—		—		—		(18,221)		—		—		(18,221)
Estimated 2022 cash patronage refunds	—		—		—		—		—		(58,745)		—		(58,745)
Estimated 2022 equity redemptions	(117,491)		—		—		—		—		—		—		(117,491)
Balances, May 31, 2022	$	3,345,398	$	28,019	$	1,627,176	$	2,264,038	$	(240,076)	$	2,710,344	$	6,279	$	9,741,178

Changes in equities for the nine months ended May 31, 2023 and 2022, are as follows:


	Equity Certificates								Accumulated Other Comprehensive Loss
	Capital Equity Certificates		Nonpatronage Equity Certificates		Nonqualified Equity Certificates		Preferred Stock				Capital Reserves		Noncontrolling Interests		Total Equities
	(Dollars in thousands)
Balances, August 31, 2022	$	3,587,131	$	27,933	$	1,776,172	$	2,264,038	$	(255,335)	$	2,055,682	$	5,645	$	9,461,266
Reversal of prior year patronage and redemption estimates	(28,368)		—		(153,858)		—		—		1,162,661		—		980,435
Distribution of 2022 patronage refunds	516,246		—		154,484		—		—		(1,173,668)		—		(502,938)
Redemptions of equities	(471,589)		(184)		(8,662)		—		—		—		—		(480,435)
Preferred stock dividends	—		—		—		—		—		(126,501)		—		(126,501)
Other, net	(390)		(44)		(79)		—		—		1,401		(614)		274
Net income (loss)	—		—		—		—		—		1,622,418		(111)		1,622,307
Other comprehensive loss, net of tax	—		—		—		—		(4,936)		—		—		(4,936)
Estimated 2023 cash patronage refunds	—		—		—		—		—		(433,047)		—		(433,047)
Estimated 2023 equity redemptions	(433,047)		—		—		—		—		—		—		(433,047)
Balances, May 31, 2023	$	3,169,983	$	27,705	$	1,768,057	$	2,264,038	$	(260,271)	$	3,108,946	$	4,920	$	10,083,378

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	Equity Certificates								Accumulated Other Comprehensive Loss
	Capital Equity Certificates		Nonpatronage Equity Certificates		Nonqualified Equity Certificates		Preferred Stock				Capital Reserves		Noncontrolling Interests		Total Equities
	(Dollars in thousands)
Balances, August 31, 2021	$	3,583,911	$	28,431	$	1,634,896	$	2,264,038	$	(216,391)	$	1,713,976	$	8,465	$	9,017,326
Reversal of prior year patronage and redemption estimates	99,216		—		(230,290)		—		—		280,290		—		149,216
Distribution of 2021 patronage refunds	—		—		235,576		—		—		(286,602)		—		(51,026)
Redemptions of equities	(92,668)		(428)		(6,133)		—		—		—		—		(99,229)
Preferred stock dividends	—		—		—		—		—		(126,501)		—		(126,501)
Other, net	(3,256)		16		(6,873)		—		—		2,548		(1,735)		(9,300)
Net income (loss)	—		—		—		—		—		1,247,535		(451)		1,247,084
Other comprehensive loss, net of tax	—		—		—		—		(23,685)		—		—		(23,685)
Estimated 2022 cash patronage refunds	—		—		—		—		—		(120,902)		—		(120,902)
Estimated 2022 equity redemptions	(241,805)		—		—		—		—		—		—		(241,805)
Balances, May 31, 2022	$	3,345,398	$	28,019	$	1,627,176	$	2,264,038	$	(240,076)	$	2,710,344	$	6,279	$	9,741,178

Preferred Stock Dividends

The following is a summary of dividends declared per share by series of preferred stock for the nine months ended May 31, 2023. Due to the timing of dividend declarations throughout the fiscal year, no declarations were made during the three months ended May 31, 2023 or 2022.


		Nine Months Ended May 31,
	Nasdaq symbol		2023		2022
Series of preferred stock:			(Dollars per share)
8% Cumulative Redeemable	CHSCP		$	1.50	$	1.50
Class B Cumulative Redeemable, Series 1	CHSCO		$	1.48	$	1.48
Class B Reset Rate Cumulative Redeemable, Series 2	CHSCN		$	1.33	$	1.33
Class B Reset Rate Cumulative Redeemable, Series 3	CHSCM		$	1.27	$	1.27
Class B Cumulative Redeemable, Series 4	CHSCL		$	1.41	$	1.41

Accumulated Other Comprehensive Income (Loss)

Changes in accumulated other comprehensive income (loss) by component for the three months ended May 31, 2023 and 2022, are as follows:


	Pension and Other Postretirement Benefits		Cash Flow Hedges		Foreign Currency Translation Adjustment		Total
	(Dollars in thousands)
Balance as of February 28, 2023, net of tax	$	(164,089)	$	3,779	$	(96,853)	$	(257,163)
Other comprehensive income (loss), before tax:
Amounts before reclassifications	148		(1,051)		(800)		(1,703)
Amounts reclassified	23		(2,289)		—		(2,266)
Total other comprehensive income (loss), before tax	171		(3,340)		(800)		(3,969)
Tax effect	(41)		809		93		861
Other comprehensive income (loss), net of tax	130		(2,531)		(707)		(3,108)
Balance as of May 31, 2023, net of tax	$	(163,959)	$	1,248	$	(97,560)	$	(260,271)

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	Pension and Other Postretirement Benefits		Cash Flow Hedges		Foreign Currency Translation Adjustment		Total
	(Dollars in thousands)
Balance as of February 28, 2022, net of tax	$	(133,036)	$	(4,870)	$	(83,949)	$	(221,855)
Other comprehensive income (loss), before tax:
Amounts before reclassifications	369		(39,169)		2,497		(36,303)
Amounts reclassified	5,560		5,782		—		11,342
Total other comprehensive income (loss), before tax	5,929		(33,387)		2,497		(24,961)
Tax effect	(1,444)		8,130		54		6,740
Other comprehensive income (loss), net of tax	4,485		(25,257)		2,551		(18,221)
Balance as of May 31, 2022, net of tax	$	(128,551)	$	(30,127)	$	(81,398)	$	(240,076)

Changes in accumulated other comprehensive income (loss) by component for the nine months ended May 31, 2023 and 2022, are as follows:


	Pension and Other Postretirement Benefits		Cash Flow Hedges		Foreign Currency Translation Adjustment		Total
	(Dollars in thousands)
Balance as of August 31, 2022, net of tax	$	(168,640)	$	8,843	$	(95,538)	$	(255,335)
Other comprehensive income (loss), before tax:
Amounts before reclassifications	351		(24,392)		(2,288)		(26,329)
Amounts reclassified	70		14,368		—		14,438
Total other comprehensive income (loss), before tax	421		(10,024)		(2,288)		(11,891)
Tax effect	4,260		2,429		266		6,955
Other comprehensive income (loss), net of tax	4,681		(7,595)		(2,022)		(4,936)
Balance as of May 31, 2023, net of tax	$	(163,959)	$	1,248	$	(97,560)	$	(260,271)


	Pension and Other Postretirement Benefits		Cash Flow Hedges		Foreign Currency Translation Adjustment		Total
	(Dollars in thousands)
Balance as of August 31, 2021, net of tax	$	(141,385)	$	4,824	$	(79,830)	$	(216,391)
Other comprehensive income (loss), before tax:
Amounts before reclassifications	286		(34,325)		(1,679)		(35,718)
Amounts reclassified	16,680		(11,877)		—		4,803
Total other comprehensive income (loss), before tax	16,966		(46,202)		(1,679)		(30,915)
Tax effect	(4,132)		11,251		111		7,230
Other comprehensive income (loss), net of tax	12,834		(34,951)		(1,568)		(23,685)
Balance as of May 31, 2022, net of tax	$	(128,551)	$	(30,127)	$	(81,398)	$	(240,076)

Amounts reclassified from accumulated other comprehensive income (loss) were related to pension and other postretirement benefits, cash flow hedges and foreign currency translation adjustments. Pension and other postretirement reclassifications include amortization of net actuarial loss, prior service credit and transition amounts and are recorded as cost of goods sold and marketing, general and administrative expenses (see Note 9, Benefit Plans, for further information). As described in Note 11, Derivative Financial Instruments and Hedging Activities, amounts reclassified from accumulated other comprehensive loss for cash flow hedges are recorded as cost of goods sold. Gains or losses on foreign currency translation reclassifications are recorded as other income.

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Note 9 Benefit Plans

We have various pension and other defined benefit and defined contribution plans, in which substantially all employees may participate. We also have nonqualified supplemental executive and Board of Directors retirement plans.

Components of net periodic benefit costs for the three and nine months ended May 31, 2023 and 2022, are as follows:


	Three Months Ended May 31,
	Qualified Pension Benefits				Nonqualified Pension Benefits				Other Benefits
	2023		2022		2023		2022		2023		2022
Components of net periodic benefit costs:	(Dollars in thousands)
Service cost	$	9,645	$	11,569	$	460	$	232	$	168	$	249
Interest cost	7,647		4,292		185		70		259		126
Expected return on assets	(10,782)		(10,990)		—		—		—		—
Prior service cost (credit) amortization	37		44		(29)		(29)		(111)		(111)
Actuarial loss (gain) amortization	468		5,852		61		120		(404)		(315)

Net periodic benefit cost (benefit)	$	7,015	$	10,767	$	677	$	393	$	(88)	$	(51)

	Nine Months Ended May 31,
	Qualified Pension Benefits				Nonqualified Pension Benefits				Other Benefits
	2023		2022		2023		2022		2023		2022
Components of net periodic benefit costs:	(Dollars in thousands)
Service cost	$	28,934	$	34,706	$	1,380	$	695	$	503	$	747
Interest cost	22,941		12,875		556		211		776		377
Expected return on assets	(32,347)		(32,969)		—		—		—		—
Prior service cost (credit) amortization	112		131		(86)		(86)		(334)		(334)
Actuarial loss (gain) amortization	1,404		17,555		184		359		(1,211)		(944)

Net periodic benefit cost (benefit)	$	21,044	$	32,298	$	2,034	$	1,179	$	(266)	$	(154)

Employer Contributions

Contributions depend primarily on market returns on the pension plan assets and minimum funding level requirements. No contributions were made to the pension plans during the nine months ended May 31, 2023, and we do not anticipate being required to make contributions for our pension plans in fiscal 2023, although we may voluntarily elect to do so.

Note 10 Segment Reporting

We are an integrated agricultural cooperative, providing grain, foods and energy resources to businesses and consumers on a global basis. We provide a wide variety of products and services, 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. We define our operating segments in accordance with ASC Topic 280, Segment Reporting, to reflect the manner in which our chief operating decision maker, our chief executive officer, evaluates performance and allocates resources in managing the business. We have aggregated those operating segments into three reportable segments: Energy, Ag and Nitrogen Production.

Our Energy segment produces and provides primarily for the wholesale distribution of petroleum products and transportation of those products. Our Ag segment purchases and further processes or resells grain and oilseed originated by our country operations business, by our member cooperatives and by third parties; serves as a wholesaler and retailer of crop inputs; and produces and markets ethanol. Our Nitrogen Production segment consists of our equity method investment in CF Nitrogen and allocated expenses. Our supply agreement with CF Nitrogen entitles us to purchase up to a specified quantity of granular urea and urea ammonium nitrate ("UAN") annually from CF Nitrogen. Corporate and Other represents our financing and hedging businesses, which primarily consist of financial services related to crop production and a U.S. Commodity Futures Trading Commission-regulated futures commission merchant ("FCM") for commodities hedging. Our nonconsolidated

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investments in Ventura Foods, LLC ("Ventura Foods"), and Ardent Mills, LLC ("Ardent Mills"), are also included in our Corporate and Other category.

Corporate administrative expenses and interest are allocated to each reportable segment and Corporate and Other, based on direct use of services, such as information technology and legal, and other factors or considerations relevant to the costs incurred.

Many of our business activities are highly seasonal and our operating results vary throughout the year. Our revenues generally trend lower during the second fiscal quarter and increase in the third quarter; however, our income before income taxes does not necessarily follow the same trend due to weather and other events that can impact profitability. For example, in our Ag segment, our country operations business generally experiences higher volumes and revenues during the fall harvest and spring planting seasons, which generally correspond to our first and third fiscal quarters, respectively. Additionally, our agronomy business generally experiences higher volumes and revenues during the spring planting season. Our global grain and processing operations are subject to fluctuations in volume and revenues based on producer harvests, world grain prices, global demand and international trade relationships. 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 use by agricultural producers is highest and is subject to global supply and demand forces. Other energy products, such as propane, generally experience higher volumes and revenues during the winter heating and fall crop-drying seasons.

Our revenues, assets and cash flows can be significantly affected by global market prices for commodities such as petroleum products, natural gas, grain, oilseed and oilseed products, crop nutrients and flour. Changes in market prices for commodities that we purchase without a corresponding change in the selling prices of those products can affect revenues and operating earnings. Commodity prices are affected by a wide range of factors beyond our control, including weather, crop damage due to plant disease or insects, drought, availability and adequacy of supply, availability of reliable rail and river transportation networks, outbreaks of disease, government regulations and policies, global trade disputes, wars and civil unrest, bank failures, and general political and economic conditions.

While our revenues and operating results are derived primarily from businesses and operations that are wholly-owned or subsidiaries and limited liability companies in which we have a controlling interest, a portion of our business operations is conducted through companies in which we hold ownership interests of 50% or less or otherwise do not control the operations. We account for these investments primarily using the equity method of accounting, wherein we record our proportionate share of income or loss reported by the entity as equity income from investments, without consolidating the revenues and expenses of the entity in our Condensed Consolidated Statements of Operations. In our Ag segment, this includes our 50% interest in TEMCO, LLC. In our Nitrogen Production segment, this consists of our approximate 8% membership interest (based on product tons) in CF Nitrogen. In Corporate and Other, this principally includes our 50% ownership in Ventura Foods and our 12% ownership in Ardent Mills. See Note 5, Investments, for more information related to our equity method investments.

Reconciling amounts represent the elimination of revenues between segments. Such transactions are executed at market prices to more accurately evaluate the profitability of the individual business segments.

Segment information for the three and nine months ended May 31, 2023 and 2022, is presented in the tables below:


	Energy		Ag		Nitrogen Production		Corporate and Other		Reconciling Amounts		Total
Three Months Ended May 31, 2023	(Dollars in thousands)
Revenues, including intersegment revenues	$	2,433,108	$	9,752,861	$	—	$	21,996	$	(181,914)	$	12,026,051
Intersegment revenues	(169,021)		(8,885)		—		(4,008)		181,914		—
Revenues, net of intersegment revenues	$	2,264,087	$	9,743,976	$	—	$	17,988	$	—	$	12,026,051
Operating earnings (loss)	198,015		219,333		(17,393)		1,147		—		401,102
Interest expense	2,662		20,677		14,619		8,410		(9,419)		36,949
Other income	(4,922)		(25,001)		—		(10,523)		9,419		(31,027)
Equity (income) loss from investments	1,280		(9,858)		(88,275)		(66,087)		—		(162,940)
Income before income taxes	$	198,995	$	233,515	$	56,263	$	69,347	$	—	$	558,120

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	Energy		Ag		Nitrogen Production		Corporate and Other		Reconciling Amounts		Total
Three Months Ended May 31, 2022	(Dollars in thousands)
Revenues, including intersegment revenues	$	2,943,305	$	10,359,992	$	—	$	11,215	$	(176,788)	$	13,137,724
Intersegment revenues	(167,363)		(7,623)		—		(1,802)		176,788		—
Revenues, net of intersegment revenues	$	2,775,942	$	10,352,369	$	—	$	9,413	$	—	$	13,137,724
Operating earnings (loss)	164,016		256,817		(14,480)		(5,232)		—		401,121
Interest expense	2,182		18,581		12,263		(257)		(670)		32,099
Other income	(485)		(10,221)		(258)		3,658		670		(6,636)
Equity income from investments	(922)		(25,231)		(204,697)		(32,229)		—		(263,079)
Income before income taxes	$	163,241	$	273,688	$	178,212	$	23,596	$	—	$	638,737


	Energy		Ag		Nitrogen Production		Corporate and Other		Reconciling Amounts		Total
Nine Months Ended May 31, 2023	(Dollars in thousands)
Revenues, including intersegment revenues	$	8,084,834	$	28,520,946	$	—	$	58,574	$	(565,616)	$	36,098,738
Intersegment revenues	(532,540)		(23,256)		—		(9,820)		565,616		—
Revenues, net of intersegment revenues	$	7,552,294	$	28,497,690	$	—	$	48,754	$	—	$	36,098,738
Operating earnings (loss)	857,018		383,946		(51,762)		(1,289)		—		1,187,913
Interest expense	7,203		57,678		44,224		19,740		(22,679)		106,166
Other income	(13,934)		(64,588)		—		(27,786)		22,679		(83,629)
Equity (income) loss from investments	3,338		(48,392)		(330,855)		(147,327)		—		(523,236)
Income before income taxes	$	860,411	$	439,248	$	234,869	$	154,084	$	—	$	1,688,612
Total assets as of May 31, 2023	$	4,435,618	$	7,938,831	$	2,717,704	$	4,102,298	$	—	$	19,194,451

	Energy		Ag		Nitrogen Production		Corporate and Other		Reconciling Amounts		Total
Nine Months Ended May 31, 2022	(Dollars in thousands)
Revenues, including intersegment revenues	$	7,574,881	$	27,239,897	$	—	$	32,060	$	(495,769)	$	34,351,069
Intersegment revenues	(466,953)		(22,338)		—		(6,478)		495,769		—
Revenues, net of intersegment revenues	$	7,107,928	$	27,217,559	$	—	$	25,582	$	—	$	34,351,069
Operating earnings (loss)	243,009		560,200		(35,525)		(26,916)		—		740,768
Interest expense	4,568		45,466		34,770		(3,073)		(1,026)		80,705
Other income	(1,217)		(37,320)		(2,058)		7,752		1,026		(31,817)
Equity income from investments	(3,604)		(63,240)		(497,289)		(80,214)		—		(644,347)
Income before income taxes	$	243,262	$	615,294	$	429,052	$	48,619	$	—	$	1,336,227

Note 11 Derivative Financial Instruments and Hedging Activities

We enter into various derivative instruments to manage our exposure to movements primarily associated with agricultural and energy commodity prices and, to a lesser degree, foreign currency exchange rates and interest rates. Except for certain cash-settled swaps related to future crude oil purchases and refined product sales, which are accounted for as cash flow hedges, our derivative instruments represent economic hedges of price risk for which hedge accounting under ASC Topic 815 is not applied. Rather, the derivative instruments are recorded on our Condensed Consolidated Balance Sheets at fair value with changes in fair value being recorded directly to earnings, primarily within cost of goods sold in our Condensed Consolidated Statements of Operations. See Note 12, Fair Value Measurements, for additional information. The majority of our exchange-traded agricultural commodity futures are settled daily through CHS Hedging, LLC, our wholly-owned FCM.

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Derivatives Not Designated as Hedging Instruments

The majority of our derivative instruments have not been designated as hedging instruments. The following tables present the gross fair values of derivative assets, derivative liabilities and margin deposits (cash collateral) recorded on our Condensed Consolidated Balance Sheets, along with related amounts permitted to be offset in accordance with U.S. GAAP. Although we have certain netting arrangements for our exchange-traded futures and options contracts and certain over-the-counter ("OTC") contracts, we have elected to report our derivative instruments on a gross basis on our Condensed Consolidated Balance Sheets under ASC Topic 210-20, Balance Sheet-Offsetting.


	May 31, 2023
			Amounts Not Offset on Condensed Consolidated Balance Sheet but Eligible for Offsetting
	Gross Amount Recognized		Cash Collateral		Derivative Instruments		Net Amount
	(Dollars in thousands)
Derivative assets
Commodity derivatives	$	443,518	$	—	$	6,794	$	436,724
Foreign exchange derivatives	39,623		—		10,815		28,808

Total	$	483,141	$	—	$	17,609	$	465,532
Derivative liabilities
Commodity derivatives	$	352,978	$	1,905	$	14,301	$	336,772
Foreign exchange derivatives	13,261		—		10,815		2,446

Total	$	366,239	$	1,905	$	25,116	$	339,218


	August 31, 2022
			Amounts Not Offset on Condensed Consolidated Balance Sheet but Eligible for Offsetting
	Gross Amount Recognized		Cash Collateral		Derivative Instruments		Net Amount
	(Dollars in thousands)
Derivative assets
Commodity derivatives	$	464,167	$	—	$	3,834	$	460,333
Foreign exchange derivatives	52,923		—		8,901		44,022

Total	$	517,090	$	—	$	12,735	$	504,355
Derivative liabilities
Commodity derivatives	$	378,291	$	1,424	$	12,574	$	364,293
Foreign exchange derivatives	12,649		—		8,901		3,748
Total	$	390,940	$	1,424	$	21,475	$	368,041

Derivative assets and liabilities with maturities of 12 months or less are recorded in other current assets and other current liabilities, respectively, on our Condensed Consolidated Balance Sheets. Derivative assets and liabilities with maturities greater than 12 months are recorded in other assets and other liabilities, respectively, on our Condensed Consolidated Balance Sheets. The amount of long-term derivative assets recorded on our Condensed Consolidated Balance Sheets as of May 31, 2023, and August 31, 2022, was $4.4 million and $8.5 million, respectively. The amount of long-term derivative liabilities recorded on our Condensed Consolidated Balance Sheets as of May 31, 2023, and August 31, 2022, was $3.5 million and $4.0 million, respectively.

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The following table sets forth the pretax gains (losses) on derivatives not accounted for as hedging instruments that have been included in our Condensed Consolidated Statements of Operations for the three and nine months ended May 31, 2023 and 2022:


		Three Months Ended May 31,				Nine Months Ended May 31,
	Location of Gain (Loss)	2023		2022		2023		2022
		(Dollars in thousands)
Commodity derivatives	Cost of goods sold	$	(59,177)	$	(324,965)	$	(194,832)	$	(905,400)
Foreign exchange derivatives	Cost of goods sold	(21,753)		18,147		(23,792)		58,438
Foreign exchange derivatives	Marketing, general and administrative expenses	556		1,097		804		1,600
Other derivatives	Other income	—		258		—		2,057
Total		$	(80,374)	$	(305,463)	$	(217,820)	$	(843,305)

Commodity Contracts

As of May 31, 2023, and August 31, 2022, we had outstanding commodity futures and options contracts that were used as economic hedges, as well as fixed-price forward contracts related to physical purchases and sales of commodities. The table below presents the notional volumes for all outstanding commodity contracts:


	May 31, 2023		August 31, 2022
	Long	Short	Long	Short
	(Units in thousands)
Grain and oilseed (bushels)	418,318	559,715	609,300	773,239
Energy products (barrels)	15,119	9,157	10,541	5,706
Processed grain and oilseed (tons)	5,672	11,324	1,191	4,182
Crop nutrients (tons)	76	15	23	22
Ocean freight (metric tons)	60	—	60	—
Natural gas (metric million Btu)	940	—	420	—

Foreign Exchange Contracts

We conduct a substantial portion of our business in U.S. dollars, but are exposed to risks relating to foreign currency fluctuations, primarily due to global grain marketing transactions in South America, the Asia Pacific region and Europe and purchases of products from Canada. We use foreign currency derivative instruments to mitigate the impact of exchange rate fluctuations. Although we have some risk exposure relating to foreign currency transactions, a larger impact with exchange rate fluctuations is the ability of foreign buyers to purchase U.S. agricultural products and the competitiveness of U.S. agricultural products compared to the same products offered by alternative sources of world supply. The notional amount of our foreign exchange derivative contracts was $1.9 billion as of May 31, 2023, and August 31, 2022, respectively.

Derivatives Designated as Cash Flow Hedging Strategies

Certain pay-fixed, receive-variable, cash-settled swaps are designated as cash flow hedges of future crude oil purchases in our Energy segment. We also designate certain pay-variable, receive-fixed, cash-settled swaps as cash flow hedges of future refined energy product sales. These hedging instruments and the related hedged items are exposed to significant market price risk and potential volatility. As part of our risk management strategy, we look to hedge a portion of our expected future crude oil needs and the resulting refined product output based on prevailing futures prices, management's expectations about future commodity price changes and our risk appetite. We may also elect to dedesignate certain derivative instruments previously designated as cash flow hedges as part of our risk management strategy. Amounts recorded in other comprehensive income for these dedesignated derivative instruments remain in other comprehensive income and are recognized in earnings in the period in which the underlying transactions affect earnings. As of May 31, 2023, and August 31, 2022, the aggregate notional amounts of cash flow hedges were 1.1 million and 3.8 million barrels, respectively.

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The following table presents the fair value of our commodity derivative instruments designated as cash flow hedges and the locations on our Condensed Consolidated Balance Sheets in which they are recorded:


	Derivative Assets					Derivative Liabilities
Balance Sheet Location	May 31, 2023		August 31, 2022		Balance Sheet Location	May 31, 2023		August 31, 2022
	(Dollars in thousands)					(Dollars in thousands)
Other current assets	$	4,698	$	27,154	Other current liabilities	$	1,551	$	11,818

The following table presents the pretax losses recorded in other comprehensive income relating to cash flow hedges for the three and nine months ended May 31, 2023 and 2022:


	Three Months Ended May 31,				Nine Months Ended May 31,
	2023		2022		2023		2022
	(Dollars in thousands)
Commodity derivatives	$	(3,430)	$	(36,688)	$	(12,189)	$	(51,961)

The following table presents the pretax gains (losses) relating to our existing cash flow hedges that were reclassified from accumulated other comprehensive loss into our Condensed Consolidated Statements of Operations for the three and nine months ended May 31, 2023 and 2022:


		Three Months Ended May 31,				Nine Months Ended May 31,
	Location of Gain (Loss)	2023		2022		2023		2022
		(Dollars in thousands)
Commodity derivatives	Cost of goods sold	$	2,590	$	(5,482)	$	(13,468)	$	12,777

Note 12 Fair Value Measurements

ASC Topic 820, Fair Value Measurement, defines fair value as the price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction among the market participants on the measurement date.

We determine fair values of derivative instruments and certain other assets based on the fair value hierarchy established in ASC Topic 820, which requires an entity to maximize use of observable inputs and minimize use of unobservable inputs when measuring fair value. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability based on the best information available in the circumstances. ASC Topic 820 describes three levels within its hierarchy that may be used to measure fair value. Level 1 inputs are unadjusted quoted prices in active markets for identical assets or liabilities. Level 2 inputs include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active and other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3 inputs are unobservable inputs that are supported by little or no market activity for the assets or liabilities. Categorization within the valuation hierarchy is based on the lowest level of input significant to the fair value measurement.

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Recurring fair value measurements as of May 31, 2023, and August 31, 2022, are as follows:


	May 31, 2023
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
	(Dollars in thousands)
Assets
Commodity derivatives	$	2,118	$	446,098	$	—	$	448,216
Foreign exchange derivatives	—		39,623		—		39,623




Segregated investments and marketable securities	221,295		—		—		221,295
Other assets	49,066		—		—		49,066
Total	$	272,479	$	485,721	$	—	$	758,200
Liabilities
Commodity derivatives	$	8,372	$	346,157	$	—	$	354,529
Foreign exchange derivatives	—		13,261		—		13,261

Total	$	8,372	$	359,418	$	—	$	367,790


	August 31, 2022
	Quoted Prices in Active Markets for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)		Total
	(Dollars in thousands)
Assets
Commodity derivatives	$	1,161	$	490,160	$	—	$	491,321
Foreign exchange derivatives	—		52,923		—		52,923




Segregated investments and marketable securities	238,124		—		—		238,124
Other assets	58,280		—		—		58,280
Total	$	297,565	$	543,083	$	—	$	840,648
Liabilities
Commodity derivatives	$	10,256	$	379,883	$	—	$	390,139
Foreign exchange derivatives	—		12,649		—		12,649

Total	$	10,256	$	392,532	$	—	$	402,788

Commodity and foreign exchange derivatives. Exchange-traded futures and options contracts are valued based on unadjusted quoted prices in active markets and are classified within Level 1. Our forward commodity purchase and sales contracts with fixed-price components, select ocean freight contracts and other OTC derivatives are determined using inputs that are generally based on exchange traded prices and/or recent market bids and offers, including location-specific adjustments, and are classified within Level 2. Location-specific inputs are driven by local market supply and demand and are generally based on broker or dealer quotations or market transactions in either listed or OTC markets. Changes in the fair values of these contracts are recognized in our Condensed Consolidated Statements of Operations as a component of cost of goods sold.

Segregated investments and marketable securities and other assets. Our segregated investments and marketable securities and other assets are comprised primarily of investments in various government agencies, U.S. Treasury securities, money market funds and rabbi trust assets, which are valued using quoted market prices and classified within Level 1.

Note 13 Commitments and Contingencies

Environmental

We are required to comply with various environmental laws and regulations incidental to our normal business operations. To meet our compliance requirements, we establish reserves for future costs of remediation associated with identified issues that are both probable and can be reasonably estimated. Estimates of environmental costs are based on current

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available facts, existing technology, undiscounted site-specific costs and currently enacted laws and regulations and are included in cost of goods sold and marketing, general and administrative expenses in our Condensed Consolidated Statements of Operations. Recoveries, if any, are recorded in the period in which recovery is received. Liabilities are monitored and adjusted as new facts or changes in law or technology occur. The resolution of any such matters may affect consolidated net income for any fiscal period; however, we currently believe any resulting liabilities, individually or in aggregate, will not have a material effect on our consolidated financial position, results of operations or cash flows during any fiscal year.

Other Litigation and Claims

We are involved as a defendant in various lawsuits, claims and disputes, which are in the normal course of our business. The resolution of any such matters may affect consolidated net income for any fiscal period; however, we currently believe any resulting liabilities, individually or in aggregate, will not have a material effect on our consolidated financial position, results of operations or cash flows during any fiscal year.

Guarantees

We are a guarantor for lines of credit and performance obligations of related, nonconsolidated companies. Our bank covenants allow maximum guarantees of $1.1 billion, of which $74.3 million were outstanding on May 31, 2023. We have collateral for a portion of these contingent obligations. We have not recorded a liability related to the contingent obligations as we do not expect to pay out any cash related to them, and the fair values are considered immaterial. The underlying loans to the counterparties for which we provide these guarantees were current as of May 31, 2023.

Note 14 Other Current Assets and Liabilities

Other current assets and liabilities as of May 31, 2023, and August 31, 2022, are as follows:


	May 31, 2023		August 31, 2022
Other current assets	(Dollars in thousands)
Derivative assets (Note 11)	$	483,436	$	535,698
Margin and related deposits	275,457		390,782
Supplier advance payments	223,419		198,753
Restricted cash	77,608		109,517
Other	209,129		147,954
Total other current assets	$	1,269,049	$	1,382,704
Other current liabilities
Customer margin deposits and credit balances	$	148,658	$	283,234
Customer advance payments	469,753		525,003
Derivative liabilities (Note 11)	364,291		398,781
Dividends and equity payable	885,659		1,000,000
Total other current liabilities	$	1,868,361	$	2,207,018

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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This Management's Discussion and Analysis of Financial Condition and Results of Operations ("MD&A") is intended to provide a reader of our condensed consolidated financial statements with a narrative from the perspective of our management regarding our financial condition and results of operations, liquidity and certain other factors that may affect our future results. Our MD&A is presented in the following sections:

•Overview

•Business Strategy

•Fiscal 2023 Third Quarter Highlights

•Fiscal 2023 Trends Update

•Operating Metrics

•Results of Operations

•Liquidity and Capital Resources

•Critical Accounting Policies

•Recent Accounting Pronouncements

Our MD&A should be read in conjunction with our Annual Report on Form 10-K for the year ended August 31, 2022 (including the information presented therein under Risk Factors), as well as the condensed consolidated financial statements and the related notes included in Item 1 of Part I of this Quarterly Report on Form 10-Q.

Overview

CHS Inc. ("CHS") is a diversified company that provides grain, food, agronomy and energy resources to businesses and consumers on a global scale. As a cooperative, we are owned by farmers, ranchers and member cooperatives across the United States. We also have preferred shareholders who own 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 operate in the following three reportable segments:

•Energy. Produces and provides primarily for the wholesale distribution and transportation of petroleum products.

•Ag. Purchases and further processes or resells grain and oilseed originated by our country operations and global grain and processing businesses, by our member cooperatives and by third parties. It also includes our renewable fuels business and serves as a wholesaler and retailer of agronomy products.

•Nitrogen Production. Produces and distributes nitrogen fertilizer. It consists of our equity method investment in CF Industries Nitrogen, LLC ("CF Nitrogen"), and allocated expenses.

In addition, our financing and hedging businesses, along with our nonconsolidated food production and distribution and wheat milling joint ventures, have been aggregated within our Corporate and Other category.

The condensed consolidated financial statements include the accounts of CHS and all subsidiaries and limited liability companies in which we have a controlling interest. The effects of all significant intercompany transactions have been eliminated.

Management's Focus. When evaluating our operating performance, management focuses on gross profit and income before income taxes ("IBIT"). As a company that operates heavily in global commodities, there is significant unpredictability and volatility in pricing, costs and global trade volumes. Consequently, we focus on managing the margin we can earn and the resulting IBIT. We also focus on ensuring balance sheet strength through appropriate management of financial liquidity, leverage, capital allocation and cash flow optimization.

Seasonality. Many of our business activities are highly seasonal and our operating results vary throughout the year. Our revenues generally trend lower during the second fiscal quarter and increase in the third quarter; however, our IBIT does not necessarily follow the same trend due to weather and other events that can impact profitability. For example, in our Ag segment, our country operations business generally experiences higher volumes and revenues during the fall harvest and spring planting seasons, which generally correspond to our first and third fiscal quarters, respectively. Additionally, our agronomy business generally experiences higher volumes and revenues during the spring planting season. Our global grain and processing

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operations are subject to fluctuations in volumes and revenues based on producer harvests, world grain prices, demand and international trade relationships. 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 use by agricultural producers is highest and is subject to global supply and demand forces. Other energy products, such as propane, generally experience higher volumes and revenues during the winter heating and fall crop-drying seasons. The graphs below depict the seasonality inherent in our businesses:

Pricing and Volumes. Our revenues, assets and cash flows can be significantly affected by global market prices and sales volumes of commodities such as petroleum products, natural gas, grain, oilseed products and agronomy products. Changes in market prices for commodities we purchase without a corresponding change in the selling prices of those products can affect revenues and operating earnings. Similarly, increased or decreased sales volumes without a corresponding change in the purchase and selling prices of those products can affect revenues and operating earnings. Commodity prices and sales volumes are affected by a wide range of factors beyond our control, including weather, crop damage due to plant disease or insects, drought, availability/adequacy of supply of a commodity, availability of reliable rail and river transportation networks, disease outbreaks, government regulations and policies, global trade disputes, wars and civil unrest, and general political and/or economic conditions.

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Business Strategy

Our business strategies focus on an enterprisewide effort to create an experience that empowers customers to make CHS their first choice, expand market access to add value for our owners and transform and evolve our core businesses by capitalizing on changing market dynamics. To execute these strategies, we are focused on implementing agile, efficient and sustainable technology platforms; building robust and efficient supply chains; hiring, developing and retaining high-performing, diverse and passionate teams; achieving operational excellence and continuously improving; and maintaining a strong balance sheet.

Fiscal 2023 Third Quarter Highlights

•Robust global demand and market volatility continued to result in commodity prices that are elevated from historical averages.

•Strong meal and oil demand resulted in improved oilseed crush margins that contributed to higher earnings in our oilseed processing business, which was partially offset by decreased prices for agronomy products in our Ag segment.

•Our Energy segment continued to deliver strong earnings as a result of favorable market conditions in our refined fuels business, including sustained high global demand for energy products, as consumption outpaced supply.

•Equity method investments continued to perform well, with our CF Nitrogen and Ventura Foods investments being the largest contributors.

•We completed planned major maintenance to overhaul, repair, inspect and replace process materials and equipment (referred to in the industry as "turnaround") at our Laurel, Montana, refinery during April and May 2023.

Fiscal 2023 Trends Update

Our segments operate in cyclical environments in which market conditions can change rapidly with significant positive or negative impacts on our results. We anticipate that various macroeconomic factors, including the ongoing war between Russia and Ukraine; rising interest rates; bank failures and potential bank failures; and inflationary pressures increasing costs of labor, freight and materials; will continue to drive uncertainty and instability in global energy and agricultural commodity markets, as well as in global financial markets. This uncertainty and instability could have a significant impact on each of our segments through the remainder of fiscal 2023. In addition to these broad macroeconomic factors, other factors could impact demand for agricultural inputs and outputs, as well as our ability to supply those inputs and outputs. These include the cost of renewable energy credits, which remains higher than historical levels and could continue to negatively impact our profitability, and regional factors, such as unpredictable weather conditions, including those due to climate change. We currently expect the imbalance between global supply and strong global demand for agricultural commodities to continue to moderate through the remainder of fiscal 2023. We are unable to predict how long the current environment and market conditions will last or the extent of the financial and operational impacts to us in fiscal 2023. Refer to Item 1A of our Annual Report on Form 10-K for the year ended August 31, 2022, and Item 1A of our Quarterly Report on Form 10-Q for the quarter ended February 28, 2023, for additional impacts that these and other risks may have on our business operations and financial performance.

In addition to navigating market conditions that impact our businesses, we will continue to execute our enterprise priorities for fiscal 2023, including empowering and supporting our people, advancing our operating model by transforming how we work and adopting new technologies, and strategically investing in our infrastructure to meet the evolving needs of our owners and customers, enhancing value for the cooperative system and propelling sustainable growth.

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Operating Metrics

Energy

Our Energy segment operations primarily include our refineries in Laurel, Montana, and McPherson, Kansas, which process crude oil to produce refined products, including gasoline, distillates and other products. To ensure the reliability of our refineries, we perform major maintenance activities every two to five years, which require a temporary shutdown of operations. These planned shutdowns allow us to extend the life, increase the capacity and improve the safety and efficiency of our refinery processing assets. They also minimize unplanned business interruptions and are essential to the long-term reliability and profitability of our Energy segment.

During periods of maintenance, utilization rates, throughput volumes and refined fuel yields are lower, and we may purchase refined petroleum products from third parties to meet the needs of our customers. These third-party purchases may result in lower margins than for products produced by our refineries, which reduces our profitability. The following table provides information about our consolidated refinery operations:


	Three Months Ended May 31,		Nine Months Ended May 31,
	2023	2022	2023	2022
Refinery throughput volumes*	(Barrels per day)
Heavy, high-sulfur crude oil	80,994	106,658	90,878	104,090
All other crude oil	71,037	72,915	70,704	72,359
Other feedstocks and blendstocks	14,543	11,436	11,594	14,007
Total refinery throughput volumes	166,574	191,009	173,176	190,456
Refined fuel yields*
Gasolines	79,690	87,174	78,805	89,602
Distillates	69,460	85,078	75,640	82,396

*Lower refinery throughput volumes and refined fuel yields experienced during the three and nine months ended May 31, 2023, are primarily due to a planned shutdown to perform major maintenance at our Laurel, Montana, refinery.

We are subject to the Renewable Fuel Standard, which requires refiners to blend renewable fuels (e.g., ethanol and biodiesel) into their finished transportation fuels or purchase renewable energy credits, known as renewable identification numbers ("RINs"), in lieu of blending. The U.S. Environmental Protection Agency ("EPA") generally establishes new annual renewable fuel percentage standards for each compliance year in the preceding year. In June 2023, the EPA issued its final renewable volume obligation ("RVO") for calendar years 2023 through 2025. We generate RINs through our blending activities, but we cannot generate enough RINs to meet the needs of our refining capacity, and RINs must be purchased on the open market. The price of RINs can be volatile, which can impact our profitability. The prices for D6 ethanol RINs and D4 biodiesel RINs increased by 16% and decreased by 5%, respectively, during the third quarter of fiscal 2023 compared to the same period in the prior year. Estimates of our RIN expenses are calculated using an average RIN price each month.

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In addition to our internal operational reliability, the profitability of our Energy segment is largely driven by crack spreads (i.e., the price differential between refined products and inputs such as crude oil) and Western Canadian Select ("WCS") crude oil discounts (i.e., the price discount for WCS crude oil relative to West Texas Intermediate ("WTI") crude oil), which are driven by the supply and demand for refined products. Crack spreads and WCS crude oil discounts both increased during the nine months ended May 31, 2023, compared to the same period during the prior year, which contributed to improved IBIT for the Energy segment during the period. Although the WCS crude oil discount increased during the three months ended May 31, 2023, and resulted in improved IBIT for the Energy segment during the quarter, crack spreads decreased in the third quarter of fiscal 2023 relative to the same period during the prior year. The table below provides information about average market reference prices and discounts that impacted our Energy segment during the three and nine months ended May 31, 2023 and 2022:


	Three Months Ended May 31,				Nine Months Ended May 31,
	2023		2022		2023		2022
Market indicators
WTI crude oil (dollars per barrel)	$	74.81	$	106.39	$	79.05	$	88.54
WTI - WCS crude oil discount (dollars per barrel)	$	17.24	$	12.98	$	22.48	$	14.03
Group 3 2:1:1 crack spread (dollars per barrel)*	$	32.74	$	38.86	$	35.99	$	24.93
Group 3 5:3:2 crack spread (dollars per barrel)*	$	32.12	$	36.30	$	33.54	$	23.70
D6 ethanol RIN (dollars per RIN)	$	1.5263	$	1.3176	$	1.6063	$	1.1995
D4 biodiesel RIN (dollars per RIN)	$	1.5593	$	1.6443	$	1.6903	$	1.5175

*Group 3 refers to the oil refining and distribution system serving Midwest markets from the Gulf Coast through the Plains states.

Our Ag segment operations work together to facilitate production, purchase, sale and eventual use of grain and other agricultural commodities within the United States and internationally. Profitability in our Ag segment is largely driven by throughput and production volumes, as well as commodity price spreads; however, revenues and cost of goods sold ("COGS") are largely affected by market-driven commodity prices that are outside our control. The table below provides information about average market prices for agricultural commodities and our sales/throughput volumes that impacted our Ag segment for the three and nine months ended May 31, 2023 and 2022:


		Three Months Ended May 31,				Nine Months Ended May 31,
	Market Source*	2023		2022		2023		2022
Commodity prices
Corn (dollars per bushel)	Chicago Board of Trade	$	6.30	$	7.74	$	6.57	$	6.34
Soybeans (dollars per bushel)	Chicago Board of Trade	$	14.17	$	16.70	$	14.49	$	14.18
Wheat (dollars per bushel)	Chicago Board of Trade	$	6.35	$	10.46	$	7.47	$	8.74
Urea (dollars per ton)	Green Markets NOLA	$	351.04	$	745.00	$	448.50	$	688.00
Urea ammonium nitrate (dollars per ton)	Green Markets NOLA	$	268.92	$	615.04	$	396.93	$	539.52
Ethanol (dollars per gallon)	Chicago Platts	$	2.37	$	2.62	$	2.35	$	2.62

Volumes
Grain and oilseed (thousands of bushels)		544,908		575,827		1,629,545		1,674,894
North American grain and oilseed port throughput (thousands of bushels)		135,329		176,773		471,920		536,695
Wholesale crop nutrients (thousands of tons)		2,113		1,750		5,098		4,949
Ethanol (thousands of gallons)		236,035		234,679		717,438		687,280

*Market source information represents the average month-end price during the period.

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Results of Operations

Three Months Ended May 31, 2023 and 2022


	Three Months Ended May 31,
	2023		% of Revenues*		2022		% of Revenues*
	(Dollars in thousands)
Revenues	$	12,026,051	100.0	%	$	13,137,724	100.0	%
Cost of goods sold	11,351,711		94.4		12,493,467		95.1
Gross profit	674,340		5.6		644,257		4.9
Marketing, general and administrative expenses	273,238		2.3		243,136		1.9
Operating earnings	401,102		3.3		401,121		3.1

Interest expense	36,949		0.3		32,099		0.2
Other income	(31,027)		(0.3)		(6,636)		(0.1)
Equity income from investments	(162,940)		(1.4)		(263,079)		(2.0)
Income before income taxes	558,120		4.6		638,737		4.9
Income tax expense	10,777		0.1		62,492		0.5
Net income	547,343		4.6		576,245		4.4
Net loss attributable to noncontrolling interests	(156)		—		(329)		—
Net income attributable to CHS Inc.	$	547,499	4.6	%	$	576,574	4.4	%

*Amounts less than 0.1% are shown as zero percent. Percentage totals may differ due to rounding.

The charts below detail revenues, net of intersegment revenues, and IBIT by reportable segment for the three months ended May 31, 2023. Our Nitrogen Production reportable segment represents an equity method investment that records earnings and allocated expenses but not revenues.

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Income Before Income Taxes by Segment

Energy


	Three Months Ended May 31,				Change
	2023		2022		Dollars		Percent
	(Dollars in thousands)
Income before income taxes	$	198,995	$	163,241	$	35,754	21.9	%

The following waterfall analysis and commentary presents the changes in our Energy segment IBIT for the three months ended May 31, 2023, compared to the same period during the prior year:

*See commentary related to these changes in the marketing, general and administrative expenses, interest expense, other income and equity income from investments sections of this Results of Operations.

The change in Energy segment IBIT reflects the following:

•Increased margins resulting from hedging-related gains due to global market conditions and increased WCS crude oil discounts in our refined fuels business contributed to $101.0 million and $33.2 million increases of IBIT, respectively.

•Increased margins were partially offset by decreased refined fuels production volumes due to planned major maintenance at our Laurel, Montana, refinery, which reduced the sales mix of higher-margin produced refined fuels compared to the prior period and contributed to a $74.0 million decrease of IBIT, as well as lower crack spreads that contributed to a $54.3 million decrease of IBIT.

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	Three Months Ended May 31,				Change
	2023		2022		Dollars		Percent
	(Dollars in thousands)
Income before income taxes	$	233,515	$	273,688	$	(40,173)	(14.7	%)

The following waterfall analysis and commentary presents the changes in our Ag segment IBIT for the three months ended May 31, 2023, compared to the same period during the prior year:

The change in Ag segment IBIT reflects the following:

•Decreased margins for wholesale and retail agronomy products resulted from market-driven price decreases and contributed to a $99.9 million decrease of IBIT.

•The margin decrease in Ag segment IBIT was partially offset by increased margins in our grain and oilseed and oilseed processing product categories due to strong meal and oil demand resulting in improved crush margins.

•Higher volumes of wholesale and retail agronomy products contributed to a $31.1 million increase of IBIT due to increased demand during the third quarter of fiscal 2023 as prices declined due to global market conditions.

All Other Segments


	Three Months Ended May 31,				Change
	2023		2022		Dollars		Percent
	(Dollars in thousands)
Nitrogen Production IBIT*	$	56,263	$	178,212	$	(121,949)	(68.4	%)
Corporate and Other IBIT	$	69,347	$	23,596	$	45,751	193.9	%

*For additional information, see Note 5, Investments, of the notes to the unaudited condensed consolidated financial statements that are included in this Quarterly Report on Form 10-Q.

Our Nitrogen Production segment IBIT decreased from the prior year due to lower equity income attributed to decreased selling prices of urea and UAN due to global supply and demand factors. Corporate and Other IBIT increased primarily due to increased equity income from our Ventura Foods, LLC ("Ventura Foods"), investment as a result of more favorable market conditions for edible oils experienced during the third quarter of fiscal 2023 compared to the same period in the prior year, as well as increased interest income due to higher interest rates.

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Revenues by Segment

Energy


	Three Months Ended May 31,				Change
	2023		2022		Dollars		Percent
	(Dollars in thousands)
Revenues	$	2,264,087	$	2,775,942	$	(511,855)	(18.4	%)

The following waterfall analysis and commentary presents the changes in our Energy segment revenues for the three months ended May 31, 2023, compared to the same period during the prior year:

The change in Energy segment revenues reflects the following:

•Decreased selling prices resulting from global market conditions contributed to $545.5 million and $62.9 million decreases of revenues for refined fuels and propane, respectively.

•Higher refined fuels volumes contributed to a $91.5 million increase in revenues driven by higher demand.

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	Three Months Ended May 31,				Change
	2023		2022		Dollars		Percent
	(Dollars in thousands)
Revenues	$	9,743,976	$	10,352,369	$	(608,393)	(5.9	%)

The following waterfall analysis and commentary presents the changes in our Ag segment revenues for the three months ended May 31, 2023, compared to the same period during the prior year:

The change in Ag segment revenues reflects the following:

•Decreased selling prices across many of our Ag segment product categories during the third quarter of fiscal 2023, included:

◦$654.0 million decrease for wholesale and retail agronomy products driven by lower urea and UAN prices;

◦$64.1 million decrease for renewable fuels resulting from lower ethanol prices due to decreased demand; and

◦$36.7 million decrease for oilseed processing due to global market conditions.

•Increased volumes of wholesale and retail agronomy products contributed to a $374.6 million increase in revenues, which experienced increased demand during the third quarter of fiscal 2023 as prices declined due to global market conditions.

•The overall volume increase was mostly offset by decreased volumes within our grain and oilseed product category due to a combination of factors, including drought conditions in parts of our trade territory and lower global demand for U.S. grain.

All Other Segments


	Three Months Ended May 31,				Change
	2023		2022		Dollars		Percent
	(Dollars in thousands)
Corporate and Other revenues*	$	17,988	$	9,413	$	8,575	91.1	%

*Our Nitrogen Production reportable segment represents an equity method investment that records earnings and allocated expenses but not revenues.

Corporate and Other revenues increased during the three months ended May 31, 2023, compared to the same period during the prior year, primarily as a result of increased interest income due to higher interest rates.

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Cost of Goods Sold by Segment

Energy


	Three Months Ended May 31,				Change
	2023		2022		Dollars		Percent
	(Dollars in thousands)
Cost of goods sold	$	1,989,646	$	2,533,135	$	(543,489)	(21.5	%)

The following waterfall analysis and commentary presents the changes in our Energy segment COGS for the three months ended May 31, 2023, compared to the same period during the prior year:

The change in Energy segment COGS reflects the following:

•Global market conditions contributed to decreased costs for refined fuels and propane that drove $583.7 million and $52.3 million decreases in COGS, respectively.

•Higher volumes of refined fuels resulting from higher demand contributed to increased COGS of $83.2 million.

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	Three Months Ended May 31,				Change
	2023		2022		Dollars		Percent
	(Dollars in thousands)
Cost of goods sold	$	9,365,319	$	9,960,631	$	(595,312)	(6.0	%)

The following waterfall analysis and commentary presents the changes in our Ag segment COGS for the three months ended May 31, 2023, compared to the same period during the prior year:

The change in Ag segment COGS reflects the following:

•Lower costs across many of our Ag segment product categories during the third quarter of fiscal 2023, included:

◦$554.1 million decrease for wholesale and retail agronomy products driven by lower urea and UAN prices;

◦$65.4 million decrease for oilseed processing due to lower commodity prices; and

◦$53.5 million decrease for renewable fuels resulting from lower input costs.

•Increased volumes of wholesale and retail agronomy products contributed to a $343.5 million increase in COGS, which experienced increased demand during the third quarter of fiscal 2023 as prices declined due to global market conditions.

•The overall volume increase was mostly offset by volume decreases within our grain and oilseed product category primarily due to drought conditions in parts of our trade territory and lower global demand for U.S. grain.

All Other Segments


	Three Months Ended May 31,				Change
	2023		2022		Dollars		Percent
	(Dollars in thousands)
Nitrogen Production COGS	$	424	$	428	$	(4)	(0.9	%)
Corporate and Other COGS	$	(3,678)	$	(727)	$	(2,951)	(405.9	%)

There were no significant changes to COGS in our Nitrogen Production segment or Corporate and Other during the three months ended May 31, 2023, compared to the same period during the prior year.

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Marketing, General and Administrative Expenses


	Three Months Ended May 31,				Change
	2023		2022		Dollars		Percent
	(Dollars in thousands)
Marketing, general and administrative expenses	$	273,238	$	243,136	$	30,102	12.4	%

Marketing, general and administrative expenses increased during the three months ended May 31, 2023, primarily due to higher salary and benefit expenses, as well as costs related to certain legal matters.

Interest Expense


	Three Months Ended May 31,				Change
	2023		2022		Dollars		Percent
	(Dollars in thousands)
Interest expense	$	36,949	$	32,099	$	4,850	15.1	%

Interest expense increased during the three months ended May 31, 2023, as a result of higher interest rates compared to the same period in the prior year, which was partially offset by decreased notes payable balances.

Other Income


	Three Months Ended May 31,				Change
	2023		2022		Dollars		Percent
	(Dollars in thousands)
Other income	$	31,027	$	6,636	$	24,391	367.6	%

Other income increased during the three months ended May 31, 2023, as a result of increased interest income due to higher interest rates and a larger cash balance earning interest.

Equity Income from Investments


	Three Months Ended May 31,				Change
	2023		2022		Dollars		Percent
	(Dollars in thousands)
Equity income from investments*	$	162,940	$	263,079	$	(100,139)	(38.1	%)

*For additional information, see Note 5, Investments, of the notes to the condensed consolidated financial statements that are included in this Quarterly Report on Form 10-Q.

Equity income from investments decreased during the three months ended May 31, 2023, compared to the same period during the prior year, primarily due to lower income associated with our equity method investment in CF Nitrogen, partially offset by higher income associated with our equity method investment in Ventura Foods. Equity income decreased for CF Nitrogen as a result of lower prices of urea and UAN due to global supply and demand factors and increased for Ventura Foods as a result of more favorable market conditions for edible oils.

Income Tax Expense


	Three Months Ended May 31,				Change
	2023		2022		Dollars		Percent
	(Dollars in thousands)
Income tax expense	$	10,777	$	62,492	$	(51,715)	(82.8	%)

Decreased income tax expense during the three months ended May 31, 2023, resulted from decreased nonpatronage earnings and additional Domestic Production Activities Deduction ("DPAD") benefit during the period. Effective tax rates for the three months ended May 31, 2023 and 2022, were 1.9% and 9.8%, respectively. Federal and state statutory rates of 24.7% and 24.4% were applied to nonpatronage business activity for the three months ended May 31, 2023 and 2022, respectively. Income taxes and effective tax rates vary each year based on profitability, nonpatronage business activity and current equity management assumptions.

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Results of Operations

Nine Months Ended May 31, 2023 and 2022


	Nine Months Ended May 31,
	2023		% of Revenues*		2022		% of Revenues*
	(Dollars in thousands)
Revenues	$	36,098,738	100.0	%	$	34,351,069	100.0	%
Cost of goods sold	34,160,996		94.6		32,917,906		95.8
Gross profit	1,937,742		5.4		1,433,163		4.2
Marketing, general and administrative expenses	749,829		2.1		692,395		2.0
Operating earnings	1,187,913		3.3		740,768		2.2

Interest expense	106,166		0.3		80,705		0.2
Other income	(83,629)		(0.2)		(31,817)		(0.1)
Equity income from investments	(523,236)		(1.4)		(644,347)		(1.9)
Income before income taxes	1,688,612		4.7		1,336,227		3.9
Income tax expense	66,305		0.2		89,143		0.3
Net income	1,622,307		4.5		1,247,084		3.6
Net loss attributable to noncontrolling interests	(111)		—		(451)		—
Net income attributable to CHS Inc.	$	1,622,418	4.5	%	$	1,247,535	3.6	%

*Amounts less than 0.1% are shown as zero percent. Percentage totals may differ due to rounding.

The charts below detail revenues, net of intersegment revenues, and IBIT by reportable segment for the nine months ended May 31, 2023. Our Nitrogen Production reportable segment represents an equity method investment that records earnings and allocated expenses but not revenues.

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Income Before Income Taxes by Segment

Energy


	Nine Months Ended May 31,				Change
	2023		2022		Dollars		Percent
	(Dollars in thousands)
Income before income taxes	$	860,411	$	243,262	$	617,149	253.7	%

The following waterfall analysis and commentary presents the changes in our Energy segment IBIT for the nine months ended May 31, 2023, compared to the same period during the prior year:

The change in Energy segment IBIT reflects the following:

•Higher crack spreads and increased WCS crude oil discounts resulted from higher global demand and improved market conditions in our refined fuels business, which contributed to a $742.3 million increase of IBIT.

•Higher margins for refined fuels and propane attributable to hedging-related impacts due to global market conditions affecting the price of these products contributed to $108.0 million and $19.6 million increases of IBIT, respectively.

•The increased IBIT was partially offset by the impact of decreased refined fuels production volumes due to planned and unplanned major maintenance at our Laurel and McPherson refineries that reduced the sales mix of higher-margin produced refined fuels compared to the prior year and contributed to a $170.0 million decrease of IBIT.

•Increased costs in our refined fuels business also partially offset the increased IBIT, the most significant of which included $59.0 million related to higher RIN prices due to market conditions and $33.0 million of higher repair and maintenance expenses in the current year.

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	Nine Months Ended May 31,				Change
	2023		2022		Dollars		Percent
	(Dollars in thousands)
Income before income taxes	$	439,248	$	615,294	$	(176,046)	(28.6	%)

The following waterfall analysis and commentary presents the changes in our Ag segment IBIT for the nine months ended May 31, 2023, compared to the same period during the prior year:

The change in Ag segment IBIT reflects the following:

•Decreased margins of $238.7 million were realized primarily for wholesale and retail agronomy products, which experienced market-driven price decreases during the period.

•Decreased margins of $47.6 million for renewable fuels resulted from decreased ethanol prices.

•Overall decreased Ag margins were partially offset by increased margins of $63.5 million and $40.8 million in our oilseed processing and grain and oilseed product categories due to strong meal and oil crush margins and favorable global market conditions, respectively.

All Other Segments


	Nine Months Ended May 31,				Change
	2023		2022		Dollars		Percent
	(Dollars in thousands)
Nitrogen Production IBIT*	$	234,869	$	429,052	$	(194,183)	(45.3	%)
Corporate and Other IBIT	$	154,084	$	48,619	$	105,465	216.9	%

*For additional information, see Note 5, Investments, of the notes to the unaudited condensed consolidated financial statements that are included in this Quarterly Report on Form 10-Q.

Our Nitrogen Production segment IBIT decreased from the prior year as a result of lower equity income attributed to decreased selling prices of urea and UAN due to global supply and demand factors. Corporate and Other IBIT increased primarily due to increased equity income from our Ventura Foods investment as a result of more favorable market conditions for edible oils experienced during the first nine months of fiscal 2023 compared to the same period in the prior year, as well as increased interest income due to higher interest rates.

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Revenues by Segment

Energy


	Nine Months Ended May 31,				Change
	2023		2022		Dollars		Percent
	(Dollars in thousands)
Revenues	$	7,552,294	$	7,107,928	$	444,366	6.3	%

The following waterfall analysis and commentary presents the changes in our Energy segment revenues for the nine months ended May 31, 2023, compared to the same period during the prior year:

The change in Energy segment revenues reflects the following:

•Global market conditions contributed to increased selling prices for refined fuels that contributed to a $390.2 million increase in revenues, which was partially offset by lower selling prices for propane, which resulted in a $135.0 million decrease in revenues.

•Higher refined fuels volumes driven by higher demand contributed to a $151.6 million increase in revenues.

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	Nine Months Ended May 31,				Change
	2023		2022		Dollars		Percent
	(Dollars in thousands)
Revenues	$	28,497,690	$	27,217,559	$	1,280,131	4.7	%

The following waterfall analysis and commentary presents the changes in our Ag segment revenues for the nine months ended May 31, 2023, compared to the same period during the prior year:

The change in Ag segment revenues reflects the following:

•Higher revenues were primarily attributed to market-driven price increases for grain and oilseed, which resulted from increased global demand during the first nine months of fiscal 2023 and contributed to a $2.5 billion increase of revenues.

•The overall increase of revenues was partially offset by a $1.1 billion decrease in revenues for wholesale and retail agronomy products driven by lower urea and UAN prices.

•Volumes decreased within our grain and oilseed product category due to a combination of factors, including lower crop yields resulting from drought conditions experienced in portions of our trade territory in North America, and contributed to a $464.0 million decrease in revenues.

•The overall volume decrease was partially offset by volume increases in most of our product categories, including a $119.9 million increase in revenues for oilseed processing driven by strong meal and oil demand, a $79.8 million increase in revenues for renewable fuels due to higher demand and a $47.5 million increase in revenues for retail and wholesale agronomy products, which experienced increased demand during the third quarter of fiscal 2023 as prices declined due to global market conditions.

All Other Segments


	Nine Months Ended May 31,				Change
	2023		2022		Dollars		Percent
	(Dollars in thousands)
Corporate and Other revenues*	$	48,754	$	25,582	$	23,172	90.6	%

*Our Nitrogen Production reportable segment represents an equity method investment that records earnings and allocated expenses but not revenues.

Corporate and Other revenues increased during the nine months ended May 31, 2023, compared to the same period during the prior year, primarily as a result of increased interest income due to higher interest rates.

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Cost of Goods Sold by Segment

Energy


	Nine Months Ended May 31,				Change
	2023		2022		Dollars		Percent
	(Dollars in thousands)
Cost of goods sold	$	6,475,627	$	6,665,612	$	(189,985)	(2.9	%)

The following waterfall analysis and commentary presents the changes in our Energy segment COGS for the nine months ended May 31, 2023, compared to the same period during the prior year:

The change in Energy segment COGS reflects the following:

•Global market conditions, including hedging-related impacts for refined fuels and propane, contributed to $215.2 million and $154.2 million decreases in COGS, respectively.

•Higher volumes of refined fuels due to higher demand contributed to increased COGS of $141.3 million.

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	Nine Months Ended May 31,				Change
	2023		2022		Dollars		Percent
	(Dollars in thousands)
Cost of goods sold	$	27,689,354	$	26,256,104	$	1,433,250	5.5	%

The following waterfall analysis and commentary presents the changes in our Ag segment COGS for the nine months ended May 31, 2023, compared to the same period during the prior year:

The change in Ag segment COGS reflects the following:

•Higher costs were primarily attributed to market-driven price increases for grain and oilseed, which resulted from increased global demand during the first nine months of fiscal 2023 and contributed to a $2.5 billion increase of COGS.

•The overall increase of costs was partially offset by a $819.2 million decrease for wholesale and retail agronomy products driven by lower urea and UAN prices.

•Volumes decreased within our grain and oilseed product category due to a combination of factors, including lower crop yields resulting from drought conditions experienced in portions of our trade territory in North America and contributed to a $458.3 million decrease in COGS.

•The overall volume decrease was partially offset by volume increases in most of our product categories, including a $105.6 million increase in COGS for oilseed processing driven by strong meal and oil demand, a $77.1 million increase in COGS for renewable fuels due to higher demand and a $49.6 million increase in COGS for retail and wholesale agronomy products, which experienced increased demand during the third quarter of fiscal 2023 as prices declined due to global market conditions.

All Other Segments


	Nine Months Ended May 31,				Change
	2023		2022		Dollars		Percent
	(Dollars in thousands)
Nitrogen Production COGS	$	1,276	$	1,256	$	20	1.6	%
Corporate and Other COGS	$	(5,261)	$	(5,066)	$	(195)	(3.8	%)

There were no significant changes to COGS in our Nitrogen Production segment or Corporate and Other during the nine months ended May 31, 2023, compared to the same period during the prior year.

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Marketing, General and Administrative Expenses


	Nine Months Ended May 31,				Change
	2023		2022		Dollars		Percent
	(Dollars in thousands)
Marketing, general and administrative expenses	$	749,829	$	692,395	$	57,434	8.3	%

Marketing, general and administrative expenses increased during the nine months ended May 31, 2023, primarily due to higher salary and benefit expenses, as well as costs related to certain legal matters and higher repair and maintenance expenses for our facilities and information technology platforms.

Interest Expense


	Nine Months Ended May 31,				Change
	2023		2022		Dollars		Percent
	(Dollars in thousands)
Interest expense	$	106,166	$	80,705	$	25,461	31.5	%

Interest expense increased during the nine months ended May 31, 2023, as a result of higher interest rates compared to the same period in the prior year, which was partially offset by decreased notes payable balances.

Other Income


	Nine Months Ended May 31,				Change
	2023		2022		Dollars		Percent
	(Dollars in thousands)
Other income	$	83,629	$	31,817	$	51,812	162.8	%

Other income increased during the nine months ended May 31, 2023, primarily as a result of increased interest income due to higher interest rates and a larger cash balance earning interest.

Equity Income from Investments


	Nine Months Ended May 31,				Change
	2023		2022		Dollars		Percent
	(Dollars in thousands)
Equity income from investments*	$	523,236	$	644,347	$	(121,111)	(18.8	%)

*For additional information, see Note 5, Investments, of the notes to the condensed consolidated financial statements that are included in this Quarterly Report on Form 10-Q.

Equity income from investments decreased during the nine months ended May 31, 2023, compared to the same period during the prior year, primarily due to lower income associated with our equity method investment in CF Nitrogen, which was partially offset by higher income associated with our equity method investment in Ventura Foods. Equity income decreased for CF Nitrogen as a result of lower prices of urea and UAN due to global supply and demand factors and increased for Ventura Foods as a result of more favorable market conditions for edible oils.

Income Tax Expense


	Nine Months Ended May 31,				Change
	2023		2022		Dollars		Percent
	(Dollars in thousands)
Income tax expense	$	66,305	$	89,143	$	(22,838)	(25.6	%)

Decreased income tax expense during the nine months ended May 31, 2023, resulted from decreased nonpatronage earnings and additional DPAD benefit during the period. Effective tax rates for the nine months ended May 31, 2023 and 2022, were 3.9% and 6.7%, respectively. Federal and state statutory rates of 24.7% and 24.4% were applied to nonpatronage business activity for the nine months ended May 31, 2023 and 2022, respectively. Income taxes and effective tax rates vary each year based on profitability, nonpatronage business activity and current equity management assumptions.

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Liquidity and Capital Resources

In assessing our financial condition, we consider factors such as working capital, internal benchmarking related to our applicable covenants and other financial information. The following financial information is used when assessing our liquidity and capital resources to meet our capital allocation priorities, which include maintaining the safety and compliance of our operations, paying interest on debt and preferred stock dividends, returning cash to our member-owners in the form of cash patronage and equity redemptions, and taking advantage of strategic opportunities that benefit our member-owners:


	May 31, 2023		August 31, 2022
	(Dollars in thousands)
Cash and cash equivalents	$	997,323	$	793,957
Notes payable	605,955		606,719
Long-term debt including current maturities	1,952,256		1,958,814
Total equities	10,083,378		9,461,266
Working capital	2,765,321		2,425,878
Current ratio*	1.4		1.3

*Current ratio is defined as current assets divided by current liabilities.

Summary of Our Major Sources of Cash and Cash Equivalents

We fund our current operations primarily through our cash flows from operations and with short-term borrowings through our committed and uncommitted revolving credit facilities, including our securitization facility with certain unaffiliated financial institutions and our repurchase facilities relating thereto. On April 21, 2023, we amended and restated our five-year unsecured revolving credit facility, which provides a committed amount of $2.8 billion. That facility now expires on April 21, 2028. We fund certain of our long-term capital needs, primarily those related to acquisitions of property, plant and equipment, with cash flows from operations and by issuing long-term debt. On January 24, 2023, we entered into a Note Purchase Agreement to borrow $150.0 million of debt in the form of a note. The note matures on January 24, 2030, and interest accrues at a rate of 5.68%, subject to certain adjustments depending on our ratio of consolidated funded debt to consolidated cash flow, and the proceeds were used to retire maturing debt. See Note 6, Notes Payable and Long-Term Debt, of the notes to the unaudited condensed consolidated financial statements that are included in this Quarterly Report on Form 10-Q for additional information on our short-term borrowings and long-term debt. We will continue to consider opportunities to further diversify and enhance our sources and amounts of liquidity.

Summary of Our Major Uses of Cash and Cash Equivalents

The following is a summary of our primary cash requirements for fiscal 2023:

•Capital expenditures. We expect total capital expenditures for fiscal 2023 to be approximately $730.2 million compared to capital expenditures of $354.4 million in fiscal 2022. Increased capital expenditures for fiscal 2023 are for investments in our infrastructure to meet the evolving needs of our owners and customers, enhance value for the cooperative system and propel sustainable growth. During the nine months ended May 31, 2023, we acquired $374.2 million of property, plant and equipment.

•Major maintenance. We expect total major maintenance for fiscal 2023 to be approximately $238.3 million compared to major maintenance of $24.8 million in fiscal 2022. Increased major maintenance for fiscal 2023 is for a turnaround at our Laurel refinery. During the nine months ended May 31, 2023, we paid $184.4 million in major maintenance.

•Debt and interest. We expect to repay approximately $291.7 million of long-term debt and finance lease obligations and incur interest payments related to long-term debt of approximately $87.5 million during fiscal 2023. During the nine months ended May 31, 2023, we repaid $159.4 million of scheduled long-term debt maturities and finance lease obligations.

•Preferred stock dividends. We had approximately $2.3 billion of preferred stock outstanding as of May 31, 2023. We expect to pay dividends on our preferred stock of approximately $168.7 million during fiscal 2023. Dividends paid on our preferred stock during the nine months ended May 31, 2023, were $126.5 million.

•Patronage. Our Board of Directors has authorized approximately $500.0 million of our fiscal 2022 patronage-sourced earnings to be paid to our member-owners during fiscal 2023. During the nine months ended May 31, 2023, we distributed $502.9 million of cash patronage related to the year ended August 31, 2022.

•Equity redemptions. Our Board of Directors has authorized equity redemptions of up to $500.0 million to be distributed in fiscal 2023 in the form of redemptions of qualified and nonqualified equity owned by individual

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producer-members and association members. During the nine months ended May 31, 2023, we redeemed $480.4 million of member equity.

We believe cash generated by operating and investing activities, along with available borrowing capacity under our credit facilities, will be sufficient to support our short- and long-term operations. Our notes payable and long-term debt are subject to various restrictive requirements for maintenance of minimum consolidated net worth and other financial ratios. We were in compliance with all debt covenants and restrictions as of May 31, 2023. Based on our current fiscal 2023 projections, we expect continued covenant compliance.

Working Capital

We measure working capital as current assets less current liabilities as each amount appears on our condensed consolidated balance sheets. We believe this information is meaningful to investors as a measure of operational efficiency and short-term financial health. Working capital is not defined under U.S. generally accepted accounting principles ("U.S. GAAP") and may not be computed the same as similarly titled measures used by other companies. Working capital as of May 31, 2023, and August 31, 2022, was as follows:


	May 31, 2023		August 31, 2022		Change
	(Dollars in thousands)
Current assets	$	9,386,291	$	9,377,847	$	8,444
Less current liabilities	6,620,970		6,951,969		(330,999)
Working capital	$	2,765,321	$	2,425,878	$	339,443

As of May 31, 2023, working capital increased by $339.4 million compared with August 31, 2022. Current asset balance changes increased working capital by $8.4 million, primarily driven by increases in receivables and cash and cash equivalents, which were driven by seasonality in our business. Current liability balance changes increased working capital by $331.0 million, primarily due to a decrease in the current portion of long-term debt following its maturity during fiscal 2023 and a decrease in customer advances, which was driven by seasonality in our business.

We finance our working capital needs through committed and uncommitted lines of credit with domestic and international banks. We believe our current cash balances and available capacity on our committed and uncommitted lines of credit will provide adequate liquidity to meet our working capital needs.

Contractual Obligations

For information regarding our estimated contractual obligations, see the MD&A discussion included in Item 7 of Part II of our Annual Report on Form 10-K for the year ended August 31, 2022. No material changes occurred during the nine months ended May 31, 2023.

Cash Flows

The following table presents summarized cash flow data for the nine months ended May 31, 2023 and 2022:


	Nine Months Ended May 31,
	2023		2022		Change
	(Dollars in thousands)
Net cash provided by (used in) operating activities	$	1,969,725	$	(7,138)	$	1,976,863
Net cash used in investing activities	(651,088)		(339,888)		(311,200)
Net cash (used in) provided by financing activities	(1,147,164)		355,946		(1,503,110)
Effect of exchange rate changes on cash and cash equivalents	(16)		(11,311)		11,295
Increase (decrease) in cash and cash equivalents and restricted cash	$	171,457	$	(2,391)	$	173,848

Cash flows from operating activities can fluctuate significantly from period to period as a result of various factors, including seasonality and timing differences associated with purchases, sales, taxes and other business decisions. The $2.0 billion decrease in cash used in operating activities primarily reflects decreases in inventories and receivables, which resulted from a combination of reduced prices and volumes, as well as increased net income during the first nine months of fiscal 2023 compared to the same period during fiscal 2022.

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The $311.2 million increase of cash used in investing activities reflects larger expenditures for property, plant and equipment and major maintenance during the first nine months of fiscal 2023, compared to the same period during fiscal 2022.

The $1.5 billion decrease in cash provided by financing activities primarily reflects decreased net cash inflows associated with our notes payable due to lower short-term funding needs resulting from strong cash earnings and increased cash outflows for patronage paid and equity redemptions during the first nine months of fiscal 2023 compared to the same period during fiscal 2022.

Preferred Stock

The following is a summary of our outstanding preferred stock as of May 31, 2023, all shares of which are listed on the Global Select Market of The Nasdaq Stock Market LLC:


	Nasdaq Symbol	Issuance Date	Shares Outstanding	Redemption Value		Net Proceeds (a)		Dividend Rate (b) (c)		Dividend Payment Frequency	Redeemable Beginning (d)
				(Dollars in millions)
8% Cumulative Redeemable	CHSCP	(e)	12,272,003	$	306.8	$	311.2	8.00	%	Quarterly	7/18/2023
Class B Cumulative Redeemable, Series 1	CHSCO	(f)	21,459,066	$	536.5	$	569.3	7.875	%	Quarterly	9/26/2023
Class B Reset Rate Cumulative Redeemable, Series 2	CHSCN	3/11/2014	16,800,000	$	420.0	$	406.2	7.10	%	Quarterly	3/31/2024
Class B Reset Rate Cumulative Redeemable, Series 3	CHSCM	9/15/2014	19,700,000	$	492.5	$	476.7	6.75	%	Quarterly	9/30/2024
Class B Cumulative Redeemable, Series 4	CHSCL	1/21/2015	20,700,000	$	517.5	$	501.0	7.50	%	Quarterly	1/21/2025

(a) Includes patron equities redeemed with preferred stock.

(b) Class B Reset Rate Cumulative Redeemable Preferred Stock, Series 2 accumulates dividends at a rate of 7.10% per year until March 31, 2024, and then at a rate equal to the three-month benchmark interest rate plus 4.298%, not to exceed 8.00% per annum, subsequent to March 31, 2024.

(c) Class B Reset Rate Cumulative Redeemable Preferred Stock, Series 3 accumulates dividends at a rate of 6.75% per year until September 30, 2024, and then at a rate equal to the three-month benchmark interest rate plus 4.155%, not to exceed 8.00% per annum, subsequent to September 30, 2024.

(d) All series of preferred stock are redeemable for cash at our option, in whole or in part, at a per share price equal to the per share liquidation preference of $25.00 per share, plus all dividends accumulated and unpaid on that share to and including the date of redemption, beginning on the dates set forth in this column.

(e) The 8% Cumulative Redeemable Preferred Stock was issued at various times from 2002 through 2010.

(f) Shares of Class B Cumulative Redeemable Preferred Stock, Series 1 were issued on September 26, 2013, August 25, 2014, March 31, 2016, and March 30, 2017.

Critical Accounting Policies

Our critical accounting policies as presented in the MD&A in our Annual Report on Form 10-K for the year ended August 31, 2022, have not materially changed during the nine months ended May 31, 2023.

Recent Accounting Pronouncements

No recent accounting pronouncements are expected to have a material impact on our condensed consolidated financial statements.

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We did not experience material changes in market risk exposures for the period ended May 31, 2023, that would affect the quantitative and qualitative disclosures presented in our Annual Report on Form 10-K for the year ended August 31, 2022.

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ITEM 4. CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including our chief executive officer and chief financial officer, we evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934) as of May 31, 2023. Based on that evaluation, our chief executive officer and chief financial officer concluded that, as of that date, our disclosure controls and procedures were effective.

Changes in Internal Control Over Financial Reporting

There have been no changes in internal control over financial reporting during the quarter ended May 31, 2023, that have materially affected or are reasonably likely to materially affect our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

For a description of our material pending legal proceedings, please see Note 13, Commitments and Contingencies, of the notes to the unaudited condensed consolidated financial statements that are included in this Quarterly Report on Form 10-Q.

ITEM 1A. RISK FACTORS

There have been no material changes from the risk factors disclosed in Item 1A of our Annual Report on Form 10-K for the year ended August 31, 2022, or disclosed in Item 1A of our Quarterly Report on Form 10-Q for the quarter ended February 28, 2023.

ITEM 5. OTHER INFORMATION

Effective as of September 1, 2023, the CHS Inc. Executive Long-Term Incentive Plan was amended and restated (the "ELTI Plan") to update the ELTI Plan eligibility to clarify that the employees in the positions of Vice President, Senior Vice President, Executive Vice President, President and Chief Executive Officer are eligible to participate in the ELTI Plan. The ELTI Plan was also updated to clarify that the Chief Executive Officer, Chief Financial Officer and Chief Human Resource Officer administer the ELTI Plan and that as administrators they may jointly approve amendments to the ELTI Plan subject to the CHS Board of Directors approving any material amendments to the ELTI Plan. The ELTI Plan was also updated to make certain other technical, administrative and non-substantive changes.

Effective as of September 1, 2023, the CHS Inc. Annual Variable Pay Plan was amended and restated (the "AVP Plan") to update the AVP Plan eligibility provisions to outline the criteria that employees must meet in order to be eligible to participate in the AVP Plan and provides examples of the types of job roles or job start dates that are not eligible for participation in the AVP Plan. The AVP Plan was updated to clarify the proration of awards under the AVP plan under certain promotions and other status changes. The AVP Plan was also updated to clarify that the Chief Executive Officer, Chief Financial Officer and Chief Human Resource Officer administer the AVP Plan and that as administrators they may jointly approve amendments to the AVP Plan subject to the CHS Board of Directors approving any material amendments to the AVP Plan. The AVP Plan makes it clear that the Chief Executive Officer and the Chief Financial Officer must approve any modification of the business unit level performance metrics or performance goals. The AVP Plan was also updated to made certain other technical, administrative and non-substantive changes.

The foregoing descriptions of the ELTI Plan as amended and restated and the AVP Plan as amended and restated do not purport to be complete and are qualified in their entirety by reference to the full text of the ELTI Plan and the AVP Plan, copies of which are attached hereto as Exhibits 10.6 and 10.7, respectively, and which are incorporated herein by reference.

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ITEM 6. EXHIBITS


Exhibit			Description
10.1			Second Amended and Restated Limited Liability Company Agreement, dated as of April 1, 2023, between CHS Inc. and Cargill, Incorporated.
10.2			2023 Third Amended and Restated Credit Agreement (5-Year Revolving Loan), dated as of April 21, 2023, by and between CHS Inc., CoBank, ACB, for its own benefit as a lender and as the administrative agent and the bid agent for the benefit of the present and future lenders, Sumitomo Mitsui Banking Corporation, for its own benefit as a lender and as the syndication agent, and the other lenders thereto. (Incorporated by reference to our Current Report on Form 8-K, filed April 25, 2023).
10.3			Amendment No. 4 to 2015 Credit Agreement (10-Year Term Loan), dated as of April 21, 2023, by and between CHS Inc., CoBank, ACB, for its own benefit as a lender and as the administrative agent for the benefit of the present and future lenders, and the other lenders party thereto. (Incorporated by reference to our Current Report on Form 8-K, filed April 25, 2023).
10.4			Twelfth Amendment and Restated Receivables Purchase Agreement, dated as of July 11, 2023, by and among Cofina Funding, LLC, as seller, CHS Inc., as servicer and as originator, CHS Capital, LLC, as an originator, each of the conduit purchasers, committed purchasers and purchaser agents set forth on the signature pages thereto and MUFG Bank Ltd. f/k/a The Bank of Tokyo-Mitsubishi UFJ. Ltd., New York Branch, as administrative agent.
10.5			Master Framework Agreement, dated as of July 11, 2023 (the "Framework Agreement), by and among Coöperatieve Rabobank, U.A., New York Branch, a Dutch coöperatieve acting through its New York Branch, as buyer, CHS Inc. and CHS Capital, LLC, as sellers, and CHS Inc., as agent for the sellers.
10.6			CHS Inc. Executive Long-Term Incentive Plan (2023 Restatement).
10.7			CHS Inc. Annual Variable Pay Plan (2023 Restatement).
31.1			Certification of the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2			Certification of the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1			Certification of the Chief Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2			Certification of the Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS			XBRL Instance Document (The Instance Document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document).
101.SCH			XBRL Taxonomy Extension Schema Document.
101.CAL			XBRL Taxonomy Extension Calculation Linkbase Document.
101.DEF			XBRL Taxonomy Extension Definition Linkbase Document.
101.LAB			XBRL Taxonomy Extension Labels Linkbase Document.
101.PRE			XBRL Taxonomy Extension Presentation Linkbase Document.
104			Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

CHS Inc.

(Registrant)

Date:

July 13, 2023

By:

/s/ Olivia Nelligan

Olivia Nelligan

Executive Vice President, Chief Financial Officer and Chief Strategy Officer

Document

EX10.1

SECOND AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT

BETWEEN

CARGILL, INCORPORATED

AND

CHS INC.

THIS SECOND AMENDED AND RESTATED LIMITED LIABILITY COMPANY AGREEMENT (“Agreement”) is made and entered into on this 1st day of April, 2023 (the “Effective Date”) by and between CHS Inc., a corporation organized and existing under the laws of Minnesota (“CHS”) and Cargill, Incorporated, a corporation organized and existing under the laws of Delaware (“Cargill”), each hereafter individually referred to as a “Member” and collectively referred to as “Members”.

WHEREAS, CHS and Cargill previously entered into a Limited Liability Company Agreement dated August 26, 2002, as amended from time to time, for the purpose of engaging in the buying, selling, storing and handling of certain feedgrains and oilseeds for export from the Pacific Northwest, United States primarily through Cargill’s leased facility at Tacoma, Washington (“Tacoma Facility”) and such other business activities as were related thereto (the “Initial Agreement”); and

WHEREAS, CHS and Cargill entered into an Amended and Restated Limited Liability Company Agreement dated as of February 1, 2012 to expand the scope of the Initial Agreement (the “Amended Agreement”); and

WHEREAS, CHS and Cargill desire to amend and restate the Amended Agreement as provided herein to further expand the purpose and scope of the Company’s operations to include buying, selling, storing and handling of certain feed grains and oilseeds tributary to the Texas Gulf Coast area, primarily through the Houston Facility (defined below), and such other business activities as are related thereto; and

WHEREAS, in accordance with the Act, each Member of the Company and the Company desire to enter into this Agreement to set forth the rights, powers and interests of the Members with respect to the Company and to provide for the management of the business and operations of the Company; and

NOW, THEREFORE, in consideration of the promises and the mutual agreements contained herein, the Members hereto agree as follows:

ARTICLE I

DEFINITIONS

1.1 Terms Defined Herein. As used herein, the following terms shall have the following meanings, unless the context otherwise specifies:

“Accountant” shall have the meaning set forth in Section 5.5(r).

“Act” means the Delaware Limited Liability Company Act, 6 Del. C. Section 8-101, et seq., as amended from time to time.

“Additional Contribution” shall have the meaning set forth in Section 3.1.1.

“Adjusted Capital Account Deficit” means, with respect to any Member, the deficit balance, if any, in such Member’s Capital Account as of the end of the relevant Fiscal Year, after giving effect to the following adjustments: (i) increased for any amounts such Member is unconditionally obligated to restore under Treasury Regulations 1.704-1(b)(2)(ii.)(c), and the amount of such Member’s share of Company

Minimum Gain and Member Minimum Gain after taking into account any changes during such year in accordance with Treasury Regulations 1.704-2(g)(1) and (i.)(5); and (ii) reduced by the items described in Treasury Regulation §1.704-1(b)(2)(ii)(d) (4), (5) and (6).

“Affiliate” means, with respect to any Member, any Person that directly or indirectly controls, is controlled by or is under common control with that Member. As used in this definition, the term “control” means the possession of the power to direct or cause the direction of the management and policies of a Person or through the direct or indirect ownership of over 50% of the outstanding capital stock or other equity interest having ordinary voting power.

“Available Cash” means that portion of the aggregate amount of cash on hand or in bank, money market or similar accounts of the Company at any given time derived from any source and which the Board of Managers determine is available for distribution after taking in account amounts required or appropriate to maintain a reasonable amount of working capital and reserves for outstanding obligations and anticipated future expenditures of the Company.

“Bankruptcy” with respect to any Person, means the entry of an order for relief against such Person under the Federal Bankruptcy Code.

“Board of Managers” shall have the meaning set forth in Section 5.1.

“Business” means the Company’s business conducted in accordance with the Business Purpose.

“Business Plan” has the meaning set forth in Section 2.7.

“Business Purpose” means to engage in the business of buying, trading, selling, handling and transporting for export and exporting Feedgrains, Oilseeds, Wheat and By-Products from: (a) the Pacific Northwest, United States including but not limited to through the Tacoma Facility, the Kalama Facility and the Irving Facility, to Pacific Basin destinations, and (b) the Texas Gulf Coast, including, but not limited to, through the Houston Facility, and (c) engaging in such other activities and business as may be incidental or related thereto or necessary or desirable in furtherance of such purpose. The Company shall establish or cause to be established such business organizations and shall own or lease, directly or indirectly, such assets as the Company determines are appropriate to achieve the purpose set forth herein.

“ By-Products” means soybean meal, DDGs, Beet Pulp Pellets, loaded in bulk, and other such by-products as agreed by the Members.

“Capital Account” means the separate account established and maintained for each Member by the Company pursuant to Section 3.2.

“Cash for Distribution” has the meaning set forth in Section 8.8.

“Cash Needs” has the meaning set forth in Section 8.2.1.

“Cargill Change of Control” means the occurrence of either of the following events: (i) any person or group (within the meaning of Sections 13(d)(3) and 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), who are not beneficial owners of voting securities of Cargill as of the Effective Date, at any time becomes the beneficial owner, directly or indirectly, of 50% or more of the combined voting power of the voting securities of Cargill, other than (x) as a result of employees of Cargill acquiring beneficial ownership of such securities of Cargill in excess of the foregoing percentage through an employee stock ownership plan or (y) any person controlled, directly or indirectly, by Cargill; or (ii) Continuing Directors cease to constitute a majority of the members of Cargill board of directors.

“CHS Change of Control” means the occurrence of either of the following events: (i) any person or group (within the meaning of Sections 13(d)(3) and 14(d)(2) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), who are not beneficial owners of voting securities of CHS as of the Effective Date, at any time becomes the beneficial owner, directly or indirectly, of 50% or more of the combined voting power of the voting securities of CHS, other than (x) as a result of employees of CHS acquiring beneficial ownership of such securities of CHS in excess of the foregoing percentage through

an employee stock ownership plan or (y) any person controlled, directly or indirectly, by CHS; or (ii) Continuing Directors cease to constitute a majority of the members of CHS’s board of directors.

“Code” means the Internal Revenue Code of 1986, as amended from time to time, or any successor Internal Revenue Code or superseding U.S. federal revenue laws.

“Company” means TEMCO, LLC, a Delaware limited liability company.

“Company Minimum Gain” shall have the same meaning as partnership minimum gain set forth in Treasury Regulations §§ 1.704-2(b)(2) and 1.704-2(d).

“Confidential Information” has the meaning set forth in Section 11.1.

“Contributing Member” has the meaning set forth in Section 3.1.4.

“Credits” means all credits allowed by the Code with respect to activities of the Company or the Property.

“Deadlock” has the meaning set forth in Section 5.6.

“Delinquent Member” has the meaning set forth in Section 3.1.4.

“Depreciation” means, for each fiscal year or other period, an amount equal to the depreciation, amortization or other cost recovery deduction allowable with respect to an asset for such year or other period; provided, however, that (a) if the Gross Asset Value of an asset differs from its adjusted basis for federal income tax purposes and such difference is being eliminated by use of the “remedial allocation method” defined by Treasury Regulations §1.704-3(d), Depreciation for such Fiscal Year shall be the amount of basis recovered for such fiscal year under the rules prescribed by Treasury Regulations §1.704-3(d)(2), and (b) in any other case in which the Gross Asset Value of an asset differs from its adjusted basis for federal income tax purposes at the beginning of such year or other period, Depreciation shall be an amount which bears the same ratio to such beginning Gross Asset Value as the federal income tax deduction, amortization or other cost recovery deduction for such year or other period bears to such beginning adjusted tax basis; provided, however, that if the adjusted basis of an asset at the beginning of the Fiscal Year is zero for federal income tax purposes, then Depreciation shall be determined with reference to such beginning Gross Asset Value using any reasonable method selected by the Members.

“Disclosing Party” has the meaning set forth in Section 11.1.

“Effective Date” shall mean the date set forth in the preamble of this Agreement.

“Effective Rate” shall have the meaning set forth in Section 8.3.2.

“Emergency Needs” has the meaning set forth in Section 8.2.2.

“Fair Value” of an asset means its fair market value.

“Feedgrains” shall mean bulk corn, bulk sorghum, and specialty commodities. The Members do not anticipate trading barley at the Irving, the Kalama or the Tacoma facility, but if the Members do trade bulk barley for export out of the PNW, the Company will have the right of first refusal to put such bulk barley through the Tacoma, Irving or Kalama Facilities.

“Fiscal Year” shall mean the Company’s fiscal year which shall begin on June 1 and end on May 31 of each year.

“Fundamental Issue(s)” has the meaning set forth in Section 5.5.

“GAAP” has the meaning set forth in Section 8.6.2.

“General Manager” has the meaning set forth in Section 6.1.

“Gross Asset Value” means, with respect to any asset, the asset’s adjusted basis for federal income tax purposes, except as follows:

(1) The initial Gross Asset Value of any asset contributed by a Member to the Company shall be the Fair Value of such asset, as determined by the contributing Member and the Company;

(2) The Gross Asset Value of all Company assets may be adjusted to equal their respective gross fair market values, as determined by the Members, as of, among other times, the following: (i) the acquisition of an additional interest in the Company by any new or existing Member in exchange for more than a de minimis contribution of money or other property; (ii) the distribution by the Company of more than a de minimis amount of money or other property to a Member as a consideration for an interest in the Company; and (iii) the liquidation of the Company within the meaning of Treasury Regulations §1.704-1(b)(2)(ii)(g) (other than a liquidation pursuant to Code Section 708(b)(1)(B));

(3) The Gross Asset Value of any Company asset distributed to any Member shall be the Fair Value of such asset on the date of distribution, as determined by the Members; and

(4) The Gross Asset Value of any Company assets may be increased (or decreased) by the Members to reflect any adjustments to the adjusted basis of such assets pursuant to Code Sections 734(b) or 743(b), but only to the extent that such adjustments are taken into account in determining Capital Accounts pursuant to Treasury Regulations §1.704-1(b)(2)(iv)(m) and Section 4.5(h) hereof.

If the Gross Asset Value of an asset has been determined or adjusted hereunder, such Gross Asset Value shall thereafter be adjusted by the Depreciation taken into account with respect to such asset for purposes of computing Income and Losses.

“Texas Gulf Coast” means central gulf coast locations for shipment into the Texas Gulf, including through Houston, Corpus Christie or Beaumont.

“Houston Facility” means the facility in Houston, Texas owned by Cargill and leased to the Company.

“Income” and “Loss” means, respectively, for each Fiscal Year or other period, an amount equal to the Company’s taxable income or loss for such year or period, determined in accordance with Code Section 703(a), except that for this purpose (i) all items of income, gain, deduction or loss required to be separately stated by Code Section 703(a)(1) shall be included in taxable income or loss; (ii) tax exempt income shall be added to taxable income or loss; (iii) any expenditures described in Code Section 705(a)(2)(B) (or otherwise treated in a similar manner) and not otherwise taken into account in computing taxable income or loss shall be subtracted; (iv) in the event the Gross Asset Value of any Company asset is adjusted pursuant to subparagraphs (2) or (3) of the definition of Gross Asset Value hereunder, the amount of such adjustment shall be taken into account as gain or loss from the disposition of such asset for purposes of computing Income or Losses; (v) gain or loss resulting from any disposition of a Company asset with respect to which gain or loss is recognized for federal income tax purposes shall be computed by reference to the Gross Asset Value of the asset disposed of, notwithstanding that the adjusted tax basis of such asset differs from its Gross Asset Value; (vi) in lieu of the depreciation, amortization and other cost recovery deductions taken into account in computing such taxable income or loss, there shall be taken into account Depreciation for such Fiscal Year or other period computed in accordance with the definition of Depreciation contained herein; (vii) to the extent an adjustment to the adjusted tax basis of any Company asset pursuant to Code Sections 734(b) or 743(b) is required by Treasure Regulations §1.704-1(b)(2)(iv)(m)(4) to be taken into account in determining Capital Accounts as a result of a distribution other than in liquidation of a Member’s Interest in the Company, the amount of such adjustment shall be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases the basis of the asset) from the disposition of the asset and shall be taken into account for purposes of computing Income or Losses, and (viii) notwithstanding any other provision of this definition, taxable income or loss shall be adjusted to eliminate the impact of any item of income or loss specifically allocated in Article IV.

“Indemnified Parties” has the meaning set forth in Section 7.6.2.

“Indemnified Party” has the meaning set forth in Section 7.6.4.

“Indemnifying Party” has the meaning set forth in Section 7.6.4.

“Interest” refers to all of a Member’s right and interest in the Company in its capacity as a Member.

“Intellectual Property” has the meaning set forth in Section 11.4.

“Irving Facility” means the facility owned by Cargill and located in Portland, Oregon which is leased to Company.

“Kalama Facility” means the facility owned by the Port of Kalama in Kalama, Washington and which is leased to CHS and subleased to Company.

“Law” means any federal, state, or local law, rule, regulation or ordinance.

“Liquidation Proceeds” shall have the meaning set forth in Section 10.2.

“Losses” has the meaning set forth in Section 7.6.1.

“Managers” means the Person or Persons designated as Managers of the Company in the Certificate of Formation or those Persons subsequently chosen as the Managers of the Company from time to time pursuant to Article V.

“Members” means those Persons who are members of the Company from time to time, including any Substitute Members. The initial Members of the Company shall be those Persons listed in the preamble of this Agreement.

“Member Minimum Gain” means an amount, with respect to each Member Nonrecourse Debt, equal to the Company Minimum Gain that would result if such Member Nonrecourse Debt were treated as a Nonrecourse Liability, determined in accordance with Treasury Regulations §1.704-2(i)(3).

“Member Nonrecourse Debt” shall have the same meaning as partner nonrecourse debt set forth in Treasury Regulations §1.704-2(b)(4).

“Member Nonrecourse Deductions” shall have the same meaning as partner nonrecourse deductions set forth in Treasury Regulations §1.704-2(i)(2). Generally, the amount of Member Nonrecourse Deductions with respect to a Member Nonrecourse Debt for a Fiscal Year equals the excess, if any, of the net increase, if any, in the amount of the Member Minimum Gain attributable to such Member Nonrecourse Debt during that Fiscal Year over the aggregate amount of any distributions during that Fiscal Year to the Member that bears the economic risk of loss for such Member Nonrecourse Debt to the extent distributions are from proceeds of such Member Nonrecourse Debt and are allocable to an increase in Member Minimum Gain determined in accordance with Treasury Regulations §1.704-2(i).

“Nonrecourse Deduction” shall have the same meaning as nonrecourse deductions set forth in Treasury Regulations §§ 1.704-2(b)(1) and 1.704-2(c). Generally, the amount of Nonrecourse Deductions for a Fiscal Year equals the excess, if any, of any increase, if any, in the amount of Company Minimum Gain during that Fiscal Year over the aggregate amount of any distributions during that Fiscal Year of proceeds of a Nonrecourse Liability that are allocable to an increase in Company Minimum Gain, determined according to the provisions of Treasury Regulations §1.704-2(c) and (h).

“Nonrecourse Liability” means a Company liability with respect to which no Member bears the economic risk of loss as determined under Treasury Regulations §§ 1.752-1(a)(2) and 1.752-2.

“Offer” has the meaning set forth in Section 9.2.1.

“Oilseeds” shall mean bulk soybeans.

“Other Member” has the meaning set forth in Section 9.2.1.

“Pacific Northwest, “Pacific Northwest, United States”, and “PNW” means the states of Oregon and Washington USA.

“Percentage Interest” means, with respect to any Member, such Member’s Percentage Interest in the Company, including such Member’s percentage of the net income, gain, loss, deduction and credits of the Company. The Percentage Interest for each Member, prior to any adjustments thereto required by the provisions of this Agreement, shall be as follows:

CARGILL, INCORPORATED 50%

CHS Inc. 50%

Unless otherwise expressly set forth in this Agreement, no changes shall be made to the Members’ Percentage Interests set forth above without the unanimous written consent of the Members.

“Person” means any individual, partnership, corporation, cooperative, trust or other entity.

“Property” means all properties and assets that the Company may own or otherwise have an interest in from time to time.

“Receiving Party” has the meaning set forth in Section 11.1

“Related Party Transactions” has the meaning set forth in Section 15.1.

“Selling Member” has the meaning set forth in Section 9.2.

“Tacoma Facility” means the facility owned by the Port of Tacoma in Tacoma, Washington and which is leased to Cargill.

“Tacoma Facility Sublease” shall have the meaning set forth in Section 2.9.1.

“Tax Matters Member” shall have the meaning set forth in Section 8.11.

“Treasurer” has the meaning set forth in Section 6.3.

“Treasury Regulations” means the regulations promulgated by the Treasury Department with respect to the Code, as such regulations are amended from time to time, or corresponding provisions of future regulations.

“Wheat” means any and all classes of bulk wheat.

1.2 Interpretation. Words of the masculine gender shall be deemed to include the feminine and neuter genders, and vice versa, where applicable. Words of the singular number shall be deemed to include the plural number, and vice versa, where applicable.

ARTICLE II

ORGANIZATION

2.1 Principal Office. The principal office of the Company shall be located at 5500 Cenex Drive, Inver Grove Heights, Minnesota 55077 or at such other place(s) as the Managers may determine from time to time.

2.2 Registered Agent. The Company shall maintain a registered office at c/o The Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware 19801. The name and address of the Company’s registered agent is the Corporation Trust Company, Corporation Trust Center, 1209 Orange Street, Wilmington, Delaware 19801.

2.3 Business Purpose.

2.3.1 The Company will have all of the powers and authority granted by the Act, any other Law and this Agreement necessary, appropriate, advisable or convenient to the conduct, promotion or attainment of the Business Purpose of the Company. The Company may not conduct, however, any business or activities outside the scope of the Business Purpose.

2.3.2 The scope of the Business Purpose may be modified only upon the written agreement of all Members.

2.4 Term. Unless earlier terminated in accordance with this Agreement or the Act or extended by the written mutual agreement of the Members, the Company shall continue in existence for an initial term of fifteen (15) years from the Effective Date (the “Initial Term”). Thereafter, this Agreement shall automatically renew for two (2) successive five (5) year periods (each a “Renewal Term”) unless this Agreement is earlier terminated in accordance with this Agreement or the Act or extended by the written mutual agreement of the Members. .

2.5 No Liability of Members, Representatives and Officers. No Member or its representative or officer, solely by reason of such status, shall be liable, under a judgment, decree or order of a court, or in any other manner, for any debt, obligation or liability of the Company, whether arising in contract, tort or otherwise, or for the acts or omissions of any other Member or its representative or officer. The failure of the Company to observe any formalities or requirements relating to the exercise of its powers or management of its business or affairs under this Agreement or the Act shall not be grounds for imposing liability on the Members, or representatives or officers of a Member, for liabilities of the Company.

2.6 Interest Not Acquired for Resale. Each Member warrants to the Company and the other Members that: (a) the Member is duly organized, validly existing, and in good standing under the laws of its state of organization and that it has the requisite power and authority to execute this Agreement and to perform its obligations hereunder; (b) the Member is acquiring an Interest for such Member’s own account as an investment and with no intent to distribute such Interest; and (c) the Member acknowledges that the Interests have not been registered under the Securities Act of 1933 or any state securities laws, and such Member’s Interest may not be resold or transferred by it except in accordance with this Agreement, the Act and all applicable Law.

2.7 Adoption of Business Plan. At least sixty (60) days prior to the beginning of each Fiscal Year, the Board of Managers shall adopt a business plan (the “Business Plan”) for such Fiscal Year, which may be amended from time to time; provided, however, that the Board of Managers shall adopt an initial Business Plan within thirty (30) days after the Effective Date. The Business Plan shall include an annual budget for revenues, expenses, working capital reserves and capital expenditures; any additional capital contributions anticipated to be required for the operation of the Company’s Business; and such other information, plans and strategies as the Managers deem advisable. If the Board of Managers fail to adopt a Business Plan for any Fiscal Year as required hereunder, the Business Plan previously in effect shall continue in effect until a new Business Plan has been adopted.

2.8 Scope of Company Business. The Company business shall be limited to the Business Purpose. The Company intends to source Feedgrains, Oilseeds, Wheat and By-Products primarily from its Members and its Members intend to supply Feedgrains, Wheat, Oilseeds and By-Products on market terms from their grain originating facilities and, in the case of CHS, its affiliated cooperatives from which it purchases such Feedgrains and Oilseeds, Wheat and By-Products.

2.9 Leased Property. In order to facilitate the ability of the Company to transport and handle the Feedgrains, Oilseeds, Wheat and By-Products which it intends to market into export channels, TEMCO has entered into the following sublease and lease agreements:

2.9.1 Sublease Agreement between Cargill and Temco, dated (the “Tacoma Facility Sublease”). The Tacoma Facility Sublease shall terminate on the termination, expiration or dissolution of the Company or as otherwise provided for in the Tacoma Facility Sublease, and all rights to the Tacoma facility shall revert to Cargill, unless otherwise agreed by the Members. In the event that the Tacoma Facility Sublease terminates or expires in accordance with its terms prior to the termination, expiration or dissolution of the Company, Cargill shall pay to the Company the then book value (net of accumulated depreciation) of all capital improvements and/or repairs made by Company to the Tacoma Facility and which have been authorized to be made by the Company’s Board of Managers.

2.9.2 Sublease Agreement between CHS and Temco, dated February 1, 2012(the “Kalama Facility Sublease”). The Kalama Facility Sublease shall terminate on the termination, expiration or dissolution of the Company or as otherwise provided for in the Kalama Facility Sublease, and all rights to the Kalama Facility shall revert to CHS following such termination, expiration or dissolution unless otherwise agreed by the Members. In the event that the Kalama Facility Sublease terminates or expires in accordance with its terms prior to the termination, expiration or dissolution of the Company, CHS shall pay to the Company the then book value (net of accumulated depreciation) of all capital improvements and/or repairs made by Company to the Kalama Facility and which have been authorized to be made by the Company’s Board of Managers.

2.9.3 Lease Agreement between Cargill and Temco, dated February 1, 2012 (the “Irving Facility Lease”). The Irving Facility Lease shall terminate on the termination, expiration or dissolution of the Company or as otherwise provided for in the Irving Facility Lease, and all rights to the Irving Facility shall revert to Cargill, unless otherwise agreed by the Members. In the event that the Irving Facility Lease terminates or expires in accordance with its terms prior to the termination, expiration or dissolution of the Company, Cargill shall pay to the Company the then book value (net of accumulated depreciation) of all capital improvements and/or repairs made by Company to the Irving Facility and which have been authorized to be made by the Company’s Board of Managers.

2.9.4 Lease Agreement between Cargill and Temco, dated as of April 1, 2023 (the Houston Facility Lease”). The Houston Facility Lease shall terminate on the termination, expiration or dissolution of the Company or as otherwise provided for in the Houston Facility Lease, and all rights to the Houston Facility shall revert to Cargill, unless otherwise agreed by the Members. In the event that the Houston Facility Lease terminates or expires in accordance with its terms prior to the termination, expiration or dissolution of the Company, Cargill shall pay to the Company the then book value (net of accumulated depreciation) of all capital improvements and/or repairs made by Company to the Houston Facility and which have been authorized to be made by the Company's Board of Managers.

2.10 Exclusivity in the Pacific Northwest and the Texas Gulf Coast

2.10.1 Each Member agrees to commit all of its Feedgrains, Wheat, Oilseeds and By-Product origination that are tributary to the PNW or the Texas Gulf Coast for export to the Company. Whether origination is tributary to the PNW or the Texas Gulf Coast for export shall be based upon what is the best market (i.e., what is the best net value to the Member originating and selling the grain) for such grain at the time the grain is to be liquidated. If markets offer equal value, origination shall be split equally between the markets, unless doing so negatively impacts the net value to the Member. The Members shall transfer grain to the Company at the market price for such grain.

2.10.2 Each Member further agrees that the Company shall be the exclusive export-marketing vehicle for it and its Affiliates for Feedgrains, Oilseeds, and Wheat exported through the PNW and the Texas Gulf Coast. In the case of By-Products, the Company shall be the exclusive export-marketing vehicle for it and its Affiliates for bulk By-Products, when at least one of the Company’s facilities (Tacoma Facility, Kalama Facility, Irving Facility, Houston Facility) is physically capable of handling such By-Products. The Company will, in turn, use its best efforts to offer the Members a right of first refusal on all FOB PNW and Texas Gulf Coast Feedgrains, Oilseeds, Wheat and By-Products before selling such grain to third parties.

2.10.3 Upon request of a Member, the other Member shall provide information reasonably requested to the requesting Member to verify compliance with the terms of this Section 2.10.

2.11 Insurance. The Company shall ensure that commercial general liability, property insurance and other necessary insurance coverage, with deductibles and limits as established and approved by the Board of Managers, is purchased and maintained on the Tacoma Facility, the Kalama Facility, the Irving Facility and the Houston Facility. The coverage, limits and deductibles shall not be changed without the approval of the Board of Managers.

ARTICLE III

CONTRIBUTIONS AND LOANS

3.1 Capital Contributions.

3.1.1 The Members agree that the Company shall meet its capital needs through the borrowing of funds as provided in Section 8.3 and that unless specifically agreed to by the Members and except as set forth in this Section 3.1, the Members shall not be obligated to make any additional capital contributions to the Company. However, if the Board of Managers determine that additional capital contributions are appropriate or necessary for the Company, the General Manager shall, by written notice, call for such additional contributions to the capital of the Company as the Board of Managers determine should be made by the Members. Within a period of time determined by the Board of Managers, not to exceed thirty (30) days following the delivery of such notice, each Member shall contribute, in cash, to the capital of the Company an amount (“Additional Contribution”) equal to such Member’s Percentage Interest multiplied by the aggregate additional capital contribution as called for by the Board of Managers.

3.1.2 No interest shall accrue on any Member’s Capital Account. A Member shall not be entitled to withdraw any part of its capital in the Company or to receive any capital distribution from the Company except as part of a distribution of capital agreed to by the Board of Managers as hereinafter defined or as provided in Article VIII.

3.1.3 All capital contributions and other payments required or permitted to be made by a Member under this Agreement shall be either in cash or, at the request of any Member and if agreed to by the Board of Managers, on such conditions and for such fair value as the Board of Managers as hereinafter defined shall so determine, in kind.

3.1.4 If a Member (a “Delinquent Member”) shall fail to make when due a contribution required pursuant to this Agreement, the other Member (the “Contributing Member”) may, in its sole discretion, advance all or part of that amount to the Company. Such advance shall be deemed to be a demand loan by the contributing Member to the Delinquent Member at an interest rate equal to 2% in excess of the Prime Rate for the period during which the advance is outstanding. This loan shall be repaid, together with such interest, by the Delinquent Member promptly upon demand from any funds of the Delinquent Member, including, without limitation, any distribution from the Company which would otherwise be payable to the Delinquent Member. Unless and until the Delinquent Member makes such repayment, the Company shall make no cash distribution to such Member (except that a cash distribution shall be applied to make such repayment and the balance then made to the formerly Delinquent Member). The Contributing Member to which such debt is due (or to which a debt pursuant to Article VIII is due) shall have a security interest in the Interest of the Delinquent Member to secure such amounts owed to it, and such security interest is hereby granted by each Member. To the extent that the principal amount of the delinquency is repaid, the principal amount of such repayment (excluding any interest) shall be deemed a contribution to the capital of the Company by the Delinquent Member and shall be reflected as such in the Capital Account of the Delinquent Member.

3.2 Capital Accounts. A separate Capital Account shall be maintained for each Member in accordance with Treasury Regulations §1.704-1(b)(2)(iv). Each Member’s Capital Account shall be (a) increased by: (i) the amount of any cash and the Gross Asset Value of property contributed to the Company by such Member. (net of liabilities secured by such contributed property that the Company is considered to assume or take subject to under Code Section 752), (ii) allocations to such Member, pursuant to Article IV, of Company income and gain (or items thereof), and (iii) to the extent not already netted out under clause (b)(ii) below, the amount of any Company liabilities assumed by the Member or which are secured by any property distributed to such Member; and (b) decreased by: (i) the amount of cash distributed to such Member by the Company, (ii) the Gross Asset Value of property distributed to such Member (net of liabilities secured by such distributed Property that such Member is considered to assume or take subject to under Code Section 752), (iii) allocations to such Member, pursuant to Article IV, of Company loss and deduction (or items thereof), and (iv) to the extent not already netted out under clause (a)(ii) above, the amount of any liabilities of the Member assumed by the Company or which are secured by any property contributed by such Member to the Company.

In the event any Interest in the Company is transferred in accordance with the terms of this Agreement, the transferee shall succeed to the Capital Account of the transferor to the extent it relates to the transferred Interest.

In the event Property is subject to Code § 704(c) or is revalued on the books of the Company in accordance with the first paragraph of this Section 3.2 and pursuant to Treasury Regulations §1.704-1(b)(2)(iv)(f), the Capital Accounts shall be adjusted in accordance with Treasury Regulations §1.704-1(b)(2)(iv)(g) for allocations to the Members of depreciation, amortization and gain or loss, as computed for “book” purposes (and not tax purposes) with respect to such Property.

The foregoing provisions of this Section 3.2 and the other provisions of this Agreement relating to the maintenance of Capital Accounts are intended to comply with Treasury Regulations §§ 1.704-1(b) and 1.704-2, and shall be interpreted and applied in a manner consistent with such Treasury Regulations. In the event the Board of Managers determine that it is prudent or advisable to modify the manner in which the Capital Accounts, or any increases or decreases thereto, are computed in order to comply with such Treasury Regulations, the Board of Managers may cause such modification to be made, provided that it is not likely to have a material effect on the amounts distributable to any Member upon the dissolution of the Company. In addition, the Members may amend this Agreement in order to comply with such Treasury Regulations as provided in Section 4.5(k) below.

3.3 Capital Withdrawal Rights, Interest and Priority. Prior to the dissolution and termination of the Company, no Member shall be entitled to withdraw or reduce such Member’s Capital Account or to receive any distributions from the Company, except as provided in Articles IV and IX. No Member shall be entitled to receive or be credited with any interest on the balance in such Member’s Capital Account at any time. Except as may be otherwise expressly provided herein, no Member shall have any priority over any other Member as to the return of the balance in such Member’s Capital Account.

ARTICLE IV

ALLOCATIONS AND DISTRIBUTIONS

4.1 Non-Liquidation Cash Distributions. Any Available Cash shall be distributed as may be agreed to by the Board of Managers, to the Members in accordance with their respective Percentage Interests as of the end of such Fiscal Year and at such other times as may be agreed to by the Board of Managers.

4.2 Liquidation Distributions. Liquidation Proceeds shall be distributed in the following order of priority:

4.2.1 To the payment of debts and liabilities of the Company (including to Members to the extent otherwise permitted by law) and the expenses of liquidation; then

4.2.2 To the setting up of such reserves as the Person required or authorized by law to wind up the Company’s affairs may reasonably deem necessary or appropriate for any disputed, contingent or unforeseen liabilities or obligations of the Company, if any, provided that any such reserves shall be paid

over by such Person to an independent escrow agent, to be held by such agent or its successor for such period as such Person shall deem advisable for the purpose of applying such reserves to the payment of such liabilities or obligations and, at the expiration of such period, the balance of such reserves, if any, shall be distributed as hereinafter provided; then

4.2.3 To the Members in accordance with and to the extent of the positive balances in their respective Capital Accounts after taking into account the allocation of all Income or Loss pursuant to this Agreement for the Fiscal Year(s) in which the Company is liquidated until such Capital Accounts are reduced to zero; then

4.2.4 Any remainder to the Members in proportion to their Percentage Interests.

4.3 Profits, Losses and Distributive Shares of Tax Items. The Company’s Income or Loss, as the case may be, for each Fiscal Year of the Company, as determined in accordance with such method of accounting as may be adopted for the Company pursuant to Article VII, shall be allocated to the Members for both financial accounting and income tax purposes as set forth in this Article IV, except as otherwise provided for herein or unless the Members unanimously agree otherwise.

4.4 Allocation of Income, Loss and Credits.

4.4.1 Income or Loss (other than from liquidation transactions) and Credits for each Fiscal Year shall be allocated among the Members in accordance with their respective Percentage Interests. To the extent there is a change in the respective Percentage Interests of the Members during the year, Income, Loss and Credits shall be allocated among the pre-adjustment and post-adjustment periods as provided in Section 4.5(l).

4.4.2 Income or Loss from liquidation transactions shall be allocated among the Members in accordance with their respective Percentage Interests.

4.5 Special Rules Regarding Allocation of Tax Items. Notwithstanding the foregoing provisions of Article IV, the following special rules shall apply in allocating the Income or Loss of the Company:

(a) Code Section 704(c) and Revaluation Allocations. In accordance with Code § 704(c) and the Treasury Regulations thereunder, Income, gain, Loss and deduction with respect to any Property contributed to the capital of the Company shall, solely for tax purposes, be allocated among the Members so as to take account of any variation between the adjusted basis of such property to the Company for federal income tax purposes and its Gross Asset Value at the time of contribution using such method of allocation as permitted under the applicable Treasury Regulations as agreed by the Members. In the event of the adjustments to Members’ Capital Account(s) pursuant to Section 3.2 (hereinafter referred to as a “Revaluation”), subsequent allocations of Income, gain, Loss and deduction with respect to such property shall take account of any variation between the adjusted basis of such property to the Company for federal income tax purposes and its Fair Value immediately after the adjustment in the same manner as under Code § 704(c) and the Treasury Regulations thereunder. If as a result of a Revaluation, Company Minimum Gain is reduced, the reduction of such Company Minimum Gain shall be added back to the net decrease or increase in Company Minimum Gain otherwise determined. Any elections or other decisions relating to such allocations shall be made by the Board of Managers in a manner that reasonably reflects the purpose and intention of this Agreement. Allocations pursuant to this Section 4.5(a) are solely for income tax purposes and shall not affect, or in any way be taken into account in computing, any Member’s Capital Account or share of Income or Loss, pursuant to any provision of this Agreement.

(b) Minimum Gain Chargeback. Notwithstanding any other provision of this Article IV, if there is a net decrease in Company Minimum Gain during a Fiscal Year or other taxable period, each Member shall be allocated items of Income and gain for such year (and, if necessary, for subsequent years) in proportion to, and to the extent of, an amount equal to the greater of: (1) the portion of such Member’s share of the net decrease in Company Minimum Gain during such year that is allocable to the disposition of Company property subject to Nonrecourse Liabilities; or (2) if such Person would otherwise have an Adjusted Capital Account Deficit at the end of such year, an amount sufficient to eliminate such Member’s Adjusted Capital Account Deficit. The items to be allocated shall be determined in accordance with Treasury Regulations §1.704-2(g). For purposes of this Section 4.5(b)

only, each Member’s Adjusted Capital Account Deficit shall be determined prior to any other allocations pursuant to this Article IV with respect to such Fiscal Year and without regard to any net decrease in Member Minimum Gain during such Fiscal Year. The foregoing provisions of this Section 4.5(b) are intended to comply with Treasury Regulations §1704-2(f) and shall be interpreted and applied in a manner consistent with such regulation.

A Member’s share of Company Minimum Gain shall be, as of the relevant time, the excess of (u) the sum of Nonrecourse Deductions allocated to such Member and the aggregate distributions to such Member of Nonrecourse Liability proceeds allocable to an increase in Company Minimum Gain, over (v) the sum of the Member’s aggregate share of the net decreases in Company Minimum Gain, including decreases from Revaluations. In computing the above, amounts allocated or distributed to the Member’s predecessor-in-interest shall be taken into account.

(c) Member Minimum Gain Chargeback. Notwithstanding any other provision of this Article IV other than Section 4.5(b), if there is a net decrease in Member Minimum Gain during a Fiscal Year or other taxable period, each Member who has a share of the Member Minimum Gain attributable to such Member Nonrecourse Debt shall be allocated items of Income and gain for such year (and, if necessary, for subsequent years) in proportion to, and to the extent of, an amount equal to the greater of: (1) the portion of such Member’s share of the net decrease in Member Minimum Gain attributable to such Member Nonrecourse Debt during such year that is allocable to the disposition of Company property subject to such Member Nonrecourse Debt; or (2) if such Person would otherwise have an Adjusted Capital Account Deficit at the end of such year, an amount sufficient to eliminate such Member’s Adjusted Capital Account Deficit. The items to be allocated shall be determined in accordance with Treasury Regulations §1.704-2(i)(4) and (5). For purposes of this Section 4.5(c) only, each Member’s Adjusted Capital Account Deficit shall be determined prior to any other allocations pursuant to this Article IV with respect to such Fiscal Year, other than allocations of Company Minimum Gain pursuant to Section 4.5(b) hereof. The foregoing provisions of this Section 4.5(c) are intended to comply with Treasury Regulations §1.704-2(i)(4) and shall be interpreted and applied in a manner consistent with such regulation.

(d) Qualified Income Offset. In the event any Member unexpectedly receives an adjustment, allocation or distribution described in Treasury Regulations §1.704.1(b)(2)(ii)(d)(4), (5) or (6), which causes or increases such Member’s Adjusted Capital Account Deficit, items of Company Income and gain shall be specially allocated to such Member in an amount and manner sufficient to eliminate such Adjusted Capital Account Deficit as quickly as possible, provided that an allocation under this Section 4.5(d) shall be made if and only to the extent such Member would have an Adjusted Capital Account Deficit after all other allocations under this Article IV have been made. It is intended that this Section 4.5(d) be interpreted to comply with the alternate test for economic effect set forth in Treasury Regulations §1.704-1(b)(2)(ii)(d).

(e) Nonrecourse Deductions. Nonrecourse Deductions for any Fiscal Year or other period shall be allocated to the Members in proportion to their Percentage Interests.

(f) Member Nonrecourse Deductions. Any Member Nonrecourse Deduction shall be allocated to the Member who bears the risk of loss with respect to the loan to which such Member Nonrecourse Deductions are attributable in accordance with Treasury Regulations §1.704-2(i)(1).

(g) Curative Allocations. Any special allocations of items of Income, gain, deduction or Loss pursuant to Sections 4.5(b), (c), (d), (e) and (f) shall be taken into account in computing subsequent allocations of income and gain pursuant to this Article IV, so that the net amount of any items so allocated and all other items allocated to each Member pursuant to this Article IV shall, to the extent possible, be equal to the net amount that would have been allocated to each such Member pursuant to the provisions of this Article IV if such adjustments, allocations or distributions had not occurred. No allocations pursuant to Sections 4.5(b) and (c) shall be made prior to the Fiscal Year or other taxable period during which there is a net decrease in Company Minimum Gain or Member Minimum Gain, respectively, and in any such case then only to the extent necessary to avoid the potential distortion. In addition, allocations pursuant to this Section 4.5(g) with respect to Nonrecourse Deductions in Section 4.5(e) and Member Nonrecourse Deductions in Section 4.5(f) shall be deferred to the extent the Members reasonably determine that such

allocations are likely to be offset by subsequent allocations of Company Minimum Gain or Member Minimum Gain, respectively.

(h) Code Section 754 Adjustments. To the extent an adjustment to the adjusted tax basis of any Company asset pursuant to Code §§ 734(b) or 743(b) is required, pursuant to Treasury Regulations §§ 1.704-1(b)(2)(iv)(m)(2) or 1.704-1(b)(2)(iv)(m)(4), to be taken into account in determining Capital Accounts as the result of a distribution to a Member in complete liquidation of its interest in the Company, the amount of such adjustment to the Capital Accounts shall be treated as an item of gain (if the adjustment increases the basis of the asset) or loss (if the adjustment decreases such basis) and such gain or loss shall be specially allocated to the Members in accordance with their interests in the Company if Treasury Regulations §1.704-1(b)(2)(iv)(m)(2) applies, or to the Member to whom such distributions was made in the event that Treasury Regulations §1.704-1(b)(2)(iv)(m)(4) applies.

(i) Loss Allocation Limitation. Notwithstanding the other provisions of this Article IV, unless otherwise agreed to by the Managers, no Member shall be allocated Loss in any Fiscal Year or other taxable period that would cause or increase an Adjusted Capital Account Deficit as of the end of such Fiscal Year or other taxable period.

(j) Share of Nonrecourse Liabilities. Solely for purposes of determining a Member’s proportionate share of the “excess nonrecourse liabilities” of the Company within the meaning of Treasury Regulation §1.752-3(a)(3), each Member’s Interest in Company profits is equal to such Member’s respective Percentage Interest.

(k) Compliance with Treasury Regulations. The foregoing provisions of this Section 4.5 are intended to comply with Treasury Regulations §§ 1.704-1(b), 1.704-2 and 1.752-1 through 5, and shall be interpreted and applied in a manner consistent with such Treasury Regulations.

(l) General Allocation Provisions. Except as otherwise provided in this Agreement, all items that are components of Income or Loss shall be divided among the Members in the same proportions as they share such Income or Loss, as the case may be, for the year. For purposes of determining the Income, Loss or any other items for any period, Income, Loss or any such other items shall be determined on a daily, monthly or other basis, on an accrual method of accounting. . Notwithstanding anything herein to the contrary, if in the determination of the Board of Managers or the Tax Matters Partner, any Member should be treated as having made any contribution to the capital of the Company with respect to services or the use of property, or a contribution of assets to the Company other than as provided herein, unless the Board of Managers determines otherwise, corresponding items of deduction, income, gain or loss to the Company shall be specially allocated as of offset to the Member determined to have made such contribution, to the extent necessary to preserve the Members’ intended economic arrangement

4.6 Withholding of Distributions. Notwithstanding any other provision of this Agreement, the Board of Managers (or any Person(s) required or authorized by law to wind up the Company’s affairs) may determine in their absolute discretion, when in their opinion it is in the best interest of the Company, to suspend or restrict distributions.

4.7 No Priority. Except as may be otherwise expressly provided herein, no Member shall have priority over any other Member as to Company Income, gain, Loss, Credits and deductions or distributions.

4.8 Tax Withholding. Notwithstanding any other provision of this Agreement, the Board of Managers are authorized to take any action that they determine to be necessary or appropriate to cause the Company to comply with any withholding requirements established under any federal, state or local tax law, including, without limitation, withholding on any distribution to any Member. For all purposes of this Article IV, any amount withheld on any distribution and paid over to the appropriate governmental body shall be treated as if such amount had in fact been distributed to the Member.

ARTICLE V

MANAGEMENT OF THE COMPANY

5.1 Board of Managers. Except as reserved to the Members in this Agreement or delegated to an Officer, the business and affairs of the Company shall be managed under the direction of the Board of Managers (“Board of Managers”), and the Board of Managers shall have power and authority to manage and direct the business and affairs of the Company Approval by or actions taken by the Board of Managers in accordance with this Agreement shall constitute approval or action by the Company.

5.2 Designation of Managers. The Board of Managers shall at all times consist of six (6) Managers. Three Managers shall be appointed by Cargill and three Managers shall be appointed by CHS and each Member may appoint such alternate Managers as such Member deems advisable. Each of the Members may appoint or replace any or all of its Managers or alternate Managers of the Board of Managers by written notice to the Company and the other Member. Each of the Members shall at all times maintain in effect the appointment of at least one (1) Manager. Each Manager shall serve for indefinite terms at the pleasure of the appointing Member. The Managers of the Company, as appointed by each Member, are set forth on Exhibit 5.2.

5.3 Powers of the Managers. In addition to the powers and authorities conferred upon them by this Agreement, the Certificate of Formation and the Act, the Board of Managers may exercise all of the powers of the Company, and do all such lawful acts and things, that are not by statute or by the Certificate of Formation or by this Agreement directed or required to be exercised or done by the Members. Notwithstanding the foregoing, except as provided below with respect to the General Manager, the Managers individually are not agents of the Company and do not have any authority to take any actions or execute any instruments on behalf of the Company or otherwise act for or bind the Company.

5.4 Meetings.

5.4.1 The Board of Managers shall meet not less three times annually at such times and places as it may determine. Meetings of the Board of Managers may be called by one (1) Manager. Notice of each meeting of the Board of Managers shall be sent by facsimile (with confirmation receipt), or email, or mail or delivered personally, or by telephone, to each regular and alternate Manager not later than ten (10) Business Days before the date on which the meeting is to be held. The Manager(s) entitled to notice of meetings may waive such notice.

5.4.2 The attendance of two (2) Managers from each Member shall constitute a quorum for the transaction of business of the Board of Managers. Each Manager at the meeting shall be entitled to one vote for each matter to be voted upon by the Board of Managers. Any decision or approval before the Board of Managers shall be taken by majority vote of those of the Board of Managers present or participating in a meeting at which a quorum is present; provided, however, no action shall be authorized unless at least one (1) Manager appointed by each Member votes affirmatively on such action. The failure of the Board of Managers to authorize action with respect to any matter pursuant to the foregoing sentence shall constitute a Deadlock pursuant to Section 5.6.

5.4.3 The General Manager shall act as chairperson of meetings of the Board of Managers. Minutes of all meeting shall be prepared by the Secretary and shall be distributed to all regular Managers (and alternate Managers if present at a meeting) within thirty (30) days following any meeting.

5.5 Fundamental Issues. No action may be taken or decision made which binds the Company by the General Manager, any Member on behalf of the Company, or the Company, with regard to any of the Fundamental Issues without the vote (or written consent) of the Board of Managers in accordance with Section 5.4.2. Fundamental Issues shall include decisions and actions on the following matters, and such other matters as may be deemed Fundamental Issues, from time to time, by the Board of Managers:

(a) calls for Additional Contributions or guarantees hereunder;

(b) the issuance of any notes, bonds, debentures or other obligations by the Company, or the incurrence of or assumption of any indebtedness if, after giving effect thereto, the aggregate principal amount of all such indebtedness of the Company, other than indebtedness previously approved by the

Board of Managers (including, without limitation, the utilization by the Company of lines of credit previously approved by the Board of Managers for the purpose of financing the business of the Company in the ordinary course), would either (i) exceed the amounts specifically provided therefor and sufficiently identified in the Company’s current annual budgets referred to in Sections 5.5(p) and 8.1, or (ii) result in direct or indirect liability on either or both of the Members for repayment of such indebtedness;

(c) any acquisition, disposition, sale, conveyance, lease, sublease, exchange or other disposition of any interest in the Tacoma Facility other than the sublease contemplated by Section 2.9 hereof; in the Kalama Facility other than the sublease contemplated in Section 2.9 hereof; in the Irving Facility other than the lease contemplated in Section 2.9 hereof; or in the Houston Facility other than the lease contemplated in Section 2.9 hereof;

(d) the acquisition, disposition, sale, conveyance, lease, sublease, exchange or other disposition of real property having a value greater than a threshold amount to be determined by the Board of Managers;

(e) the acquisition, disposition, sale, conveyance, lease, sublease, exchange or other disposition of personal property, other than agricultural commodities traded in the ordinary course of business, with a value greater than a threshold amount to be determined by the Board of Managers;

(f) investing in any Person;

(g) the establishment of trading position limits for agricultural commodities traded by the Company;

(h) the making of loans or provision of guaranties, or the extension or pledge of credit to others, except endorsements and extensions of credit in the ordinary course of business;

(i) the sale of any equity interests (or operation, warrant, conversion in similar rights with respect thereto) in the Company;

(j) the selection, appointment, remuneration, removal and determination of the terms and conditions of employment agreements of officers, executives and key employees of the Company;

(k) the payment of bonuses and perquisites to officers, executives and key employees of the Company;

(l) the confession of any judgment against the Company or the creation, assumption, incurrence, or suffering to be created, assumed or incurred or to exist of, any encumbrance upon any of the assets or property of the Company, or the acquisition or holding or agreement to acquire or hold such property or assets subject to any encumbrance other than (i) liens for taxes not yet due or which are being contested in good faith by appropriate proceedings, and (ii) other minor encumbrances incidental to the conduct of the business of the Company or the ownership of its property and assets which are not incurred in connection with the borrowing of money or the obtaining of advances or credit, and which do not in the aggregate materially detract from the value of such property or assets or materially impair the use thereof in the operation of the business of the Company;

(m) the compromise or submission to arbitration (other than by contract specifically providing for arbitration) or litigation of any claim due, or any dispute or controversy involving the Company for any claim, dispute or controversy in excess of any amount to be determined by the Board of Managers;

(n) the entering into of any contract or commitment (other than those contracts made in the ordinary course of business) involving aggregate expenditures in excess of an amount to be determined by the Board of Managers;

(o) the entering into any contract or commitment (other than those commodity, sales and purchase contracts made in the ordinary course of the Company’s grain merchandising business) involving either Member, or any of their Affiliates;

(p) the approval of the annual business operating budget, capital expenditure budget and business plan and the amount of Cash for Distribution and adoption of other major financial policies of the Company;

(q) the approval of the opening financial statements of the Company as referred to in Section 8.6;

(r) the appointment and removal of the independent third party accountants (“Accountants”) for the Company;

(s) any material changes in the purposes of the Company beyond that expressly contemplated by this Agreement as provided in Section 2.3;

(t) the voluntary dissolution and winding-up of the Company, provided, however, that this provision shall in no way limit the rights of the Members under Article X.

(u) any changes in the scope or method of operations or business policies of the Company which is likely to materially increase the working capital or cash requirements of the Company.

(v) approval of the credit policy applicable to export sales and any material deviation therefrom.

5.6 Deadlock. If the Board of Managers cannot agree on any Fundamental Issue within thirty (30) days following the Board of Managers’ meeting at which a decision on such Fundamental Issue was sought, or within thirty (30) days of any such Fundamental Issue being submitted to the Managers for approval, then such matter shall be submitted to the Chief Operating Officer of CHS and the appropriate Corporate Center Member of Cargill to resolve. If the above mentioned executives of the Members are unable to resolve such deadlocked Fundamental Issue within thirty (30) days following submission of the matter to them for resolution, and such Fundamental Issue has or will have a material adverse effect on the business of the Company, then the matter shall be submitted to arbitration in accordance with Section 13.2 of this Agreement.

5.7 Subcommittees. The Board of Managers may appoint such subcommittees as it deems advisable, each with an equal number of representatives from each Member.

5.8 Waiver of Notice. Whenever any notice is required to be given hereunder, a written waiver thereof, signed by the Person entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to notice. Attendance or participation of a Person at a meeting shall constitute a waiver of notice of such meeting, except when the Person attends or participates in a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular meeting of the Managers need be specified in any written waiver of notice, but the business to be transacted at, or the purpose of, any special meeting of the Managers shall be specified in any written waiver of notice.

5.9 Meetings by Conference Telephone or Similar Communications Equipment. Notwithstanding Section 5.4.1, any Manager may participate in a meeting by means of conference telephone or similar communications equipment by means of which all Persons participating in the meeting can hear each other, and participation in a meeting pursuant hereto shall constitute presence in Person at such meeting.

5.10 Action Without Meeting. Any action required, or permitted, to be taken at any meeting of the Board of Managers may be taken without a meeting if written or electronic consent thereto is given by all of the Managers and such written or electronic consent is filed with the books and records of the Company.

5.11 Powers of Members. Notwithstanding anything contained in this Article V, only the Members shall have the power and authority, and unanimous consent of the Members shall be required, to (a) admit

a new Member, except as provided in Article IX; (b) amend or repeal this Agreement or the Certificate of Formation or adopt a new limited liability company agreement; and (c) amend or repeal any resolution of the Members which, by its terms, is not amendable or repealable.

ARTICLE VI

OFFICERS AND EMPLOYEES

6.1 The General Manager.

6.1.1 Cargill shall appoint the General Manager so long as the administration and trading functions of the Company are predominantly operated out of CHS’ facilities. If the Company’s administration and trading functions are moved to any Cargill facility, the General Manager shall be appointed by CHS. The General Manager is hereby vested with such executive and financial authority as to enable him to direct the business and affairs of the Company, subject to the directions of the Board of Managers and in accordance with this Agreement and the annual budget adopted by the Board of Managers. The General Manager shall be authorized to execute documents within the scope of his authority on behalf of the Company that will bind the Company without the necessity of obtaining the signature of either of the Members. The General Manager shall be responsible for the implementation of the various decisions of the Board of Managers and for the day-to-day management and operation of the Company. The General Manager shall regularly inform the Board of Managers of the Company’s ongoing activities. The General Manager shall report to and take direction from the Board of Managers. The General Manager shall enter into transactions on behalf of the Company except that the General Manager is not authorized to take any action on a Fundamental Issue unless the Board of Managers shall have approved such action pursuant to Section 5.4.2.

6.1.2 The General Manager shall provide such reports on the Business and performance of the Company as requested by the Board of Managers from time to time.

6.2 Secretary. The Secretary shall be appointed by the Board of Managers. The Secretary shall act as Secretary of all meetings of the Board of Managers, shall keep the minutes thereof in the proper book or books to be provided for that purpose, shall see that all notices required to be given by the Company are duly given and served, shall have charge of the books, records and papers of the Company relating to its organization and management as a Company, and shall see that the reports, statements and other documents required by law are properly kept and filed; and shall, in general, perform all the duties incident to the office of Secretary and such other duties as from time to time may be assigned to him by the Board of Managers and the General Manager.

6.3 Treasurer. The Board of Managers shall appoint the Treasurer. The Treasurer shall report to the Board of Managers. The Treasurer shall perform all the duties assigned to him by this Agreement including, without limitation, (a) arranging for the Company to borrow funds pursuant to Section 8.3; (b) submission to each Member of quarterly comparisons pursuant to Section 8.1.2, current cash estimates pursuant to Section 8.2, and statements relating to Emergency Needs pursuant to Section 8.2.2; (c) determination of the amount of Cash for Distribution and the distribution of such Cash for Distribution pursuant to Section 8.7; (d) causing to be prepared and given to each Member un-audited financial statements pursuant to Section 8.6.2; (e) having charge of, and being responsible for, all funds, securities and notes of the Company; (f) receiving and giving receipts for moneys due and payable to the Company from any sources whatsoever; (g) depositing all such moneys in the name of the Company in such banks, trust companies or other depositaries as shall be selected by the Board of Managers; (h) against proper vouchers, causing such funds to be disbursed by checks or drafts on the authorized depositaries of the Company, and being responsible for accuracy of the amounts of all moneys so disbursed; (i) regularly entering or causing to be entered into books to be kept by him or under his discretion full and adequate account of all moneys received or paid by him for the account of the Company; (j) having the right to require, from time to time, reports or statements giving such information as he may desire with respect to any and all financial transactions of the Company from the officers or agents transacting the same; and, (k) in general, all the duties incident to the office of Treasurer and such other duties as from time to time may be assigned to him by the Board of Managers or the General Manager.

6.4 Other Persons. The Board of Managers may appoint such other executive and management employees, including Persons employed by Cargill or CHS, as it shall from time to time deem appropriate, and may approve a plan for hiring of other salaried employees including employees from Cargill and CHS.

6.5 Appointment and Removal of Officers and Employees. The Board of Managers shall make the appointment and removal of officers and employees of the Company. Either Member may request the removal of any officer or employee.

6.6 Affiliations. The officers, executives and other employees of the Company may also be employees of the Members or their Affiliates, and shall not be required (except as may be determined by the Board of Managers) to be full-time employees of the Company. The Board of Managers and the Members will agree on the designation of employees of the respective Members to be made available by the respective Members for the purpose of providing marketing, transportation, logistics, export administration, grain settlements, accounting and other services, for and on behalf of the Company. Such designated employees shall at all times remain employees of the respective Members. The duties performed by such designated employees for and on behalf of the Company in conducting and performing Company business shall be Company business activities. In consideration of each of the Members making such employees available to the Company, the Company shall pay to each of the Members the charges for services by and other expenses incurred by such designated employees in performing Company business and agreed by the Board of Managers as reflected in the operating budget. The Company shall have the right to direct the action of such designated employees in performance of their duties for and on behalf of the Company. If the Company does not desire to maintain the services of any such designated employee, the Company may so advise the respective Member employing such designated employee and such Member shall cause the designated employee to cease performing such services for and on behalf of the Company. Each Member retains the right to fire its employees even if designated to the Company or to transfer any such employee to other duties within the business of such Member; provided, however, that such Member will cooperate with the Company to provide a suitable replacement so that the services of like kind provided by such dismissed or transferred employee will continue to be provided to the Company.

ARTICLE VII

COMPENSATION, LIABILITY, INDEMNIFICATION AND NON-COMPETITION

7.1 Compensation. No Manager will receive any compensation from the Company for serving as Manager, and each Manager will be responsible for its own costs and expenses in acting in such capacity.

7.2 Liability of Managers. Except in the case where the Managers are guilty of fraud, gross negligence, misconduct, reckless disregard of duty or a criminal act which is a felony, no Manager shall be liable to the Company or any Member for any loss, damage, liability or expense suffered by the Company or any Member on account of any action taken or omitted to be taken by him as a Manager.

7.3 Indemnification of Managers.

7.3.1 Subject to Subsection 7.3.4, the Company shall indemnify any Person who was or is a party, or is threatened to be made a party, to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative, other than an action by or in the right of the Company, by reason of the fact that such Person is or was a Manager, manager, officer, employee or agent of the Company, or is or was serving at the request of the Company as a Manager, manager, officer, employee or agent of another limited liability company, corporation, partnership, joint venture, trust or other enterprise, against expenses, judgments, fines and amounts paid in settlement actually and reasonably incurred by such Person in connection with such action, suit or proceeding, including attorneys’ fees, if such Person acted in good faith and in a manner such Person reasonably believed to be in (or not opposed to) the best interests of the Company, and, with respect to any criminal action or proceeding, had no reasonable cause to believe such Person’s conduct was unlawful. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the Person did not act in good faith and in a manner which such Person reasonably believed to be in or not opposed to the best interests

of the Company, and with respect to any criminal action or proceeding, had reasonable cause to believe that such Person’s conduct was unlawful.

7.3.2 Subject to Subsection 7.3.4, the Company shall indemnify any Person who was or is a party, or is threatened to be made a party, to any threatened, pending or completed action or suit by or in the right of the Company to procure a judgment in its favor by reason of the fact that such Person is or was a Manager, manager, officer, employee or agent of the Company, or is or was serving at the request of the Company as a Manager, manager, officer, employee or agent of another limited liability company, corporation, partnership, joint venture, trust or other enterprise against expenses actually and reasonably incurred by such Person in connection with the defense or settlement of such action or suit, including attorneys’ fees, if such Person acted in good faith and in a manner such Person reasonably believed to be in (or not opposed to) the best interests of the Company and except that no indemnification shall be made in respect of any claim, issue or matter as to which such Person shall have been adjudged to be liable to the Company unless and only to the extent that the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such Person is fairly and reasonably entitled to indemnity for such expenses which the court shall deem proper.

7.3.3 To the extent that a Manager, manager, officer, employee or agent of the Company has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in Subsections 7.3.1 and 7.3.2, or in defense of any claim, issue or matter therein, such Manager, manager, officer, employee or agent shall be indemnified against expenses actually and reasonably incurred by such Person in connection therewith, including attorneys’ fees.

7.3.4 Any indemnification under Subsections 7.3.1 and 7.3.2, unless ordered by a court, shall be made by the Company only as authorized in the specific case upon a determination that indemnification of the Manager, manager, officer, employee or agent is proper in the circumstances because such Manager, officer, employee or agent has met the applicable standard of conduct set forth in Subsections 7.3.1 and 7.3.2. The Board of Managers shall make such determination.

7.3.5 Expenses incurred by a Manager or officer in defending a civil or criminal action, suit or proceeding may be paid by the Company in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of the Manager or officer to repay such amount if it is ultimately determined that the Manager or officer is not entitled to be indemnified by the Company as authorized in this Section 7.3. Such expenses may be so paid upon such terms and conditions, if any, as prescribed by the Board of Managers.

7.3.6 The indemnification and advancement of expenses provided by, or granted pursuant to, the other subsections of this Section 7.3 shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled.

7.3.7 The Company may purchase and maintain insurance on behalf of any Person who is or was a Manager, manager, officer, employee or agent of the Company, or is or was serving at the request of the Company as a Manager, manager, officer, employee or agent of another limited liability company, corporation, partnership, joint venture, trust or other enterprise against any liability asserted against such Person and incurred by such Person in any such capacity, or arising out of such Person’s status as such, whether or not the Company would have the power to indemnify such Person against such liability under the provisions of this Section 6.3.

7.3.8 For purposes of this Section 7.3, references to the “Company” shall include, in addition to the limited liability company, any constituent company or corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its Managers, managers, officers and employees or agents, so that any Person who is or was a Manager, manager, officer, employee or agent of such constituent entity, or is or was serving at the request of such constituent entity as a Manager, manager, officer, employee or agent of another limited liability company, corporation, partnership, joint venture, trust or other enterprise, shall stand in the same position under this Section 7.3 with respect to the resulting or surviving entity as such Person would have with respect to such constituent entity if its separate existence had continued.

7.3.9 For purposes of this Section 7.3, references to “other enterprises” shall include employee benefit plans; references to “fines” shall include any excise taxes assessed to a Person with respect to any employee benefit plan; and references to “serving at the request of the Company” shall include any service as a Manager, manager, officer, employee or agent of the Company which imposes duties on, or involves services by, such Manager, manager, officer, employee or agent with respect to an employee benefit plan, its participants or beneficiaries; and a Person who acted in good faith and in a manner such Person reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner “not opposed to the best interests of the Company” as referred to in this Section 7.3.

7.3.10 The indemnification and advancement of expenses provided by, or granted pursuant to, this Section 7.3 shall, unless otherwise provided when authorized or ratified, continue as to a Person who has ceased to be a Manager, manager, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a Person.

7.4 Other Business Ventures. Except as otherwise provided herein, any Member may engage in or possess an interest in other business ventures of any nature or description, independently or with others, similar or dissimilar to the business of the Company, and the Company and the Members shall have no rights by virtue of this Agreement in and to such independent ventures or the income or profits derived therefrom, and the pursuit of any such venture, even if competitive with the business of the Company, shall not be deemed wrongful or improper. No Member shall be obligated to present any particular investment opportunity to the Company even if such opportunity is of a character that, if presented to the Company, could be taken by the Company, and either Member shall have the right to take for its own account (individually or as a partner or fiduciary) or to recommend to others, any such particular investment opportunity.

7.5 Non-Solicitation Clause. During the duration of this Agreement each Member represents that it will not, without agreement from the other Member, initiate employment discussions with Company personnel (either employed directly by the Company or seconded to the Company by the other Member) by direct contact or through executive search firms, employment agencies, or other indirect means, for so long as such Company personnel is employed by the Member and for an additional six (6) months after such Company personnel leaves the Company’s employ or is no longer seconded to the Company. It being understood that this would not apply in instances where Company personnel from either Member are responding to general advertisements of job.

7.6 Indemnification of Members and the Company.

7.6.1 Each Member shall hold harmless and indemnify the other Member, the other Member’s Affiliates and the Company, and their respective officers, directors, managers, employees, agents and representatives from and against and in respect of any and all claims, liabilities, losses, damages, fines, penalties, costs or expenses (including reasonable attorneys’ fees, expert and consultant fees, investigation costs and response, removal and corrective action and other remediation or clean-up costs) (collectively, the “Losses”) suffered or incurred by the other Member, the other Member’s Affiliates or the Company to the extent that such Losses arise from, by reason of or are in connection with (i) any negligent act or omission of the indemnifying Member or any of its officers, directors, employees, agents or representatives, and/or (ii) any misrepresentation, breach or nonfulfillment of any warranty, representation, obligation or responsibility owed to the other Member or the Company under the terms of this Agreement.

7.6.2 The Members agree that the Company shall hold harmless and indemnify the Members, the Members’ Affiliates, and their respective officers, directors, employees, agents and representatives (collectively, the “Indemnified Parties”) from and against and in respect of any and all Losses suffered or incurred by the Indemnified Parties to the extent that such losses arise from, by reason of or are in connection with (i) any negligent act or omission of the Company or any of its Managers, officers, managers, employees, agents or representatives, and (ii) the operation or ownership by the Company of the facility and the conduct of business therein, thereabout, thereon or with regard thereto at all times on and after September 19, 1992 of the Company, including without limitation environmental and Title VII claims, suits, cases or charges.

7.6.3 If and to the extent that either Member becomes liable for or pays more than its Percentage Interest of any Company obligation or liability, other than those which arise under the circumstances described in Section 7.6.1, then (i) the other Member will pay any such excess that is unpaid or reimburse the other Member which has paid any of that excess for the amount paid by the other Member, and (ii) will indemnify and hold harmless that Member from and against any and all liability for that excess.

7.6.4 In the event that either a Member or the Company has a claim of indemnification pursuant to this Section 7.6, then such Member or the Company (the “Indemnified Party”) shall provide written notice promptly to the party from which the Indemnified Party seeks indemnification (the “Indemnifying Party”). Such written notice shall specify in reasonable detail the nature of the Losses suffered or incurred by the Indemnified Party, and, if known, the amount or an estimate of the amount of the Losses; provided, however, that failure to give such notice shall relieve the Indemnifying Party from liability only to the extent that it has been damaged by such failure to notify. If the claim for indemnification arises out of a claim or action by a third party, the Indemnifying Party may assume the defense and prosecution thereof at its own cost and expense, with counsel reasonably acceptable to the Indemnified Party, by giving prompt written notice to the Indemnified Party. In such event, the Indemnified Party shall have the right to employ, at its own expense, counsel separate from the counsel employed by the Indemnifying Party and to participate in such defense and prosecution, at its own expense, subject to the management and control of the claim by the Indemnifying Party. The Indemnifying Party shall not settle any claim without the prior written consent of the Indemnified Party, which consent shall not be unreasonably withheld. Each party to this Agreement shall cooperate fully with the other party in the defense, prosecution, negotiation of a settlement or any other matter with respect to any claim by a third party which is subject to the indemnification rights set forth herein. Any indemnification that is required to be paid by one of the Members or the Company pursuant to this Section 7.6 shall be paid within thirty (30) days after demand for the payment has been given by the indemnified Member or Company, in each case together with interest at the Effective Rate from the date on which the obligation to pay first arose to the date of payment.

7.6.5 The respective rights and obligations of the Members, Members’ Affiliates, Managers, and the Company under this Article VII shall survive the termination of this Agreement and the dissolution of the Company.

ARTICLE VIII

ACCOUNTING AND BANK ACCOUNTS

8.1 Programs and Budgets.

8.1.1 The General Manager shall, not later than one (1) month prior to the commencement of the next succeeding Fiscal Year of the Company, prepare and submit to the Board of Managers for its review and approval a business operating budget and a capital expenditure budget for such Fiscal Year.

8.1.2 Not later than the 25th calendar day after the close of each fiscal quarter, the Treasurer shall submit to each Member a comparison, for the immediately preceding quarter and for the year to date, of the results of operations of the Company with the applicable Fiscal Year budget.

8.2 Estimates on Cash Needs.

8.2.1 Based on the budgets referred to in Section 8.1.1 and the quarterly comparisons referred to in Section 8.1.2, the Treasurer will, at such time and for such periods as requested by the Board of Managers, submit to the Board of Managers a current cash estimate showing: (i) the estimated cash disbursements which the Company will be required to make during the next succeeding calendar period for operating costs; (ii) estimated receipts; (iii) amounts needed for additional working capital; and (iv) the amount of funds (“Cash Needs”) that will be required to cover the amount, if any, by which estimated cash disbursements and amounts needed for additional working capital exceed estimated receipts available to cover such cash disbursements and additional working capital. The current cash estimate shall also specify the dates on which the Company must receive the necessary funds.

8.2.2 If, in the event of an emergency, the Company requires cash payments (“Emergency Needs”) not provided for by such current cash estimates, the General Manager or the Treasurer, may at any time furnish a statement thereof to the Board of Managers, giving the maximum period of notice for any such additional cash payments as is practicable in the circumstances, specifying in detail the reasons for such emergency cash payment and the amount thereof. Upon receipt of such emergency cash statement, the Board of Managers shall promptly decide, taking into account the circumstances, how the Emergency Needs shall be met.

8.2.3 Unless otherwise agreed by the Board of Managers, the Cash Needs and the Emergency Needs shall be made through borrowings of the Company in accordance with Section 8.3.

8.3 Loans.

8.3.1 In the event that the Board of Managers decides at any time during the term of this Agreement that it is desirable for the Company to borrow funds to acquire significant inventories or to meet the Cash Needs, Emergency Needs or other requirements of the Company, the Treasurer shall, within the limits of his authority as defined by the Board of Managers, negotiate on behalf of the Company to borrow such funds from financial institutions. The Board of Managers may approve, reject, or modify the terms negotiated by the Treasurer and may negotiate or authorize others to negotiate borrowings on behalf of the Company in order to find terms more beneficial to the Company.

8.3.2 Any Member or Affiliate may make direct loans to the Company in such amounts, at such times and on such terms and conditions as may be approved by the Board of Managers. Loans by any Member to the Company shall not be considered as contributions to the Capital Account of the Member making such loan to the Company. Any loans to the Company shall (a) be evidenced by a promissory note maturing on a date that is agreed to by the Board of Managers at the time at which the loan is made, and (b) bear interest at a rate that is agreed to by the Board of Managers at the time at which the loan is made or, if no rate is agreed to by the Board of Managers, at a floating rate (the “Effective Rate”) that is equal to the lower of (i) the prime rate for corporate loans at U.S. money center commercial banks as reported in The Wall Street Journal, and (ii) the highest lawful rate. Each of the loans that is referred to in this Section 8.3.2 shall be treated as a fixed obligation of the Company, and advances of principal of those loans and payments of principal and interest on those loans shall be treated as transactions between the Company and a Person who is not a Member in accordance with Section 707(a) of the Code.

8.4 Fiscal Year and Accounting Method. The Fiscal Year and taxable year of the Company shall be determined in accordance with the provisions of Code § 706 and the Treasury Regulations thereunder and unless otherwise required by such regulations shall annually begin on the 1st of June and end on the 31st of May and shall permit the minimum tax deferral in accordance with federal Internal Revenue Code or Treasury Regulations. The Company shall use the accrual method of accounting.

8.5 Books and Records.

8.5.1 The Company shall keep at its principal office true and accurate records of the following:

(i) A current list of the full name and last known business, residence, or mailing address of each Member and Manager, both past and present;

(ii) A copy of the Certificate of Formation, and all amendments thereto, together with executed copies of any powers of attorney pursuant to which any amendment has been executed;

(iii) Copies of the Company’s federal, state, and local income tax returns and reports, if any, for the three (3) most recent years;

(iv) Copies of this Agreement and copies of any financial statements of the Company for the three (3) most recent years;

(v) Minutes of every regular and special meeting of the Board of Managers; and

(vi) Any written consents obtained from the Members or Managers pursuant to Section 5.7.

8.5.2 Each Member (or such Member’s designated representative) shall have the right during ordinary business hours to inspect and copy (at such Member’s own expense) all books and records of Company.

8.6 Books of Account

8.6.1 The Board of Managers shall approve the opening financial statements for the Company as of the date hereof.

8.6.2 Accurate books of account of the Company shall be maintained in accordance with Generally Accepted Accounting Principles (“GAAP”) consistently applied. In those instances in which more than one GAAP can be applied, the Board of Managers shall determine, in consultation with the Member’s independent accountants, which principle the Company will adopt. Such books shall at any reasonable time be available for examination by either Member, or Persons acting on its behalf, at the sole expense of such Member.

8.7 Financial Statements.

8.7.1 Within ninety (90) days after the close of each Fiscal Year of the Company there shall be prepared and submitted to each Member the following financial statements, accompanied by the report thereon of the Accountants for the Company:

(i) a balance sheet of the Company as at the end of such Fiscal Year;

(ii) a statement of profit and loss for such Fiscal Year;

(iii) a statement of changes in financial position; and

(iv) a statement of the respective Member Accounts and changes therein for such Fiscal Year.

8.7.2 Within twenty (20) Business Days after the close of each fiscal month the Treasurer will cause to be prepared and given to each Member un-audited financial statements comparable to those referred to in Subsections 8.7(i) and 8.7(ii).

8.8 Cash for Distribution. The Treasurer shall determine, at such times as requested by the Board of Managers, the amount of cash for distribution (“Cash for Distribution”) and shall distribute such Cash for Distribution, if any, to the Members, in accordance with each Member’s respective Percentage Inventory; provided, however, that (a) if any Member has advanced loans to a Delinquent Member, the distributions otherwise payable to the Delinquent Member shall be made to the other Member up to an amount sufficient to repay such loans in full with interest, and (b) if any Member is in default or delinquent in respect of an obligation to the Company, no distribution shall be made to such Member until such default is cured or such delinquent obligation is paid.

8.9 Tax Returns. The Company shall cause to be prepared and timely filed all federal, state and local income tax returns or other returns or statements required by applicable law. The Members shall be afforded an opportunity to review and comment upon each tax return and election of the Company, and for this purpose a final draft of each such return or election shall be distributed to the Members at least fifteen (15) days prior to the anticipated date of filing with the tax authorities concerned. If a Member disagrees with the proposed treatment of any item on a proposed tax return of the Company, then such Member shall give prompt written notice to the other Member(s) and the Company. The parties shall negotiate in good faith to resolve proper treatment of the item; however, failing such agreement the Company shall treat such item in the manner determined by a majority of the Managers. No Member

shall file, or file a notice of, an inconsistent position with respect to any Company tax item pursuant to Code Section 6222(b) or otherwise, or institute proceedings, under Code Sections 6226(b) or 6228(b) or otherwise, without first notifying the other Members and the Company of such intention and the nature of the proceeding.

The Company shall ensure that all workpapers related to the preparation of the Company’s federal, state, and local tax returns for any tax year are retained by the Company for a period of not less than ten (10) years after the due date for filing (including extensions) the Company’s annual or short period tax return or the period such records remain relevant with respect to open tax years of the Members, if longer. The Company shall provide each Member with an opportunity, at the expense of such Member, to obtain a complete set of such workpapers or true and accurate photocopies of such workpapers prior to their destruction. Upon the dissolution of the Company, the rights of the Company to obtain such workpapers (if retained by outside preparers) shall pass to each former Member.

8.10 Code Section 754 Election. In the event a distribution of Company assets occurs which satisfies the provisions of § 734 of the Code or in the event a transfer of an Interest occurs which satisfies the provisions of § 743 of the Code, absent an election by the Members to the contrary, the Company shall elect, pursuant to § 754 of the Code, to adjust the basis of the Company’s property to the extent allowed by such §§ 734 or 743 and shall cause such adjustments to be made and maintained.

8.11 Tax Matters Member. The Company shall not elect, pursuant to § 6231(a)(1)(B)(ii) of the Code, to have Section 6231(a)(1)(B)(i) of the Code not apply to the Company until otherwise determined by the Members. If the Members subsequently determine to elect to have this provision apply to the Company, then the parties shall agree upon who shall serve as the “Tax Matters Member” of the Company under the Code.

The Tax Matters Member shall be entitled to reimbursement for any and all reasonable expenses incurred with respect to any administrative and/or judicial proceedings affecting the Company.

The Tax Matters Member shall incur no liability to the other Member(s) to the extent it acts in good faith in connection with its role as Tax Matters Member or otherwise in connection with the Tax Matters Member’s activities in representing the Company with respect to tax matters, and the other Member agrees to cooperate with the Tax Matters Member’s efforts to comply with the applicable provisions of the Code and the Treasury Regulations thereunder. The Company (and to the extent the Company resources are insufficient therefore, the other Member(s)) agrees to indemnify the Tax Matters Member with respect to any liabilities or costs the Tax Matters Member may incur in connection with its activity as Tax Matters Member of the Company, except in the case of fraud or willful misconduct of the Tax Matter Member. The Tax Matters Member may resign upon thirty (30) days notice to the other Member(s).

8.12 Deposits and Investments. The funds of the Company shall be deposited in the name of the Company in accounts designated by the Board of Managers in banks or banking institutions to be selected by the Board of Managers or invested in such manner as shall be authorized by the Board of Managers. The Board of Managers shall prescribe such procedures as its shall deem necessary with respect to making such investments.

ARTICLE IX

TRANSFERS OF INTERESTS

9.1 General. No Member may sell, transfer, assign, give, mortgage, alienate, pledge, hypothecate or otherwise encumber or dispose of all or any part of such Member’s Interest, except as provided in this Agreement or except with the written consent of the other Member; provided, however, that such consent shall not be unreasonably withheld in the event that a Member intends to assign such Member’s Interest to an Affiliate. Any purported encumbrance or disposition of an Interest in violation of the terms of this Agreement shall be null and void and of no legal effect whatsoever.

9.2 Right of First Refusal. If in accordance with Section 9.1.1a Member obtains consent (“Selling Member”) to transfer any or all of its Interest to a third party pursuant to a bona fide offer to purchase such Interest for cash, the following shall apply:

9.2.1 The Selling Member shall submit to the other Member (the “Other Member”) a copy of the written offer, the name of the proposed purchaser, the price and payment terms and other terms and conditions of the third party offer (the “Offer”).

9.2.2 The Other Member shall have thirty (30) days from receipt of the Offer to accept the terms and conditions set forth in the Offer, by giving written notice thereof to the Selling Member. Failure to give notice of acceptance as required shall be deemed to be a rejection of the Offer.

9.2.3 If the Other Member agrees to purchase the Selling Member’s Interest, then the Selling Member and the Other Member shall close the purchase upon the terms and conditions of the Offer within ninety (90) days after the Offer is made (or later, if consistent with the closing date set forth in the Offer or if required by law).

9.2.4 If the Other Member rejects the terms and conditions set forth in the Offer, the Selling Member shall have the right to consummate the sale or conveyance of its Interest so long as (i) the purchaser is the proposed purchaser named in the Offer, (ii) the price, payment and other terms are at least as favorable to the Selling Member as those set forth in the Offer, and (iii) the closing occurs no more than ninety (90) days from when the Member is first notified of the Offer.

9.3 Reasonableness of Restrictions. Each Member acknowledges and agrees that the restrictions on the transfer of interests herein are reasonable in view of the purpose and intent of the Members.

9.4 Certain Encumbrances Permitted. Anything in this Agreement to the contrary notwithstanding, any Member (and the Affiliates of any Member) may encumber all or part of such Member’s Share to the extent and in the manner which may be required pursuant to financing agreements contemplated by Section 8.3.

ARTICLE X

DISSOLUTION AND TERMINATION

10.1 Events Causing Dissolution. This Agreement shall be terminated and the Company shall be dissolved upon the first to occur of the following events:

10.1.1 the expiration of the term of the Company;

10.1.2 the unanimous written agreement of the Members to terminate this Agreement and to dissolve the Company;

10.1.3 the election by a Member to terminate and dissolve the Company (the “Election to Terminate”) in the event of a Cargill Change in Control or a CHS Change in Control;

10.1.4 the sale, abandonment or disposal by the Company of all or substantially all of its assets not in the ordinary course of business;

10.1.5 the Company or either Member shall (i) file a petition in bankruptcy, (ii) petition or apply to any tribunal for the appointment of a receiver or any trustee for it or a substantial part of its assets, (iii) commence any proceeding under any bankruptcy, reorganization, arrangement, readjustment of debt, dissolution or liquidation law or statute of any jurisdiction, whether now or hereafter in effect, or (iv) make an assignment for the benefit of creditors or take any other similar action for the protection or benefit of creditors; or if there shall have been filed any such petition or application, or any such petition shall have been commenced against it, in which an order for relief is entered or which remains un-dismissed for a period of forty-five (45) days or more; or the Company or either Member by any act or omission shall indicate its consent to, approval of or acquiescence in any such petition, application or proceeding or order for relief or the appointment of a receiver or any trustee for it or any substantial part

of any of its properties, or shall suffer any such receivership or trusteeship to continue un-discharged for a period of forty-five (45) days or more;

10.1.6 if all or any portion of the Member’s Interest is levied upon or attached (other than by the other Member) in any proceeding, including any suit in equity, action at law or other judicial, arbitral or administrative proceeding, and that levy or attachment is not vacated or discharged within sixty (60) days after the date on which it is made;

10.1.7 if a Member becomes subject to any legal incapacity affecting its right or power to participate in the Company or if there is an attempted or purported voluntary or involuntary sale, transfer, conveyance, pledge or disposal, whether direct or indirect, of the Members Interest, except in compliance with Section 9.1;

10.1.8 an entry of a decree of judicial dissolution against the Company;

10.1.9 excluding termination in accordance with Sections 10.1.1 through 10.1.8 above, the Election to Terminate by either Member for any reason or no reason whatsoever during the Initial Term or any Renewal Term; provided, however, that (i) the Member desiring to terminate the Company in accordance with this Section 10.1.9 must provide an Election to Terminate at least three years prior to such termination and dissolution; (ii) neither Member may provide an Election to Terminate during the first ten (10) years from the Effective Date; and (iii) that the Member desiring to terminate early pays termination damages to the other Member of fifty million dollars ($50,000,000) (an “Early Termination Damages”). Cargill and CHS acknowledge and agree that the Early Termination Damages are not a penalty but, rather, constitute liquidated damages as a result of early termination in accordance with this Section 10.1.9 and are an amount that Cargill and CHS do both agree is reasonable in light of the anticipated or actual harm suffered by the non-terminating Member in such event, the difficulties of proof of loss, and the inconvenience or non-feasibility of otherwise obtaining an adequate remedy;

10.1.10 except as otherwise agreed upon in this Agreement, any other event causing dissolution of the Company under the provisions of the Act.

10.2 Effect of Dissolution. Except as otherwise provided in this Agreement, upon the dissolution of the Company, the Board of Managers shall take such actions as may be required pursuant to the Act and shall proceed to wind up, liquidate and terminate the business and affairs of the Company. In connection with such winding up, the Board of Managers shall have the authority to liquidate and reduce to cash (to the extent necessary or appropriate) the Property of the Company as promptly as is consistent with obtaining a Fair Value therefore, to apply and distribute the proceeds of such liquidation and any remaining Property (“Liquidation Proceeds”) in accordance with the provisions of Section 4.2, and to do any and all acts and things authorized by, and in accordance with, the Act and other applicable laws for the purpose of winding up and liquidation.

10.2.1 All accounting on termination shall be done by the Accountants, and any determination made by the Accountants as to accounting matters shall be binding upon the Members.

10.2.2 The Board of Managers shall determine the disposition of any other matter in connection with the sale and distribution of Property. If the Board of Managers cannot agree as to those matters, those matters shall be determined in accordance with Article XIII.

10.2.3 Each Member shall pay to the Company all amounts owing by such Member to the Company.

10.2.4 In conjunction with dissolution and liquidation of the Company:

(a) Cargill shall pay to the Company the then book value (net of accumulated depreciation) of all capital improvements and/or repairs made by the Company to the Tacoma Facility and which have been authorized by the Company’s Board of Managers.

(b) Cargill shall pay to the Company the then book value (net of accumulated depreciation) of all capital improvements and/or repairs made by the Company to the Irving Facility and which have been authorized by the Company’s Board of Managers.

(c) CHS shall pay to the Company the then book value (net of accumulated depreciation) of all capital improvements and/or repairs made by the Company to the Kalama Facility and which have been authorized by the Company’s Board of Managers.

(d) Cargill shall pay to the Company the then book value (net of accumulated depreciation) of all capital improvements and/or repairs made by the Company to the Houston Facility and which have been authorized by the Company's Board of Managers.

(e)

10.3 Put-through Agreement. Upon dissolution of the Company pursuant to Subsection 10.1.1, 10.1.2, 10.1.3, 10.1.4 or 10.1.5, Cargill and CHS shall enter into a put-through agreement giving CHS the right to access the Tacoma Facility, the Irving Facility and Houston Facility for put-through of Feedgrains and Oilseeds for the balance of the term of Cargill’s lease of the Tacoma Facility (including any extensions, renewals or amendments thereof) at market put-through rates and Cargill and CHS shall enter into a put-through agreement giving Cargill the right to access the Kalama Facility for put-through of Feedgrains, Wheat and Oilseeds for the balance of the term of CHS’s lease of the Kalama Facility (including any extensions, renewals or amendments thereof) at market put-through rates. The put-through agreement shall be substantially in accordance with the terms of the Put-Through Agreement attached hereto as Exhibit 10.3.

ARTICLE XI

CONFIDENTIALITY AND INTELLECTUAL PROPERTY OWNERSHIP

11.1 Confidentiality. During the term of this Agreement, the Members may exchange certain Confidential Information with one another; and also, each Member may exchange certain Confidential Information with the Company. “Confidential Information” shall mean all information of either Member or the Company, that is not generally known to the public, whether of a technical, business or other nature (including, without limitation, inventions, trade secrets, know-how and information relating to the customers, business plans, promotional and market activities, finances and other business affairs of such party) that is disclosed by a Member, or the Company, (the “Disclosing Party”) to a Member, or the Company, (the “Receiving Party”) in furtherance of this Agreement.

11.2 Non-Disclosure and Non-Use. The Receiving Party agrees to treat as secret and hold in strict confidence all Confidential Information it receives from a Disclosing Party under this Agreement. The Receiving Party agrees that it will not disclose any Confidential Information to any third party without the prior written permission of the Disclosing Party (or as otherwise specifically provided in this Agreement). The Receiving Party also agrees that it will only use the Confidential Information received under this Agreement as specifically provided herein and in furtherance of this Agreement. In the event a Receiving Party is required by court order, or by law or legal process, to disclose Confidential Information of a Disclosing Party, the Receiving Party shall inform the Disclosing Party in writing prior to making such disclosure to provide sufficient time to request a protective order or other appropriate measure, and the Receiving Party will disclose only such information that is legally required and will use its reasonable best efforts to obtain confidential treatment for any Confidential Information that is so disclosed.

11.3 Exclusions to Confidential Information. Confidential Information shall not include information that (a) was in the public domain, in its entirety in a unified form, at the time of disclosure to the Receiving Party; (b) was known by the Receiving Party prior to its disclosure by the Disclosing Party; (c) becomes part of the public domain after the date of disclosure by the Disclosing Party through no fault of the Receiving Party; or, (d) is disclosed by a third party to the Receiving Party after the date of disclosure by the Disclosing Party, where the third party did not require the Receiving Party to hold such information in confidence and did not acquire such information directly or indirectly from the Disclosing Party;

11.4 Ownership. Except as otherwise specifically provided in this Agreement, all rights to Confidential Information, trade secrets, know-how, inventions, patents, patents pending, copyrights, trademarks, and tradenames (hereinafter, “Intellectual Property”) owned by a Member shall be fully retained by that Member and no rights or licenses are provided the other Member or the Company. In the event that the Company develops any Intellectual Property based upon a Member’s Intellectual Property, the new Intellectual Property shall be owned by that Member with a non-exclusive, royalty-free, non-transferable, perpetual, worldwide license being granted to the Company for use of the new Intellectual Property consistent with the Business Purpose. In the event that the Company develops any Intellectual Property that is not based upon the Intellectual Property of a Member, the new Intellectual Property shall be owned by the Company with a non-exclusive, royalty-free, non-transferable, perpetual, worldwide license being granted to each Member.

11.5 Survival. The provisions of this Article X shall survive the dissolution and liquidation of the Company and the termination of this Agreement for a period of three (3) years.

ARTICLE XII

REPRESENTATIONS, WARRANTIES AND COVENANTS

12.1 Representations and Warranties. Each Member represents and warrants to the other Member that:

(a) it is a corporation duly organized, validly existing, and in good standing under the laws of the jurisdiction of its incorporation;

(b) it is duly licensed or qualified to do business and in good standing in each of the jurisdictions in which the failure to be so licensed or qualified would have a material adverse effect on its financial condition or its ability to perform its obligations under this Agreement;

(d) neither the execution, delivery, and performance of this Agreement, nor the consummation by it of the transactions contemplated by this Agreement, will:

(i) conflict with, violate, or result in a breach of any of the terms, conditions, or provisions of any law, regulation, order, writ, injunction, decree, determination, or award of any court, any governmental department, board, agency, or instrumentality, domestic or foreign, or any arbitrator, applicable to it;

(ii) conflict with, violate, result in a breach of, or constitute a default under any terms, conditions, or provisions of its articles of incorporation, bylaws, or operating agreement, or of any material agreement or instrument to which it is a party or by which it is or may be bound or to which any of its material properties or assets is subject;

(iii) conflict with, violate, result in a breach of, constitute a default under (whether with notice or lapse of time or both), accelerate or permit the acceleration of the performance required by, give to others any material interests or rights, or require any consent, authorization or approval under any indenture, mortgage, lease agreement, or instrument to which it is a party or by which it may be bound; or

(iv) result in the creation or imposition of any lien upon any of its material properties or assets;

(e) any registration, declaration or filing with, or consent, approval, license, permit or other authorization or order by, any governmental or regulatory authority, domestic or foreign, that is required in connection with the valid execution, delivery, acceptance and performance by it of this Agreement or its consummation of any transaction contemplated by this Agreement has been completed, made or obtained on or before the effective date of this Agreement;

(f) except as set forth on Exhibit 12.1(f), there are no actions, suits, proceedings or investigations pending or, to its knowledge, threatened against or affecting it or any of its properties, assets, or businesses in any court or before or by any governmental department, board, agency, or instrumentality, domestic or foreign, or any arbitrator which could, if adversely determined (or, in the case of an investigation could lead to any action, suit, or proceeding, which if adversely determined could) reasonably be expected to materially impair its ability to perform its obligations under this Agreement or to have a material adverse effect on its financial condition, and it has not received any currently effective notice of any default, under any applicable order, writ, injunction, decree permit, determination, or award of any court, any governmental department, board, agency or instrumentality, domestic or foreign, or any arbitrator which could reasonably be expected to materially impair its ability to perform its obligations under this Agreement or to have a material adverse effect on its financial condition;

(g) neither it nor any of its Affiliates is, nor will the Company as a result of it holding an interest in the Company be, an “investment company” as defined in, or subject to regulation under, the Investment Company Act of 1940; and

(h) it is acquiring its interest in the Company based upon its own investigation, and the exercise by it of its rights and the performance of its obligations under this Agreement will be based upon its own investigation, analysis and expertise, and its interest in the Company is being made for its own account for investment, and not with a view to its sale or distribution.

12.2 Covenants. Each Member covenants that it shall:

(a) except as otherwise is provided in this Agreement, not (i) sell, assign, transfer, mortgage, encumber or dispose of any part of its Interest, or (ii) consent to the imposition or permit to exist any lien or charge upon all or any portion of its Interest, except for liens in favor of the other Member under this Agreement and liens for taxes which either are not yet due or are being contested in good faith by appropriate proceedings;

(b) cause to be executed and delivered such instruments as the other Member or the Board of Managers reasonably requests in order to carry out the Company’s purposes or to give effect to the terms of this Agreement; and

(c) assist the Company in preparing any tax returns which Company is responsible for preparing, cooperate fully in preparing for any audits of or disputes with taxing governmental authorities relating to the transaction set forth in this Agreement, and make available to the Company and other Member(s) such reasonably requested information, records and documentation relating to and necessary to prepare tax returns or respond to audit requests.

ARTICLE XIII

RESOLUTION OF DISPUTES

13.1 Resolution of Controversies. Any dispute, controversy or claim between the Members arising from this Agreement or the performance thereof shall be settled solely by arbitration in accordance with the provisions of Section 13.2.

13.2 Method of Arbitration. The arbitration shall be effected by arbitrators selected as hereinafter provided and shall be conducted by the American Arbitration Association in Minneapolis, Minnesota applying the Commercial Arbitration Rules then in effect on the date thereof. The dispute shall be submitted to three arbitrators, each of whom shall have had at least five (5) years’ experience in connection with the Business of the Company, one arbitrator being selected by the Member submitting the controversy or dispute to arbitration, the second arbitrator being selected by the other Member and the third arbitrator being selected by the two arbitrators so selected. Conditions of any such arbitration shall include (a) that the arbitrators shall not have the authority to modify, amend or supplement the terms of this Agreement, and shall interpret this Agreement strictly in accordance with its terms; (b) that the amount of capital required to be contributed by a Member to the Company shall not be increased; and (c) that the Member submitting such controversy or dispute to arbitration shall appoint its arbitrator

within fifteen (15) Business Days after the date of such submission. The failure of the Member requesting arbitration to timely appoint such arbitrator shall void the effectiveness of the notice of submission of the matter to arbitration. The second arbitrator to be selected by the other Member as hereinbefore provided shall be selected within fifteen (15) Business Days after receipt of notice by such Member of the selection of the submitting arbitrator and, if the second arbitrator is not so selected, the determination of the single arbitrator selected by the submitting Member shall be binding and conclusive. If the non-submitting Member shall have timely selected the second arbitrator, then the two selected arbitrators shall select the third arbitrator within five (5) Business Days following the selection of the second arbitrator. The meetings of the arbitrators shall be held at such place or places as may be agreed upon by the arbitrators, and each Member shall bear the cost of the fees and expenses of the arbitrator selected by or for it, with the fees and expenses of the third arbitrator to be borne equally. Upon making any order or award, which order may include an order to dissolve the Company pursuant to the provisions of Article X, the arbitrators shall retain jurisdiction to determine any subsequent claim that a defaulting Member has failed to comply with terms of any such order or award. The arbitrators shall have no authority to impose a fine or penalty.

ARTICLE XIV

DEFAULT UNDER INDEMNITY

14.1 Right of Offset; Payment to non-defaulting Member. If a Member is in default under its indemnity obligation, to the extent such default may be cured by the payment of money, the Company may, and shall at the request of the non-defaulting Member, offset against the defaulting Member’s interest in and to the Company, and under this Agreement, including all of the present and future rights to any profits, payments, distributions, or other rights to payment arising under or in connection with this Agreement (the “Member’s Interest”) such obligation of the defaulting Member. If the non-defaulting Member incurs such loss, the non-defaulting Member shall be entitled to receive all subsequent distributions, payments or rights to payment arising out of the Member’s Interest of the defaulting Member until the non-defaulting Member has recovered the full amount of its loss together with interest at the rate of 2% in excess of the prime rate.

14.2 Prohibition on Liens or Transfer of Member’s Interest. Neither Member will transfer or assign, grant a security interest in or otherwise dispose of its respective interests in and to its Member’s Interest and will maintain its Member’s Interest free and clear of all liens, claims and security interests whatsoever.

ARTICLE XV

MISCELLANEOUS

15.1 Related Party Transactions. Any contract, commitment or understanding between the Company and any Member or an Affiliate (“Related Party Transactions”), shall be on terms and conditions that are as competitive as would be found in a similar contract, commitment or understanding entered into by unrelated third parties on an arms-length basis.

15.2 Additional Members. Additional Members may be admitted to the Company only upon the written consent of all Members and upon such terms and conditions as such consent may specify.

15.3 Nature of Interest in the Company. A Member’s Interest shall be personal property for all purposes.

15.4 Organizational Expenses. The Company shall pay all organization expenses incurred, if any, in connection with this Agreement. Such expenses may be paid directly by the Company or may be reimbursed by the Company to the Members.

15.5 Notices. Any notice, demand, request, call, offer or other communication required or permitted to be given by this Agreement shall be sufficient if in writing and if hand delivered or sent by overnight mail or facsimile to the address and representative of the Member as follows:


If to Cargill:			With a copy to:
Cargill, Incorporated			Cargill, Incorporated
15407 McGinty Road West			15407 McGinty Road West
Wayzata, Minnesota 55391-2399			Wayzata, MN 55391-5624
Attention: Grain & Oilseeds Supply Chain NA			Attention: Grain & Oilseeds Supply Chain NA
Fax: (952) 742-7242			Fax: (952) 742-6349

If to CHS:			With a copy to:
CHS Inc.			CHS Inc.
5500 Cenex Drive			5500 Cenex Drive
Inver Grove Heights, MN 55077			Inver Grove Heights, MN 55077
Attention: Vice President, Aligned Grain			Attention: Legal Department
Fax : (651) 355-4554			Fax: (651) 355-4554

or to such other address(es) or representative(s) as either Member may designate to the other Member in writing. All mailed notices shall be deemed to be given when deposited in the United States mail, postage prepaid.

15.6 Waiver of Default. No consent or waiver, express or implied, by the Company or a Member with respect to any breach or default by another Member hereunder shall be deemed or construed to be a consent or waiver with respect to any other breach or default by such Member of the same provision or any other provision of this Agreement. Failure on the part of the Company or a Member to complain of any act or failure to act of another Member or to declare such other Member in default shall not be deemed or constitute a waiver by the Company or the Member of any rights hereunder.

15.7 No Third Party Rights. None of the provisions contained in this Agreement shall be for the benefit of or enforceable by any third parties, including creditors of the Company.

15.8 Integration. This Agreement, together with the Certificate of Formation, contains the entire Agreement between the Members, in such capacity, relative to the formation, operation and continuation of the Company and this Agreement shall not be altered, modified or changed except by a written document duly executed by the Members at the time of such alteration, modification or change.

15.9 Severability. In the event any provision of this Agreement is held to be illegal, invalid or unenforceable to any extent, the legality, validity and enforceability of the remainder of this Agreement shall not be affected thereby and shall remain in full force and effect and shall be enforced to the greatest extent permitted by law.

15.10 Binding Agreement. Subject to the restrictions on the disposition of Interests herein contained, the provisions of this Agreement shall be binding upon, and inure to the benefit of, the Members and their respective heirs, personal representatives, successors and permitted assigns.

15.11 Headings. The headings of the Articles and Sections of this Agreement are for convenience only and shall not be considered in construing or interpreting any of the terms or provisions hereof.

15.12 Counterparts. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original and all of which shall constitute one (1) agreement that is binding upon the Members, notwithstanding that all Members are not signatories to the same counterpart.

15.13 Limitation of Damages. In no event shall either Member be liable for the punitive, incidental or consequential damages, or loss of profit, suffered by the other Member except to the extent any such damage or loss arises pursuant to Section 7.6.

15.14 Governing Law. Except as otherwise specifically provided herein, this Agreement shall be governed by and construed in accordance with the laws of Minnesota without giving effect to the choice of law principles of the State of Minnesota that would result in the application of the laws of another jurisdiction.

15.15 Commercial Efficacy. The Members shall take all reasonable actions to give commercial efficacy to the terms and conditions of this Agreement and to promote the business of the Company, including, but not limited to, taking or causing the Managers of the Board of Managers appointed by them to take all necessary actions in a timely fashion, in order for the Company to pursue the business contemplated by this Agreement, entering into all the agreements contemplated hereby and any additional agreements or instruments of further assurance, as on advice from legal counsel, the Members shall reasonably deem necessary, and seeking all necessary governmental approvals.

15.16 GAAP Basis. In the event the auditors of the Company are required hereunder to determine the values, accounts, give opinions or make, any other valuation of any nature, the auditors shall employ and apply GAAP consistently unless the context otherwise requires the application of the principles of tax accounting (or differing regulatory rules).

15.17 First Right on Tacoma Facility. In the event Cargill wishes to sell, transfer or assign its lease of the Tacoma Facility to a third party during the term of the Company, Cargill shall provide CHS with thirty (30) days prior written notice of its desire to do so. During such thirty (30) day period CHS shall have the first right to acquire the Tacoma Facility, to the extent Cargill’s lease with the Port of Tacoma entitles Cargill to extend that right to CHS, and the Members shall negotiate in good faith the terms and conditions of such proposed transaction. In the event the Members cannot reach a mutually acceptable agreement for such transaction in the thirty (30) day period, Cargill shall be free to pursue and consummate the sale, transfer or assignment of the Tacoma Facility to and with any third party, provided that such sale, transfer or assignment is on no less favorable terms and conditions to Cargill than the last offer of CHS to Cargill for same and CHS is still willing to agree to such terms and conditions (i.e., Cargill cannot sell, transfer or assign the Tacoma Facility to a third party on terms and conditions less favorable to Cargill than the last offer of CHS to Cargill for same). This section 15.17 shall not apply in the event Cargill is also transferring its Percentage Interest in the Company to a third party.

15.18. First Right on Kalama Facility. In the event CHS wishes to sell, transfer or assign its lease of the Kalama Facility to a third party during the term of the Company, CHS shall provide Cargill with thirty (30) days prior written notice of its desire to do so. During such thirty (30) day period Cargill shall have the first right to acquire the Kalama Facility, to the extent CHS’s lease with the Port of Kalama entitles CHS to extend that right to Cargill, and the Members shall negotiate in good faith the terms and conditions of such proposed transaction. In the event the Members cannot reach a mutually acceptable agreement for such transaction in the thirty (30) day period, CHS shall be free to pursue and consummate the sale, transfer or assignment of the Kalama Facility to and with any third party, provided that such sale, transfer or assignment is on no less favorable terms and conditions to CHS than the last offer of Cargill to CHS for same and Cargill is still willing to agree to such terms and conditions (i.e., CHS cannot sell, transfer or assign the Kalama Facility to a third party on terms and conditions less favorable to CHS than the last offer of Cargill to CHS for same). This section 15.18 shall not apply in the event CHS is also transferring its Percentage Interest in the Company to a third party.

15.19 First Right on Irving Facility. In the event Cargill wishes to sell, transfer or assign its rights to the Irving Facility to a third party during the term of the Company, Cargill shall provide CHS with thirty (30) days prior written notice of its desire to do so. During such thirty (30) day period CHS shall have the first right to acquire the Irving Facility, and the Members shall negotiate in good faith the terms and conditions of such proposed transaction. In the event the Members cannot reach a mutually acceptable agreement for such transaction in the thirty (30) day period, Cargill shall be free to pursue and consummate the sale, transfer or assignment of the Irving Facility to and with any third party, provided that such sale, transfer or assignment is on no less favorable terms and conditions to Cargill than the last offer of CHS to Cargill for same and CHS is still willing to agree to such terms and conditions (i.e., Cargill cannot sell, transfer or assign the Irving Facility to a third party on terms and conditions less favorable to Cargill than the last offer of CHS to Cargill for same). This section 15.19 shall not apply in the event Cargill is also transferring its Percentage Interest in the Company to a third party.

15.20 First Right on Houston Facility. In the event Cargill wishes to sell, transfer or assign its rights to the Houston Facility to a third party during the term of the Company, Cargill shall provide CHS with thirty (30) days prior written notice of its desire to do so. During such thirty (30) day period CHS shall have the first right to acquire the Houston Facility, and the Members shall negotiate in good faith the terms and conditions of such proposed transaction. In the event the Members cannot reach a mutually acceptable agreement for such transaction in the thirty (30) day period, Cargill shall be free to pursue and consummate the sale, transfer or assignment of the Houston Facility to and with any third party, provided that such sale, transfer or assignment is on no less favorable terms and conditions to Cargill than the last offer of CHS to Cargill for same and CHS is still willing to agree to such terms and conditions (i.e., Cargill cannot sell, transfer or assign the Houston Facility to a third party on terms and conditions less favorable to Cargill than the last offer of CHS to Cargill for same). This Section 15.20 shall not apply in the event Cargill is also transferring its Percentage Interest in the Company to a third party.

[SIGNATURE PAGE TO FOLLOW]

IN WITNESS WHEREOF, CHS and Cargill have caused this Agreement to be duly executed as of the date first written above.

MEMBERS:


CARGILL, INCORPORATED						CHS INC



By:_______________________						By:_______________________

Name:_____________________						Name:_____________________

Title:______________________						Title:______________________

EXHIBIT 5.2

Designation of Managers

Cargill’s Managers:

(1) Mike Ricks

(2) Sheryl Wallace

(3) James Walker

CHS’s Managers:

(1)Chris Pothen

(2)Javier Alarcon

(3)Brian Schouvieller

EXHIBIT 10.3

Form of Put-through Agreement (CHS Put-through)

PUT-THROUGH AGREEMENT

THIS Put-Through Agreement, dated _____________________________ by and between CHS INC. (“CHS”), a Minnesota corporation; and CARGILL, INCORPORATED (“Cargill”), a Delaware corporation is made with reference to the following:

WITNESSETH:

WHEREAS, CHS desires to enter into a put through agreement with respect to various commodities to be stored and handled at Cargill’s Irving, Oregon, Tacoma, Washington grain elevators (the “PNW Facilities”) and at Cargill’s Houston grain elevator (the “Houston Facility”, which together with the PNW Facilities are referred to herein the “Facilities”), all as described herein;

NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreement set forth herein, the parties hereto, intending to be legally bound, mutually agree as follows:

1. Services Provided. Cargill agrees to use its elevator facility, office space, personnel and support equipment currently located at the Facilities to provide put through services for CHS in accordance with the terms of this Agreement for corn, sorghum and soybeans. CHS and Cargill may, but shall not be obligated to, agree to the put through of other commodities from time to time.

2. Payment For Services. As consideration for providing the put through services and necessary elevator facilities, office space, personnel and support equipment, Cargill will be paid a put-through fee equal to the fair market put through fee charged by elevators similarly situated for the applicable commodities. The fee shall be established upon commencement of this Agreement and shall be adjusted annually during the term of this Agreement to reflect the then current fair market put through fee. If the parties are unable to agree upon what is the fair market put through fee at the time such fee is to be established or adjusted, either party may submit the matter to the American Arbitration Association in Minneapolis, Minnesota. The decision of the arbitrators shall be binding upon the parties and enforceable in a court of law having jurisdiction over the parties.

3. Operating Expenses. In consideration of payment received hereunder, Cargill will be responsible for all fixed and variable operating expenses with regard to the Facilities (including labor), including, without limitation, depreciation, taxes, insurance, repairs and utilities.

4. Cargill’ Functions. Cargill will be responsible for performing the normal day-to-day functions of the grain elevator business, including, without limitation, weighing, grading and binning inbound grain deliveries and loading outbound shipments.

5. Insurance. Cargill will maintain the property and casualty insurance on the Facilities as it sees fit. CHS shall be responsible for insuring its inventory.

6. Indemnity. CHS, its respective affiliates, officers, directors and employees, successors and assigns shall be indemnified and held harmless by Cargill from any and all liabilities, losses, damages, costs and expenses, interest, awards, judgments and penalties (including, without limitation, reasonable legal costs and expenses) actually suffered or incurred by it to the extent arising out of or resulting from the negligent acts of any of Cargill, its employees or agents hereunder. In no event shall Cargill be liable under this paragraph for CHS’s lost profits, lost business or damage to the goodwill or reputation of CHS; provided, however, that nothing herein shall be construed as limiting Cargill’s liability for, and the preceding limitations shall not apply to, breach of this Agreement.

7. Term. The term of this Agreement with respect to the PNW Facilities shall continue until expiration of the term of the Cargill’s lease of the Tacoma Facility, including any extensions, renewals or amendments thereof. The term of this Agreement with respect to the Houston Facility shall continue for [10 years] after the date this Agreement is signed. Cargill covenants and agrees to keep such lease in full force and effect for the term thereof and covenants and agrees not to voluntarily terminate such lease before its expiration without the prior written consent of CHS. If Cargill sells or otherwise transfers its interest in the Facility, Cargill shall obtain the written agreement of the transferee to be bound by the terms of this Agreement.

8. Miscellaneous Provisions.

8.1 Binding Effect. This Agreement shall be binding on and inure to the benefit of the parties and their heirs, personal representatives, successors, and, to the extent permitted by Section 8.2, assigns.

8.2 Assignment. Except with the other party’s prior written consent, a party may not assign any rights or delegate any duties under this Agreement.

8.3 Notices. Any notice or other communication required or permitted to be given under this Agreement shall be in writing and shall be mailed by certified mail, return receipt requested, postage prepaid, addressed to the parties as follows:


(a) To CHS:			CHS Inc. Attention: Senior Vice President, Grain Marketing 5500 Cenex Drive Inver Grove Heights, MN 55077
with a copy to:			CHS Inc. Attention: Legal Department 5500 Cenex Drive Inver Grove Heights, MN 55077
(b) To Cargill:			Cargill, Incorporated Attention: N.A. Grain President/Lake 15615 McGinty Road West Wayzata, MN 55391-2398
with copies to:			Cargill, Incorporated Attention: Law Department/GOSC-NA Attorney P.O. Box 5624 Minneapolis, MN 55440-5624

Any notice or other communication shall be deemed to be given at the expiration of the day after the date of deposit in the United States mail. The addresses to which notices or other communications shall be mailed may be changed from time to time by giving written notice to the other party as provided in this Section.

8.4 Attorney Fees. If any suit, action or arbitration proceeding is filed by any party to enforce this Agreement or otherwise with respect to the subject matter of this Agreement, the prevailing party shall be entitled to recover reasonable attorney fees incurred in preparation or in prosecution or defense of such suit, action or arbitration proceeding as fixed by the trial court, or the arbitrator(s) and if any appeal is taken from the decision of the trial court or the arbitrator(s), reasonable attorney fees as fixed by the appellate court.

8.5 Amendments. This Agreement may be amended only by an instrument in writing executed by all the parties.

8.6 Headings. The headings used in this Agreement are solely for convenience of reference, are not part of this Agreement, and are not to be considered in construing or interpreting this Agreement.

8.7 Entire Agreement. This Agreement (including the exhibits) sets forth the entire understanding of the parties with respect to the subject matter of this Agreement and supersedes any and all prior understandings and agreements, whether written or oral, between the parties with respect to such subject matter.

8.8 Counterparts. This Agreement may be executed by the parties in separate counterparts, each of which when executed and delivered shall be an original, but all of which together shall constitute one and the same instrument.

8.9 Severability. If any provision of this Agreement shall be invalid or unenforceable in any respect for any reason, the validity and enforceability of any such provision in any other respect and of the remaining provisions of this Agreement shall not be in any way impaired.

8.10 Waiver. A provision of this Agreement may be waived only by a written instrument executed by the party waiving compliance. No waiver of any provision of this Agreement shall constitute a waiver of any other provision, whether or not similar, nor shall any waiver constitute a continuing waiver. Failure to enforce any provision of this Agreement shall not operate as a waiver of such provision or any other provision.

8.11 Gender. Any indication of gender of a party in this Agreement shall be modified, as required, to fit the gender of the party or parties in question.

8.12 Further Assurances. From time to time, each of the parties shall execute, acknowledge, and deliver any instruments or documents necessary to carry out the purposes of this Agreement.

8.13 Time of Essence. Time is of the essence for each and every provision of this Agreement.

8.14 No Third-Party Beneficiaries. Nothing in this Agreement, express or implied, is intended to confer on any person, other than the parties to this Agreement, any right or remedy of any nature whatsoever.

8.15 Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the state of Washington.

8.16 Arbitration. Any controversy or claim arising out of or relating to this Agreement, including, without limitation, the making, performance, or interpretation of this Agreement, shall be settled by arbitration before the American Arbitration Association in Minneapolis, Minnesota.

8.17 Force Majeure. Neither party shall be liable to the other for failure or delay in performance of its obligations by a cause not within its reasonable control, including, but not limited to, acts of God, acts of public disturbance, riots, war, fire, windstorm, flood, strikes, destruction of facilities, or other labor disputes or government intervention, provided, however, that the party experiencing the

force majeure condition shall use commercially reasonable efforts to remove such condition as soon as possible, and upon such removal, the terms of this Agreement shall become fully in effect.

IN WITNESS WHEREOF, the undersigned have executed this Agreement on the date and year first above written.

CHS INC., a Minnesota corporation

By:__________________________________________

Its:__________________________________________

CARGILL, INCORPORATED, a Delaware corporation

By:__________________________________________

Its:__________________________________________

EXHIBIT 10.3

Form of Put-through Agreement (Cargill Put-through)

PUT-THROUGH AGREEMENT

WITNESSETH:

WHEREAS, Cargill desires to enter into a put through agreement with respect to various commodities to be stored and handled at CHS’s Kalama, Washington grain elevator (“Facility”) all as described herein;

NOW, THEREFORE, in consideration of the premises and the mutual covenants and agreement set forth herein, the parties hereto, intending to be legally bound, mutually agree as follows:

1. Services Provided. CHS agrees to use its elevator facility, office space, personnel and support equipment currently located at the Facility to provide put through services for Cargill in accordance with the terms of this Agreement for corn, sorghum and soybeans. Cargill and CHS may, but shall not be obligated to, agree to the put through of other commodities from time to time.

2. Payment For Services. As consideration for providing the put through services and necessary elevator facilities, office space, personnel and support equipment, CHS will be paid a put-through fee equal to the fair market put through fee charged by elevators similarly situated for the applicable commodities. The fee shall be established upon commencement of this Agreement and shall be adjusted annually during the term of this Agreement to reflect the then current fair market put through fee. If the parties are unable to agree upon what is the fair market put through fee at the time such fee is to be established or adjusted, either party may submit the matter to the American Arbitration Association in Minneapolis, Minnesota. The decision of the arbitrators shall be binding upon the parties and enforceable in a court of law having jurisdiction over the parties.

3. Operating Expenses. In consideration of payment received hereunder, CHS will be responsible for all fixed and variable operating expenses with regard to the Facility (including labor), including, without limitation, depreciation, taxes, insurance, repairs and utilities.

4. CHS’ Functions. CHS will be responsible for performing the normal day-to-day functions of the grain elevator business, including, without limitation, weighing, grading and binning inbound grain deliveries and loading outbound shipments.

5. Insurance. CHS will maintain the property and casualty insurance on the Facility as it sees fit. Cargill shall be responsible for insuring its inventory.

6. Indemnity. Cargill, its respective affiliates, officers, directors and employees, successors and assigns shall be indemnified and held harmless by CHS from any and all liabilities, losses, damages, costs and expenses, interest, awards, judgments and penalties (including, without limitation, reasonable legal costs and expenses) actually suffered or incurred by it to the extent arising out of or resulting from the negligent acts of any of CHS, its employees or agents hereunder. In no event shall CHS be liable under this paragraph for Cargill’s lost profits, lost business or damage to the goodwill or reputation of Cargill; provided, however, that nothing herein shall be construed as limiting CHS’s liability for, and the preceding limitations shall not apply to, breach of this Agreement.

7. Term. The term of this Agreement shall continue until expiration of the term of the CHS’s lease of the Facility, including any extensions, renewals or amendments thereof. CHS covenants and agrees to keep such lease in full force and effect for the term thereof and covenants and agrees not to voluntarily terminate such lease before its expiration without the prior written consent of Cargill. If CHS

sells or otherwise transfers its interest in the Facility, CHS shall obtain the written agreement of the transferee to be bound by the terms of this Agreement.

8. Miscellaneous Provisions.

8.2 Assignment. Except with the other party’s prior written consent, a party may not assign any rights or delegate any duties under this Agreement.


(a) To CHS:			CHS Inc. Attention: Senior Vice President, Grain Marketing 5500 Cenex Drive Inver Grove Heights, MN 55077
with a copy to:			CHS Inc. Attention: Legal Department 5500 Cenex Drive Inver Grove Heights, MN 55077
(b) To Cargill:			Cargill, Incorporated Attention: N.A. Grain President/Lake 15615 McGinty Road West Wayzata, MN 55391-2398
with copies to:			Cargill, Incorporated Attention: Law Department/GOSC-NA Attorney P.O. Box 5624 Minneapolis, MN 55440-5624