Wednesday November 7 Ag News

CHS posts record fiscal 2012 earnings of $1.26 billion

CHS Inc., the nation's leading farmer-owned cooperative, today reported record fiscal net income of $1.26 billion for 2012, the first time a U.S. agricultural cooperative has surpassed the $1 billion earnings mark.

Net income of $1.26 billion for the year ending Aug. 31, 2012, increased 31 percent from the $961.4 million reported for fiscal 2011, which was also a record. Largely as a result of increased values for the energy, crop nutrients, grains and other commodities that comprise the majority of the company's business, CHS also set a new mark for revenues at $40.6 billion in fiscal 2012. That figure represents a 10 percent increase from the previous record of $36.9 billion, also set in fiscal 2011.

"The strength of our diverse CHS business portfolio, along with a strong domestic and global footprint, combined in fiscal 2012 to allow us to successfully navigate continued market volatility and deliver record results for the U.S. farmers, ranchers and cooperatives who own us," said Carl Casale, CHS president and chief executive officer. "Continued strong performance has allowed CHS to invest in growing our business, maintain a strong balance sheet and – most important – return direct economic value to those who own this cooperative."

Based on fiscal 2012 earnings, CHS expects to return a record nearly $600 million in cash to its owners during fiscal 2013.

For the fourth quarter of fiscal 2012 (June 1 – Aug. 31, 2012), CHS reported earnings of $360.9 million, compared with $206.5 million for the same period a year ago. Revenues for the fourth quarter of fiscal 2012 were $11.0 billion, compared with $10.6 billion for the final quarter of fiscal 2011.

Strong petroleum refining margins at the company's refineries at Laurel, Mont., and McPherson, Kan., helped drive record performance within the Energy segment which led overall CHS earnings. CHS also reported strong performance for its propane, and transportation businesses, while lubricants and renewable fuels marketing results were behind those of fiscal 2011.

The company's Ag segment earnings were led by record profitability for the CHS Country Operations unit. Earnings for Country Operations – which consists of local retail facilities, livestock nutrition and sunflower processing – were largely due to strong local crop nutrients movement and solid grain volume during fiscal 2012. The overall CHS crop nutrients business also recorded strong performance driven by significant product movement in spring 2012. The company's own grain marketing operations performed well under challenging fiscal 2012 market conditions, while processing and food ingredients results declined largely due to acquisition and investment expenses. Overall Ag segment earnings for fiscal 2012 declined from fiscal 2011 which included a pre-tax gain of $119.7 million on that year's sale of the CHS investment in Multigrain S.A., a Brazil-based joint venture.

CHS reports results for its business services operations, as well as two food processing-related joint ventures under the Corporate and Other heading. CHS own insurance, risk management and financing businesses combined earnings were flat for fiscal 2012. The company recorded strong contributions from its 50 percent ownership of Ventura Foods, LLC, a vegetable oil-based food manufacturing business, as well as from its 25 percent share of Horizon Milling, LLC, the nation's leading wheat miller.



The Andersons Reports Third Quarter Results

The Andersons, Inc. announced third quarter net income attributable to the company of $16.9 million, or $0.90 per diluted share, on revenues of $1.1 billion. In the third quarter of 2011, the company reported results of $10.9 million, or $0.59 per diluted share, on revenues of $939 million. For the first nine months of 2012, the company earned $64.5 million, or $3.43 per diluted share, on revenues of $3.6 billion. In the same period of 2011, The Andersons reported results of $73.4 million, or $3.92 per diluted share, on $3.3 billion of revenues.

The Rail Group achieved record third quarter operating income of $19.1 million on revenues of $60 million. In the same three month period of 2011, the group earned $1.1 million and revenues were $24 million. This quarter, the group recognized $13.5 million in gains on sales of railcars and related leases and non-recourse transactions (where the company continues to provide car management services to the purchaser and typically holds an option to purchase the railcars at the end of the assigned lease). In the third quarter of 2011, the company recognized a gain on similar transactions of $0.7 million. Gross profit from the leasing business was significantly higher due primarily to an increase in the average lease rate. The average utilization rate for the quarter was approximately 84 percent, which is down slightly from 85 percent last year. The rail fleet has increased to approximately 23,400 cars from 22,300 last year. The group's first nine months operating income was $34.3 million on $128 million of revenues. In 2011, operating income through September was $7.4 million and revenues were $82 million. These results include gains similar to those aforementioned of $22.2 million and $7.7 million in 2012 and 2011, respectively.

The Grain Group had operating income of $10.8 million in the third quarter of 2012 versus $8.3 million for the same period last year. The group benefited from an early harvest, which resulted in higher gross profit on sales in comparison to the prior year third quarter. Space income was down considerably, as expected. This was offset by record third quarter earnings from the company's investment in Lansing Trade Group. Revenues for the Grain Group were $677 million and $539 million for the third quarter of 2012 and 2011, respectively. Revenues increased primarily due to an increase in the bushels sold. The Grain Group's operating income for the first nine months of the year was $45.5 million on revenues of $2.1 billion. Last year, its operating income through September was $60.0 million on revenues of $2.0 billion. As announced last week, the group has entered into an agreement to purchase the majority of the grain and agronomy assets of Green Plains Grain Company, LLC, a subsidiary of Green Plains Renewable Energy, Inc. This acquisition includes seven facilities in Iowa and five in Tennessee, with a combined grain storage capacity of approximately 32 million bushels, which increases the group's storage capacity by nearly 30 percent. The Iowa locations also have 30,000 tons of fertilizer storage space.

The Plant Nutrient Group's third quarter operating income was $0.8 million on revenues of $135 million. In the same three month period of 2011, the group had operating income of $6.6 million on revenues of $138 million. Margins in the third quarter were solid; however, in the prior year margins were significantly higher. The group's first nine months' operating income was $34.5 million on $619 million of revenues. Last year, its operating income through September was $35.8 million on revenues of $521 million. Increased revenues this year are due to both increased volume and higher selling prices.

The Ethanol Group had an operating loss of $0.9 million in the third quarter, compared to earnings of $4.4 million during the same period last year. The loss was primarily the result of a decrease in the company's earnings from its ethanol investment affiliates, whose income continues to be significantly impacted by lower ethanol margins that have resulted from increased corn costs and lower ethanol demand. Partially offsetting the group's lower margins are service income and income from co-products such as corn-oil, DDGs, E-85, and CO2. Total revenues for the quarter in 2012 and 2011 were $210 million and $179 million, respectively. Revenues were up due to the addition of the Denison, Iowa facility in May. The group's operating loss through September was $2.9 million on revenues of $528 million. Last year, its nine month operating income was $16.8 million on revenues of $477 million.

The Turf & Specialty Group had an operating loss of $1.6 million in the third quarter on $22 million of revenues. Last year, the group reported an operating loss of $1.2 million on $23 million of revenues for the same period. Through the first nine months of 2012, the group's operating income was $3.4 million on $110 million of revenues. Last year, its operating income was $3.8 million for the same period on revenues of $112 million.

The Retail Group had an operating loss of $1.8 million in the third quarter of 2012 on revenues of $35 million. In the comparable period last year, the group's operating loss was $1.2 million and total revenues were $36 million. Through nine months, the group recorded a loss of $3.1 million and total revenues of $110 million. Last year through September the group lost $2.0 million on total revenues of $112 million.

"We had a great quarter, due in a large part to the exceptional results seen in our Rail Group, which has had record results every quarter this year due to skillful management of its railcar assets," CEO Mike Anderson stated. "We also had good results in the Grain Group, although some of its income has been accelerated due to the early harvest. The Grain Group's performance was impacted by record Lansing Trade Group earnings," added Mr. Anderson. "Our expectations for the remainder of the year still remain tempered by the drought, which will continue to impact our grain and ethanol businesses through the first half of 2013. Our recent acquisitions and capital expansions, however, will pay dividends in the future. These include the acquisition of Mt. Pulaski Products, which was finalized last week, breaking ground on a new, state of the art, railcar blast and paint facility, the recent opening of our Anselmo, Nebraska grain elevator, and the previously mentioned Green Plains Grain Company, LLC acquisition. We will effectively manage through the 2012 drought, as we have to date, and will continue our focus on long term earnings growth," concluded Anderson.



Group to Discuss Missouri River Nov. 14

Flood recovery, appropriate prioritization of flood control in river management and water allocation are the top items on the agenda for the State Interagency Missouri River Authority's Nov. 14 meeting in Council Bluffs, Iowa.

The group will get an update on the continuing dry conditions, and in a related matter, will discuss two U.S. Army Corps of Engineers' reports. One report provides a five-year plan for managing surplus water in the Missouri River system of reservoirs. The other is a report on the corps' start-up efforts to change the permanent allocation of Missouri River water for municipal and industrial use.

The Missouri River Authority is an interagency, interstate group that makes recommendations on policies affecting the Missouri River.

The group will meet from 9 a.m. to 1 p.m. in the Iowa School for the Deaf, Lied Multipurpose Complex, 3501 Harry Langdon Boulevard, Council Bluffs. The meeting is open to the public.

Also on the agenda are updates from the state hydrology work group, the sediment management meeting, the county official coalition and a committee working on the Missouri River Recovery. MidAmerican Energy will discuss its perspective on operation of the river.

The complete agenda is available below and on the state public meetings calendar at www.iowa.gov/state/main/pmc/pmc.php.  



ASA Congratulates President Obama on Second Term, Urges Bipartisan Cooperation

The American Soybean Association (ASA) congratulates President Barack Obama on his reelection as the 44th president of the United States. ASA President Steve Wellman, a soybean producer from Syracuse, Neb., issues the following statement on yesterday’s poll results:

“The American Soybean Association congratulates President Obama on his reelection and looks forward to working with the president and his administration in the interest of America’s soybean farmers. Over the past four years, ASA has worked with the Obama Administration and Agriculture Secretary Tom Vilsack to advance critical priorities for the men and women of the soybean industry, including work toward the passing a comprehensive Farm Bill in 2012, passage of trade agreements, and restoring budgetary responsibility in Washington and nationwide.

“ASA is committed to working with the Obama Administration and Congress to help avoid the fiscal cliff; pass a new comprehensive farm bill to provide certainty to farmers and ranchers; extend current estate tax rates; expand trade opportunities; ensure freedom to operate and avoid needless regulatory burdens; address our nation’s energy needs through biodiesel and bio-based products; and advance new technologies, including biotechnology, both domestically and globally.

"With Democrats continuing to have a majority in the Senate and Republicans continuing to hold a majority in the House, the need for both parties and the President to work to find common ground on the pressing issues important to our country is critical. A hallmark of agricultural policy has always been its bipartisan nature. ASA urges the President as well as members of both the House and Senate return to Washington with a renewed sense of purpose next week, so we can all get back to work serving America’s hard-working families.

“ASA looks forward to working with elected officials on the key issues important to our country and to soybean farmers.”



NCGA Congratulates President Obama on Re-election

National Corn Growers Association President Pam Johnson released the following statement in response to President Barack Obama’s successful re-election:  “The National Corn Growers Association congratulates President Obama on his successful re-election for president of the United States.  Our organization has worked closely with the president and Secretary of Agriculture Tom Vilsack over the past four years on issues important to our members.  We greatly value our relationship with the administration and look forward to continuing that trend.”



Ethanol Industry Congratulates the President, Looks Ahead

Early this morning, Bob Dinnen, President and CEO of Renewable Fuels Assiciation, commented on the 2012 Presidential campaign results.

"U.S. ethanol producers across this nation congratulate President Obama.  Despite the many differences between the candidates and their political supporters, both candidates agreed energy independence was an important national goal.  We are pleased that both candidates publicly supported the Renewable Fuel Standard based on its proven success," Mr. Dinneen said.

"Ethanol has already helped reduce U.S. imports from Persian Gulf oil by 25% since 2000.  We are very proud of the 400,000 American jobs we support across the economy.  This is just the beginning of what biofuels can accomplish and we stand ready and eager to work with the President  to expand the market for biofuels and bring the next generation online."



Weekly Ethanol Production for 11/2/2012

According to EIA data, ethanol production averaged 827,000 barrels per day (b/d) – or 34.73 million gallons daily.  That is up 2,000 b/d from the week before.  The 4-week average for ethanol production stood at 813,000 b/d for an annualized rate of 12.46 billion gallons.

Stocks of ethanol stood at 18.1 million barrels. That is a 5.7% decrease from last week and the lowest of the year. Reported stocks on the East Coast dropped 12.5%, likely the result of Hurricane Sandy-induced terminal outages.

Imports of ethanol showed 60,000 b/d, up slightly from last week.

Gasoline demand for the week averaged 349 million gallons daily.

Expressed as a percentage of daily gasoline demand, daily ethanol production was 9.96%, the highest percentage since late June.

On the co-products side, ethanol producers were using 12.539 million bushels of corn to produce ethanol and 92,296 metric tons of livestock feed, 82,282 metric tons of which were distillers grains.  The rest is comprised of corn gluten feed and corn gluten meal.  Additionally, ethanol producers were providing 4.31 million pounds of corn oil daily.



The Phosphorus Index: Changes Afoot

Phosphorus (P) is both an essential nutrient in agricultural fields and a contributor to poor water quality in surface waters. To encourage improved P management in fields, the P Index was proposed as a risk assessment tool in 1992. After 20 years of use, modifications, and growing pains, does the P Index accurately assess the risk of P loss?

A special section being published next month in the Journal of Environmental Quality addresses that question. The collection of papers grew out of a symposium at the American Society of Agronomy, Crop Science Society of America, and Soil Science Society of America 2011 Annual Meetings. The section acknowledges the problems that have been encountered with P Index development and implementation, such as inconsistencies between state indices, and also suggests ways in which the indices can be tested against data or models to improve risk assessment and shape future indices.

The P Index was proposed in a 1992 symposium after people became aware of the environmental impacts of P loss from fields. Many farmers were applying manure or other biosolids to their fields at rates that over-applied P. Researchers realized that assessing the risk of P loss from those products was important to protect water quality. The P Index tool was needed to connect various conditions because P loss is influenced by both site characteristics (e.g., soil test levels, connectivity to water) and the sources of P applied (e.g., inorganic fertilizer, organic sources). It was therefore a great improvement over the use of agronomic soil testing for P risk assessment.

"The objective of the original P Index was to identify fields that had high risk of P loss and then guide producers' decisions on implementing best management practices," says Nathan Nelson, ASA and SSSA member and co-author of the special section's introductory paper. "The P Index has developed into a widely used tool to identify appropriate management practices for P application and fields suitable for such application."

The original 1993 paper by Lemunyon and Gilbert laid out three short-term objectives for the P Index: 1) to develop a procedure to assess the risk for P leaving a site and traveling toward a water body; 2) to develop a method of identifying critical parameters that influence P loss; and 3) to select management practices that would decrease a site's vulnerability to P loss.

These objectives were to be met using fairly simple calculations that took into account both source factors and transport factors. Source factors included levels of P in the soil, rates of P fertilization, and methods or timing of P addition. Features such as soil erosion, runoff, and distance to streams composed the transport factors.

"P loss is high when you have both a lot of P present and an easy transport pathway," explains Nelson. "The index has been designed to evaluate the interaction between these different factors."

Because the P Index can be used to guide conservation practices, the USDA-National Resource Conservation Service (NRCS) adopted it as part of their management planning process. The NRCS, then, left it up to each state to develop their own P Index best suited for their environments and concerns.

"The P Index was meant to be something that could be easily computed with readily available data, so an NRCS agent would be able to obtain the necessary inputs," says Nelson. "But there are many different factors that influence P loss as you move from one physiographic region to the next. The differences in transport processes, soils, and landscapes in each state have led to 48 different versions of the P Index, and some of them are very different."

The inconsistencies of indices across states, along with a perceived lack of improvement in water quality in some regions, are now bringing the accuracy of the P Index into question. With different calculations in place, a set of factors may be categorized as low risk in one state and medium, or even high, risk in another. These discrepancies become especially obvious along state borders.

Researchers understand the need to improve P indices and have made it a priority to base any changes on sound scientific data. Efforts to preserve, evaluate, and improve the P index led the NRCS to release a Request for Proposals within the Conservation Innovation Grant Program. Three regional efforts were funded to evaluate and improve the indices in the Heartland, the Southern State, and the Chesapeake Bay regions of the U.S. Additionally, a national coordination project and two other state-level efforts (Ohio and Wisconsin) were recently funded through the Conservation Innovation Program.

While the final suggestions for the next generation of the P Index are likely a few years off, the research is currently underway. Due to variations in regional characteristics and the problems previously encountered by state boundaries, it is likely that suggestions for improved indices will be based on regional distinctions, Nelson says. The objective is that the evaluations will lead to optimized P indices and better management tools that accurately incorporate site and source characteristics to predict the risk of P loss from fields.




California Rejects GM Food Label -- Prop 37

California voters Tuesday rejected a proposal to force food companies to label products containing genetically modified ingredients, officials said, based on a majority of votes.  California rejected Proposition 37--which would have been a first for a U.S. state--with 54% against and 46% in favor, the California Secretary of State's website said, declaring the proposal rejected.



China Soybean Imports to Grow 5%-6% Annually Next 5 Years

China's imports of soybeans are expected to grow at a much slower pace in the next five years, as growth for feedmeal and edible oil demand will slow, an executive from China Grain Reserves Corp., or Sinograin, said Wednesday.

Soybean imports by China, the world's largest importer, will likely increase by 3 million-4 million metric tons annually in the next five years, representing average annual growth of 5%-6%, Chen Xuecong, vice general manager of the company's edible oil unit, told an industry conference in Guangzhou. His remarks are published on Sina.com.cn.

This compared with double-digit growth recorded in the past few years. In the first nine months of this year, China imported 44.3 million tons of soybeans, up 18% on year. The country's soybean imports in 2011 fell 3.9% compared with 2010. Soybean imports in 2010 rose 29% from 2009, when soybean imports grew 14% from 2008.

The company is the government stockpiler of grain and oilseeds.

Chen also expects China's demand for feedmeal to grow 4%-5% annually in the next five years, slower compared with the last five years.

China's government reserves of soybeans and rapeseed oil are ample, Chen said, adding the government is able to keep edible oil prices stable.



Aussie Wheat Surplus Might End by April

Surplus wheat for exports in Australia's eastern states of New South Wales, Victoria and Queensland is expected to be almost exhausted by April, pushing up futures to a significant premium to Chicago Board of Trade prices, ANZ Banking Group forecast Wednesday.

Australia's wheat output in the current marketing year that started Oct. 1 is forecast around 20 million metric tons, down from 29 million tons in 2011-12, the group said in a report.

Production in the eastern states is likely to total around 10 million tons in 2012-13, and after accounting for local consumption of 5 million tons, the rest is available for export, the group's senior agricultural economist, Paul Deane, told Dow Jones Newswires.

Eastern states already have a strong export pipeline and are shipping out around 1 million tons of wheat each month, Mr. Deane said, adding that domestic prices may rise above export rates, which would ensure that local users have enough supply until the next harvest in November 2013.



Majority of consumers and growers are confident agriculture can increase productivity while practicing stewardship

A majority of consumers and growers agree that modern agriculture can achieve two critical goals simultaneously: Feed the world’s growing population while demonstrating responsible stewardship.

More than 80 percent of the growers and nearly 70 percent of the consumers who participated in a recent BASF survey were confident that growers will be able to strike a balance between producing enough food for the planet and preserving it for future generations. “Technology and knowledge advancements” were cited by both groups as the primary reasons for their confidence.

“Technology is and will continue to be the number one driver behind our ability to meet the demands of a growing population in a way that stewards resources,” said Paul Rea, Vice President, U.S. Crop Operations, BASF. “We know there is no room for failure—we have to make it happen. This is what drives our commitment to invest $2 million a day in research and development on innovations that will help growers preserve the land and maximize yields.”

According the growers surveyed, these vital capabilities are growing. When asked if stewardship efforts in agriculture have improved over the last few years, 85 percent of the growers surveyed agreed. That’s nearly a 10-percent increase in positive responses from a BASF survey conducted two years ago.

“This growth in confidence behind agriculture parallels the growth in the number of innovations that the industry continues bringing to the market,” said Rea. “BASF will introduce more than 30 new products by 2015, helping growers produce higher quality crops and more output.”

The survey indicated that for farmers, stewardship is an intrinsic belief that is a constant among growers. Every one of the 350 growers surveyed agreed that their peers care about the environment.

“The land is my livelihood,” said one grower who participated. “If I ruin it, I am out of business.”

Consumers believe that high quality crops and more output should be a farmer’s top priority. “We’re proud of the role BASF has played in helping growers get the most out of every acre,” said Rea. “Our leadership in Advanced Weed Control helps growers fight yield-robbing weeds. And, through our commitment to Plant Health, we’re helping growers control diseases while increasing growth efficiency and stress tolerance. All of these things work together to maximize yield potential and quality, in ways that will continue moving forward to meet the challenges of feeding a growing population.”

The survey regarding the confidence in agriculture was conducted among 400 consumers and 360 growers in 2012.