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Table of Contents

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, 2021
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 o | Accelerated filer o | 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.

TABLE OF CONTENTS

| PART I. FINANCIAL INFORMATION | Page No.
Item 1. | Financial Statements (unaudited) | 2
| Condensed Consolidated Balance Sheets as of May 31, 2021, and August 31, 2020 | 2
| Condensed Consolidated Statements of Operations for the three and nine months ended May 31, 2021 and 2020 | 3
| Condensed Consolidated Statements of Comprehensive Income for the three and nine months ended May 31, 2021 and 2020 | 4
| Condensed Consolidated Statements of Cash Flows for the nine months ended May 31, 2021 and 2020 | 5
| Notes to Condensed Consolidated Financial Statements | 6
Item 2. | Management's Discussion and Analysis of Financial Condition and Results of Operations | 26
Item 3. | Quantitative and Qualitative Disclosures About Market Risk | 53
Item 4. | Controls and Procedures | 53
| PART II. OTHER INFORMATION | 54
Item 1. | Legal Proceedings | 54
Item 1A. | Risk Factors | 54
Item 6. | Exhibits | 55
Signatures | 56

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, 2021.
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 year ended August 31, 2020, and Item 1A of Part II of CHS Quarterly Report on Form 10-Q for the quarterly period ended May 31, 2021. 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 impact of the ongoing COVID–19 outbreak or other similar outbreaks; 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; 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 and casualty losses; the impact of workforce factors; our funding needs and financing sources; changes in the method of determining, or the replacement of, LIBOR; 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; the impairment of long–lived assets; 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 publicly 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.
1

Table of Contents
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
CHS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)

| May 31, 2021 |  | August 31, 2020
| (Dollars in thousands)
ASSETS |  |  |
Current assets: |  |  |
Cash and cash equivalents | $ | 301,230 |  |  | $ | 140,874 |
Receivables | 3,191,478 |  |  | 2,366,047 |
Inventories | 3,513,871 |  |  | 2,742,138 |
Other current assets | 1,896,796 |  |  | 1,017,488 |
Total current assets | 8,903,375 |  |  | 6,266,547 |
Investments | 3,763,936 |  |  | 3,630,033 |
Property, plant and equipment | 4,827,076 |  |  | 4,957,938 |
Other assets | 1,106,239 |  |  | 1,139,429 |
Total assets | $ | 18,600,626 |  |  | $ | 15,993,947 |
LIABILITIES AND EQUITIES |  |  |
Current liabilities: |  |  |
Notes payable | $ | 2,776,812 |  |  | $ | 1,575,491 |
Current portion of long-term debt | 198,147 |  |  | 189,287 |
Accounts payable | 2,378,812 |  |  | 1,724,516 |
Accrued expenses | 595,660 |  |  | 501,904 |
Other current liabilities | 1,444,716 |  |  | 928,843 |
Total current liabilities | 7,394,147 |  |  | 4,920,041 |
Long-term debt | 1,571,644 |  |  | 1,601,836 |
Other liabilities | 683,642 |  |  | 652,897 |
Commitments and contingencies (Note 13) |  |  |
Equities: |  |  |
Preferred stock | 2,264,038 |  |  | 2,264,038 |
Equity certificates | 5,133,465 |  |  | 5,161,610 |
Accumulated other comprehensive loss | (215,343) |  |  | (233,924) |
Capital reserves | 1,760,468 |  |  | 1,618,147 |
Total CHS Inc. equities | 8,942,628 |  |  | 8,809,871 |
Noncontrolling interests | 8,565 |  |  | 9,302 |
Total equities | 8,951,193 |  |  | 8,819,173 |
Total liabilities and equities | $ | 18,600,626 |  |  | $ | 15,993,947 |

The accompanying notes are an integral part of the condensed consolidated financial statements (unaudited).
2

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CHS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)

| Three Months Ended May 31, |  | Nine Months Ended May 31, |  |
| 2021 |  | 2020 |  | 2021 |  | 2020 |  |  |  |
| (Dollars in thousands)
Revenues | $ | 10,929,976 |  |  | $ | 7,241,031 |  |  | $ | 27,965,778 |  |  | $ | 21,460,742 |  |  |  |  |
Cost of goods sold | 10,615,348 |  |  | 7,022,672 |  |  | 27,371,326 |  |  | 20,601,785 |  |  |  |  |
Gross profit | 314,628 |  |  | 218,359 |  |  | 594,452 |  |  | 858,957 |  |  |  |  |
Marketing, general and administrative expenses | 186,703 |  |  | 180,439 |  |  | 518,875 |  |  | 548,340 |  |  |  |  |
Operating earnings | 127,925 |  |  | 37,920 |  |  | 75,577 |  |  | 310,617 |  |  |  |  |
Interest expense | 28,992 |  |  | 26,661 |  |  | 82,897 |  |  | 95,043 |  |  |  |  |
Other income | (10,748) |  |  | (8,076) |  |  | (41,219) |  |  | (32,926) |  |  |  |  |
Equity income from investments | (146,522) |  |  | (51,114) |  |  | (260,654) |  |  | (135,174) |  |  |  |  |
Income before income taxes | 256,203 |  |  | 70,449 |  |  | 294,553 |  |  | 383,674 |  |  |  |  |
Income tax benefit | (17,469) |  |  | (27,052) |  |  | (10,130) |  |  | (18,258) |  |  |  |  |
Net income | 273,672 |  |  | 97,501 |  |  | 304,683 |  |  | 401,932 |  |  |  |  |
Net income (loss) attributable to noncontrolling interests | 81 |  |  | (147) |  |  | (350) |  |  | 955 |  |  |  |  |
Net income attributable to CHS Inc. | $ | 273,591 |  |  | $ | 97,648 |  |  | $ | 305,033 |  |  | $ | 400,977 |  |  |  |  |

The accompanying notes are an integral part of the condensed consolidated financial statements (unaudited).
3

Table of Contents
CHS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)

| Three Months Ended May 31, |  | Nine Months Ended May 31, |  |
| 2021 |  | 2020 |  | 2021 |  | 2020 |  |  |  |
| (Dollars in thousands)
Net income | $ | 273,672 |  |  | $ | 97,501 |  |  | $ | 304,683 |  |  | $ | 401,932 |  |  |  |  |
Other comprehensive income (loss), net of tax: |  |  |  |  |  |  |  |  |  |  |
Pension and other postretirement benefits | 3,888 |  |  | 3,490 |  |  | 11,402 |  |  | 12,309 |  |  |  |  |
Cash flow hedges | (4,991) |  |  | 6,817 |  |  | (3,881) |  |  | (4,867) |  |  |  |  |
Foreign currency translation adjustment | 8,218 |  |  | (12,316) |  |  | 11,060 |  |  | (21,674) |  |  |  |  |
Other comprehensive income (loss), net of tax | 7,115 |  |  | (2,009) |  |  | 18,581 |  |  | (14,232) |  |  |  |  |
Comprehensive income | 280,787 |  |  | 95,492 |  |  | 323,264 |  |  | 387,700 |  |  |  |  |
Comprehensive income (loss) attributable to noncontrolling interests | 81 |  |  | (147) |  |  | (350) |  |  | 955 |  |  |  |  |
Comprehensive income attributable to CHS Inc. | $ | 280,706 |  |  | $ | 95,639 |  |  | $ | 323,614 |  |  | $ | 386,745 |  |  |  |  |

The accompanying notes are an integral part of the condensed consolidated financial statements (unaudited).
4

Table of Contents
CHS INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)

| Nine Months Ended May 31,
| 2021 |  | 2020
| (Dollars in thousands)
Cash flows from operating activities: |  |  |
Net income | $ | 304,683 |  |  | $ | 401,932 |
Adjustments to reconcile net income to net cash (used in) provided by operating activities: |  |  |
Depreciation and amortization, including amortization of deferred major maintenance | 401,657 |  |  | 408,613 |
Equity income from investments, net of distributions received | (128,635) |  |  | 1,339 |
Provision for doubtful accounts | 3,353 |  |  | 7,692 |
Deferred taxes | 17,379 |  |  | (11,811) |
Other, net | (24,420) |  |  | 67,625 |
Changes in operating assets and liabilities: |  |  |
Receivables | (885,496) |  |  | 25,290 |
Inventories | (763,675) |  |  | (5,602) |
Accounts payable and accrued expenses | 775,825 |  |  | (185,503) |
Other, net | (333,049) |  |  | (183,732) |
Net cash (used in) provided by operating activities | (632,378) |  |  | 525,843 |
Cash flows from investing activities: |  |  |
Acquisition of property, plant and equipment | (238,774) |  |  | (316,506) |
Proceeds from disposition of property, plant and equipment | 17,039 |  |  | 28,257 |
Expenditures for major maintenance | (42,466) |  |  | (10,414) |
Proceeds from sale of business | 39,567 |  |  | 694 |
Changes in CHS Capital notes receivable, net | 31,543 |  |  | 219,173 |
Financing extended to customers | (1,890) |  |  | (5,139) |
Payments from customer financing | 6,110 |  |  | 21,341 |
Other investing activities, net | 11,362 |  |  | 14,061 |
Net cash used in investing activities | (177,509) |  |  | (48,533) |
Cash flows from financing activities: |  |  |
Proceeds from notes payable and long-term debt | 26,618,429 |  |  | 19,841,762 |
Payments on notes payable, long-term debt and finance lease obligations | (25,381,437) |  |  | (19,805,609) |
Preferred stock dividends paid | (126,501) |  |  | (126,501) |
Redemptions of equities | (37,809) |  |  | (86,272) |
Cash patronage dividends paid | (30,042) |  |  | (90,112) |
Other financing activities, net | (30,634) |  |  | (25,475) |
Net cash provided by (used in) financing activities | 1,012,006 |  |  | (292,207) |
Effect of exchange rate changes on cash and cash equivalents | (451) |  |  | (786) |
Increase in cash and cash equivalents and restricted cash | 201,668 |  |  | 184,317 |
Cash and cash equivalents and restricted cash at beginning of period | 216,993 |  |  | 299,675 |
Cash and cash equivalents and restricted cash at end of period | $ | 418,661 |  |  | $ | 483,992 |

The accompanying notes are an integral part of the condensed consolidated financial statements (unaudited).
5

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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, 2020, included in our Annual Report on Form 10-K, filed with the Securities and Exchange Commission ("SEC").
Significant Accounting Policies
The following significant accounting policy was updated or changed since our Annual Report on Form 10-K for the year ended August 31, 2020.
Receivables
As described in the "Recent Accounting Pronouncements" section, we adopted Accounting Standards Update ("ASU") No. 2016-13, Financial Instruments - Credit Losses ("ASC Topic 326"): Measurement of Credit Losses on Financial Instruments, on September 1, 2020, using the modified retrospective approach. Our accounting policies with respect to ASC Topic 326 are included in Note 3, Receivables.
Recent Accounting Pronouncements
Except for the recent accounting pronouncement described below, other recent accounting pronouncements are not expected to have a material impact on our condensed consolidated financial statements.
Adopted
In June 2016, the Financial Accounting Standards Board issued ASC Topic 326. The amendments in this ASU introduce a new approach, based on expected losses, to estimate credit losses on certain types of financial instruments. This ASU is intended to provide financial statement users with more decision-useful information about the expected credit losses associated with most financial assets measured at amortized cost and certain other instruments, including trade and other receivables, loans, held-to-maturity debt securities, net investments in leases and off-balance sheet credit exposures. Entities are required to apply the provisions of this ASU as a cumulative-effect adjustment to the opening balance of capital reserves as of the beginning of the first reporting period in which the guidance is adopted. As part of our adoption efforts, we performed various data-gathering activities, developed a credit losses model, performed data analyses and made accounting policy election determinations. The impact of adoption did not have a material impact on our condensed consolidated financial statements.
Not Yet Adopted
None.
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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, 2021 and 2020. Other applicable accounting guidance primarily includes revenues recognized under ASC Topic 842, Leases, and ASC Topic 470, Debt, that fall outside the scope of ASC Topic 606.

|  | ASC Topic 606 |  | ASC Topic 815 |  | Other Guidance |  | Total Revenues
Three Months Ended May 31, 2021 |  | (Dollars in thousands)
Energy |  | $ | 1,533,643 |  |  | $ | 171,155 |  |  | $ | — |  |  | $ | 1,704,798 |
Ag |  | 2,810,389 |  |  | 6,389,677 |  |  | 16,138 |  |  | 9,216,204 |
Corporate and Other |  | 3,929 |  |  | — |  |  | 5,045 |  |  | 8,974 |
Total revenues |  | $ | 4,347,961 |  |  | $ | 6,560,832 |  |  | $ | 21,183 |  |  | $ | 10,929,976 |
Three Months Ended May 31, 2020 |  |  |  |  |  |  |  |
Energy |  | $ | 762,053 |  |  | $ | 128,866 |  |  | $ | — |  |  | $ | 890,919 |
Ag |  | 2,026,588 |  |  | 4,290,627 |  |  | 20,686 |  |  | 6,337,901 |
Corporate and Other |  | 6,027 |  |  | — |  |  | 6,184 |  |  | 12,211 |
Total revenues |  | $ | 2,794,668 |  |  | $ | 4,419,493 |  |  | $ | 26,870 |  |  | $ | 7,241,031 |
Nine Months Ended May 31, 2021 |  |  |  |  |  |  |  |
Energy |  | $ | 3,841,678 |  |  | $ | 493,125 |  |  | $ | — |  |  | $ | 4,334,803 |
Ag |  | 5,324,396 |  |  | 18,232,235 |  |  | 43,187 |  |  | 23,599,818 |
Corporate and Other |  | 14,925 |  |  | — |  |  | 16,232 |  |  | 31,157 |
Total revenues |  | $ | 9,180,999 |  |  | $ | 18,725,360 |  |  | $ | 59,419 |  |  | $ | 27,965,778 |
Nine Months Ended May 31, 2020 |  |  |  |  |  |  |  |
Energy |  | $ | 3,831,806 |  |  | $ | 415,586 |  |  | $ | — |  |  | $ | 4,247,392 |
Ag |  | 4,446,097 |  |  | 12,681,108 |  |  | 46,753 |  |  | 17,173,958 |
Corporate and Other |  | 16,910 |  |  | — |  |  | 22,482 |  |  | 39,392 |
Total revenues |  | $ | 8,294,813 |  |  | $ | 13,096,694 |  |  | $ | 69,235 |  |  | $ | 21,460,742 |

Less than 1% of revenues accounted for under ASC Topic 606 included within the table above are recorded over time; these revenues are primarily related 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 the customer. Contract assets are recorded in receivables within our Condensed Consolidated Balance Sheets and were not material as of May 31, 2021, or August 31, 2020.
Contract liabilities relate to advance payments from customers for goods and services that we have yet to provide. Contract liabilities of $318.8 million and $139.1 million as of May 31, 2021, and August 31, 2020, respectively, are recorded within other current liabilities on our Condensed Consolidated Balance Sheets. For the three months ended May 31, 2021 and 2020, we recognized revenues of $34.2 million and $50.5 million related to contract liabilities, respectively. For the nine months ended May 31, 2021 and 2020, we recognized revenues of $126.2 million and $182.0 million related to contract liabilities, respectively. These amounts were included in the other current liabilities balance at the beginning of the respective periods.
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Note 3 Receivables

| May 31, 2021 |  | August 31, 2020
| (Dollars in thousands)
Trade accounts receivable | $ | 2,364,709 |  |  | $ | 1,476,585 |
CHS Capital short-term notes receivable | 512,750 |  |  | 563,934 |
Other | 458,760 |  |  | 491,068 |
Gross receivables | 3,336,219 |  |  | 2,531,587 |
Less: allowances and reserves | 144,741 |  |  | 165,540 |
Total receivables | $ | 3,191,478 |  |  | $ | 2,366,047 |

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 capital stock from certain regional cooperatives. These loans are originated in various states, primarily in the Upper Midwest region of the United States, the most significant of which include North Dakota and Minnesota. CHS Capital also has loans receivable from producer borrowers that are collateralized by various combinations of growing crops, livestock, inventories, accounts receivable, personal property and supplemental mortgages and are originated primarily in the same states as the commercial notes.
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 $68.3 million and $101.5 million as of May 31, 2021, and August 31, 2020, respectively. Long-term notes receivable are included in other assets on our Condensed Consolidated Balance Sheets. As of May 31, 2021, and August 31, 2020, the commercial notes represented 53% and 33%, respectively, and the producer notes represented 47% and 67%, respectively, of total CHS Capital notes receivable.
CHS Capital has commitments to extend credit to customers if there are no violations of contractually established conditions. As of May 31, 2021, CHS Capital customers had additional available credit of $684.2 million. 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, 2021, or August 31, 2020.
Note 4 Inventories

| May 31, 2021 |  | August 31, 2020
| (Dollars in thousands)
Grain and oilseed | $ | 1,689,408 |  |  | $ | 1,064,079 |
Energy | 758,765 |  |  | 696,858 |
Agronomy | 836,974 |  |  | 822,535 |
Processed grain and oilseed | 187,132 |  |  | 126,022 |
Other | 41,592 |  |  | 32,644 |
Total inventories | $ | 3,513,871 |  |  | $ | 2,742,138 |

As of May 31, 2021, and August 31, 2020, we valued approximately 15% and 16%, respectively, of inventories, primarily crude oil and refined fuels within our Energy segment, using the lower of cost, determined on the LIFO method, or net realizable value. If the FIFO method of accounting had been used, inventories would have been higher than the reported amount by $313.3 million and $93.5 million as of May 31, 2021, and August 31, 2020, 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.
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Note 5 Investments

| May 31, 2021 |  | August 31, 2020
| (Dollars in thousands)
Equity method investments: |  |  |
CF Industries Nitrogen, LLC | $ | 2,717,270 |  |  | $ | 2,662,618 |
Ventura Foods, LLC | 418,571 |  |  | 381,351 |
Ardent Mills, LLC | 218,822 |  |  | 208,927 |
Other equity method investments | 279,020 |  |  | 253,182 |
Other investments | 130,253 |  |  | 123,955 |
Total investments | $ | 3,763,936 |  |  | $ | 3,630,033 |

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 significant equity method investments consist of CF Industries Nitrogen, LLC ("CF Nitrogen"); Ventura Foods, LLC ("Ventura Foods"); Ardent Mills, LLC ("Ardent Mills"); and TEMCO, LLC ("TEMCO"), which are 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 measured at cost, unless an impairment or other observable market price change occurs, requiring an adjustment. Approximately $552.6 million of cumulative undistributed earnings from our equity method investees are included in the investments balance as of May 31, 2021.
CF Nitrogen
We have an approximate $2.7 billion investment in CF Nitrogen, a strategic venture with CF Industries Holdings, Inc. ("CF Industries"). The investment consists of an approximate 10% 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 the CF Nitrogen Limited Liability Company Agreement, adjusted for the semi-annual cash distributions we receive as a result of our membership interest in CF Nitrogen.
The following table provides summarized unaudited financial information for our equity method investment in CF Nitrogen for the nine months ended May 31, 2021 and 2020:

| Nine Months Ended May 31,
| 2021 |  | 2020
| (Dollars in thousands)
Net sales | $ | 2,116,040 |  |  | $ | 1,954,660 |
Gross profit | 565,067 |  |  | 481,711 |
Net earnings | 524,071 |  |  | 452,859 |
Earnings attributable to CHS Inc. | 118,477 |  |  | 104,021 |

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Ventura Foods
We have a 50% interest in Ventura Foods, a joint venture with Mitsui & Co., that produces and distributes primarily vegetable-oil-based products. We account for Ventura Foods as an equity method investment, and our share of the results of this equity method investment are included in Corporate and Other.
The following table provides aggregate summarized unaudited financial information for our equity method investment in Ventura Foods for the nine months ended May 31, 2021 and 2020:

| Nine Months Ended May 31,
| 2021 |  | 2020
| (Dollars in thousands)
Net sales | $ | 1,807,997 |  |  | $ | 1,693,097 |
Gross profit | 304,720 |  |  | 450,510 |
Net earnings | 154,384 |  |  | 39,175 |
Earnings attributable to CHS Inc. | 77,192 |  |  | 19,588 |

Ardent Mills and TEMCO
We have a 12% interest in Ardent Mills, which is a joint venture with Cargill Incorporated ("Cargill") and Conagra Brands, Inc., and is the largest flour miller in the United States. Additionally, we have a 50% interest in TEMCO, which is a joint venture with Cargill focused on export elevation, primarily to Asia. We account for Ardent Mills and TEMCO as equity method investments, and our shares of the results of these equity method investments are included in Corporate and Other and our Ag segment, respectively.
The following table provides aggregate summarized unaudited financial information for our equity method investments in Ardent Mills and TEMCO for the nine months ended May 31, 2021 and 2020:

| Nine Months Ended May 31,
| 2021 |  | 2020
| (Dollars in thousands)
Net sales | $ | 5,663,762 |  |  | $ | 4,524,569 |
Gross profit | 436,741 |  |  | 269,901 |
Net earnings | 209,604 |  |  | 67,483 |
Earnings attributable to CHS Inc. | 39,244 |  |  | (3,875) |

Our investments in other equity method investees are not significant in relation to our condensed consolidated financial statements, either individually or in the 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 our debt covenants as of May 31, 2021. The table below summarizes our notes payable as of May 31, 2021, and August 31, 2020.

| May 31, 2021 |  | August 31, 2020
| (Dollars in thousands)
Notes payable | $ | 2,019,880 |  |  | $ | 763,215 |
CHS Capital notes payable | 756,932 |  |  | 812,276 |
Total notes payable | $ | 2,776,812 |  |  | $ | 1,575,491 |

As of May 31, 2021, our primary line of credit was a five-year unsecured revolving credit facility with a syndicate of domestic and international banks. The credit facility provides a committed amount of $2.75 billion that expires on July 16, 2024. As of May 31, 2021, and August 31, 2020, the outstanding balance on this facility was $1.2 billion and $345.0 million, respectively.
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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 a secured borrowing. 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. As of May 31, 2021, total availability under the Securitization Facility was $600.0 million, all of which had been utilized.
We also have a repurchase facility ("Repurchase Facility") related to the Securitization Facility. Under the Repurchase Facility, we can borrow up to $150.0 million, collateralized by a subordinated note 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. As of May 31, 2021, and August 31, 2020, the outstanding balance under the Repurchase Facility was $150.0 million.
On August 14, 2020, we entered into a Note Purchase Agreement to borrow $375.0 million of debt in the form of notes. The notes under this Note Purchase Agreement are structured in four series with maturities ranging from 7 to 15 years and interest accruing at rates ranging from 3.24% to 3.73%, subject to certain adjustments depending on our ratio of consolidated funded debt to consolidated cash flow and whether the notes have an investment grade rating from a nationally recognized statistical rating organization. The funding of these notes took place on November 2, 2020. This funding is being used to pay debt maturities and manage liquidity.
On September 24, 2020, the Securitization Facility and Repurchase Facility were amended, increasing the maximum availability under the Securitization Facility to $600.0 million from $500.0 million and extending their respective termination dates to July 30, 2021.
On February 19, 2021, we amended our 10-year term loan facility to convert the entire $366.0 million aggregate principle amount outstanding thereunder into a revolving loan, which can be paid down and readvanced in an amount up to the referenced $366.0 million until February 19, 2022. On February 19, 2022, the total funded loan balance outstanding reverts to a nonrevolving term loan that is payable on September 4, 2025. There was no balance outstanding under this facility as of May 31, 2021.
Interest expense for the three months ended May 31, 2021 and 2020, was $29.0 million and $26.7 million, respectively, net of capitalized interest of $3.9 million and $2.7 million, respectively. Interest expense for the nine months ended May 31, 2021 and 2020, was $82.9 million and $95.0 million, respectively, net of capitalized interest of $6.0 million and $8.9 million, respectively.
Note 7 Income Taxes
Our effective tax rate for the three months ended May 31, 2021, was (6.8)%, compared to (38.4)% for the three months ended May 31, 2020. Our effective tax rate for the nine months ended May 31, 2021, was (3.4)%, compared to (4.8)% for the nine months ended May 31, 2020. Our income tax benefit for the nine months ended May 31, 2021, reflects the mix of full-year earnings projected across business units and equity management assumptions, including tax benefits related to an intercompany transfer of assets for tax planning. Income taxes and effective tax rate vary each year based on profitability and nonpatronage business activity during each of the comparable years.
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, $136.1 million and $111.3 million of the unrecognized tax benefits would ultimately benefit our effective tax rate as of May 31, 2021, and August 31, 2020, 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 and nine months ended May 31, 2021 and 2020, 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, 2020 | $ | 3,724,187 |  |  | $ | 28,727 |  |  | $ | 1,408,696 |  |  | $ | 2,264,038 |  |  | $ | (233,924) |  |  | $ | 1,618,147 |  |  | $ | 9,302 |  |  | $ | 8,819,173 |
Reversal of prior year redemption estimates | 7,726 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 7,726 |
Redemptions of equities | (6,539) |  |  | (31) |  |  | (1,156) |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (7,726) |
Preferred stock dividends | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (84,334) |  |  | — |  |  | (84,334) |
Other, net | (654) |  |  | (47) |  |  | (197) |  |  | — |  |  | — |  |  | (7,798) |  |  | 35 |  |  | (8,661) |
Net income (loss) | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 69,671 |  |  | (302) |  |  | 69,369 |
Other comprehensive income, net of tax | — |  |  | — |  |  | — |  |  | — |  |  | 8,917 |  |  | — |  |  | — |  |  | 8,917 |
Estimated 2021 cash patronage refunds | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (9,304) |  |  | — |  |  | (9,304) |
Estimated 2021 equity redemptions | (9,304) |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (9,304) |
Balances, November 30, 2020 | $ | 3,715,416 |  |  | $ | 28,649 |  |  | $ | 1,407,343 |  |  | $ | 2,264,038 |  |  | $ | (225,007) |  |  | $ | 1,586,382 |  |  | $ | 9,035 |  |  | $ | 8,785,856 |
Reversal of prior year patronage and redemption estimates | 4,760 |  |  | — |  |  | (211,970) |  |  | — |  |  | — |  |  | 233,345 |  |  | — |  |  | 26,135 |
Distribution of 2020 patronage refunds | — |  |  | — |  |  | 214,720 |  |  | — |  |  | — |  |  | (236,136) |  |  | — |  |  | (21,416) |
Redemptions of equities | (4,177) |  |  | (35) |  |  | (548) |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (4,760) |
Preferred stock dividends | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (42,167) |  |  | — |  |  | (42,167) |
Other, net | (26) |  |  | — |  |  | (15) |  |  | — |  |  | — |  |  | 1,068 |  |  | (361) |  |  | 666 |
Net loss | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (38,229) |  |  | (129) |  |  | (38,358) |
Other comprehensive income, net of tax | — |  |  | — |  |  | — |  |  | — |  |  | 2,549 |  |  | — |  |  | — |  |  | 2,549 |
Estimated 2021 cash patronage refunds | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 5,639 |  |  | — |  |  | 5,639 |
Estimated 2021 equity redemptions | 5,639 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 5,639 |
Balances, February 28, 2021 | $ | 3,721,612 |  |  | $ | 28,614 |  |  | $ | 1,409,530 |  |  | $ | 2,264,038 |  |  | $ | (222,458) |  |  | $ | 1,509,902 |  |  | $ | 8,545 |  |  | $ | 8,719,783 |
Reversal of prior year redemption estimates | 15,514 |  |  | — |  |  | 5,000 |  |  | — |  |  | — |  |  | 8,625 |  |  | — |  |  | 29,139 |
Distribution of 2020 patronage refunds | — |  |  | — |  |  | 7 |  |  | — |  |  | — |  |  | (8,632) |  |  | — |  |  | (8,625) |
Redemptions of equities | (19,275) |  |  | (35) |  |  | (6,013) |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (25,323) |
Other, net | (298) |  |  | 43 |  |  | 58 |  |  | — |  |  | — |  |  | (1,726) |  |  | (61) |  |  | (1,984) |
Net income | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 273,591 |  |  | 81 |  |  | 273,672 |
Other comprehensive income, net of tax | — |  |  | — |  |  | — |  |  | — |  |  | 7,115 |  |  | — |  |  | — |  |  | 7,115 |
Estimated 2021 cash patronage refunds | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (21,292) |  |  | — |  |  | (21,292) |
Estimated 2021 equity redemptions | (21,292) |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (21,292) |
Balances, May 31, 2021 | $ | 3,696,261 |  |  | $ | 28,622 |  |  | $ | 1,408,582 |  |  | $ | 2,264,038 |  |  | $ | (215,343) |  |  | $ | 1,760,468 |  |  | $ | 8,565 |  |  | $ | 8,951,193 |

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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, 2019 | $ | 3,753,493 |  |  | $ | 29,074 |  |  | $ | 1,206,310 |  |  | $ | 2,264,038 |  |  | $ | (226,933) |  |  | $ | 1,584,158 |  |  | $ | 7,390 |  |  | $ | 8,617,530 |
Reversal of prior year redemption estimates | 5,447 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 5,447 |
Redemptions of equities | (4,721) |  |  | (54) |  |  | (672) |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (5,447) |
Preferred stock dividends | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (84,334) |  |  | — |  |  | (84,334) |
ASC Topic 842 cumulative-effect adjustment | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 33,707 |  |  | — |  |  | 33,707 |
Other, net | (8) |  |  | — |  |  | (39) |  |  | — |  |  | — |  |  | (1,312) |  |  | 410 |  |  | (949) |
Net income | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 177,882 |  |  | 855 |  |  | 178,737 |
Other comprehensive loss, net of tax | — |  |  | — |  |  | — |  |  | — |  |  | (1,638) |  |  | — |  |  | — |  |  | (1,638) |
Estimated 2020 cash patronage refunds | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (28,504) |  |  | — |  |  | (28,504) |
Estimated 2020 equity redemptions | (91,633) |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (91,633) |
Balances, November 30, 2019 | $ | 3,662,578 |  |  | $ | 29,020 |  |  | $ | 1,205,599 |  |  | $ | 2,264,038 |  |  | $ | (228,571) |  |  | $ | 1,681,597 |  |  | $ | 8,655 |  |  | $ | 8,622,916 |
Reversal of prior year patronage and redemption estimates | 3,387 |  |  | — |  |  | (472,398) |  |  | — |  |  | — |  |  | 562,398 |  |  | — |  |  | 93,387 |
Distribution of 2019 patronage refunds | — |  |  | — |  |  | 474,066 |  |  | — |  |  | — |  |  | (564,096) |  |  | — |  |  | (90,030) |
Redemptions of equities | (2,998) |  |  | (20) |  |  | (369) |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (3,387) |
Preferred stock dividends | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (42,167) |  |  | — |  |  | (42,167) |
Other, net | (201) |  |  | — |  |  | 3 |  |  | — |  |  | — |  |  | 10 |  |  | (324) |  |  | (512) |
Net income | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 125,447 |  |  | 247 |  |  | 125,694 |
Other comprehensive loss, net of tax | — |  |  | — |  |  | — |  |  | — |  |  | (10,585) |  |  | — |  |  | — |  |  | (10,585) |
Estimated 2020 cash patronage refunds | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (22,206) |  |  | — |  |  | (22,206) |
Estimated 2020 equity redemptions | (49,154) |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (49,154) |
Balances, February 29, 2020 | $ | 3,613,612 |  |  | $ | 29,000 |  |  | $ | 1,206,901 |  |  | $ | 2,264,038 |  |  | $ | (239,156) |  |  | $ | 1,740,983 |  |  | $ | 8,578 |  |  | $ | 8,623,956 |
Reversal of prior year redemption estimates | 67,438 |  |  | — |  |  | 10,000 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 77,438 |
Distribution of 2019 patronage refunds | — |  |  | — |  |  | 327 |  |  | — |  |  | — |  |  | (409) |  |  | — |  |  | (82) |
Redemptions of equities | (64,273) |  |  | (91) |  |  | (13,074) |  |  | — |  |  | — |  |  | — |  |  | — |  |  | (77,438) |
Other, net | (1,544) |  |  | (7) |  |  | (116) |  |  | — |  |  | — |  |  | 1,053 |  |  | 8 |  |  | (606) |
Net income (loss) | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 97,648 |  |  | (147) |  |  | 97,501 |
Other comprehensive loss, net of tax | — |  |  | — |  |  | — |  |  | — |  |  | (2,009) |  |  | — |  |  | — |  |  | (2,009) |
Estimated 2020 cash patronage refunds | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 13,551 |  |  | — |  |  | 13,551 |
Estimated 2020 equity redemptions | 47,975 |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | — |  |  | 47,975 |
Balances, May 31, 2020 | $ | 3,663,208 |  |  | $ | 28,902 |  |  | $ | 1,204,038 |  |  | $ | 2,264,038 |  |  | $ | (241,165) |  |  | $ | 1,852,826 |  |  | $ | 8,439 |  |  | $ | 8,780,286 |

Preferred Stock Dividends
The following is a summary of dividends per share by series of preferred stock for the nine months ended May 31, 2021 and 2020. Note that due to the timing of dividend declarations during the fiscal year, no declarations were made during the third quarter of fiscal 2021 or the third quarter of fiscal 2020.

|  |  |  |  | Nine Months Ended May 31,
| Nasdaq symbol |  |  |  |  |  | 2021 |  | 2020
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 |

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Accumulated Other Comprehensive Income (Loss)
Changes in accumulated other comprehensive income (loss) by component, net of tax, are as follows for the three and nine months ended May 31, 2021 and 2020:

| Pension and Other Postretirement Benefits |  | Cash Flow Hedges |  | Foreign Currency Translation Adjustment |  | Total
| (Dollars in thousands)
Balance as of August 31, 2020, net of tax | $ | (159,680) |  |  | $ | 10,886 |  |  | $ | (85,130) |  |  | $ | (233,924) |
Other comprehensive income (loss), before tax: |  |  |  |  |  |  |
Amounts before reclassifications | (125) |  |  | 14,506 |  |  | 3,629 |  |  | 18,010 |
Amounts reclassified | 4,977 |  |  | (12,284) |  |  | — |  |  | (7,307) |
Total other comprehensive income, before tax | 4,852 |  |  | 2,222 |  |  | 3,629 |  |  | 10,703 |
Tax effect | (1,207) |  |  | (553) |  |  | (26) |  |  | (1,786) |
Other comprehensive income, net of tax | 3,645 |  |  | 1,669 |  |  | 3,603 |  |  | 8,917 |
Balance as of November 30, 2020, net of tax | $ | (156,035) |  |  | $ | 12,555 |  |  | $ | (81,527) |  |  | $ | (225,007) |
Other comprehensive income (loss), before tax: |  |  |  |  |  |  |
Amounts before reclassifications | — |  |  | 2,929 |  |  | (587) |  |  | 2,342 |
Amounts reclassified | 5,151 |  |  | (3,673) |  |  | — |  |  | 1,478 |
Total other comprehensive income (loss), before tax | 5,151 |  |  | (744) |  |  | (587) |  |  | 3,820 |
Tax effect | (1,282) |  |  | 185 |  |  | (174) |  |  | (1,271) |
Other comprehensive income (loss), net of tax | 3,869 |  |  | (559) |  |  | (761) |  |  | 2,549 |
Balance as of February 28, 2021, net of tax | $ | (152,166) |  |  | $ | 11,996 |  |  | $ | (82,288) |  |  | $ | (222,458) |
Other comprehensive income (loss), before tax: |  |  |  |  |  |  |
Amounts before reclassifications | 112 |  |  | (4,725) |  |  | 8,398 |  |  | 3,785 |
Amounts reclassified | 5,064 |  |  | (1,919) |  |  | — |  |  | 3,145 |
Total other comprehensive income (loss), before tax | 5,176 |  |  | (6,644) |  |  | 8,398 |  |  | 6,930 |
Tax effect | (1,288) |  |  | 1,653 |  |  | (180) |  |  | 185 |
Other comprehensive income (loss), net of tax | 3,888 |  |  | (4,991) |  |  | 8,218 |  |  | 7,115 |
Balance as of May 31, 2021, net of tax | $ | (148,278) |  |  | $ | 7,005 |  |  | $ | (74,070) |  |  | $ | (215,343) |

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| Pension and Other Postretirement Benefits |  | Cash Flow Hedges |  | Foreign Currency Translation Adjustment |  | Total
| (Dollars in thousands)
Balance as of August 31, 2019, net of tax | $ | (172,478) |  |  | $ | 15,297 |  |  | $ | (69,752) |  |  | $ | (226,933) |
Other comprehensive income (loss), before tax: |  |  |  |  |  |  |
Amounts before reclassifications | (85) |  |  | (3,331) |  |  | (2,411) |  |  | (5,827) |
Amounts reclassified | 4,977 |  |  | (4,473) |  |  | — |  |  | 504 |
Total other comprehensive income (loss), before tax | 4,892 |  |  | (7,804) |  |  | (2,411) |  |  | (5,323) |
Tax effect | 181 |  |  | 1,932 |  |  | 1,572 |  |  | 3,685 |
Other comprehensive income (loss), net of tax | 5,073 |  |  | (5,872) |  |  | (839) |  |  | (1,638) |
Balance as of November 30, 2019, net of tax | $ | (167,405) |  |  | $ | 9,425 |  |  | $ | (70,591) |  |  | $ | (228,571) |
Other comprehensive income (loss), before tax: |  |  |  |  |  |  |
Amounts before reclassifications | — |  |  | (5,975) |  |  | (8,540) |  |  | (14,515) |
Amounts reclassified | 4,977 |  |  | (1,747) |  |  | — |  |  | 3,230 |
Total other comprehensive income (loss), before tax | 4,977 |  |  | (7,722) |  |  | (8,540) |  |  | (11,285) |
Tax effect | (1,231) |  |  | 1,910 |  |  | 21 |  |  | 700 |
Other comprehensive income (loss), net of tax | 3,746 |  |  | (5,812) |  |  | (8,519) |  |  | (10,585) |
Balance as of February 29, 2020, net of tax | $ | (163,659) |  |  | $ | 3,613 |  |  | $ | (79,110) |  |  | $ | (239,156) |
Other comprehensive income (loss), before tax: |  |  |  |  |  |  |
Amounts before reclassifications | (340) |  |  | 7,795 |  |  | (12,515) |  |  | (5,060) |
Amounts reclassified | 4,977 |  |  | 1,263 |  |  | — |  |  | 6,240 |
Total other comprehensive income (loss), before tax | 4,637 |  |  | 9,058 |  |  | (12,515) |  |  | 1,180 |
Tax effect | (1,147) |  |  | (2,241) |  |  | 199 |  |  | (3,189) |
Other comprehensive income (loss), net of tax | 3,490 |  |  | 6,817 |  |  | (12,316) |  |  | (2,009) |
Balance as of May 31, 2020, net of tax | $ | (160,169) |  |  | $ | 10,430 |  |  | $ | (91,426) |  |  | $ | (241,165) |

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, marketing, general and administrative expenses, and other income (see Note 9, Benefit Plans, for further information). Gains or losses associated with cash flow hedges are recorded as cost of goods sold (see Note 11, Derivative Financial Instruments and Hedging Activities, for further information). Gains or losses on foreign currency translation reclassifications related to sales of businesses are recorded as other income.
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 retirement plans.
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Components of net periodic benefit costs for the three and nine months ended May 31, 2021 and 2020, are as follows:

| Three Months Ended May 31,
| Qualified Pension Benefits |  | Nonqualified Pension Benefits |  | Other Benefits
| 2021 |  | 2020 |  | 2021 |  | 2020 |  | 2021 |  | 2020
Components of net periodic benefit costs: | (Dollars in thousands)
Service cost | $ | 11,307 |  |  | $ | 10,538 |  |  | $ | 108 |  |  | $ | 101 |  |  | $ | 297 |  |  | $ | 262 |
Interest cost | 4,141 |  |  | 5,431 |  |  | 68 |  |  | 107 |  |  | 123 |  |  | 187 |
Expected return on assets | (10,910) |  |  | (11,671) |  |  | — |  |  | — |  |  | — |  |  | — |
Prior service cost (credit) amortization | 45 |  |  | 45 |  |  | (28) |  |  | (28) |  |  | (111) |  |  | (111) |
Actuarial loss (gain) amortization | 5,447 |  |  | 5,396 |  |  | 53 |  |  | 25 |  |  | (341) |  |  | (348) |
Net periodic benefit cost (benefit) | $ | 10,030 |  |  | $ | 9,739 |  |  | $ | 201 |  |  | $ | 205 |  |  | $ | (32) |  |  | $ | (10) |
| Nine Months Ended May 31,
| Qualified Pension Benefits |  | Nonqualified Pension Benefits |  | Other Benefits
| 2021 |  | 2020 |  | 2021 |  | 2020 |  | 2021 |  | 2020
Components of net periodic benefit costs: | (Dollars in thousands)
Service cost | $ | 33,921 |  |  | $ | 31,613 |  |  | $ | 325 |  |  | $ | 304 |  |  | $ | 890 |  |  | $ | 787 |
Interest cost | 12,422 |  |  | 16,292 |  |  | 205 |  |  | 322 |  |  | 369 |  |  | 560 |
Expected return on assets | (32,731) |  |  | (35,013) |  |  | — |  |  | — |  |  | — |  |  | — |
Prior service cost (credit) amortization | 134 |  |  | 134 |  |  | (85) |  |  | (85) |  |  | (334) |  |  | (334) |
Actuarial loss (gain) amortization | 16,342 |  |  | 16,187 |  |  | 159 |  |  | 74 |  |  | (1,024) |  |  | (1,044) |
Net periodic benefit cost (benefit) | $ | 30,088 |  |  | $ | 29,213 |  |  | $ | 604 |  |  | $ | 615 |  |  | $ | (99) |  |  | $ | (31) |

The service cost component of defined benefit net periodic benefit cost is recorded in cost of goods sold and marketing, general and administrative expenses. The other components of net periodic benefit cost are recorded in other income.
Employer Contributions
Any contributions made during fiscal 2021 will 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, 2021, and we do not currently anticipate being required to make contributions for our pension plans in fiscal 2021.
Note 10 Segment Reporting
We are an integrated agricultural enterprise, 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 grains and oilseeds, grain and oilseed processing and food products, and the production and marketing of ethanol. 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 our businesses. 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 grains and oilseeds 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 solely of our equity method investment in CF Nitrogen, which entitles us, pursuant to a supply agreement that we entered into with CF Nitrogen, to purchase up to a specified quantity of granular urea and urea ammonium nitrate annually from CF Nitrogen. Corporate and Other represents our financing and hedging businesses, which consist primarily of financial services related to crop production and a U.S. Commodity Futures Trading Commission-regulated futures commission merchant for commodities hedging. Our nonconsolidated investments in Ventura Foods and Ardent Mills are also included in our Corporate and Other category.
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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 operating results vary throughout the year. Our revenues generally trend lower during the second and fourth fiscal quarters and higher during the first and third fiscal quarters; however, our income (loss) 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 during the spring planting season. Our global grain marketing operations are subject to fluctuations in volume and income based on producer harvests, world grain prices, demand and global trade volumes. Our Energy segment generally experiences higher volumes 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 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, grains, oilseeds, 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 a reliable rail and river transportation network, outbreaks of disease, government regulations and policies, global trade disputes, 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 are conducted through companies in which we hold ownership interests of 50% or less or 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 consolidation of the revenues and expenses of the entity in our Condensed Consolidated Statements of Operations. In our Nitrogen Production segment, this consists of our approximate 10% 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 on these entities.
Reconciling amounts primarily represent the elimination of revenues between segments. Such transactions are executed at market prices to more accurately evaluate the profitability of individual business segments.
Segment information for the three and nine months ended May 31, 2021 and 2020, is presented in the tables below.

| Energy |  | Ag |  | Nitrogen Production |  | Corporate and Other |  | Reconciling Amounts |  | Total
Three Months Ended May 31, 2021 | (Dollars in thousands)
Revenues, including intersegment revenues | $ | 1,815,077 |  |  | $ | 9,222,597 |  |  | $ | — |  |  | $ | 10,842 |  |  | $ | (118,540) |  |  | $ | 10,929,976 |
Intersegment revenues | (110,279) |  |  | (6,393) |  |  | — |  |  | (1,868) |  |  | 118,540 |  |  | — |
Revenues, net of intersegment revenues | $ | 1,704,798 |  |  | $ | 9,216,204 |  |  | $ | — |  |  | $ | 8,974 |  |  | $ | — |  |  | $ | 10,929,976 |
Operating earnings (loss) | 2,955 |  |  | 134,606 |  |  | (8,799) |  |  | (837) |  |  | — |  |  | 127,925 |
Interest expense | (333) |  |  | 17,661 |  |  | 10,318 |  |  | 390 |  |  | 956 |  |  | 28,992 |
Other income | (636) |  |  | (6,331) |  |  | (308) |  |  | (2,517) |  |  | (956) |  |  | (10,748) |
Equity income from investments | (1,035) |  |  | (16,855) |  |  | (65,444) |  |  | (63,188) |  |  | — |  |  | (146,522) |
Income before income taxes | $ | 4,959 |  |  | $ | 140,131 |  |  | $ | 46,635 |  |  | $ | 64,478 |  |  | $ | — |  |  | $ | 256,203 |

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| Energy |  | Ag |  | Nitrogen Production |  | Corporate and Other |  | Reconciling Amounts |  | Total
Three Months Ended May 31, 2020 | (Dollars in thousands)
Revenues, including intersegment revenues | $ | 960,352 |  |  | $ | 6,340,386 |  |  | $ | — |  |  | $ | 13,515 |  |  | $ | (73,222) |  |  | $ | 7,241,031 |
Intersegment revenues | (69,433) |  |  | (2,485) |  |  | — |  |  | (1,304) |  |  | 73,222 |  |  | — |
Revenues, net of intersegment revenues | $ | 890,919 |  |  | $ | 6,337,901 |  |  | $ | — |  |  | $ | 12,211 |  |  | $ | — |  |  | $ | 7,241,031 |
Operating earnings (loss) | (56,792) |  |  | 95,328 |  |  | (7,936) |  |  | 7,320 |  |  | — |  |  | 37,920 |
Interest expense | (145) |  |  | 16,261 |  |  | 10,176 |  |  | 1,810 |  |  | (1,441) |  |  | 26,661 |
Other income | (614) |  |  | (8,294) |  |  | (355) |  |  | (254) |  |  | 1,441 |  |  | (8,076) |
Equity income from investments | (1,269) |  |  | (7,999) |  |  | (41,264) |  |  | (582) |  |  | — |  |  | (51,114) |
Income (loss) before income taxes | $ | (54,764) |  |  | $ | 95,360 |  |  | $ | 23,507 |  |  | $ | 6,346 |  |  | $ | — |  |  | $ | 70,449 |

| Energy |  | Ag |  | Nitrogen Production |  | Corporate and Other |  | Reconciling Amounts |  | Total
Nine Months Ended May 31, 2021 | (Dollars in thousands)
Revenues, including intersegment revenues | $ | 4,643,387 |  |  | $ | 23,615,087 |  |  | $ | — |  |  | $ | 38,370 |  |  | $ | (331,066) |  |  | $ | 27,965,778 |
Intersegment revenues | (308,584) |  |  | (15,269) |  |  | — |  |  | (7,213) |  |  | 331,066 |  |  | — |
Revenues, net of intersegment revenues | $ | 4,334,803 |  |  | $ | 23,599,818 |  |  | $ | — |  |  | $ | 31,157 |  |  | $ | — |  |  | $ | 27,965,778 |
Operating earnings (loss) | (120,879) |  |  | 212,223 |  |  | (24,661) |  |  | 8,894 |  |  | — |  |  | 75,577 |
Interest expense | 492 |  |  | 48,796 |  |  | 33,721 |  |  | 1,536 |  |  | (1,648) |  |  | 82,897 |
Other income | (2,108) |  |  | (29,784) |  |  | (2,175) |  |  | (8,800) |  |  | 1,648 |  |  | (41,219) |
Equity income from investments | (2,355) |  |  | (43,974) |  |  | (118,477) |  |  | (95,848) |  |  | — |  |  | (260,654) |
Income (loss) before income taxes | $ | (116,908) |  |  | $ | 237,185 |  |  | $ | 62,270 |  |  | $ | 112,006 |  |  | $ | — |  |  | $ | 294,553 |
Total assets as of May 31, 2021 | $ | 4,451,203 |  |  | $ | 8,388,074 |  |  | $ | 2,733,443 |  |  | $ | 3,027,906 |  |  | $ | — |  |  | $ | 18,600,626 |
| Energy |  | Ag |  | Nitrogen Production |  | Corporate and Other |  | Reconciling Amounts |  | Total
Nine Months Ended May 31, 2020 | (Dollars in thousands)
Revenues, including intersegment revenues | $ | 4,550,155 |  |  | $ | 17,183,820 |  |  | $ | — |  |  | $ | 43,514 |  |  | $ | (316,747) |  |  | $ | 21,460,742 |
Intersegment revenues | (302,763) |  |  | (9,862) |  |  | — |  |  | (4,122) |  |  | 316,747 |  |  | — |
Revenues, net of intersegment revenues | $ | 4,247,392 |  |  | $ | 17,173,958 |  |  | $ | — |  |  | $ | 39,392 |  |  | $ | — |  |  | $ | 21,460,742 |
Operating earnings (loss) | 241,594 |  |  | 88,102 |  |  | (26,318) |  |  | 7,239 |  |  | — |  |  | 310,617 |
Interest expense | 43 |  |  | 57,761 |  |  | 34,277 |  |  | 8,680 |  |  | (5,718) |  |  | 95,043 |
Other income | (2,516) |  |  | (31,142) |  |  | (2,272) |  |  | (2,714) |  |  | 5,718 |  |  | (32,926) |
Equity (income) loss from investments | (2,242) |  |  | 830 |  |  | (104,021) |  |  | (29,741) |  |  | — |  |  | (135,174) |
Income before income taxes | $ | 246,309 |  |  | $ | 60,653 |  |  | $ | 45,698 |  |  | $ | 31,014 |  |  | $ | — |  |  | $ | 383,674 |

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 interest rate swaps and certain pay-fixed, receive-variable, cash-settled swaps related to future crude oil purchases, which are accounted for as fair value hedges and cash flow hedges, respectively, 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 futures commission merchant.
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Derivatives Not 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, 2021
|  |  | 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 | $ | 843,728 |  |  | $ | — |  |  | $ | 8,226 |  |  | $ | 835,502 |
Foreign exchange derivatives | 29,332 |  |  | — |  |  | 7,386 |  |  | 21,946 |
Embedded derivative asset | 16,173 |  |  | — |  |  | — |  |  | 16,173 |
Total | $ | 889,233 |  |  | $ | — |  |  | $ | 15,612 |  |  | $ | 873,621 |
Derivative Liabilities |  |  |  |  |  |  |
Commodity derivatives | $ | 585,658 |  |  | $ | 2,809 |  |  | $ | 8,226 |  |  | $ | 574,623 |
Foreign exchange derivatives | 9,907 |  |  | — |  |  | 7,386 |  |  | 2,521 |
Total | $ | 595,565 |  |  | $ | 2,809 |  |  | $ | 15,612 |  |  | $ | 577,144 |

| August 31, 2020
|  |  | 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 | $ | 327,493 |  |  | $ | — |  |  | $ | 2,980 |  |  | $ | 324,513 |
Foreign exchange derivatives | 11,809 |  |  | — |  |  | 9,385 |  |  | 2,424 |
Embedded derivative asset | 18,998 |  |  | — |  |  | — |  |  | 18,998 |
Total | $ | 358,300 |  |  | $ | — |  |  | $ | 12,365 |  |  | $ | 345,935 |
Derivative Liabilities |  |  |  |  |  |  |
Commodity derivatives | $ | 343,343 |  |  | $ | 956 |  |  | $ | 5,578 |  |  | $ | 336,809 |
Foreign exchange derivatives | 69,466 |  |  | — |  |  | 9,385 |  |  | 60,081 |
Total | $ | 412,809 |  |  | $ | 956 |  |  | $ | 14,963 |  |  | $ | 396,890 |

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, 2021, and August 31, 2020, was $18.8 million and $21.2 million, respectively. The amount of long-term derivative liabilities recorded on our Condensed Consolidated Balance Sheets as of May 31, 2021, and August 31, 2020, was $6.7 million and $5.4 million, respectively.
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The majority of our derivative instruments have not been designated as hedging instruments. 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, 2021 and 2020.

|  |  | Three Months Ended May 31, |  | Nine Months Ended May 31,
| Location of Gain (Loss) |  | 2021 |  | 2020 |  | 2021 |  | 2020
|  |  | (Dollars in thousands)
Commodity derivatives | Cost of goods sold |  | $ | (552,985) |  |  | $ | 85,259 |  |  | $ | (945,631) |  |  | $ | 228,201 |
Foreign exchange derivatives | Cost of goods sold |  | 35,567 |  |  | (129,699) |  |  | 27,327 |  |  | (177,008) |
Foreign exchange derivatives | Marketing, general and administrative expenses |  | 838 |  |  | (2,553) |  |  | 1,011 |  |  | (615) |
Embedded derivative | Other income |  | 308 |  |  | 355 |  |  | 2,174 |  |  | 2,272 |
Total |  | $ | (516,272) |  |  | $ | (46,638) |  |  | $ | (915,119) |  |  | $ | 52,850 |

Commodity Contracts
As of May 31, 2021, and August 31, 2020, 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, 2021 |  | August 31, 2020
| Long |  | Short |  | Long |  | Short
| (Units in thousands)
Grain and oilseed (bushels) | 808,152 |  |  | 1,008,593 |  |  | 664,673 |  | 892,303
Energy products (barrels) | 10,346 |  |  | 9,211 |  |  | 10,028 |  | 6,570
Processed grain and oilseed (tons) | 579 |  |  | 2,468 |  |  | 657 |  | 3,304
Crop nutrients (tons) | 36 |  |  | 32 |  |  | 74 |  | 127
Ocean freight (metric tons) | 225 |  |  | — |  |  | 1,140 |  | 95

Foreign Exchange Contracts
We conduct a substantial portion of our business in U.S. dollars, but we 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 related 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 amounts of our foreign exchange derivative contracts were $1.4 billion and $1.2 billion as of May 31, 2021, and August 31, 2020, respectively.
Embedded Derivative Asset
Under the terms of our strategic investment in CF Nitrogen, if the CF Industries credit rating is reduced below certain levels by two of three specified credit ratings agencies, we are entitled to receive a nonrefundable annual payment of $5.0 million from CF Industries. These payments will continue on an annual basis until the date that the CF Industries credit rating is upgraded to or above certain levels by two of the three specified credit ratings agencies or February 1, 2026, whichever is earlier.
Since the CF Industries credit rating was reduced below the specified levels during fiscal 2017, we have received an annual payment of $5.0 million from CF Industries. Gains totaling $2.2 million and $2.3 million were recognized in other income in our Condensed Consolidated Statements of Operations for the nine months ended May 31, 2021 and 2020, respectively. The fair value of the embedded derivative asset recorded on our Condensed Consolidated Balance Sheet as of May 31, 2021, was equal to $16.2 million. The current and long-term portions of the embedded derivative asset are included in other current assets and other assets on our Condensed Consolidated Balance Sheets, respectively. See Note 12, Fair Value Measurements, for additional information regarding valuation of the embedded derivative asset.
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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 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, 2021, and August 31, 2020, the aggregate notional amount of cash flow hedges was 5.1 million and 9.7 million barrels, respectively.
The following table presents the fair value of our commodity derivative instruments designated as cash flow hedges and the line items on our Condensed Consolidated Balance Sheets in which they are recorded.

|  | Derivative Assets |  |  |  | Derivative Liabilities
Balance Sheet Location |  | May 31, 2021 |  | August 31, 2020 |  | Balance Sheet Location |  | May 31, 2021 |  | August 31, 2020
|  | (Dollars in thousands) |  |  |  | (Dollars in thousands)
Other current assets |  | $ | 11,243 |  |  | $ | 34,052 |  |  | Other current liabilities |  | $ | 6,761 |  |  | $ | 8,821 |

The following table presents the pretax gains (losses) recorded in other comprehensive income relating to cash flow hedges for the three and nine months ended May 31, 2021 and 2020:

|  | Three Months Ended May 31, |  | Nine Months Ended May 31,
|  | 2021 |  | 2020 |  | 2021 |  | 2020
|  | (Dollars in thousands)
Commodity derivatives |  | $ | (7,590) |  |  | $ | 11,081 |  |  | $ | (7,700) |  |  | $ | (4,153) |

The following table presents the pretax gains 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, 2021 and 2020:

|  |  | Three Months Ended May 31, |  | Nine Months Ended May 31,
| Location of Gain |  | 2021 |  | 2020 |  | 2021 |  | 2020
|  |  | (Dollars in thousands)
Commodity derivatives | Cost of goods sold |  | $ | 2,329 |  |  | $ | 884 |  |  | $ | 19,084 |  |  | $ | 7,862 |

Note 12 Fair Value Measurements
ASC Topic 820, Fair Value Measurements, 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 between market participants on the measurement date.
We determine fair values of derivative instruments and other assets, based on the fair value hierarchy established in ASC Topic 820, which requires an entity to maximize the use of observable inputs and minimize the 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 under the circumstances. ASC Topic 820 describes three levels within its hierarchy that may be used to measure fair value, and our assessment of relevant instruments within those levels is as follows: Level 1 inputs are quoted prices (unadjusted) 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 inputs (other than quoted prices) that are observable for the asset or liability, either directly or indirectly. Level 3 inputs are unobservable inputs for the asset or liability. Categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.
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Recurring fair value measurements as of May 31, 2021, and August 31, 2020, are as follows:

| May 31, 2021
| 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 | $ | 2,349 |  |  | $ | 852,622 |  |  | $ | — |  |  | $ | 854,971 |
Foreign exchange derivatives | — |  |  | 29,332 |  |  | — |  |  | 29,332 |
Deferred compensation assets | 50,660 |  |  | — |  |  | — |  |  | 50,660 |
Embedded derivative asset | — |  |  | 16,173 |  |  | — |  |  | 16,173 |
Segregated investments and marketable securities | 195,197 |  |  | — |  |  | — |  |  | 195,197 |
Other assets | 6,563 |  |  | — |  |  | — |  |  | 6,563 |
Total | $ | 254,769 |  |  | $ | 898,127 |  |  | $ | — |  |  | $ | 1,152,896 |
Liabilities |  |  |  |  |  |  |
Commodity derivatives | $ | 1,037 |  |  | $ | 591,382 |  |  | $ | — |  |  | $ | 592,419 |
Foreign exchange derivatives | — |  |  | 9,907 |  |  | — |  |  | 9,907 |
Total | $ | 1,037 |  |  | $ | 601,289 |  |  | $ | — |  |  | $ | 602,326 |

| August 31, 2020
| 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 | $ | 5,762 |  |  | $ | 355,783 |  |  | $ | — |  |  | $ | 361,545 |
Foreign exchange derivatives | — |  |  | 11,523 |  |  | — |  |  | 11,523 |
Deferred compensation assets | 47,669 |  |  | — |  |  | — |  |  | 47,669 |
Embedded derivative asset | — |  |  | 18,998 |  |  | — |  |  | 18,998 |
Segregated investments and marketable securities | 85,950 |  |  | — |  |  | — |  |  | 85,950 |
Other assets | 5,276 |  |  | — |  |  | — |  |  | 5,276 |
Total | $ | 144,657 |  |  | $ | 386,304 |  |  | $ | — |  |  | $ | 530,961 |
Liabilities |  |  |  |  |  |  |
Commodity derivatives | $ | 6,037 |  |  | $ | 346,126 |  |  | $ | — |  |  | $ | 352,163 |
Foreign exchange derivatives | — |  |  | 69,467 |  |  | — |  |  | 69,467 |
Total | $ | 6,037 |  |  | $ | 415,593 |  |  | $ | — |  |  | $ | 421,630 |

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, adjusted for location-specific inputs, 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 the 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.
Deferred compensation and other assets. Our deferred compensation investments consist primarily of rabbi trust assets that are valued based on unadjusted quoted prices on active exchanges and are classified within Level 1. Changes in the fair values of these other assets are primarily recognized in our Condensed Consolidated Statements of Operations as a component of marketing, general and administrative expenses.
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Embedded derivative asset. The embedded derivative asset relates to contingent payments inherent to our investment in CF Nitrogen. The inputs used in the fair value measurement include the probability of future upgrades and downgrades of the CF Industries credit rating based on historical credit rating movements of other public companies and the discount rates applied to potential annual payments based on applicable historical and current yield coupon rates. Based on these observable inputs, our fair value measurement is classified within Level 2. See Note 11, Derivative Financial Instruments and Hedging Activities, for additional information.
Segregated investments and marketable securities. Our segregated investments and marketable securities are comprised of investments in various government agencies and U.S. Treasury securities, 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 compliance requirements, we establish reserves for the future costs of remediation of identified issues that are both probable and can be reasonably estimated, which are included in cost of goods sold and marketing, general and administrative expenses in our Condensed Consolidated Statements of Operations. The resolution of any such matters may affect consolidated net income for any fiscal period; however, we believe any resulting liabilities, individually or in aggregate, will not have a material effect on our condensed consolidated financial statements 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 net income for any fiscal period; however, we believe any resulting liabilities, individually or in aggregate, will not have a material effect on our condensed consolidated financial statements 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 $1.0 billion, of which $188.8 million were outstanding on May 31, 2021. 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, 2021.
Note 14 Leases
We assess arrangements at inception to determine whether they contain a lease. An arrangement is considered to contain a lease if it conveys the right to control the use of an asset for a period of time in exchange for consideration. The right to control the use of an asset must include both (a) the right to obtain substantially all economic benefits associated with an identified asset and (b) the right to direct how and for what purpose the identified asset is used. Certain arrangements provide us with the right to use an identified asset; however, most of these arrangements are not considered to represent a lease, as we do not control how and for what purpose the identified asset is used. For example, our supply agreements, warehousing and distribution services agreements, and transportation services agreements generally do not contain leases.
We lease property, plant and equipment used in our operations primarily under operating lease agreements and, to a lesser extent, under finance lease agreements. Our operating leases are primarily for railcars, equipment, vehicles and office space, many of which contain renewal options and escalation clauses. Renewal options are included as part of the right of use asset and liability when it is reasonably certain that we will exercise the renewal option; however, renewal options are generally not included as we are not reasonably certain to exercise such options.
Operating lease right of use assets and liabilities for operating leases are recognized at the lease commencement date for leases in excess of 12 months based on the present value of lease payments over the lease term. For measurement and classification of lease agreements, lease and nonlease components are grouped into a single lease component for all asset classes. Variable lease payments are excluded from measurement of right of use assets and liabilities and generally include payments for nonlease components such as maintenance costs, payments for leased assets beyond their noncancelable lease term and payments for other nonlease components such as sales tax. The discount rate used to calculate present value is our
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collateralized incremental borrowing rate or, if available, the rate implicit in the lease. The incremental borrowing rate is determined for each lease based primarily on its lease term. Certain lease arrangements include rental payments adjusted annually based on changes in an inflation index. Our lease arrangements generally do not contain residual value guarantees or material restrictive covenants.
Lease expense is recognized on a straight-line basis over the lease term. The components of lease expense recognized in our Condensed Consolidated Statements of Operations are as follows:

| Three Months Ended May 31, |  | Nine Months Ended May 31,
| 2021 |  | 2020 |  | 2021 |  | 2020
| (Dollars in thousands)
Operating lease expense | $ | 18,534 |  |  | $ | 17,057 |  |  | $ | 54,508 |  |  | $ | 53,155 |
Finance lease expense: |  |  |  |  |  |  |
Amortization of assets | 1,974 |  |  | 1,908 |  |  | 5,919 |  |  | 5,170 |
Interest on lease liabilities | 218 |  |  | 257 |  |  | 694 |  |  | 742 |
Short-term lease expense | 3,970 |  |  | 3,108 |  |  | 12,394 |  |  | 12,768 |
Variable lease expense | 668 |  |  | 1,176 |  |  | 2,209 |  |  | 2,089 |
Total net lease expense* | $ | 25,364 |  |  | $ | 23,506 |  |  | $ | 75,724 |  |  | $ | 73,924 |

*Income related to sub-lease activity is not material and has been excluded from the table above.
Supplemental balance sheet information related to operating and finance leases is as follows:

| Balance Sheet Location |  | May 31, 2021 |  | August 31, 2020 |  |  |  |  |  |
|  |  | (Dollars in thousands)
Operating leases |  |  |  |  |  |  |  |  |  |  |
Assets |  |  |  |  |  |  |  |  |  |  |
Operating lease right of use assets | Other assets |  | $ | 262,737 |  |  | $ | 257,834 |  |  |  |  |  |  |
Liabilities |  |  |  |  |  |  |  |  |  |  |
Current operating lease liabilities | Accrued expenses |  | 58,767 |  |  | 57,200 |  |  |  |  |  |  |
Long-term operating lease liabilities | Other liabilities |  | 207,513 |  |  | 203,691 |  |  |  |  |  |  |
Total operating lease liabilities |  | $ | 266,280 |  |  | $ | 260,891 |  |  |  |  |  |  |
Finance leases |  |  |  |  |  |  |  |  |  |  |
Assets |  |  |  |  |  |  |  |  |  |  |
Finance lease assets | Property, plant and equipment |  | $ | 39,393 |  |  | $ | 44,860 |  |  |  |  |  |  |
Liabilities |  |  |  |  |  |  |  |  |  |  |
Current finance lease liabilities | Current portion of long-term debt |  | 7,152 |  |  | 7,993 |  |  |  |  |  |  |
Long-term finance lease liabilities | Long-term debt |  | 19,307 |  |  | 23,467 |  |  |  |  |  |  |
Total finance lease liabilities |  | $ | 26,459 |  |  | $ | 31,460 |  |  |  |  |  |  |
Weighted average remaining lease term (in years) |  |  |  |  |  |  |  |  |  |
Operating leases |  | 7.9 |  | 8.3 |  |  |  |  |  |
Finance leases |  | 5.7 |  | 6.0 |  |  |  |  |  |
Weighted average discount rate |  |  |  |  |  |  |  |  |  |
Operating leases |  | 2.99 | % |  | 3.11 | % |  |  |  |  |  |
Finance leases |  | 3.34 | % |  | 3.33 | % |  |  |  |  |  |

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Supplemental cash flow and other information related to operating and finance leases are as follows:

| Nine Months Ended May 31,
| 2021 |  | 2020
| (Dollars in thousands)
Cash paid for amounts included in measurement of lease liabilities: |  |  |
Operating cash flows from operating leases | $ | 56,448 |  |  | $ | 45,718 |
Operating cash flows from finance leases | 694 |  |  | 742 |
Financing cash flows from finance leases | 6,426 |  |  | 5,239 |
Supplemental noncash information: |  |  |
Right of use assets obtained in exchange for lease liabilities | 37,284 |  |  | 32,567 |
Right of use asset modifications | 23,886 |  |  | 6,507 |

Maturities of lease liabilities as of May 31, 2021, were as follows:

| May 31, 2021
| Finance Leases |  | Operating Leases
| (Dollars in thousands)
Remainder of fiscal 2021 | $ | 2,004 |  |  | $ | 18,002 |
Fiscal 2022 | 7,787 |  |  | 65,469 |
Fiscal 2023 | 6,206 |  |  | 51,946 |
Fiscal 2024 | 3,487 |  |  | 41,945 |
Fiscal 2025 | 2,078 |  |  | 31,211 |
After fiscal 2025 | 8,071 |  |  | 108,601 |
Total maturities of lease liabilities | 29,633 |  |  | 317,174 |
Less amounts representing interest | 3,174 |  |  | 50,894 |
Present value of future minimum lease payments | 26,459 |  |  | 266,280 |
Less current lease liabilities | 7,152 |  |  | 58,767 |
Long-term lease liabilities | $ | 19,307 |  |  | $ | 207,513 |

Note 15 Other Current Assets and Liabilities
Other current assets and liabilities as of May 31, 2021, and August 31, 2020, are as follows:

| May 31, 2021 |  | August 31, 2020
Other current assets | (Dollars in thousands)
Derivative assets (Note 11) | $ | 881,636 |  |  | $ | 371,195 |
Margin and related deposits | 430,336 |  |  | 194,097 |
Supplier advance payments | 214,147 |  |  | 198,699 |
Other | 370,677 |  |  | 253,497 |
Total other current assets | $ | 1,896,796 |  |  | $ | 1,017,488 |
Other current liabilities |  |  |
Customer margin deposits and credit balances | $ | 276,344 |  |  | $ | 149,539 |
Customer advance payments | 522,804 |  |  | 300,100 |
Derivative liabilities (Note 11) | 595,654 |  |  | 416,204 |
Dividends and equity payable | 49,914 |  |  | 63,000 |
Total other current liabilities | $ | 1,444,716 |  |  | $ | 928,843 |

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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 financial statements with a narrative from the perspective of our management on 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 2021 Third Quarter Highlights
•Fiscal 2021 Trends Update
•Operating Metrics
•Results of Operations
•Liquidity and Capital Resources
•Off-Balance Sheet Financing Arrangements
•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, 2020 (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. 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 grains and oilseeds originated by our country operations business, by our member cooperatives and by third parties; also serves as a wholesaler and retailer of agronomy products.
•Nitrogen Production. Consists solely of our equity method investment in CF Industries Nitrogen, LLC ("CF Nitrogen"), and produces and distributes nitrogen fertilizer.
In addition, our financing and hedging businesses, along with our nonconsolidated wheat milling and food production and distribution joint ventures, have been aggregated within Corporate and Other.
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.
Corporate administrative expenses and interest are allocated to each reporting segment, along with 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.
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. Management also focuses 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 and fourth fiscal quarters and higher during the first and third fiscal quarters; 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 during the spring planting season. Our
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global grain marketing operations are subject to fluctuations in volume and income based on producer harvests, world grain prices, demand and global trade volumes. Our Energy segment generally experiences higher volumes 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 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, grains, 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 network, outbreaks of disease, government regulations and policies, global trade disputes and general political/economic conditions.
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 on these strategies, we are focused on implementing agile, efficient and sustainable new technology platforms; building robust and efficient supply chains; hiring, developing and retaining high-
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performing, diverse and passionate teams; achieving operational excellence and continuous improvement; and maintaining a strong balance sheet.
Fiscal 2021 Third Quarter Highlights
•Strong global demand drove commodity prices higher, and improved trade relations between the United States and foreign trade partners led to continued higher volumes for grain and oilseed, which significantly improved earnings in our Ag segment compared to the prior year.
•Improved crack spreads in our refined fuels business resulted in increased margins as the demand shocks that occurred during the COVID-19 pandemic began to subside.
•Improved margins in our refined fuels business were partially offset by exceptionally high costs for renewable energy credits.
•Equity earnings from investments were a significant source of pretax earnings during the fiscal 2021 third quarter.
•Although a significant portion of our global employees continued with remote working arrangements through the end of the third quarter, we began efforts to bring employees back to our offices in either full or hybrid capacities as COVID-19 restrictions were being lifted. The costs of these activities were not material during the third quarter of fiscal 2021 and are not expected to be material for the remainder of fiscal 2021.
Fiscal 2021 Trends Update
Our Energy and Ag segments operate in cyclical environments in which unforeseen market conditions can have significant positive or negative impacts. We continue to navigate the lingering effects of the COVID-19 pandemic. Most of our operations are considered to be essential; however, periods of depressed demand and margins could result in decreased profitability and the need to assess for potential impairments. Easing of measures taken to mitigate the spread of COVID-19, the rollout of vaccines and other efforts to respond to the pandemic in the United States and globally could also impact the profitability of our businesses. Refer to Item 1A of our Annual Report on Form 10-K for the year ended August 31, 2020, for additional considerations of risks the COVID-19 pandemic may continue to have on our business, liquidity, capital resources and financial results.
Although improving from the lows experienced during the prior fiscal year, the energy industry continued to experience volume and margin reductions compared to historical levels. These reductions are primarily the result of the COVID-19 pandemic, which began in our second quarter of fiscal 2020 and significantly reduced our profitability. In addition, the cost of renewable energy credits has increased significantly, which negatively impacted our profitability during fiscal 2021. We are unable to predict how long the current environment will last or the severity of the financial and operational impacts; however, we expect uncertainty and volatility to drive unfavorable market conditions in the energy industry that will negatively impact our profitability through the remainder of fiscal 2021.
Although challenges remain, the U.S. agricultural industry has experienced increased demand for grain and oilseed commodities following the Phase One trade agreement with China, which has resulted in increased volumes and improved commodity prices. Unforeseen global market conditions can positively or negatively impact agricultural commodity prices and volumes sold. We are unable to predict these conditions or the severity of the impact such conditions could have on our pricing and volumes. In addition to global supply and demand impacts, regional factors such as unpredictable weather conditions could impact our operations. As of May 31, 2021, much of our trade territory was experiencing drought conditions. If these conditions persist through the remainder of the summer, we would expect our fourth quarter Ag business to be impacted through lower volumes and margins on our Ag products. However, if timely rainfall were to occur, we would expect crops to mostly recover and the impact to our business to be minimal. Nonetheless, we expect revenues, margins and cash flows from core operations in our Ag segment to potentially fluctuate through the remainder of fiscal 2021. Additionally, unforeseen global market conditions with negative impacts remain a risk that could put pressure on asset valuations in our Ag segment.
In addition to market conditions that impact our businesses, we will continue to take actions to protect our financial health while continuing to deliver on our enterprise resource planning system implementation and advance our target operating model, with actions that include implementing plans to substantially reduce budgeted costs and improving cash flow management with the objective of generating substantial additional operating cash flows.
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Operating Metrics
Energy
Our Energy segment operations primarily include our Laurel, Montana, and McPherson, Kansas, refineries, which process crude oil to produce refined products, including gasolines, distillates and other products. The following table provides information about our consolidated refinery operations.

| Three Months Ended May 31, |  | Nine Months Ended May 31,
| 2021 |  | 2020 |  | 2021 |  | 2020
Refinery throughput volumes | (Barrels per day)
Heavy, high-sulfur crude oil | 94,854 |  |  | 90,118 |  |  | 94,758 |  |  | 90,976 |
All other crude oil | 69,156 |  |  | 61,328 |  |  | 61,893 |  |  | 71,730 |
Other feedstocks and blendstocks | 12,917 |  |  | 6,657 |  |  | 13,496 |  |  | 12,184 |
Total refinery throughput volumes | 176,927 |  |  | 158,103 |  |  | 170,147 |  |  | 174,890 |
Refined fuel yields |  |  |  |  |  |  |
Gasolines | 89,297 |  |  | 73,196 |  |  | 83,723 |  |  | 84,837 |
Distillates | 65,841 |  |  | 68,920 |  |  | 66,859 |  |  | 73,172 |

We are subject to the Renewable Fuels Standard, which requires refiners to blend renewable fuels (e.g., ethanol, 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 generally establishes new annual renewable fuel percentage standards for each compliance year in the preceding year, although standards have not yet been established for calendar year 2021. 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, with prices for D6 ethanol RINs and D4 ethanol RINs rising by 295% and 180%, respectively, during the third quarter of fiscal 2021 compared to the same period of the prior year, which negatively impacted our profitability during the third quarter of fiscal 2021. Estimates of our RIN expense are based on past practice and are calculated using an average RIN price each month.
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 differentials (i.e., the price differential between West Texas Intermediate ("WTI") crude oil and WCS crude oil), which are driven by the supply and demand of refined product markets. Crack spreads increased during the three months ended May 31, 2021, compared to the same period during the prior year, contributing to improved IBIT for the Energy segment. However, WCS crude oil differentials decreased during the three months ended May 31, 2021, which partially offset the positive impact of improved crack spreads. The table below provides information about average market reference prices and differentials that impact our Energy segment.

| Three Months Ended May 31, |  | Nine Months Ended May 31,
| 2021 |  | 2020 |  | 2021 |  | 2020
Market indicators |  |  |  |  |  |  |
WTI crude oil (dollars per barrel) | $ | 63.07 |  |  | $ | 25.22 |  |  | $ | 52.00 |  |  | $ | 45.76 |
WTI - WCS crude oil differential (dollars per barrel) | $ | 11.00 |  |  | $ | 15.89 |  |  | $ | 10.90 |  |  | $ | 16.81 |
Group 3 2:1:1 crack spread (dollars per barrel)* | $ | 20.27 |  |  | $ | 9.38 |  |  | $ | 13.49 |  |  | $ | 13.69 |
Group 3 5:3:2 crack spread (dollars per barrel)* | $ | 20.38 |  |  | $ | 8.26 |  |  | $ | 13.28 |  |  | $ | 12.69 |
D6 ethanol RIN (dollars per RIN) | $ | 1.3496 |  |  | $ | 0.3414 |  |  | $ | 0.9242 |  |  | $ | 0.2342 |
D4 ethanol RIN (dollars per RIN) | $ | 1.4342 |  |  | $ | 0.5131 |  |  | $ | 1.0928 |  |  | $ | 0.5112 |

*Group 3 refers to the oil refining and distribution system serving Midwest markets from the Gulf Coast through the Plains states.
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Ag
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, 2021 and 2020.

|  |  | Three Months Ended May 31, |  | Nine Months Ended May 31,
| Market Source* |  | 2021 |  | 2020 |  | 2021 |  | 2020
Commodity prices |  |  |  |  |  |  |  |  |
Corn (dollars per bushel) | Chicago Board of Trade |  | $ | 6.54 |  |  | $ | 3.26 |  |  | $ | 5.27 |  |  | $ | 3.63 |
Soybeans (dollars per bushel) | Chicago Board of Trade |  | $ | 15.13 |  |  | $ | 8.59 |  |  | $ | 13.20 |  |  | $ | 8.86 |
Wheat (dollars per bushel) | Chicago Board of Trade |  | $ | 6.75 |  |  | $ | 5.22 |  |  | $ | 6.38 |  |  | $ | 5.26 |
Urea (dollars per ton) | Green Markets NOLA |  | $ | 376.00 |  |  | $ | 239.00 |  |  | $ | 298.00 |  |  | $ | 228.00 |
Urea ammonium nitrate (dollars per ton) | Green Markets NOLA |  | $ | 295.68 |  |  | $ | 145.00 |  |  | $ | 189.76 |  |  | $ | 145.00 |
Ethanol (dollars per gallon) | Chicago Platts |  | $ | 2.16 |  |  | $ | 1.03 |  |  | $ | 1.72 |  |  | $ | 1.29 |
Volumes |  |  |  |  |  |  |  |  |
Grain and oilseed (thousands of bushels) |  | 685,761 |  |  | 621,775 |  |  | 2,099,623 |  |  | 1,825,064 |
North American grain and oilseed port throughput (thousands of bushels) |  | 199,246 |  |  | 145,789 |  |  | 736,612 |  |  | 409,739 |
Crop nutrients (thousands of tons) |  | 2,857 |  |  | 2,319 |  |  | 6,265 |  |  | 5,645 |
Ethanol (thousands of gallons) |  | 221,125 |  |  | 171,034 |  |  | 660,043 |  |  | 618,834 |

*Market source information represents the average month-end price during the period.
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Results of Operations
Three months ended May 31, 2021 and 2020

| Three Months Ended May 31,
| 2021 |  | % of Revenues |  | 2020 |  | % of Revenues |  |  |  |
| (Dollars in thousands)
Revenues | $ | 10,929,976 |  |  | 100.0 | % |  | $ | 7,241,031 |  |  | 100.0 | % |  |  |  |
Cost of goods sold | 10,615,348 |  |  | 97.1 |  |  | 7,022,672 |  |  | 97.0 |  |  |  |  |
Gross profit | 314,628 |  |  | 2.9 |  |  | 218,359 |  |  | 3.0 |  |  |  |  |
Marketing, general and administrative expenses | 186,703 |  |  | 1.7 |  |  | 180,439 |  |  | 2.5 |  |  |  |  |
Operating earnings | 127,925 |  |  | 1.2 |  |  | 37,920 |  |  | 0.5 |  |  |  |  |
Interest expense | 28,992 |  |  | 0.3 |  |  | 26,661 |  |  | 0.4 |  |  |  |  |
Other income | (10,748) |  |  | (0.1) |  |  | (8,076) |  |  | (0.1) |  |  |  |  |
Equity income from investments | (146,522) |  |  | (1.3) |  |  | (51,114) |  |  | (0.7) |  |  |  |  |
Income before income taxes | 256,203 |  |  | 2.3 |  |  | 70,449 |  |  | 1.0 |  |  |  |  |
Income tax benefit | (17,469) |  |  | (0.2) |  |  | (27,052) |  |  | (0.4) |  |  |  |  |
Net income | 273,672 |  |  | 2.5 |  |  | 97,501 |  |  | 1.3 |  |  |  |  |
Net income (loss) attributable to noncontrolling interests | 81 |  |  | — |  |  | (147) |  |  | — |  |  |  |  |
Net income attributable to CHS Inc. | $ | 273,591 |  |  | 2.5 | % |  | $ | 97,648 |  |  | 1.3 | % |  |  |  |

The charts below detail revenues, net of intersegment revenues, and IBIT by reportable segment for the three months ended May 31, 2021. Our Nitrogen Production reportable segment represents an equity method investment that records earnings and allocated expenses, but not revenues.
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Income (Loss) Before Income Taxes by Segment
Energy

| Three Months Ended May 31, |  | Change |  |  |  |
| 2021 |  | 2020 |  | Dollars |  | Percent |  |  |  |  |  |  |  |
| (Dollars in thousands) |  |  |  |  |  |  |  |  |  |  |  |
Income (loss) before income taxes | $ | 4,959 |  |  | $ | (54,764) |  |  | $ | 59,723 |  |  | 109.1 | % |  |  |  |  |  |  |  |

The following waterfall analysis and commentary presents the changes in our Energy segment IBIT for the three months ended May 31, 2021, 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:
•Improved crack spreads in our refined fuels business resulted in increased margins as the demand shocks that occurred during the COVID-19 pandemic began to subside and a $42.0 million noncash charge to reduce our refined fuels inventories to their market value during the third quarter of fiscal 2020 that did not reoccur during the third quarter of fiscal 2021.
•Improved margins in our refined fuels business were partially offset by significantly higher RIN prices that negatively impacted margins by approximately $82.0 million and decreased WCS crude oil differentials and lower propane margins due to the reversal of hedging gains recognized during the prior year.
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Ag

| Three Months Ended May 31, |  | Change |  |  |  |
| 2021 |  | 2020 |  | Dollars |  | Percent |  |  |  |  |  |  |  |
| (Dollars in thousands) |  |  |  |  |  |  |  |  |  |  |  |
Income (loss) before income taxes | $ | 140,131 |  |  | $ | 95,360 |  |  | $ | 44,771 |  |  | 46.9 | % |  |  |  |  |  |  |  |

The following waterfall analysis and commentary presents the changes in our Ag segment IBIT for the three months ended May 31, 2021, 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 Ag segment IBIT reflects the following:
•Increased margins on feed and farm supplies, grain and oilseed, renewable fuels and agronomy resulted from improved global commodity market conditions during the third quarter of fiscal 2021. The increased margins were partially offset by mark-to-market losses for certain processing and food ingredients products, which we expect to reverse over time.
•Decreased volumes of feed and farm supplies were partially offset by increased volumes of agronomy products that resulted from strong demand due to favorable weather conditions for the spring planting and application season. Increased volumes of grain and oilseed resulted from improved trade relations between the United States and foreign trade partners.
All Other Segments

| Three Months Ended May 31, |  | Change |  |  |  |
| 2021 |  | 2020 |  | Dollars |  | Percent |  |  |  |  |  |  |  |
| (Dollars in thousands) |  |  |  |  |  |  |  |  |  |  |  |
Nitrogen Production IBIT* | $ | 46,635 |  |  | $ | 23,507 |  |  | $ | 23,128 |  |  | 98.4 | % |  |  |  |  |  |  |  |
Corporate and Other IBIT | $ | 64,478 |  |  | $ | 6,346 |  |  | $ | 58,132 |  |  | 916.0 | % |  |  |  |  |  |  |  |

*See Note 5, Investments, of the notes to the condensed consolidated financial statements that are included in this Quarterly Report on Form 10-Q for additional information.
Our Nitrogen Production segment IBIT increased as a result of higher equity method income attributed to increased sale prices of urea and urea ammonium nitrate ("UAN"), which are produced and sold by CF Nitrogen. Corporate and Other IBIT increased primarily due to our equity method investment in Ventura Foods, LLC ("Ventura Foods"), which had significantly increased income as a result of favorable market conditions for oils and a recovery of sales volumes compared with the early stages of the COVID-19 pandemic.
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Revenues by Segment
Energy

| Three Months Ended May 31, |  | Change |  |  |  |
| 2021 |  | 2020 |  | Dollars |  | Percent |  |  |  |  |  |  |  |
| (Dollars in thousands) |  |  |  |  |  |  |  |  |  |  |  |
Revenues | $ | 1,704,798 |  |  | $ | 890,919 |  |  | $ | 813,879 |  |  | 91.4 | % |  |  |  |  |  |  |  |

The following waterfall analysis and commentary presents the changes in our Energy segment revenues for the three months ended May 31, 2021, compared to the same period during the prior year.
The change in Energy segment revenues reflects the following:
•Increased selling prices and volumes for refined fuels as a result of global market conditions, including improved demand following the initial demand shocks associated with the COVID-19 pandemic, contributed to $724.8 million and $33.8 million increases in revenues, respectively.
•Increased selling prices for propane as a result of global market conditions during the third quarter of fiscal 2021 positively impacted revenue by $53.2 million.
•Increased revenues were partially offset by lower volumes of propane driven by lower demand as a result of warm weather conditions during most of the third quarter of fiscal 2021.
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Ag

| Three Months Ended May 31, |  | Change |  |  |  |
| 2021 |  | 2020 |  | Dollars |  | Percent |  |  |  |  |  |  |  |
| (Dollars in thousands) |  |  |  |  |  |  |  |  |  |  |  |
Revenues | $ | 9,216,204 |  |  | $ | 6,337,901 |  |  | $ | 2,878,303 |  |  | 45.4 | % |  |  |  |  |  |  |  |

The following waterfall analysis and commentary presents the changes in our Ag segment revenues for the three months ended May 31, 2021, compared to the same period during the prior year.
The change in Ag segment revenues reflects the following:
•Higher pricing for grain and oilseed was driven by increased global demand and contributed to a $1.5 billion increase in revenues. The remaining price increase was attributed to a combination of price increases and product mix across our other Ag segment businesses, including feed and farm supplies, renewable fuels, agronomy, and processing and food ingredients.
•Improved trade relations between the United States and foreign trade partners drove increased grain and oilseed volumes that contributed to a $473.6 million increase in revenues. The increased grain and oilseed volumes were partially offset by the net impact of decreased volumes of feed and farm supplies and increased volumes of agronomy products and renewable fuels that were driven by global market conditions.
•Due to a planned business model change at our TEMCO LLC ("TEMCO") equity method investment to increase its operational efficiency, we reduced our revenues and COGS on certain transactions associated with TEMCO, which partially offset strong volume growth in grain and oilseed during the three months ended May 31, 2021.
All Other Segments

| Three Months Ended May 31, |  | Change |  |  |  |
| 2021 |  | 2020 |  | Dollars |  | Percent |  |  |  |  |  |  |  |
| (Dollars in thousands) |  |  |  |  |  |  |  |  |  |  |  |
Corporate and Other revenues* | $ | 8,974 |  |  | $ | 12,211 |  |  | $ | (3,237) |  |  | (26.5) | % |  |  |  |  |  |  |  |

*Our Nitrogen Production reportable segment represents an equity method investment that records earnings and allocated expenses, but not revenues.
Corporate and Other revenues decreased during the three months ended May 31, 2021, compared to the same period during the prior year as a result of lower revenues in our financing and hedging businesses due to market-driven interest rate reductions and decreased commissions from hedging activities, respectively.
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Cost of Goods Sold by Segment
Energy

| Three Months Ended May 31, |  | Change |  |  |  |
| 2021 |  | 2020 |  | Dollars |  | Percent |  |  |  |  |  |  |  |
| (Dollars in thousands) |  |  |  |  |  |  |  |  |  |  |  |
Cost of goods sold | $ | 1,649,905 |  |  | $ | 893,922 |  |  | $ | 755,983 |  |  | 84.6 | % |  |  |  |  |  |  |  |

The following waterfall analysis and commentary presents the changes in our Energy segment COGS for the three months ended May 31, 2021, compared to the same period during the prior year.
The change in Energy segment COGS reflects the following:
•Increased costs and volumes for refined fuels contributed to $631.4 million and $35.8 million increases of COGS, respectively. Increased refined fuels costs resulted from global market conditions, including the impact of significantly higher RIN prices, and increased volumes resulted from improved demand following the initial demand shocks associated with the COVID-19 pandemic.
•Increased costs for propane as a result of global market conditions and increased distribution costs resulted in an $80.8 million increase of COGS.
•Increased COGS was partially offset by lower volumes of propane driven by lower demand as a result of warm weather conditions during most of the third quarter of fiscal 2021.
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Ag

| Three Months Ended May 31, |  | Change |  |  |  |
| 2021 |  | 2020 |  | Dollars |  | Percent |  |  |  |  |  |  |  |
| (Dollars in thousands) |  |  |  |  |  |  |  |  |  |  |  |
Cost of goods sold | $ | 8,967,297 |  |  | $ | 6,129,293 |  |  | $ | 2,838,004 |  |  | 46.3 | % |  |  |  |  |  |  |  |

The following waterfall analysis and commentary presents the changes in our Ag segment COGS for the three months ended May 31, 2021, compared to the same period during the prior year.
The change in Ag segment COGS reflects the following:
•Higher pricing for grain and oilseed was driven by increased global demand and contributed to a $1.5 billion increase in COGS. The remaining price increase was attributed to a combination of price increases and product mix across our other Ag segment businesses, including feed and farm supplies, renewable fuels, agronomy, and processing and food ingredients.
•Improved trade relations between the United States and foreign trade partners drove increased grain and oilseed volumes that contributed to a $474.0 million increase in COGS. The increased grain and oilseed volumes were partially offset by the net impact of decreased volumes of feed and farm supplies and increased volumes of agronomy products and renewable fuels that were driven by global market conditions.
•Due to a planned business model change at our TEMCO equity method investment to increase its operational efficiency, we reduced our revenues and COGS on certain transactions associated with TEMCO, which partially offset strong volume growth in grain and oilseed during the three months ended May 31, 2021.
All Other Segments

| Three Months Ended May 31, |  | Change |  |  |  |
| 2021 |  | 2020 |  | Dollars |  | Percent |  |  |  |  |  |  |  |
| (Dollars in thousands) |  |  |  |  |  |  |  |  |  |  |  |
Nitrogen Production COGS | $ | 425 |  |  | $ | 430 |  |  | $ | (5) |  |  | (1.2)% |  |  |  |  |  |  |  |
Corporate and Other COGS | $ | (2,279) |  |  | $ | (973) |  |  | $ | (1,306) |  |  | (134.2)% |  |  |  |  |  |  |  |

There were no significant changes to COGS in our Nitrogen Production segment or Corporate and Other during the three months ended May 31, 2021, compared to the same period during the prior year.
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Marketing, General and Administrative Expenses

| Three Months Ended May 31, |  | Change |  |  |  |
| 2021 |  | 2020 |  | Dollars |  | Percent |  |  |  |  |  |  |  |
| (Dollars in thousands) |  |  |  |  |  |  |  |  |  |  |  |
Marketing, general and administrative expenses | $ | 186,703 |  |  | $ | 180,439 |  |  | $ | 6,264 |  |  | 3.5 | % |  |  |  |  |  |  |  |

Marketing, general and administrative expenses increased during the three months ended May 31, 2021, compared to the three months ended May 31, 2020, primarily due to increased variable incentive compensation resulting from improved earnings across our Ag segment businesses, which was partially offset by various cost reduction initiatives launched during the current year.
Interest Expense

| Three Months Ended May 31, |  | Change |  |  |  |
| 2021 |  | 2020 |  | Dollars |  | Percent |  |  |  |  |  |  |  |
| (Dollars in thousands) |  |  |  |  |  |  |  |  |  |  |  |
Interest expense | $ | 28,992 |  |  | $ | 26,661 |  |  | $ | 2,331 |  |  | 8.7 | % |  |  |  |  |  |  |  |

Interest expense increased during the three months ended May 31, 2021, as a result of higher notes payable balances compared to the same period of the prior year.
Other Income

| Three Months Ended May 31, |  | Change |  |  |  |
| 2021 |  | 2020 |  | Dollars |  | Percent |  |  |  |  |  |  |  |
| (Dollars in thousands) |  |  |  |  |  |  |  |  |  |  |  |
Other income | $ | 10,748 |  |  | $ | 8,076 |  |  | $ | 2,672 |  |  | 33.1 | % |  |  |  |  |  |  |  |

Other income increased during the three months ended May 31, 2021, primarily due to investment gains that did not occur during the same period of the prior year.
Equity Income from Investments

| Three Months Ended May 31, |  | Change |  |  |  |
| 2021 |  | 2020 |  | Dollars |  | Percent |  |  |  |  |  |  |  |
| (Dollars in thousands) |  |  |  |  |  |  |  |  |  |  |  |
Equity income from investments* | $ | 146,522 |  |  | $ | 51,114 |  |  | $ | 95,408 |  |  | 186.7 | % |  |  |  |  |  |  |  |

*See Note 5, Investments, of the notes to the condensed consolidated financial statements that are included in this Quarterly Report on Form 10-Q for additional information.
We record equity income or loss for investments in which we have an ownership interest of 50% or less and have significant influence, but not control, for our proportionate share of income or loss reported by the entity, without consolidating the revenues and expenses of the entity in our Condensed Consolidated Statements of Operations. Equity income from investments increased during the three months ended May 31, 2021, compared to the same period during the prior year, primarily due to increased income associated with our equity method investments in Ventura Foods and CF Nitrogen. Ventura Foods experienced favorable market conditions for oils and a recovery of sales volumes compared with the early stages of the COVID-19 pandemic, and CF Nitrogen experienced increased sale prices of urea and UAN.
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Income Tax Benefit

| Three Months Ended May 31, |  | Change |  |  |  |
| 2021 |  | 2020 |  | Dollars |  | Percent |  |  |  |  |  |  |  |
| (Dollars in thousands) |  |  |  |  |  |  |  |  |  |  |  |
Income tax benefit | $ | 17,469 |  |  | $ | 27,052 |  |  | $ | (9,583) |  |  | (35.4) | % |  |  |  |  |  |  |  |

The lower income tax benefit during the three months ended May 31, 2021, primarily reflected changes in the mix of full-year earnings projected across business units and equity management assumptions. Effective tax rates for the three months ended May 31, 2021 and 2020, were (6.8)% and (38.4)%, respectively. Federal and state statutory rates applied to nonpatronage business activity were 24.9% and 24.7% for the three months ended May 31, 2021 and 2020, respectively. Income taxes and effective tax rate vary each year based on profitability and nonpatronage business activity during each of the comparable years.
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Nine months ended May 31, 2021 and 2020

| Nine Months Ended May 31,
| 2021 |  | % of Revenues |  | 2020 |  | % of Revenues |  |  |  |
| (Dollars in thousands)
Revenues | $ | 27,965,778 |  |  | 100.0 | % |  | $ | 21,460,742 |  |  | 100.0 | % |  |  |  |
Cost of goods sold | 27,371,326 |  |  | 97.9 |  |  | 20,601,785 |  |  | 96.0 |  |  |  |  |
Gross profit | 594,452 |  |  | 2.1 |  |  | 858,957 |  |  | 4.0 |  |  |  |  |
Marketing, general and administrative expenses | 518,875 |  |  | 1.9 |  |  | 548,340 |  |  | 2.6 |  |  |  |  |
Operating earnings | 75,577 |  |  | 0.3 |  |  | 310,617 |  |  | 1.4 |  |  |  |  |
Interest expense | 82,897 |  |  | 0.3 |  |  | 95,043 |  |  | 0.4 |  |  |  |  |
Other income | (41,219) |  |  | (0.1) |  |  | (32,926) |  |  | (0.2) |  |  |  |  |
Equity income from investments | (260,654) |  |  | (0.9) |  |  | (135,174) |  |  | (0.6) |  |  |  |  |
Income before income taxes | 294,553 |  |  | 1.1 |  |  | 383,674 |  |  | 1.8 |  |  |  |  |
Income tax benefit | (10,130) |  |  | — |  |  | (18,258) |  |  | (0.1) |  |  |  |  |
Net income | 304,683 |  |  | 1.1 |  |  | 401,932 |  |  | 1.9 |  |  |  |  |
Net (loss) income attributable to noncontrolling interests | (350) |  |  | — |  |  | 955 |  |  | — |  |  |  |  |
Net income attributable to CHS Inc. | $ | 305,033 |  |  | 1.1 | % |  | $ | 400,977 |  |  | 1.9 | % |  |  |  |

The charts below detail revenues, net of intersegment revenues, and IBIT by reportable segment for the nine months ended May 31, 2021. Our Nitrogen Production reportable segment represents an equity method investment that records earnings and allocated expenses, but not revenues.
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Income (Loss) Before Income Taxes by Segment
Energy

| Nine Months Ended May 31, |  | Change |  |  |  |
| 2021 |  | 2020 |  | Dollars |  | Percent |  |  |  |  |  |  |  |
| (Dollars in thousands) |  |  |  |  |  |  |  |  |  |  |  |
Income (loss) before income taxes | $ | (116,908) |  |  | $ | 246,309 |  |  | $ | (363,217) |  |  | (147.5) | % |  |  |  |  |  |  |  |

The following waterfall analysis and commentary presents the changes in our Energy segment IBIT for the nine months ended May 31, 2021, 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:
•Less advantageous market conditions in our refined fuels business compared to the same period of the prior year resulted in significantly lower margins and volumes. These market conditions were driven by continued impact of the demand shocks occurring during the COVID-19 pandemic during the first three quarters of fiscal 2021, which resulted in a combination of decreased WCS crude oil differentials experienced on heavy Canadian crude oil processed by our refineries and decreased crack spreads.
•Significantly higher RIN prices negatively impacted margins by approximately $145.0 million.
•Lower propane margins due to the reversal of hedging gains recognized during the prior year and reduced propane volumes as a result of warmer and drier weather conditions during fiscal 2021 reduced income compared to the same period during the prior year.
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Ag

| Nine Months Ended May 31, |  | Change |  |  |  |
| 2021 |  | 2020 |  | Dollars |  | Percent |  |  |  |  |  |  |  |
| (Dollars in thousands) |  |  |  |  |  |  |  |  |  |  |  |
Income (loss) before income taxes | $ | 237,185 |  |  | $ | 60,653 |  |  | $ | 176,532 |  |  | 291.1 | % |  |  |  |  |  |  |  |

The following waterfall analysis and commentary presents the changes in our Ag segment IBIT for the nine months ended May 31, 2021, 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 Ag segment IBIT reflects the following:
•Favorable weather conditions for the fall harvest and spring planting seasons and improved trade relations between the United States and foreign trade partners during fiscal 2021 compared to the prior year contributed to increased volumes and margins across most of our Ag segment. These improved margins were partially offset by decreased grain and oilseed and processing and food ingredients margins, including mark-to-market losses that we expect to reverse over time.
•We experienced decreased marketing, general and administrative expenses associated with focused cost-reduction initiatives and increased equity income from our investment in TEMCO.
All Other Segments

| Nine Months Ended May 31, |  | Change |  |  |  |
| 2021 |  | 2020 |  | Dollars |  | Percent |  |  |  |  |  |  |  |
| (Dollars in thousands) |  |  |  |  |  |  |  |  |  |  |  |
Nitrogen Production IBIT* | $ | 62,270 |  |  | $ | 45,698 |  |  | $ | 16,572 |  |  | 36.3 | % |  |  |  |  |  |  |  |
Corporate and Other IBIT | $ | 112,006 |  |  | $ | 31,014 |  |  | $ | 80,992 |  |  | 261.1 | % |  |  |  |  |  |  |  |

*See Note 5, Investments, of the notes to the condensed consolidated financial statements that are included in this Quarterly Report on Form 10-Q for additional information.
Our Nitrogen Production segment experienced increased IBIT due to increased equity method income attributed to higher sale prices of urea and UAN, which were partially offset by increased natural gas costs. Corporate and Other IBIT increased primarily due to increased income from our equity method investments in Ventura Foods and Ardent Mills as a result of favorable market conditions for oils and a recovery of sales volumes compared with the early stages of the COVID-19 pandemic; decreased marketing, general and administrative expenses as a result of focused cost reduction efforts; and decreased interest expense due to lower interest rates.
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Revenues by Segment
Energy

| Nine Months Ended May 31, |  | Change |  |  |  |
| 2021 |  | 2020 |  | Dollars |  | Percent |  |  |  |  |  |  |  |
| (Dollars in thousands) |  |  |  |  |  |  |  |  |  |  |  |
Revenues | $ | 4,334,803 |  |  | $ | 4,247,392 |  |  | $ | 87,411 |  |  | 2.1 | % |  |  |  |  |  |  |  |

The following waterfall analysis and commentary presents the changes in our Energy segment revenues for the nine months ended May 31, 2021, compared to the same period during the prior year.
The change in Energy segment revenues reflects the following:
•Increased selling prices for propane and refined fuels as a result of global market conditions, including improved demand following the initial demand shocks associated with the COVID-19 pandemic, resulted in increased revenues of $126.7 million and $99.3 million, respectively.
•Decreased volumes of propane and refined fuels contributed to $89.9 million and $47.7 million decreases in revenues, respectively. Decreased propane volumes resulted from lower demand due to warmer and drier weather conditions during fiscal 2021 and the decreased volumes of refined fuels resulted from global market conditions, including the continued impact of the demand shocks occurring during the COVID-19 pandemic, as well as product mix.
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Ag

| Nine Months Ended May 31, |  | Change |  |  |  |
| 2021 |  | 2020 |  | Dollars |  | Percent |  |  |  |  |  |  |  |
| (Dollars in thousands) |  |  |  |  |  |  |  |  |  |  |  |
Revenues | $ | 23,599,818 |  |  | $ | 17,173,958 |  |  | $ | 6,425,860 |  |  | 37.4 | % |  |  |  |  |  |  |  |

The following waterfall analysis and commentary presents the changes in our Ag segment revenues for the nine months ended May 31, 2021, compared to the same period during the prior year.
The change in Ag segment revenues reflects the following:
•Trade relations improved between the United States and foreign trade partners and weather conditions were more favorable compared to the same period of the prior year. Stronger grain and oilseed shipments contributed to a $2.1 billion increase in revenues with the remaining increase being composed primarily of improved sales volumes of feed and farm supplies and agronomy products.
•Due to a planned business model change at our TEMCO equity method investment to increase its operational efficiency, we reduced our revenues and COGS on certain transactions associated with TEMCO, which partially offset strong volume growth in grain and oilseed during fiscal 2021.
•Higher pricing for grain and oilseed was driven by increased global demand and contributed to a $3.2 billion increase in revenues. The remaining price increase was attributed to a combination of price increases and product mix across our other businesses, including feed and farm supplies, renewable fuels, agronomy and processing and food ingredients.
All Other Segments

| Nine Months Ended May 31, |  | Change |  |  |  |
| 2021 |  | 2020 |  | Dollars |  | Percent |  |  |  |  |  |  |  |
| (Dollars in thousands) |  |  |  |  |  |  |  |  |  |  |  |
Corporate and Other revenues* | $ | 31,157 |  |  | $ | 39,392 |  |  | $ | (8,235) |  |  | (20.9) | % |  |  |  |  |  |  |  |

*Our Nitrogen Production reportable segment represents an equity method investment that records earnings and allocated expenses, but not revenues.
Corporate and Other revenues decreased during the nine months ended May 31, 2021, compared to the same period during the prior year as a result of lower revenues in our financing business due to market-driven interest rate reductions.
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Cost of Goods Sold by Segment
Energy

| Nine Months Ended May 31, |  | Change |  |  |  |
| 2021 |  | 2020 |  | Dollars |  | Percent |  |  |  |  |  |  |  |
| (Dollars in thousands) |  |  |  |  |  |  |  |  |  |  |  |
Cost of goods sold | $ | 4,310,992 |  |  | $ | 3,850,176 |  |  | $ | 460,816 |  |  | 12.0 | % |  |  |  |  |  |  |  |

The following waterfall analysis and commentary presents the changes in our Energy segment COGS for the nine months ended May 31, 2021, compared to the same period during the prior year.
The change in Energy segment COGS reflects the following:
•Increased refined fuel prices resulted from global market conditions and contributed to a $375.2 million increase of COGS, including the impact of significantly higher costs for RINs of approximately $145.0 million.
•Global market conditions, the reversal of hedging gains recognized during the prior year and increased distribution costs contributed to a $201.7 million increase of COGS for propane.
•Lower volumes of propane and refined fuels contributed to $73.2 million and $44.2 million decreases of COGS, respectively. Decreased propane volumes were driven by lower demand that resulted from warmer and drier weather conditions during fiscal 2021, and lower volumes of refined fuels resulted from global market conditions, including the continued impact of demand shocks occurring during the COVID-19 pandemic.
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Ag

| Nine Months Ended May 31, |  | Change |  |  |  |
| 2021 |  | 2020 |  | Dollars |  | Percent |  |  |  |  |  |  |  |
| (Dollars in thousands) |  |  |  |  |  |  |  |  |  |  |  |
Cost of goods sold | $ | 23,068,732 |  |  | $ | 16,752,073 |  |  | $ | 6,316,659 |  |  | 37.7 | % |  |  |  |  |  |  |  |

The following waterfall analysis and commentary presents the changes in our Ag segment COGS for the nine months ended May 31, 2021, compared to the same period during the prior year.
The change in Ag segment COGS reflects the following:
•Improved trade relations between the United States and foreign trade partners and favorable weather conditions compared to the same period of the prior year drove volumes higher. Stronger grain and oilseed shipments contributed to a $2.0 billion increase of COGS with the remaining increase being composed primarily of improved volumes of agronomy products and feed and farm supplies.
•Due to a planned business model change at our TEMCO equity method investment to increase its operational efficiency, we reduced our revenues and COGS on certain transactions associated with TEMCO, which partially offset strong volume growth in grain and oilseed during fiscal 2021.
•Higher prices for grain and oilseed resulted from increased global demand and contributed to a $3.3 billion increase of COGS. The remaining price increase was driven by a combination of global market conditions and product mix, which increased costs for renewable fuels, agronomy products, and processing and food ingredients, as well as partially offsetting price decreases for feed and farm supplies.
All Other Segments

| Nine Months Ended May 31, |  | Change |  |  |  |
| 2021 |  | 2020 |  | Dollars |  | Percent |  |  |  |  |  |  |  |
| (Dollars in thousands) |  |  |  |  |  |  |  |  |  |  |  |
Nitrogen Production COGS | $ | 1,268 |  |  | $ | 1,964 |  |  | $ | (696) |  |  | (35.4)% |  |  |  |  |  |  |  |
Corporate and Other COGS | $ | (9,666) |  |  | $ | (2,428) |  |  | $ | (7,238) |  |  | (298.1)% |  |  |  |  |  |  |  |

There were no significant changes to COGS in our Nitrogen Production segment or Corporate and Other during the nine months ended May 31, 2021, compared to the same period during the prior year.
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Marketing, General and Administrative Expenses

| Nine Months Ended May 31, |  | Change |  |  |  |
| 2021 |  | 2020 |  | Dollars |  | Percent |  |  |  |  |  |  |  |
| (Dollars in thousands) |  |  |  |  |  |  |  |  |  |  |  |
Marketing, general and administrative expenses | $ | 518,875 |  |  | $ | 548,340 |  |  | $ | (29,465) |  |  | (5.4) | % |  |  |  |  |  |  |  |

Marketing, general and administrative expenses decreased during the nine months ended May 31, 2021, compared to the nine months ended May 31, 2020, due to lower employee-related expenses, lower bad debt expenses and focused cost reduction initiatives launched during the current year.
Interest Expense

| Nine Months Ended May 31, |  | Change |  |  |  |
| 2021 |  | 2020 |  | Dollars |  | Percent |  |  |  |  |  |  |  |
| (Dollars in thousands) |  |  |  |  |  |  |  |  |  |  |  |
Interest expense | $ | 82,897 |  |  | $ | 95,043 |  |  | $ | (12,146) |  |  | (12.8) | % |  |  |  |  |  |  |  |

Interest expense decreased during the nine months ended May 31, 2021, as a result of lower interest rates compared to the same period of the prior year.
Other Income

| Nine Months Ended May 31, |  | Change |  |  |  |
| 2021 |  | 2020 |  | Dollars |  | Percent |  |  |  |  |  |  |  |
| (Dollars in thousands) |  |  |  |  |  |  |  |  |  |  |  |
Other income | $ | 41,219 |  |  | $ | 32,926 |  |  | $ | 8,293 |  |  | 25.2 | % |  |  |  |  |  |  |  |

Other income increased during the nine months ended May 31, 2021, primarily due to investment gains that did not occur during the same period of the prior year.
Equity Income from Investments

| Nine Months Ended May 31, |  | Change |  |  |  |
| 2021 |  | 2020 |  | Dollars |  | Percent |  |  |  |  |  |  |  |
| (Dollars in thousands) |  |  |  |  |  |  |  |  |  |  |  |
Equity income from investments* | $ | 260,654 |  |  | $ | 135,174 |  |  | $ | 125,480 |  |  | 92.8 | % |  |  |  |  |  |  |  |

*See Note 5, Investments, of the notes to the condensed consolidated financial statements that are included in this Quarterly Report on Form 10-Q for additional information.
We record equity income or loss for investments in which we have an ownership interest of 50% or less and have significant influence, but not control, for our proportionate share of income or loss reported by the entity, without consolidating the revenues and expenses of the entity in our Condensed Consolidated Statements of Operations. Equity income from investments increased during the nine months ended May 31, 2021, compared to the same period during the prior year, primarily due to increased income associated with our equity method investments in Ventura Foods and TEMCO. Ventura Foods experienced increased volumes and profitability as a result of favorable market conditions for oils and a recovery of sales volumes compared with the early stages of the COVID-19 pandemic, and TEMCO experienced a significant increase in volumes and profitability with increased trade flows to China. In addition, TEMCO changed its business model during the nine months ended May 31, 2021, which has improved its operating efficiency.
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Income Tax Benefit

| Nine Months Ended May 31, |  | Change |  |  |  |
| 2021 |  | 2020 |  | Dollars |  | Percent |  |  |  |  |  |  |  |
| (Dollars in thousands) |  |  |  |  |  |  |  |  |  |  |  |
Income tax benefit | $ | 10,130 |  |  | $ | 18,258 |  |  | $ | (8,128) |  |  | (44.5) | % |  |  |  |  |  |  |  |

The lower income tax benefit during the nine months ended May 31, 2021, primarily reflects changes in the mix of full-year earnings projected across business units and equity management assumptions, which were partially offset by tax benefits related to an intercompany transfer of assets for tax planning. Effective tax rates for the nine months ended May 31, 2021 and 2020, were (3.4)% and (4.8)%, respectively. Federal and state statutory rates applied to nonpatronage business activity were 24.9% and 24.7% for the nine months ended May 31, 2021 and 2020, respectively. Income taxes and effective tax rate vary each year based on profitability and nonpatronage business activity during each of the comparable years.
Liquidity and Capital Resources
Summary
In assessing our financial condition, we consider factors such as working capital and internal benchmarking related to our applicable covenants and other financial criteria. We fund our operations primarily through a combination of cash flows from operations supplemented with borrowings under our revolving credit facility. We fund our capital expenditures and growth primarily through cash, operating cash flow and long-term debt financing.
On May 31, 2021, we had working capital, defined as current assets less current liabilities, of $1.5 billion, and a current ratio, defined as current assets divided by current liabilities, of 1.2 compared to working capital of $1.3 billion and a current ratio of 1.3 on August 31, 2020. On May 31, 2020, we had working capital of $1.4 billion and a current ratio of 1.3 compared to working capital of $1.1 billion and a current ratio of 1.2 on August 31, 2019. Working capital and the current ratio may not be computed the same as similarly titled measures used by other companies. We believe this information is meaningful to investors as a measure of operational efficiency and short-term financial health.
As of May 31, 2021, we had cash and cash equivalents of $301.2 million, total equities of $9.0 billion, long-term debt (including current maturities) of $1.8 billion and notes payable of $2.8 billion. Our capital allocation priorities 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 owners. We will continue to consider opportunities to further diversify and enhance our sources and amounts of liquidity. We believe cash generated by operating and investing activities, along with available borrowing capacity under our credit facilities, will be sufficient to support our operations for the foreseeable future and we expect to remain in compliance with our loan covenants.
As we navigate the lingering impact of COVID-19 on our business and operations, we continue to strengthen our liquidity through a variety of means, including curtailing certain spending and reprioritizing capital expenditures. We are also actively managing our short-term and long-term liquidity.
Fiscal 2021 and 2020 Activity
On February 19, 2021, we amended our 10-year term loan facility to convert the entire $366.0 million aggregate principle amount outstanding thereunder into a revolving loan, which can be paid down and readvanced in an amount up to the referenced $366.0 million until February 19, 2022. On February 19, 2022, the total funded loan balance outstanding reverts to a nonrevolving term loan that is payable on September 4, 2025. There was no balance outstanding under this facility as of May 31, 2021.
On August 14, 2020, we entered into a Note Purchase Agreement to borrow $375.0 million of debt in the form of notes. The notes under this Note Purchase Agreement are structured in four series with maturities ranging from 7 to 15 years and interest accruing at rates ranging from 3.24% to 3.73%, subject to certain adjustments depending on our ratio of consolidated funded debt to consolidated cash flow and whether the notes have an investment grade rating from a nationally recognized statistical rating organization. The funding of these notes took place on November 2, 2020. This funding is being used to pay debt maturities and manage liquidity.
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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 a secured borrowing. 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. As of May 31, 2021, and August 31, 2020, total availability under the Securitization Facility was $600.0 million and $423.0 million, respectively, all of which had been utilized.
We also have a repurchase facility ("Repurchase Facility") related to the Securitization Facility. Under the Repurchase Facility, we can borrow up to $150.0 million, collateralized by a subordinated note 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. As of May 31, 2021, and August 31, 2020, the outstanding balance under the Repurchase Facility was $150.0 million.
On September 24, 2020, the Securitization Facility and Repurchase Facility were amended, increasing the maximum availability under the Securitization Facility to $600.0 million from $500.0 million and extending their respective termination dates to July 30, 2021.
Cash Flows
The following table presents summarized cash flow data for the nine months ended May 31, 2021 and 2020:

| Nine Months Ended May 31, |  | Change
| 2021 |  | 2020 |  | Dollars
| (Dollars in thousands) |  |
Net cash (used in) provided by operating activities | $ | (632,378) |  |  | $ | 525,843 |  |  | $ | (1,158,221) |
Net cash used in investing activities | (177,509) |  |  | (48,533) |  |  | (128,976) |
Net cash provided by (used in) financing activities | 1,012,006 |  |  | (292,207) |  |  | 1,304,213 |
Effect of exchange rate changes on cash and cash equivalents | (451) |  |  | (786) |  |  | 335 |
Increase in cash and cash equivalents and restricted cash | $ | 201,668 |  |  | $ | 184,317 |  |  | $ | 17,351 |

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 $1.2 billion decrease in cash provided by operating activities reflects decreased net income during fiscal 2021 compared to the same period of the prior fiscal year and working capital increases, primarily associated with increased receivables and inventories.
The $129.0 million increase in cash used in investing activities primarily reflects timing differences associated with borrowings and payments for CHS Capital notes receivable balances during fiscal 2021 compared to the same period during fiscal 2020.
The $1.3 billion increase in cash provided by financing activities primarily reflects increased net cash inflows associated with our notes payable and long-term debt facilities, including the $375.0 million Note Purchase Agreement funding during the first quarter of fiscal 2021.
Future Uses of Cash
We expect to utilize cash and cash equivalents, cash generated by operating activities and cash raised through the Note Purchase Agreement to fund capital expenditures, major maintenance, debt and interest payments, preferred stock dividends, patronage and equity redemptions. The following is a summary of our primary cash requirements for fiscal 2021:
•Capital expenditures. We expect total capital expenditures for fiscal 2021 to be approximately $415.1 million, compared to capital expenditures of $418.4 million in fiscal 2020. During the nine months ended May 31, 2021, we acquired property, plant and equipment of $238.8 million.
•Debt and interest. We expect to repay approximately $555.3 million of long-term debt and finance lease obligations and incur interest payments related to long-term debt of approximately $73.7 million during fiscal 2021. During the
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nine months ended May 31, 2021, we repaid $20.0 million of scheduled long-term debt maturities and an additional $366.0 million of long-term debt maturities.
•Preferred stock dividends. We had approximately $2.3 billion of preferred stock outstanding on May 31, 2021. We expect to pay dividends on our preferred stock of approximately $168.7 million during fiscal 2021.
•Patronage. Our Board of Directors authorized approximately $30.0 million of our fiscal 2020 patronage-sourced earnings to be paid to our member-owners during fiscal 2021.
•Equity redemptions. Our Board of Directors has authorized equity redemptions of $83.0 million to be distributed in fiscal 2021 in the form of redemptions of qualified and nonqualified equity owned by individual producer members and association members. During the nine months ended May 31, 2021, we redeemed $37.8 million of member equity.
Future Sources of Cash
We fund our current operations primarily through a combination of cash flows from operations and committed and uncommitted revolving credit facilities, including our Securitization Facility and Repurchase Facility. We believe these sources will provide adequate liquidity to meet our working capital needs. 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 and term loans. In addition, our wholly-owned subsidiary, CHS Capital, makes loans to member cooperatives, businesses and individual producers of agricultural products included in our cash flows from investing activities and has financing sources as detailed below in "CHS Capital Financing."
Working Capital Financing
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.
Our primary line of credit is a five-year unsecured revolving credit facility with a syndicate of domestic and international banks that expires on July 16, 2024. The credit facility provides a committed amount of $2.75 billion of which $1.2 billion was outstanding as of May 31, 2021. We also maintain certain uncommitted bilateral facilities to support our working capital needs with borrowings outstanding of $330.0 million as of May 31, 2021.
In addition to our facilities above, our wholly-owned subsidiaries CHS Europe S.a.r.l. and CHS Agronegocio Industria e Comercio Ltda have lines of credit with $325.5 million outstanding as of May 31, 2021, and our other international subsidiaries have lines of credit with $119.2 million outstanding as of May 31, 2021.
Long-term Debt Financing
The following table presents summarized long-term debt data (including current maturities) as of May 31, 2021, and August 31, 2020:

| May 31, 2021 |  | August 31, 2020
| (Dollars in thousands)
Private placement debt | $ | 1,713,949 |  |  | $ | 1,363,725 |
Bank financing | — |  |  | 366,000 |
Finance lease obligations | 26,459 |  |  | 31,460 |
Other notes and contract payable | 33,661 |  |  | 34,709 |
Deferred financing costs | (4,278) |  |  | (4,771) |
| $ | 1,769,791 |  |  | $ | 1,791,123 |

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CHS Capital Financing
For a description of the Securitization Facility and the Repurchase Facility, see above in "Fiscal 2021 and 2020 Activity."
CHS Capital sells loan commitments it has originated to Compeer Financial, PCA, d/b/a ProPartners Financial on a recourse basis. Total outstanding commitments under the program were $150.0 million as of May 31, 2021, of which $11.3 million was borrowed.
CHS Capital borrows funds under short-term notes issued as part of a surplus funds program. Borrowings under this program are unsecured and are due upon demand. Borrowings under these notes totaled $64.4 million as of May 31, 2021.
Covenants
Our long-term debt is mostly unsecured; however, restrictive covenants under various debt agreements require maintenance of minimum consolidated net worth and other financial ratios. We were in compliance with all debt covenants and restrictions as of May 31, 2021. Based on our current fiscal 2021 projections, we expect continued covenant compliance.
All outstanding private placement notes conform to financial covenants applicable to those of our amended and restated five-year unsecured revolving credit facility. The notes provide that if our ratio of consolidated funded debt to consolidated cash flows is greater than 3.0 to 1.0, the interest rate on outstanding notes will be increased between 0.25% and 1.00%, depending on the related note series, the actual ratio and/or whether the notes have an investment grade rating from a nationally recognized statistical rating organization, until the ratio becomes 3.0 to 1.0, or less. During the three months ended May 31, 2021 and 2020, our ratio of consolidated funded debt to consolidated cash flows remained below 3.0 to 1.0.
Patronage and Equity Redemptions
In accordance with our bylaws and by action of our Board of Directors, annual net earnings from patronage sources are distributed to consenting patrons following the close of each fiscal year and are based on financial performance. During the nine months ended May 31, 2021, we distributed $30.0 million of cash patronage related to the year ended August 31, 2020. During the nine months ended May 31, 2020, we distributed cash patronage of $90.1 million.
In accordance with authorization from our Board of Directors, we expect total cash redemptions related to the year ended August 31, 2020, which will be distributed in fiscal 2021, to be approximately $83.0 million and to include redemptions of qualified and nonqualified equity owned by individual producer members and association members. During the nine months ended May 31, 2021, $37.8 million of that amount was redeemed in cash, compared to $86.3 million redeemed in cash during the nine months ended May 31, 2020.
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Preferred Stock
Dividends paid on our preferred stock during the nine months ended May 31, 2021 and 2020, were $126.5 million. The following is a summary of our outstanding preferred stock as of May 31, 2021, 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 LIBOR 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 LIBOR plus 4.155%, not to exceed 8.00% per annum, subsequent to September 30, 2024.
(d) Preferred stock is 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.
Off-Balance Sheet Financing Arrangements
Guarantees
We are a guarantor for lines of credit and performance obligations of related companies. As of May 31, 2021, our bank covenants allowed maximum guarantees of $1.0 billion, of which $188.8 million were outstanding. 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 guarantees were current as of May 31, 2021.
Debt
We have no material off-balance sheet debt.
Loan Participations
We engaged in off-balance sheet arrangements through certain loan participation agreements. Refer to further details about these arrangements in Note 3, Receivables, of the notes to the consolidated financial statements in our Annual Report on Form 10-K for the year ended August 31, 2020.
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Critical Accounting Policies
Other than as described within the Significant Accounting Policies section of Note 1, Basis of Presentation and Significant Accounting Policies, to our unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q, our critical accounting policies as presented in Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended August 31, 2020, have not materially changed during the nine months ended May 31, 2021.
Recent Accounting Pronouncements
See Note 1, Basis of Presentation and Significant Accounting Policies, to our unaudited condensed consolidated financial statements included in this Quarterly Report on Form 10-Q for a description of recent accounting pronouncements that apply to us.
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, 2021, that would affect the quantitative and qualitative disclosures presented in our Annual Report on Form 10-K for the year ended August 31, 2020.
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, 2021. 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, 2021, that have materially affected, or are reasonably likely to materially affect our internal control over financial reporting.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
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, our management believes any resulting liabilities, individually or in aggregate, will not have a material effect on our condensed consolidated financial position, results of operations or cash flows during any fiscal year.
As previously reported in our Quarterly Report on Form 10-Q for the quarterly period ended February 28, 2021, between January 8, 2021, and March 16, 2021, a total of 21 putative class action lawsuits were filed in the United States District Courts for the District of Idaho, the Southern District of Illinois, the District of Kansas, the District of Minnesota and the Eastern District of Pennsylvania naming us and several other crop protection manufacturers, wholesalers and retailers as defendants and alleging that the defendants violated various federal and state laws, including antitrust, unfair competition, consumer protection and unjust enrichment laws by conspiring to maintain supracompetitive prices in seeds and crop protection chemicals, such as fungicides, herbicides and insecticides ("Crop Inputs"), and to engage in a group boycott intended to prevent companies utilizing electronic sales platforms from competing in the Crop Inputs retail sales market, thereby harming farmers. As of May 31, 2021, an additional six putative class action lawsuits, asserting the same allegations against the same defendants, were filed in the United States District Courts listed above. On June 8, 2021, the Judicial Panel on Multidistrict Litigation ordered that all of the pending lawsuits be consolidated in the United States District Court for the Eastern District of Missouri. It remains too early in the litigation to evaluate the likelihood of any particular outcome or of any estimate of the amount or range of potential loss.
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, 2020, except for the risk factor set forth below, which updates the risk factor with the same title included in such Annual Report on Form 10–K.
We utilize information technology systems to support our business. The ongoing multiyear implementation of an enterprise wide resource planning system, reliance upon multiple legacy business systems, security breaches or other disruptions to our information technology systems or assets could interfere with our operations, compromise security of our customers' or suppliers' information and expose us to liability that could adversely impact our business and reputation.
Our operations rely on certain key information technology ("IT") systems, many of which are legacy in nature or may depend on third–party services to provide critical connections of data, information and services for internal and external users.
Over the past several years, we have been implementing a new enterprise resource planning system ("ERP"), and we expect this ERP implementation to continue for the next several years. This ERP implementation has and will continue to require significant capital and human resources to deploy. Changes we have experienced in the implementation timeline and the scope of the implementation likely have impacted the capital and operating expense amounts required to complete the implementation and there can be no assurance that the actual costs for completing the ERP implementation will not exceed our current estimates or that the ERP will not take longer to implement than we currently expect. In addition, potential flaws in implementing the ERP or in the failure of any portion/module of the ERP to meet our needs or provide appropriate controls may pose risks to our ability to operate successfully and efficiently and with an effective system of internal controls.
There may be other challenges and risks to both our aging and current IT systems over time due to any number of causes, such as catastrophic events, availability of resources, power outages, security breaches or cyber–based attacks. These challenges and risks could result in legal claims or proceedings, liability or penalties, disruption in operations, loss of valuable data, increased costs and damage to our reputation, all of which could adversely affect our business. Our ongoing IT investments include those relating to cybersecurity, including technology, hired expertise and cybersecurity risk mitigation actions. However, in connection with the COVID-19 pandemic, a number of our employees have transitioned to working remotely. As a result, more of our employees are working from locations where our cybersecurity programs may be less effective and robust.
Like many companies, we continue to experience an increase in the number of sophisticated attempts by external parties to access and/or disrupt our networks without authorization. For example, we recently learned of a credible cybersecurity threat to our IT systems. Upon learning of the cybersecurity threat, we launched an investigation and undertook immediate action, including employing protocols to mitigate the impact of the threat, and engaging internal and third–party information technology security and forensics experts to assess any impact on our IT systems. We also utilized additional
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security measures to help safeguard the integrity of our IT systems’ infrastructure and the data contained therein. Although our systems were not breached, no data was lost or exposed, and our operations were not significantly interrupted from this incident, there is no guarantee that a future incident would not have a greater impact on our operations, our data or our reputation.
In addition, we are subject to laws and regulations in the United States and other jurisdictions regarding privacy, data protection and data security, including those related to the collection, storage, handling, use, disclosure, transfer and security of personal data. These laws and regulations pose increasingly complex compliance challenges and will require us to incur costs to achieve and maintain compliance; some of those costs may be significant. Any violation of such laws and regulations, including as a result of a security or privacy breach, could subject us to legal claims, regulatory penalties and damage to our reputation.
ITEM 6. EXHIBITS

Exhibit | Description
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 8, 2021 |  | By: |  | /s/ Olivia Nelligan
|  |  |  |  | Olivia Nelligan
|  |  |  |  | Executive Vice President and Chief Financial Officer

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