What this security is. CHS Inc. is the largest farmer-owned cooperative in the United States. It sells fuel, fertilizer, seed and crop inputs to farmers, buys and exports their grain and oilseeds, runs two oil refineries (Laurel, Montana and McPherson, Kansas, selling under the Cenex brand), processes soybeans and wheat, and owns a large stake in CF Nitrogen, a fertilizer joint venture with CF Industries that contributed $303 million of earnings in the first nine months of fiscal 2026. CHS has no publicly traded common stock; its owners are member cooperatives and farmers. What trades under this symbol is the Class B Cumulative Redeemable Preferred Stock, Series 4: 20.7 million shares issued in January 2015, each with a $25 liquidation preference, paying a fixed 7.50% ($1.875 a year) in quarterly instalments. Unpaid dividends accumulate and must be paid before members receive anything. CHS has been free to redeem the shares at $25 plus accrued dividends since January 21, 2025. An earlier write-up described the separate 8% series; this analysis covers Series 4 specifically, and earlier figures are not comparable. How we value it. A holder's return is limited to the $1.875 dividend and, at most, the $25 call price. Because the company can call the shares at $25 at any time, they cannot be worth more than about $25 to a holder; the question is whether anything in the business can push their value below that. That depends on whether CHS keeps paying the dividend and whether there is enough business value ahead of the members to cover all of its preferred stock. Earnings power. We measure the cash the cooperative generates after maintaining its plants: operating cash flow, stripped of working-capital swings (large in a grain business, where inventories and receivables move with crop prices), minus capital spending, including the cash spent on refinery turnarounds. CHS has no stock-based pay. Before interest, this cash flow has ranged from about $250 million (fiscal 2016 and fiscal 2025, both years of weak crop prices with major refinery turnarounds; fiscal 2025 alone carried $271 million of turnaround spending at McPherson) to $2.1 billion at the fertilizer and refining peak in fiscal 2022. The ten-year median is about $835 million, roughly five times the $169 million paid each year across all five preferred series. In the most recent full year, fiscal 2025, cash earnings after interest fell about 87% to roughly $100 million. The first nine months of fiscal 2026 brought net income of $381 million against $401 million a year earlier, with fertilizer income up and refining and agronomy weaker. Nothing in those results suggests a lasting change to the trough-to-peak range. What ranks ahead and behind. Ahead of the preferred, CHS owed about $2.13 billion of long-term debt and $1.59 billion of notes payable at May 31, 2026, against $0.5 billion of cash. Part of the notes payable funds CHS Capital's loans to farmers, which is a financial asset rather than a pure claim on the business. All preferred series together have a $2.26 billion liquidation value. Behind them sits about $8.9 billion of member equity, which absorbs losses first. Base case. CHS keeps all five preferred series outstanding, as it has done with the 8% and Series 1 shares that became callable in 2023 and with this series since January 2025. It pays $1.875 a year from a business whose median cash flow covers interest plus all preferred dividends about 2.6 times. The business is worth roughly $14 billion on its median cash flow. After about $3.2 billion of net borrowings, that leaves some $11 billion against $2.26 billion of preferred, so the preferred is fully covered. Paying 7.5% indefinitely would be worth more than $25 at our yardstick, but the call caps the value: $25. Bear case. We model a downturn like the one from fiscal 2015 to 2017, when weak crop prices and poor refining margins cut cash flow before interest to about $265 million, followed by a second trough like fiscal 2025. Three such years in a row would leave cash flow below interest plus preferred dividends of about $320 million. In that scenario the board first cuts the discretionary cash it returns to members: cash patronage and equity redemptions, $120 million planned for fiscal 2026. It then defers the preferred dividends for up to three years and pays the arrears once earnings return to the fiscal 2017 to 2021 level of about $700 to $900 million. Even with three years of dividends deferred and then paid, the shares are worth about $25. A business earning only $450 million a year on average across ten years would still be worth about $7.5 billion, enough to cover all borrowings and the full $2.26 billion of preferred. CHS has paid every preferred dividend since the first series was issued in 2003, including through the 2008 to 2009 crisis, the 2015 to 2016 farm and oil slump and the 2020 shutdown.
Bear: $25. Bull case. Fertilizer income from CF Nitrogen stays strong and refining recovers. CHS either calls the shares at $25 or keeps paying. Either way the holder receives no more than $25 plus dividends: $25. All three cases come out at the same figure. That is not because the risks are small. It is because the call caps the upside, and $8.9 billion of member equity absorbs any downside the filings support before the preferred is touched. The business would have to lose more than three-quarters of its median earning power for good before these shares were impaired. Margin-of-safety price. How sure are we of the earnings level? Moderately: cash flow swings eightfold between trough and peak, but even trough years such as fiscal 2016 and fiscal 2025 kept running profits, and the preferred has never missed a payment. What is the worst plausible outcome? A long ag and refining slump combined with a credit loss at CHS Capital, a refinery accident, or rising borrowing costs. The cooperative structure survives these: there are no shareholders demanding buybacks, members' equity sits behind the preferred, and the board can withhold cash from members first. Where are we most likely to be wrong? First, on the call: CHS has left every callable series outstanding, so a holder may never get $25 back and earns only the dividend. Second, on a dividend deferral, which delays but does not cancel payments. A 20% annual return from the dividend alone would need a price near $9.40. Reaching 20% instead needs the shares to be worth $25 to a holder within roughly five years, through a call or full value, while the $1.875 dividend is about 12.5% a year on a $15 price in the meantime. The price assumes a holding period of up to about five years, given that nothing forces a call. At $15 the dividend is substantial, the claim is backed by substantial asset and equity coverage, and a redemption or return to full value within five years implies the 20% target. That is why the margin-of-safety price is $15 and not higher.