Results for the cooperative have been led by its energy segment in recent quarters, which has helped mask weakness in its agricultural segment. But in the most-recent period, earnings in the energy segment, which includes refineries in Montana and Kansas, fell 61% to $42.1 million.

Earnings in CHS's Ag Business segment, which includes a network of grain storage and processing facilities as well as fertilizer distributors, declined 58% to $36.2 million.

CHS, based outside St. Paul, Minn., said profit margins fell at both of its refineries, more than offsetting improved earnings in its propane and renewable fuels marketing businesses.

Within Ag Business, profit margins declined in its fertilizer business and in grain merchandising. Increased costs from acquisitions and expansions also weighed on earnings, the cooperative said.

The company has been steadily expanding in a variety of areas. In the last six months it announced the purchase of an Iowa soybean processing plant and an Israel soy protein company, bought out its partner in a Russian grain merchandiser, and formed a livestock and pet-food-manufacturing company.

CHS is not the only merchandiser to struggle recently with its grain trading and processing. Privately held Cargill Inc. and Archer Daniels Midland Co. (ADM) reported quarterly earnings declines of nearly 90% in January, although on Tuesday Cargill reported its business had stabilized, as its fiscal third-quarter earnings edged up slightly. Grain companies have struggled in recent months with excess soybean-processing capacity and volatile grain markets.

CHS said in a filing that while its soybean-processing margins improved during the quarter, earnings for the business fell due to $5.5 million in acquisition costs stemming from the purchase of the Israeli soy protein company Solbar. It added that it expects decreased grain volumes throughout the fiscal year due to large crops in the Black Sea, South America and Australia that will reduce its exports.

For the quarter ended Feb. 29, CHS reported earnings of $78.5 million, down from $194.6 million a year earlier. Revenue increased 15% to $8.84 billion.

Gross margin narrowed to 2.6% from 3.8%.

Shares closed down 19 cents Wednesday to $29.60.

-By Ian Berry, Dow Jones Newswires; 312-750-4072 ; ian.berry@dowjones.com

--Nicholas Hatcher and Nathalie Tadena contributed to this article.

(END) Dow Jones Newswires

April 11, 2012 16:28 ET (20:28 GMT)