Receivables



	May 31, 2017		August 31, 2016
	(Dollars in thousands)
Trade accounts receivable	$	1,739,027	$	1,804,646
CHS Capital notes receivable	766,731		858,805
Other	464,051		380,956
	2,969,809		3,044,407
Less allowances and reserves	247,484		163,644
Total receivables	$	2,722,325	$	2,880,763

Trade accounts receivable are initially recorded at a selling price, which approximates fair value, upon the sale of goods or services to customers. Subsequently, trade accounts receivable are carried at net realizable value, which includes an allowance for estimated uncollectible amounts. We calculate this allowance based on our history of write-offs, level of past due accounts, and our relationships with, and the economic status of, our customers. The carrying value of CHS Capital, LLC ("CHS Capital") short-term notes receivable approximates fair value, given the notes' short duration and the use of market pricing adjusted for risk. Other receivables is comprised of certain other amounts recorded in the normal course of business, including receivables related to valued added taxes and production cost financing.

During the third quarter of fiscal 2017, a trading partner of ours in Brazil entered bankruptcy proceedings under Brazilian law, resulting in a $98.7 million increase to our accounts receivable reserve. We also recorded a reserve of approximately $130.7 million related to supplier advance payments held by this trading partner. We have initiated efforts to recover these losses; however, as such actions are in the early stages and are considered neither probable nor estimable, no recoveries have been recorded as of the date of this Quarterly Report on Form 10-Q.

CHS Capital has notes receivable from commercial and producer borrowers. The short-term notes receivable generally have terms of 12-14 months and are reported at their outstanding principal balances as CHS Capital has the ability and intent to hold these notes to maturity. The notes receivable from commercial borrowers are collateralized by various combinations of mortgages, personal property, accounts and notes receivable, inventories and assignments of certain regional cooperatives' capital stock. These loans are primarily originated in the states of Minnesota, Wisconsin, and North Dakota. CHS Capital also has loans receivable from producer borrowers which are collateralized by various combinations of growing crops, livestock, inventories, accounts receivable, personal property and supplemental mortgages and are originated in the same states as the commercial notes with the addition of Michigan. 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 of $252.4 million and $322.4 million as of May 31, 2017, and August 31, 2016, respectively. The long-term notes receivable are included in other assets on our Consolidated Balance Sheets. As of May 31, 2017, and August 31, 2016, the commercial notes represented 52% and 26%, respectively, and the producer notes represented 48% and 74%, respectively, of the total CHS Capital notes receivable. As of August 31, 2016, a single producer borrower accounted for 20% of the total outstanding CHS Capital notes receivable. During the third quarter of fiscal 2017, CHS Capital concluded a transaction with the single producer borrower whereby CHS Capital obtained from the borrower title to approximately 14,000 acres of land and improvements that, prior to the transaction, was owned by the borrower and served as collateral for the outstanding loans to CHS Capital. The amount corresponding to the fair value of the land and improvements, approximately $139.0 million, was credited against the notes receivable from this single producer borrower. As a result of this arrangement, all remaining outstanding notes receivable balances and corresponding reserves related to this single producer borrower were removed from the balance sheet of CHS Capital. However, we continue to enforce our rights under the various agreements between us and the producer borrower to pursue future potential recoveries. The collateral received in connection with the arrangement has been recorded in “Property, plant and equipment” on the Consolidated Balance Sheet.

CHS Capital evaluates the collectability of both commercial and producer notes on a specific identification basis, based on the amount and quality of the collateral obtained, and records specific loan loss reserves when appropriate. A general reserve is also maintained based on historical loss experience and various qualitative factors. Further, the accrual of interest income is discontinued at the time the loan is 90 days past due unless the credit is well-collateralized and in process of collection. Past due amounts were approximately 5.0% and 2.5% of the total CHS Capital notes outstanding as of May 31, 2017, and August 31, 2016, respectively.

Specific and general loan loss reserves related to CHS Capital totaled $17.2 million and $45.8 million as of May 31, 2017, and August 31, 2016, respectively. The reduction in the reserve is substantially all related to the single producer borrower agreement discussed above.

CHS Capital has commitments to extend credit to customers as long as there are no violations of any contractually established conditions. As of May 31, 2017, customers of CHS Capital had additional available credit of approximately $966.2 million.