Green Plains Inc (GPRE) 2010 Q4 法說會逐字稿

Good day, ladies and gentlemen, and welcome to the Green Plains Renewable Energy earnings conference call. At this time, all participants are in a listen-only mode. Later we will conduct a question-and-answer session and instructions will follow at that time. (Operator Instructions). As a reminder, this conference is being recorded. I would now like to introduce your host for today's conference, Mr. Jim Stark. You may begin.

Thanks, Mimi. Good morning and welcome to our fourth-quarter and full-year 2010 earnings call. Todd Becker, President and CEO; Jerry Peters, our CFO; Jeff Briggs, our Chief Operating Officer; and Steve Bleyl, our Executive Vice President of Ethanol Marketing, are on the call today.

We are here to discuss our fourth-quarter and full-year financial results of 2010 and recent developments for Green Plains Renewable Energy. We have prepared a slide presentation for you to follow along with as we go through our comments today. You can find this presentation on our website, www.GPREInc.com on the Investor page under the Events and Presentations link.

Our comments today will contain forward-looking statements, and forward-looking statements are any statements made that are not historically facts. These forward-looking statements are based on the current expectations of Green Plains's management team, and there can be no assurance that such expectations will prove to be correct. Because forward-looking statements involve risks and uncertainties, Green Plains' actual results could differ materially from management's expectations.

Please refer to page 2 of the website presentation and our 10-K and other periodic SEC filings for information about factors that could cause the outcomes to be different.

The information presented today is time sensitive and is accurate only at this time. Any portion of this presentation that is rebroadcast, retransmitted, or redistributed at a later date, we do not plan to have updates to as we go forward. I would now like to turn the call over to Todd Becker.

Thanks, Jim. Glad you could join us on the call this morning. We have a number of topics to cover today, so let's get right to it.

We experienced good improvement with safety last year. Both our total reportable incident rate and lost time were down versus the prior year. Operating our plants in a safe environment remains a priority to us, and I am pleased with the progress we made in 2010.

We had a strong finish to 2010, ending the year with $2.1 billion of revenue, $48 million of net income, and $1.51 in diluted earnings per share. That makes for two consecutive profitable years for our young company, and we plan on remaining profitable as we continue to expand our platform.

All of our segments had a solid year that contributed or generated $109 million of operating income before corporate expenses. Total EBITDA for 2010 was approximately $130 million. We were successful in expanding our Ethanol Production platform last year, both organically and through acquisitions by adding 200 million gallons, which is a 42% increase in capacity. 157 million gallons of that capacity came from the Global Ethanol acquisition, and 43 million gallons of that capacity was added through our process improvements and debottlenecking. That 43 million gallons was donating cost of less than $0.10 a gallon of CapEx, or capital expenditures. I will discuss these improvements later in the call.

For the coming year, we expect our eight plants to produce approximately 680 million gallons of ethanol. And once the Otter Tail acquisition is completed, which should be later this month, we will be at 740 million gallons annual run rate.

We increased our grain storage capacity by 63% in 2010, and this is an area we are keenly focused on growing further in the coming years. We're planning to both build and acquire more grain assets strategically located in proximity to our Ethanol Production plants, but would not adverse to looking at agribusiness growth outside of our ethanol plant territories.

The agribusiness segment underperformed our expectations last year, and we have made changes to the structure of this business unit. I believe we can improve the income contribution significantly as we are improving our turns on grain handling and reducing our operating expenses. With that said, though, the Tennessee acquisition was a great strategic fit and it's performing very well.

Marketing and Distribution saw steady improvement year over year with the operating income contribution from this segment increasing to $11.2 million in 2010, or more than 3 times greater than 2009. We expect this segment to have significant growth this year with net corn oil earnings recognized in this business segment. Remember, the corn oil equipment at the plants is owned by the Marketing and Distribution segment, and those cash flows, after keeping the ethanol plants whole for lost distilleries grain revenues, flows freely to the parent.

By the end of the year, we had four plants online producing corn oil, but most were just starting up so we had limited production during the quarter of 5 million pounds of product. Today, we are deployed at five of our eight plants. The three remaining plants should be completed in the second quarter and once the Otter Tail acquisition is closed, we will move to install corn oil extraction at that plant very quickly.

Once all the plants have the technology deployed, we expect to produce over 100 million pounds of corn oil on an annual basis. And with current prices in the corn oil market, we expect to generate at least $30 million of incremental operating income annually, paying back our investment in less than eight months.

Since the project was implemented, we have seen corn oil prices as high as $0.55 a pound on a gross basis. From that, you will need to deduct a small amount of operating costs and to make whole to the subsidiaries for the value of the lost distilleries grains to get to a net price realized. This product typically trades at a discount to soy oil, which we do not expect to change and is used in both bio diesel production and feed markets.

We continue to diversify our business, and as we noted in the earnings release yesterday, we expect to generate $50 million of total operating income annually from corn oil production, agribusiness operations, and Marketing and Distribution services, essentially income from non-crush sources.

We believe this additional operating income provides our overall company with a solid platform of recurring cash flows to manage through the dynamics of a commodity processing business and help us minimize the impact of margin contractions from Ethanol Production over time.

We ended the year with a strong cash position of $261 million. We generated positive cash flows from operations and raised $170 million of debt and equity capital last year to fund our growth.

We also substantially increased our short-term borrowing capacity by $110 million at both our trade group and agribusiness operations to support the growing working capital needs of both businesses.

Our risk management team did a great job last year of executing our business strategy. We generated $127 million of operating income before depreciation and amortization in our Ethanol Production segment in 2010. This is a $60 million improvement over 2009 and equates to $0.23 per gallon produced.

At the end of the year, we have locked in margins on 95 million gallons of ethanol production for the next 12 months. In addition, we had unpriced physical index sales on for the next year of over 25 million gallons. But since that time, we have moved to lock away most of the first quarter, focusing it as well on the second and fourth quarter where the best margins are on the curve.

Now I would like to turn the call over to Jerry to review our financials in more detail, and then I will cover industry topics and our current outlook for the Company.

Thanks, Todd. Good morning, everyone. As Jim mentioned, there's a slide presentation that walks you through our year-over-year and quarter-over-quarter comparisons. I will add some color to the drivers of the changes in those side-by-side comparisons.

Starting on slide 5, this slide shows at a glance the progress we made during 2010. Our increase in ethanol production volumes, along with increased prices for commodities, drove revenues substantially higher. The fourth quarter reflects the addition of the global ethanol plants late in October.

EBITDA shown here on a trailing 12-month basis continues to trend higher, reaching $129.6 million for calendar year 2010.

Our net leverage ticked up to 3.1 times EBITDA from a low of 2.3 times in the second quarter, mainly because of the Global acquisition. With the close of this acquisition late in 2010, we had a partial year of incremental EBITDA against the full debt load included in the numerator.

Including a full year of operations of these plants along with our scheduled debt payments, should allow us to continue to improve our net leverage ratio going forward.

On a consolidated basis, slide 6 shows a quick summary of our income statement for the fourth quarter and full year 2010 compared to the periods in 2009.

Looking at the fourth quarter, revenues increased $320 million or 73% over the prior year. We produced nearly 40 million gallons more ethanol quarter over quarter, which again was primarily the result of the two global ethanol plants added in October of 2010, as well as the continued process improvements made at our existing plants.

The revenue increase was also driven by higher revenues from our agribusiness segment, which was the result of doubling the grains sold in the fourth quarter to 21.6 million bushels. The Tennessee grain operations, which were added in the second quarter of 2010, account for most of the increase between these periods.

Consolidated gross profit was up 16%, which was a $7 million increase over the fourth quarter of 2009. This increase is attributable to higher ethanol production volumes, both organic and through acquisitions, and nice growth and profits from our Marketing and Distribution segment.

I also think it's important to remember we are comparing against the fourth quarter of 2009, a period of cyclically strong Ethanol Production margins.

Earnings before income taxes on a consolidated basis was up 3% in 2010 compared to the quarterly -- with a quarterly number of $24.3 million.

Income tax increased significantly in the fourth quarter of 2010 compared to the same period in 2009. The change in our income tax was not unexpected as it reflects our transition from the startup of our plants a few years ago to profitable operations in 2009 and 2010.

As I have discussed in the past, we had previously provided valuation allowances against the tax assets that were generated prior to 2009.

During 2009 and 2010, we were able to realize the benefit from the reversal of these allowances, resulting in minimal taxes recorded in 2009 and an effective tax rate of 27% in 2010.

Going forward for 2011, we expect our effective tax rate to be pretty close to the full statutory federal rate, although we probably will realize the continuing benefit from various state tax deductions and credits.

Earnings per share for the fourth quarter of 2010 reflects more shares outstanding as a result of stock issued in conjunction with the Global acquisition; our March 2000 and equity offering; and the implied shares that would be outstanding, assuming the convertible notes were actually exchanged for stock.

And by the way, we provided a bridge in the earnings release yesterday that walks you through the diluted earnings per share effect of the $90 million convertible debt issued in the fourth quarter.

Under GAAP, we are required to present diluted earnings per share under an as-if converted approach, so we add back to net income the interest and amortization expense net of tax related to the converts, which was about $700,000 for the fourth quarter.

The number of shares associated with the converts determined on a daily weighted average basis for the quarter was 4,028,000. Going forward, this will add a total of 6.3 million shares to our weighted average shares outstanding. The net income add-back before tax is about $5.7 million in interest and amortization expense.

Our financial position is strong and getting stronger. The progress we have made during 2009 is significant with acquisitions, liquidity, and working capital growth increasing our total assets by over $550 million during the year. To finance that growth, we have increased our total debt by $212 million on a net basis after considering approximately $50 million in principal payments that were made during 2010 on our existing debt.

With all this growth, we have managed to maintain our capital structure by increasing stockholders' equity by $187 million. In the first quarter of 2010, we issued 6.3 million shares of stock in a public offering, and also used 4.4 million shares in the Global acquisition. We believe this issuance of equity will position us very well for our next stage of growth.

I would like to review some key metrics in terms of liquidity and our capital structure. Our liquidity position now stands at $261 million in total cash and equivalents with approximately $56 million available under committed loan agreements, bringing our available liquidity to approximately $317 million at the end of 2010.

I would like to note here that in our agribusiness segment, we generally build liquidity in the fourth quarter to meet significant payments made early in January as many of our grain customers defer cash receipts against their contracts until the new tax year. As a result, cash will adjust down seasonally as we paid farmers for the grain purchased early in 2011.

Our total ethanol plant debt increased by a net $50.5 million, or 12%, over the prior year, but our ethanol production capacity increased by 42%.

As a result, gross ethanol plant debt per gallon before considering our cash balances, dropped by 21% to $0.68 per gallon.

Our lenders appreciate the job we have done in consistently meeting all of our debt obligations. These relationships are providing benefits in becoming a preferred purchaser of plants as the lenders work through difficulties with other plants such as the Otter Tail situation.

With about $800 million in enterprise value and $130 million of EBITDA, we are currently trading at a 6.3 times multiple on EBITDA. We believe this level does not reflect the overall value we have created in our platform and are working hard to consistently deliver results and provide greater transparency of that value to the marketplace.

Now I would like to turn the call back over to Todd for his comments on the industry and our current outlook.

Thanks, Jerry. Today, ethanol is the cheapest motor fuel in the world even with $7 corn and we are still profitable. In December, the industry exported over 72 million gallons of our fuel as American ethanol is in demand around the world. Our ethanol is very competitive to other sources of ethanol from outside America without the tax credit.

At this point, we have three plants capable of producing ethanol to export specifications with a fourth coming on later this quarter. At times, we realize a quality premium for making this specification for the export market.

In addition, four of our plants now qualify for low CI, or carbon intensity, which can be shipped into California under the new low carbon fuel standard implemented at the beginning of the year. For now, we realize a slight premium for this quality as well. With this ability to produce premium quality ethanol and the operational improvements that allow us to continually lower our production costs, we believe Green Plains can remain a low-cost position in the marketplace.

Ethanol is also the cheapest motor fuel in the United States. The chart on page 10 demonstrates that over the last four years, there's only been a six-month period of time when ethanol was not priced at a discount to gasoline. Looking at the forward curve, ethanol remains a discount to gasoline through 2013.

So putting all these factors together, we are still bullish on the outlook for US ethanol. More importantly, during 2009 and 2010, our first two full years of operation, we were profitable as well as now have remained profitable for seven straight quarters, managing successfully through margin volatility and cyclical downturns.

Margin trends for 2011 certainly remain dynamic. Margins for the year are still better on the back end of the curve. Over the last five days, we have started to see a margin expansion as demand both globally and domestically is picking up. As I mentioned in my opening comments, we expect to remain profitable in 2011 as well. Margin management remains our central theme, and we believe it allows us to outperform in margin contracting environments without allocating risk capital or operating outside our established VAR, value at risk, limits. There are a lot of moving parts in the equation and I'm confident our risk managers are very capable to execute our 2011 strategy.

But with uncertainties come opportunities. We anticipate completing the Otter Tail acquisition by the end of March. This plant is in a great location for feedstock, and the plant is fully functioning and should be quickly integrated into our platform. We should, again, realize immediate savings and production costs because of our strategic sourcing initiatives that allow us to use our scale in purchasing non-commodity inputs.

This was already demonstrated in our quick integration of the Global assets, eliminating over $8 million of overhead costs and several million dollars in operating costs.

In addition, our operational improvement initiative to increase production levels and yield provided for great performance of our production facility this year. The quality of the US corn crop with lower moisture and higher test weights has also driven yields higher. Why is this important? We won't necessarily make more ethanol. What we will do is use less corn and reduce our cost of goods sold.

As I have said and will continue to say, we are a growth company. The opportunity for consolidation continues to be very active in the ethanol production space. And as we noted in the earnings release yesterday, we plan to aggressively pursue expanding all of our segments in 2011.

We are very excited about our BioProcess Algae phase 2 venture. The commercial scale project is completed and fully inoculated and producing algae. It is our belief that these are the largest and only commercial-scale algae reactors taking CO2 directly from an industrial plant and producing products. We are working with local universities and developing relationships for the downstream use of algae. As development occurs, we will keep you informed as to our progress and validation of this technology.

In closing, I want to thank our employees for their hard work and dedication in making 2010 a very successful year. I also want to thank our shareholders who continue to support our long-term view and strategy for growing shareholder value.

We will continue to do what we do best -- by focusing on safety, operational excellence, and risk management, all while we continue to deploy capital effectively to grow our business. Our goal has always been to de-risk the ethanol production segment to make sure we outperform during a margin contraction environment. Between operational enhancements; corn quality; ability to make high-value product for California and export corridors; higher realized values of distilleries' grain versus corn values; and non-crush expanded operating income, we are on the road to achieving this bold goal in building a best-in-class companies deriving value from the quality of our assets all while we are focusing on creating sustainable long-term shareholder value. I want to thank everybody for calling in today, and now I'm going to ask the moderator to start the question-and-answer session.

(Operator Instructions). Laurence Alexander, Jefferies & Company.

Good morning. This is Lucy Watson on for Laurence today. A quick question regarding M&A. Would you mind just discussing the current environment for both ethanol production and green storage assets? And specifically, are you seeing willing sellers and do valuations seem reasonable?

Yes, I mean it's interesting. On the M&A side for ethanol, we continue to see opportunities come our way, and we're really focused on location technology and price. And so we will continue to focus on that.

Right now, I think what we are seeing is a more active environment; some plants that maybe were independent in the past; our understanding what the benefit of scale is. And we provide those benefits to them with the ability to use our cash stock and debt to purchase these plants. I think it still puts us in a good competitive advantage.

These are not easy plants to buy. It takes quite a while to do that, and it may take -- you might have to spend a year with a plant just to get it done, but we think with our patients that we have, we have been able to scale our business up at a reduced cost relative to other transactions we have seen in the market.

We've seen plants trade as high as between $1.25 and $1.40 a gallon as of late for good location, good technology production facilities. And we think that our ability to purchase plants below that gives us a competitive advantage, a strategic advantage and a cost advantage. And I think we will continually be able to look at those transactions because of our ability to provide stock cash and debt. And I think that just tells you that for high-quality assets, there is always a bid from high-quality buyers out there, and that has always played into our overall valuation thoughts as well.

In terms of the agribusiness assets that are out there, we're starting to see kind of frothy evaluations in terms of purchasing assets from even from a year, year and a half ago. It feels a bit like back in 2007 and 2008 when the agribusiness sector was very much in vogue as well.

And so, while we might have some interesting opportunities, there's lots competition for agribusiness assets today coming from not just domestic players, from global players. And some of the multiples that are being thrown around aren't anything today that we would be interested in doing. But we think we're going to have opportunities selectively to pick up assets that complement our business.

Okay, great. And just another quick one. How much ethanol did you export in 2010? And what would be your outlook for exports in 2011? And I guess just as a quick follow-up to that, how much of your capacity in those three plants that meet ethanol export specs -- or I guess could you quantify that amount? And what would that amount be with the fourth plant?

Yes; in terms of overall platform exports in 2010, a lot of our plants were still coming on later in the year. We saw overall the US exports somewhere around 400 million gallons. And we expect with December exports and some of the demand that we're seeing, it could double in 2011 in terms of the export markets today based on our [parity] to other sources of supply.

In terms of our own production, with the four plants, they would be capable of around 250 million gallons to 280 million gallons of production, but we are very -- we realize very much so that we are not going to take a third of the US export market out of our three plants.

So I mean we're going to get a piece of that, so it's not going to be 280 million gallons at a premium. It's going to be our goal to do a percentage of the export demand, and we will just have to wait and see what that is.

It's -- the plants run a little bit slower, but you get a premium for that and it covers a lot of those expenses, and you get a premium for the quality. So we focus on it. We try to sell it, and we're starting to see a lot more interest in it, but today we can't give you real guidance on what we expect to sell for 2011.

Thank you.

Michael Cox, Piper Jaffray.

Good morning. Congratulations on a great quarter, guys. My first question is on the margin outlook. I was wondering if you could talk a little bit about the variability you are seeing on the forward curve and potentially what impact E15 might have as you see it through the course of the year.

Yes, the curve has certainly been no less than volatile and dynamic over the last couple of months. We have started to see an expansion here as of late. The best margins are still in the fourth quarter, especially in October and November because of the new crop corn that will be coming on and the inverted market that we are seeing in the corn futures, but we have seen an expansion of margins even in the last five days for Q2 and even March because we are kind of coming out of the winter doldrums that we experienced last year. And as I typically have said, there's not a lot of seasonality of margins.

There, for two years in a row, we have seen the seasonality hit the first quarter. That has been very similar to kind of lower demand, a bit of a lower margin structure and then coming out of the first quarter with an expanding driving season coming, as well as now working through the inventories of higher exports, we have seen a bit of tightness now developing in the market, and we will see where that goes to.

It's going to be a battle. The market's job today is to try to destruct demand for corn in the United States, to try and grow some more carry out, even though it is adequate and it could take care of all of our needs and we will not run out of corn this year. I think the market would like to see some demand destruction across some of the sectors that use corn. We haven't ever taken our plants off of full throttle. We got ahead of Q1 and locked a lot of the margins away there, as the indicated, and we focused on Q4 as well. But what we are seeing is kind of right now into Q2, the market has expanded. It's flat to Q3, and the best margins are still in Q4.

Okay. That's very helpful. On the -- the corporate G&A line item ticked up in the fourth quarter. Should we expect that $7 million run rate going forward or is there some maybe M&A expenses incurred?

That's the -- we accrued incentives in the fourth quarter and that's when you basically see the final pool get hit. So it ticked up last year in the fourth quarter as well for incentives.

Yes, that's right. That shouldn't -- that fourth-quarter number isn't an indicative run rate going forward. I would look more at the full-year rate and then as we bring on production, it might tick up slightly as we add a small amount of staff to cover that incremental back-office activity. But full year should be a better run rate to look at.

Okay. And my last question is on the agribusiness segment. You talked about some changes there to boost the profit structure. Could you maybe elaborate a little bit on what you put in place?

Yes, we had some management changes. We're driving a lot more in terms of going after higher volumes in our Iowa assets. Our Tennessee assets actually performed very, very well. And we're going to look for that type of performance out of our Iowa assets, which actually have more storage space.

But there's also the fertilizer and agronomy segment definitely has some volatility around earnings over the last couple of years. We're trying to limit that volatility as well and look at that cost structure up there in general. And so, we think we could buy more in Iowa. We think we can sell more fertilizer and chemicals in Iowa, increase our volumes, reduce some operating cost structures, and drive more profitability up there.

I mean those assets are in -- those Iowa assets in 100-mile radius are in an area that produces over 1 billion bushels of corn. And we have felt like the last couple of years, those have underperformed from an origination standpoint and we're going to aggressively go -- going after to build market share up in that area.

It might take a little while to realize all that, but we are not -- we are very much focused on those great assets that we think we could -- 50% to 100% greater volume increases than what we are seeing today. So it's just going to take a little while, but the data supports it, and some of our initiatives have supported it well.

In addition, I think what's really -- what we focused on this year was coming out of harvest to earn the carry. And in the past, those assets really didn't earn. We didn't come out full. We were selling our -- some of our inventories in the past to local demand, and we basically came out full out of harvest with corn and beans, and started to earn the carry up there as well.

And it really comes in our ability to increase our lines for working capital, as well as fund through corporate cash as well to make sure that we can earn the revenue on those assets.

Okay. And one last modeling question if I could, a few moving pieces on the share count. What is your expectation for the fully diluted share count for 2011?

Well, I think if you take -- we have about 36.1 million shares outstanding as of 12/31, and that, of course, wouldn't include the convert, so you would need to add in the convert; about 6.2 or 6.3 million shares on the convert.

And then the rest of it, the other dilutive shares, the option grants and that, aren't terribly significant. I think no big changes there.

Okay, great. Thank you very much.

Farha Aslam, Stephens, Inc.

Todd, did you say that you expect exports out of the US to double in 2011 versus 2010?

It's a possibility, actually. With the run rate we saw in December, January should be -- might be down a little bit. But we are seeing really good export demand to all of the typical markets.

In addition, we have seen interest out of the Brazilian market. With their increase in gasoline usage and the tightness of ethanol, there is a chance that we will be exporting ethanol to Brazil as well.

And I think when you kind of look at our -- if you take a look at wholesale ethanol prices in the United States versus gas prices around the world versus oil prices and versus what's going on, I think that we have a lot of interest in what -- even without the tax credit, is extremely low-priced fuel relative to the replacements. And that is where we have seen the pickup as well.

But really a lot of it is driven by global growth, especially Brazilian growth, on motor fuel and driving. We've seen -- Brazil is up -- we think they're going to be up 4.4% on fuel demand for 2011. And with the current sugar market down there, we don't think they'll be able to satisfy all of the ethanol demand. We're looking at that market as well.

So I think we have a chance that we could push towards a 700 million or 800 million gallon market because there really is no other competition in the world that can compete today with US ethanol from a price perspective. Brazilian ethanol cannot compete in the world market with US ethanol today.

And that 800 million gallon -- does that include ethylene exports to Europe? Or is that excluding the ethylene exports?

Steve?

It's just pure fuel grade ethanol.

Pure fuel-grade -- and that includes Canada as well, we've seen the impact.

Right?

And this $72 million for December, correct me if I'm wrong, Steve, but that did not include $15 million going to Canada for December.

Did not. That was strictly off the Gulf Coast.

Right. So that was -- we actually exported more for December, but -- because that number does not include Canada.

Okay. And currently you do not produce any export quality ethanol, but you're going to convert plants to export quality?

No, no; currently we have three plants that can make export quality.

But you don't produce it right now?

No, we produce it when the market pays us to produce it over what we can get in the local markets.

Is it hard to switch from export grade to domestic grade?

Not in our plants; not in the plants that we have converted over. We can -- what you do is you -- Jeff, do you want to talk about what happens in the export grade?

Essentially it's a -- you have to be licensed, number one with the TTP, which is what we know of as the old ATF. Because the denatured product where it's actually not adding the natural gas gasoline to make a denatured product. And then secondarily you have to dry it.

The market for the export to Europe, it's a much drier product, meaning there's less water content in it. And so, the ability to make a drier product is simply essentially using more capacity in your plant to do that. It takes a little bit more energy. You run a little slower. But in the right margin environment, it presents itself and you can certainly do that.

There's a variety of export specs out there, both European, Asian, Canadian, and we certainly look at those all the time. And whatever the market gives us, we certainly hit those.

We also benefit quite a bit from replacement for some other suppliers that do ship some ethanol overseas, and we end up replacing some of their domestic volume as well.

And what we've seen is the other players that export, they've got to replace their domestic volume and then they come to us for their replacement. So net-net, we do always -- there is some benefit to us even when we don't export.

Okay. And so, what do you expect US production of ethanol to be for 2011, overall, for the industry?

You know, I think it's going to range from that kind of 13.3 to 13.8 type of number. There's plants that have said they're going to come on, but now they're in delays. There's a couple plants that have gone down and potentially will go into bankruptcy in the destination markets. So I think up and down number is that 13.5 to 13.7 type number.

So if you kind of take a look at the mandate for 2011, which is 12.6 --

12.6.

12.6, and if we can export 600 million to 800 million or 700 million to 800 million gallons, that gets us there without any incremental blending from -- other than obligated parties.

And that's why we have started to see some tightness here. And the correlation broke down early in the first quarter between corn and ethanol, and now, we're starting to see that correlation come back into play and margins expand here as of late, on an EBITDA basis, $0.06 to $0.08 a gallon in the last week, but that was from lower levels. We got out of first quarter early, so we didn't necessarily experience those lower levels.

Okay. And then currently the ethanol inventory, how many days of inventory do we have in the US?

I think it's coming down. We have definitely built inventory. We were up into the mid-20s, and I think we're coming down into the lower 20s and we are still working off some inventories, but there's definitely tightness. Steve, is there some regional tightness that you are starting to see?

Yes, there is incremental blending that is picking up that with the spread to RBOB with the way -- or just with gasoline in general with the price jump-up here lately, so --

Anybody that can blend ethanol today as far -- is blending ethanol. They've got the tax credit and they've got somewhere between $0.20 and $0.40 a gallon if not greater than that discount to gasoline. And anybody that can blend is blending and the market is wide open across the United States for blending today.

And now we're going to see with the weather changing, we had a pretty bad winter in a lot of places. The same thing as last year, we really saw the downtick in demand. And it wasn't just ethanol demand. There was some gas demand. And we had markets that -- like a Birmingham that shut down for two days because of weather. Atlanta shut down because of weather literally, and gas demand which then shut down ethanol.

We're starting to see because of the weather clearing up, those markets start fully blending again. So we're fully open across the whole US on blending today. And then the ARB is open as well and the export markets against Brazil and into Brazil is open as well.

So, we anticipate that demand is going to remain strong here through the summer driving season. Third quarter, we're still a -- end of the crop year for corn. It will still be an interesting quarter. But then we get fully into the fourth quarter, the blend margin is still fully intact. Margins expand into the low 20s, is what we're kind of seeing right now on an EBITDA per gallon basis in our platform. And we are starting to see that, again, everything remains open all the way through the end of the year.

So while we might see some interesting times, I think more in the third quarter than the second quarter just because of the end of the year carryout tightness, I think in general, people are still going to want to buy ethanol all throughout the year to blend until we start to go on over gasoline and we have got a long way to go for that.

Your comments are really helpful. One final question, in terms of corn, historically, you've been buried disciplined in terms of only buying corn and hedging ethanol on the other side and keeping that balance pretty tight. Are you maintaining that kind of hedge discipline? Or have you taken any opportunities with options etc. to cover for any potential kind of spike in corn?

Well, first of all, our discipline remains absolutely the same. We're not approaching our risk management any differently than what we started the business. In fact, what's interesting is our value at risk, our VAR limit, remains the same today from when we were operating three plants to when we were operating nine plants. And we're operating within those parameters.

We buy corn, we sell ethanol. We do it first physically. We then do it financially. We do use options. Occasionally we made do -- we may use calls or call spreads to -- and then use that as a protection if the market completely blows higher, but that's not any significant piece of our risk management strategy. We are really focused on financially hedging our risk and that has worked very, very well for us.

The key for that though Farha, is you can't do it unless you have a strong balance sheet. And because we have a strong balance sheet, we are able to lock financial risk.

Look, I mean the markets, they are definitely interesting this year, much more than -- we don't see the visibility on the curve like we saw last year. We're going to have to work into that. We're starting to see a bit of margin expansion in the middle of six months, which we thought would be the tightest period of the year. But we're getting -- we're starting to see some visibility there. We're going to lock some margins away. That, along with kind of premiums for OCI export opportunities, those type of things, we think we have some opportunities, but we have got to let those play out a little bit.

We have locked away some second-quarter volume that we saw when the margins expanded. But these are daily margin expansions. And when the margins expand in one day, we will move very quickly to lock part of our second quarter away, and the same thing in the fourth quarter.

Thank you very much.

Ian Horowitz, Rafferty Capital.

Good morning, guys. A couple of mechanical questions first. First of all, the Marketing and Distribution, are we still -- were there any net additions in the quarter in terms of partners?

No, no new marketing contracts in the quarter.

Okay. So then I'm calculating then kind of an implied -- pretty significant implied utilization rate for the partners. Actually, right now, kind of without really understanding when Global came on, it looks like that their utilization rates were a bit higher than your nameplate. Is that correct?

Well, part of it is because Global came on and that adds to the Marketing and Distribution segment. You had good terminal capacity in the fourth quarter as well in our terminal business, which is included in there as well. We did see some upticks in production at some of the plants that we market for as well, as well as our plants -- if you look our total production, it was up as well for the quarter. So net-net, you put all those together and the revenues or the operating income was definitely improved because of those reasons.

Right. Okay. It may just be a mechanical issue that I can go through at a later date. Jerry, you said the tax rate for 2011 is going to kind of move more towards normal rates. I mean should we expect something significantly higher in the first quarter and then kind of throughout the remainder of the year?

Yes, I think kind of that full statutory rate, maybe slightly off for state taxes, but that full statutory rate, starting first quarter going through the full year.

Okay. And then, for corn oil, I don't know who wants to answer this one. You talked about kind of a run rate of 30 million pounds for 2011. Again, can we just kind of give some indication of the timing of that in terms of ramping that up?

Yes. First of all, our run rate based on what we're putting in will be 100 million pounds plus annually. It will probably be greater than that in the end.

What we're saying is that our net operating income impact -- incremental impact -- will be at least $30 million based on current market prices. How we look at it is basically, it trades -- you can think about it like soy oil. The traded discount to soy oil, but we have to keep our plants whole for the loss of DDG weight. Because every pound of corn oil you take out, almost 9/10 of that pound is reduced in your DDGs. So basically, you have to deduct that off as well.

In addition, you have to look at extraction rates. Our extraction rates that we're putting in into our models are around 0.4 pounds per bushel. So if you think about if we grind 250 million bushels of corn, it will be about 100 million pounds.

Now, we will continue to focus up. We think we can get to potentially 0.5 on kind of our first installations. There isn't a commercially available extraction at this point to go after more oil that we're looking at today. There are some out there that are early stage that maybe you can get some more oil out of the DDGs, but you don't want to degrade your quality of DDGs either and you don't want to take too much weight off of that because it doesn't -- it may not pay. But we haven't seen anything today that would tell us that at a commercial scale, and that's how we want to -- we don't want to try anything out; we want to make sure it works. At a commercial scale today, we haven't seen anything that would tell us that there is any next-generation systems that will extract more oil out at a reasonable price, a reasonable cost and the ability to scale it right now. So we're not focused on getting more oil out. We're focused on kind of our first-generation implementation.

But we're really excited about it. It's interesting; it trades -- there's different markets for this oil. Some of it trades into bio diesel because at this type of oil discount, to soy oil, which is kind of a 10% to 15% discount to soy oil, it makes a bio diesel plant profitable if you can actually run your plant, as well as it's also a very good substitute for fats as well in the animal sector. So, and there are even other people that are looking at it using it into potential crude production.

So there's interesting applications for this; it's still being developed, but this market is deep enough to handle our volume. And I (multiple speakers) we're very excited.

So that [wasn't] the follow-up question. So, forgive me, but what is 100 million pounds of corn oil compared to the rest of the market?

It's very, very small. It's 13 million gallons. Right? So 13 million gallons -- 100 million pounds; you divide it by 7.5 or so, and it's 13 million gallons. So if you kind of put it in a gallon perspective, it's not a lot, but it does provide quite a bit of revenue for us because of the uses for it.

Oh, absolutely. And this is not a Green Plains question, but just more of a macro question. Especially as you go out and look at M&A opportunities, is there any front end systems currently in place or being discussed? Or is that kind off the table and we're going to stay kind of on the back end with the crude corn oil?

We're staying on the back end right now. There have been some front end systems installed in some ethanol plants, some working better than others.

We are looking at -- I think where you will see kind of the next -- I think -- we're focused on the back end now, but really where you are going to see kind of the next phase of development in this industry is kind of the use of enzymes and chemicals to get more of that residual sugar and make ethanol out of it. Jeff, do you want to comment on that real quick as well?

Yes. It's -- you know, we're always looking at different trials for different enzymes, different products, focusing on trying to expand our yield. There are a variety of -- I don't want to call it snake oil, but there's folks out there that are always trying to get new types of technology on the front end, things on the back end.

Like corn oil, we want to focus on solutions that work. We're not interested in a lot of our R&D. This company has always been focused on, as we like to say, cash earn, not cash burn. And so, we're very focused on buying systems that work, getting revenue from them, and making sure they contribute to the bottom line.

It doesn't mean that we won't do some investigation and some research and things like that. But we are certainly focused on systems that have real proven application on a commercial scale basis.

And we have trials -- I would say we have a trial at every one of our plants on something different right now. Maybe several trials. We're always looking at what somebody has to sell. But to date, we haven't seen anything that would tell us that somebody is cracking the code on enzymes and yield and -- but it's getting better. We're starting to see some better products out there, but nobody in our mind has cracked the code yet at commercial scale.

Okay. You guys gave some pretty good color on your outlook for ethanol for the upcoming year. I didn't quite see the -- can you just comment a little bit on outlook for the agribusiness segment? We're supposed to be seeing some pretty record acres, and some pretty high demand for big yielding acres. What is it -- what are you guys witnessing or seeing if anything at all? Or is it too early to tell in terms of buyer demand for crop nutrients and other products?

Look. This is -- the acreage number that is being thrown around is in the 92 range. And that's kind of becoming more standard from everybody from seed companies to analysts to just about everybody you can imagine. If you take a look at the profitability of planting corn versus just about anything else today, you're going to plant corn, and you're going to probably plant a lot of it. And that income is going to come down, can we yield? Because last year I think the yield was very disappointing in the United States for a lot of reasons. We are seeing very good investment in nutrients, very good investment in fertilizer, chemicals. The farmers really thinking about it. You obviously want to protect your $7 corn and $0.6 new crop very well and make sure you invest in that crop because it is highly profitable right now.

I think we will see pretty good acres. I think we could push towards that upper end, but we always start there; we got to make sure we finish there.

And so I'm not -- I'm still always skeptical of just going right to the highest number, but I think we're going to have a great opportunity to grow a good crop. It obviously shows itself in the structure of the US corn futures market. We're able to buy corn in new crop today, and a lot of it. And I think we will have the structure for next year to set up to carry the crop as well.

So, what we need, as I tell people, we kind of need is one crop cycle can kind of take care of all these -- a lot of the problems. We're not going to grow a huge amount in the carryout number next year, but we've got to make sure that this crop performs. So I don't think we're going to see any kind of tempering of the volatility -- underlying volatility in this market until we know that we've got a crop made. But it should be pretty big.

Great. One last question and I'll get back in queue. With the way that the blending margin opportunity is right now, and the way we produced -- seeming to produce in 2010, are you -- is it your expectation that the 2010 RIN will basically just go currently -- right now unused?

They'll be used -- go ahead.

More from a logistics standpoint, right? Not from a financial standpoint?

Well you've seen an uptick over the last week actually. You've seen them start to tick up a little bit I think as there's been some announcements of plants starting to slow down maybe a little bit. So I think you start to see that.

If there's any kind of spotted -- spots on some of these plants that may not run, I think you will see RINs tick up with them.

What's happening, Ian, and what we're seeing is that people are very nervous about the third quarter. And -- the buyers because plants are -- some plants are slowing down. Some plants are in trouble. Some of the destination markets are not performing as well and might look at needing to shut down. And when you kind of look at it, with a 600 million bushel carryout in corn, and the last time we were here, at this price, the farmer held 500 million bushels on farm.

And so we have to incent, number one, the farmer to sell. We have got to make sure we have the corn coming in, and make sure we have very good origination in the third quarter. I think people are -- I think the market will easily get through the second quarter. I think where the market is very, very nervous about where they're going to get their gallons is -- enough gallons because of the blending margin and because of the ability to make money in the third quarter. We're looking out there, we're trying to buy physical corn, and every time we buy physical corn, we will sell physical ethanol. And so, that's basically our focus. But I think the market is nervous about the third quarter production.

Ian, the RIN will relieve that obligation from that obligated party, but their concern is that they have set their network up for physical blending must blend of ethanol. That's their concern.

And you know what that is about. That's about CBOB right? So there's a lot of refiners that have gone --

This is the issue that was going on with Steve like in the fall -- what was it -- you and I talked about -- what was this? This was an issue that happened before.

As people started turning and flipping their networks over so that they had CBOB set up, yes, so they are now set for blending. So the RIN relieves their obligation, but they still have the concern on the physical availability.

So if you can't buy the ethanol in the third quarter, but you've got your refineries set up, it takes 60 to 90 days to get that back to a conventional, but then by then, it will be a new crop.

Right.

So it needs to get produced.

Thanks, guys.

Matt Farwell, Imperial Capital.

Given the high test weight and the lower moisture content of the corn, I'm just curious, is there -- the primary offset on the corn feedstock, or are there other input costs that are affected?

No, it's -- the primary impact is on your corn feedstock. We think the industry is out -- the industry is averaging closer to 2.8, but then USDA is 2.71 that they use in their SNDs. And that obviously adds back some corn, but we won't see it because it usually falls through the feed and residual number at the USDA.

But we are seeing across -- from what we understand with the higher test weight, lower moisture, yields this year, could be up between kind of 0.05 and 0.10 is what we're thinking across the board.

And so that -- can you help quantify how that sort of improves the EBITDA margin on a very low margin business?

Yes, because basically what you do is you're using less corn to make the same amount of ethanol. So, let's just say, for example, our platform needs to use 245 million bushels of corn. That's a rough number. It's in the range.

With a yield improvement from kind of 278 to a 280 or a 282, you're going to use 5 million to 7 million bushels less corn across the platform. That would generate a [$7] -- $35 million reduction in cost of goods sold, which then over the platform is about a nickel gallon.

Now, you might have to use that to make your margin, but in general, it just keeps you in the game longer is you have higher yields. And you could use that then to make sure that your plants continue to run at full throttle.

What do you mean by making your margin? (multiple speakers)

What I'm saying is you might have to give up -- you might have to use some of that in a tighter margin environment. So let's say at these prices when last year, say margins might be $0.10 a gallon, and at the same price relationship now with that extra reduction in cost of goods sold because of yield, maybe margins are $0.15 a gallon. Or let's say for a plant at $0 a gallon, not ours, let's just say for a plant that goes down to $0 a gallon, they might actually get $0.05 a gallon under the same economics this year because of higher yield.

Okay. So, sort of macro look, but given the [backward-ated] corn futures, there's tremendous operating leverage in this model to a decline in corn. At the same time, we have to maintain land allocation to corn at these levels. So I'm just curious, could you comment on expectations on how the curve may develop as the harvest progresses?

Yes. I mean basically, once we get into harvest, the old backward-ated curve should be gone. Once, July -- July [deceptdees] are all backward-ated or inverted. And once we get into harvest, that inversion should go away if we grow a crop and go back to straight full carrier market on basically the US becomes a residual supplier to the world again on corn.

Got to prove that out though, Matt, and I think until then we're going to see some serious volatility on these -- on the inverses that we see. If you go back to -- well we always go back and look at similar years, that July/Dec blew out pretty hard from even where we're at today, but then, failed -- eventually you're going to have to figure out are you going to use futures to -- is your future going to be your cheapest replacement for physical corn. And that has to prove itself out yet today.

The basic structure in the United States is still telling us you don't need futures as your last resort to buy your physical corn. Remember because futures can always converge into physical.

And today, the structure of the US physical market is telling you that you don't need that to happen, but there is anticipating that that could happen and that's why the risk premium on the backwardation.

So I think in general, as we get through and we understand that are the acres there? Did we get them planted? How's the weather? And once we start to see, we start to track through the summer and get through the too hot, too dry, too cold, too wet season, are we going to make a crop? And then we will really see the impact in Sep/Dec. But I don't think we will see any impact today in July/Dec. I think we will stay very, very firm on that spread through the crop cycle until we prove that we're going to grow our crop.

Do you think -- do you have sort of a stocks-to-use bogey that may signal that the market is going to be well supplied?

I think stocks-to-use will remain tight for at least another year. Right now we're at that 5% range, and the last time we hit $7 corn, I think we were in double digit stocks to use still or high single digits.

Even with a growth in the carry out 164 yield on 92 million acres, we are going to grow our carry out 200, 300, 400 million bushels, and so it's going to have to come down to yield. Even growing our carry out 200 million, 300 million, 400 million bushels, stocks to use will still be in the single digit range. And then we think overall then we will still be higher prices relative to the long-term physical means, but hopefully we can get back from this far right-hand tail, far right hand of the curve tail that we are dealing with right now.

So, if we see at least some ability to grow our carry out next year, we should see a significant break in prices, but it's going to have to be proven out.

Okay. And then this last question on the low CI markets, do those markets have inferior net backs due to transportation costs? Or is the premium that you are getting and in fact an origin premium per gallon?

There is no inferior return to the plant. In fact, typically we get a premium for that. And that plant - it comes from plants that would have the ability to shift from the California market to the Western markets or to the southern market, even to the Eastern markets. So it's really a function of there is -- we won't sell it. We typically haven't needed to sell it at any discount or the same that back that typically is a -- it's not a net back at the same price. It's typically a premium to the price when it heads in that direction. So, we haven't seen -- there's no transportation issue from that perspective. Because these plants are all kind of swing plants.

For example, Central City can go to California, and Steve can go south, and go east, and go just about any -- local as well. So if they want it -- and then sometimes, some plants they actually have to buy it away from the Eastern markets to get to low CI. Is that correct?

Correct. You're seeing enough supply for CI right now, too for 2011, so the values --

So values -- yes, more plants are coming on. So we saw some of the benefit in 2010. That's why we said it's a marginal benefit, but when it's there, we will ship it.

Great.

We don't have to ship it.

Thanks for the color.

Ederer Mattias, Goldman Sachs.

Great quarter, guys. I -- much more basic of a question. I'm trying to -- with the help of your guidance on your non-ethanol operating income, trying to back into your free cash flow for 2011. Now, you said $50 million should come from non-ethanol. Given your consistent performance in ethanol on the now $750 million performance between $0.20 to $0.25 per gallon, I'm trying to forecast your free cash flow and kind of get out what you are paying in cash interest for next year and how much CapEx you're expecting for next year.

Yes, I think the maintenance CapEx is a pretty small number. For the current year, our total CapEx actually was about $20 million, and that probably included about $12 million of different growth projects. So that should give you some idea, kind of going forward, in terms of maintenance CapEx. We will spend some growth CapEx as well, obviously.

Our cash interest on an annual basis -- of course spreads on interest rates, but somewhere in the $30 million to $35 million range on the total portfolio. So I guess the way I look at it is we've got about, for full year 2011, we should have about $80 million to $84 million of total debt service.

Okay. But that includes amortization, right?

Yes. (multiple speakers)

That includes principal and all.

So, excluding amortization, it's more in the $30 million to $35 million context, right?

Right. And again, that is not just ethanol. That is total consolidated debt.

Understood, understood. So that -- so is it kind of in the right ballpark to think about your free cash flow in the ballpark of $120 million to $130 million on a run rate basis once the non-ethanol business, i.e. the corn oil, is fully ramped up?

It depends what you want to use for your margins. I mean, margins are not -- in the front end of this curve are not in the 20%s, so it depends what you want to use for your annualized margins.

And so, while you get to the back end of the curve and you can certainly see some visibility in the 20%s, you don't see that on the front end of the curve. So it may not be quite that high.

Understood. That's helpful. Thank you very much.

Brent Rystrom, Feltl.

Thank you. A couple quick questions for you guys. Any particular thoughts on the E85 sales? We're seeing a lot of visibility particularly in the upper Midwest here for E85 taking off the last couple of weeks. How is that impacting you guys?

It's still a minimal piece of our demand base. I mean there is -- Minnesota obviously sells probably the most -- one of the most -- one of the biggest states in the US and is still somewhat minimal. Steve, it's -- a year?

Yes. Just not that many -- it just doesn't move the needle at all on the piece of it.

And I think somebody asked earlier on the E15, if you want me -- I'll just give you the 30 second on that. I think it -- it took 30 years to get to E10, basically full, kind of full availability. And we are not even at 10% yet across the fuel supply, so just -- E15 is a -- is going to be a multi-year project that I think it's not going to be anything in the next six to 12 that has any impact to demand at all. It's going to be further out as we develop developed markets, can get through still a lot of the regulatory hurdles that we're dealing with.

Okay. Out of curiosity, you mentioned either acquiring or developing storage assets. What is the leadtime? Is it a year, 1.5 years from the point you decide to build something to actually having a storage asset up and running?

No, actually what we're looking at is -- we're not looking at any new greenfield sites right at this moment. What we're looking at is additional storage at our facilities. If we let the contract out in the next 30 days, we will have that storage up by harvest this year.

Okay. Todd, when you look at the harvest this year with all the acreage, with the likely -- the chances yields should be good, the more likely risk is probably the timing on planting really versus the acres, wouldn't you say, as far as if we get the crop in early enough that we can manage that window a little bit better as far as the carry out?

Yes, absolutely. Early crop would be better. We don't need planting delays this year because we've got -- we've got to be very careful in the September timeframe. We are starting to see -- Southern crops are getting planted Monday. That's when they're going to start. So, they're going to get on it early; we need a clear planting season here all the way through it. It would be good not to have some major snow storms hit us in the month of March. We get this crop planted and we would be off to a good start.

I think that's key because this August/Sep time period is going to be quite an interesting market in the US corn market, and we need to get on it early.

And from everything I can see, and I think this is really important for you guys, when you look at the corn in storage right now, it's much stronger in the Western part of the corn belt, which should favor you and it's weaker in the Eastern corn belt. Is that a fair assessment?

Yes, I mean I still think -- there's -- we're not having any trouble buying corn today. In fact, we're still buying June, July corn across all of our plants, but more so in the West than in the East. The farmer definitely has plenty of stocks on farm. He sees the high prices. He sees the current market versus the forward market, and he's letting -- starting to let some go before he gets into the field.

The risk here is if you don't have your physical body, you're going to lose them for about 40 days between corn and soybean planting. So, we've done a very good job as a company at making sure we have plenty of physical coverage. And the margins have been there for us and they continue to be there for us. We're going to continue to run our plants full throttle. We don't see any impact right now that we would need to slow down any of our plants today.

Two quick questions and then I will sign off after this so you can end the call.

The first is, looking at some of the stuff that came out of the NCBA the last couple of weeks as far as cattle producers looking like they're going to go long on bred heifers, which seems kind of counterintuitive with where corn prices are; wondering what your thoughts are as far as demand disruption looking at the cattle industry in particular.

And then also wondering, when you look at what's happening with Coca-Cola's PET technology, as far as using sugar-based ethanol for their PET bottles, is that an opportunity for you guys long term or is there a reason corn-based ethanol doesn't show up in PET technology?

Well, I mean in terms of PET technology, I think there's going to be plenty of industrial uses going forward for ethanol. And some of that is still being developed today. Right now, I can't -- we can't even get our head around how there's going to be any extra sugar-based Brazilian ethanol to sell to other than a vehicle in Brazil based on the fact that they're going to have to import oil, let alone import ethanol. So while they're using the -- a better ingredient to make that, I'm not sure that that's going to be widely available. And they may just be staying away from it because it has corn in it.

In terms of the cattle, it's very interesting because we talk to a lot of cattle feeders. In fact, we have one on our board and there's a huge impact on cattle feeding from DDGs. And I think that often gets lost.

If you take a look at DDGs at $7 corn are much more attractive to a cattle feeder than at $3.50 corn because of the price differential. So take a look at, we have seen expanded use of distilleries grains in cattle, over 50%; in chickens up to 12%, which a couple years ago was 4% and 3%; and in hogs. And if you take a look at the ratio and you calculate it, at $7 corn, we're trading over 80% the value of corn on distilleries grains, which is still equivalent to about a $2 discount equivalent on corn. So when they feed the DDGs and you look at that against the cattle crush, while it may look not great, they are still seeing opportunities to make money feeding cattle. As well as, we are -- we get impacted for the fact that people think we are keeping food prices high, but we get no credit for the fact that we are keeping feed prices much lower than what the cattle and the chicken and the hogs would have to feed.

So, in general, what we've also heard, and I think this is really important, is that we think a lot of the sectors came in long corn or long DDGs. And so they have some ability and staying power to continue to buy some of this front-end animal type products so that they can continue to feed and because they have a good position on. And I think that's probably more than anything that's impacting it.

And I think it's the same thing kind of with ethanol because I think we've seen the marginal plants that kind of run out of their first-quarter hedges as they are grinding ethanol and they get into kind of the narrower margin structure and the destination marginal plants. I think you will see that impact them as well.

So I think the markets in general between animals, between industrial and between ethanol, I think the markets are working through some long hedges that they came in with. Now, that's not us. We just continue to buy corn and sell ethanol, but I think in general, the market came in long for the first quarter and part of the second quarter.

Great. Thank you, guys.

Thanks a lot. I appreciate it.

I'll hand the call back to Todd Becker.

Yes, I appreciate everybody being on today. We're really excited about our future. We have done great things to continue to grow a low-cost platform. I think we have showed that we could perform through margin volatility all throughout 2009, 2010. We anticipate 2011 will be no less than some fun and challenging times. And we are really excited about all of the non-ethanol income that we are going to produce, and then see the opportunities on the forward curve as we get into late 2011 and 2012 for continually great growth in our prospects for the Company. So we appreciate you guys coming on today. Thanks a lot.

Thank you. Ladies and gentlemen, this concludes the conference for today. You may all disconnect and have a wonderful day.