Q1 2021 American Vanguard Corp Earnings Call
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Good afternoon, ladies and gentlemen, and welcome to the American Vanguard, One Qs 21 conference call and webcast at.
At this time, all participants have been placed on a listen only mode and the floor will be open for questions and comments after the presentation.
It is now my pleasure to turn the floor over to your host Bill cruiser director of Investor Relations, Sir the floor is yours.
Well. Thank you very much Julie much appreciate it welcome everyone to American Vanguard first quarter 2021 earnings review.
Our speakers today will be Mr. Eric went to mute, the chairman and CEO of American Vanguard Mr.
Mr. David Johnson, the Companys, Chief Financial Officer, and assisting in answering your questions Mr. Bob <unk> company's Chief operating officer.
Before beginning let's take a moment for our usual cautionary reminder.
In today's call the company May discuss forward looking information.
Such information and statements are based on estimates and assumptions by the company's management.
And are subject to various risks and uncertainties that may cause actual results to differ from management's current expectations. Such factors can include weather conditions changes in regulatory policy competitive pressures and various other risks that are detailed in the company's SEC.
Reports and filings.
All forward looking statements.
Represent the Companys best judgment as of the date of this call and such information will not necessarily be updated by the company.
With that said, we turn the call over to Eric.
Thank you Bill good afternoon, everyone. Thank you for your continued support of American Vanguard.
First I would like to comment on our quarterly performance, then turn it over to David for more detail.
Follow with an update on growth initiatives and our 2021 outlook.
With net sales for Q1 up by over 20% and net income up by a factor of six I am pleased with our overall results.
This is a good start to the year and stands in Stark contrast to Q1 of 2020 on the global pandemic started.
The bright spot for us was herbicides for corn, soybeans, fruits, and vegetables, which reported an increase of 86% of net sales of 60% increase in gross profit.
We enjoyed sales increases among our corn soil insecticides. However, they were offset by decreased sales of Byron our cotton insecticide <unk>.
As our customers work through inventories carried over from last year, when there was low pest pressure.
Further our soil fumigant sales declined by about 10% due largely to water allocation.
Issues in California.
Our non crop business came on strong led by dibromide mosquito adult aside.
Strips and increased license fees and royalties from our proprietary advanced solutions.
We continue to pursue expansion of the unmatched portfolio into additional markets.
In our international business, we continued to see strong performance in Mexico improvement in Brazil, and higher gross margins in Central America.
Also our newly acquired Australia business, <unk> performed very well and is providing both market access.
And a level of critical mass to Australia.
And the Pacific region.
Further our newly acquired a greenhouse business, which features a line of biological solutions for soil health net.
<unk> uptake and stress tolerance fits well within our markets in the Americas, and Australia and has given us expanded market access in India, China and Europe.
As David will elaborate we continued to exercise financial discipline over the quarter.
While operating expenses rose on an absolute basis, they dropped as a percentage of sales from.
<unk> 36 from 38% during the comparable quarter.
Thus, we're assumes some economies of scale in our overall operations.
In addition, improved sales enabled us to reduce inventory levels when compared to the first quarter of 2020. Despite the addition of the two new businesses.
Our factory overhead absorption was up slightly due largely to the addition of the two greenhouse plants.
We expect the factory efficiency will improve over the course of current year.
Finally, we finished the first quarter of 2021 with borrowing capacity of $51 million as compared to $36 million from the comparable period of 2020.
Next I would like to turn to David for his comments on our financial performance with a focus on matters of particular interest to our investors David Thank you Eric.
With regard with regard to our public filing we plan to file our form 10-Q within the next few days.
As we have noted in previous calls the company is fortunate to participate in industries.
Debt are considered part of critical infrastructure in all countries in which we operate as a result throughout 2020 and now into 2021, our customers and suppliers and our employees and operations have all continued more or less without disruption during the pandemic.
With regard to our sales performance for the first quarter of 2021, the company's net sales increased by 21% to $116 million as compared to net sales of $96 million. This time last year within that overall improvement our U S sales increased by 18%.
<unk> to $72 million and our international sales increased by 27% to $44 million.
Net sales accounted for 38% of total net sales as compared to 36% of net sales. This time last year.
Okay.
With regard to gross profit performance, our U S crop business recorded a low absolute gross profit on the increased sales there are a few reasons.
First we recorded lower manufacturing output compared to this time last year and lower factory recovery as a result.
We believe we will catch up during the balance of the year.
Second we had lower sales of higher margin products for example, those products associated with our cotton market.
Higher sales of some low margin products.
Our non crop gross margin approximately doubled as compared to the same quarter of the prior year. There are two reasons first as Eric mentioned has already mentioned, we had improved sales of our U S diverse products and our pest strips and second we secured an extension to one of our inbounds essential oil <unk>.
Hologic agreements and recorded increased royalties and license fees as a result.
With regard to our first quarter 2021 International sales, we saw increased sales and as a result increased gross profit.
Half of the improvement was driven by the newly acquired businesses <unk> in Australia, and the Green Us Biologicals business, which both generated margins above our international average.
In addition, our other international been busy.
Business has benefited from an overall favorable mix of sales in the quarter.
Operator.
Operating expenses for the quarter increased by 13% as compared to the same period of the prior year.
This included the addition of the activities of the two newly acquired businesses, which together accounted for approximately half of the increase.
Other increases included legal expenses higher incentive compensation accruals linked to business performance.
And freight costs associated with volume and mix.
Offsetting these increases we recorded lower marketing expenses and an improved performance on foreign exchange rates.
In the comparable quarter of 2020.
Eric covered the sales performance and I, followed up with comments on gross margin and operating expenses.
These factors generated operating income that was twice the level reported for the same period of 2020.
From this statement you can also see that joined the first quarter, we recorded a gain on our equity investment in a business called clean seed, which has some exciting technology that fits well with our simple business.
We also recognized in other income the forgiveness of a payroll protection plan loan that we assumed upon the acquisition of the agreements biological business out of bankruptcy.
Finally, we recorded $560000 lower interest expense in the first quarter of 2021 as compared to the same period of 2020.
There were two factors first day rates on our loan is down as a result of U S policy to stimulate the economy and second we have low borrowings caused by 12 months of cash generation from our businesses offset by some acquisition activity.
Our income before tax is up 14 times in comparison to last year.
From a tax perspective, we had a very similar base rate for the quarter of 31%. However in 2020, we recorded very low taxable income and in addition, we had some benefits primarily related to the tax cuts and jobs Act that were not available for.
<unk> 2021.
All of these factors came together and the bottom line, we reported $3 1 million, which is a six fold increase compared to the first quarter of 2020.
Now I want to turn my attention to the balance sheet as you can see on this slide we started 2021 with an improvement of 44% in the cash.
Cash generated by our activities.
Further you can see that working capital increased which is normal at this point in the company's annual cycle.
Plus we have two more businesses in 2021 as compared to the same quarter of 2020.
The main driver for the increase in the first quarter relates to accounts receivable you can see that in the statement of operations, our sales were up more than $20 million quarter over quarter.
As I noted at the start of my remarks, our customers have continued to operate without significant disruption throughout the pandemic. They are placing orders for our products and making payments when expected.
We continue to monitor accounts receivable performance across our various businesses both in the U S and abroad and can confirm that at this time, we continue to experience a pretty stable credit risk position.
At the end of March 2021, our inventories were at $172 million.
Including about $8 million of inventory related to acquisitions completed since the end of the first quarter of the prior year.
This compares with inventories of $176 million this time last year.
So we feel that we have controlled inventory fairly well during this early phase in the Companys annual cycle.
Our current inventory target for the end of the financial year is $150 million that compares with $164 million at the end of 2020.
That target is obviously dependent on a few things, including a continued low.
Low impact from the pandemic normal weather patterns and no acquisitions.
With regard to liquidity as you can see from this chart, we have been consistently moving debt down.
You can see that our position at the end of the first quarter is significantly better than at the end of the first quarter of the prior year.
Availability under the credit line has improved to $51 million at March 31, 2021, as compared to $36 million last year.
Our credit facility is scheduled to terminate in June of 2022, and we are already in discussions with our lead bankers regarding a reset on the facility to ensure that it does not go current at the end of the second quarter of this year.
In summary, then in the first quarter of 2021, we have increased sales by 21% seen manufacturing output lower than the prior year and taken a higher level of under recovery of factory costs as a consequence.
Overall margins have remained in the normal range for the company. We have managed operating expenses, which increased in absolute terms, but reduced when expressed as a percentage of sales our.
Pre tax income increased 14 times and net income six times.
From a balance sheet perspective accounts receivable increased driven by strong sales growth inventories increased but to a lesser degree than last year, including the impact of the addition of the two new businesses.
Debt increase but continues to track below prior year comparative periods and finally <unk>.
<unk> ability under the company's credit facility has improved.
We believe that this performance represents a good start to 2021.
Yes.
Thank you.
With that.
I want to turn to our growth initiatives, beginning with our biological business.
As we've mentioned in the past we have assembled multiple product lines globally.
Operating soil health and biological solutions for farmers presently these products generate over $30 million in sales annually for us.
We have intentionally taken this direction in light of the fact that biological markets.
<unk> is forecasted to grow at a compound annual growth rate of nearly 10%, which is far higher than that of traditional crop protection from a second only to precision AG and projected growth in the AG sector.
Over the past few decades industry has spent billions of dollars in R&D to develop these solutions, which at first were not widely accepted by growers.
However, the tide is turning and growers have increasingly embraced this technology.
Sustainability has become a vital consideration for farmers as farmland is considered their most precious asset.
Growers want to improve yield while ensuring that their soil is healthy both now and for future generations.
We are poised to address growers' demand with the portfolio globally of over 80 bio solutions that enhanced soil health and sustainable agriculture.
Let me now turn to technology, and specifically to the subject of how our Sim pass Ultimate technology offers an unrivaled solution for the carbon credit market.
First let me set the stage as you know climate change is becoming subject of enormous interest globally.
Along with infrastructure. It is one of the most important pillars of the current U S administration and.
In the interest of addressing climate change within the AG industry, we have seen a proliferation of carbon credit markets globally, some private some public and each with its own set of rules and standards.
Within the past month and growing climate Solutions Act of 2020 was introduced to the U S Senate.
Under the act USDA, we'd become the National authority for certifying both carbon credit programs and Verifiers for compliance with these programs.
Similarly, three days ago, the European Commission published their own guidance on carbon farming, and which they stressed the importance of monitoring reporting and verification.
MRV staining MRV is integral to result based carbon farming schemes as it is the step that quantifies the impact of climate actions that is the result.
In short governments are moving at a rapid pace to organize and standardize the carbon credit markets.
The common theme is that of MRV.
With that background, let me turn to our patented Sim pass ultimate technology and explain why it is ideal solution for the carbon credit market.
The <unk> part of the technology as a precision application system that we have described before.
As variable rate multiple product dispensing system that enables to grow or to use only what is needed precisely where it is needed on the field as per an agronomist prescriptions.
Further Sim passed is not limited to any particular type of input.
It can dispense crop protection products, such as insecticides, monocytes and fungicides as well as biologicals and Nutritionals.
This season planters using our <unk> technology will be treating 60000 to 70000 acres in the United States using our products alone while strategic partners are testing their own products.
In fact, I will now share a brief video that was shot two weeks ago by asthma farm supply are leading edge.
Retailer located in Iowa simultaneously, applying insecticide fungicide and micronutrient through their 24 row some pass system.
Okay.
Hey, good morning, guys.
On the balance sheet.
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Thank you.
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Expense.
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Now, let's turn to ultimate <unk>, which through the use of RFID tags, and our ISO configured software platform measures records and verifies the use of crop inputs.
When coupled with the permanent ledger system, such as blockchain the ultimate <unk>.
Record.
Of these activities and trends actions becomes in beautiful.
To demonstrate how <unk> can address the carbon credit market allow me to use a concrete example.
Our greenhouse makes a product called invigorate, which is a consortium of 22 microbial that improve soil health well embracing the routes ability to absorb nutrients such.
As nitrogen and phosphorous.
Let's say as a part of a carbon credit program, our farmer wants to reduce the use of nitrogen laden synthetic fertilizer.
With some pass ultimate us.
By using invigorate and a less than full rate of synthetic fertilizer, a farmer could measure record and verify the application and presents a permanent record to the carbon program authority.
Interestingly working with the University of Illinois in 2018, a greenhouse conducted this very exercise and demonstrated using half rates of nitrogen and phosphorous fertilizer on corn with invigorate generated the same yield as a full rate fertilizer alone.
One other point worth mentioning here is that in certain European nations farmers are already being required to do a pre plant soil analysis.
If they find a high level of nitrogen in the soil. They are restricted as to how much nitrogen they can add to the field.
The Sim pass ultimate.
The soil health product like invigorate, those farmers could not only ensure compliance with the mandate, but also improve bioavailability of nitrogen.
Sales team on phosphorus to the crop.
Before leaving this topic I would like to share a quick video showing our team utilizing the smart field operators to fill smart cartridges with our zinc micronutrient.
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Eric.
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Eric.
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By the way, we have successfully engineered that smart <unk> system. So that it can be deployed anywhere globally at a very reasonable cost.
As you can see them, we are unique and offering a comprehensive solution towards advancing sustainable agriculture and addressing climate change.
<unk> offers the farmer prescriptive delivery of multiple products for use only where needed and is it on the ideal platform for delivering soil and plant health products.
And as I mentioned, we offer over 80 biologicals from our own portfolio.
Ultimate completes the picture as a leading MRV technology for the fast developing carbon credit market.
Turning now to full year 2021, we are encouraged encouraged at what we are seeing in the row crop markets.
After eight years of relative stagnation, which is the longest running down cycle in a century commodity prices for corn have taken off.
After floundering around three to $4 per bushel corn has now jumped to $7 50.
Similarly, soybeans have risen from the eight to $9 range to over $15 per bushel. These.
These prices should have a positive effect on the farm economy.
Thus, we expect that weather permitting row crop farmers will be inclined to invest in their crops with greater confidence and lesser strength than we've seen in the past several years.
Current sales activity for our crop products.
Has been strong during the second quarter.
In order to ensure a reliable supply of products and to respond swiftly to changing market conditions, we continued to invest in our core manufacturing assets.
In this vein after being offline for several years, we have resumed synthesis of our unique <unk> fungicide product line at our Los Angeles facility.
As you May recall <unk> under the turf side brand is used for snow mold control and turf applications, such as golf courses and under the Walker brands brand.
To control, a common scab and potatoes.
This revival will help not only sales performance, but also factory absorption.
On a consolidated basis, then we expect full year 2021, net sales to increase by low double digits as compared to those in 2020.
In fact, we reiterate the other measures from this slide.
Which we presented in our last earnings call with respect to gross margin operating expenses and alike.
However, we add that we expect our net income growth to be even stronger than that of sales.
In summary, based on Q1, we are off to a strong start and looking forward to a better year.
The the entire 2020 with agnos included and maybe just give us a little view.
You see that business developing next year and into 2024 2025 or I think you also provided some.
Targeted levels.
Okay. So I think I think it was.
I mean, if we included a greenhouse for the full year, yeah, Yeah, obviously been north North of 30, as we look going forward I think we've provided a slide.
Maybe a sleigh showing the biologicals.
Growing I think by 2025 to over 100 correct yeah.
Yeah.
Okay.
Oh.
Got it.
And then maybe just switching gears. It's similar question just with some pass 70 585, I think units out in the field just curious if you've gotten any feedback on on the system's yet or at what point do you expect to get some other feedback or or definitive data that you may be looking for and.
The first the first per.
First feedback we got was.
The Guy go into the field with asthma.
The ones that you that we received so far.
And we've got our people out in the fields now kind of recording and monitoring.
When we talk about.
When things are planted then we will see.
Any issues or questions that might have occurred we've got people that are.
Monitoring every every.
Being applied in getting getting any problems that might occur.
When we go actually to take.
What is the true return on the investment that that takes us more to kind of November timeline, after they've harvested and processed the data but.
But we plan on rolling out more aggressive plan or.
Launch.
In July of this of this year farmers.
Farmers.
Tend to make equipment decisions and third quarter and so we're getting everybody together to lay out exactly what the what the program look like for the 22 season.
Got it and on that is more aggressive rollout.
Believe your partner would tremble.
Would it be I'd just have you any vision are sort of.
Well that would entail I'm not sure if it's.
Direct farmer visits or.
Demonstrations things like that how to sort.
Sort of get a little bit more of the I guess the word out there per se.
Yeah, I'm not sure of the trade shows.
During the farm Congress show this year.
Because obviously this last year, we weren't able to to do that we did have completed a whole group of videos from.
Assembly too.
Application how to write prescriptions.
And of course, we're we've got staff that are available.
To service on on a moment's notice.
And Bob and color.
Two events coming up this summer where are we going to be likely present, one for sure is in July FTC's retail farm show.
So Brian Fda's total is that he's going to have a live event.
And that drove a lot of.
Farmers from the North Dakota, South Dakota, Iowa area.
So we will be present, they're doing a live demonstration.
And then the farm progress show, which is the biggest show, which we've been present when we were president of 2019, we were top three technologies and.
And the business that you're sort of being presented.
Which is the biggest farm show.
I believe in the United States is going to be live in August.
And.
I think we will if it is liable would probably be easier to have.
Have a live demonstration.
So those are two events has come top of mind.
With Orange crap.
The day.
You got to remember this will be a very profitable year from farmers.
In one way that they will be managing there.
Your taxes and their cash will be to invest in equipment.
Got it tough.
And I apologize I, probably should have asked us buyer jumping over to stand passed but I know, there's evo product if it gets to Proctor and Gamble late license the formulation from Ya and I believe in one other recent calls you talk about that product maybe falling out two additional store locations sort of it just overall growth with that do you have any.
Would you be able to find an update on that by chance.
Yeah, our understanding.
As it's widely.
Widely distributed from Walmart that was the big Big.
Change you know they were with home depot and target and all of their stores last year and this year they are adding.
Indicated, they're adding Walmart and they are in the Walmart stores.
I'd say are in the Walmart starts got it got it.
Okay got it okay. That's helpful. I appreciate it thank you.
Okay. Thanks Jake.
Your next question is coming from Chris kept from lip capital markets crashed your line of sight.
Yeah. Good afternoon, I may have made some of the formal commentary around a couple of my questions, but just on on the on the cotton.
And market.
Thank you said there was a biting destock for access channel an excess challenge or anyway. Just wondering if you expect that to persist through this season or will that be work through and it's any way to quantify what the dragging on overall on your overall outlet for the year from that one product.
I think I am most of our impact as an as in Q1.
I mean first first month sales here, we're pretty good.
In this quarter.
But it's a.
It's a it's a function of the early market is strips pressure.
And I think I think it's within okay for that.
But plaque bug instinct bugger really.
Really takes off and Thats people starting in July.
August space.
Okay, so any drag you're saying.
May have been limited.
Or isolated in the first quarter is that.
That's what it looks like right now yeah.
I think Bob just made the comment that.
Farmer profitability is gonna be pretty good this year I would hope so it's $7 corn right and we're soybean prices are so.
The question I guess is.
You know to the extent that they want to take advantage of that now and tried to press the yields.
Work.
Where can you see that show up in your.
Demand profile.
I guess, we're not through the planting season. So are you seeing incremental demand for CSI currently and then.
And then also you're you're either your impact or beside or some of that.
Repackage blends that are based on impact are you seeing the channel full forward some of that I I would imagine that.
There's gonna be a press three per yields here.
Take advantage of that price.
Yeah I agree.
We are seeing continue sales of our corn zone insecticides in this quarter. So far as you pointed out planting does not complete.
Once planting is complete I think there'll be more more effort put in keeping the field clean and knocking down knocking down the weeds and so herbicides post emergence herbicides will probably be stronger.
And this quarter, then maybe maybe they have been with the depressed corn price and also keep in mind, we've got our phone line of soybean herbicides now that.
So we have it's kind of a double uptick there.
Okay, and then I know you mentioned you just mentioned the.
The broader distribution for for zero, but.
In your prepared remarks, you mentioned, an adjustment to the and dance royalty agreement and I was hoping you could elaborate.
Is that the.
An extension of the technology.
And when it's.
It's been.
That agreement is the royalty shows up in certain quarters, but not others, it's been kind of.
I wanted to say random, but it's been kind of hasn't been consistent or is that changing this year. It will there be.
Went through a royalties every quarter any.
Any elaboration there'll be helpful from a modeling amp, yes.
It is set now for quarterly.
It was it it has been poorly all alone, but the accounting wise there was a change in recognition of.
From what periods in advance you would you would recognize the royalty.
And then as you mentioned, we had some licensing increases in in this quarter that.
Aren't there every every year every quarter.
I'm sorry can you is there any way to elaborate.
That.
Any way to elaborate debt.
Related to.
I know you have.
And then technology, you think you've talked about it being applicable in.
Broader categories are.
What time.
Is this suggestion speaking to that or is there any time I am when when that may be a commercialization opportunity for free.
For a D D.
So so it is.
In addition to.
The other technologies, we're looking for license partners continuously as we see broader market opportunity.
But as to specifics of who the other the license agreement is with we're not able to talk about that.
Okay.
And then.
Sorry, just on on the on your cash flow statement.
The receivables was.
A pretty big Dragon working capital I'm, just wondering if you can elaborate on why such a big number there.
An operating cash flow.
Yeah I'm in sales are up 21% so.
What we're looking at it doesn't it.
So okay. So is it timing I don't know what kind of term drawn but.
So is there stronger demand trends towards the latter part of the year.
There.
Let me spell even even those are the quarter and.
Given the fact that is global business with.
Different terms all over the world is a bit difficult to me too.
Respond to whether it's longer terms, but yeah, it's mainly driven by the sales in the quarter.
R. R broke up business day like impact from the corn, so insecticides those are generally.
June 15th terms.
So.
Okay, how are you.
Alright, Thank you very much.
Okay.
Thank you Chris.
Your next question is coming from a friend Evans at Heartland Padua lines. It from the line is nice.
Good afternoon everybody.
Hey, Hey, Hey, Brad.
Thank you for taking my questions I appreciate it in advance or.
Just just to amplify on a previous question just a promo meat on the bone if.
Looking across the commodity landscape it seems like there's.
Fairly strong price and dynamics cross most commodities. These days how do you feel about your ability to and I understand that you have enough revenues out from your but.
How do you feel about your the organizations ability to respond to perhaps stronger demand then you're currently forecasting.
Well, there's two parts of that one.
If you were alluding to price increases, but we have put price increases through.
And the us on.
The portion of our volume at this point.
So that's one piece.
From.
From from those products as well and I think higher demand most of most of what were what are strong margin products are.
For the U S. We control the manufacturing and so we're constantly take.
Taking putting it any updates in an activity, where we might have stronger demand and shifting production, where we can.
In our in our inventory this this quarter.
R. R. Generally we do start building in Q1.
And but.
It was our finished products were equal to or.
To where we were at the end of the year.
But.
Probably added about.
Have a $9 million worth of raw materials.
Because again was.
50, plus percent margins, we want to make sure if there's upsides, we're in a position to capitalize.
That's a very good thanks for that could be the answer I guess I was more wrangling in on.
You answered part of the question I was saying leaning on that is on the volume side. So just to elaborate more fully <unk>.
From a supply chain perspective.
Downstream of you you you if you were to see stronger demand you feel like you're you're you're downstream suppliers would be able to provide you precursors them all the other other chemicals that you require to formulate.
Yes.
Correct I mean, we certainly have some raw materials that.
Come from confirmation.
Good portion of what we're doing.
Is is domestic sourcing.
But it doesn't mean, there wouldn't be bottleneck somewhere.
We have experienced.
Plays.
The ports, particularly in the West coast.
Sure.
The freighters of stacked up that seems to relieve some.
We're seeing free essentially double of what it was a year ago.
As people are fighting to get get on the vessels and get their get their goods move.
But we tried we've tried to take a position of getting ahead of that so that we wouldn't get held up.
And again, we're we're meeting.
Formerly every every month walking through and any skew, where we see some particular upsides and making decisions is.
To be ahead of last year, but if you get into the I guess northern Western Plains.
They are they have a water issue right. So that's.
That's kind of a two sided coin on the one side it's.
It's bad for those farmers located in that area, but overall it squeezes the.
The output and that's one of the reasons Youre seeing right now the corn price in soybean price going up especially in the Dakotas.
You also have problems with drought in Brazil right.
The Sip arena area drought drought issues in Argentina.
The per annum River, which is basically the shipping routes for Argentinian range is.
Low level and they can't ship the grain.
So this is the.
The dynamics, it's almost like a perfect storm for commodity prices.
And.
The farmers, who do have any old inventory youre, just holding on to it because they think prices are going to go up and theres not a lot of that in there.
We're already starting to look at what do we get for next year's crop. So I think we're seeing a really uptick in the cycle.
The only question Mark you have is how much is China going to buy right.
And.
It looks to us it looks like we are ahead on the export market.
So I don't know if that answers your question, Brian Yes, Bob. Thank you that's very helpful. I just recall that there was some discussion.
Last season that there was some concern that.
Root worm infestations have returned to the Midwest.
As a result, corn on corn planting in the building.
So I was just curious whether you've heard anything as to whether that was became more problematic.
Fortunately for us those are not the pockets where were strong with our CSI is right.
Need to have a strong CFO most of them are concerned in Iowa, Iowa, starting to dry up a little bit but.
But as far as once once that plant that they've got the corn.
From a product that they haven't yes, that's correct.
The only question then comes Okay, maybe herbicides might slow down but.
If theres limited water you want to make sure that it's therefore crop and not for wheat. So.
And again with these prices.
Forward to do those kind of inputs.
Okay. Sorry, My last question is just were.
Several quarters ago, Eric and the team you all had given some fairly.
From some nice targets for your financial performance out to 2023 and <unk>.
2025, I'd just be curious kind of.
How does the you know as we now enter into you duly duly noted that we've gone through this very long.
Now I'll turn the AG cycle I'm, just kind of curious how you think we are now in the on the cost per perhaps <unk>.
Bull market in the AG space I'm, just curious how you.
Do you do you have more or are you more confident around those 23% and 25 2025 targets you laid out.
I would say I would say, yes because.
<unk> is a lot easier than having headwinds.
Again after eight years of headwinds.
It's not like we just jump up and down and say this is going to ride the next three years, but.
Having been through a lot of cycles over the years.
Things are lined up pretty well, particularly coming out of this pandemic.
Hi.
It looks good to me.
If anything's possible obviously.
That could be.
Not to be sarcastic, but I guess do you think that if this if this bull market in the AG space kind of persists longer than one year. Do you think you can is there a chance you could achieve that.
Three targets, a little sooner than you thought.
22, well.
Obviously, we would move things up.
Yes.
Yeah, I guess, Mike My question is whether you'd be able to give us free and achieved our targets in 2022.
Yes, I mean, obviously given the three to five year target says okay. There is some some variance and obviously if we've got tailwind we will move faster.
Now from <unk>.
Headwind something else comes in from surrounding.
That's the reason in the three to five so but right now yes, it looks good.
Congrats on a great quarter. Good luck you guys. Thank you.
Thank you.
Yeah.
Once again, ladies and gentlemen, if there are any questions or comments. Please press star one on your phone at this time.
So are there appears to be no further questions from the queue.
Okay. Julie Thank you very much and thank all of you on the phone and we look forward to our.
Thanks.
Session, which show will be a per shareholder meeting.
It will be.
First week of June yes, okay. Thank you very much.
Have a good evening.
Thank you ladies and gentlemen, this does conclude today's conference call and webcast. You may disconnect. Your lines at this time and have a wonderful day. Thank you for your participation.