Q1 2022 Green Plains Inc & Green Plains Partners LP Earnings Call
Good morning, and welcome to the Green Plains, Inc, and Green Plains Partners first quarter conference call. Following the company's prepared remarks instructions will be provided for Q&A. At this time all participants are in listen only mode. I will now turn the call over to your host Phil Boggs Executive Vice President of Investor Relations.
Mr. Boggs. Please go ahead.
Alright, Thanks, and good morning, everyone welcome to Green Plains, Inc, and Green Plains Partners first quarter earnings call participants on today's call are Todd Becker, President and Chief Executive Officer, Patrick Simpkins, Chief Financial Officer, and Leslie van or meal, and EVP product marketing and innovation.
There is a slide presentation available and you can find it on the investor page under the events and presentations link on both corporate websites during.
During this call we will be making forward looking statements, which are predictions projections or other statements about future events.
These statements are based on current expectations and assumptions that are subject to risks and uncertainties.
Actual results could materially differ because of factors discussed in today's press releases and the comments made during this conference call and in the risk factors section of our Form 10-K Form 10-Q, and other reports and filings with the Securities and Exchange Commission.
We do not undertake any duty to update any forward looking statement.
Now I'd like to turn the call over to Todd Becker.
Thanks, Phil and good morning, everyone and thanks for joining our call today.
Our recent announcements demonstrate that our ongoing transformation continues to gain steam as we achieve milestone after milestone achieving 60% plus protein concentrations isn't at that event that we have been aiming for and discussing with you for some time and we announced our success a couple of weeks ago, our commercial project progress on protein.
And high value ingredients as exceptional as the team has added new customers across multiple species, we now expect.
In the quarter overproduction from the industry resulted in high ethanol inventories, which led to an extremely challenging margin environment on top of that we have what we believe will be our last quarter of significant negative absorption from our BARDA modernization program.
We also had 36 distinct individual operating days, where we could not get adequate rail service to operate one or more of our plans and increased corporate costs due to onetime reclassification of compensation along with additional onetime legal fees. That's all I'd pick impacted our quarter negatively and should not be recurring other than wage inflation, which Patrick will discuss later on.
We had indicated on our last call and our recent conferences that ethanol margins would be very weak during the first quarter. So it should come as no surprise overall, our ethanol crush margins were a negative seven cents per gallon in the quarter. However.
However, I'm happy to report since the end of the quarter things have changed for the better and we will be unable to take advantage of some of the appreciation in crush.
Ethanol margins have improved significantly off the lows we experienced in the first quarter today on paper second quarter margins exceed 25 cents per gallon in the crush margin and that's factoring in strong renewable porno values and our protein business. We have locked in about half of our open gallons for may and June towards the recent highs.
We came into the quarter with minimal price exposure exposure to natural gas markets as we have locked in most of it for 2022 at much lower prices as indicated on previous calls and lastly, we have seen very strong pricing a vegetable oils, which is also helping.
Besides our transformation update.
I think this is a really important point I'm happy to announce that for the first time in over two years all of our plants are currently capable of running at capacity or multiyear upgrade and modernization program is finally complete with our Madison and Mount Vernon locations, returning to full rate and we've completed necessary grain bin repairs at York in fact Madison.
Vernon are capable of running at rates that we have never seen there before which is great for the rollout of our protein technologies.
Anticipate that second quarter utilization levels should be strong subject of rail service, which so far this quarter has been somewhat better.
Operating our plants safely and consistently is crucial to our long term success as we deploy MSC technology across our platform.
Construction at our MSC facilities in Central City, my burden and or buying continue to make good progress. We will continue to post new construction update photos. So I encourage you all to check them out.
Our construction schedules now show two of the facilities coming online in the third quarter with a buying in the fourth quarter. Although we are working diligently to shave time off the schedule, adding extra shifts to start up as soon as possible as engineering is underway for our next two sites in Madison Superior and anticipate breaking ground at those sites late in the year or early in 2023.
Hi.
We continue engineering, our turnkey JV partnerships and they have their project out to bid and we believe it will be the largest MSC system in the world. When completed we hope to get all of that what we need in the next coming weeks, allowing us to break ground.
During the first quarter, we completed a new revolving credit facility with sustainability linked targets. This facility replaced our prior trade group and grain revolvers consolidating our overall working capital financing into one facility for the first time in our history. This financing allows us to streamline how we fund our business internally expand access to <unk>.
Capital collateral, while also linking our capital structure to our sustainability goals Green Plains partners increased their distribution for the third quarter in a row.
Rising another hassan to $44.05 per unit. This was supported by the partnership's long term minimum volume commitments and optimize balance sheet, allowing for a stable operating results.
Green Plains ended the quarter with over $620 million in cash on the balance sheet, leaving us in a strong position to execute on our transformation plan again I think this is important that even after a quarter of weak margins, we remain in great financial shape, especially with a better margin outlook.
I will come back on the call to provide a more thorough update on the exciting protein trials and next steps across our transformation plan now I would like to call turn the call over to Patrick to review, both Green Plains, Inc, and Green Plains Partners' financial performance. Thank.
Thank you Todd and good morning, everyone Green Plains consolidated revenues for the first quarter of $781 $4 million were higher than the same period, a year ago of $553 6 million driven mainly by higher prices and run rates our plant.
<unk> rate improved year over year with an 83, 1% run rate during the period comparing favorably to the 71, 1% run rate in the prior year first quarter.
As Todd indicated earlier and consistent with our message in Q4 of 2021, we are now in a position to achieve higher utilization rates across the platform as we move through 2022, mainly due to the completion of our modernization programs.
Consistent higher run rates for our platform remain key to supporting our transformation, reducing fixed cost absorption and improving margins long term.
For the quarter, we reported a net loss of $61 $5 million or $1 16 per diluted share compared with a $6 $5 million loss reported for the same period in 2021.
Adjusted EBITDA for the quarter was a negative $27 8 million compared to $15 4 million in the prior year quarter, largely due to weaker ethanol market markets as well as higher corporate costs, driven partly by higher wages and onetime adjustments coupled with comparative over over performance of our AG and energy segment in 2021.
For the period, we realized a negative seven per gallon consolidated crush margin.
For the quarter, our SG&A cost for all segments was $30 9 million compared to $23 5 million reported in Q1 of 2021 the.
The increase of approximately $7 4 million is not indicative of a normalized SG&A run rate for 2022, but is driven mainly by a number of one time corporate expenses related to professional fees and adjustments to compensation. We have seen an increase in inflationary salary related expenses and slight increases in head count to support our business transformation.
We would expect our normalized SG&A run rate for all segments to be around 23% to $24 million per quarter through 2022.
Of that amount, we expect corporate SG&A costs, which came in around $18 million in the quarter to be right around $13 $5 million going forward.
Interest expense of $8 8 million for the quarter was $22 $9 million favorable to the $31 7 million reported in the prior year first quarter, mainly as a result of a $22 $1 million charge related to the partial extinguishment of our 2022 convertible notes the.
The remaining difference in interest expense is attributable to a combination of slightly higher interest rates and higher debt balances offset by the effect of capitalized interest for.
For the remainder of the year based on expected debt levels, our cash interest expense should remain consistent with prior gallon prior guidance of $10 million per quarter before capitalized interest.
Our income tax benefit for the quarter was $1 $2 million compared to a tax expense of $1 9 million for the same period in 2022, resulting from accumulative valuation adjustment to our deferred tax asset which is reassessed quarterly.
<unk> ended the quarter the net loss carryforwards available to the company were $114 million, which may be carried forward indefinitely or normalized tax rate for the quarter, excluding any valuation allowance adjustments was 23, 3%.
On slide nine of the earnings deck, we provided summary of the Companys balance sheet as shown we ended the quarter with $634 million of cash and working capital net of working capital financing compared to $666 million for the prior year quarter our.
Our liquidity position at the end of the quarter included $629 $2 million in cash cash equivalents restricted cash and marketable securities along with approximately $45 million available under our working capital revolver.
For the quarter, we allocated $62 million of capital to profit sustaining and growth projects, including $36 million to our MSC protein initiatives about $13 million to other growth initiatives, including plant modernization initiatives and approximately $13 million towards maintenance safety and regulatory capital.
We continue to anticipate capex for the year of $250 million to $300 million based on our 2022 plan and current construction schedules.
I am pleased to report the partnership realized another steady quarter with adjusted EBITDA of $12 6 million EBITDA was lower than the $13 8 million reported for the same period a year ago. As a result of the sale of the parents Ford plant. However, the partnership's stable operational performance and low leverage enabled the partnership to enhance returns to.
Unit holders by increasing the quarterly distribution to <unk> 44, and a half cents per unit, while maintaining a one six times coverage ratio for the quarter.
For the partnership distributable cash flow was $11 2 million for the quarter comparing favorably to the $11 7 million for the same quarter of 2021, when considering the volumetric changes from the sale of the transport plant.
Over the last 12 months the company produced adjusted EBITDA of $51 million distributable cash flow of $44 9 million and declared distributions of $34 $1 million, resulting in a 132 times coverage ratio, excluding any adjustment for the required principal payments amortized in the past year now I'd like to return the call.
Back over to Todd Thanks, Patrick.
So we have often pointed out late 2022, and 2023 is an inflection point for our company and we are on track to achieve our transformation as we have done on prior calls I'd like to walk you through an update of each of our strategic pillars protein oil sugar in carbon, but first let's spend a little bit of time on ethanol since we still do make some and we.
It's important for you to understand the economics of the current market.
To reiterate margins have rallied after Q1 lows and we are benefiting from that.
When we started the quarter opened to the crush but as we see these recent highs we began to lock in margins during that multi week window with April over we are focus on locking down some may and June as we saw the opportunity to return to profitability.
It also helps on our platform is once again running at full rate base.
Based on the current market our full company EBITDA for the quarter is tracking over $50 million in corporate Cros have returned more towards normal as well, we still have some open exposure of approximately 50% of what's left to produce for the quarter. So the numbers could move around a bit, but we do know summer driving season and geographic locations could still be beneficial.
Looking forward to Q3 and Q4 margins. They also have recovered, but we remain fully opened other than the fact that we own our natural gas cheaper than today's prices.
Our protein trial at Wood River was simply groundbreaking and exceeded all of our expectations. We ran this trial for a full month and quickly learn quickly learned how to dial in the plan to achieve higher protein concentrations within five days, we are producing near 60% protein are engineers and operators quickly took those learnings from the early days of this.
Trial and began to dial in the mechanical processes necessary to achieve higher protein purity and increased yields.
For the back half of the trial, we ran over 61% protein concentration and began to see days with yields of up to and greater than four pounds per bushel.
In addition, our learnings also resulted in the ability to achieve record high low carbon renewable corn oil yields up to and sometimes exceeding one four pounds per bushel and we believe we have seen the future of this technology.
Let's think about what we just accomplished we have demonstrated for the market and for our customers our ability to produce a high value, 60% plus fermented protein ingredient for the first time from a dry mill by a refinery.
And not just in some sort of small batches. The old rule of thumb is if you can't achieve success for 10 days in a row you need to go back to square one after 10 days. We just kept going this was across the entire fermentation process of our wood River plant and sustained for over a month on top of this we achieved low carbon renewable corn oil yields there were 75% above the industry.
Baseline.
And exceeded our prior expectations of one two pounds per bushel.
Market validation efforts are now underway in earnest in both internally and externally we are providing quantities and numerous customers across species and regions include South America and Asia. We are also utilizing our in house innovation center platform to develop and validate Aqua culture diets and performing fee trials to demonstrate what we believe to be a superior.
Nutritional benefits from this pre digested plant based proteins and east created through fermentation.
Is truly unique and we are excited to have achieved this result, as early as we have after acquiring fluid quip less than a year and a half ago, we laid out a vision to reach this goal in three to five years.
We are already ahead of schedule, we believe over the next two years that we will convert a significant portion if not all of our production to 60% or higher protein, we anticipate having additional partnerships on a protein products over the next several quarters as we move to ingredients that provide out only higher protein concentrations, but also nutritional solutions.
Currently there is nothing I see that would prevent us from reaching our forward targets in 2024 and 2025.
Low carbon and renewable corn oil continues to be in high demand with prices hitting record levels. During the recent months. We are now seeing strong price indications for the last half of the year.
When completed with the MSC builds we believe we will push over 400 million pounds of low carbon oils, which has a ci score of an average 20 points lower than soybean oil make it in a premium strategic feedstock for the rapidly expanding renewable diesel industry.
In addition, fluid quip recently announced a new technology offering D. C O plus in order to offer the industry a path to expanded renewable corn oil yields as well. This technology is covered under our current IP suite and at the beginning of making fluid quip technologies truly modular.
We also anticipate completing this at some of our own facilities ahead of our full MSC Buildout, we're permitting takes a bit longer such as Minnesota as we are able to engineer and deploy this technology to increase renewable corn oil yields more quickly as it does not add to emission of a plant in any meaningful manner.
And we continue to engage in substantive discussions with potential partners regarding our renewable corn oil we have been patient on this front and have continued to benefit from the strong market in the meantime, the technological developments in process refinements fluid quip has been working on.
With us only enhances our ability to provide higher corn oil capacity over the long run it makes green plains overall, even more valuable.
We are excited to announce that Shenandoah will be a site of our first full scale Queen sugar technology deployment. We were recently awarded some financial incentives from the state of Iowa, and the city of Shenandoah totaling approximately $11 million over 20 years. This will benefit the project development to make Shenandoah, our first fully developed bio refinery platform other.
Future complete.
Complete with protein and sugar operations at a dry mill this $30 a bushel per day grind capacity glucose dextrose system or <unk> system will be uniquely positioned to add significant value and demonstrate the possibilities for future development of this initiative.
We expect to make food grade as well as industrial grade products Engineers engineering is ongoing and we continue to anticipate breaking ground later this year with anticipation anticipated completion by the middle or end of 'twenty three or.
Our potential co location partners continue to engage in substantive discussions with us as well as well as potential offtake partners.
Our carbon reduction initiatives remain on track and we are exploring how to expand to new areas. We have several main areas of focus with the largest being our participation in the stomach carbon solutions pipeline.
They have been able to secure significant and equity investments during the quarter from key players with eight of our facilities committed to their projects Theyre success drives a significant contribution to our low carbon strategy and we remain confident we are partnered with a winning project.
Summit conditions continues to make progress on permitting and right away and late last week announced their partnership which gained access and partnering with a fully permitted 100 million tons Sidoti storage site in North Dakota.
We remain constructive to overall carbon prices long term as well, we continue to evaluate alcohol to jet opportunities and have explored several new paths as well that are emerging as possibilities. We also remain focused on some sort of direct injection and the eastern plants. The questions. We all have to ask ourselves is whether all of our biogenic carbon should end up in the ground is there.
Could be opportunities in other products above the ground.
We also believe new opportunities exists in Biobased mass Pete biomass based heat and electricity further reducing our carbon intensity of our ethanol in the end I believe traditional gen. One ethanol production will be the most economical path to a low to zero carbon fuels as the base infrastructure is in place today, and we believe becoming more valuable.
So where does that leave us for our margin expectation for 2022.
Even with Q1 results, we continue to believe our prior numbers of approximately 140 to 160 million from corn oil at $40 to $60 million of EBITDA from protein as we bring more online and look for success of our 60% protein marketing. We look forward to keeping you all updated on these efforts in the quarters ahead again, while first quarter experienced weak ethanol margin.
<unk> currently the balance of the year looks much stronger.
Corporate SG&A has trended a bit higher with wage inflation and overall cost increasing while we are attracting great talent and retaining great talent at Green Plains for our transformation as we have seen some leveling off of wage pressures for the short term at least since we still make biofuels is important to note. The EPA issued an emergency waiver to allow <unk> to continue.
To be sold over the course of the summer months and the administration, including the President acknowledged this product is better for the environment and for consumers as it is more affordable than <unk> or <unk> 10.
We have surplus supply to help make our up for recent events tied to Ukraine conflict in the cornfields and Midwest continued to serve as our strategic food and fuel reserve state.
States continue to expand low carbon fuel policies as well and I was leading the way on requiring <unk> to be offered at most gas stations something we think other states will be quick to follow even more important is the letter to the EPA for Midwest governors requesting the one pound waiver to be eliminated.
Which would force the refineries and pipelines to ship, a Bob with lower volatility and effort a work around to allow a permanent round permanent year round E 15, and higher blends in these states.
The final letter included eight states that represent just over 10% of the U S population and approximately 10% of the U S fuel demand the equivalent of the California market we.
We are hearing positive disposition from the government, which could increase demand by over 500 million gallons per year of ethanol. If this waiver happens that would be a game changer and as bullish to our legacy business and certainly to our expanded production of low carbon renewable corn oil is renewable diesel industry continues to be transformational as well.
So even without these <unk>, we can see the inflection point in our transfer even with these tailwind we can see the inflection point in our transformation to Green Plains 2.0, and we are closing in on achieving escape velocity from historically volatile fuel ethanol economics. Thanks for joining the call today and we can now start the Q&A.
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Our first question comes from the line of Jordan Levy of true as Securities. Your line is open.
Good morning, all.
<unk> had a lot of exciting recent news with the successful trials for <unk>.
You were able to achieve there and you talked a new protein customers fluid quip technology rollout.
And all of this points to some really exciting possibilities as we move to 24 25, even.
A number of potentially above the numbers you've already put out there.
Broadly clearly there is a ton of caution even fear at this market. So my question is how can you use what you've already accomplished being the completion of project 24, now hydro at Wood River at Shenandoah and so on.
As tangibles to show the market that these base numbers, you've talked to for 2020 for closer achievable or even have some upside potential to them.
Yes, I think the key here is going to be obviously running at full rate because when you run the protein systems you want to run your full grind and even continue to expand those crimes, which I think we have possibilities as well so completing not just project 24, but some of the modernization updates post project 24, like new dryers and in Madison.
Vernon and obviously getting York back up and running it's going to be helpful. As well. So that you start with a strong base and on top of that what we're learning at Wood River in Shenandoah is again, giving us great confidence number one even at the 50 pro.
Sales that we have on we've just gotten approved by another major pet food brand.
To supply them product, we went through a year of audits with them. This isn't just a let me call somebody up and sell them some into pet food. This is a long process, where they come out and they do significant audits on your.
Your sites, where they want to buy from to make sure obviously the product is safe.
To ship and safe to use and so we've just got a second.
Our new.
Major pet food brand that has is going to beginning to use our product and we're in late stages with several other as well we started some of these processes even two to three years ago. Before we are we were even making product in our own platform. So we're seeing success there.
Even more exciting though is after we announced the 60 pro success.
It wasn't that we had to make calls out is actually that we got the calls in we.
We got called in from around the globe from producers of Aqua culture.
And and the swine who want to use this 60 pro fermented product as a replacement for some of the products that they've seen why.
Some of it is around what 60 pro fermented protein does but it's also around what it.
What it can do to help with flesh color and obviously feed conversion ratios et cetera. So.
Everything that we've seen it was while product was we did a lot of product development out on the 50 pro we're getting a lot of inbounds on the 60 pro <unk>.
Sending our first shipment of 60 pro to Southeast Asia, and 50 Pro we're also sending getting ready to send our first shipments of 60 pro into South America, as well and we're seeing real interest for those products as displacements for other products and.
And the market lastly, I'll only say when you look at pricing comparisons.
Have a fish meal right now low quality fishing on Peru is trading around $9800 a ton high quality around $2300 a ton.
So obviously the expectations are high we would love to get those prices, but we know that's probably not not in the cards today, but somewhere between.
Where we started in those high numbers theres opportunities to start to displace other products in those markets. So.
As I said this is just a matter of of not if but a matter of when this is going to happen. We know that we can make the product and our intent ultimately is to basically make it across our whole platform.
Thanks, Tom that's a great segue into kind of my next question.
That is recognizing the 60 per trials kind of just concluded at the time you talked to run these programs that the customers have you seen any change in the time link needed from the first discussions youre, having and tests.
Yes.
Securing AG.
Long term off take no it would be kind of importance of the market sees in those contracts.
I think the time will be a lot shorter on the 60 probe than it will be on the 50 pro and Leslie is here. If you want to maybe comment on what youre seeing as well to give.
Give our shareholders a bit of a view on why 60 pro is a lot different to the potential customers, yes. So in essence by achieving the 60% Mark and possibly even higher we put ourselves in a different category. So the formulating nutritionist on the agriculture side of the pet food side is now an ability to use.
More of the product it fits better in the formulation of lot of these guys are already dialed into using whether it's soy protein concentrates corn gluten meal or fish meal. So it was imperative that we really joined that more elite group of ingredient. So thats really what opens up and I think due to the tightness in the supply of those markets.
That's why we're seeing a lot of inbound calls quite aggressively since this is really the only new scalable source available to many of those customers.
Thanks, so much.
Leave it at that.
Thank you.
Thank you. Our next question comes from Laurence Alexander of Jefferies. Your line is open.
So good morning, I just wanted to follow up on the discussion about the outreach from the accuracy what do you see.
Based on what Youre hearing now is the timeline.
For validation contracts in place to validate the asp's in the J curve that it's been sketched out the last couple of years.
So this is Leslie again, yes so.
So.
There will always be the need to test and validate the product within the systems of the farmers and that really is a.
A question that we leave up to them, whether they want to do with three months trial in a specific phase of life or whether they want to build some more data by running certain life phases concurrently.
So we expect with our own internal validation efforts, having been kicked off that we can actually supply a lot of data ahead of time. So that we don't have to do this with each customer, but traditionally you could see still a time between three to six funds to really get to the level of what's the optimal inclusion rate of the product.
So that would imply that you should have data speak to the J curve economics by early next year.
We believe we are on track for that correct.
And I guess just secondly.
If you look at kind of the.
The new opportunities on the bio fuels that are opening up on the biofuel front.
From a capital allocation business.
Focus perspective, do you view a dollar of EBITDA.
Has the same if it's from bio fuels or from dextrose.
Or do you also look at the relative valuations of fuel companies and.
Food ingredient companies.
And sort of how does that change your incentive to participate in the next wave of biofuel projects that might be on the horizon.
From our standpoint.
What we will get capital allocation.
Is recurring and predictable cash flows and so while biofuels is going to have some spikes in obviously.
We've seen as well as some weaknesses like we've seen.
When we look at our dextrose and glucose business that we believe will develop over the next several years those are going to be recurring predictable.
Cash flows in non volatile because.
We believe we will enter into <unk>.
Partnerships and supply agreements and co location opportunities with potential partners.
Partners and so capital will while it certainly biofuel is still subject to policy.
When we look at our dextrose and glucose opportunity, it's really not subject to policy. This is just subject to when it's available.
We believe the demand is there for it and that's really evidenced by again.
The call is in its not called out as now the calls in now that we've kind of had success and now we do also have what we didn't say here's.
You May now have York has the capability to run.
Not just batch, but continuous as we put new.
Unit operations, and therefore ion exchange and and refining so that should also continue to.
So our success in our capability to make this product and so.
Again allocation, we'll get our capital allocation.
<unk> first and foremost will go against things that are predictable recurring and expanding which will expand our our gross margin percentages.
And obviously, we're still going to make a lot of fuel for a while so it's great to see some expanding opportunities there.
But it's.
It's all going to be around.
Any capital location, there would be just for grind expansion. So that we can make more proteins and oils and sugars and enter byproduct as ethanol that's fine, but it has to be around recurring and predictable cash flows.
Okay. Thank you.
Okay.
Thank you. Our next question comes from Ken Zaslow of BMO. Your question. Please.
Good morning, guys.
Good morning.
Of the 25 that you guys referenced how much of that is within your control, which would be high protein and corn oil.
Yes, I mean basically.
That's the reason we use the numbers because we've seen ethanol margins.
Come up and.
A high percentage of that is within our control, but also the fact that April was done in half of the rest of the quarter is done.
We believe that's in our control if the market were to close out right now.
Would be greater than that.
But we're being conservative in our estimates as there's been a lot of volatility as of late and the ethanol and the ethanol margin.
But if the market were to.
If today was the end of the quarter and margins were where there are where they are today, we would exceed those numbers.
Okay.
So of the 25 how.
How much of that is high protein and corn oil.
Yes, I mean, basically when we look at it.
Okay.
It'll be in that somewhere between well I mean, we're.
We haven't isolated like that what we gave you a guidance for the year, which is a $140 million to $160 million in corn oil at quarter end we.
We give you our per year and $40 million to $60 million on our protein initiatives.
And so but a large percentage of that 25 today is coming from those two products and that's why we had said if the market closed out today, we'd be higher than that for the ethanol is positive.
Okay.
As you start to develop your all these.
Products in your balance your longer term story with the short term.
Can you talk about how.
Your current operation is relative to the industry.
If I were to look at it the margin structure. It seems like it's lower than that of the industry at this point and I get that you are investing for the future.
I get the sense that the investors are looking a little bit more of a balance between hey, we want good operations and yet being able to deliver margins in line with some of your peers as well as we'd like.
The ICU.
With them on the Sunday for the future, but im just trying to figure out how you're balancing that and it doesn't seem like it's a full balance and how do you go forward from here.
Well the going forward is a balanced now I think that we're very confident that if we were in the spot every day.
We would be at.
At the at the market average basis, what else Youre seeing I mean, it really took us we've eaten a lot of absorption for over the last several years because of the projects took longer because of COVID-19.
But now that they are complete we believe last quarter was basically our last quarter of of negative fixed cost absorptions that were driving some results. Obviously it was a quarter of increasing it.
Grain prices, but I think we're all we all have had the same opportunity there, but in general I would say Q2 will represent more fairly and adequately where we will stand in the future relative to others and I think youll see us at at or better than then.
And then what we've done in the past relative to that spread and so our well better than that spread and then possibly exceeding some of those expectations. So we're there now I mean now it's up to US just to start to make sure our plants run everyday obviously rail service was something that hit us hard last quarter is not hitting us hard this quarter.
But we've done a really good job keeping our plants open.
But overall I believe you've seen.
Probably one of our is is going to be the last quarter.
Where we see any any negative absorption from our old projects. So.
We are basically at rate today.
Okay. My last question is if I go forward would you expect it anytime in the next couple of years anytime that you would have a negative EBITDA again, and what would be the situation in which that would occur. If you guys are building this resilient model and I'll leave it there.
Yes, I mean, obviously a quarter.
Their ethanol just completely.
Is negative obviously, we have to watch that but no I don't believe.
Sure.
And less ethanol, obviously, it's up to the industry from that standpoint, but I think the industry is gaining momentum on a lot of other opportunities, but also from the standpoint of the fuel and the announcement, we've seen out of some of the <unk> initiatives, we're going to watch that closely but.
The industry is obviously at times oversupplied and under supplied.
So I would hope that there is no other occurrences like that but if ethanol margins completely with tank for some reason, obviously, we would be at risk of that but in general.
I don't see.
An environment as we move into more of our proteins and protein and then continue to expand our oil yields where we're at today and.
And then obviously, if we when we get to sugar I don't see it I don't see.
An environment that would would take us to that low because then basically the industry is completely in negative variable contribution margins. So.
Our <unk>, our hope is that it doesn't happen again, but obviously.
Can't predict completely every quarter in the future, but I think we're set up well to defend against that.
Great. Thank you thank.
Thank you.
Thank you. Our next question comes from Ben Bienvenu Stephens. Your line is open.
Hey, Thanks, good morning.
Good morning, I wanted to ask about the corn oil.
Just given the value that the market is presenting.
And the validation of the Ci score associated with it.
Relative to other vegetable oils.
How do you decide what to do with that whether you just sell it into the open market or established an off take agreement and as you think about the potential for off take agreements what are the things that youre looking for.
To make sure that it's in the best interest of maximizing the value of the corn oil you produce.
Yes, I think it's it's a little bit of everything basically theres ways. If you put on.
Forward sale obviously.
The bean oil futures market trades.
Very similar in terms of moves and you can you can participate in upside rallies by hedging some of that in and bean oil because it does have a high correlation because once the spread has established youre basically.
Highly correlated to bean oil and you could use that as a hedge at.
After that then you just determine how much you want to keep open how much you want to sell forward.
We are open on a significant portion of our forward book.
And we're evaluating that we are seeing better bids for the last half of the year than we've seen before I think theres more demand coming on in the last half of that.
Some of these some of the <unk>.
Buyers are beginning to beginning to worry about where theyre going to source their low carbon oils, because when you look at and products because when you look at fats tallow <unk> and corn oil.
Our estimate is theres only about 15 billion pounds of that available on the market on top of that obviously, another 25 billion pounds of soybean oil, but when you look at the availability of low carbon oils, there's one or two players that could take all of that and then the rest of it's left to some of the some of the higher carbon score product.
So we feel like we're in a really good position.
We've seen bids last half of the year at premiums to soybean oil obviously, you've seen a <unk>.
Big Universe.
Soybean oil market, but.
There is still deep demand for our product.
And so from our standpoint, we feel like on a really good position now off take agreements we've seen.
We've seen several.
Proposals come our way and I think the way we've left it at this point is is there is no benefit necessarily.
Just doing an offtake without some benefit for our shareholders.
And.
And there is definitely some interesting opportunities out there today, we continue to evaluate but it's got to be a not just.
A place to put oil that's not going to be a problem I don't think theres going to be a time, where corn oil won't have a home.
I think it's a matter of what can we do to benefit our shareholders.
And why would we put together an offtake agreement without some additional benefit over the market and Thats.
That's kind of what we're working on today.
Could we enter into one it's possibility, but at this point I think staying a free agent with the amount of oil that we have.
Hi.
It has been a really good thing for Green Plains, and its shareholders and I think it will continue to be that way for at least a little while longer but.
Something if something is so compelling that I think we will probably have to take a look at it.
Yes, okay that makes sense.
With respect to clean sugar.
The announcement of Shenandoah is the first facility.
Purely a.
Tax driven decision tax incentive driven decision.
And.
How long should we expect kind of the spool up process for that to get to full production capacity.
And maybe a second part of the question.
At what point do you decide or what are the things that youre, considering when you're deciding how many plants do you want to convert to sugar.
As you look across your portfolio and Thats all I have thank you.
No. It wasn't a tax incentive decision necessarily I think we could have probably.
Achieved similar results anywhere we would want to put that plant Shenandoah is really special place obviously, one of our best and most profitable plants as a standalone plant.
First place that we had high protein and performing very well it performs at rates ever every almost every operating day and we see yields in proteins.
Under our control now in terms of pressing higher higher yields in managing our protein levels. So.
A lot of learnings there. So we have a great operating staff that is really ready for new technologies now and so what we want to show is the future and the future is going to be what Shenandoah will look like which is a combination of all of the technologies and all the IP that we have.
And there is also an opportunity for co location as well so we've been talking to potential co location partners of doing over the fence opportunities in Shenandoah is very unique from a workforce standpoint as.
As well and kind of where it's located from a rail and transport standpoint. So.
When we look at it we're going to do with 30 to 40000 bushel a day system, which is the grind.
That's about.
Oh.
Little less than half their grind, maybe 40% of their Brian will go into sugar.
And the rest will still go into alcohol.
And so.
Our first choice was really around.
The best location for.
To show a full bio refinery and a modern day with co location partners with the opportunity for tax incentives with a great workforce that can deliver on what we want to do and in close to Omaha, and so that's how we decided on that.
From there, it's going to be what the customers looking for.
We think actually one of the best locations, we have as in Madison It can hit.
The south it really hit all parts of the country as well as river in rail and truck access and we'll look we'll look at that one as well, it's probably best on the list, but it really comes down to the customer and what the customer where they want to be with the product theyre going to make and where they want to be with the product that we need to ship to them, but what I find really interesting about this is that the cause.
We're coming in on this you know there seems to be big interest from a lot of mid sized guys that are looking for new opportunities to source.
Glucose and dextrose.
And food grade and industrial grade and we believe we have a great standalone.
Technology that we can build with our with our with our systems and the IP to support it.
Okay, and Tom just on the timing of the ramp up of the facility.
Yes, we should break ground.
<unk> to third quarter of this year in Shenandoah, where engineering today, and we have started to order. Some long lead time equipment, we expect to be running about a year after that.
And one thing is important we are running in Europe today and again, we brought in what we thought was the last step that we needed to do in New York, which was around refining and ability to get to a food and industrial grade and now have been have been able to see that as well. So that really is what gave us the confidence to move forward and just increase the <unk>.
Sizing and do another standalone facility.
Okay, great. Thank you so much best of luck.
Thank you.
Thank you. Our next question comes from Steve Byrne of Bank of America. Please go ahead.
Can you talk a little bit about the characteristics of the residual DDG is after you extracted the 60% plus protein in the you know the one four on the corn oil was was the quality of that BD.
Still.
Comparable to two kind of.
Generic DDG or do you do you see any risks in the value of that.
I'll have Leslie answer that question, yes.
Yes, thank you for addressing that other value added products. So when we take the protein and we move.
Moving into the 60% protein product category.
In essence, the traditional DDG product really becomes a fiber product. So the energy density of that product is still very high and Thats. Ultimately when you look at the formulation of those products into rations for ruminants is really the most critical point. So while we are going to do some more validation on that particular product right now.
I actually see some interesting.
Side effects, if you will on that product that could lead for better applications versus the DDG, but as I said, we still need some additional data points to start making that are taking that position.
And Todd in your comments earlier about.
<unk> evaluating the alcohol to jet technologies, and Theres, a few of them out there.
What is your assessment of those and do you think any of them might be.
Good fit for your plants.
It seems like Youre, a little bit cautious about.
The bio fuels given the volatility in ethanol, but.
The airline industry doesn't have too many options and it would seem.
The alcohol based approach could be so much more cost competitive than.
The vegetable oil based approach to sustainable aviation fuel do you share that view.
I share that view, but I think that Thats, a long game and so we have to focus on for Green Plains is obviously, what we can achieve in the short short medium term and then I think ultimately this industry is going to produce alcohol to jet.
I think it's going to produce it from several technologies that are available today and some that are developing that that we have seen as well I think it's really what baselines. Besides what we're doing on protein oil sugar and then obviously de carbonization I.
I don't think today it is easy to buy an ethanol plant than it was five years ago I think if you want to buy one.
Are there are there are a few deals out there maybe but I think the prices have gone up and I think they've gone up because.
<unk>.
Everything thats going on with us, but also everything that's going on with lots of other.
Producers that are developing their own different differentiating technologies and opportunities. It's really not just everything we're doing there is some great work being done on lowering your energy use great work being done on.
Making more.
Cellulosic ethanol out of your.
Corn based ethanol as well and the fermenter, that's coming our way I think in the future as this industry to take care of.
Some of the low carbon fuel markets that are looking for cellulosic.
I think there is as I said biomass heat and electricity that are coming your way renewables solar and wind are going to be powering some of these plants.
And then I go on I mean, I think and then you've got alcohol to jet on top of everything we're doing so.
I think some of these plants could go into chemical like we like we've talked about it starts with dextrose and glucose and moves into biochemicals and bio products and the circular economy.
And that's what I think has put a baseline notwithstanding volatility that you saw in the first quarter.
That is that's a one quarter event and maybe it's going to be a quarter event in the next two years again, but the baseline of this industry is significantly different than the baseline was five years ago and it's because of.
Everything obviously, we're doing but also everything that all of the other.
Producers have different plans, leading ultimately to somebody will make alcohol to jet.
It could be all of us actually the demand we are probably the best way to supply.
Sustainable aviation fuel is now just going to come down to obviously, how much does it cost to build it.
The programs around it it does need policy.
And I think the policy will come ultimately for sustainable aviation fuel and what other catalysts will be developed over this time too.
To make these more efficient and lower capital requirements, but ultimately I think the demand is there I think you're seeing it right now in jet fuel.
We had it today it would be used it would be used all day every day and I think ultimately that's the that's the one of the potential and games for this industry.
As a little bit further away for us than protein oil sugar and carbon.
We will probably we will most likely participate in opportunities there as well.
Thank you.
Thanks.
Thank you. Our next question comes from Adam Samuelson Goldman Sachs. Please go ahead.
Thanks, Good morning, everyone.
Good morning, Adam.
Good morning. So first question just as we wrap up Gary roll everything together between kind of the updates on clean sugar on 60% protein and then.
The roadmap for the next few plants that are getting built.
The new Dcs, plus technology, which it sounds like it might accelerate it if he was a non hydro plants.
In the near term what.
What what's the latest thinking on Capex.
For this year and even next year, if you are at and really thinking about.
Now you are facing different projects and are you seeing kind of inflation on some of the capital cost for some of these things at this juncture.
Yeah I'll address the last question first which is yes, we definitely have seen inflation across the board in every aspect of our business.
<unk> seen it on wage inflation for retention and attraction.
I think what everybody has seen that so it's an equal opportunity inflation.
Think that.
Obviously construction.
Costs continue to.
To be something we watch closely on some of the commodity parts of our build we've seen some inflation on some of the other stuff we locked in we've taken care of that especially with the fact that we have.
We have our partnership with vegan. So we have we have labor on site every day and we're pressing to potentially add night shifts as well to get these done even faster because we have so much opportunity around <unk>.
The 60 pro and then.
Obviously.
On DCF plus I mean, I think it's the second question on D C O plus yes.
In Minnesota, where we probably can't build as fast, we still want to build and Fairmont and otter tail, but in the meantime, we could put up a tcl plex system and we've had.
Incredible inquiries at fluid quip from outside.
<unk> other independents that want to look at this technology as well because it's a very quick payback.
Two to three year very quick payback on our current oil prices, which I think really and I'll, let Patrick talk about the Capex banks Thats really still basically on track to what we've talked about.
But I think what it illustrates the value of fluid quip as well we bought into a technology company with significant IP portfolios and we're just starting to see some of the beginning of that theres more to come with what with what they have and what they have been working on which I think is a hidden gem within green Plains that has great partners in it as well.
And if you take a look at the value of <unk>.
Green Plains today.
Just take our oil prices alone in our oil contribution margins.
<unk>.
And youre getting everything else for free as somebody has said in the past so.
And on top of that you get fluid quip value of flukes, IP portfolio and technology company on top of that I think Green Plains is is setting itself up for for great.
Opportunities and great upside, but again, yes.
So we have to get through the noise of what we saw in some of these economics of fuel, but I think we're moving past that as well Patrick you want to comment on Capex sure as I mentioned earlier, our guidance from $2 50 to 300.
It remains fairly solid for the year.
Depending on construction schedules for the following year, probably more than $150 million, that's not including anything we might do with respect to further development and clean sugar and some of the other things that Todd is talking about but.
As it relates to protein and and maintenance cap, that's probably what we're looking at for next year.
So as we've seen the Minnesota projects real quick and I'll, let you.
A follow up the Minnesota project pushing into 'twenty, four obviously, we're going to put desio, plus there, which in its own right as a major contributor.
And so kind of keeps us on track, which is why we're we're confident on our 2025 numbers.
But that's just some of that will just get funded through free cash as well as we start to generate that when everything starts to come off.
So we're well positioned from a balance sheet standpoint to execute.
Okay, Alright, that's helpful and if I can just maybe switch gears and follow up question on the ethanol market has softened.
Let me see there's been a lot of volatility year to date.
One of the things, that's a little bit harder to see in the real time data.
As the export picture.
Picture and just wondering kind of how you how you frame kind of exports at this juncture. If you are seeing incremental opportunities emerge with.
Especially in Europe , with with refining processing costs over there.
And is that maybe providing a nice lift to the U S market right now.
Yes, I don't know that its.
Yes.
Making a huge impact today, but I think it's going to in the later part of this year, starting starting now I think year to date. We're just we're just basically status quo. We have seen some arbs open up into into Brazil, you saw their ethanol production down last week.
I think the European opportunity around octane still sits there I think <unk> for the summer.
We'll continue to grow and expand.
And I think we just need to get out of these this weather pattern that we're in and get the consumer driving them buying gasoline again.
And kind of get into the full summer driving season, which I think is a bit delayed.
Part of it is also.
The ability to move product right now still remains challenging although we have done better this quarter.
At our plants.
In terms of getting service than some of our plants last quarter, but we still see challenges across the industry, which is providing opportunities for us for some dislocations at some of the destination markets, including the ability to just sell export.
There is while there is while their stocks out there. It doesn't mean there is extra capacity just to go sell exports. So but I think the demand will be there I think that where we're priced in the world as a molecule is very favorable from a octane standpoint, and so I am constructive for the last.
Eight or nine months of the year eight months of the year.
Okay that color is really helpful. I'll pass it on thanks. Thanks.
Thank you. Our next question comes from Christopher Nolan of Oppenheimer. Your line is open.
Great. Thank you good morning.
Good morning.
And some of the responses that you provided but I'm wondering if you could put a finer point around.
Learning cycles that you've been able to achieve with the MLP conversions.
Window and now with Wood River.
From an engineering standpoint, what that does for utilization and throughput as you think about ramping the next tranche of facilities in the back half of the year.
Yeah, that's a great question and.
We learned a lot I mean, it was definitely something that we had to learn how to run these systems because it really is moving from dry milling into.
Into more of a wet milling technology and so our expertise was in dry milling.
And so we now have our head of protein operations as it is a 20 year wet Miller, who understands how to run and train up our workforce for running these technologies going forward. So we learned a lot Shenandoah continued to.
Provide challenges, but now it just runs every day at rate consistently as we have dialed in what we needed to do and there was some mechanical and engineering fixes we needed to do in terms of design.
We fixed all those and now going back towards last year, even we've just been running that plant and now we can we learn how to dial it up and dial it down if we make a little too high protein, we can dial it down and have higher yields and if we want a higher protein we can dial it up and we can do it on the fly so we've learned a lot there.
We then took those learnings and apply them to Wood River Wood River somewhat similar we.
We needed some engineering once we started up we realize there are some deficiencies it took us a little while to get that started and then before the <unk> before we'd ever do to 60 Pro trial. We wanted to make sure that was plant was running at rate.
As well and at rate everyday and we got to that as well. So then we went to the 60 <unk> trial, where we will start up the next three all of those operators are <unk>.
Training at Wood River, our Shenandoah.
So they are ready to run systems. They understand the systems. So it is a learning curve and I think each plant gets better as we started up in each plant gets the rate faster.
And each plant, we learned how to dial up and dial down what we want to do with those plants and then and now with the learnings from what we were able to achieve in 60 pro those are very very valuable as we went to full rate and for example, the central city operators were there for that getting we're thinking looking at that as well as thinking about how they're going to run central city when it starts up so.
A lot of learnings, but.
We're at the point now, where we have a great workforce as well as a new head approaching operations that is really very serious about consistency and quality.
That's really helpful.
Follow up question is actually another people question, but more on the commercialization side.
Patrick you called out the 23 to 24 million consistent spending.
SG&A, but I'm just wondering do you need to invest in commercialization resources.
Do you need to add to that side of the house in order to see some of these opportunities come to fruition. Thank you so much.
Yeah. This is Todd again, I think when we looked at that was the overall, including planned SG&A I mean, how we've looked at corporate corporate costs have gone up a little bit. So we've made an investment but the bigger part of portion of corporate costs was an overall, 15% to 20% increase in wages over the last 12 months.
Thats all wages not that's from.
Everyone from accountants to traders to salespeople too.
Across the board we've seen wage as everybody has so I think we're in a good steady place right now and that was inclusive of building out.
What we believe is a great structure around marketing sales and technology and so yeah. We now have a point where we're at filling.
Stages of what we need to best.
Get our product to market, but the base is there and I think I invite any anybody to come to see our innovation centers between Shenandoah York.
Omaha, we have three now that have validate the whole product and can make commercial products for our partners and obviously there was you have to pre invest when you want to sell a product for eight or 900 or $1000 a tonne.
We did some pre investment into.
Our sales and marketing and technology.
People and in processes and I.
I think we're getting the benefit of that now so that when somebody in global agriculture calls they can talk to everybody from somebody in a feed mill that makes the feed.
Somebody in an Aqua lab that feeds the fish.
Aquiculture nutritionist with it which is a ph D that talks about the beneficial aspects of this of this protein.
And so on and so that has been invested in.
And but you have to invest in that to sell high quality products like this at higher prices.
Thank you so much.
Thank you. Our next question comes from Craig Irwin of Roth Capital Partners. Your line is open.
Hi, good morning, Thanks for taking my questions.
Really just a housekeeping question here.
Can you talk a little bit about the utilization today now that project 24 is complete.
And behind you and maybe if you could share with us any color about additional turnarounds.
During the second quarter of planned before the end of the summer driving season and.
What kind of outages do you need for the three.
Three hydro plants to come on line at the end of the year.
The last question first we don't take plant outages, when we bring on high pro systems.
Basically turn on the hydro system and the Stillage hostility out of fermentation will just flow into there instead of flowing to our traditional dryer system. So that's that's number one we are in our last outage at Shenandoah and just coming up I think as we speak and that was basically take care of this half of the year outages.
And part of.
What happened in March and April , especially in March during during lower run rates and a little bit left over in April and then the last one here recently, so we're in a really good position.
The rest of the year, we will still go through some normal outages at the last half of the year, but it was already a plan. So I think we're going to start to run.
Our goal basically is to start to run.
<unk>, 90% into that 95%.
Area not subject to unplanned downtime. So we're seeing that right now, but we saw it we are seeing it as we speak.
And I think going forward, that's really going to help.
To lower the volatility of our operating platform and just so we can just focus on rolling these technologies out grinding them as much corn as we can to get as much of the oil in the protein out of it.
And letting our plants just run after the investments we've made in our project 24, our modernization plans.
Thank you. My next question is really a macro question I guess maybe.
Training.
Might appreciate this question, but when we look at the price.
Palm oil, which is the highest volume.
In the market.
More than 75% from the beginning of the year.
The rest of the complex.
It really moved at the same rate that usually palm oil does lead lead the pack.
We looked at corn oil prices over the last few months basically flattish, yes, we have diamond Green diesel suite coming online shortly and port Arthur and others.
I would say almost frantic to buy their feedstock.
What do you think we need to see for.
The veg oil complex or more specifically corn oil.
To climb in prices is something youre constructive on at the moment.
Or are you still somewhat conservative about the outlook for corn oil pricing thinking something in the <unk>.
80% to 85% range is reasonable.
Yes, I think going forward I think you could you could.
I mean, it's obviously based on the bigger.
Oilseeds complex globally.
But were seeing obviously with Ukraine, and the reduced some seed production, Canada and reduced acres.
Weather in South America, and obviously, what we're dealing with here on the planting season.
In terms of.
In the U S.
Still think there is obviously.
Especially on the forward curve upside potential in all of these.
Oils.
Veg oils and so.
What we're seeing in the spot market versus at the end of the year you see soybean oil is somewhat backward dated.
But we are starting to see bids show up in the last half of the year and it's and it's a little bit driven by what you talked about some new demand coming on others worrying where are they going to get some of the corn oil in a low carbon feedstocks.
After after basically their own yuko or tallow.
Supply chain. So I think we're in a good position.
I can't predict whether it can be 75% to 95, but I think it's still going to remain firm in terms of being oil.
And which leads to obviously firm corn oil prices.
And we will have to see what happens from there, but I think we're in a really really good position to execute and we will.
Continue to drive as much oil as we can out of this out of this kernel of corn Theres still oil left by the way.
And there is still another half upon oil after we get to one three and one four and now we have to figure out how to go after that as a company and as an industry and we are continuing to evolve our technology in that way, but we believe we're not we're in a pretty good place from a margin contribution for quite a long time.
Out of this this federal conflicts Federals go too low.
Just any sense obviously.
Additional rd renewable diesel production to get built.
And if it goes too high and obviously the the ones that are being built or.
Or are running.
It's.
They are set up well.
And then it's going to come down to energy prices as well, which looks like at least for the short and medium term diesel prices remain strong jet fuel prices remain strong and oil prices remain strong. So I think that's overall bullish to our overall corn oil position.
Excellent congrats on the strong execution.
Yes.
Yes.
Thank you. Our next question comes from Eric Stine of Craig Hallum. Your line is open.
Good morning, everyone.
Good morning.
Good morning, just maybe sneak one in here at the end can you just give updated thoughts if you're if you were to rollout the 60% plus yields.
Across the platform and what that would do to your EBITDA plan I guess, whether it's what you've put out there for 2024 or beyond.
If we can execute on the 60 pro strategy.
If I can only.
If I can just indulge me for a second we always.
We always thought while we're building for 50 pro we're really building for 60 pro.
60 pro becomes an ingredient that becomes a product that doesn't become a commodity and so once you're once you start hitting with a six in front of it and going from there you attract a very very different opportunity and so if you think about what we're going to have which is <unk>.
Approximately 700000 tons of of a 60% plant based from fermented product.
That's really not that much product relative to the demand that is there and waiting for more product to come on.
So that's the real opportunity with this technology, which is why obviously, we made the investments that we did not only in the assets, but then the technology itself.
Because that was the dream and the Dream was to make 60 pro plus and we did it and now it's a function of how fast can we get it to market and accelerate away from even these lower these lower proteins, which are still high obviously, but accelerate away from that so when you look at our you can blue Sky. It all you want and start using eight or $900 a ton for our <unk>.
This line product project product like this and continue to potentially go up from there.
You can see you can see what the what the possibility is and so if you get to 2024.
And 1 billion gallons or so and you're making 60 pro and oil prices are sitting at 80 or 85.
I think you can see that those numbers that we've outlined in the past would probably below.
We have a lot of work to do to get there, but so this is not it's still not going to be and if any more of in our mind is just to win how quickly can we do it how quickly we can get our plants built we are going to get we do have already customers that have asked for the product. This is we're not asking customers theyre asking us which is great. Although we are obviously, making a lot of calls.
<unk> out as well to get our product out there but.
We're seeing interest as a replacement from everything from corn gluten meal to soy protein concentrate all the way to some fish meal replacement and some diets and and so on so this is a really unique product with a really unique opportunity on top of that at four pounds. A bushel. If you think about this.
A wet mill protein doesn't usually exceed two five pounds per bushel.
Dry mill now with our technology, we can get the four we believe ultimately we're at four and even potentially higher pounds per bushel and so we just think we're in a unique position notwithstanding some of the volatility that we've seen.
But it's not stopping us nor does it.
Even sway anything that we're doing because ultimately.
Even in Q1 at a low run rate if we had all of our protein running at 60 pro and oil all of our oil running at.
<unk>.
At 85.
<unk> and maybe a sugar here and there.
We wouldn't even be having a discussion about ethanol margins anymore, and I think that answers from earlier questions about <unk>.
Going negative on margins again once we're through all of this we believe that we ultimately won't have discussions very much on ethanol anymore.
Okay. That's helpful. Thanks, Thank you.
Thank you at this time I would like to turn the call back over to Todd Becker for closing remarks, Sir.
Yes, thanks, everybody and thanks for coming on the call today, obviously, a lot to talk about it as we're.
We're looking forward.
We believe we're in a great place all of our plants are back to rates that is.
The first thing.
Margins, obviously have come off the lows of the first quarter and we were able to take advantage of somewhat some of that strong product pricing.
On corn oil and and then and obviously now it's to 60 pro conversion.
We continue to also build customers in 50 pro as I indicated we are now.
New approval after multiple years of audits.
Our new pet food customers and we are working on more and we expect more to come.
From for our product its unique product and how we're approaching it every day.
In the market and so when you look at all of that and combine it with our opportunities around sugar and de Carbonization I think we're well set up getting to our $23 $24 25 strategy and and there is nothing that we see today that doesn't say, we can't accomplish those goals and obviously a strong balance sheet is leading the way with.
With a curve that keeps our balance with a margin curve that keeps our balance sheet strong and ultimately getting into 'twenty three 'twenty four even stronger and I think we're well positioned to achieve success. So thanks for coming on the call today, and we will update you next quarter. Thank you.
This concludes today's conference call. Thank you for participating you may now disconnect.
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