Good day ladies and gentlemen and welcome to the fourth quarter 2007 Archer-Daniels-Midland Company Earnings Call. My name is Lauren and I will be your coordinator for today. At this time all participants are in listen-only mode. We will conduct a question-and-answer session towards the end of this conference. (Operator Instructions) As a reminder, this conference is being recorded for replay purposes. I would now like to turn the call over to your host for today's presentation, Mr. Dwight Grimestad, Vice President of Investor Relations.

Thank you, Lauren. Good morning and welcome to ADM's fourth quarter Earnings Call. Before we begin I would like to remind you that we are webcasting our call and that you can access it at ADM's website admworld.com. The replay will also be available at that address. For those following the presentation, please turn to slide 2, the Company's Safe Harbor Statement, which explains that some of our comments constitute forward-looking statements that reflect management's current views and estimates of future economic circumstances, industry conditions, company performance and financial results. These statements are based on many assumptions and factors, including availability and prices of raw materials, market conditions, operating efficiencies, access to capital and actions of government. Any changes in such assumptions or factors could produce significantly different results. To the extent permitted under applicable law, the company assumes no obligation to update any forward-looking statements as a result of new information or future events. Slide 3 in our presentation on the website shows the matters we will discuss in our conference call today. And I will now turn the call over to Pat Woertz, Chairman, CEO and President. Pat?

Thank you, Dwight and good morning everyone. Well, this is of course our fourth quarter call. I thought I would begin with some highlights about the full fiscal year 2007 and that are shown on slide 4. Starting with safety, a big highlight and focus area for us, we closed our fiscal year achieving double-digit improvement in both lost work day rate and recordable incident rate. And as we continue to improve safety on our wage force world class, I would like to thank all the ADM colleagues who continue to work safely and look out for one another. Turning to financial highlights, this morning ADM announced its third consecutive year of record earnings. Net earnings for the year were up 65% to a record $2.16 billion or $3.30 per share with all major segments producing record results. Those revenues surpassed $44 billion rising 20%, mostly of course on the strength of commodity pricing and also on modest additional volumes. The company exceeded its targets for both return-on-net assets and cost per metric ton. And likewise we improved in return-on-equity, return-on-invested capital, EBITDA and EBITDA growth. The company increased cash dividend payouts in absolute dollars and in cents per share. The company issued $1.15 billion of convertible debt during the year. The issuance was the first of its kind for ADM, and was a very cost effective borrowing -- it provided funds for a significant share buyback of $15.4 million share of ADM stock. On the strategic front, a formal strategic planning process was established this year. ADM outlined its long-term, strategic destination to be the global leader in bio-energy while expanding our premier position in the agricultural processing value chain. And we began to flush out the process for that direction specifically to diversify feedstocks, to expand the technology…

Thanks Pat, and good morning everybody. As Pat mentioned, solid fourth quarter operating results were achieved during the quarter marked by continued high volatility. We move to slide 5; it’s a summary of our financial earnings highlights for the quarter. Fiscal year 2007 net sales and other operating income increased 28% to $12.2 billion. The most significant driver of that increase was the impact of increased selling prices. Gross profit decreased 13% to $718 million, key drivers of the declining gross profit raised $60 million LIFO charge reflecting the increased commodity prices and lower gross profit in oil seeds and corn processing. Selling general and administrative expenses declined 1% to $293 million as cost reductions exceeded the impact of stronger foreign currencies on translated costs. In line with our strategic focus, asset sales and repositioning of our asset base was significant in the fourth quarter. Gains on asset sales in fiscal 2000s fourth quarter of $967 million, includes a gain of $440 million on the exchange of our interest in certain Chinese joint ventures for shares of Wilmar International Limited, the largest agricultural processing company in Asia. It also includes the $153 million gain on the sale of the company’s investment in Agricore United. In addition, we sold our Tyson Foods and Overseas Shipholding common equity positions at a gain of approximately $375 million. We continue to take actions to align our asset portfolio with our strategic directions. Financing cost net equal to interest expense plus investment income was $45 million, which is comparable to last year. The fiscal year fourth quarter 2007 effective tax rate increased to 31.5% from 29.5% last year. Our annual effective rate for the full fiscal 2007 year is also 31.5%, which is up slightly from the fiscal year 2006 annual effective rate of 31.2%,…

Thank you, Doug. Operator, please announce that Mr. John Rice, Doug Schmalz and myself are all here to open up for questions.

Great, thank you. (Operator Instructions) And your first question comes from the line of Diane Geissler with Merrill Lynch.

Yes, good morning.

Good morning, Diane.

Just a couple of questions, actually clarification here on your comments Doug, on the volume reduction, would you say the volume reduction is more of an inventory build and anticipation of maybe a strengthening in the market here which were crude and wholesale gas is gone or whether just the fourth quarter or your fiscal fourth quarter last year was unusually high and therefore the comp or maybe it was a little bit of both, and could you just give us some clarity around that statement?

And since I have John here, I'll turn over to him, and let him…

Sure.

Good morning Diane.

Good morning.

Last year we had high inventories or higher inventories of ethanol just because we are entering new markets because of the ban of MTBE in many parts of the country. So we had built the higher inventories and are working with our customers so they have an adequate supply. And so the comparables this fourth quarter compared to last four quarters, that’s really the reason for the down trend, we had higher inventories and we've reduced our inventories last year.

Okay. And then, I guess, the comment that you expected prices first quarter '08, prices to be down, was that sequentially or year-over-year or both? Just, if you could clarify that for me?

Sequentially.

Sequentially?

Yes.

And then, I guess, I appreciate some of the detail you have given here on the capital project. Doug, I think you said, you spent $1.2 billion this year…?

Right.

In capital, could you give us some clarity about -- now that we're moving into fiscal '08, what we should expect, the CapEx this year?

I think it'll be up somewhat in the 1.2, I mean it will depend on how these project proceeds go down through and the spend rate. But I would anticipate that number to be up over the 1.2, I can't say exactly how much, but I would say may be up in the 1.4 range, 1.5 or 6, somewhere, it will all depend on how that comes through Diane.

And then with that tail off, would that be the bulk of the capital plans that you have spoken about over the last, I don't know 12 to 18 month, where you talked about it, the $2.5 billion to $3 billion. Or is there more than in fiscal '09 above maintenance?

It all somewhat as listed on that schedule, I mean those are the major ones and those timelines are what we see right now.

Okay. And then I guess…

I might just comment, I think you could categorize that is the peak is in a rate. But you are right, there are some that will continue to start up in '09.

Okay. And if obviously excludes any other, anything you might do on palm oil or sugar-based ethanol, and all which you've talked about wanting to get into but… Right, that's more of a long-range, so that would be incremental to what you have built? Is that correct?

These are the ones we've announced so far, correct.

Alright. And then I guess the oilseed crush commentary, if I am reading you correctly it sounds like Europe – biodiesel, you expect that to be a little bit more challenging in the near term? Could you talk a little bit about, you know, I know we've had build up an edible oil inventories, in light of biodiesel you are expanding capacities, more capacity coming on line just from the industry in general, can you talk about how we should expect that to develop over the course of this next fiscal year, some of the drivers in oilseeds?

In Europe, specifically, the rapeseed crop is little bit less because of the heavy rains. Harvest is just about done, we should be finishing up here shortly but the crop is less than expected, and we were seen more imports into Europe of biodiesel, a lot of soybean oil, but now during the winter months, just because of cold flow issues, people will have to burn more rapeseed well. So we should see more demand for rapeseed oil during the fourth quarter calendar year and first quarter of '08 fiscal calendar year also. So I think it's, you know, the business is not as good as it has been, but it’s still a fairly good business, I want to say.

And is that primarily just a build-up of an inventory, the short crop, lack of --?

Kind of, it comes from the higher vegetable oil prices also.

Okay.

We've seen the future's rallying, but we've seen the basis. Cash prices being heavily discounted and worked away into the biodiesel markets just to keep the inventory a little bit less than full capacity.

Okay. And you are expanding in five of your oilseed crush plants in North America, is that what you said in your capital review?

Yes.

How much incremental capacity are you adding -- into three?

It’s kind of set in line with that.

It’s in line with that – kind of in line with what the industry is doing.

With the industry in total.

Alright. Thank you very much.

Welcome.

Thanks Diane.

Your next question comes from the line of Vincent Andrew with Morgan Stanley.

Good morning, everyone.

Good morning.

Good morning, Vincent, how are you?

I am well, thank you. I am wondering if you’ve got some comment on the fact that we seem to repeatedly read in the press about an ethanol supply line and all the capacity is coming on line. I am wondering if you could just discuss what it is you are seeing in particular in terms of what the refiners are doing and adding blending infrastructure and to markets that have not traditionally blended gasoline, perhaps if you could just start there?

Well, this is John Rice. We are working with all of our customers, we are seeing a little bit more blending coming into Florida, and also in the southeast, but now we still have some issues on the vapor pressure down there. So we haven't seen everybody go to full blending in Florida. So that should expand the market, and also in California we are working with customers there, where they will increase their blend from 5.7% to 10%. So, it's just more of a timing issue. We still feel very good long-term that will blend up to the 14 billion gallon, but at times a capacity comes out little quicker than whatever they at such point.

Sure. What I mean, even just from kind of microeconomic perspective, it would seem to me that where RBOB is versus where ethanol is, that I if were a blender, I would be looking to do as much crushing and blending as possible and I would be economically incentivized to add infrastructure, and this is forgetting about even the idea that there would be a step up in the RFS. I’m sorry, from their perspective, are they -- other than Florida and California, are there other markets that they are looking at now in your view?

Yes, what you stated is absolutely correct. I mean they see the returns, so they are looking to blend as much as they can.

But there is time lag between. Obviously you'd like to do it today, but how long does it take to actually get into a new market? If you are a refiner, in other words if you want to open up in new market, what do you think that time lag is?

It's actually, Andrew, it’s being a blender and of course they need the infrastructure build at their terminal so it’s tankage, it’s piping, it’s additional storage, so all that takes some time.

Okay, but there is no real way to quantify that time? Does it vary?

How else would they want to blend up to the 10% [U.S. turns] or I guess it just through the summer months, I think is the way to look at it.

Okay, and then in terms of the energy bill, any view on when the House is going to pick that up?

Well, most of our indications of course is after they come back from the August recess, in September there will be good discussions. So we are pretty pleased with the way the Senate bill came through and looking towards the House to do some of the same.

Okay. And have you or are you looking to swing any of your ethanol capacity to any of the other corn products which you make, given the theoretically lower ethanol prices that you are seeing sequentially?

When that time arrives, if it does arise, we will look at -- especially with Mexico, going to start importing more high-fructose corn syrup. We feel that first part of next year, yes, we will definitely look at that and we are also seeing a little uptick in our lysine pricing.

Okay and then on the co-products issue in Europe, is there any visibility on improving on that situation?

Not really. I personally thought that we would have this issue resolved, and then June 25th they took a vote, and it failed, so the imports not allowed. So that kind of caught us by surprise. The next vote comes in the end of September, so we may see a little window of opportunity shift some corn gluten feed into that market. And with the European crop having some problems, maybe they'll be more likely to vote in favor at this time, but once again during the winter months there could be another issue.

Okay. I think it's -- but still in the last call you were trying to open up new markets with co-products given the issue in your position. Is that what you were doing during this quarter and is there any kind of update on how that stands?

I mean it's going very well. We are converting a lot of customers from other feed products, even from corn. The same people now buy corn and buy corn gluten feeds. So in the long term this is very positive.

Okay. Thank you. I'll pass it along.

Thanks.

And the next question comes from the line of Christina McGlone with Deutsche Bank.

Good morning.

Good morning.

You wouldn’t mind talking about the change that happened in China with your partners? From what I understand you had owned I think 30% of Chinese crushing and then a transition to maybe 18% of Wilmar. And so what exactly do you own now that you didn’t own before? And how should we think about modeling Chinese oilseed processing in terms of impacts to you going forward?

Yes. Doug here. The model really doesn’t change other than the percentage ownership changes. We had a number of joint ventures with our joint venture partners down there, which we now sort of consolidated down into this one entity, which now has the ability, the ownership interest in all of the Chinese, as well as the Kuok group assets and so forth. And what we did is exchange our shares in the joint ventures that we had in China, not in our interest that we had in Wilmar and then we took a direct stake in Wilmar International and exchanged four of those. So, effectively, now we have about a little bit over 16% net ownership in Wilmar International. Around the same group of assets in there, except for the merger that they had that brought in the Kuok group assets.

So, the current difficulty within China with crush margins, even the blue ear disease, how will that impact you going forward?

Well, I mean, we were, it have affect -- that's really been an affect almost for about 9 months to a year, I mean, we are still seeing pretty good meal demand over there right now and good all demand. So, I guess, I don't see that it has been a huge issue.

Okay. And then also in Argentina they have, I guess, some issues with energy and some oil seed crushes are closing down facility, how is that impacting you?

Well, I don't think they are really closing down. Whenever you really look at the statistics, the numbers -- they haven't slowed down the crush as much as what the market was thinking. And it's really just raising the cost of using fuel oil instead of the natural gas. But because that's really what hurt us in Europe, as a little bit of the vegetable oil going into Europe from Argentina.

Okay. So, and we always think about South America crush margins for you looking, I mean, Europe you mentioned there's going to be a challenge, South America should improve sequentially or it should be flat. And what's the outlook down there?

Well, it's going to depend on the crops, I mean, we just have our crush assets in Brazil. We still keep seeing the meal market grow in Brazil. We also have our new biodiesel plant in Rondonopolis starting up which also helps the oil demand. So, I think it should improve a little in Brazil.

Okay. And then last question, in terms of LIFO, in the past you had said that it was about a third corn, or third soybean oil, or the third soybeans, I guess, roughly but charge was higher than we thought this quarter, was there more of an impact from soybean oil or soybeans as that allocation changed?

Yes, it's because of the high run up in oil prices.

In soybean oil prices?

Oil prices really worldwide. That was the biggest, I think it was more in six years.

Okay. Thank you.

Cristina, I might just add a comment on Wilmar, your original questions, it might be worse kind of reading the Wilmar annual report, looking at the Wilmar investor presentations now, since our ownership is in a publicly health company, you can get more data there, on their website and they described sales of $10 billion and earnings of $600 million et cetera. So, when you think about our equity ownership there coming through on an equity basis it might be good to kind of reflect on their public information.

Okay. And Pat, you are still going to report that in oilseed a processing in the segment?

Correct.

Okay. Thank you.

Your next question comes from the line of Ann Gurkin with Davenport.

Good morning.

Good morning.

Good morning, Ann.

I wanted to ask you about the build out in the ethanol market, where are we in terms of the end users, do you think their build out will keep up with the ethanol production right now in the US?

As to what we are seeing in the market just and -- what we are seeing actually in the index going from about 1000 to 1500 to 10 over, I would say yes, it is keeping up.

Okay. And so you think by year-end we'll have more of a balanced situation with ethanol supply versus the end-market use?

That's just tough to say, a lot depends on win, do we really nice to have two big markets come on, which would be really the South East or the California will have the base impact.

We're about 6.5 billion gallons today and we look at about 7 billion by the end of the year so it's a, kind of the market opening is the big question.

Okay. And are you switching gram capacity in your wet mills back to Asia, CS right now?

No, we are not.

Do you anticipate doing that in the next six months?

I think a lot of that will depend on how the high fructose pricing goes and with the addition of the new market in Mexico.

And do you expect to negotiate HFCS contract sooner this year than contracts were historically negotiated?

I would anticipate contract due to be finished kind of like what we saw last year.

That was earlier than normal.

Yes.

Okay. That's great. Thank you.

Welcome.

The next question comes from the line of Robert Moskow with Credit Suisse.

Thank you. Could you -- you’ve made some comments about wheat milling probably having some challenges for the next 12 months, having to do with the crop. Can you give us an idea of just to the extent to which you expect that to be a challenging market, and also to the extent that the input pricing is obviously going to be a lot higher, do you expect your margins to be a lot tighter as a result?

Well, most of our wheat milling business is done on the basis of price of -- our flour business is done on the basis of price of wheat. So, we really think we are exceptionally strong in this area now just because of our transportation assets. We can work with our customers to be on the move -- wheat from one area to the other area, and be on work on different blends. So I think I would consider this more of a positive for our milling business.

So, does that mean profit should be higher in the next 12 months?

I can't say that, for sure.

Should I pardon, Doug's comments? The outlook was negative and now you are saying it's more positive?

I said what it was, it's going to be challenging and I think John's right, I mean we are going have to move that wheat crop around and that’s going to be a challenge to be able to get that done, and do it efficiently and effectively.

Yes, so we market the challenge and I think John’s point is we have a business that can accommodate and the logistics can accommodate kind of challenging markets, could be an advantage.

Okay. Thanks. And regarding Europe, we hear in the headlines about the challenges of operating in Germany with the tax implications changing there, how has that impacted demand for biodiesel in Germany?

Well, that’s really impacted demand as much as we are just seeing an increased supply coming in from other parts of the world.

Right. But are they taxing blenders more aggressively in Germany?

The tax-rate came down $0.09 -- throughout $0.09.

Tax rate was up $0.09, and so does that mean it’s more economic for them to import or does that -- are the two things not related?

I’m sorry, I didn’t understand the question.

I guess if they are taxing the blenders more aggressively in Germany, does it make any difference to them whether they are importing the oil from Argentina or whether they are getting palm oil from Malaysia, or whether they are getting rapeseed domestically?

No, it really comes down due to the cold flow issues and rapeseed is a lot better with the specifications in Europe to blend during the winter time.

Thank you very much.

And finally coal is just more expensive with the new tax.

Right.

Thank you, Rob.

Your next question comes from the line of Michael Piken with Cleveland Research.

Good morning, I’m calling on behalf of Christine McCracken. I just wanted to touch base a little bit more on the sweetener side of the business, in terms of outlook for 2008, it looks like -- we’ve talked of high capacity here in the United States and Mexico coming on board, but the corn costs have obviously come down. How do you sort of see the negotiations playing out?

We’ve, like I mentioned before, we see Mexico coming on, so we think it should increase the overall demand and tighten of corn. So it's too early to say we haven't come out with our prices yet, we will probably look to doing that maybe in August or September.

Okay. And in terms of some of the co-products, you touched on sort of the situation with gluten feed opening up other markets, but also the other co-products, corn oil and gluten meal have remained pretty strong. How do you see those markets trending over the remainder of the year?

I think you are exactly right. I see in corn gluten meal we are seeing very good demand and good pricing on that and also just because of the high oil prices, corn oil is also staying very high.

Okay. And in terms of, I guess you're moving on to the oilseed business, I mean you had mentioned that the meal demand in China hasn't really swept that much because of the blue ear disease. Are they extending on the poultry side or is that more of a function of their just rebuilding the herds or how is sort of meal demand kept up, given the number of losses I've heard that are out there?

We’ve seen a little bit of a dip, it’s just not a huge percentage. I mean, if you look at the bean imports coming into China, we've seen a very little bit of a dip, but it just hasn't been -- it hasn’t had a huge effect. We’ve seen a lot of added capacity added in China also the last year.

Your ears are looking a little less glued.

I guess a couple of your competitors, North American competitors have recently announced expansion into China. Where are we now today in terms of utilization rights? And I recognize there are a number of older inefficient plans that are out there in China, but kind of where do you see that going over the course of the next couple of years?

Right now we think it’s right around 65%, and I mean those annual growth rates over there are about 8% to 10% a year or so. I mean this should keep utilization, we don’t see a lot more plans being built. So I think the capacity utilization will keep increasing.

Okay. Thank you very much.

Thanks.

Your next question comes from the line Ed Roesch with Banc of America Securities.

Hi, good morning.

Good morning.

There is a chance that you may have covered this, and I might have missed it. I was in another call. But just wanted an update out of Europe, because I think in Q1 when there is switch to the tax in on biodiesel, there is an issue where the mandates should not really caught up when you are in overcapacity. Could you comment on kind of where those mandates are relative to industry capacity now?

We have seen a lot of additional capacity in the biodiesel come on line. From two years ago, we had very high margins in biodiesel and rapeseed crush margins. But with the smaller crops and with additional capacity, we are seeing the effects in this.

Okay. And the mandates haven’t ratcheted it up enough to kind of offset some of these things?

On soy bean.

Yes.

That’s correct.

Okay. Any outlook on when that could occur?

I guess I don’t have good handle on that one right now.

Okay, thanks. And then I think you've covered a lot of these questions, one last one. You recently announced, a think a fairly small acquisition of grain elevators around the Illinois area, is that right?

Right, Ed.

And could you just kind of comment on what that does strategically for ADM?

Basically, there is a large corn crop as we said this year, I think positioning ourselves to take advantage of the additional storage, additional transportation and marketing network etcetera. This just fits strategically with our global footprint, but particularly here in the U.S., about 10 million bushels.

About 10 million bushels is what it is.

Okay. That’s the increased capacity along with your existing business lines?

It is the whole origination network.

Okay, very good. Alright thanks for your help.

Okay.

Your next question comes from the line of David Driscoll with Citigroup Investment Research.

Hi, good morning everyone.

Good morning, David.

Good morning, David

Just two questions for you here. I think most of in your financial, back to oilseeds, net when you are taking into account path the decline in profitability in European biodiesel. Is that the factor that's going to be prevalent in the outlook for the next year or do you see improving crush margins in North America particularly being more than enough to offset those declines?

Well, we don't give guidance but I think you've got it right on, as far as where the improvements are in North America and obviously if we are adding to our capacity here we feel strongly about North America. Europe will continue to be a challenge for oilseed helping come up and of course our improved China investments position us with heavier weighting in palms. So you'd even argue that the Asia peak there -- while which servicing holdings there is of a nature of a little different variety and I think will be strong.

And then my second question. Doug you might want to answer this question, the financial segment has had profit that have grown, I think, this year profits came in reported profits just add $200 million back in '04. These profits relate to $33 million, can you really talk us through here a little bit about what's driving this segment overall, though there is a lot in that segment and quite frankly, a lot hear how you go about trying to forecast what's happening in that segment and any color you could provide on the sustainability of a very helpful giving the type of profit it has been producing?

Well, and included in that is our ADMIS or to trade operation up in Chicago and that has -- and very markets that moving a lot and so forth, they have done better going forward. We see that business remaining relatively the same. We have had funds jump around lots, so funds really drove a big increase this year, about $50 million of the increase this year for the four years in fund. So the rest of that is pretty consistent, it doesn't change a lot in the insurance area and so forth you may have some ups and downs because it is a captive insurance. So, we have losses, we're on the way, we can take charges as they occur. So, we have reserves on the bulks that we feel we are adequate but we have to refinance those reserves. In important time we got, we use them. But, the main two things that moves or I think the funds and then ADMIS is been a relatively good performer.

Great. Thanks a lot everybody.

Welcome.

Thanks David.

The next question comes from the line of Kenneth Zaslow with BMO Capital Markets.

Hi, good morning everyone.

Good morning.

Hi, Ken.

I'd just like to ask more of a holistic question. I know last quarter you talked a lot about challenging environment, this quarter there doesn't seem to be as much talk about the challenging side of the environment. Would you consider on a holistic point of view that things are getting better, worse or indifferent relative to the last quarter?

I'll tell you, I think this whole year has been a big challenge and I think if anything we can just truly manage through the volatility and its relative to all markets, not only the commodity markets, it's a kind of challenging time. So, maybe your guess is as good as mine going forward, but I think the strength that we have to manage through that, I am still as much if not more confident than ever.

Okay. And then in terms of the Ag services business, there is definitely a pretty significant rebound order, historical level. Is that something in '08, '09 and beyond, it's something that if they are working days to grow up or is it going to be more cyclical around the historical average?

I guess I shouldn’t be a smart Alec, and can say the ice has melted on the river, should I? I think with this large crop coming forward, there are even opportunities for us to take advantage of our strong network here and of course that’s -- we said we made a small acquisition as well. So we continue to build out storage and the opportunity to handle. So I think Ag service is a key part of our business going forward, it will have its ups and downs too, but I think it’s key.

And just on barge rates and volumes, any improvement in that on the outlook or is it still barge rate looking like they are going to be similar to press?

Barge rates are somewhat off, right?

Yes. And with the large crop you should see movements.

Okay, great.

That’s to make our transportation assets work there much more and just because the timing of the harvest, so when it comes we are in great shape to be able to move the crops around.

Yes, more corn and more bushels.

So again, the outlook for Ag services should be growing after this base, not volatility around this base, is I guess as what I’m trying to figure out?

When you handle a crop this big, it should have some upside potential.

Great. Thank you very much.

Thank you, Ken.

And your next question comes from the line of Pablo Zuanic, with J.P. Morgan.

Good morning, everyone.

Good morning.

Good morning.

Couple of questions on the financials and then strategic, and for me to get to your $0.65 pro forma EPS, I have to -- where we are at 23% tax-rate, I think additionally when you total before the tax rate, it should be much higher than that? Can you just explain why the tax rate was so low this quarter?

Only 3%.

Yeah, I am afraid so.

Yeah, because what you did, your reported tax rate is 31.5%, but when you gave us the charges that you gave pre-tax and after tax…?

Their net of rate of effective -- it comes from where it is, I mean, there are some of those items that have no tax…

Excuse me -- I don’t want to waste your time, but the question is the core tax rate is 23% and that’s -- I just want to understand why the tax rate relying on your ongoing business was so low?

I guess, I am not following what you are saying because…

Well, let me explain. In your report when your charges -- the way that you disclose your charges, the after-tax charges and before-tax charges, if I take those numbers then I am getting $537 million, if you take those numbers, the pre-tax number you are using taxes of 36% there?

Right.

And the reported numbers in the statement, you are using 31.5, as a result to get to your $0.65 I have to use 23%. I want to understand, I mean, I’ve more -- hopefully most of these questions to ask you but I want to understand why was the tax rate so low on your pro-forma numbers?

The specific items that occurred in this pro-forma items column there, basically most of them are at U.S. rate and…

U.S. rate is 38%.

Look at the operations, the operations rate is declined because we do have tax advantages in our export sales companies and so forth that reflect directly to our operations, really don’t reflect to the one-off type issues when we sell shares in a security it's going to be taxed at the U.S. rate of 35%.

Okay. So, in the…

So we specially do that.

Yes. But I don’t think your effective tax figures would benefit…?

Always follow-up offline on that.

It’s just kind of misleading, I mean, we don’t really expect that anything is misleading to put a pro forma EPS number of $0.65, using a tax rate of 23%, okay?

Off line.

All right. Can I ask another question, if I may? In terms of this discussion about sugar ethanol, how should we think about Archer-Daniels trying to get into a resilient sugar ethanol? Is that a hedge in the sense that someday the U.S. market perhaps will open to Brazilian ethanol? How should we think about that?

Well, I think you should think about it as an opportunity for profitable growth for us, regardless of what happens in the U.S. market, although you could also think of it as a compliment to our U.S. ethanol business. If we want to be the global leader in bioenergy, I think the largest -- one of the largest ethanol markets in the world and obviously largest crops to produce ethanol is in Brazil. So I think you can think of it as a profitable growth opportunity on its own, as well as the great compliment to our U.S. and growing global business.

That’s helpful. And then just to -- what do you think of the government potentially with new targets that are being proposed 35 billion gallons, 36 billion gallons. What do you think is the reasonable number to expect that corn could meet that total number eventually?

Well, generally speaking, we talk about 14 billion to 15 billion gallons. And that’s based on the view not only of ourselves but national corn growers and others who look at the market with corn and the technology today. To advance beyond that, we will need and assume that that will happen over time, greater yield per acre and then moving to sort of second generation technology or other technologies to produce biofuels.

Okay. And just one last one if I may, I want to follow up on that question that came out over the elasticity. The elasticity -- when you have this issue in ethanol that the gap between the ethanol and the RBOB is so low, do you expect the refiners to accelerate? And obviously there are some structural issues that you talked about. What do you think it’s a -- I don’t know if you can talk about the natural growth rate or what the cap is in that growth rate? If incentives are so good, why weren’t the blenders be save now 10%, I mean, how does that work? I mean what is the -- how should we think in terms of the those impediments and how do we cap the potential growth rates?

Though last quarter was $0.10 under, this quarter it is $0.10 out or $0.10 over. I think you can think of it as maybe you described, there was an earlier question which was that blenders will do what's economic, but they will also do what their system can accommodate and that's a system from sort of the beginning to the end, from the refinery gate all the way to these various large marketing distribution systems. So sometimes that includes pipeline changes, that includes terminal changes, that includes truck and barge and rail and long-term, contracts and spot contracts and who they are importing from and what they can get locally. So it's a great optimization model and yes, they should take more as the economic prices drive them to and they probably do take as much as they can, but again the structural implications are an obvious physical issue.

That was very helpful. Pat if I may, just one last one, and I'll pass it on. The volume data it's probably, I think from the year-to-date, I think what we have is only through April. I think the number is about 40%, 41% year-to-date. Obviously, we don't have May and June yet, so I cannot compare with your quarter, but let's assume that the industry was still at above 40% in the June quarter and your volumes are down. I understand this issue of volume will include the adjustment, but why would be there such difference between ADM trends, the industry leader and the rest of the industry? Or is it just that ADM is losing share or there are some contracts that are being done at a rate that is not attractive to you. How should we think about that?

Our trends are -- you are comparing last year’s fourth quarter with this year's fourth quarter, and last year fourth quarter we had built large inventories because our customers were blending out of MTBE. And so last year fourth quarter we shipped a lot of ethanol out of our inventories.

But wouldn't that be something that applies to the rest of the industry also? And your competitor AVR was assigned -- you would think that they went through the same thing, right?

Last year the industry wasn't as large as it is now either.

Right, thank you.

You are welcome.

Thank you, Pablo.

Your next question is a follow-up from the line of Christina McGlone with Deutsche Bank.

Thanks for taking the follow-up. John, last quarter you said that year-end ethanol production was 8.6 billion gallons. Did I misunderstand it, now you guys just said that it's going to be 7 billion gallons?

It's always -- the market is constantly moving, and we are just taking our best guess. So I think construction is --

It's in our page number eight.

Yeah, that's in our page number eight. And construction slowed down a little bit at certain places, so it’s early to move the target.

So from $8.6 billion to $7 billion that would be your new union target, 7 billion? That's a pretty sizeable drop?

Yes.

Not ours, Christina just to be clear.

Okay.

That's all we comment -- the RFA takes all of the industry data and kind of takes it blind and indicates that on the website. So, I guess it's an adjustment if you will from the industry.

Okay. Thank you.

Welcome.

(Operator Instructions) And your next question is a follow-up from the line of Diane Geissler with Merrill Lynch.

Hi. Thank you for taking the follow-up. Just one question on the equity investments or the fund investments, my understanding of those, as those stretch back to the 1990s and that benefits we’re seeing from those now from long-term investments. Is there a point where those funds sort of repay what they plan to repay and then the benefit from that goes away and how should we think about the impact of the funds on your earnings over the next two to three years?

That's eventually if they terminate the effect, those funds do go away and they distribute out and that's -- I think there might be some that are still here that will go another two or three years, but at the end of that point in time, we basically will be out of them. Our carrying values are quite low right now in relation to where they were at one point in time. So we still could see some uptick in those as they roll-out investments and so forth, or we could see some down too if the markets run bad. Okay?

But over the course of the next two to three years, you really expect them to be fully distributed?

They should be, that's correct.

Okay, perfect, thank you.

Operator is there…?

I apologize. (Operator Instructions) No ma'am, there are no further questions in the queue.

Okay, thank you so much. Well, thank you everyone for being on the call and let me also apologize for scheduling this call on top of another call I know that you need to listen to as well. We will review that next time and make sure that that's clear. So, thanks, I appreciate the questions and the attention. This year we did define our strategic destination -- our record performance I think reaffirms our strength and the opportunities in that position. I think we can truly manage through volatility and we enter fiscal 2008 with confidence and momentum. So, thank you all for joining us this morning. Good day.

Thanks for your participation in today's conference. This concludes the presentation. You may now disconnect. And have a great day.