Archer-Daniels-Midland Company (ADM) Q3 2011 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to the Archer Daniels Midland's Third Quarter Earnings Conference Call. My name is Chanel, and I'll be your operator for today. [Operator Instructions] As a reminder, this conference is being recorded for replay purposes. I would now like to turn the conference over to your host for today, Mr. Dwight Grimestad, Vice President of Investor Relations. Please proceed.

Thank you, Chanel. Good morning, and welcome to ADM's Third Quarter Earnings Conference Call. Before we begin, I would like to remind you that we are webcasting this presentation on our website, adm.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 says that some of the comments constitute forward-looking statements that reflect management's current views and estimates of future economic circumstances, industry conditions, company performance and financial results. 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 list the matters we'll discussed on our conference call today, and I will now turn the call over to our Chairman and Chief Executive Officer, Pat Woertz.

Thank you, Dwight, and good morning, everyone. Welcome to our third quarter conference call. I'll begin, as always, with safety. Through the third quarter, we reduced our lost workday injury rate by 4% and our total recordable incident rate by 13% compared to the full fiscal 2010. We will continue to make -- we have continued to make very important progress on safety. Turning to our financial results. This morning, we reported net earnings of $578 million or $0.86 per share on a fully diluted basis, a 32% improvement over last year. Segment operating profit was $1 billion, a 45% improvement. And excluding LIFO charge and other specified items that Ray will talk about in a moment, ADM earned $0.92 per share. The ADM team performed very well against the backdrop of volatile commodity prices, a challenging margin environment and geopolitical instability in the Middle East, North Africa and Côte d’Ivoire. Our team worked smart and hard and delivered strong results. Since our last call, we've continued executing our strategy to drive profitable growth. In North America, we announced expansions at our barge-loading terminal and elevators in Missouri and Illinois. These expansions totaled 1.7 million bushels of storage. At our Lloydminster, Alberta, canola processing plant, we are doubling our storage capacity. We announced plans to construct a shuttle loader elevator in Hebron, North Dakota. In Decatur, Illinois, we began production at our propylene-ethylene glycol plant. And we announced the acquisition of a soybean crush plant and biodiesel facility in Deerfield, Missouri. In South America, we announced plans to begin originating and processing sustainable palm, expanding our crop base in that region. And in Europe, we announced the construction of an additional warehouse at our joint venture grain terminal on the Baltic ports of Gdynia in Poland. And after that addition, the facility will have a total storage capacity of 90,000 metric tons, making it the largest grain terminal in Poland. And also during the third quarter, Fortune Magazine named ADM the most -- the World's Most Admired Food Production Company for the third consecutive year. We appreciate this recognition and believe it speaks to the passion and commitment of our 29,000 employees. As we look ahead, we are monitoring the planting and growing season in North America and Europe. Overall, global demand for crops and agricultural products remains relatively strong. In these conditions, ADM will use our unique global asset base and our strong balance sheet to serve vital needs efficiently connecting the world's growers with the world's buyers and delivering value for our customers and our shareholders. Now I will hand the call over to Ray, who will review our financial results. Ray?

Thanks, Pat, and hello to everyone on the call today. I'm happy to be with you to share our third quarter results. Slide 5 lists our financial highlights for the quarter. We will discuss the quarterly results. We also listed cumulative 9-month results for your reference. Overall, financial results this quarter were solid. Segment operating profit was $1 billion, up $310 million or about 45% from a year ago. In a moment, I'll review our results on a segment-by-segment basis. Quarterly net earnings were $578 million, up 37% from last year's third quarter, and earnings per share were $0.86 on a fully diluted basis compared to last year's $0.65. Looking at our effective income tax rate for the quarter. We recorded taxes at 28%, 6% higher than the third quarter last year. Last year's third quarter tax rate benefit from updated estimates to bring the cumulative rate in line with the lower yearly forecast. On a year-to-date basis, we have brought our effective tax rate down from 27.6% in 2010 to 27.2% in 2011. This rate is significantly lower than the 2009 and 2008 effective tax rates of approximately 30%. I also want to highlight that our return on invested capital on a 4-quarter trailing average basis was 10%, an improvement from the prior year percentage and over 300 -- and over 3% above our 4-quarter trailing average -- weighted average cost of capital for the quarter. We've cut out a few items in the waterfall chart at the bottom of the page. We recorded a LIFO charge of $27 million after tax or approximately $0.04 per share compared to a $0.04 credit in the same period last year. Also, we had net charges for other specified items of $10 million or $0.02 per share. These were comprised of startup cost this quarter of $14 million after tax related to our BioProducts plants in the Corn segment and mark-to-market gains on interest rate swaps that contributed $4 million after tax. For simplicity, these specified items are grouped together here on the waterfall chart, and we've broken them out for you in the appendix. Adjusting for these specified items, ADM earned $0.92 per share. I also want to highlight that our diluted EPS calculation was impacted by the accounting for the equity units issued in 2008. These 4 purchase contracts will result in an additional 44 million common shares on June 1. Our remarketing in March of the debt associated with the equity units effectively triggered its converted accounting, resulting in a $0.05 per share negative impact for the quarter for the diluted EPS calculation. Turning to Slide 6. This slide shows the breakdown of our segment operating profit. Let's turn to Slide 7 to begin a review of each segment in greater detail. Slide 7. Oilseeds operating profit in the quarter increased $107 million to $512 million. Crushing and origination operating profit increased $133 million to $405 million for the quarter. Favorable ownership and strong North American results offset a decline from South America. The European results increased significantly, principally due to the reversal of approximately $100 million of mark-to-market timing effects that occurred in the first half of the fiscal year. Refining, packaging, biodiesel and other generated a profit of $89 million for the quarter, up $23 million from last year as low results from Europe were offset by increases from North and South America. Oilseeds results in Asia declined $49 million to $18 million for the quarter, principally reflecting ADM's share of the weaker results from our equity investee, Wilmar International Ltd. Now looking at the crop. Harvest of the soybean crop in South America is nearly complete. The crop is estimated at a near record 133 million metric tons and is a sufficient supply to meet near-term global requirements. The projected U.S. soybean carryout remains at 140 million bushels, which is a tight supply. Rye conditions are raising concerns about the size of the rapeseed crop in some regions of Europe. As you look at the current Oilseed Processing market conditions, global demand for all-protein meal is projected to grow by 4% to 6% for the '10, '11 crop year, although high prices may tamper demand. There has been little forward buying by protein meal customers. And U.S. vegetable oil inventory levels are currently high, although biodiesel production will increase demand and help reduce inventories. Now moving to Slide 8. For the Corn Processing segment for the quarter, Corn Processing operating profit increased $100 million to a profit of $204 million. Processed volumes were up 13%, reflecting strong production across ADM's Corn Processing plants, including our new ethanol dry mills in Cedar Rapids, Iowa, and Columbus, Nebraska. Sweeteners and starches operating profit of $46 million was essentially flat, as higher average selling prices and volumes were mostly offset by a higher net corn cost. Sales volumes were up as export demand for sweetener remains strong and U.S. demand for industrial starches improved. BioProducts profit in the quarter rolled $99 million to $158 million, driven by favorable corn ownership and strong demand for our value-added food and feed ingredients, particularly lysine. Looking at the crop. 13% of the U.S. corn crop is currently planted, the low five-year average planting progress at this time of the year. The five-year total has ranged from 10% to 66%, with the average around 40%. The USDA projects the U.S. corn carryout at 675 million bushels, a tight supply. As you look at current market conditions, and yesterday, wholesale ethanol spot prices were $0.60 to $0.90 below unleaded gasoline. And the excise tax credit adds another $0.45 per gallon benefit to the blender. With these attractive economics, customers generally will blend ethanol to the maximum allowable levels. But Ethanol margins are near breakeven due to overcapacity in the U.S. ethanol industry. Lysine demand remains strong and industry corn sweetener volumes, driven by exports to Mexico and Canada, also remain strong. Industry corn sweetener export volumes to Mexico were about 1.5 million metric tons in 2010 and are projected to grow around 10% in 2011. Now let's turn to Slide 9 and review the operating performance of our Agricultural Services business segment, where profit increased $6 million to $171 million for the third quarter. The global merchandising and handling team delivered good results, comparable to last year, amid a challenging environment of significant volatility in agricultural commodity markets, regional instability in the Middle East and North Africa, and the earthquake and tsunami in Japan. U.S. export volumes and margins remained strong in the quarter. Earnings from transportation operations improved on higher barge freight rates. As we look at current market conditions, we continue to have a tight supply in several of the crops we source and transport and are using our global network to meet the customer demands. Regional crop supply imbalances are resulting in elevated prices and significant volatility. South America is harvesting a near-record soybean crop and has sufficient supply. In North America, the carryouts of corn and soybeans are projected to be tight, and farmers are beginning to plant. The global wheat supply is ample, and canola and rapeseed supplies vary by region. Slide 10 is an operating profit analysis of our other business units. In the third quarter, profits increased $97 million to $119 million. In Other Processing, profits in the wheat milling and cocoa operations were $96 million, up $87 million from last year's third quarter, which included mark-to-market charges of $63 million in our cocoa operations. Other financial increased $10 million, mainly due to improved results of our captive insurance subsidiary and ADM Investor Services. Looking at current market conditions, sanctions pertain to exports of cocoa beans and products from Côte d’Ivoire have been lifted. The overall situation in the country seems to be improving day by day. Our operations have resumed on a limited basis, and we're managing the situation daily. Turning to Slide 11. Slide 11 shows the major components of our other -- of our corporate line. Market prices for our LIFO-based inventories rose in the third quarter, resulting in a charge of $43 million compared to a credit of $43 million last year. Interest expense net is higher in the current year by $8 million during last quarter's -- during last year's quarter, approximately $19 million of our interest cost was capitalized in connection with the construction projects in progress. This has declined significantly this year, as most of the apps have now been put into service. Helping to mitigate this effect, interest cost on our long-term debt was down approximately $12 million as a result of debt retirements. We also recognized $6 million of unrealized gains on interest rate swaps, which were related to the debt remarketing at the end of the quarter. Our corporate costs were up for the quarter, in part due to higher administrative expenses, including the accrual for some previously announced multiyear corporate grants. Slide 12 shifts to the financial statement view and shows statement of earnings highlights for the quarter. Net sales and other operating income increased 33% to $20 billion due to generally higher average selling prices associated with higher cost for underlying commodities. Gross profit increased $269 million or 30% this quarter due to higher average selling prices, favorable commodity ownership and a partial reversal of certain oilseed mark-to-market losses. Partially offsetting these items were $43 million of pretax LIFO charges discussed earlier. Selling, general and administrative expenses increased 11% to $395 million due primarily to higher administrative expenses, including the accrual for some previously announced multiyear corporate grants, which I talked about earlier. On a year-to-date basis, our SG&A cost increases, when adjusted for unique items, are in line with volume growth. The change in other income expense was due to lower equity earnings from affiliates, higher interest expense and the absence of a $75 million debt extinguishment charge. And I've covered the changes in income taxes earlier on the call. Turning to Slide 13. We're comparing selected balance sheet highlights at March 31 against our June 30 balance sheet. We can clearly see the impact of elevated commodity prices on our balance sheet. Operating working capital has increased by nearly $8 billion to $17 billion, principally in inventories, about a $6 million increase. Inventory includes approximately $8.9 billion of readily marketable commodities as of March 31 compared to $4.9 billion at the end of June. Total debt increased by $6.7 billion, mainly from borrowings of commercial paper and revolving credit lines to help finance the higher inventory balances. Additionally in the third quarter, we issued $1.5 billion of floating rate notes. In March, we remarketed $1.75 billion in debt originally issued as a component of the equity units in June 2008. This will result in the receipt of $1.75 billion of proceeds by ADM on June 1, in exchange for the issuance of common shares under the forward purchase contracts. Therefore, for the third quarter balance sheet, there is no impact on the cash, debt and equity accounts related to the debt remarketing. Shareholders’ equity increased $2 billion during the past 9 months. At the end of the quarter, we had in place a $6.5 billion U.S. commercial paper program, of which $3 billion was unused. In addition, we had $2 billion of other global credit lines, of which $1.1 billion was available. Although leverage has increased due to higher commodity prices, we continue to have good liquidity access and financial flexibility to support both our ongoing business in the elevated commodity price environment and growth initiatives. Slide 14 shows the significant items impacting our cash flows for the past 9 months compared to the prior year's 9-month period. Cash generated from operations before working capital improvements was $2.2 billion compared to a $2 billion in the prior period. Higher commodity prices drove the use of $7 billion in cash in our working capital accounts. This is a sizable outflow of cash over a 9-month period. But as you know, we have successfully managed through high commodity prices and sizable increases in working capital in the past. And as I've discussed in the prior slide, we were prepared for this elevated commodity price scenario and had bolstered our balance sheet to operate in this environment. Investments in property, plant and equipment were $0.9 billion for the past 9 months. Significantly lower than the $1.2 billion spent in the prior year period. This reflects the completion of the majority of our Greenfield projects. Acquisitions of $206 million are primarily related to our purchase of the remaining shares of Golden Peanut back in December. We expect fiscal year 2011 capital spending to be approximately $1.5 billion, including the purchase of our remaining 50% of the shares in Golden Peanut that occurred at the end of December. The increase in working capital and the capital expenditures and investments were funded by a net increase of debt of $6.5 billion, primarily comprised of $5.3 billion of borrowings under lines of credit and $1.5 billion of borrowings through the issuance of the floating rate notes, less some debt paydowns. Also in the 9-month period, we bought back 3.2 million shares for a total spend of approximately $100 million. On June 1, our equity units will convert to about 44 million common shares. Consistent with our objective to increase shareholder value, our intent is to continue to buy back shares to offset, within 2 years of the date of conversion, the impact of the dilution. Subsequent to the equity unit issuance in 2008, we have already bought back 6 million shares in addition to the shares we purchased to offset benefit plan issuances, leaving 38 million more shares to repurchase. As I indicated in our second quarter earnings call, we will want to ensure our balance sheet remains strong enough to help drive strong business results in a period of elevated commodity prices, as we did in this third quarter, and to undertake significant strategic investments. And that could have an impact on the timing and the number of shares we have repurchased. Turning to Slide 15, which depicts our financial return measure comparing our historical 4-quarter trailing return on invested capital against our trailing 4-quarter weighted average cost of capital. As you see, our ROIC was 10%, and our WACC is currently running below 7% for a 3% positive return over our cost of capital. As you know, our longer-term ROIC objective is to earn 200 basis points above WACC. In addition, we are reintroducing the return-on-equity metric as a gauge of our return performance as a complement to our ROIC metric. This will help provide further focus on driving returns as a key contributor towards long-term shareholder value creation. For the third quarter, our ROE on a trailing 4-quarter LIFO adjusted basis was 14.9%. Our long-term ROE target is a range of 12% to 14%. At this time, I'll turn the call back over to Pat.

Excellent. Thank you, Ray. Before we take your questions, I thought I'd make a couple of comments about our recent leadership additions at ADM. Last month, Juan Luciano joined ADM as our Chief Operating Officer, and we're very pleased to have him on our executive team as he brings global manufacturing experience and an excellent track record of profitable growth. I thought I'd take a moment to talk about how and why we grew our leadership team, bringing in Juan, and before that, Ray, to ADM. Both of these talent additions were part of a purposeful, planned, multiyear effort to add relevant expertise to our team, to prepare for executive succession and further develop our future leaders. Juan and Ray both broadened the perspective of the ADM team with their extensive global experience, particularly in key growth regions for ADM and with their valuable leadership development and process expertise as we continue to grow our company. These actions enlarge the group of people at the senior-most level who are helping develop the next generation of ADM senior leaders. As Juan takes over the leadership of the commercial and production areas of the business, he is supported by our unrivaled team of business unit presidents. We have an excellent integration plan and through the transition and beyond, John Rice and I will continue to provide Juan and the team with guidance and counsel on a range of matters, including ADM's risk management strategy. John will have more time to develop and devote to supporting our growth initiatives around the world, including the Asia region, which continues to report directly to him. I think we have an outstanding group of strong leaders. I think it's the right team at the right time to lead ADM as we execute our compelling strategy, generate strong earnings and deliver good returns, all towards the goal of driving shareholder value. With that, John will join Ray and me today for the Q&A. And Juan will join the May 18 conference in New York City. So operator, at this time, if you could please open the line for questions.

[Operator Instructions] And your first question comes from the line of Vincent Andrews of Morgan Stanley.

It would be helpful if you guys could give some very detailed commentary, sort of what drove sort of the sequential performance in Oilseeds Processing and Ag Services? I think most people were surprised to see Ag Services where it was and were surprised to see Oilseed's Processing as strong as it was. So can you give us a sense of what drove those variances?

Sure, Vincent. This is John. On the Ag Services, we had a very good second quarter, and we also feel we had a very good third quarter. We tend to look at these businesses also on a year basis. And you have to remember, during the third quarter, at any given time, we got 100 ships, over 100 ships going to different destinations throughout the world. We have the period of unrest in the Middle East, and we usually have ships going over there. You have ships going over to Japan. So it really becomes a lot of logistics on where you want to offload, where you don't want to offload, where you want to have ships sitting. So it became a little bit more logistics involved in that period of time, with unprecedented volatility also during that quarter. Oilseed Processing, we have had very good man, we feel, in Europe with the biodiesel and the rapeseed margins. In North America, we're starting up the biodiesel demand right now. In South America, we're starting off the harvest. So we feel, with the sales we had on forward and how we were purchasing our raw materials, our team executed very well between the two. And it's always a little difficult in time. When you take a point in time, at the end of March you have crop reports; end of June, you have a crop report. So taking an absolute and coming up with market prices can also have a little bit of variance between the second and third quarter. But I feel very good about our third quarter results. And on a year-long basis, we should have a very good year in Ag Services.

So John, as we think going from third quarter to fourth quarter, it sounds like some of the things that took place in Ag Services during the quarter were unique, and, hopefully, won't reoccur in the fourth quarter. Is it fair to say the same thing about Oilseeds Processing? In other words, if we look sequentially going forward, that Ag Services is likely to be better sequentially, but Oilseeds Processing is likely to come down?

In Oilseeds Processing, we have lower global oilseed margins right now. We have -- with the crop coming out of South America, you have Brazil running ahead of last year. You have them exporting more meal, exporting more oil. But their Biodiesel demand should help their oil situation down there, and the Argentine crush coming on will also affect the North America. So we're in the process of slowing down our North American crush. So it's really more of a balance. And then since you're coming into a period where you have a lower carryout of soybeans in the United States and then also in Europe, watching the rapeseed crop. It's always a little harder to say exactly what's going to happen with the weather and other things. But we feel over all crush margins are a little down globally. And in Ag Services this time of year, we tend to export less out of the United States. It comes more out of South America, and exports out of Brazil are recorded in the Oilseed Processing portion and not in the Ag Services.

Okay, and maybe just as two last thoughts. There was nothing that sort of – Bugsy [ph], for example, reports both of these segments together. And you provide the amount of disclosure where they're separate. So was there anything that we might have perceived as what might have shown up in Ag Services that actually belongs in Oilseeds Processing from an accounting perspective in this quarter that would also highlight the difference in the performance?

Nothing accounting-wise. But we do manage risk in this company, as an overall, on a company basis. We look at it that way. So at times, we may do things in one division that makes more sense in another division, just because of how it's situated.

And is one of those times this quarter?

It happens every -- it's a weekly decision. It's a very fluid operation.

I'll get back in the queue.

Vince, it's Ray here. Just on a couple of other things I just wanted to make sure we highlight. I didn’t mention that in this particular quarter, or the third quarter, we did have a favorable timing effect here where the oilseeds grew approximately $100 million in the Oilseeds division. And when we kind of think through the rest of the fiscal year, it's always difficult to estimate the future timing impacts because the impacts are a function of the changes in inventory levels and prices within the quarter. I recognize a lot of you folks would like to get some level of visibility in terms of future quarters. So in order to help you directionally for the fourth quarter, because we believe that European inventory levels of certain oilseeds and later products would further decline. We could see some favorable mark-to-market timing effects also in the fourth quarter, roughly in the same order of the magnitude that we saw in the third quarter. So I think that's important for you to understand that perspective as well.

Sure. Even as I take that $100 million out, the crushing origination number looks like it was almost a record?

Yes, I mean, again, I think a couple of things, we did have -- as we indicated in the press release, good ownership here. So that's an important aspect of it. And the last thing to do is, remember in Ag Services, I mean, the term I use for the second quarter, we kind of hit a home run there. We were using an analogy driving on all 8 cylinders there on the second quarter here, and you don't drive in all 8 cylinders necessary in this business every time. And so actually when I kind of look at kind of the historical performance, the recent performance of Ag Services, people will look back in 2010 and 2011, excluding the second quarter, you see that on the Ag Services division, we run on an annualized basis, let's say $600 million to $800 million. Again, you take out the exceptional second quarter, which translates so you average like $150 million to $200 million on a quarterly rate. And that's in the absence of significant market events or actions. And as John indicated, I mean, we do see inter-quarter volatility in the Ag Services division. So when I do the comparison, and I did the same thing that you did, Vince, compare second quarter to third quarter. And second quarter was an exceptional quarter, and we've done that in the past. We have had quarters of plus-$400 million operating profits in this company. So we know that we can -- when these opportunities present itself, we can take advantage of it. But when I take a look at the third quarter, I'd say that we had a very good quarter comparable to some of the recent good quarters that we've had within ADM and the AG Services division.

Your next question comes from the line of Christine McCracken of Cleveland Research.

Just on ethanol, because you did mention the higher lending rates, and yet we're seeing kind of breakeven margins here. I'm just wondering, as we go into the summer season and with the fuel prices where they are, if you could give a little bit of color around what your expectations are around production levels for this summer. And two, for that part of the industry that doesn't have its corn, but if you're expecting some declines there?

During the summer, we usually see the driving miles go up and gasoline usage also increase. But with the higher price of gasoline, you don't know if we'll see the normal summer increase. But right now, the industry is running about 13.5 billion to 13.8 billion gallons. And with the corn situation this year and the steep backwardation and inverses, I don't know exactly how other people manage their inventory, so I don't know exactly how they're going to run. But I would assume people that can source their corn are going to keep running even at a close to fully breakeven because of cash flows for them. But it seems like once every other week, we see another company go bankrupt and then they get new financing. But I think it's still a situation that’s going to take us a little bit, awhile, to grow through this, but we still feel very strong about the Ethanol business, and it's probably the most competitive fuel in the world right now.

With the advantage of ethanol in this current environment, it seems like they would be blending as much as they can. Are you seeing any progress of moving towards E15 blends? What are the hurdles you're still seeing there?

I think, this is Pat, Christine, we have probably, still, I wouldn't say a concern, but a belief that until the regulatory outcome has E15 applicable to all cars, that it really won't be widely accepted. I think your point is correct that we have -- the lenders have the opportunity and the economic driver to blend as much as they can and are doing so. But the widespread use of E15, still some hurdles to overcome.

Your next question comes from the line of Christine (sic)[Christina] McGlone of Deutsche Bank.

It's Christina. I guess, the question is on oilseed back to Vincent's plan of questioning. You talked about favorable position and maybe some forward sales, and so I guess I just want to understand the underlying strength of the market. Because from we see -- from what we see on the cash margin basis, it's very weak. And I'm curious, why is that weak given that utilization is low, and really what makes it better? And do we need to see a plant in the U.S. close to improve things?

I think you'll see plants close down maybe for the summer. We're looking at a few of those right now to help balance the supply and the demand. Biodiesel will be better, like I mentioned earlier, but the meal demand, especially with Argentine and Brazil exporting meal, make a little bit more important. But the U.S. has a little bit of a disadvantage in the world market. So I think you'll see that happen. And on the overall basis, I think with just the large South American crops, we have a situation where all the world capacity can operate. But now, as we've said in the past, we've added capacity around the world, and I do not see much more capacity being added. So we should be able to grow out this as meal demand keeps increasing around 4% here in the next year. And it doesn't take much when you have -- in these kind of markets, one ton too much or one ton not enough makes a big difference in global markets.

But I guess, John, it just -- it seems that the footprint is maybe off. Because the expansion of the U.S. plants to 5 plants a year or 2 ago is, I think, one of the reasons that the market is in a state of overcapacity in the U.S. And then with Paraguay coming on, I guess the concern is, maybe is ADM too optimistic about forward demand and/or should the Paraguay plant be there but maybe some U.S. capacity come off because between DDG inclusion rates, which is becoming more creative higher canola meal imports from Canada and are a likely poultry production cut, it just -- it seems like it's going to take a real while to grow out. And I just don't know how long does ADM think it's appropriate to wait it out?

Well, I have a different view. I guess I think the world is looking a little bit better than that. We -- the big difference you have in the world right now is EU, Brazil, Argentina, all have very good renewable fuel programs. So they have a biodiesel industry that is elevates the prices of their oil, which allows them to sell their soybean meal a little cheaper, let's say. And what we have in the United States, we have this uncertainty in the biodiesel program. So as that's picking up, the price of oil is coming up; as plants are coming online, we should see that same situation. When you look at that on a global basis, then it comes down to energy and logistics and whatever. And I don't think the U.S. is any more disadvantaged than Brazil or Argentina when it comes to competing in the world. It's just that when you get to this geopolitical situations that you can get those offsets. And as long as we have a biodiesel program here in the United States, I feel very good about it, U.S. crush.

You mentioned to Christine's question, if plants would shut, you don't know how maybe they'll get their corn given the corn situation, the inverse in the market. Can you speak to that? Basically, carrying corn down the invert? How is ADM positioned with that respect? What does that mean for ADM and for results? How should we think about that?

Well, we've done this before. We know how our team knows how to manage through these, but whenever you have big backwardation and big inverses, you don't know want to carry much cash inventories. So you have to make sure you're managing your pipeline accordingly. We use our railcars, we our transportation, our truck assets, along with our elevators. And we manage inventories accordingly. That's really the July Ds [ph] that we see the big inverse. A lot can happen between now and then, and what happens even on that inverse. That inverse have been going anywhere between $0.60 to a $1.20. And when we get closer, we'll determine how exactly how we want to manage our inventories. But we look at this on a daily basis.

So when in BioProducts, you say you have a favorable corn ownership position in this quarter, should we assume that, that starts to trail off ahead of July because of this inverse situation and you're managing it?

That is a pretty good assumption; how's that?

And I guess last question. On Ag Services, when you talk about there was kind of dislocation with Japan and Middle East and Africa and commodity volatility, I guess I thought that, that's when ADM excels in Ag Services. So what am I missing?

Nothing. We had an outstanding second quarter, and we excelled very good. And in the third quarter, we also did very good. But as I mentioned earlier, when you cannot offload ships, you have them sitting out to sea and determining when you're going to offload them, when you come down to valuations, it can make a difference. But I don't know how else to answer that. I think that we had an outstanding second quarter, and the third quarter was still a very good quarter.

Your next question comes from the line of Jeff Farmer of Jefferies & Company. Jeffrey Farmer - Jefferies & Company, Inc.: You continue to call a lysine in the BioProducts segment, at least for I think the last 2 or 3 quarters. Can you give us some sense of how meaningful it is as a profit contributor for the segment?

Let's put it this way. First of all, it’s important keep on diversifying our profit stream in the Corn segment. And so it's actually an area whereby we continue to see volume growth and we can seem -- continue to see good margins driven by global demand. I don't necessarily want to kind of highlight the exact number in terms of what lysine is contributing, but the trend is actually a favorable trend here, Jeff. Jeffrey Farmer - Jefferies & Company, Inc.: Just a little bit of a follow up, is it fair to assume that the margin is materially greater than the rest of the segment? How should we think about that?

Yes, we're seeing good margins in lysine. Lysine values have been going up, especially with higher world sugar prices and lower corn prices, most other people’s substrates are sugar-based molasses, so we do have an advantage during these types in the lysine markets. Jeffrey Farmer - Jefferies & Company, Inc.: And then just a follow up on some of the oilseeds conversation, I'm just curious, as the crush shifts down to South America in the June quarter, how important would that be to your margin mix? Should I think about it like that in terms of looking at better South American margins, a larger percent of your crush coming from that part of the world, shouldn’t that be a nice tail wind for oilseeds in the June quarter?

It's more of a global situation where you have supply globally, whether it's from China, Europe, from South America. So it's the ability of all crushing plants, I shouldn't say all -- most crushing plants throughout the world being able to operate. So I think it's just a little bit of an overcapacity situation right now. Jeffrey Farmer - Jefferies & Company, Inc.: I guess coming back to some of your competitors talking about some pretty strong margins, specifically in Brazil, I would expect that you, at least in the June quarter, you see a decent benefit from that as well?

If margins pick up from the present day, yes. The crush is running about 4 million tons quicker or higher than last year. With a good biodiesel program, that could happen, yes.

Your next question comes from the line of Robert Moskow of Crédit Suisse. Robert Moskow - Crédit Suisse AG: Ray, I was hoping you could help me understand the $100 million you called out of favorability and how that carries through to fourth quarter. Is that a function of just higher value vegetable oil on the balance sheet or your positions? Can you just help me understand the mechanics of that?

Yes, I mean, If you recall, Rob, in the first half of the year, we had -- actually in the Oilseeds group had some negative timing effects. And that's really brought about by the fact that we're building up inventory in Europe. And just due to certain GAAP accounting rules, we can't mark-to-market that inventory. We actually carry that at the lower cost of the market. But as you kind of sell down that inventory, and that's just a seasonal pattern that we see, as we sell down that inventory, we actually then bring that thing to market as we relieve that inventory. And that's what we're seeing right now in the second half of the year, second half of the year -- second half of the fiscal year as we bring down that inventory. So assuming the prices of these commodities remain at these elevated levels, as we sell down the inventory, we're basically -- we saw some of the negative timing effects that we had in the first half of the year. So I called out that in the third quarter, there was approximately $100 million of that reversing out in the oilseed results. And then based upon what we're seeing in the fourth quarter, with continued high elevated prices and the rate that we’re selling down our inventory, I could see an order of magnitude in the fourth quarter, in terms of reversing the timing effects is similar to what we've seen in the third. Robert Moskow - Crédit Suisse AG: And is that comparison sequentially from, say, the first half of the year, or is that a comparison from a year ago?

No, that's sequential. This is sequential here. Robert Moskow - Crédit Suisse AG: Okay, good. Secondly, on ethanol margin, it seems like that's the biggest question I get from investors because you're talking about the industry being at breakeven. But this year, you're probably going to have record results in BioProducts. So do you think that your division here will continue to operate above industry norms into fiscal '12? Or are we going to see a pretty significant falloff in results for ethanol going forward?

We feel we have a competitive advantage in the ethanol industry, just because of our footprint, our plants, our locations and how we handle our inventories, how we operate our assets around it. So to put a delta spread on it, it's very tough, but we do look at that all the time, but we feel we have a very good competitive advantage in the ethanol markets. Robert Moskow - Crédit Suisse AG: Okay. And lastly, John, I guess my question is on the CapEx budget. And also, Ray, it's up again this quarter. Can you give us kind of a summary of how you're thinking of CapEx this year compared to what you might have thought about it 6 or 9 months ago? What's really changed in driving that CapEx budget higher? Was it Golden Peanut? Or were there just a lot of little things that you just keep adding as your expectations went along?

I think, Rob, one of the things that we're focusing on is growing our asset base, growing our earnings base around the world. I’ve highlighted at a prior conference, one of the things that I know that this company does extremely well is actually making a lot of smaller investments, what we call below the radar screen types of investments, which really contribute a lot towards both returns in the bottom line. And just to give you some perspective, I just got the third quarter numbers. So if you look at the first quarter to third quarter this fiscal year, we've approved about 130 smaller projects, with a CapEx commitment about -- a little over $800 million. So the average investment per project is about $6 million to $7 million, which is pretty small investment, which, again, generally we don't highlight to the outside world. But we're doing a lot of these particular projects, and these things generate good returns. In fact, these projects here, on a conservative basis, will generate plus 20% ROICs when they come online. So I think what we're seeing, Rob, is that there is a tremendous focus on growth around here. We continue to execute a lot of these smaller projects, which are below the radar screen. And the other thing that I've noticed is just the CapEx footprint. From fiscal year '06 to fiscal year '10, about, roughly 85% of the capital spending was in geographic North America. And when I take a look at what's happening in this fiscal year, fiscal year-to-date, the 85% has dropped to a little over 70%. And in the third quarter, only 63% was actually North America oriented. So I am seeing a shift. I think it's a conscientious shift in order to make sure that we are diversifying our global footprint, which is one of our key strategies right now, is to move our geographic model to other parts of the world. The other thing to note is like, when you take a look at 2011, and I think earlier here Steve kind of mentioned that, we think CapEx probably be in the neighborhood of $1.4 billion. With the Golden Peanut acquisition, you add that on to this particular list. We're basically in line with where we thought we were going to end up at this particular year -- this particular fiscal year. So I guess we're not surprised in terms of the size of this capital spending. I think this is in line with what we're trying to do to grow the company. We have the balance sheet to support it. That's another critical element as to why we continue to bolster our balance sheet in order to support these types of investments.

Rob, let me also add that, as we've talked earlier, we think shareholder value’s created by the clear and compelling strategy, growing our earnings and the strong returns. And these projects that Ray highlighted, which you might call under the radar screen, are -- I think are more explicit examples of very good returns that will grow earnings to the base that are sort of -- you might even call it cheap creep, the ability to add specifically to many of our assets that already exist, but having them either become more efficient, more effective, higher volumes to add that profitable growth at very good returns. So it is conscious and purposeful, but in line with what we said earlier in the year. Robert Moskow - Crédit Suisse AG: Okay, I'll follow up later.

Your next question comes from the line of Ken Zaslow of BMO Capital Markets.

John, what is your role in the positioning of the soybeans and the corn in the last couple of quarters?

What do you mean? I guess, what's the...

Because there's a changing of guards, right, on the Chief Operating Officer side? And I'm just trying to figure out, where does the decision actually get made for positioning soybeans and corn? Just because it's been rather excellent, right, for the last 3 to 4 quarters, if not even longer than that. So I'm just trying to figure out where the decision is actually made on the positioning?

We have a very good group of people that work at ADM. We have constant communication of what should be done, what we feel we ought to be doing in certain markets, how we run our plants, how we don't run our plants, where we want to sell or we don't want to sell. It's constant and open communication. So it's a very good team, it's a team effort, and I feel confident about this team and with Juan coming onboard. Juan has a very good track record, and I have the utmost confidence in the team that will support him.

Okay, but how does -- I guess how does the decision get made? Does it come from the bottom? What are the role? Can you just talk about the role of how it's positioned, the risk management? What are the main decision makers on that process?

I'm in the middle of it. And as decisions are made, and as Juan seeks help or what have you, I can still be in the middle of it.

And maybe I'll add a bit to that from my perspective. We have a process and a reporting and a proactive effort that meets on a both weekly basis on certain elements and on a daily basis on certain elements and daily reporting processes on everything. So it's a very open communication and a process where everybody sort of knows their roles, if you ask. And people can fill in for each other in knowing those roles, and we can do it virtually whether people who are traveling or they are in Decatur. But everything does come together at this center, which I think is a bit of the nerve center that we think is a very proactive and good way to risk manage. So we've done that for a long time. We have a good view of how that works. We have a good view of the control processes around that. And it is a little bit of what makes us ADM.

Okay. My other question on the high fructose corn syrup. This quarter, I know that you said last quarter that the pricing has high enough to recapture your margins from higher corn prices. Is that something that we're going to see progressively over the next couple of quarters? This quarter was slightly a little lighter than I would've expected. But how do you see the progression of the margin structure? Does the backwardation actually help you in this business? Does the high fructose corn syrup prices going forward -- I know it takes a little bit to get them all in? How it does play out?

Well overall, fructose demand is very good right now. We see the industry running at very high levels. When you take a look at the Corn Sweeteners and Starch business, you have to look at that almost on a calendar year rolling basis, just because of how corn is brought to market. So it's a little bit tough on that area to actually look on a quarter-per-quarter basis. But when I look at the fructose, demand is very good. We're still very -- we're $0.20 cheap to sugar in the United States. We're $0.10 cents cheap to world sugar. So we still see demand growing, especially in Mexico, and more people around the United States just because of the cost of sugar increases food cost then. More people are looking to switch back to fructose also. So if you look at it on quarter-to-quarter, it's a little bit tough just because of how the corn flows through. But on the year-long basis, we feel very good about the Fructose business.

Your next question comes from the line of Bryan Spillane of Bank of America.

Hey guys, it's actually Ryan Oksenhendler in for Bryan here. I just had a follow-up on Rob's question about ethanol margins. I get that you guys can outperform the industry. But John, the way it seems is that ethanol margins could hang out here in the breakeven range for quite some time. And it seems like we almost have to grow into the overcapacity that we have and maybe there's bit of talk [ph], 13.8 billion gallons until 2013. How do we break out of this breakeven range before that?

Well, I think with the E15, if we get that all the legislation cleared on that, with such the price disparity between ethanol and unleaded gasoline, my personal feeling is we'll going to see some gas stations go to that. We'll have the label on it, and I think we'll increase a little bit of demand there. We are still the cheapest ethanol in the world, so we'll still keep going with the exports. But it's not going to take much, and especially with the corn situation this year and plants have to shut down just because of the backwardation, that could also give us some opportunity. But I think in the long term, it's going to be the 14.5 billion gallons to be blended. And then also, with the E15, that can make a change.

And Ryan, the other thing to always look at is the overall gasoline consumption. And so, if prices would moderate and gasoline -- of course, ethanol helps to moderate those prices because it's a cheaper component of the blend pool. But if prices would happen to moderate and we did have higher driving, that would also be a little more room there.

Yes, but aren’t we pretty close to -- I mean it's already $1, over $1 per gallon benefit; we're pretty close to the blend wall here. So I mean, do you expect to see, given where great cash prices are, maybe, say, moderation here down to $3.50 a gallon. Do you expect to see a major pickup in demand over the summer?

It's just going to be the gasoline usage and the E15, which will cause that.

To put this in perspective, Ryan, on E15. I mean, the EPA actually indicated that cars newer than 2001 account for 74% of the current gasoline consumption. By 2014, that would -- expected to increase to 85%. So getting the blend wall increase expose [ph] from E10 to E15 is going to be very, very important. And there's a lot of work being done on that right now. So that's something where we're fully monitoring that situation in order to see how that evolves.

And do you know what percentage of retail gas stations, I guess, offer E15 right now?

I think it's very minimal, if any. Right now, I think a lot are waiting for the EPA waivers to finalize their waivers right at this point in time including the labeling for E15 pumps.

And do you know when that's going to happen from the EPA?

Summer is the expectation.

Okay, great.

Your next question comes from the line of Diane Geissler of CLSA. Diane Geissler - Credit Agricole Securities (USA) Inc.: I'm not quite sure how to word this question, so, here goes. When I look at your year-to-date results in your divisions, Oilseed is up a bit, Corn Processing, flattish. Ag Services, if I take Ray's comments about the $150 million to $200 million, you did have a great second quarter. But that didn't really deliver in the third quarter like I think the market expected it to. And I guess I'm just getting a little nervous when I look at 2012 versus 2011 and hear from clients that are thinking that 2011 is your earnings are peaking this year. And I guess, if you could give some commentary about your expectations. Do we need to see commodity prices drop in order for you to see demand pickup in margin expansion? Because we certainly didn't see the benefits of volatility in the Ag Services division in the third quarter, which is sort of the offset to margin compression in your operating unit. We didn't see that in the third quarter, and I guess, with your stock down the way it is today, I think, you really need to address for your investor base where you see the growth coming from in some specificity. If you can't make it in Ag Services, and your margins are compressed because commodity prices are so high, how are you going to deliver the EPS growth you keep talking about? If you could comment on that, I'd certainly appreciate it.

So let me start, Diane, and then maybe we'll go around the table here. I think we executed well across all of our businesses. But your point of asking about 2012 is a longer-term objective associated with earnings growth and doing it at good returns. Our strategy to add to the base of where it exists today and where those, where it has the highest potential of margin expansion over the long-term is generally in the areas where we are doing the investing, which, again, we believe in global oilseeds. There is space and room to do that, and we are. The Ag Services piece that you asked about is more of a multi-quarter basis of the types of opportunities that can come at us. But we have added storage capacity, transportation capacity in order to have almost this run rate that we talked about of $150 million to $200 million that didn't exist before that exists now and the upside towards the 2x, 3x to that in times where it is strong. So from the longer-term perspective, both the investments we're making -- and I think your point is a good one with more specificity all the time. That's what we're attempting to do in the larger analyst presentations, et cetera, is to dig down into each of the business units, as well as the investments we're making and sharing where that comes through. On Corn Processing, obviously, as things would improve with our BioProducts division or going from either negative or flat or U.S. spot margins and ethanol, for that to improve, obviously, the size of our business, we would benefit greatly when that happens.

Diane, I'd like to also say, with what Ray mentioned earlier, all the investments we're making globally on a daily basis, when you look at our earnings year-over-year, last year, people thought the same thing. We had a great year, this year, 4 major divisions have outperformed the previous year. Our footprint, our knowledge, our team, we can keep growing this business. And as we keep finding more investments throughout the world, whether it's big investments or small investments, with our team, our footprint, we feel very confident about things moving forward.

I guess just to compliment what Pat and John indicated, we're kind of actually working through our plans for next year right now. And what we're seeing is our asset base is growing. We're actually putting the assets in the areas whereby clearly, we’re going to earn good returns. There's a tremendous focus on this aspect of returns. So in the Ag Services area, we're putting in a lot of assets regarding storage and handling, both North America to support the export markets as well as around the world. And those are important investments that will help us drive earnings in the future. In Oilseed, same thing, we’re putting in capacity in critical parts of the world. That's one of the growth areas for us. Your aspect that we should not understate is that the team here does a very good job managing supply and demand. And as you know in this business, it’s all about managing supply and demand, over time build time in order to drive margins. So that's going to be a very -- continue to be a very important factor for us. And then lastly, as you talked about Corn-to-Corn segment, I recognized the ethanol margins are kind of, on a cash basis, pretty tight right now. But the long-term trend, with essentially moving towards E15, eventually the U.S. economy is going to show some signs of recovery, and us having a very diversified portfolio of both dried meals and wet meals, we believe that's very, very good business for us longer term here. Diane Geissler - Credit Agricole Securities (USA) Inc.: Okay. Well, maybe I can ask the question this way. Your fiscal '12 starts in 8 weeks. I'm sure you must have been through a round -- several rounds of budget planning. Is your expectation for earnings to be up in fiscal '12 versus fiscal '11? Or you've done your current plans?

We don't provide a guidance here, right? So I think one thing that you should recognize is we're looking to drive long-term value creation. So therefore, we are focused on long-term returns, and we're focused on earnings growth. And so I think it's fair to say that as we look at our plans, and if you look at our history, Diane, in terms of our track record in terms of earnings growth, we've demonstrated a consistent track record over the past 5 years, past 10 years, and looking to continue to drive this long-term earnings growth trend into the future here.

And Diane, like every year at this time, we’re coming in, we still don't have much of the corn crop planted. And we don't have the oilseed crop planted. We're watching different weathers throughout the world: What's the European weather doing, what's the China weather doing, what's the -- how are our customers business? There's so many different sets of assumptions that we're always monitoring, we’re looking at. We feel that we have an excellent team that's talking about this and managing our assets accordingly.

Coming around full circle, Diane, if you think about looking at a 2012, you can imagine we probably have a range of outcomes that we're discussing, and it's based on a set of assumptions that could fall into a particular range that looks like both where we are today but moves to different directions, and how do we manage best in all of those scenarios, but yes, we feel like every year of confidence like this year adds to our confidence that we can continue to grow those earnings.

Your next question comes from the line of David Driscoll of Citi.

I'll try to make it succinct. Corn sweeteners, you mentioned to Ken's question here, but I'm not sure that I walked away with the right answer. $46 million in the quarter. Are these results indicative of what calendar '11 will look like post the pricing?

We don't give guidance. I guess a lot of that has to do with just on how the accounting handles -- how -- with the corn and brought to markets. But demand is very good.

So maybe the short answer is, is no, these results will improve over the course of time. Is that just generally fair?

Well, I mean, most of our price in our contracts, I think the last one came in, in February. So most of the contracts have been realized in this. And going forward, I think we, maybe, pick up 1 or 2 contracts for a month in the last quarter that we’ll realize for the rest of the year.

Oilseed Processing, just to circle back on this one for just a moment. If I understand you right, the crushing market environment in the margins gives you some concern. John, I think you laid out the case that as time progresses, the demand growth is good so margin should improve? And Ray, I think you pointed out that we get $100 million benefit in the next quarter or something of that magnitude because of the European oilseed purchases. So it sounds to me like in the short term, maybe we've got some benefits from how you bought the European crop, and then in the longer term, we should just see utilization rates improve as demand continues to increase. Do I have that roughly correct putting everyone's comments together?

Yes, roughly. And that's a good synopsis.

Okay. And then just a question on weather. So we are seeing flooding in Missouri and Mississippi, snow in North Dakota, drought in Texas. Are you concerned about production or not at all at this juncture of time?

Well, not concerned is a little strong. But we've went through this many times, 2000, we're still -- corn planting is behind, but we're still ahead of 2008 corn planting. We're always monitoring. It's a very fluid situation. And yes, we have to manage and watch what are supply is. It gets reset twice a year around this place on raw materials, and how you balance and how you run your assets. I do think we'll get the crop in, and then you have to watch the weather and what the yields are. These are always very fluid and situations we have to watch. To say I'm not concerned, I don't know if I'm never concerned.

Okay, that's fair. Last question is for both John and Pat. I think the stock is down today, and I think a lot of people are just trying to understand the composition of numbers. I want to just ask you this question, do you believe that this basic environment, though, is a good one? So whether the profits show up in Oilseeds or show up in Ag Services, is this not fundamentally an environment where ADM should perform well across its various divisions. Is that the basic message you guys are trying to deliver today?

No. I think we did perform well, frankly. So I think that is -- all environments are ones that I think our team has the ability to show different strengths, but I think volatility and difficulties and challenging logistics, et cetera, our team is unsurpassed and unmatched in terms of being able to perform well in difficult environments.

And I will look at the company as a whole, on the operating earnings and how we're doing. So I'm not as concerned as long as the businesses are performing well, as 1 division is down, the other division is up. Because I actually know how we manage the businesses and the assets.

Again, it gets back to John's comment. I know -- and we've talked about this, Dave, and quarterly earnings are important for a lot of people. We recognize that. But we’re trying to look at this business longer term. A lot of it is due to, again, how we mark-to-market things, how we book inventory, et cetera, et cetera. So I don't want to lose sight of the fact that, looking at the first 9 months of this year, our segment operating profits are running at $3.1 billion. And that's a pretty impressive performance; that's a 28% higher than the same period 2010. So again getting back to Pat's comment, we think that this year, we were actually having a very, very good year this year. We've taken advantage of some opportunities that present itself; they executed it well. And as we head into fourth quarter, as John indicated, it's a dynamic situation. The team has been to these types of markets before, and we're going to continue to manage it. And then as we head into 2012 and beyond, we just -- we have a focus here and trying to -- making sure we drive value creation. And that's the reason why we're very much focused on long-term earnings growth, making sure that we're focused on driving returns. That's part of the reason why we're going to bring in the return on equity measure here into the company as well. So we feel pretty good about like where we're driving this company going forward.

Your next question comes from the line of Christine McCracken of Cleveland Research.

Has been answered. Thank you.

[Operator Instructions] Your next question comes from the line of Ian Horowitz from Rafferty Capital Markets.

John, can you just talk a little bit kind of on a macro level about the global feed supply situation? I think we hear you kind of loud and clear on the demand side, and as demand continues to grow at a pretty good pace, and you expect to see meal supplies kind of being absorbed into this demand. But are we in a situation right now between very strong oil prices and therefore a lot of meal supply, DDGs and then the wheat situation where we're kind of in an imbalance beyond just the traditional formulations? Are we seeing something unique here or something that's going to be -- is this a shift kind of in the way we should look at feed going forward due to these new kind of larger entrances into the market?

I wouldn't say it's a shift going forward. I think we've seen the shift here in the last 3 years or 4 years and we’ve brought more volatility to the market where many feed manufacturers and many poultry and beef and swine. People are looking at whatever the best cost formulations are. So whether wheat, corn, they're willing to switch in and out more now than they have been in the past. So it is more fluid, but I think it's been that way for about the last 4 to 5 years with the volatility in the market. And whether they are feeding DDGs or corn, it's really basically the same thing, except maybe the DDGs helps our lysine demand a little bit more. So I think it's a -- we do have a little bit of overcapacity in the world right now. This is nothing unusual. And at the South American crop, 3 or 4 months ago, we are talking about a not very good crop in Argentina, and the Argentine crushers wouldn’t be running very hard. Now that's changed. We're going to manage our assets accordingly and going forward. I mean, we have to plan for the long-term in this business, and that's what we're doing. And we figure that periods we're going to have a little bit of overcapacity, but we're always managing supply with demand.

Put it on another way, if [indiscernible] had a better conditioned wheat crop, and I guess DDGs are kind of where they are in terms of supply. There's not a whole lot of new capacity coming online. Would a better wheat crop alleviate kind of this oversupply in the feed situation? Would that be just enough to kind of get it back into better balance?

No. I guess I'd look at it different. I think what we're seeing is we're going to see more wheat being substituted for corn on a global basis, depending on what happens with the tariffs coming out of the Ukraine and Russia, whether they're going to be exporting more corn or not, how Argentina's crop comes in. So I think it's more of a wheat to corn situation than it is soy, but when you start blending more wheat, you also affect the soy. So I think it's very dynamic, and it's constantly moving. But I think we really just need to have good crops in North America, and that will help alleviate part of the problems globally.

And Pat, can you kind of talk to us about your thoughts and opinions on the current U.S. situation policy-wise, whether it's the tariffs or the credits that are going to be kind of back up for discussion? Where do you see those conversations sitting right at this point? And how confident are you that the blender's credits are even around to talk about it going forward it?

Well, first of all, we're working with other ethanol stakeholders and the administration and Congress to think about policies that would continue to promote the industry. Not only through this year but into next year and well beyond. And that could be discussions that include variations of VTech, which I'm sure you've read about, that have opportunities to add to some of the discussions again in the long-term. I am confident in -- I am confident in it that biofuels as a policy in the U.S. and the RFS, and what ethanol has always already contributed to sort of the mitigation of higher fuel prices, the offset to imported energy, be it at the oil level or at refined product level, is a positive thing and supported by Washington. Of course, as you know, the discussions about where you have additional revenue come from, discussions about credits or a variety of opportunities to offset diminished revenue is part of the conversation. So I think that our industry will work with Washington to make itself known. And I feel that over the long-term, biofuels have a real role to play, not in 100% replacement, but certainly a significant aspect to the transportation fuel pool in this country. And I think both sides of the isle understand and know that in Washington and want to trying to find a solution.

[Operator Instructions] Your next question comes from the line of Robert Moskow of Crédit Suisse. Robert Moskow - Crédit Suisse AG: Pat, just quickly. In the press release today, under current market conditions, you've written that global economic conditions are being impacted by significant geopolitical developments, rising energy cost and evolving monetary policies, and these all have potential to tamper global economic growth. Can you explain to me why you decided to put that in the release today? It sounds a little different from your typical strategy.

Yes, thanks, Rob. We thought about a short paragraph that acknowledged not only some of our customers concerns but just the overall economic conditions, which we always monitor and are always part of the risk factors, et cetera. In this current conditions, including the last quarter and even, of course as we were writing this, even announcements about finding Osama Bin Laden et cetera, are impacted by geopolitical developments that have sort of been unprecedented, so we kind of thought these confluences of events continue to be a current condition that always you should monitor, whether it’s the monetary and fiscal policies. Certainly rising energy cost sometimes have been there alone. Sometimes, there's one geopolitical event, but the fact that these were a group of events, the elements continue to be something that has the potential to affect economic growth. And again, our customers and other as you read, this isn't any different than what you're reading in the Wall Street Journal every morning or any other paper. So it was an acknowledgment of that. Robert Moskow - Crédit Suisse AG: And lastly for John, is there any way to quantify the negative impact on your business of the North African kind of political problems and then the Japan earthquake? And can we look at that as kind of like a one-time negative in Ag Services that goes away?

Well, I'd like to say that geopolitical situations throughout the world will go away. But we're always going to have different situations as time goes on. So yes, I mean, we had unprecedented volatility. We had people managing inventory is different. Many of our customers managing their inventories different. So I'd like to say that, that goes away. But from quarter-to-quarter, it's always tough to say.

Ladies and gentlemen, that concludes the Q&A session. I'd now like to turn the call over to Ms. Patricia Woertz.

Well, thank you very much for your interest and questions today. And we'll talk with you on the call next quarter. Bye now.

Ladies and gentlemen, that concludes the presentation. Thank you for your participation. You may now disconnect. Have a great day.