Good morning and welcome to the Archer Daniels Midland Company Third Quarter 2017 Earnings Conference Call. All lines have been placed on a listen-only mode to prevent background noise. As a reminder, this conference call is being recorded. I would now like to introduce your host for today's call, Mark Schweitzer, Vice President, Investor Relations for Archer Daniels Midland Company. Mr. Schweitzer, you may begin.

Thank you, Jack. Good morning and welcome to ADM's third quarter earnings webcast. Starting tomorrow, a replay of today's webcast will be available at adm.com. For those following this presentation, please turn to slide 2, the company's safe harbor statement, which says 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 that are subject to risk and uncertainties. ADM has provided additional information in its reports on file with the SEC, concerning assumptions and factors that could cause actual results to differ materially from those in this presentation. And you should carefully review the assumptions and factors in our SEC reports. To the extent permitted under applicable law, ADM assumes no obligation to update any forward-looking statements as a result of new information or future events. On today's webcast, our Chairman and Chief Executive Officer, Juan Luciano, will provide an overview of the quarter. Our Chief Financial Officer, Ray Young, will review financial highlights and corporate results. Then, Juan will review the drivers of our performance in the quarter, provide an update, and discuss our forward look, and finally, they will take your questions. Please, turn to slide 3. I will now turn the call over to Juan.

Thank you, Mark. Good morning, everyone. Thank you all for joining us today. This morning, we reported third quarter adjusted earnings per share of $0.45. Our adjusted segment operating profit was $541 million, down 17% from the year-ago period. Although, we created value in a difficult environment this quarter, our results were below our expectations. The operating environment in the third quarter was more challenging than we had anticipated even three months ago. Ag Services was impacted more than expected by the lack of competitiveness of U.S. corn and soybeans in global markets. And in Oilseeds, global crush margins were even more compressed than our outlook last quarter and we continued to experience tight origination margins in South America. Through the quarter, we took several actions to be even more competitive in the future, including restructuring our global workforce, reconfiguring the Peoria ethanol complex, working to complete several operational start-ups, driving additional asset monetizations and further reducing costs through our Project Readiness initiative. Some of these actions had only begun to take hold in the third quarter. As we move through the fourth quarter, we are starting to transition from the period of costs and investments in acquisitions, new innovation centers and new facilities to a period of lower capital spending and increasing benefits from these investments. Looking at the external environment, we're starting to see the possible green shoots of recovery in certain areas of our business. However, we are not counting on a significant change in conditions for 2018. We are continuing to drive operational efficiencies and asset monetizations that are lowering our cost of doing business and increasing our cash flow. In fact, we are taking additional actions, adjusting capital allocation among our businesses and then overall reduce capital spending level in 2018, which I will talk about in more detail later in the call. Now I'll turn the call over to Ray.

Hey. Thanks, Juan. Good morning, everyone. Slide 4 provides some financial highlights for the quarter. Adjusted EPS for the quarter was $0.45, down from the $0.59 in the prior-year quarter. Excluding specified items, adjusted segment operating profit was $541 million, down $109 million from the year-ago quarter. The effective tax rate for the third quarter was 13%, compared to our forecasted annual tax rate of approximately 28%, due primarily to the effect of certain favorable discrete items, including return to provision and a favorable outcome of a tax position related to an acquisition, partially offset by changes in the forecasted geographic mix of pre-tax earnings and shift to higher tax jurisdictions. Our trailing four-quarter-average ROIC of 6.4% is 60 basis points higher than the same period last year and 40 basis points above our 2017 annual WACC of 6.0%, thus generating positive EVA of $98 million on a four-quarter-trailing-average basis. On chart 18 in the appendix, you can see the reconciliation of our reported quarterly earnings of $0.34 per share to the adjusted earnings of $0.45 per share. For this quarter, we had $0.12 per share charge related to asset impairments and restructuring activities, and a $0.02 per share net gain on the sales of assets and businesses, and a $0.01 per share loss on debt extinguishment. Slide 5 provides an operating profit summary and the components of our corporate line. Before Juan discusses the operating results, I'd like to highlight some of the corporate items affecting our quarterly results. In the corporate line, net interest expense was relatively flat at $72 million versus last year. Looking ahead, we're continuing to project net interest expense of approximately $320 million for the full-year 2017, consistent with what we indicated at the beginning of the year. Unallocated corporate costs of $109 million…

Thanks, Ray. Please turn to slide 8. In the third quarter, we earned $541 million of operating profit, excluding specified items, down from $650 million in last year third quarter. Third quarter adjusted segment operating profit was down 17% versus the year-ago quarter. Now, I'll review the performance of each segment. Starting on slide 9, Ag Services results were down compared with the strong prior-year period. In Merchandising and Handling, North America Grain results were negatively impacted by the lack of competitiveness of U.S. corn and soybeans in global markets. This led to a significant reduction in margins and a decreasing export volumes. Global Trade generated positive earnings as our improvement actions are taking hold. While results declined from the third quarter of 2016, Global Trade benefited from international origination margins and the expansion of destination marketing businesses, offset by some losses incurred due to a lack of correlation on certain hedge positions. Transportation results decreased from the prior-year period due to a slower start of harvest in North America, which led to lower barge freight volumes and margins. Milling and Other earnings were down due to lower volumes, though the business was still a strong contributor and maintained steady product margins. Please, turn to slide 10. The Corn Processing team delivered another strong quarter, with results up from the year-ago period. Sweeteners and Starches had a solid performance with strong margins bolstering the North America business and our international operations continuing to provide solid contributions to overall results. Bioproducts results were substantially higher than the year-ago quarter with ethanol benefiting from higher margins. Animal Nutrition was up over the previous year with Specialty Feed Ingredients benefiting from an improving cost position despite lower amino acid prices. Slide 11, please. Oilseeds Processing results were lower for the quarter in an…

Thank you. Your first question comes from the line of David Driscoll with Citi. Your line is open.

Great. Thank you and good morning.

Hey. Good morning, David.

Good morning, David.

Thanks, guys. Can you give us just a little bit of quantification for the onetime cost associated with the recent investments, things like start-up costs that have and will occur in 2017, but won't reoccur in 2018? And related to that, can you also just talk a little bit more with quantification about the operating profits that you expect that these investments could generate next year?

Yeah, David, thank you for the question. So, we've been talking about Campo Grande and Tianjin, and it's just not only that, it's also we've been building the capabilities in this business. It's a business that its value proposition is resonating very strongly with customers. We are having a lot of success in generating new projects in terms of systems and solutions for our customers as they seek higher growth rates. So, this facility, Campo Grande, for example, in Brazil, will be the best specialty proteins facility in the world. It's six facilities integrated very, very sophisticated complex and I'm very pleased to say that we are in the fifth stage out of six. So, we have only one more to bring to operations in the last quarter. But, we also built three customer innovation centers with rapid prototyping capabilities. We have one in New Jersey here in the U.S. We have one in Australia. We have another opening up now in November in Singapore, and we're going to have another one in South America. So, when you put all these things, David, together probably for 2017 so far, it has impacted operating profit that's about $30 million. So, that's a significant number for a business that is relatively new. So, we are very pleased the way WILD Flavors have been holding that with double-digit operating profit growth, and certainly growing revenue at the rate of 5%. So we expect all these facilities that during 2016 and 2017 have been the headwinds to that business to actually become a source of profit in 2018. And to be honest, it's not only the cost of those facilities and bringing there, but then you have also the cost of the facilities you use to actually fit the market for those facilities where you lose your normal profit because you take on businesses that have higher freight, if you will. And also these facilities have taken a lot of management attention as we bring the leadership ranks of these and we bring the facility to life. So again, they probably mute how excited we are about WFSI. WFSI on a customer front is hitting on all cylinders, and we'll feel very proud and very excited about that in 2018.

So just to be clear, you're saying that in 2017 these owned investments result in about a negative $30 million impact headwind to the business and much of this is onetime in nature. When we go to 2018, those start-up expenses go away and then these businesses actually – can they produce positive operating profits on their own outside of the start-up expenses? That we would take that negative $30 million, reverse it, and then add to it some reasonably – or in relation to that $30 million, a positive impact from those – from all those investments? Is that the right way to think about the 2018 impact?

David, that is correct. That is correct. Normally, it takes us with – we decided on a bolt-on and organic growth strategy, because we thought M&A, in this space, was too expensive right now. So we think it's more value creating. I think the issue that this is more value-creating long-term, but it's probably more painful short-term, because every time you build a plant, you have 18 months of, basically, build and cost. And then the forward six months or nine months after start-up, you're not making your full range of profits from this product. So again with different contributions, your assessment is correct. We're going to see the reversal of those costs that will not happen there. And we're going to start seeing positive contribution from those investments through 2018.

Thank you, guys. I'll pass it along.

Thank you, David.

Your next question comes from the line of Ann Duignan with JPMorgan. Your line is open.

Good morning.

Good morning, Ann.

Morning, Ann.

Just to start on just some clarification. You noted that you expect corn performance to be lower in 4Q than year ago, but I don't think you told us why specifically the volume?

Ann, I think it's about ethanol. If you look at, for example, the same quarter last year, so, Q4 last year was a strong ethanol margin environment, probably in the range of maybe $0.20 or something like that. We're looking more now in the single-digit type of margins going into Q4. So that's the biggest delta. It will be offset partially, Ann, by a stronger performance in Sweeteners and Starch and a better Animal Nutrition results, as we have improved our cost position there. But all in all, we'll not be able to offset the strong ethanol performance of same quarter last year. That's what we're saying.

Okay, and I appreciate the color. And then on the reallocation of CapEx away from Ag Services and into the growth-year businesses or the value-added businesses.

Yes.

Juan, is there some acknowledgement that Ag Services is facing some structural headwinds, just given the global glut of all three soft commodities?

Yeah, I think we have a knowledge that there is a part of Ag Services that is suffering, as you describe, some structural issues. I would say, when we said the reallocation of capital, a couple of things at that. First of all, we do believe that the growth of production over the coming years will come from more yields and less geographic expansion. So as such, we don't foresee to have to build elevators or ports in other areas. We have built, as you know, a transit (28:55) in Argentina, and we are investing in Santos and Barcarena in Brazil. So we feel that we are complete from that perspective. So destination marketing, which is our effort there, doesn't require the same amount of capital. And so, in general, we don't see that much of a need. And if you think about even export capacity in North America, there is enough export capacity if the U.S. will not have simultaneous exports of soybeans and corn, because we expect South America to be competitive in corn through the first quarter. So that's how we're thinking about it in 2018. So we feel that we need less capital going forward in that business.

Okay. I appreciate the color. I'll get back in line in the interest of time. Thank you.

Thank you, Ann.

Your next question comes from the line of Adam Samuelson with Goldman Sachs. Your line is open. Adam Samuelson - Goldman Sachs & Co. LLC: Yes. Thank you. Good morning, everyone.

Morning, Adam.

Good morning, Adam. Adam Samuelson - Goldman Sachs & Co. LLC: So I guess the first question on Oilseeds and coming back to the 2018 comments. And generally you said seeing some possible benefits of green shoots, but not counting on significant change. And I'm trying to think about – and you talked about redirecting capital away from Oilseeds. Now can you talk about the path to the business realizing a higher capacity utilization, both your own and at an industry level to improve the crush margins? Does the tension have to come from reduced Argentinean exports? Is it just you need a couple more years to grow into the meal demand? Can you help me think about the bridge to a better Oilseed environment from where we are today?

Yeah, sure. So a couple of things that we're seeing here. First is global meal demand is expected to accelerate in the near term. Obviously, our customers are very strong, and they've seen a strong profitability at this point in time. We've seen global animal protein production growth and some of them are actually – have announced increase in productions in new plants. So, we see that coming soon. The other thing that we are seeing less of that we see a lessening effect are some of these substitutes. If you think about the impact of competing proteins that we have last year or this year between DDGs and feed wheat. We see that lessening and we think that that's going to continue to help the business. Think about the demand we're seeing in China being very, very strong for protein. If you think about, so far, this year when you compare to last year, crush in China has increased 11% and soybean meal destination stocks have basically stayed flat. So it means there has been a true demand growth of 11% in China, which is very strong and we started to see also in general that price is working its way through the cycle. So, price is creating less production, if you will, in some marginal areas, but it's also increasing demand. So, it takes a while for soybean meal prices to work its way into the ration. But we always have to remember that these prices of meal – milk is always the preferred choice to feed any of these animals. This is the gold standard. So, at equal prices or lower prices certainly it's going to come back into that. So, this is just a little bit the green shoots the environment. Of course the business has made several improvements as they went through the year and they have looked at their facilities. They have optimized some things that they needed to be optimized and they continue to be very excited about the possibilities that the value add continues to bring into the business. It has been performing very well. It has been the second best year of that business. And I would say with a little bit of a reduction in the substitute milk, feeding products, we expect Oilseeds to become a bigger contributor in profit that they were in 2017. Adam Samuelson - Goldman Sachs & Co. LLC: And then, just a second question, because in the last couple years you talked to this earnings construct of, call it a $2.30 or so EPS base with $1 and $1.50 of earnings improvement from things that you could mostly control.

Yes. Adam Samuelson - Goldman Sachs & Co. LLC: Has the experience to-date in 2017 led you to change the view of the base or the timing of how long it could take to realize some of those earnings?

No. Let's review the four buckets for a second for everybody's sake. The first bucket was WILD Flavors at $0.10 per year accretion and WILD Flavors has been growing operating profit 20% every year that we own them. So, we are very happy with that. That's going in the right direction. The second bucket was operational excellence and we continue to deliver those $100 million of run rate improvements every year. So, that's on track. The fourth bucket was, and I'm going to get back to the third one in a second, but the fourth bucket was buybacks, and obviously we're generating the cash flow to do that. The third bucket is where I think I need to call your attention, and that's the one that's coming a little bit slower just because we mentioned the contribution of those assets, they were $0.10 on average, the problem that we have and I explained before when I answered David's question is in order to get those $0.10 you go through a couple of years in which you have negative impact to the P&L because you're building that plant. So, in reality, that hits you a little bit later. And we took those charges in 2016 and 2017 as we were building those projects. That's why to a certain degree now we are turning a page from that period of investments and having those costs that we never adjusted out because they are normal of cost of operations. And now in 2018, we're not going to have all those, so we were integrating small acquisitions and we were building plant. Now, you're going to see that third bucket hitting our P&L on a positive perspective from 2018 or from Q4 onwards versus what it was a negative impact, if you will, during 2016 and 2017 as we were investing. And this was a conscious decision, as I said before, because we thought that we have an opportunity there to grow. We needed to build the capabilities that, as I said, are resonating with the customers. But we thought it was more value-creating to do it organically than given the current multiples and to do it through an acquisition in the ingredient space, so. Adam Samuelson - Goldman Sachs & Co. LLC: Yeah. That's helpful. I'll pass it on.

Your next question comes from the line of Ken Zaslow with Bank of Montreal. Your line is open.

Hey. Good morning, everyone.

Good morning, Ken.

Good morning, Ken.

I guess, when I think about the Oilseeds business. You talked about the improvement or kind of holding it out next year, but can you talk about the new capacity that's coming online over the next, call it, 12 months from AGT, Perdue, all that stuff, and how does that play out? Because it seems to me that the disconnect between the forward and the cash maybe implied by that. And how are you thinking about the recovery there with the new capacity coming online?

Yeah. Ken, it's Ray here. I mean, clearly, there is capacity coming online, but that's also a little bit of recognition that there is global protein growth around the world. I mean, you look at the trends, like 4% to 5% growth in terms of meal demand and protein demand. From our perspective, I mean, some of the recent – the quarter's results, they've been impacted by other factors. I mean, clearly, when we take a look at our results in Q3, for Oilseeds, we've seen that as an example, a lot of pressure in terms of the South American crop, impacting particularly the European operations. A lot of meal actually from Argentina went over to Europe and actually caused us to have one of our lowest quarters from a crush perspective over in Europe. We actually think that, over time, will equalize itself. We actually think production levels will adjust in order to take that into account. We've also seen, for example, on the Oilseeds results, part of it is just due to the simply South American origination. We actually entered the third quarter be more optimistic, regarding farmer commercialization. In fact, at the time of the last earnings call, we're actually seeing some good movements in terms of the crops. But what happened was the currency actually moved the other way as we moved through August, and then the farmers actually just really slowed down commercialization. And that really resulted in our South America results being a lot lower than what we had thought. We also – in the case of Wilmar, I mean, they had a good quarter, but it's clearly below our own internal expectations, and it was about a $35 million impact versus our own internal expectations. So I think, Ken, when we look at the quarter, I think that there's certain factors that clearly impacted us. It doesn't really change our longer-term perspective on oilseeds, which is really demand continues to be robust for protein. We're seeing China continue to be very, very strong in terms of demand side. We do believe that while there are some capacity additions, we actually think that's going to be limited in some respects as the market really adjust to the crush margin levels. And I think we actually get to a level whereby there's going to be a better balance and we're going to see industry margins actually recover in the crush business.

Okay. That's interesting. The second part of the question I have is when I think about China and the ethanol and where they're going to be in 2020, can you talk about the impact that would have on either corn, ethanol and DDGs and how that will affect your business?

Yeah, Ken. So, today China consumption is about 2.6 million tons, right? And ethanol is accepted or used in about 11 provinces in the country. So, when they declare that they're going to try to be ethane by 2020, that means going from 2.6 million tons that they are today to about 12 million tons. The current estimate of capacity being build there is that they're going to get to 4 million tons in 2019. And then the government has declared their intention that by 2025, I think they would like to have a cellulosic ethanol. So, it seems difficult to see that if they're going to have 4 million tons of domestic capacity in 2019 and by 2025 they're going to be 100% cellulosic, that makes sense to build 8 million tons of ethanol capacity in – for a couple of years, if you will. And don't forget also, their ethanol is both corn and rice. So, I'm just assuming that everything is going to go corn. So, I think, at this point in time, if I think about China, if ethanol is important for reducing pollution, there are going to be better ways to reduce pollution than using corn because that is using a disproportionate amount of water that China doesn't have. So, if I'm a strategic guy in China, why will I use water to grow corn? I'd rather go into electric vehicles or importing corn. So, to me, it's going to be more the impact of importing corn than actually the local production of DDGs. Naturally, if there is a more consumption of or production of domestic ethanol, you're going to have some DDGs. But I don't expect the impact at this point in time given the numbers and given the dynamics, I just described to be big. I probably think that that's going to be positive for us in terms of it's going to create a bigger ethanol market that, every now and then, I think we're going to export to, like we've been doing to Brazil. And I think it's going to take some imports of corn from the U.S. As I said, when you have 22% of the world population and 6% of the water, I don't think it make a lot of sense to use that water to create fuel that you're going to burn. I think you're going to create – you're going to use that water to feed your population.

So, you don't think they're going to end up using corn to make ethanol to reach the 2020...

I think they're going to use it, Ken, to reduce their stocks. I think on a forward basis, to me, personally, it doesn't make a lot of sense, as I said, to use water for that. The inventory that they have, that they need to reduce, sure, I think they're going to use that. I'm not sure they're going to be building a lot of plants beyond 3 million or 4 million tons of capacity. I'm not sure I'm going to see 12 million tons of capacity in ethanol being built in China. That's what I'm saying.

But if you have – even in the short term, wouldn't that create a lot of DDGs which would affect the soybean meal demand? I know you said that soybean meal demand is going to be very strong. Is that not a competitor of it?

Yeah. I think in the short term, yes. But all I'm saying is if they get to ethane that could be impactful. But right now, it could be a couple of million tons of DDGs, so no more than that.

Okay, perfect.

It's not 10 million tons of DDGs. That's what I'm saying. It's manageable.

Right. I appreciate.

With the crush – I mean with the demand that is growing 11% per year, that I think, is to me the most important factor when we think about China. If demand continues to grow, all these things are sorted out and will be absorbed, Ken.

Perfect. Thank you.

Welcome

Your next question comes from line Farha Aslam with Stephens, Inc. Your line is open.

Hello Farha, are you there.

Hi, good morning.

Hi.

Could we just continue on the ethanol question and just talk about potential of U.S. ethanol in Mexico, how is that market developing?

Yeah. I mean in Mexico as you probably have heard for – the government is actually looking towards introducing more ethanol into the market. There's about three cities that they're not looking to put it right now, but outside those three cities, they're looking actually to actually bring in additional ethanol blends up to 10% in those areas there. So, we're rather encouraged that we should see incremental growth in that area. I know there has been some talk regarding some injunctions out there, but we think that's going to get sorted out. We do believe, for example, Mexico, is one of these markets whereby vehicle sales will continue to grow. And so, basically, consumption is going to grow in Mexico, and given the pollution considerations in Mexico, we believe ethanol is actually a fairly clean fuel that will actually help them address some of their pollution issues.

So, how much ethanol would you anticipate going into Mexico in 2019 in longer term?

I think it's about a couple hundred million gallons. I mean, I think that's what we're thinking about right now.

Okay. And then...

I think, Farha, I think what you're going to see that at the current prices that ethanol is trading in the U.S., I think we're going to continue to buy demand and to open up markets. I mean, we're trading, what, $0.30 below gasoline, so imagine versus all the other oxygenates. So I think that between pollution in, whether it's China, India, or Mexico, and the low price of ethanol, we're going to continue to see an export market that's going to be vibrant, because we're going to open up new destinations.

That's helpful. And then could we just talk about Ag Services/Oilseeds. And clearly the origination patterns for grain have changed in North America and South America with farmers tending to hold on to their grain. How is ADM planning for the South American harvest differently this year versus the last harvest? And how are you thinking about changing your organization in the U.S. to accommodate kind of more sporadic farmer selling rather than this consistent selling we saw historically?

Let me take a stab at that, Farha. And so in North America, I will say, we've seen a little bit of a shift maybe in the way the farmer uses ADM, if you will, and the times of the year in which the farmer uses ADM. Farmers that have consolidated, have become a little bit larger, maybe has less of a need for – in certain parts of the country for ADM to be in, for example, a truck elevator. But we continue to be very important as you know a rail elevator, if you will, or as a processor or as an export terminal. So we see how, for example, our marketing services, the marketing offering that we are giving the farmer has become a much more complete and much more sophisticated, as it has become more difficult for the farmer to make money. The level of sophistication in how they need to make a decision has increased. And in that, our relationship has become more sophisticated, if you will. So I think that basic things like maybe drying or storage sometimes we do less of, but we do more sophisticated things. So we see, for example, the growth of our stevedoring operations, the growth of our destination market, and the growth of our farmer services. So that's an evolution that happened over time. It's not something that happened at one shot. In terms of South America and how are we dealing with that, South America has two elements. One is the pricing and that – the pricing of the crop. The second is the currency. And we are, of course, making decisions on how to handle that differently every year. And at times, we get it right, and at times maybe like this year, we don't get…

That's helpful. Thank you.

You're welcome, Farha.

Your next question comes from the line of Heather Jones with Vertical Group. Your line is open.

Good morning.

Good morning, Heather.

Morning, Heather.

I apologize if I might ask questions that have been answered, but I was on another call earlier. But I wanted to start with ethanol. I was just wondering if the recent EPA comments regarding the RVO and with biodiesel, ethanol, et cetera, do you think those targets, those mandates are going to necessitate a much more aggressive rollout of E15 over the next two or three years? I mean, my math would suggest so, but I would love to get you all's thought on that.

Well, I just think that with the RVOs, I mean we're talking about, again, 15 billion gallons in the case of ethanol here. We're seeing the U.S. gasoline. It continues to grow, albeit at a slower rate, but it continues to grow. On the export side, looking at next year, we're probably looking for some modest growth versus, say, the 1.3 billion gallons that we're seeing this year, 2017. So we could be up to about 1.4 billion gallons. And then there's upside, in terms of some other markets that will develop, such as Mexico. And as Juan even indicated, in the case of China, they may decide to open up bringing in ethanol as opposed to growing corn using their water in order to make their own ethanol. So like over time, we do see total demand for U.S. ethanol continue to move up over the medium term compared to kind of where we are at this point in time.

I think I wasn't clear in how I phrased my question. I'm saying the 15 billion gallon mandate in our domestic – the domestic use has fallen well short of that for a sustained period of time. And biodiesel has tended to fill that gap. But as that – as we get less imports in on the biodiesel side because the anti-dumping duties and all, it just seems like that gap is going to become more difficult for biodiesel to fill. And so, my question is do you think that's going to necessitate a more aggressive rollout of E15 here in the U.S. to meet that domestic mandate?

I mean, I think that, again, looking at domestic gasoline demand, currently about 14.4 billion gallon in terms of the ethanol blend, that's probably going to move up to 14.6 billion gallons next year. So therefore, I mean, the demand side is moving up towards the 15 billion gallon level, which would be the mandate in 2018. So, we do believe that there is growth in the domestic market. It will be approaching the 15 billion gallon. It'll necessarily need to have like some of the biodiesel in order to trying to meet that particular – those RVOs there.

Okay.

Heather, I think if your question is if you see excess RIN inventories dwindle to lower levels and I think that blending of E15 and higher level blends will be required going forward if that's what you're referring to that – to the need to the...

Yeah. That was...

Yeah. Yeah.

Yeah. That's what I want. Thank you.

So, I think that's a logical conclusion and we are ready to increase those levels from our perspective.

Okay. And then move into China, your comments on the meal demand there. So clearly, I mean if you look at their poultry production, their beef production, just livestock production in general it's not up that much, so that growth is up actually less than a percent. So, the growth has been driven by commercialization of their livestock production as well as a move into aquaculture. And so, I was just wondering if you guys have any insight on how far long we are in that transition within their livestock production, so we get a sense of how many more years we have of that kind of robust growth there.

Yeah. I'm not sure that I have that level of granularity at top of my head, Heather, to answer you. So, we may get back to you later on that. When I see production in the world, and we analyze these data and macro numbers, I'm encouraged not only by the whole growth demand in China, but also the rest of the world is when you look at the next 10 years, is a very significant percentage and is actually twice the size of the China market in that sense. So, we not only see that growth in China and we promise we're going to get you the granularity of those by species in China, but also the rest of the world. Don't forget that. That is a significant number. When we look at the numbers – when you look at the macro numbers, Heather, to feed the world, we cannot forget some of these locations, when you add all up, in 10 years, we need another Brazil in terms of production in order to feed the world. Think about that. We don't need Brazil to grow. We need another Brazil. Where we're going to get another Brazil is the biggest question, to be honest, not where demand is going to be there. It's where we're going to get another Brazil. And that's what we – when you look at the demand in the rest of the world is if you think about in million tons, we're going to go in the rest of the world from about 130 million tons to about 160 million tons in the next eight years or something like that. So, that's a significant number, and I'm not even mentioning China in that number. So, we feel that the demand side is not going to be the problem. The problem is, can we adjust the supply side and can we do it in a way that we can feed the world over the next 8 to 10 years.

Okay. Thank you for that. And my final question is sticking with Oilseeds in the U.S. Going back to Ken's question about expansion, the majority of this expansion is being done by smaller players.

Yes.

So, and that's tended to be one of the problems in Brazil and Argentina is the fragmentation and the smaller players being less rational. So, I was wondering if that is a concern of you guys for North America because it has been such a strong market. And you paint a very convincing picture of the long-term demand outstripping supply, but was wondering if you have any concerns over the next, say, two to three years of there being at least some temporary dislocation in the supply/demand balance in the North American market.

Yeah, Heather. Always, as we look at the dynamics of every market, the competitive pressures we receive, we have some pressures come in at different times. The last year, we feel the pressure of substitutes. Certainly, some of these smaller players trying to fill up their capacity will have to make their space at the beginning. We continue to have very well-integrated facilities not only integrated with feedstocks, but also integrated into refineries with swing capacities. So, we feel strongly about in the medium-term, long-term gain, we have the position to stay there. Will we have disruptions with some of these small players getting to the market? Yeah, they will be localized disruptions and we'll have to manage that. But we tend to manage that, as I said. Every year, there is something that we need to manage. So overall, I think we're going to be all right.

Okay. Perfect. Thank you so much.

No worries.

Your final question comes from the line of Eric Larson with Buckingham Research. Your line is open.

Yes. Yeah. Good morning, everyone.

Hey, Eric. How are you?

Good morning, Eric.

I'm good, thanks. So, I just want to talk a little bit more, just get a little bit more cadence on the Ag Services business in the quarter. I noticed in your working capital that it was a significant cash contributor in the quarter, and this is typically a quarter where you start using a little cash, not obviously as significant as the fourth quarter, but there were just so many moving parts in that Ag Services business in the third quarter. We saw significant farmer selling early on in the quarter, then we had the water problems on Mississippi and Ohio, raised our cost, so we were even less competitive in export markets, we had a delayed harvest, just a whole confluence of just unusual events year-over-year. And you mentioned that your storage numbers should look pretty good, which I would absolutely agree to. Can you just kind of connect the dots for us one, Ray, as to the dynamics in that third quarter and you gave us a little bit of what the fourth quarter is going to look like, how does this all play out for 2018 for your Ag Services with a very unusual third quarter?

So, just maybe some perspectives on the third quarter. First of all, you're right. I mean, it's actually a favorable environment for us to have ownership. And when you actually take a look at our inventory levels, they actually went up. So, we actually did have good ownership in order to take advantage of carries. Now, our total working capital did not go up because we actually managed the rest of the working capital, and some receivables and payables very, very effectively to offset the increase in terms of ownership that we had on the inventory side. The other aspects of Ag Services in the third quarter was – I mean, clearly it was below our expectation and part of it's just due to the fact that just handling volumes were actually down during the quarter versus our initial expectations. In fact, handling volumes were about down 20% versus where we thought we would be. And with lower volumes that had impact on our margins. And so, our average margins versus where we thought we would be were about 50% lower in the U.S. because a lot of it is volume-driven. The other factor is like in global trade. I mean, we had a very good quarter in global trade, but we kind of had a one-off item here in the sense that we had some hedges on some Black Sea sales on both corn and wheat. We hedged it off some North American exchanges and there was kind of like a lack of correlation between the hedge and the underlying movement. And that was about like – that was over $20 million impact for us, which is within the quarter here. So, but as we kind of look forward, we do have good ownership, there are carries in the…

Yeah. Thanks, Ray. I got the sense that your book has to be better as well as your carries. I mean, obviously, we can see that in the cash market. So, that's what I thought was the answer and I appreciate the clarity. Thank you.

Thank you, Eric.

Hello.

Operator?

Okay. I apologize it seems like the backup line was playing music.

Okay. Thank you, Jack.

I would now like to turn the call back over to Juan Luciano for closing remarks.

Thank you, Jack. So, thank you for joining us today. Slide 15 notes an upcoming investor event where we'll be participating in Chicago. As always, please feel free to follow up with Mark if you have any other questions. Have a good day and thanks for your time and interest in ADM.

This concludes today's conference call. All participants may now disconnect.