The Andersons, Inc. (ANDE) Q3 2018 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and welcome to The Andersons 2018 Third Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. [Operator Instructions]. And as a reminder, this conference call may be recorded. I would now like to introduce your host for today’s conference, Mr. John Kraus, Director of Investor Relations. Please go ahead.

Thanks, Crystal. Good morning, everyone, and thank you for joining us for The Andersons Third Quarter 2018 Earnings Call. We’ve provided a slide presentation that will enhance today’s discussion. If you’re viewing this presentation via our webcast, the slides and commentary will be in sync. This webcast is being recorded, and the recording and the supporting slides will be made available on the Investors page of our Web site at andersonsinc.com shortly. Certain information discussed today constitutes forward-looking statements, and actual results could differ materially from those presented in the forward-looking statements as a result of many factors, including general economic conditions, weather, competitive conditions, conditions in the company’s industries, both in the United States and internationally, and additional factors that are described in the company’s publicly filed documents, including its '34 Act filings and the prospectuses prepared in connection with the company’s offerings. Today’s call includes financial information, which the company’s independent auditors have not completely reviewed. Although the company believes that the assumptions upon which the financial information and its forward-looking statements are based are reasonable, it can give no assurance that these assumptions will prove to be accurate. This presentation and today’s prepared remarks contain non-GAAP financial measures. The company believes that adjusted pre-tax income, EBITDA and adjusted EBITDA provide additional information to investors and others about its operations, allowing an evaluation of underlying operating performance and better period-to-period comparability. Adjusted pre-tax income, EBITDA and adjusted EBITDA do not and should not be considered as alternatives to net income, or income before income taxes, as determined by generally accepted accounting principles. On the call with me today are Pat Bowe, Chief Executive Officer; and Brian Valentine, Chief Financial Officer. After our prepared remarks, Pat, Brian and I will be happy to take your questions. Corey Jorgenson, who’s President of our Grain Group, is also with us and is available to address questions. Now I’ll turn the floor over to Pat for his opening comments.

Thank you, John, and good morning, everyone. Thank you for joining our call this morning to review our third quarter 2018 results. I’ll start by providing some viewpoints on each of our four business groups. After Brian presents his business review, I’ll conclude our prepared remarks with some comments about our outlook for the remainder of the year and give you a brief look into what we’re beginning to see for 2019. Our third quarter results fell short of our third quarter 2017 results but a significant reason for that shortfall is a timing difference caused by lower basis values in the grain business, driven by abundant grain stocks and near-record corn and soybean yields. The Ethanol Group performed very well in the third quarter but we see some difficulties on the horizon as ethanol prices remain at multiyear lows. Results for Plant Nutrient and Rail groups were comparable year-over-year. The Rail Group continues to ride a gradual market recovery. Grain Group income declined during the quarter as corn and soybean basis levels fell. Frankly, resulting basis reset has provided a good opportunity to purchase most of our grain from this harvest at historically low basis levels. As a result, we’re confident that the market conditions we faced in the third quarter ultimately present opportunities over the course of the next two or three quarters. The other parts of the grain business, namely our risk management, food ingredients and affiliated companies, all recorded better year-over-year results. That was especially the case for Lansing Trade Group, which we’re in the process of acquiring. We’re very excited about the prospect of uniting our two companies. The Ethanol Group’s success in the quarter was derived from continuing good plant operations, much improved DDG values and timely hedging. Their results are especially gratifying given the market conditions created by continued high industry production and stocks. Export continued to be strong despite China’s absence from the world market. The Plant Nutrient group remains challenged by compressed margins in its specialty nutrient product lines. Primary nutrient margins were much improved, but volumes from the quarter were down by more than 10%. Gross profit from the lawn and contract manufacturing business was down on lower margins, primarily due to product mix. The railcar market continues to slowly and steadily improve, but it still remains oversupplied. As a result, renewal lease rates are lower than expiring rates, even though rates continue their gradual sequential improvement. As we expected a quarter ago, our utilization rate rose again, reaching its highest level since the second quarter of 2015 and the group also increased the number of cars on lease. We nearly completed the scrapping program we began in the second quarter and the repair business continued its solid performance that began in the second quarter. It also began operating in four new repair locations. We’re making good progress on our additional $7.5 million run rate savings goal for the year and we still expect to achieve it by the end of this year. We also continued to vigorously promote our zero harm safety culture. Almost 90% of our facilities have operated without a recordable injury year-to-date and the number of behavioral-based safety observations has more than doubled compared to this time last year. I’ll speak later in the call about our outlook for the remainder of 2018. We’ll also provide some of our thoughts on how 2019 is shaping up. Brian will now walk you through a more detailed review of our financial results.

Thanks, Pat, and good morning, everyone. We’re now on Slide 5. In the third quarter of 2018, the company reported a net loss attributable to The Andersons of $2.1 million or $0.07 per diluted share on revenues of $686 million. Earnings before interest, taxes, depreciation and amortization, or EBITDA, were $24 million. These results include the impacts to grain inventories of declining basis levels that were atypically large and have shown signs of reversing. The impact of those grain market conditions also helped cause our results to finish short of our third quarter 2017 results when our revenues of $837 million generated net income of $2.5 million or $0.09 per diluted share. Third quarter 2017 EBITDA was $32 million. As we’ve noted in earlier 2018 quarters, new revenue recognition rules effective at the beginning of this year changed the way certain transactions are recorded, particularly in the Grain Group. This reduction in grain sales has no effect on pre-tax income. Total third quarter 2018 sales would have been $859 million or 25% higher than the comparable 2017 revenue under the former revenue recognition rules. Several discrete tax items raised the company’s effective tax rate for the third quarter of 2018 to 48.5%. We continue to expect that our 2018 full year effective tax rate will be between 23% and 25%. Corporate unallocated net expenses of $2.1 million in the quarter included some unusual items. We recorded pre-tax income of $5.1 million or $0.14 per share from Maumee Ventures, our venture capital arm, including $3.9 million from the sale of one investment and $1.2 million from the increase in the value of another. We also incurred $3.5 million or $0.09 per share in transaction expenses associated with the agreement to acquire the remaining equity of Lansing Trade Group. Our long-term debt increased $66 million year-over-year as we have begun to use our nonrecourse asset-backed rail credit facility. However, our debt-to-equity ratio is up only slightly at 0.52 to 1. Our target ratio is 0.8 to 1, so we have debt capacity for growth. And as we announced recently, we’ll be using that capacity to fund a portion of our Lansing Trade Group acquisition. Next, we present bridge graphs that compare 2017 reported pre-tax income to 2018 pre-tax income for the third quarter and adjusted pre-tax income for the first nine months of the year. In the third quarter, the Grain Group’s results fell by $11.3 million despite improved results from our grain affiliates and especially Lansing Trade Group. We reduced the value of our corn and soybean ownership during the quarter as basis levels declined. In addition, wheat income for the period was significantly lower than last year’s historically strong result. Ethanol’s results improved by $3 million, headlined by higher sales volumes, timely hedging and better DDG values. Third quarter 2017 results included an unusual $1.5 million expense. Moving to our nine-month results on Slide 7. Grain results were down by more than $3 million from 2017, due primarily to lower wheat income, declining corn and soybean basis values and a second quarter impairment charge on Tennessee assets that has since been sold. Ethanol’s results are up $4.5 million on higher sales, timely hedging activity and better DDG values. Two-thirds of the Plant Nutrient Group’s $6.7 million earnings change relates to the 2017 gain on the sale of the Florida farm centers. Rail results are $7.4 million lower, primarily due to a decrease in income from car sales, including a $5.2 million loss from the Group’s previously announced scrapping program. Two-thirds of the $13.9 million improvement in the other segment comes from a year-to-date 2017 loss of $9.1 million by the former retail business. Now we’ll move on to a review of each of our four business units, beginning with the Grain Group on Slide 8. The Grain Group reported a pre-tax loss of $8.6 million, a significant decrease from the pre-tax income of $2.6 million in the same period of 2017. Base grain recorded a pre-tax loss of $10.9 million in the third quarter compared to earning pre-tax income of $3.4 million in the third quarter in 2017. The Group’s results were temporarily set back by declining basis levels. We believe the Grain Group will recover most of this margin in the fourth quarter, with the remainder to be recovered in early 2019. In addition to the impact of decreasing corn and bean basis levels, the Group earned comparatively less income on its wheat positions. The market appreciated considerably more in the third quarter of 2017 than it did this year. Grain’s affiliates, Lansing Trade Group and Thompsons Limited each recorded significantly better results in the current quarter compared to the third quarter of last year, combining for pre-tax income of $2.3 million compared to a pre-tax loss of $800,000 for the same period of 2017. Lansing Trade Group accounted for more than two-thirds of the year-over-year improvement. Moving to Slide 9. The Ethanol Group performed very well in the third quarter despite difficult market conditions. The Group earned third quarter pre-tax income attributable to the company of $9.1 million, which was $3 million better than the $6.1 million in pre-tax income for the same period last year. Margins continued to be stressed by higher industry ethanol production and inventories, but the Group prevailed by selling comparatively more ethanol and E85 and hedging effectively. The group also benefited from relatively higher DDG values. Turning to Slide 10. The Plant Nutrient Group recorded a pre-tax loss of $8 million in the third quarter, which was essentially flat with third quarter 2017 results. However, on an operating basis, the Group’s 2018 results were comparatively weaker as its 2017 third quarter results were negatively impacted by a $2.1 million legal settlement expense. Despite better primary nutrient margins, continued margin compression in specialty nutrients hurt wholesale fertilizer performance. Lawn and contract manufacturing volumes were stable year-over-year. The sale of comparatively more low margin products decreased gross profit by more than $1 million. The Rail Group generated $5.7 million of pre-tax income in the third quarter compared to $6.1 million last year. Its utilization rate averaged 92% for the quarter, which was up 2.5% compared to 89.5% last quarter and well above the 85.8% in the third quarter of 2017. Total cars on lease also increased by about 4%. Despite these improvements, lower average lease rates, higher interest expense and lower end of lease income led to leasing pre-tax income of $2.5 million, which was $1 million lower than last year’s result. The Group recorded income from car sales of $1.9 million, down from $2.6 million of pre-tax income in the third quarter of 2017 but up from the $3 million loss recorded last quarter when the Group scrapped about 600 idle cars. The Rail Group has purchased more than 1,300 cars so far this year while selling or scrapping almost 2,000 mostly older cars. These efforts have allowed us to improve the average remaining life of our fleet. The repair business enjoyed another good quarter despite incurring expenses associated with opening four new locations. The group now operates 24 locations. I’ll now turn the call back over to Pat for a few comments on our outlook for the rest of 2018 and some early thoughts on 2019.

Thanks, Brian. We’re well into the fall harvest with a grain business that is well positioned that should finish the year strongly. While the Plant Nutrient and Rail Groups are doing its best to take advantage of gradually improving markets, we have some near-term concerns at our Ethanol Group as we begin to consider our prospects for 2019. The Grain Group’s performance through harvest gives us confidence in strong earnings for the fourth quarter of 2018 and moving into 2019. We expect the full year 2018 earnings for our base grain business will be similar to its adjusted 2017 pre-tax income and should have strong momentum heading into 2019. Major factors include stronger corn and soybean basis potential as well as wider merchandizing margins on the bushels we handle. While wheat earnings potential is still historically favorable, earnings from grain ownership has become more balanced among all three grains. We also think the fourth quarter results from risk management and food ingredients will meet or beat those of 2017. Lansing and Thompsons each continue to improve their performance and build momentum. Speaking of Lansing, I can report that pre-close planning and integration work has ramped up and is going quite well. The reaction to the news of this pending acquisition by our customers and employees has been very positive. We expect to close the transaction in January. Bottom line is that we view the operating environment going into 2019 as very good for the Grain Group. The Ethanol Group performed very well in the third quarter, but margins have declined in the past couple of months and don’t show signs of improving anytime soon. The Group had comparatively less of its margins hedged going into the fourth quarter than it did entering the third quarter. Despite high export demand, rising production and moderating seasonal driving demand, this has us concerned about margins for the balance of 2018 and into 2019. More specifically, we expect our fourth quarter results to be somewhat lower than the fourth quarter of last year. One other change to note in our Ethanol Group is a 60-day delay in the progress of the construction of the plant we’re building with ICM in Kansas. The delay was caused by near-record rainfall at the site and should not materially change the cost of the project but it may delay its start up, which will impact the Group’s 2019 results. We expect our Plant Nutrient Group’s 2018 results will be similar to adjusted 2017 results after taking last year’s gain from the sale of the Florida farm centers into account. While fertilizer commodity prices have rebounded lately, we think the turnaround in wholesale margins will take some time to fully recover. There are more than a few signs that the Rail Group results should improve. Industry-wide, railcar loadings continue to increase. The number of cars on lease is steadily increasing and our utilization rate is near all-time high. However, lease revenue is still impacted by renewal rates that are lower than the expiring rates they’re replacing. The repair business continued to grow profitably, including the combination of accounting rule changes, second quarter losses from scrapping cars and a higher tank car certification expense, we now estimate our 2018 results will be 10% to 15% lower than in 2017, a slight improvement from our earlier view. We’re confident that we’ll meet or exceed our additional 2018 $7.5 million productivity and cost savings run rate goal by the end of the year. We expect to incur a total of $8 million in Lansing transactions and integration planning expenses, including about $4 million of that in the fourth quarter. In closing, we’re very optimistic about the year ahead for our existing grain business and that excitement is magnified by the prospect of integrating Lansing Trade Group in early 2019. Our view of next year for the ethanol business is cautious, given near-term market pressures. We see some signs of improvement in the Plant Nutrient Group, but specialty margins will take time to recover. We think the Rail Group’s results will be improved over those of 2018. After spending the last three years improving productivity, reducing costs and trimming underperforming assets, we’re excited to be in the growth mode. Combining Lansing Trade Group with our Grain Group will substantially grow our revenues, gross profit, pre-tax income and EBITDA. Along with the ELEMENT project in the Ethanol Group, this acquisition is another big step forward towards achieving our goal of generating $300 million of EBITDA by 2020. With that, I’d like to hand the call back to Crystal, and we’ll be happy to entertain your questions.

Thank you. [Operator Instructions]. Our first question comes from Heather Jones from Vertical Group. Your line is open.

Good morning. Thanks for taking the questions.

Good morning, Heather.

So I have a number of questions. I guess, start with ethanol first. When you say Q4 somewhat lower than '17 – I’m showing '17 you made somewhere between 6 million and 7 million in Q4 for ethanol. And I would have thought it would be much lower. But you’re saying only somewhat lower? Did I understand you correctly?

Yes, that’s correct, Heather. So entering into the quarter – at the time we entered the quarter we had about 35% of the Q4 already hedged and about 20% of Q1 of next year. We have one more shutdown of our four plants to complete coming up here in a week or two, so we’ll be in good running stead at the time. Now spot margins are still very tough, as you all know. I think we’re about $1.35 a gallon at opus in Argo, so that’s about down 12% from 2017. So as I indicated, we have a little bit of hedge going into the quarter that will help. Those weren’t at great numbers, but at decent numbers. So we don’t see a huge drop off, but the numbers will be lower.

So you think it’s highly unlikely that you’re breakeven or loss making?

Yes.

Okay. And when I think about '19 for ethanol, clearly you all had some timely hedges, et cetera, so that’s going to impact the comparison. But if we think about it just from a spot market versus spot market basis, what are your thoughts about the likelihood of this current environment continuing, assuming that China doesn’t come back – there’s no resolution on that front, what are your views on the likelihood of spot market fundamentals improving in '19 versus what we’ve been seeing in the last couple months?

Yes, the outlook, as you said, is a little bit complex because the export market has been strong. We think we’ll finish the year just over 1.6 billion gallons, which is good, and that’s without China. Of course, we have the G20 Summit coming up at the end of the month in Buenos Aires and any positive news on China trade would be helpful to soybeans and grain as well as ethanol DDGs. The outlook – these are historically low prices for ethanol and the value as an oxygenate and an octane booster is still really great value and it’s really cheap on the global market. So you’d think we have a lot more upside than downside from this level on price. Having said that, there’s nothing right now that’s getting the market excited about an increase in ethanol price. So I think in the – the first half of the year will be slow, but we could see some nice increases as we get into the latter part of the year.

Okay. And then going to fertilizer, you mentioned that it will take a while for wholesale margins to recover. Can you help us understand why? Like what drove the lower margin mix in contract manufacturing? It seems like specialty deteriorated further. Like when do we see that business stabilize and actually grow?

It’s a good – we have to divide it into three segments, and thank you for pointing that out. As you know, wholesale NPK prices have rebounded quite a bit. You’ve seen that with the miners who announced their earnings here of late. Prices were higher. We were a little bit down on some of the volume in some of our segments here. Basically, our fall early application was impacted by wet weather. But overall, wholesale looks to be stronger. Our specialty with low grain prices keeps margin pressure from farmers to want to make those moves to specialty. And we’ve had more competition on those products, so our specialty margins haven’t recovered like we’ve seen in wholesale. Completely separate in our lawn and contract manufacturing. In contract manufacturing, we will produce lawn products for other retailers who put the products on the shelves, and sometimes we get peak orders. We’ve been doing very well in that business with additional orders. But a lot of those orders have fallen off. It’s really kind of seasonal when we get those additional contract manufacturing orders. So we had a really good run here the last couple of years and some of that volume has fallen off here of late. We have plans how to fill that up in other areas. So we really have three different stories in Plant Nutrient, a wholesale market that’s recovering, a specialty market that’s slow to recover and then contract manufacturing that’s a little bit up and down, depending on SKU and volume.

And my final question is on the grain business. So you mentioned similar to adjusted '17 and I’m showing adjusted '17 of roughly, I don’t know, call it 24 million when I include Lansing and all in there. Is that the comparison you’re referring to?

Yes, I think that’s the correct number.

Okay. And so going into '19 – because bean prices have already appreciated nicely since the end of Q3, but going into '19, it sounds like you think there is further to go on bean price appreciation. And even though wheat prices have appreciated some, there’s still further to go on that front. Is that what’s driving your spot prices in '19?

Yes, it’s a good question. I think we’re particularly trying to differentiate between flat price and broad appreciation as opposed to what we’re doing on basis. So basis levels of corn and soybeans have been particularly low, almost historically low where we accumulated harvest bushels this year. We still have a ways to go with harvest about 76% done nationally on corn and 83% done on beans. But there’s still quite a bit in Michigan and some of our tributary areas. So basis has been really weak. We see a rebound to happen pretty sharply in grain here in the coming months ahead. So we feel good about that basis ownership. Corey Jorgenson, our President of our Grain Group is on the call and maybe he can add some additional color for you.

Hi, Heather. I just want to add one comment to what Pat said which is to look at what carries are in the futures market for soybeans as you go forward. It’s not just basis appreciation that will drive the income opportunity. Those carries are wide today and corn, beans and wheat are all competing for space, which is what we’ve really experienced this harvest with basis levels seeking the places they got to. Does that make sense?

It does. And I guess can you help me to understand – and again, let’s just assume that China doesn’t get resolved, what besides that drives your confidence of basis appreciation other than just – what drives your confidence over the next three to six months that those basis levels will appreciate in beans, assuming there is no resolution on the trade front?

Again, I will answer that. But again, just differentiate between the carries in the futures market and what we, or anybody else, might expect to have happen with basis. So coming from historically very low levels where we’ve accumulated at harvest here, you have really good crush margins in the U.S. And you still have global demand and supply. While we’re building stocks some, you’re not changing global demand in total and you have the supply to supply it for sure today. But as you know and as the market has seen, we’ve shifted and distorted where different demand bases are coming to get their soybean supply. And so it’s created a lot of inefficiency, but it hasn’t changed demand in total at least not in a material way. So I’ll stop with that and see if you have a follow up.

And just to clarify, Heather, as we’ve mentioned before, we like to – how you can make money in grain merchandise and it’s a couple of ways. One is storing grain and making carrying charges. We had a nice carry income from wheat in the last couple of years. Now, as Corey mentioned, there’s an earning potential on carry in both corn, wheat and beans. So we have that part of it. And then most importantly, just when you can acquire a basis at pretty discounted levels in a harvest like we have this year, that creates opportunity to merchandize those basis levels as we go forward. We feel really good about that ownership.

That’s very helpful. Thank you so much.

You bet. Thank you.

Thank you. Our next question comes from Ken Zaslow from Bank of Montreal. Your line is open.

Hi, guys. Good morning.

Good morning, Ken.

Just a couple of questions. First of all, I didn’t really get how much mark-to-market did you get in the quarter? Just a simple question.

That’s for mark-to-market versus last year the exact number is 11.3 million the difference between last year versus this year. Is that correct?

That’s what’s coming back over the next two quarters?

Yes, for the third quarter. And last year versus this year, we expect to recover that through a basis appreciation here into the fourth quarter and into the first and second quarter – first half of next year. So we won’t get all of that in the first quarter – in the fourth quarter, Ken. We expect to see some of that leak into Jan, Feb, March, and April, May, June on premiums.

Okay. And just make sure I understand this basis, basically you’re capturing the commodity at an undervalued value? And if that basis kind of tightens up and you’ve got the carry in it, it’s like almost like pent up profit that’s coming. It’s almost like betting on the come line ahead of what’s going to happen. Is that the way to think about it?

Exactly. You got it right on. So maybe if you’d have – historically, you would buy a 2,500 and you can buy it 3,500, that additional dime discount you get when buying in harvest is a good thing, a “investment for the future.” And then we hope to turnaround and load out trains for the Southeast. It could be going to the poultry market, it could be going to ethanol players, it could be going to the feed market or the export market. So we expect – the demand is still there and it looks like ownership this year, because of the big harvest, is playing kind of right into our hands and we like that position.

So would that imply that 2018 should be more in line with historical averages in terms of your margin? This is all things that are setting up for you to at least be able to reach at least the midpoint, if not better, right, for your profitability and your margin structure for agribusiness. Is that not the way to think about it?

That’s the way to think about it. And taking in the context the mark-to-market impact we’ve had experienced this quarter and then getting back to more normal merchandizing margins.

Okay. And then what about the elevation margins, how does that play into it?

That’s exactly what I’m talking about. So merchandising margin or elevation margin is all the same thing. Where you buy the grain and then we you turn around and sell it later, that’s our elevation margin or a “merchandising margin.”

And what is going to make that get stronger? Is it just the – because I get the basis point, but what’s going to expand the elevation margin? What are the key drivers?

The biggest driver is just buying it right. Buying it right is half sold. We still see demand, looks to be very consistent on all fronts, on crush margin, on flour milling, on ethanol, on grain exports. So demand is still out there. Feeding all demand looks real steady. So as a domestic player into those markets, those look like they will be solid.

And my last question is on railcar. You said it’s going to be up in 2019. Is it up substantially? Is it up double digits, mid-single digits, low – just some sort of parameters to which you think about that?

Just gradually, Ken. So the good news is our utilization rates are up and we did the scrapping the cars, so we’re positioned real well. Our rail shops are doing fine. But we still have the bubble of leases that were put on one, two and three years ago that we have to work through those ladders of leases to get those booked at higher levels. So that takes a little bit of time to get recovery. But we like the outlook of rail. It feels good. But it’s one of those businesses that doesn’t turn around and skyrocket. It’s a nice steady recovery.

Great. Thank you.

Thanks.

Thank you. [Operator Instructions]. And our next question comes from Eric Larson from Buckingham Research. Your line is open.

Good morning, everyone. Thanks for taking my questions.

Good morning, Eric.

It’s good to have Corey on as well this morning because my next question is kind of this. Just the extremely weak basis, I think it’s almost an historical low in beans. You probably have more bean exposure than you’ve had at probably any time that I can think of at The Andersons. Is that a fair assumption with what that market’s presented to you?

No, not particularly. I think we’re pretty balanced. As you know, we have quite a bit of wheat stored at this point, and corn and bean harvest is pretty balanced. Obviously, we handle a lot more bushels of corn just by the nature of corn crop being so much bigger. Bean basis, though, is like you said, I don’t know exactly historic numbers, but it’s historically very discounted. So that’s where we see a lot of potential upside in the basis.

Eric, if I can I’ll just add a comment. This is Corey. I think maybe part of what you’re pointing out is that – Pat’s comments are exactly right. We’ve got fairly normal – we of course have more incentive to tuck beans away this year than we do in a normal year. So we did our best to do that, but not dramatically different than normal. What we do have is different risk and opportunity in front of us on beans than normal. That may have been part of what you’re pointing out and that is the truth, yes.

Eric, I want to interject because it’s going back to Ken’s question, and Ken had the exact number for you, which relates to your question too, Eric. The total change this year on mark-to-market was $10 million to $11 million, about half of that in corn and soybeans and the other half of that in wheat. So that’s what the exact numbers are. I think I said $12 million, but it’s between $10 million and $11 million.

No, thanks for the clarification on that because we didn’t know what that number was and I actually thought your MTM may have been more like 7 million or something. And frankly, it was a lot bigger than I would’ve thought. So that means the quality of your quarter was better too. So thanks for that information. That really is helpful. And it’s interesting because you can go in the market right now and buy soybeans -- cash soybeans you can buy them all day long at least $1 below board. It’s just the opportunity has been enormous. So I can see why you captured some of that.

And I think the point we wanted to make while – we had half of the corn and beans, the narrowing of the carry in wheat is also a pretty significant impact during this period. And so that’s why I wanted to make that point. It’s about half of that $10 million to $11 million.

That’s correct.

Good, that really helps. That’s very helpful. And then, Pat, I know this is really early and you know what the returns on the farmer level are, et cetera. And I think the USDA just came out and put out kind of their initial kind of look at planting intentions for next year. And as you know, it’s just way, way, way too early. But they put out something like 92 million acres of corn, 82.5 million for beans, but when you look at total acreage, that’s about 174 million versus 170 million – total acreage could be down 2% to 3% next year on those two crops, which makes sense because there’s no return at the farm level. Does that make sense? Obviously, you’ll see – I thought the corn number at 92 million was maybe a little bit too low. Are there any initial thoughts on this? And I know it’s November 6. It’s just way, way, way too early. But I saw that that total number of planted acres between the two crops looked pretty low, and again it doesn’t surprise me given the returns. But any thoughts on that?

I think there might be some economic switch because the corn/bean ratio at about a 2.3 to 1 today and the low kind of outlook on soybean exports, et cetera. While crush margins are very good, there may be some incremental corn acres go in. Frankly, we’d love to see that because that would be good for fertilizer usage. I don’t think farmers let acreage go idle. It’s just a matter of what it’s going to go into. There might be some incremental wheat acres net that we’ve seen, but more it’s going to be a corn question going into next year.

Yes. No, I agree with that. Okay. Thanks, guys.

Thank you. And this will conclude the question-and-answer session for today’s conference. I’d now like to turn the call back over to John Kraus for any closing remarks.

Thanks, Crystal. We want to thank you all for joining us this morning. I also want to mention again that this presentation and slides with additional supporting information are available on the Investors page of our Web site at andersonsinc.com. Our next earnings conference call is scheduled for Thursday, February 14, 2019, at 11.00 a.m. Eastern Time when we will review our fourth quarter and full year 2018 results. We hope you can join us again at that time. Until then, be well.

Ladies and gentlemen, thank you for participating in today’s conference. This does conclude the program, and you may all disconnect. Everyone, have a wonderful day.