Good day, everyone, and welcome to the Green Plains First Quarter 2015 Financial Results Conference Call. Today's call is being recorded. At this time, I'd like to turn the call over to Jim Stark. Please go ahead.

Thanks, Angela. Welcome to our first quarter 2015 earnings call. Participants on today's call are Todd Becker, President and Chief Executive Officer; Jerry Peters, our Chief Financial Officer; Jeff Briggs, our Chief Operating Officer; and Steve Bleyl, Executive Vice President of Ethanol Marketing. We have posted a slide presentation for you to follow along with, and you can find this presentation on the Investors page under the Events & Presentations link on our website. During this call, we will be making forward-looking statements which are predictions, projections, or other statements about future events. These statements are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results could materially differ because of factors discussed in yesterday's earnings press release and the comments made during this conference call, and in the Risk Factors section on our Form 10-K and Form 10-Qs and other reports and filings with the Securities and Exchange Commission. You may also refer to Page 2 of the website presentation for information about factors that could cause different outcomes. We do not undertake any duty to update any forward-looking statement. Now I would like to turn the call over to Todd Becker.

Thanks, Jim, and good morning to everybody, and thanks for joining us today. As we indicated on our year-end call in February, 2015 was starting out with ethanol crush margins under pressure, and from that time forward, during the quarter, the environment remained the same. The weaker margin environment was a result of energy prices searching for and finding the bottom of the market, along with the ethanol industry building inventory in the first quarter, which tends to be the weakest ethanol demand quarter of all quarters in any year due to seasonality of gasoline demand. Ethanol pricing did its job remaining a discount to gasoline while margins have now expanded. This continues to prove the long-term viability of its place in the fuel tank as the cheapest source of octane and blend stock. For the first quarter, we reported a loss of $3.3 million or $0.09 a share. We generated $19 million of operating income from our corn oil marketing and distribution and agribusiness segment, but our ethanol segment was breakeven at an EBITDA level in the first quarter. After generating over $200 million of net income over the last 2 years, 1 down quarter had a de minimis impact on our financial strength for long-term commitment to the industry in the markets in which we trade. We expect to return to profitability in the second quarter and full year, based on current market conditions. I'll discuss the curve in more detail later in the call. Our daily average ethanol production rate was 92.4% of capacity, producing 232.5 million of ethanol in the quarter. We made a conscious decision to slow down and run for yield. We did have an increase in ethanol yield to 2.83 gallons per bushel of corn across the platform compared to 2.81 for the…

Thank you, Todd, and good morning, everyone. Our consolidated revenues were $738 million in the first quarter, which was up slightly from a year ago. For the first quarter of 2015 versus the same quarter in 2014, revenues for ethanol and distillers grains were down 16% and 20%, respectively, due mainly to lower average prices realized for these -- for each of these commodities. Volumes of ethanol sold increased 6.5% to 276 million gallons in the first quarter, while the average realized price per gallon was 22% lower than last year's first quarter. Revenues from sales of grains and cattle feeding increased by $70 million and $45 million, respectively, this year over last year. Our consolidated operating income for the quarter was $4.1 million versus $78.3 million a year ago, primarily as a result of the weaker ethanol margin environment and more limited merchant trading opportunities in our marketing and distribution segment. The ethanol production segment operated at a loss -- the operating loss was $13.1 million for the first quarter compared to $66.2 million in operating income last year. When you add back depreciation expense, you'll see that we were at slightly better than breakeven from ethanol production in terms of EBITDA, compared to $0.34 realized in the first quarter in -- of 2014 and about $0.28 per gallon for full calendar year of 2014. We generated $19 million of non-ethanol operating income for the quarter, which was down $22 million from the first quarter of 2014. This variance was comprised primarily of a $27 million decrease in marketing and distribution, offset by a $2.5 million increase in operating income for corn oil production and a $2.3 million increase in the agribusiness segment. As I said, marketing and distribution's performance was primarily related to a decline in merchant trading…

Thanks, Jerry. For the second quarter of 2015, we are approximately now 80% hedged as of today and have 10% hedged for Q3, and looking to add more. While stocks remain historically high, margins rallied right pass that factor, which we follow, yet today's EIA data validated the fact that stocks are starting to come down and production is starting to come down as well. We felt compelled based on the situation to start hedge our book off the lows of the first quarter. Gasoline demand remains solid coming into driving season. The run rate of the industry, as I mentioned, has come down after a strong winter production season, now due to maintenance shutdowns and warmer temperatures. Some of this will be offset as we're seeing expanded production capabilities that come on- and off-line depending on the time of the year. One indicator why margins are ignoring stocks is the number of days of total inventory supply, including in transit, which EIA does not report. These days are not much higher than last year's during the high-margin environment, but much tighter than all of 2010, 2011 and 2012. We believe this is the cause of the margin expansion, in our opinion, as the gas demand is a driver of days of supply tightness overall, which is a little bit different than we've seen in the past. In conclusion to this topic, current ethanol production run rates and demand growth suggest that inventory levels should continue to draw down over the next 4 to 5 weeks. Usually the market needs validation of this, but this time around, it is not waiting for this to happen. And for all intents and purposes, this one's realistic. Ethanol blending economics have strengthened to a normalized level while wholesale ethanol is trading $0.40 or…

[Operator Instructions] And we will take our first question from Adam Samuelson with Goldman Sachs.

Yes. Maybe, first, Todd, on the hedging activities in the quarter and as you look out into the summer, should we take the comment that you're 80% hedged through 2Q and even 10% hedged into 3Q, as a view that this is probably as good as the margin structure could get? I mean, it looks like spot margins have rallied quite strongly through April. Are you thinking, functionally, this is...

No, Adam. Actually, we put the program on and the margins rallied right through the program that we put on. But we felt, to be prudent, coming off of a down quarter, is to not be impatient on at least locking away a very good first -- or what could be a good first half after staring at a margin curve that was pretty negative for a while. So from our standpoint, it doesn't give you a view of our margin opinion, it just gives you a view of being prudent and locking margins away in Q2 and coming off of a very down quarter. With regard to the forward curve, as you can see, we've locked around 10% of Q3 and the margins have rallied passed that as well. The margin curve showing today is in the mid to high teens along our whole platform for Q3 with some of our Eastern plants in the low 30s and high 20s. So it really just depends on where you're at in the geographics of the U.S. to determine what the best strategy is. The other thing you have to watch very closely is distillers grains have felt soft as of late and the corn base has held very firm as of late. So with locked in corn bases and lock in distillers sales, we felt it was prudent to at least lock some of that away to take some of that volatility out. So it's not just the volatility of the ethanol and the corn market, it's the volatility of everything else, all the derivatives are -- be crushed. So I don't think you can say that, that was a view. I mean, I think we got away from our forward hedging program in Q1 and that proved to be the wrong thing to do and we'll admit to that. We had seen better margins in mid Q4 and late Q3 of last year for Q1 that we neglected to lock away and the market moved so fast away from us that we never had a chance to do it, but we could've locked better margins away in Q1 as a company, as an industry looking out when we had the great margins in Q3 and Q4.

Okay, that's helpful. Maybe just a follow-up there on the DDG side. The pricing there has proven to be very strong of late, although you have seen corn prices start to drift lower. Soy meal prices have come in pretty meaningfully. How are you thinking with the sustainability of current DDG pricing in the 170 [ph], 180 [ph] range? Where it is now? It's at the highest level relative to corn or soy meal, that it's been quite some time.

And so as from RV [ph] to corn, we are trading at the top -- at the higher end of the range. And as corn continues to come down, DDGs have started to come down as well. In relation to soy meal, when you look on a per unit cost of protein, we are still a cheaper per unit cost of protein to continue to feed distillers grain, even taking into consideration the protein difference. And so you can actually still achieve greater values against soy meal to the point I think it's a 1.35 ratio per unit of protein where you can still go up 35% from these prices till you've kind of hit the per unit to protein comparison of soy meal to distillers grain. So with that said, what we've seen is, as everybody talked about the exit of the domestic player in the distillers grain, we continue to sell the distillers grains every day to the domestic players. So they're not -- well, some are kicking it out, some are also leaving it in, and using more and then we've seen the -- with China's return, obviously, that took up any extra slack that there was, but the market had been absorbing already as we kind of -- as we were moving back towards parity with corn as we mentioned. So we're watching it closely, but we are still trading at premium and any China business that continues to get done keeps that premium intact. But beyond that, there's Far East and Asia business that we're seeing continues to increase overall, and it's not just China-driven. And any kind of break in these percentage of replacement values continue to be very well supported. You got a 10% drop in distillers grain, the domestic players start to come in aggressive again, I think.

Okay. And then maybe just I'll try squeezing one in on the proposed MLP. And the question is, in the quarter itself, you generated $5.6 million of operating income and marketing and distribution without much benefit from merchant activities. Where else would earnings have come from that could dairy be going into the MLP, if you can comment?

Well, we probably can't get into any specifics on the structure of the MLP. As we had said in the release related to that, it's our transportation and storage assets that will be going into that MLP. They may not all be located currently within the marketing distribution segment.

We will now go to Laurence Alexander with Jefferies.

This is Jeff Schnell, on for Laurence. Can you elaborate a little bit more on what gives you confidence in the export demand for 2015?

Yes. And when you look out on the curve beyond at some of the nearby noise around Brazilian currency and the sugar harvest and their season of when they really produce a lot of their ethanol, we still remain competitive all the way out through -- through 2016 especially as you get further in the year when the ethanol market in the U.S. is inverted and the ethanol market in Brazil is at a carry. So when you look at that, the spread starts to really widen out beyond April, May. In addition, the currency, obviously the Brazilian currency is helping us now where before when it was below 3.0. It was -- they were definitely getting close to being able to send some volume our way. A little bit of volume arrived, but I don't think that was any sign of a lot of volume coming. I think they're short volume still. I think they still need to figure out what their sugar crops is going to be and I think they still need to produce some ethanol, but overall, their gasoline demand remains very firm down there as well and gasoline demand around the world remains very firm and U.S. ethanol continues to be the cheapest alternative, so beyond maybe a little bit of Brazilian harvest activity, it looks like last half of the year, we are fully back advantage U.S. by those same type of numbers that we saw last year and first quarter and then obviously, we're already seeing business out of the Philippines, India area for first quarter 2016 being asked for pricing. So overall, that gives us our confidence that we should be at least 800 if not towards pushing towards those higher numbers.

Great. And then, quickly on your hedging strategy, you talk about locking in exports, and also just domestic demand, a few quarters out. Are these prices fixed, or are they variable? And if they're variable, when do these prices settle?

So when we sell -- typically, when we sell physical, if it's in the domestic market, we'll sell it to an end user, not a fixed price but we can hedge that fixed price and fix it immediately and crush against that and lock our margin away. So it's really a component of [indiscernible] index pricing. We can lock those index any time we want and then when we get there, it'll just price off and our hedges will fall off and there's a 100% correlation between our hedges and the way they contract prices. So it's really, we want to get the physical volumes on. If they're good index levels, and then from there, we could determine when to lock the financial and then it just settles like a normal hedge strategy settles.

But to be clear, the 80% that we talk about, the 10% that we talk about is fully fixed volumes of ethanol, not just the underlying -- or not just the basis.

And we will now go to Ed Westlake with Credit Suisse.

Yes. So a couple of questions just on the ethanol and RINS update. I mean, obviously, on the fourth quarter call, you were pretty passionate that as driving demand in the U.S. picks up, which we're seeing that the discount for ethanol against conventional gasoline looks a little bit harsh relative to some of the properties, which it has in the pool. But it's still trading a little bit weak, at least in the spot market. So any color there would be helpful. And then the second would be any general comment on whether you think we're actually going to get any updates on the RFS this year?

Okay. Well, what we saw was, Thanksgiving was the start of it where crude oil prices broke. Ethanol broke with it and corn prices, it really didn't do anything. So the U.S. farmer did not value corn from an energy component even though 1/3 of his crop -- is energy. So from that point forward, ethanol and -- actually, ethanol was priced higher than gasoline at that point for a moment. And then, obviously, gas started to go and ethanol has started to go as well, so we remain a discount, but the margin has returned. So I don't correlate the discount as much in terms of the true value of ethanol against gas as I do, to give us a margin to operate. I think that we will continue to -- as long as gasoline prices remain firm, we'll continue to have some type of discount, depending if we have a margin or not. But obviously, if we start to see tightness in these stock numbers and continued tightness, which we believe will continue to happen through late May and June, that spread should narrow a bit, depending on the overall pricing of gas and oil. So it's a component of everything we look at, but the discount to gas is sometimes not as important as the margin that we have. Does that kind of give you color?

Yes. So it's really the margin that's changed and emerged, which has been supported by the demand environment that you're seeing for gasoline and ethanol in the pool.

Yes. When you look at the demand for gasoline, which is really driving then the fact that our bigger stocks aren't expanding our days of overall storage. When you look at that, we're trending well above the 5-year high averages almost on a weekly basis right now for the first half of the year. So gas demand -- and then when you get into summer driving season, we should start to see some equivalent 150 billion gallon prints if you were to annualize it, even though that's not going to be the annualized run rate for gasoline demand, but we will start to see 145 billion to 150 billion-gallon demand prints, which starts -- should start to, again, draw on ethanol stocks as well. And then with regard to the RFS, we're only going to go with what the EPA tells us. They said they will -- had made a deal and they'll have some numbers for us mid-June. It looks like they're going to go with the '14 numbers on actuals. And then if they look at the increase in gas demand, I think they'll be able to then look at '15, and say what should -- what is the number going to be. And then if they give us any room at all for E15 expansion, so -- or any other expansion as well. So I think that they're probably going to -- again, as we said in the last call, kick the can down the road, make it easy on themselves, look at '14 actuals then '15. They can probably get to a number as well, and then '16 depends on what their view on gas demand is.

Okay. And then just quick one on -- you maybe be limited in what you can say, but obviously, in other areas of the industry, say, like refining on the MLP, you've been able to sort of like qualify tanks within ethanol facilities. Just a lot of stuff which is already within the business as something that qualifies for the MLP treatment. Is that directionally what you're looking at without getting into specific details?

I'll probably repeat. I mean, it is ethanol storage and transportation asset. So as you framed it up, storage is a component of qualifying activities and so we're looking at all of those areas of our business that qualify.

And we will now go to Farha Aslam with Stephens.

Just a quick question on what you see on grains, Todd. How do you look at the corn basis that you're seeing coming into your facilities and your outlook on the grain crops would be helpful.

The corn basis has definitely firmed up here in the last several weeks, as the farmer goes to the field and plants his corn. He's going to wait to see what he has coming at him. So to get old crop corn right now, the farmer is absolutely in charge and we're going to have to wait for him to come out of the field and spoon-feed us some corn. So the corn basis has definitely started to have an impact on the overall crush spread. But we had -- most of what we needed locked in for the second quarter and we have a good start on the third quarter for procuring corn. Most interesting though, Farha, is what we're seeing in the fourth quarter. We're starting to see commercial hedgers sell us corn at more historical levels earlier in the season and we think that's probably to make room for some soybeans as well as we have -- we'll probably have a bunch of soybeans this year. So we have started to see in places in Iowa, at the 25 to 35 under numbers, which we typically wouldn't see this early where commercial hedgers are starting to let go of some corn. And so that's a good thing. The interesting thing is the East and the West are basically at parity now, once again, where the East typically would trade at a premium to the West, but we're starting to see where the West has accelerated corn basis, which is why we see such good margins on our Eastern plants versus our Western plants. And so that's impacting the market a bit as well. Overall, our view is the farmer is going to get into the field and he's going to plant the corn. We think that he hasn't -- from what we're hearing is he's not buying the most expensive hybrid, but we still think that he's still -- the numbers are solid what we've seen in the market on corn acres and we expect that, under normal growing conditions, we're going to have another good crop year with not a big draw in the carryout. So overall, we believe that's a favorable fundamental for -- looking forward in the fourth quarter for the crush.

And then if you just talk about driving miles a little bit more. What do you expect kind of gasoline usage would be up year-over-year? And how much do you think ethanol will be used in the domestic market and how much is exported? I think you said 800 million to 1 billion is exported?

Yes. So we think that gasoline demand will be up 2-ish to 3% this year. Ethanol blending is up 3% to 4% year-over-year already for the first part of the year. And so we've seen more blended ethanol into the gasoline as driving has gone up. As the charts have indicated, we'll continue to push ahead of the 5-year demand run rate for gasoline. And so with all that said, you could have 138 billion, 139 billion-gallon gas demand, which then leads to a 13.8 billion, 13.9 billion-gallon at base ethanol demand. If you got 800 million to 1 billion above that, we're starting to see some of the evidence that stocks will draw a bit. Now the industry has shown that they could produce 15 billion gallons for 1 week or 2 at a run rate. I'm not sure we can annualize that. So we're probably capable as an industry somewhere between 14.2 billion and 14.5 billion on an annualized basis, which then leaves us somewhere close to parity, if not, a starting to draw. Again, I can only -- and we'll get the charts out to everybody is to take you back to the fact that when you look at the overall tightness of days, overall with the increased gas demand, some of those numbers we used to look at in the past aren't correlating very well with margins right now where these stock numbers would typically correlate with the lower margin structure, but the fact is that we haven't seen this gas demand really for about 4 years to know what the [indiscernible] number needs to be. In addition, in discussions with others, I'll give others credit, they also pointed out that all of the new tanks that have been built to store ethanol across the United States gives you another baseload of supply, but you can't always access when you look at tank bottoms. That are there all the time, that are not accessible as well, which could be another 0.5 billion barrels that we can't really ever get to. So overall, I think that, that when you look at gas demand and the increase, we have to take into consideration between exports and gas demand, we need higher stocks in any way as it doesn't feel like it's very loose right now.

And my final one is just on import. Could you just delve a little bit more into your comments about imports and the Brazilian kind of pricing of ethanol? What kind of it costs to bring ethanol to the U.S., just some color, on the potential import opportunities that Brazilian ethanol has into the U.S.

So we ran the numbers and obviously the currency is helping us over the last week or so. And while there was a slight window for 1 day or 2 when the currency was at its weakest, that window has closed. And while somebody might have shoved the boat in trying to fulfill an agenda, it may not have been the most economic thing to do. So right now, it appears that the U.S. is cheaper as an origin overall. It appears that there is not a window today to import Brazilian ethanol. And if you go out, really, much past July, it is advantage U.S. fully into the world market and really could not -- there's really not a window at all for export -- for imports to come in here from Brazil. Steve, do you want to comment on that?

No, that's exactly right and -- which makes them less competitive to deliver to the Southeast Asian markets also.

And we will now go to Craig Irwin with Roth Capital Partners.

First, I wanted to ask about the 100 million gallons in debottlenecking and sort of incremental capacity that you mentioned in the release. Can you give us some color on the timing for that to come online and the associated CapEx?

Yes. So we had indicated on the last call, Craig, that this next 100 million -- or 100 million gallons that we're going after is obviously more expensive than the first debottlenecking effort we had over the last 5 years. And that's going to be costing in the range of $0.65 to $0.70 a gallon, which is still the cheapest ethanol gallon we can go after. We're able to do that and be more aggressive on the volume because we have registered RIN capacity at several of our facilities, for example, Dakota, Iowa, that already had extra RIN capacity without any pathway needed to go after that capacity. And so that project alone, Jeff, is 20 million gallons. So that project alone is 20 million gallons and we don't have to ask for any pathway from the government to go after that -- go after those gallons. So overall, we expect by the end of 2015, to be able to produce 100 million gallons more in our platform than we -- than the start of 2015 at a cost between $0.65 and $0.70 a gallon.

Great. And my second question, I'll try terminals question in the context of some historic disclosures that you've made. So your Birmingham, Alabama facility that you built back in 2012 and I guess was finished and commissioned in '13. Back then, you were saying $17 million in CapEx, this is 3-year payback supported mostly by a third party that was going to use about 1/3 of the terminal's capacity. Can you comment maybe on these numbers and whether there's anything that might have changed fundamentally over these past 5 years?

We built Birmingham at around $17 million and we are still on track for a 3-year payback against EBITDA. It is being used by a multitude of customers, including ourselves who put volume through the terminal. And those are longer-term take or pay contracts that we have in place. So overall, that strategy worked well and it had done exactly what was said it was going to do.

And we will now go to Tyler Etten with Piper Jaffray.

I was wondering, with all the on-farm corn supplies and with corn trending lower in the last month or so, I was wondering when you planned on filling those Q3 hedges?

Well, I mean, overall, when we look at Q3, what we mentioned is we were 10% hedged and looking to add to that position as margins have continued to expand right through our hedges and are showing right now high teens on the board and we're making decision now how much we want to extend coverage. Now we're doing that basis the fact that we have some corn basis bought in the fourth quarter -- third quarter, and then we're estimating on what it would take to buy the rest of the corn basis that we would need for a hedge program. If we feel like we can't achieve those values, we don't want to take the risk of being short on corn basis in the third quarter, but feel like the farmer will let go of some of that corn if they're staring at a big bean and a corn crop, and it looks like conditions are off to a great start. And without a doubt, the farmer is in charge of the U.S. corn basis today, but they're going to carry in a lot of stocks. When you look at the carryout, could be pushing 2 billion bushels. The farmer is going to have to let go of some corn. Like I said, we're starting to see some commercials let go of corn in the fourth quarter, which is earlier than we expected, but we need the farmers to let go some of the corner in the third quarter. So we feel like, as the corn basis rallies, the farmer really looks at it from a flat price perspective. But when we say filling hedges for ourselves, we would buy it, do what we normally do, which is lock the margin. So it's a matter of making sure we can buy the corn basis.

Okay. Now my second question would be, could you provide us with any color on where these exports are going, or is there any markets that are trending a little bit differently than normal? The USDA doesn't give us a lot of detail on where these are going.

Well we continue to see Canada being one of our strongest customers. We have Brazil in the first quarter and late last year became a strong customer. We have the Philippines. We have India. We have other countries like that. Steve, you want to comment any more on?

I think the only one you missed that came back in, we missed them in January, was UAE. They're back on the list, [indiscernible] right now. We're expecting a strong one.

We're seeing other interest from newer countries as well, we think there's expanded countries coming as well and that's when we look at it. When you look at there's 30-plus renewable mandates around the world today, ranging from 2% to 10% and growing. And so when you look at that, as you look at the price of ethanol, people are discovering the price of U.S. ethanol globally is a very competitive fuel. These mandates are going to start getting filled. And when you start filling these mandates, we believe by mid-2017, global demand will be greater than global supply when you take into consideration utilization rates around the world of the ethanol. Now there's more ethanol production available globally than global demand, but when you run utilization rates in the mid-80s globally, you really have to see a very big margin structure to bring back that extra percent or 2% or 3% of ethanol production, which we don't think necessarily just comes out that easy. A lot of it is stuck in Brazil with the current sugar issues. That's something that we believe is very fundamentally in our favor on going forward where utilization rates just can't come up, but consumption rates continue to increase. And that doesn't even take into consideration the E15 initiative that's in place in the United States today where, when you look at 3 years out and 5 years out and 10 years out, when you start to get 30% and 40% and 50% of the fleet, E15 with an E15 cap on the fuel tank, all of a sudden, it becomes the standard, not the exception. And you'll see more wide range use of and selling of E15 as well, and there's another factor that doesn't include the 2017 numbers I'm giving you.

And with that expectation that demand will outpace supply, can we expect more capacity expansion in 2016 even in this lower margin environment?

I think the U.S. is -- in the U.S., I think that you will see capacity come online. I think you will see some expansions take place as we are already seeing with a couple of plants across the U.S. in our expansion and some more debottlenecking. So there's more debottlenecking to happen before I think you have to sit and build a plant. But I still think you'll see a plant here and there get built if they can see the demand down the road. Obviously, if the demand doesn't materialize and we overbuild again, then obviously, we're going to have to deal with that. But that just still takes your lowest and most inefficient plants will be the first one to close, so overall, I don't know that we're going to see some rapid build. I think we have to see evidence that demand will be greater than supply, but I still think, in the meantime, you'll see some capacity expansion come online.

And we will now go to Brent Rystrom with Feltl.

Just a couple of quick questions. Do you see the new ethanol railcar shipments feeds as possibly building honestly inventories?

I can't hear you. Can you repeat that?

Sure. Do you see the lower shipping speeds now for railcars, for ethanol railcars. Do you see that as something maybe driving a little build of inventory since it's going to take longer to ship?

I think you'll see an increase in the need for more fleet potentially.

Yes. I mean -- but I also think, when you look at it, so it depends, if they run slower, will they add more locomotives and more power? That's the first thing. The second thing is, we have now seen cars offered to us at $600 to $700 a month for 1 year terms, and that's off of $3,000-plus off the highs. So the market is coming back in our favor from a railcar leasing perspective. We've seen rate increases because of some of the slower speeds start to take shape, but we'll have to see how that transpires.

From a weather perspective, the Ohio River, that basin very high relative to the normal precipitation levels. Everywhere else in the Corn Belt is 50% of normal or less. I'm just wondering, how you think about that and how you plan for that relative to the expectations for third, fourth quarter. I know it's very early. I'm just curious what thoughts you might have.

Yes, I mean, it's very early, obviously in the West. This is great clear weather to plant corn. So we -- let's not complain too much about no rain. Let's get the crop planted in a big way and then start to watch the forecast after that. We are starting to see some of the forecast get wetter, but I think the farmers are full planting mode in the West. In the East, I think they are off to a solid start. We need to make up a little bit in the southwest in terms of we're behind there. But I think overall, it looks like we have a clear window and we have good -- soil moisture west of the Mississippi or east of the Mississippi and it looks like a good forecast in our favor. If we can achieve that forecast once the farmers' done planting. So overall, not too concerned just yet with weather, but watching some of these dry spot closely as you are.

And then final quick question for your Todd. You had mentioned that you think this year will be a solid performance for Green Plains. Can you give us some parameters of what a solid performance means?

Yes. Look, I mean it's not like last year where we saw a curve just explode. But I think when we look at long-term structural margins for the industry, have been between $0.18 and $0.25 a gallon is kind of what we have said. We have seen some years like last year where we saw $0.30, $0.40 plus margins, we do see some of those in the East today. Hard to say what the year will be, but it definitely -- the first quarter will definitely not be the defining quarter for our year. So our trailing 12 is still strong. It should remain strong after the next couple of quarters and we will continue to focus on paying down our debt and managing our company. So overall, it may not be like last year, which was a great year for us. But we feel like getting rid of the first quarter and moving onto the second will give us some opportunities then in the forward curve.

Maybe a different way of asking that is you've had a couple of aberrations. One, to the upside last year and then two, to the downside in 2009 and 2012 as far as profitability. Excluding those years, you've been in that low dollar to a mid-dollar EPS range. Would that be consistent with what you would consider a solid performance?

Well, we don't give year EPS guidance, but I would say the difference now is the fact that we have 1 billion gallons of production versus what we had 300 million gallons back then and we have $100 million or so of non-ethanol operating income inclusive of our corn oil revenue. So -- and growing that as well and then obviously some other things that are happening around the space in terms of we can now run harder because of the investments that we've made in SMT and maintain yield, which is a little bit different story than in the past as well. So we don't give full year guidance on EPS, but when we say that it's obviously a very different platform than it was in '12 and even more so than it was in '09. So you can kick at the highs and lows, but I would say, we probably missed the highs last year as a company anyways and so our average crush for a lot of the quarters was around $0.30 to $0.35 a gallon, but that -- the daily averages were higher than that as you can see in other companies that report at times. But overall, like I say, we believe that this isn't a 1-year deal for us and we built the company to withstand these cyclicals and we saw cyclical in the first quarter with the oil doing what it's doing, and the small loss had very minimal impact on our strategy.

And we'll take our next question from Matt Farwell with Imperial Capital.

You talked about your hedging strategy and you're kind of reverting to locking in margins. And if you look back at what you did heading into Q1, you -- which is sort of a seasonal peak in supply and a seasonal low in demand. Obviously, probably not a good quarter to be exposed to the spot, however, 3Q seems to be a pretty strong quarter for ethanol, generally, and certainly for gasoline demand. And with oil prices lower, it seems like that has only benefited the ethanol industry from a demand perspective. So why not consider going to bat again in the third quarter and being more exposed to spot?

Yes. Look, we're 90% exposed to spot today. So I don't think we'll come into any quarter fully in the spot, but with the strength of our balance sheet, obviously you can see we came into the first quarter exposed to spot. It was the wrong decision, actually. And so like I said, we're often criticized and often applauded for our strategy. And this one, we've got whipped solid a little bit on thinking that the spot margins are always going to be the best place to be. I still think there's lots of other reasons from a strength of company, generation of cash, that you lock a certain percent away with the size and scope and scale that we are. And -- but you can see, I think we went through the worst of it and I'm not sure we will aggressively lock Q3 away, but we still believe that a majority of our shareholder base and our owners expect some percentage of our forward book to be locked away when the opportunity is there. And so we make the best decision that we can, but obviously the balance sheet is a little bit different than in the past where we could stay unhedged longer as long as we feel like that's the right thing to do. So I wouldn't say we're aggressively going to go to 80% in Q3 today, but when you're staring at $0.19, $0.20 a gallon and then $0.30 in the East on some of your plants, it's not such a bad place to start.

That's helpful. And you're operating at 92% of capacity, industry production seems to be only down 5% at best. So you're really taking one for the team here. Do you think any of the other large producers or smaller producers will correspondingly cut back production, certainly perhaps later in the fourth quarter or first quarter of next year?

Well, we were running at 92% of capacity for the team, but we are now running at 96% and pushing towards 100%. So it was more, from a standpoint, this is the decision we made. I think you can disseminate from the information in the market that others had cut back as well, but others had kept running right through lower margins, waiting to see what their returns were going to be. So it's a combination of a little bit of both, overall though, I think we're pushing back towards the higher levels, but the market seems to be leveling off here in this 920 [ph] to 930 [ph] range, and probably we'll see some continued weakness in production as turnaround continues to happen. We'll see when we come out. You got to remember, in the fourth quarter it was cold again and obviously, it's winter, so it always gets cold. But in the fourth quarter and then the first quarter, we -- the industry ramps full out. Everybody had done their work on the plants. The temperatures were perfect. You can run these plants full out without the cooling capacity needed. As we get into summer and spring here, then you have to start bringing cooling capacity on, which gives you limited -- limiting factors on how hard you can run. So that will be some of the things that temper overall production rates back down from that 950, 960, 970 on a weekly basis. But overall, we're running back towards capacity again.

And one other question. You mentioned your comments about East Coast margins side, your plants being strong. However, I'm seeing that the West Coast margins have actually declined somewhat, perhaps due to the resolution of rail bottlenecks. Do you have any comment on why the West Coast margins have been so weak?

Yes, basically, when you look at the corn basis in the East and the corn basis in the West, you have parity. And so it could take you 15 over to buy corn in the middle of Iowa or Nebraska, and it can take you 15 over -- 20 over to buy corn in the middle of Indiana. And so when you look at that, the freight spread is approximately $0.11, $0.12 a gallon. And so when you get to there, you're looking at a $0.11 to $0.12 a gallon better margin structure just off of that, and distillers have more value in the East and in the Southeast more so than the West. So it's a combination of all those factors have brought a weaker margin structure in the West and a greater margin structure in the East. Now that's been consistent now for at least 6 months. And what we were used to is where the West always led the way with the margin structure. So Eastern plants have the portfolio that we have -- and I'm talking about the Corn Belt, I'm not talking about the coasts. So Eastern Corn Belt, Western Corn Belt. The geographic portfolio that we have, we get the benefit now at the East, while the West is a bit of a drag where in the past, it was the opposite.

Okay, and any comments on the West Coast margins?

No, I don't have a plant out there and I really can't comment on that. I know that they've had, for a while, Los Angeles was a very hot market in Q1 relative to everything else or in the LA market or West Coast market, but overall, I don't have a view on margin structures out there.

We will now go to David Driscoll with Citi.

Great. Can you just -- can you update us on BioProcess Algae? I don't think you mentioned it last call or today's call. Is the silence a negative implication on the performance of that business?

Not at all, actually. The site in Shenandoah, we basically increased our ownership there. We have a new management team running the business now. We are focused on streamlining and getting some kind of straight-line production in terms of some of the variability that we have seen in the past. The site in Shenandoah performed consistently throughout the winter, but that is the most difficult time typically for an autotrophic algae growth initiative, but we've discovered new ways through our ethanol plants and synergies to use the -- beyond [indiscernible] and CO2 to grow algae in winter in our facilities. We've got -- now we can take what we learned this winter, which we operate it literally straight through the winter, which we've never done before without much down time. We found the robust cultures that we needed within that time period and now we're actually incorporating that for use in some trout fish feed trials that we're going to start here shortly and we're collaborating for piglet trials as well for a feed product. We are still seeing strong interest in protein and super foods with the aspects of algae for direct human consumption. It's one of the fastest-growing categories in health food and supplement markets, but what we're making sure is that we can get our strain registered from an Omega-3 DHA and EPA standpoint, which is very lacking in vegetarian diets. So when we look at it, we've discovered a lot of new opportunities within the platform. We still are making changes to the technology to figure out what we can grow for the cheapest CapEx and the highest yields. We think there is more to come on that, but our silence is not a viewpoint that what we're doing is anywhere near -- in comparison to our silence, it was just -- we just don't want to overpromise and under delivery. We'd rather under promise and over deliver down the road and we feel like what we're doing right now in that platform is now running it and trying to run it and make it look more like a business than a science project. And so I think we're making a lot of progress there, but more to come in the next couple of quarters, most likely.

Is it this year when you will come to the point where you make the significant CapEx decision that I, think, ultimately has to be made?

Yes, it depends. We just want to be able to sell something and make money doing it and I don't know how significant the CapEx is going to take to do that. There are smaller niche markets that we can go after. What we want to really do is, yes, I mean our goal is to get to a point where we make a decision to say, we're going to grow -- we're going to build a commercial farm to grow our algae. And so we are getting closer to retrofitting our technology so that we can get through a cheaper CapEx at a yield point that makes sense of a revenue per acre, much like a farmer, much like any other production plant does. So if we weren't feeling like we can at least get to a point to make a decision, we'd have stopped the project now. But we're not stopping the project either from product development and/or technology development or CapEx decisions.

And we will take our last question from Majid Khan with Tourbillon Capital.

I had a question also about the hedging in Q3, but I apologize, I'm a little new to the story, so I hope you'll bear with me and I certainly don't want to challenge, Jerry, your business practice of hedging. But I'm a little surprised by some of the conflicting commentary relating to how positive you are on gasoline demand versus where margins can end up versus last year. So I mean, if you'll bear with me, I just wanted to go through this. If my understanding is correct, RINS at $0.70, are these substantiating broadly the assertion you make in your deck that refiners are cracking to an 84 octane level and making $0.03 to $0.04 essentially? Is that what the RINS are telling us?

No, I don't think so. I think that is a structural change that we felt was -- across the U.S. where they're producing 84 base stocks. So if you look at the Magellan system, their base fuel that they ship is 84 octane. Correct, Steve?

Correct.

And so when you look at that, obviously you can't leave their fuel terminal systems without blending ethanol for the most part, or you blend high octane normal gasoline, premium gasoline. And so the RINS have a world of their own. It's a small market supply and demand. And when you import gasoline, oftentimes you have to buy a RIN and so that's often the market defining, but if you're a blender, you don't -- and typically, everybody right now because the economics are blending to their required level. And so we have to wait for the RFS to figure out what those required levels are. But we know 2014 will be a push down the road. So when you look at that, I'm not sure -- I think the one thing you're missing when you say we have record gas demand or a very good gas demand is the fact that we are producing this year at a 920 to 960 run rate and last year overall, we didn't produce at that run rate. So our daily available ethanol is higher with a higher gas demand. So there is some equilibrium here. And when you look at everything we produce against an 800 million-gallon export program and the stocks number, we will see a draw in stocks, but we don't believe we'll see a draw in stocks to the point that we saw last year. So we think stocks can still make a run towards below 18, but we don't think that stocks will make a run to below around a 15 range like they did last year when margins hit the highs. And so it's a combination of all of those things that defines the strategy. It's not just a combination to say that you have best gas demand that we've seen in years because you also have the most ethanol production we've ever seen and you also have an equilibrium point where ethanol seems to be having enough ethanol for the demand, so it's a combination of all those things.

Got it. And I get it, and certainly, with refiners making $0.04 and ethanol trading $0.30 to $0.40 below gasoline, that's $0.70 to $0.80 spread that certainly implies that the market isn't very tight. But where would -- when the RFS was introduced in 2005, 2006, miles driven were about 3 trillion and it's taken us all this time to get back to 3 trillion miles, just at the end of last year. So it feels like, finally, we're back to what the planned production capacity for the country should have been. So where do you think gasoline demand has to be for ethanol to actually be tight and for you guys to capture some of the $0.70 to $0.80 margin that's maybe on the table?

Well, when you look at where we're heading right now, I mean, when we looked at the 2015 initial RFS program, we would have expected that the whole program was based on 150 billion gallons of gasoline demand and driving miles going up, and also I think they planned for the electrification of the fleet and/or alternatives that were in place that are happening today as well as these CAFE and the -- in terms of miles driven, but getting more miles out of your gas tank is a big factor, right? So all of that weighs down on overall gas demand. Obviously, we're seeing the impact of low gas prices and people wanting to drive more because when you have $10 and you fill up with $2 it's a lot -- $2 a gallon is a lot different than when you filled up at $4 a gallon. You can go a lot further and feel better about it -- feel better about that. So I don't -- I can't comment on the 3 trillion miles, I thought those are awfully big numbers for us so, but I can comment on the fact that there are other factors that have made the determination of where gasoline demand is going and probably where it's going to max out here and a lot of that has to do with CAFE and electrification and other alternative things that are happening in the market. So -- but overall, we like it when we're pushing 138 [ph] , 139 [ph] because the industry, with exports, is definitely equilibrium turns in our favor. If we can see over the next 5 years an expanded use of E15 broadly and nationally, that's really what you make the spread up and can tighten things up much more than, say, gas running up another to 142 [ph] or something like that, or gasoline that might be running 142 [ph]. That will only add the 200 million gallons to the demand base. We really need 1 billion-gallon-driver and the only 1 billion-gallon-driver that we can see are coming is a potentially E15, a national expansion, which we are working on very hard.

Got it. So you don't think that 200 million gallons with the industry running at 94% really moves the needle?

Every 100 million gallons moves the needle. So that's how sensitive we are, right? Because when you look at the supply of 21 million barrels or 880 million gallons of stocks, if you take that down 100 million gallons or 200 million, your stocks number now goes to 600 million gallons or 15 million barrels or 16 million barrels, then you've got some real opportunity, right? Every 200 million gallons will make a significant difference at this point. We're going to have to keep up with some of the expansions, but I think overall we can do that. Thank you very much, and thanks everybody for coming on the call today. We appreciate it. Obviously, we're more optimistic about the rest of the year than our results in Q1, but I think we've shown that the resiliency of our platform and the ability to withstand a cyclical downturn, once again, has been proven out and we emerge as a company just as strong as when we started the quarter. So we appreciate your call and appreciate your support and we'll talk to you next quarter. Thanks.

Ladies and gentlemen, this does conclude today's conference. We thank you for your participation.