Good day, everyone and welcome to the Green Plains Incorporated and Green Plains Partners Third Quarter 2017 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, sir.

Thanks, James. Welcome to the Green Plains Inc. and Green Plains Partners third quarter 2017 earnings call. Participants on the call today are Todd Becker, our President and Chief Executive Officer; John Neppl, our Chief Financial Officer; Jeff Briggs, our Chief Operating Officer; Steve Bleyl, Executive Vice President of Ethanol Marketing. There is a slide presentation for you to follow along. You can find this presentation on the investor page under the Events and Presentations link on both corporate websites. 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 releases and the comments made during this conference call and in the risk factor section of 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 our website presentation for information about factors. We do not undertake any duty to update any forward-looking statements. Now, I'd like to turn the call over to Todd.

Thanks, Jim and good morning everybody and thanks for joining our call today. We reported net income of $34.4 million or $0.74 a share for the third quarter. There are a couple of items I want to talk about briefly, and John will expand on them later. In that, we recorded an impact of our research and development tax credit of $49.5 million in the third quarter. The R&D tax credit relates to various product trials we have performed at our ethanol plants over a number of years. While this should not overshadow the small operating loss in the quarter the credit is highly beneficial to our shareholders in either future refunds or lower cash taxes to be paid. To give you a bit more perspective, if you recall, we have always been about continuous improvement in these bottleneck in the plants. I've talked at length about enzymatic and mechanical improvements we have made over the years to drive yields higher and operating costs lower. We have literally done hundreds of trials at our plants over years and along with the benefits of finding ways to achieve higher yields, of which, this quarter remains one of our highest. We now have realized a different benefit for our shareholders. While this has all come at once, you have to remember while earnings vary quarter by quarter basis, tax strategies transcends through multiple years and often take time to come to fruition. The internal and external team has spent complex hours getting to this point. On the go forward, John will spend some time discussing the strategy around this later when he comes on. Also we have previously indicated -- as we have previously indicated we had a $12.3 million of charges related to the issuance of a new term loan replacing…

Thank you, Todd. First, I'd like to tell everyone listening that I'm excited to join Green Plains. Living in Omaha and having worked in the Ag and energy industry, I watched Green Plains grow from a small ethanol company into a significant commodity processing enterprise. It has been an amazing story and I'm looking forward to working closely with the senior team into the future. Now on to the results for the third quarter. Green Plains consolidated revenues were $901.2 million in the third quarter, which was 7% higher than the third quarter a year ago. Revenues were positively impacted by the additions of Fleischmann's Vinegar during the fourth quarter 2016, the three ethanol plants acquired in September 2016, and the addition of three cattle feedlots acquired earlier this year. Consolidated volumes of ethanol sold were for the quarter were up 13% to 380 million gallons, while the average realized price per gallon were up slightly over last year's third quarter. Our utilization rate for ethanol production assets were approximately 84% for the third quarter of 2017. Consolidated net income for the quarter was $34.4 million versus net income of $7.9 million a year ago. The increase is primarily due to the $49.5 million R&D credit recognized in the quarter, partially offset by the $12.3 million of debt extinguishment charges related to the issuance of our new term loan in August. With respect to the R&D credit Todd mentioned, early this year we undertook a study with a third-party adviser to evaluate whether we have qualifying expenses within the R&D credit which Congress made permanent at the end of 2015. The detailed study was conducted covering all open tax years, which included 2013 through 2016 and year-to-date 2017. Management reviewed the detailed conclusions of the study with the third-party tax…

Thanks, John. And as of this time on this call, we are approximately 90% locked in for the fourth quarter and margins are in high single low double-digits. All the data that we see supports a program like this but the wild card still remains unexpected export volumes this quarter. Since the beginning of the fourth quarter, margins have continued to drift downward. Industry-wide inventories are 1.7 million barrels higher than a year ago and days of demand is sitting slightly over 21 days. Overall, we are in a slight oversupply situation for current ethanol demand, but not enough to justify a broad industry slowdown as most of the plants are still running the positive contribution margins and there lies the dilemma; even if we see some additional exports, we will remain in this situation, but it will be a positive emphasis for 2018. So how does this oversupply get sorted out. With ethanol, at the widest discount to gasoline in many years, and this extent out of the curve through 2018, it is getting noticed. It is not only the cheapest octane but approaching the cheapest BTU again, which had led to some growth in exports but a few things need to happen. We need to find the Brazil terrify, place some gallons over the duty-free amounts, we are continually looking at ways to engage China and opening back up their markets to get ready for their 2020 10% initiative and to use our product to prime the pump there. We are working hard to get an open program in Mexico and we believe we will make progress in 2018, and there are so many other important initiatives with countries like Canada, India, the Philippines, and more. Green Plains exports for the third quarter were approximately 11% of our…

Thank you. [Operator Instructions] And we'll take our first question today from Farha Aslam with Stephens Inc.

Good morning. Can we go through your expectation of supply demand balance this year and next year, in particular, what you expect exports to be -- E15 to take and production?

Sure. So right now we're running right around 15.7 to 15.8 run rate billion gallons for the year as an industry. We think we'll export 1.25 to 1.30 billion gallons of ethanol this year. Domestic demand is running right at that 14.3 to 14.4 pace this year. And that would get us right to -- on the low side, 15.55 to 15.75, and the rest being made up in E15 to kind of get us to where we think we'll be. So we started the year a little under, right around 19 million barrels and we will end the year -- we believe right around 21 million barrels, we should see some draws and possibly builds up towards the end of the year depending on the final movement on exports towards in December. So that's the balance. For 2018, I still think we're going to run at that 1.30 million average or 1.30 million to 1.40 million average per day. And when we take into consideration, we are optimistic that exports could exceed this year. We have a lot of work to do. We have countries that we're working on, we believe that the countries -- all that I mentioned on the call are all have great opportunities, with Mexico, Brazil, China and so on. And so our view for next year, keeping Brazil steady, which the Brazilians have indicated to us that they would be steady at those numbers even with the tear-up. I think that's probably the most risky number in our estimate. And/but if they are steady, we could exceed that 1.3 billion to 1.4 billion onto next year for exports, with China being the wildcard.

And E15? next year?

E15 next year could add 200 million to 400 million gallons of new demand depending on the roll out versus this year. If we have 2,000 stations and if you say those stations on average are super stations in general, that sells 3 million to 4 million gallons of gasoline. When you put that oil into the calculator and do the math, it's somewhere between 200 million and 400 million gallons of new additional demand over that. So we're not building a lot, we're not drawing a lot, it's just kind of a weekly basis to study. But overall, it looks at least, if we can slow down this creep that the industry has been challenged with over the last couple of years, I think at that point we could at least have equilibrium and possibly swing in our favorite certain time of the year.

That's helpful. And then, as a follow-up, in your release, you talked about Green Plains becoming more flexible with its production. Could you talk about sort of fixed cost absorption? How much do you know you would have to absorb if you do slow down? And how do you think about kind of -- the staff at the plants that you did slow down?

Yes, labor is actually not a huge component of our overall cost in general. So labor -- the labor; we kept everybody employed the last time we slowed down and I would imagine at this point, depending on the length of a slowdown, if we did a slowdown, that we would not want to impact our employees very much, as that is not really a huge part of our cost structure. The bigger thing is, when we look at it, we'll go right down to worst to best and determine which are close to not covering variable and which are slightly positive. And then looking at that against the impact that we feel would be for the margin structure. So the weaker run, 1.1 billion gallons at $0.08 a gallon to 1.2 billion gallons at $0.20 a gallon, the investments is well worth it, we will absorb those cost easily across the platform while still maintaining the MBCs at the PPP level, which we are very focused as well, we do not want to have a huge negative impact on that business either, but we want to continue grow that business. So we just basically are looking to say, if we even took went down to the MBC level, which again is not on our plans right now, that's 300 million gallons or 700 million barrels off the market, our belief is that would have a positive impact for the overall margin structure and that's just something that we look at or even the one month that we went down, 50 million or 60 million gallons, the reason that we believe the reason that we are in a position at least today to lock margins away as an industry, is because some of the actions that we have taken in the market that we believe positively impacted our results because of the volume. We have the ability to and the right to flex our volumes in the market and we're at that point with scale 1.5 billion gallons and willing to do it that if margins aren't giving our shareholders a return, we will absolutely flex those volumes more aggressively than we have in the past. And we believe that every one penny expansion -- all we would really need is about $0.01 expansion overall on the remaining gallons to absorb most of those fixed costs across the platform.

Next, we'll hear from Heather Jones with Vertical Group.

Good morning. I have a couple of questions. but first, I was just given -- I want to know, given that we have a seemingly much better regulatory visibility given recent pronouncements from the EPA. And as you know, that in your comments, profitability to the blender or north finer at or near record levels. I was wondering, do you see any chance that obligated parties like merchant refiners would potentially seek to do acquisitions or partnerships on the ethanol's space?

I can't comment on that. I mean, I don't think thus far we've seen besides Valero and a few others take positions in ethanol plants. It has been a good hedge today. I mean, if you look at ethanol earnings versus some companies grain cost, there is an offset overall on that. I think -- yes, when I look at the potential for blending ethanol at these values along with their price of the RIN, there's a great opportunity and there's ways to mitigate, and I think you're already seeing that with some of merchant refiners doing that whether it's through more blending or pushing it through retail. I think what's important to note though is that, the EPA has grant a record amount of waivers for small merchant refiners this year on the RIN front. And to their benefit, we obviously hear about the 3 or 4 ones in the market that complain about it, but there has been a record amount of waivers for hardships around RIN that EPA has given, and I think that's an important fact as well. I don't know if merchant refiners come into ethanol or not. I think long-term, it's a strong stable grow industry and we are dealing with a bit of oversupply right now for the last 24 months and that's something that we're dealing with recreep [ph]. I think some of that creep is over, we'll see some new stuff come online still. But in general, our discount to gasoline is really -- we believe a driver in our international demand. When we see these type of discounts in the past, we have seen significant interest in our product more, more globally than we have before, and I think we're starting to see that again. We are starting to see a pickup of export interest as we finish the year for 2018 volumes more than we saw this time last year.

Okay, thank you. And secondly, I want to talk about the deterioration in your relative performance. Your consolidated gross margins have generally tracked extremely well with this industry benchmark that we use. And in Q2, there was a divergence versions, but the majority of that could be explained by the lower utilization but this divergence this quarter once you adjust for the non-recurring R&D credit, it actually worsens from Q2, it was nearly $0.10 a gallon and the GAAP with some of your public peers was unprecedented. So my question is, what happened? Are the plants you've acquired such poor quality that they are waiting on the entire platform? And if so, why did it get so much worse during Q4, I mean, during Q3?

Let's go back in kind of the last four quarters. In Q4, we performed well. In Q1, I think we outperform most of those companies that you mentioned on our gross margins, some of that was due to hedging programs. Q2, we lifted when we took off the those of gallons, we made an effort to reduce. And I think our spread at that point in general, besides one, was right on track. So I don't think we added a massive divergence all throughout those 3 quarters provided in fact, even 3 quarters ago, I think we were either tied or the best performer that quarter on a gross margin standpoint in Q1. Q3, we had a couple of issues. We held up more gallons and we, even with positive conservation margins, it was slow to come off, we held an extra week off. It takes time to turn on these plants. We had a slow start up at 2 of our plants, which hit our P&L this quarter, which I would say was probably $0.01 or $0.02 of the spread. We had high RNM, at 1 or 2 of our plants, which also hit our cross and margin this quarter. And so when you look at all that, there is a GAAP. We did have July was a very long week for us because of all of those things. Actually -- when we look at August and Sept, our cross margin for August and Sept this year was actually in the high-teens pushing towards $0.20 a gallon, we just had a poor July that weighted down header. So in a while, I would argue that, yes, the July definitely weighed us down a lot. We are performing at a level that we should have been performing in August and…

And as a follow-up to that, I was wondering if you could give us something more to hold on to. What I see happening here is, it reminds me a lot of the chicken industry. So a few years ago, pilgrims and Tyson, the leaders were so uncompetitive that they created an umbrella for their all the more nimble competitors. So they're more nimble competitors could expand and know that Tyson and pilgrims will be bleeding before they even were at the break even. So they took on the burden of rationalizing supply for the industry. And the industry -- the ethanol industry is expanding, more productions coming online next year, and it seems you make sure you don't underperform you need to become the like the best, the least cost producer's out there so you're not bearing the burden of it's a blight rationalization. I'm just wondering, and I'm sure I'm not telling anything that you don't already know. So I'm wondering if you could give us greater delay about how you're going to make GPRE the least cost producer to keep that from happening.

Well, we're not -- and nobody will ever get to -- there is a lease cost producer out there that has a big platform, which they bought them right and they have 10 or 11 of the best plants of the platform, you're not going to get to that level. So comparing yourself of at least a 10-plant cost producer, with the platform that they have is going to be hard to do. It's a single, it's all location at that point. Some of those are lease cost depending on where they by their corn, some dependent on where they sell their ethanol bigger in general, I believe that with the acquisitions that we have made and we're driving costs out by now we will not get ourselves back into a position where our operating costs are right in line where they always have a. We have been saying that we are $0.29, $0.32 per gallon on the average operating because on the ethanol after the gross margin online. And of ethanol and natural gas distillers of corn, and these things were heading right back to their providing obviously and our yields are improving, our corn yields are improving and I'm not sure we have to bear the burden. I think the demand that we're going to see for E15 and exports are going to bear the burden of taking this extra inventory, which I think it's beneficial to us. And I don't think that she don't have today of our 500 million gallons out of this market to get us back and bounce back on the market in general is really out of balance 200 to 300 million gallons Paraguay if you get 700 million barrels of the market, if you did that, we would have a very interesting margin structure. So I don't think bearing the burden, it's not our place to bear the burden of the industry nor do we expect that we will do that. I'm confident that we can certainly act operably for our shareholders, I buried the burden for our shareholders and get ourselves in line for going but listen, it's -- I'm not sure you can judge a 1 quarter versus Q1 judging another quarters saying that we have a fallen off to do abyss of the operating structure. I don't -- we just didn't really have the conversation in Q1. And so we have good explanations in July, July all goodness step performed very well. Coming out of those shutdowns it more difficult and more costly than we thought and cost us this quarter. That's really the biggest driver to our underperformance on a gross margin was our July performance would wait down heavily.

We'll now move on to Laurence Alexander with Jefferies.

This is Jeff Schnell for Laurence. Can you talk about the potential opportunities in China if we're going through E10. How do you expect this play out today, build import, can you talk about the dynamics.

Yes. Our intelligence says, there's somewhere in the range of nine ethanol plants in China that today is producing about 650 million gallons or can produce close to 1 billion gallons, so that's -- where we believe is their internal production capability today of a non-operating at capacity. We believe that 10% is somewhere to 323.5 billion gallon range of demand in 2020. In the meantime, there is an opportunity for the U.S. to participate in that market and provide them product, and where we are at versus the cost of gasoline is we're even becoming competitive into China with even some areas with the import duty. And so what we're seeing today is, a lot of talk, a little bit of interest. we think some, we're hearing rumors that some business can be getting done, which we believe will be positive. I think it'll be a slow start if we do anything and start to get their product into the market but it is a cheap molecule. And I think that's the most important thing. It is a cheap molecule, they don't have the capacity to be self-sustaining yet, but I would say, they will work up to that capacity in the coming years to at least take care of some of that. I think they're open to it, I think this trip to China by the administration is extremely important for distillers grains and for ethanol. I think it's on the agenda and I think that, with some of the things that you're seeing in the soy protein complex around lower protein soybeans, the interest surrounded DGG's is definitely picking up in general, both in Asia and the U.S. and around the world because of the DGG's beans being lowest per cost of protein as well. And so that's a -- we think it's all positive going forward. I'm cautiously optimistic as I always am about China, but thus far, the initial messages are looking positive.

And the 165 to 190 non-ethanol EBITDA, is that the bridge for 2018, is that correct? Just to clarify.

That's correct.

Okay. And lastly if I can, it seems this is the highest level of being hedged for the quarter. Giving your comments in supply/demand then what you're seeing in the forward curves, or what sort of prompted that level of hedging and is this on the -- is the 90% on a full production or do you have any assets down on operating at reduced rates for Q4?

19 -- right around high 80% to 90% is in our total production of what we expect in that the 340 million to 350 million gallon range. We are making decisions on the rest of the quarter on some plants. But at this point, we expect to operate in that range and its 90% against those gallons. We can move, and if we something positive coming out to China plant or our other export markets, we could move quickly to lift at that. But we felt let's lock it in for the quarter, at least to have some certainty because the -- when you have 20.5 million barrels and 1.7 million barrels more than last year, the physical markets are not telling you at this point that they'll be a massive expansion in margins, but they're also not telling at this point that they need to go down very much as well, so right now we just felt like to risk of the table, let's get a hedging program on it and this quarter, we will continue to generate high levels of free cash flow even at these levels hedge.

Adam Samuelson with Goldman Sachs for you next question.

Maybe first, Todd, going back to this question about the running the assets. I'm just trying to reconcile kind of the incremental operating costs of bringing the assets up and down that you certainly bore in July. And the comments you made about 2018 that markets only, a couple of 100 million gallons long. Given maybe, was it one-time challenge on the operating cost that you think would repeat if you flex the system? Would you actually considered being proactive and shut down one or two couple of facilities to really start of the supply problems now for 2018. Any thoughts there?

Sure. So we learned a lot on a couple of facilities especially the new ones that we bought bringing them back up was harder and more costly than we expected. Jeff can comment maybe a little bit maybe just a color of that. But not get into the weed. But I think it's important understand that they were a bit more of a challenge to bring back up from the shutdown that we did. John, do you have any comments?

Right, The assets, the continuous fermentation process took some more time to get started. Where the best process is relatively straightforward. Some infection issues, just some throughput issues, fermentation, timing. In addition to that just some maintenance issues. Todd talked about trying to reduce the cost. We certainly had deferred maintenance in the Abengoa [ph] asset that we bought. So catching that up, trying to make sure the plants are more reliable. All of those playing and that decision going forward. Having said that, I think that we're very skilled in taking a plant offline, bring them up. We have a specific one off issues here and there over the years. So we know what we need to do but we'll certainly look and see where it makes the most sense to do that from a margin standpoint. It's not just operating cost, it maybe gross margin, in the various markets. So that's always under analysis. And we know we can go forward certainly with the new assets that we acquired.

We think that bringing those assets, we think the cost of that in general for that month over the whole platform was somewhere in that $0.05 to $0.06 a gallon range, just overall cost of the whole platform, it was very expensive to exercise for us to bring those back up along with R&M flowing through the income statement as well. It had a detrimental impact to the quarter, that July start up. Well, it certainly had a positive impact overall. overall cost margin, that was a bit more of an investment that I'd thought we were going to make in shutting down.

My second question was going to be around capital allocation. Looking at your stock price today, trading below book value, quite low value for the ethanol plants and you back out the MLP. When you think about opportunities to maximize shareholder value here. I mean, it seems like there's a good opportunity to monetize some of the MLP perhaps to buy back some of the parent, but any thoughts on the maximizing the value.

Yes. We think about it all the time. And we thought about it last quarter when we got below $17. Well, I can't tell you what we would do this quarter, we'll discuss this with our board and see what their -- what strategy will be overall. We're highly focused on share price of both MLP, equity markets have been weak at this point. So we're certainly not in any hurry to do anything from the MLP side. And in general, our Green Plains Partners has performed fairly well against the backdrop of the broader MLP performance. And it is due to the fact that we maintain high coverage -- we maintain good coverage ratio and have them continue to increase the distribution. On the GPRE side, we do have the share buyback authorize. I think in the past, as we've seen weakness, we have stepped in and bought. The last time we did that last quarter, we stepped in and the market kind of get away from us and rally throughout ones we -- after we have a step in, and then the window shut on us anyways and then the window open back up [indiscernible]. We're highly focused on it, we don't like share price, we believe it's under value versus the future and the future earnings key of this platform and that we will not be afraid to try to maximize value from that perspective.

Next we'll hear from Craig Irwin with ROTH Capital Partners.

So Todd, to continue along the valuation. I seems that if we look at the non-ethanol EBITDA and what you've shared from the couple of quarters about the trajectory there -- that there's a pretty significant amount of skepticism in the market about your targets being achieved. Maybe can you recap what allows you to significant disability in those businesses, feedlots, vinegar and other items? And maybe share anything you can on the growth potential on these businesses and what you see as sort of directly related opportunities to continue to expand that.

Yes. So when we look at the 3 segments and we take them each step by step, the -- first, we start with the Eigen energy. We are then outcome out of harvest we believe close to full at our grain elevators. Our grain storage capacity of 60 million gallons or so or 60 million bushels, I'm sorry. And with the market paying you a significant return of loss above costs in your space earnings. so we'll come out of harvest full with a ability to earn against that. In addition to that, we will start to see a stronger finish to our merchant trading businesses or distribution businesses. Overall, we had a weak second quarter in Ag and energy due to low merchant volumes, we start to see a pickup in Q3, now we're really starting to see a pickup in Q4 and we'll still end the year and that should be above $30 million for EBITDA in Ag and energy, even though we had a week start, some of that is coming back through just normal counting practices, just timing issues. So what we are -- I believe next year, we'll be able to achieve the same, if not better, in that $30 million to $35 million range or more based on earnings. Our food and ingredient segment has had 2 components to it, which is the cattle feed -- 3 components actually cattle feeding, our Fleischmann's Vinegar segment and food rate corn oil, all we believe can earn in that $60 million to $80 million range, of which, cattle obviously, is the one that can potentially supercharge those earnings depending on the margin structure there. But we still our fine cattle-based are what we believe our base margin so that we can earn against the operation that…

Great. my next question is really a follow-up on the Abengoa plans and the re-start there. Can you [indiscernible] how much of the challenges that you had was learning's and actually executing a restart on these plants versus structural things that will impact your ability to bring them up and down in the future?

It was not structural, it was a -- they needed a lot of work, anyways, when we bought them. We did a lot of work to them when we were down. And we were down for -- in a plant like that, not just a normalize ICM or Delta-Ts and it was just a little bit a different of a process. But some was driven by higher RNM because of the shutdown. Some of it was driven by harder to bring back up, but we learned a lot of lessons and I would say it would be a lot easier next time. Jeff you want to?

Yes. absolutely, we learned a lot of process doing that if we're going to it again.

And so overall, we learned a lot of lessons again, it was a big drag on our quarter, just bringing somebody's plants back up. and because the quarter would have been a much different, would have been different than we achieved mainly through to that July performance.

Next we have Tyler Etten with Piper Jaffray.

I was wondering if you could, just your thoughts around the [indiscernible] policy being discussed in Brazil about how U.S. ethanol fits into a potential deal like that. And then a follow-up, is there any desire for GPRE to operate or build out capacity in Brazil given the push of capacity in the region.

We don't know all the specifics in the bio program. I mean, We think there's some benefits overall. But in general, I think there's a lot of wait and see, there's a lot of pushback. The government level to implementation and I think in the end, we have to wait and see what the overall program will be. Optimistically though, I think that Brazil needs and wants our product. I know that the highest levels. They're still discussions taking place on this import duty, it's getting a lot of attention at -- in Washington, and we'll see what happens when that but if you talk to the market, down there, they still believe they will bring in the volumes necessary to achieve their targets, in which we think could be somewhat substantially similar to this year's volumes. And then the second question; investing in Brazil, I'm sorry. So the second question on investing in Brazil, this point, we don't have investment initiative or a thesis for Green Plains to be an investor in Brazil.

Okay. And then just last one, just your thoughts on China building out their own production. A competitor have mentioned that they don't have the water to produce something like that. Just interested in your puts and takes?

Yes, I don't know their internal capabilities or not. Water has always been an issue in China, that is a good point. In general, they have corn there. I'm not sure the quality of the corn, given the quality of distillers that they would need at this point, but they do have an initiative and they will continue to grow more corn as they go forward. And ethanol is part of their strategy, I think that they'll probably build more ethanol plants and use their local corn with U.S. ethanol as distiller to come in. Unless they can built -- crushing there as well so they buy U.S. soybeans. So it's really hard to say exactly what they'd do. I think water is a good issue, a good point. But in general, we believe that, that the relationship between U.S. and China. And the -- at the highest levels are discussing these topics as we think now -- I think one very important point when we think about China is to look at the distillers grain issue. When China exited the market a few years ago, the whole world thought we wouldn't clear our product. Yet, we found a price, and right now about 100% price of corn. We found a price and the world is clearing our product. If China reentered today, we might have a little bit of excess, but that product has found a home already. And I think if you look at that example, especially when it's cheapest source of a protein to feed an animal and you have an issue with protein and soybeans this year, I think, China's waking up to the fact that they should begin to really look at this product as well as the whole ethanol thing is happening is a somewhat similar idea there, which is, we kicked out a product that we really want to use, does that make sense? And so I think that we will have windows of opportunities to sell our products into there as well for ethanol. And all of that I think is beneficial to the overall balance between supply and demand in the U.S.

We'll now hear from Eric Stine with Craig-Hallum.

I'm just wondering just to clarify something on the exports in Brazil. When you were talking about cautious optimism that, that is flat year-over-year. When you think about 2018, does that assume that the tear ups go away or does that assume that it's got a steady state from where we stand right now?

No. I'm not assuming that the tariffs go away at those numbers. so you can look at it in a couple of ways. If you're an importer and you have the license to import your share and if you bring in double that, an average, you have a 10% duty against your license, not 20% against the other half. And at 10%, the windows start to work if you bring in your total volume. And so that's how I think some will a look at it, which, I'll get my 160 in free, I'll get my 160 with 20%, which is 320 at 10% and the window is open at that point or close to open at that point, and I think that's how they'll view it instead of making $0.10, they'll make $0.03 on import. And again, I don't know their number, I'm just giving you an example. But I don't know their margin numbers on the import but I think that the market's focus on bringing in volume. And I think they'll definitely look at the engineering of the number and the import tariff to say, how do I spread it over a larger amount of gallons? And I think the market was not really focused on that, they were are just focused on the 20%. And so if you do that, I think we'll have an opportunity there.

Okay. And maybe last one for me, I think at a little bit longer term, you obviously mentioned China, but just some other markets that you see on the export front and others talked about India opening up, and that's a very sizable market. maybe just some other ones that you might see as you look out a few years.

To China, we talked about Mexico, we think there's a lot of work being done for some time in 2018 to bring in volumes. Our view Steve in volumes is what?

I'm still looking at it, probably 200 million right now, because of the three major cities.

So Mexico around 200 million is our estimate for 2018, bring in China, India has a major tender for ethanol.

Do they increase the requirement on, and they still haven't met the original one. so it's interesting if they increase their overall tender value.

2 billion gallons.

They took it up 2 billion gallons

2 billion gallons for their tender, which we think is a positive point that we are looking at. In the Indian market, the Philippines is still looking to bring up their internal industry while bring up volumes. So we sold some volumes to the Middle East again this week. We have India volume up for 2018 already. We've got Canada, continues to be a strong user of ethanol and especially when you are my $0.40 it with gas they truly take advantage of that and they take advantage of that blind opportunities. so when you add that up altogether, we're highly competitive in the world from a price perspective, which should bring volume on. It'll probably take volume longer than you think, but we are starting to see more inquiries coming in now for volume that we've seen probably the last six weeks based on the discounted the gasoline.

Omar Mejias with BMO Capital Markets has our next question.

Good morning. This is Omar filling in for Ken, most questions were asked already. I think you had a question earlier but can you add a little bit of color on what's your estimate for the your production next year?

It's going to probably be 1% to 2% in that range. We -- I think people are running. Even though you put on some of volume, if you run full out, you may see some drop in the efficiencies, but I think in general, we think it will be 1.030 to 1.040 type daily average next year which can get you to 15.8 to 15.9 with some production -- with some new construction coming on potentially late in the year. So -- and the overall average, we're not creeping it all the right now. I think we're done as a company, I think other others are done, there are some projects still being under construction, but in general, on average. I think even right now you're starting to see this year, we're getting these 1.050's but it's cooler, so you can run better. I think the one thing we have to look at is that through some of the technology that we have put into place, running slower or running faster is not having the impact on yield anymore at least in our platform that we could run slower and maintain the same yield as when we run faster. So when we start to see the yields at where we're at today at 2.87, 2.88 and 2.89s; when we run faster, we actually don't see those yields drop as much anymore as we would in the past. So that is done through front end efficiencies and things that we have put into place.

And one quick follow-up to that. Just based on this year's weather, I think temperatures is real low but cooler, was that -- is there any impact on -- I mean, was there a sizable impact on production there; it's -- is there a way to quantify that? So just any color around that the weather being a little bit cooler this year or in summer?

On ethanol production or corn production?

Ethanol production.

Yes, I think we ran easier this summer. I mean didn't -- we had about a month of real hot weather where we matched our cooling capacities but in general, if you look at the weather over the last three or four months, there was not a lot of stress put on our system and cooling capacity, so the industry ran really well I think overall.

Thanks. That's it for me.

Next we'll hear from Pavel Molchanov with Raymond James.

Just one question for me and I ask this knowing that you guys are yourselves involved in cellulose ethanol but in the last 48 hours we saw two of the remaining players in cellulose, one in Italy and one domestically announcing an exit from that part of the market and I thought I would get your perspective on that.

We have not invested in it to date, we always said we're a best follower, maybe there'll be some vault on souk and get a little bit out on it. I know companies are working on those, I think a major plant is a hard thing to accomplish and be competitive. Look, we're now $1.40 to $1.50 a gallon ethanol, corn remains in the mid-threes and oil is $60, this is our set up as an industry to make for corn ethanol, we just need a little bit more demand or just a little bit of less supply and this industry will write itself very, very quickly. From sales [ph] side, it is – there is a lot of money per gallon being spent when you could build a new corn-based ethanol plant for $1.80 a gallon and people are spending $10 or $15 a gallon trying to get these plants up and running, it's a hard and equation and it's a long road and it is something that from our perspective we didn't spend any time on nor do we plan out in the future at this point. So it's not surprising but it certainly is disheartening at this point to see that happening.

Alright, I appreciate it.

We'll put you on number one next year, so you don't have to wait for number 10 in the queue for next quarter. So we'll do that for you guys.

Our final question will come from Selman Akyol with Stifel.

Thank you. So question regarding the MLP. You talked about needing to invest the MLP into diversify and I'm curious as to what you're looking at; I mean clearly you've got terminal in Beaumont, you've got Little Rock but sort of what else do you see longer term?

We think there's an opportunity for us to look at fuel terminals that are in-line with things that we could do for them with the build out of E15, and that's probably a couple of years. So if there is a one-off terminals in different areas that we believe does a nice amount of volume for that terminal that we could add value through expanding their ethanol volumes or other products. We'll look at those of terminals, valuations; obviously we have to be somewhat cognizant of the overall valuation and our limitations of what we can do but we've just recently upsized the revolver for GPP, either getting ready for a drop of Jefferson in 2018 and/or looking at other opportunities before that as well. And -- so we believe that -- we believe our long-term, we should have some diversification over straight Green Plains volumes coming from the ethanol plants for the market to understand how serious we are about creating value in that entity.

Got you. And then just one thing on the quarter, in the press release, you guys referenced lower third-party throughput volumes, down at Birmingham, what's the output for that?

We said actually we had lower volumes of other products, ethanol actually performed very well through all of our terminals, it was really things like biodiesel and other products that we saw lower volumes this quarter but in terms of the ethanol volumes that we thought we would handle, we've handled actually mostly steady at all of our terminals and saw an increase in Birmingham. So we'll have to look at that. Or did we see an increase, Steve?

Yes, we did. You're missing just the biodiesel.

Yes, the biodiesel is really where we saw the follow-up this quarter in volumes which we think potentially comes back with some of the new certainty that they're getting around in their market as well.

All right, thank you very much.

That will conclude our question-and-answer session. I will now turn the call over to Todd Becker for any additional comments.

I've been called worse. So -- anyway, thanks everybody for coming on the call today. Obviously, a quarter that had a lot of moving pieces. We continue to focus on cost and will continue to focus on cost, getting them back in line. And on the go forward, we were still very optimistic in 2018, might have been a pushback from 2017 but where we are at today with a little bit slower pace of capacity creep, potentially higher exports and domestic demands study and E15 started to catch a tailwind. We still remain very optimistic for the go-forward strategy and what we're trying to accomplish at Green Plains. So thanks for coming on the call today and we'll see you next quarter.

That does conclude today's conference call. Thank you for you participation. You may now disconnect.