Good morning and welcome to the Green Plains Inc. and Green Plains Partners Second Quarter Earnings Conference Call. Following the company's prepared remarks, instructions will be provided for Q&A. [Operator Instructions] I will now turn the conference over to your host, Phil Boggs, Senior Vice President, Investor Relations and Treasurer. Mr. Boggs, please go ahead.

Good morning and welcome to Green Plains Inc. and Green Plains Partners second quarter 2020 earnings call. Participants on today's call are Todd Becker, President and Chief Executive Officer; Patrich Simpkins, Chief Financial Officer; and Walter Cronin, Chief Commercial Officer. There is a slide presentation available, and you can find the 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 press releases, in the comments made during this conference call and in the Risk Factors section of our Form 10-K and 10-Q and other reports and filings with the Securities and Exchange Commission. We do not undertake any duty to update any forward-looking statement. Now I'd like to turn the call over to Todd Becker.

Thanks, Phil and good morning everyone and thanks for joining our call today. For the quarter, we reported a net loss of $8.2 million or $0.24 a diluted share. While we had a small loss, we were free cash flow positive for the quarter. We also reported $17.9 million in adjusted EBITDA for the quarter. Before I get more specific on our results, I would like to recognize how proud we are of our employees during the quarter, as we continued our high quality alcohol donation program and partnership with the University of Nebraska, Lincoln as students, staff and professors made hand sanitizers. This product was provided for free to various organizations ranging from day cares, to USDA offices, to local school districts, which we believe positively impacted Nebraska Health and Wellness during this pandemic. The market value of this production from hand sanitizer program was significant and a gratitude from those receiving this was simply something we could not have done without a facility like Green Plains, York, Nebraska. We never ever said no to an organization in need. Our positive results were driven by several businesses within our portfolio. We had another record quarter in our investment in Green Plains Cattle Company, which will allow a dividend to be paid to all the partners. Our high-quality alcohol sales out of our York, Nebraska facility helped deliver strong results and we had some beginning contribution from our high protein sales from Shenandoah, Iowa. Finally, the completed Project 24 facilities continue to reduce our operating costs per gallon. Without these improvements and initiatives, ethanol margins would have been very negative. While cattle in the last half of the year will become more normalized, the rest of the initiatives that provided better performance versus the market margins should continue as part…

Thank you, Todd, and good morning everyone. Green Plains consolidated revenues were $418 million in the second quarter, down $212.6 million or 34% from the second quarter a year ago, driven primarily by lower ethanol production run rates as compared to the second quarter of 2019. During the quarter, we adjusted our run rates down to 53.5% of capacity compared to an 80% run rate for the prior year second quarter, in order to maximize our respective operating margins. Our consolidated net loss for the quarter was $8.2 million comparing favorably to a net loss of $45.3 million in the second quarter last year. Adjusted EBITDA for the second quarter was a positive $17.9 million, up from an adjusted EBITDA loss of $19.5 million for the same period a year ago. For the quarter, our SG&A costs for all segments of $19.6 million remained relatively unchanged compared to Q2 of 2019. Consolidated interest expense for the company was $9.7 million, which was $1.6 million lower than the $11.2 million in Q2 2019, primarily due to an increase -- decrease in overall interest rates. CapEx for the second quarter was $28.9 million with approximately $4.3 million of maintenance CapEx with a balance of $24.6 million dollars being allocated to growth capital primarily for Project 24 and our high protein initiative. With the continued improvement in our overall liquidity driven mostly by non-product sales and financing arrangements, we are revising our target CapEx for the balance of the year and expect full year CapEx to be between $100 to $120 million in line with our original guidance. This estimate includes $28 million of CapEx spent for Wood River protein project during 2020. On Slide 8 of the investor deck, you will see a summary of our balance sheet highlights. We had $243…

Thanks, Patrich. Over the past few months, we have witnessed the industry production drop to levels we have not seen in modern history and come back just as fast as overall industry production dropped to about 50% of overall capacity. While the industry moved faster than other energy industry production to shut down during the COVID, it came back possibly faster than those same industries. However, for Green Plains, we are in a better place than we would have expected at the start of the pandemic. What we learned was York, Nebraska produces a great product that was previously exported to industrial markets and now almost fully transitioned to domestic use. The quality of York's product is very unique as it was originally a beverage facility that has a very different profile than FCC and industrial alcohol being produced by others. That is why we chose this plant to immediately upgrade the USP. We have been able to redeploy some of the equipment, we have in inventory from dismantling our Hopewell location, which is adding to the speed of completing this project. There are a lot of fast followers, just because you have a great certificate that says you make that specification, doesn't mean it's a good product. In fact many of York's early sales were replacing substandard products from other ethanol plants. We have worked closely with branded consumer product companies to get our product into their cleaning lines. Meeting their strict QA-QC requirements from such companies is something that sets us apart and our continued development of York and Wood River to USP secures our position to be a long-term player in this important segment of the industry. These customers know there are many ranges of quality and know that ours is exceptionally high. In fact, we believe…

Thank you. [Operator Instructions] And our first question comes from the line of Adam Samuelson with Goldman Sachs. Your line is now open.

Yes, thanks, good morning everyone. So I guess first, Todd, tremendous amount of moving pieces between kind of market volatility and the internal initiatives you have under way in the quarter. And I guess, I'm trying to parse through the ethanol crush margin that you achieved and it was up about $0.18 a gallon, year-on-year. Is there any way we can dissect the drivers of that between the industrial hand sanitizer sales, Shenandoah ramping from the high-pro Project 24 changes in kind of market crush margins and your internal hedging activities that seem to have been beneficial. Just trying to get my head around how to triangulate the performance through some of those different factors.

So as we're not going to breakout all of that because of competition reasons, I would tell you that if we had none of that, we would have been negative double-digit EBITDA crush margins. And then from there, you can see that we achieved a positive $0.09 a gallon, plus the uplift from cattle. So you can assume that much of that came from all the initiatives that you talked about, but we really don't want to break out the uplift from some of those initiatives individually at this point because the industry, I think at this point is watching closely and we don't want to give them a road map to success.

No, that's fair. I appreciate this -- that limited color. And then as we think about, kind of, the balance of the year and we think about Shenandoah continuing to now, at full rate and Wood River launching mid next year, help us thinking what kind of premiums that you're starting to just to realize on the high pro that you're producing, and, kind of, what's the road map to getting that hired from both a protein, kind of, content perspective, which obviously adds value, but also the different addressable markets as you start getting those redundancies in place from a quality control and supply chain resiliency?

Yeah, that's a good question. Thank you. So if you think about the baseline distillers' grains that we produce, which are worth somewhere in the $100, maybe $120 range and every $100 you achieve as a premium over that for this product that we're producing, adds about $0.06 a gallon of margin to -- and that -- to our production platform. So, as we indicated, we believe baseline this margin, before other improvements, trades at a premium to high protein soybean meal, because right off the production line, first week, that we are producing product, we are producing protein in the 51%, 52% range, as high as 53% mechanically, with no other other technology added on top of that, which was really beyond our expectations. The overall business thesis was made as a baseline high protein, soybean meal replacement and that added about $0.12 a gallon or couple of hundred -- $200 a ton premium to distillers' grains. But because of the protein level and as we've talked about, the J-curve which as the protein level increases the margin increases faster -- the margin improvement increases faster. So as high protein soybean meal is about 47% pro and we're putting 51% pro out right away, as high as 53%, we're getting premiums above high protein soybean meal as well. So our first initial sales we had in place gave us somewhere between a $0.14 to $0.17 a gallon uplift depending on the customer, which basically was a $200 to $300 premium over distillers' grains or up to $100 premium over high protein soybean meal and we believe it will just go up from there. The addressable markets and I will tell you that the value of the product doesn't, in our view and this is a strange way to think…

Thank you. And our next question comes from the line of Ben Bienvenu with Stephens Inc. Your line is now open.

Hey, thanks, good morning. Really, at this point, really solid consolidated crush margins. Congrats on that. It sounds like it's largely internally driven. I wanted to focus in on the hand sanitizer business and lesser in the quarter, in and of itself, but in terms of how you get -- are arranging your assets to be a more substantial player in this market going forward. And I'm curious when you think about making those commitments and converting some of your capacity to produce that product. How do you think about the demand for the product relative to what you supply in a world beyond COVID, where we've seen all that demand? And then how variable is the revenue per gallon for those products that you sell?

Okay. So first of all, we are not just selling our alcohol for hand sanitizer. I think that's really important, a really important point. It's going into many things from cleaners, disinfectants as well as hand sanitizers and the hand sanitizer revolution that we saw early was the initial driver of the euphoria around high quality alcohols. And what happened was, the market got very confused, as you see the FDA recalling and just putting out warnings. Other companies thinking they make the grade, selling it and then the quality and the smell and the odor was be off the charts negative. And then they found their way back to York, Nebraska. So, the early euphoria, I would say, was mostly around sanitizers like that and we've made our way into that and the reputation of York was it was a replacement for bad odor, bad quality products, that they came and got a higher quality product from our company, which led us then into moving away from Ted and John's hand sanitizer company into more of the branded products companies, where they were needing long-term supply as their demand, as the move to quality took place on these products and less about euphoria, more about quality, which is what we announced earlier in our partnerships with GE Current, our partnership with Xerox and our most recent announcement with our partnership with Lysol, that was a flight to quality. And I think that's lost on many who think you're just going to start up and access the market and get themselves injected into the supply chain, because there are many -- many plants have started up with a USP or an FCC grade that will never get -- never make it through QA-QC of these organizations and that's the one…

Very helpful. And Todd, is that, is the revenue per gallon, is it variable or fixed in the contracts that you supply or give us a sense of what's embedded in whether it's volatility or line-of-sight to pricing.

Yeah, for us, what's more important is line-of-sight and putting together partnerships that work for both ourselves and our customers. And I'd say we have taken business away from others, because of our ability to commit to volumes and be fair with our customers and our -- and the people that we supply our product to in our partners as they will extend contracts farther out. More importantly, to us, than getting an elevated price in the spot market is actually locking in a margin for a longer period of time with a partner and helping them, make sure they can lock in their needs at what I would say is reasonable terms and we can lock in our margins at reasonable terms and we work together on that instead of just trying to get the best price as we -- as you can in the spot market. So we've always taken the view as a company that if we can lock-in and become more predictable and know where 75 million gallons of a very high quality alcohol will have a home, we'd much rather have that than playing around and messing around in some of these spot, high-priced markets, although we still have product for that as well, and we're still -- we still are selling some of that, but the long-term offtakes are much more important to us. But no, but they are definitely not at the same level as the nearby prices, but they are at levels that give our shareholders a very good baseline earnings at least, our baseline EBITDA as before everything else starts.

Okay, very helpful. My second question is around Project 24 and you guys have made really solid progress there to the point where it seems like you might need to start to rename the project, I don't know, Project 22 or 20. But can you help us think about what the barriers or governors might be on getting your network below that $0.24 level from a cost perspective? And just kind of quantifying or putting parameters around what we should be considering with respect to what that ultimate opportunity looks like.

Yeah, I think you're on the right track when you think about where we're going to end up because of the results that we've seen with our partnership with ICM as well who I hope not to mention in our other partnership discussion, who has really worked closely with us on driving the cost of our operations down. The results we saw in Wood River put Wood River into the world-class facility and OpEx mode much similar to modern and best-in-class ICM plants. In fact, as we said, we're basically converting the biggest part of the plant to an ICM facility and it's operating consistently like that. The Fairmont facility is starting up right now. We had a bit of a COVID outbreak there. But now that's under control. So we're back in start-up mode, should have that running sometime next week, that's our second big Delta-T after we did two also smaller Delta-Ts. The big driver will be our Eastern plants of Mount Vernon and Madison, those are the Vogelbusch plants and we're going to do the same thing there. We have started to convert Mount Vernon as we speak, we should probably take that plant down in a couple of months for conversion and that will be really the telltale sign of where we end up at the end of this program. But I would -- I would agree with you, it will not be Project 24, it will be probably closer to Project 23 or Project 22. And then from there, I actually think there is next steps that we will be able to take once we're at those levels to drive our cost structure down further, where we can get our whole platform down into that, probably that 22-ish type -- that 22 type range. But…

Thank you. Our next question comes from the line of Eric Stine with Craig-Hallum. Your line is now open.

Good morning, everyone. Hey, I just wanted to get back to the FCC, the USP alcohol. Just curious, obviously much more as you said after the early days, much more of an emphasis put on a higher quality or meeting certain specifications of some of your partners. With that in mind, I mean, what are your thoughts about what your ultimate volume levels could be and we know 75 million gallons at York. I'm not sure if you've ever disclosed what your production level is at Wood River, but would love to know what you think this can be going forward for the overall platform.

No, York is about 50 million gallons, Wood River is at 25. So that's the two plants combined.

Okay

Are being -- both will be upgraded to USP and we are actually now engineering or now starting to design and think about going to VHQ, which is very high quality, just continue to go. We don't want to stop. I think from our standpoint, we have to continue to differentiate ourselves and because we have such a big starting advantage, because York was already a beverage grade facility and Wood River is getting massive columns -- distillation columns from our Hopewell facility that we have in stock today that can transform that B Grade column that -- I'm sorry York's getting the massive distillation columns, but Wood River now being a B Grade facility is going to get the same treatment as well. We can move so much faster, but we're not going to -- as I said, we're not going to stop. I mean, we probably won't become a beverage grade seller of alcohol, but we want to get to the VHQ type specs, the very high quality pharmacy grade. We want to continue to move because USP moniker is not really the same with every single plant. And we would warn and tell customers out there that buy product from this industry to make sure you know what you're buying, because USP is not USP at every facility, make sure the odor meets the standard and make sure the quality meets the standard. And while you might get the moniker, it might not give you what you're, what you're looking for. So make sure you're very, very careful on that. So I think we're going to probably stay around 75 million gallons. There is enough projects announced, let's see if there is any growth in the business as we move into specialty alcohols and VHQ type alcohol and how it -- and we do have a strategy around that. We'll wait and see if we transform anything else, but right now I think we're very good at the volumes that we're selling today. The market, there are, the market is active, but I wouldn't say it's, it's deep without, without a lot of work.

Got it, got it. And maybe just follow up on that, I mean, just in response to a previous question, talked about your preference to be under long-term contracts. I'm just wondering, are you able to or willing to disclose the contracts that like the one this morning, you've got through the end of '21 versus the ones that are -- have yet to come up for renewal? Just trying to get a sense of what -- the contracts that reflect today's environment and going forward rather than ones that maybe were signed in 2019.

I can only comment that in the beginning of the COVID crisis, the market was in that $5 to $10 a gallon range for some volumes because of the shortness of supply. And then it's come down from there. It's definitely a premium to fuel grade because it costs more to make. It's a much different supply chain, much different logistics, much different cost structure, but it's definitely not in that initial euphoric price range. But either way, when you take 75 million gallons and you multiply it by something better than fuel grade and as I said, probably not over that low end of that euphoric range, it's still, it's still meaningful. But it's just different customers. We'll pay different for different needs, whether it's a long-term, short term totes versus rail trucks versus gallons. I mean you can go on and on and on, and in fact, we are starting up two packet lines at the end of the month at Green Plains owns with a partnership with a pharma grade company, a pharma company in a clean room facility. We're starting up two packet lines to give one milliliter, single-serving delivery mechanism, for the market and we've already -- we're going to make -- we're going to make packets, not just for our own distribution, but also for our customers that will buy the one millimeter, 1.5 milliliter packet lines that we order those from European manufacturers right at the beginning of this, as we saw the vision for the need for different delivery mechanisms. We've partnered with others that make 1 gallon jugs, that trade a lot higher because of the cost of production. So it's really all over the place, but we're involved in all the different sizes and all the different delivery mechanisms and if somebody needs to move from totes to rail and rail to truck and truck to gallons, we can deliver all of that. And that's what I think makes us very unique in our ability to service very high end, high-quality customers better than anybody else, today.

Thank you. And our next question comes from the line of Pavel Molchanov with Raymond James. Your line is now open.

Thanks for taking the question. Kind of a high-level policy dynamic, we're obviously watching the stimulus conversation in Congress wrapping up here, presumably. What do you think the ethanol industry can realistically get from the next stimulus package in your mind?

Well the difference between reality and hope is -- is wide, right? Hope is not a strategy. It is sometimes all this industry has. But the reality of it is, we're probably not going to get very much. And any -- and everything else is wishful thinking. I think that if we get something, we are obviously not going to say no, but I think it's a very hard ask and it continues to try to get pushed out of the legislation. And our champions continue to try to keep it in, that believe this industry was damaged from many different policies that -- and many different issues that took place. This EPA damaged this industry beyond reproach. They -- the China trade war was damaging to us. And I think that we need -- a little payback wouldn't be so bad, but I'm not sure that that's going to happen. And so I'd say that the chance is low that we probably see very much, but relative to what we've endured, more probably than any other industry impacted by China trade, EPA and other policies, we are probably the biggest impacted -- the industry that was -- had the most impact negatively as the ethanol industry. And I think that that needs to be taken into consideration.

Okay. One other kind of policy dynamic, this one from the other side of the Atlantic. When we talk about exports. It's usually Western hemisphere and in China, in the conversation. But we're seeing more and more headlines from Europe about the European Green Deal, the climate law, etc. Why is the U.S. industry not exporting billions of gallons to the world's largest fuel market?

Because exactly what the administration is fighting, which is breaking down tariffs, is exactly what has to happen. And it's a very unfair system where we'll bring in Brazilian ethanol without a tariff, but they tariff us to go into Brazil. We'll bring in Chinese products without a tariff, but we pay a tariff to go into China. We will bring EU products without a tariff, but we pay a tariff to go into the EU. And we continue to get unfair trade policy around ethanol everywhere in the world that we have to compete not only be cheaper, but also have to be cheaper, when you take into consideration a tariff while our boats pass in the night, as our policy is flawed on many different fronts. We've done a good job building up our exports of ethanol around the world to what was pushing -- what was going to push probably 2 billion gallons. And I would say because of COVID and because of the lack of movement, we are significantly -- we're going to be significantly hampered at least over the short term to get ethanol out of this country and it's going to be driven both by not just COVID, but also trade policies and tariffs and that's what I think where we support this administration is, in the fact, that they are trying to break down these tariffs. What's crazy is that, while we can get our ethanol into China, they're stealing our corn at the lowest farm prices that we've seen in how many years. I mean this is a a unbelievable grain robbery from China stealing the corn out of the United States, stealing farm products from the U.S. farmer, when not having to buy US ethanol and putting a tariff on that, while they come into our country and let COVID and this trade policy drive U.S. corn prices, lower and now they step in and now they're going to buy? That to me is a gross -- that is a complete, what I would say, mistake of our agricultural policy to let that happen and I think we need to stop it.

Thank you. Our next question comes from the line of Craig Irwin with ROTH Capital Partners. Your line is now open.

Thank you. Todd, I would agree with you, blatant ineptitude at the head of the EPA. My question is about high pro. So can you please update us on the collaboration with Novozymes? What you're working on and what you expect within the next few quarters incremental production available out of the yeast strains that you're using and other potential enhancements to the product? And then the Norwegians obviously want soy out of salmon. They've taken some specific actions there already. Can you quantify for us what the size of the Norwegian aquaculture market is and is it going to take many, many high pro plants beyond what Green Plains can do to satisfy their demand?

Yeah. So with regard to what we're doing on moving up the price curve. It's not just a combination of just the level of protein, which has been done for -- Fluid Quip was doing that long before and collaborating to move those up the protein J curve long before anybody else even thought about it. And so we believe that won't be the biggest issue to do that. In fact, it's a combination not just of protein, but as you said yeasts and other things that we're working on to really create a product. If you think about the J curve that we've talked about, which is the higher the protein, it's not a linear price move on value. It's a J price move, which is the higher the protein, you get actually multiples higher on price. And when you think about that if you flatten out that surface all around the J-curve, that's where we're going to operate, because it's not just about a higher protein. It's about nutritional solutions and that's where we, where we believe the partnership with Novozymes is really what that takes us to. It's going into their libraries of other things that they do, other than just moving protein higher and partnering with them to provide solutions to our customers that are much more valuable than just the level of protein. And so we're making -- and what we wanted to do is get to a steady state in Shenandoah and run that way for a while before we start to bring these other nutritional solutions into the product quality and that's going to probably start to begin shortly there. Our partner is chomping at the bit and ready to go. We believe that we have lots and lots of innovation to add…

Thank you. And my second question, I guess, I should start by saying, congratulations on the $75 million debt financing. It really does give you a cleaner runway. Many of us thought you would probably monetize your cattle assets, sort of back of the envelope math is, you would get something similar to what you got for the other half $75 million. Is there may be an opportunity to do high pro faster on monetizing cattle or maybe a plant sale if that's still available to you? What would it take to do high pro faster and is that potentially under consideration for the next couple of quarters?

Yeah. We're looking at accelerating and moving at warp speed if we can on high pro. We want to get it rolled out across all of our production facilities that we have and we're working on a strategy to do that. Financial strategy to do that, inclusive of many of the things that we've mentioned in the past, some that you've mentioned on this call. But the great thing about this announcement and the approval that we got and trying -- and getting -- and now getting to a close hopefully mid-August, mid-to-late August with the lender who we will announce at that time, is that it validates that this is a financeable asset. Now remember, what's interesting is, this is not just bolting on a few pieces of equipment. It's a stand-alone high protein production facility that gets fed a stream from the ethanol plant, but that's it. At that point, it's on its own. It has its own driers. Its own production facility. Its own load out. Its own quality control. It's much higher in standard to -- as we service pet and aqua markets, so it's own -- as you've seen -- actually you have seen it. It's a stand-alone facility. And now as the lenders and as financing understands that, that we believe will kick off other project level financing in different forms. Obviously, we have to wait and see what those are. But as this was so important to get that first one, that first announcement out to get the first $75 million, that what I would say is very good terms for this type of investment, which is even another validating point on how much our partner believes that this investment is financeable, when we look at the terms that we announced. So we think this will lead to many other announcements, whether it's going to be through monetization of assets, whether it's going to be through partnerships or whether it's going to be through project level financings, I think you'll see more to come on that, but we want to move at warp speed.

Great. Congratulations again on surprisingly strong execution.

Thank you.

Thank you. And our next question comes from the line of Laurence Alexander with Jefferies. Your line is now open.

Hi. I guess two things. First on the very near term, can you just confirm that the high protein will be accretive in Q3 or is there any offsets for rent time or lagging running it through the P&L?

So if you think about Shenandoah, I mean, it's obviously going to be a contributor. As you run, we said Shenandoah has the capability of running about 40,000 tons a year, 40,000 to 45,000 tons a year. If you just take a $0.15 a gallon uplift on those 45,000 tons at an 80 million gallon plant, it will start to have a run rate of about $12 million of EBITDA a year, $10 million to $12 million of EBITDA a year and we'll start to see that contribution start to come in in Q3 as we start -- as we've ramped up now to a 100% without -- we do have some ups -- we do have some downtime just to upgrade some systems in this quarter, as we learned some new things and we want to add new things to it. But in general, you should start to see post some downtime this quarter, starting in Q4, you'll start to see that run rate of $0.15 to $0.20 a gallon, at 80 million gallons for 40,000 tons of production.

Great. And how close are these units to the kind of theoretical yields or should we expect a multi-year optimization cycle once you are done installing these units?

Yeah, so our models were all built on a little over 3 pounds per bushels of yield. So that's going to be 3 pounds of protein for every bushel of corn, a bushel weighs about 56 pounds. And so you could see how much of the corn kernel was going to go into this protein. We believe our short-term, we're going right -- we will be at 3.5 pounds and most -- it also depends on obviously location, protein, test fleet, all the other types of things. We're moving quickly and we will move quickly to that 3.5 pounds and then at that point, it will also come down to the post MSC distillers' grains -- the post production distillers' grains. What we're seeing is the increase in quality of also the traditional distillers' grains that we produced because it's a much cleaner product, because we are now dividing our corn oil. We're dividing out some high protein and what we're leaving though is also a very clean post-production distillers grains product as well. But in general, our view is -- it's a 3.5 pound per bushel yields and can go up from there, but at that point you got to make sure it's the locational -- it's a locational perspective. Some locations don't mind the lower protein, remaining distillers' grains, because it's the cleaner and better product. At some locations, want to still maintain a minimum level of protein on the remaining distillers grains, which will prevent you from maximizing yield, but we believe the effective yield of the Fluid Quip system that we're putting in can go as high as 5 pounds per bushel, which you can understand that would be a much bigger uplift to the margin structure, but you just have to make sure that the remaining post production traditional distillers grains still maintain their value. But our goal is to continue to push yield with Fluid Quip.

There has been some discussion in the soy industry about on using gene editing rather than the GMO to upgrade the protein content in the soy. Are you seeing the same discussions is in corn? So you could have a non-few high protein product that would be easier for you to convert?

Yeah, so as you know, we have a strong partners -- commercial partnership with Syngenta on Energen corn. In fact we're one of the largest commercial partners they have on these, on these type of products and that's why, what was so important as I announced is, we have 10,000 farmers that are coming on to our platform and many of those farmers are in our Energen program today. And we've discussed with our partner, what we're doing with the thought process around the corn kernel and what's important for them to think about as they come out with new genetics. And interestingly enough, they're very excited as well and they can probably help and they believe they can help us in the future on working with us on our needs to what needs to get budgeted into the corn kernel for a -- obviously it would be a GMO product, but it can move under CRISPR and the things that they have, they can move so fast to turn out a new product, obviously still takes a couple of years to scale up seed, but the ability to edit into a corn kernel actually is easier, if I recall, than the ability to edit into a soybean today. And so what's great about our partnership with the seed company is that because of what we're doing in our platforms and they have an amazing farmer platform as well, producer platform, when we put those together then knowledge base that we have, we believe will be second to none as we innovate around changing characteristics in the corn kernel that match what we need to do in say our Fluid Quip process. But lastly I think what we also have talked to them about is a non-GMO kernel that we…

And then I guess the other question is when you would look at the kind of the bundle nutrient profile for the agriculture application, is getting the corn, are there ways to modify the corn protein to improve the mixability of other nutrients and micro nutrients or the processing stability of the final compounds. So is there a layer of differentiation that you can do on the downstream treatments step, or is that something that is more sort of two, three steps down the value chain from you.

I think that's a step following exhausting our technology partnerships to increased nutritional value and profile in our feeds, both for Aqua Pet and other animals. And I think that's really the importance, as I said of the Novozymes relationship is that's what we're working on is using all of their libraries and technologies. Not -- it's not just about protein, it's all about the characteristics of what's in our feed. And that's I think what makes our situation unique between kind of what we call as a hardware and the software. The hardware is the Fluid Quip system and the software is all of the other partnerships we're putting in place that we can deliver. And I think the corn kernel will be part of that at some point, but in terms of nutritional characteristics, I think we're really focused on just on the, quote unquote, software relationships we have today and the software relationships we're developing today. And so we haven't even scratched the surface on those before we even get back into breeding them back into the corn kernel.

Thank you. And our next question comes from the line of Ken Zaslow with Bank of Montreal. Your line is now open.

Yes, I know, I'd say good afternoon. I'll actually just limit it to one question. If I were assume your margins were breakeven two years ago, then I would assume they're breakeven today and I assume that breakeven two years, what do you think the difference of your profitability would be on those four -- on those three different levels of metrics.

While a break-even two years ago was at a $0.32 a gallon OpEx, so a breakeven today is approaching a $0.24 a gallon OpEx, so you would say that's a $0.10 to $0.12 uplift and a break-even two years from now and this is just OpEx alone, would be probably, let's shoot for $0.22. So you're a $0.12 to $0.14 a gallon uplift, two years from now better than four years -- two years from now, better than two years ago. Now, two years from now, let's say, we have a four to five, let's say 400 million gallons to 500 million gallons of high pro running at, let's use $0.20 a gallon two years from now, that's going to add 100 million gallons -- $100 million, I'm using round numbers to make it faster for you. $100 million over a 1.1 billion gallons. So now you are two years from now from OpEx, you're going to get $0.12 to $0.14 uplift plus you're going to get another $0.11 a gallon uplift from just half the platform converted to high pro, not inclusive of nutritional uplifts and other things that we're working on. If you fast forward two years from there, you're going to be $0.12 to $0.14 a gallon on OpEx and you're going to be a minimum of $0.11 a gallon on high pro at a -- at the first cut of -- of margin at 50 pro. And I would say, by then we should be realizing another potential -- I'm sorry at that point, you are now $0.20 a gallon uplift. Four years from now when everything is built, you have $0.20 a gallon uplift over the whole platform because that's the baseline. So now you're $0.32 to $0.34 a gallon uplift over two years ago, and that's not inclusive of any other nutritional quality uplifts or our protein J curve uplift. So it's a pretty dramatic shift from two years ago at $0.32 a gallon OpEx with nothing else going to today with $0.24 a gallon uplift, OpEx uplift to two years from now with a $0.12 to $0.14 a gallon uplift from OpEx at $0.22 to $0.11 for half the high pro to four years from now, to $0.12 to $0.14 a gallon OpEx to $0.20 minimum across the whole platform, which is $0.32 to $0.34 and then from there, potentially, it's $0.10 to $0.20 a gallon at certain levels at certain plants that have -- at certain plants that have our nutritional characteristics built-in and that's not even inclusive of the USP business that we've built, which we're not going to break out. So that's fine, that's getting you just to crazy levels, but that's the path that we're on, that's why we're so focused on it.

Let me just rephrase this. So your -- a few years ago, the industry breakeven margin, you thought would be a breakeven margin. Today if there is breakeven, you probably about $0.08 to $0.10 margin and 2 years from now, if there is a breakeven margin in the industry, you'd be about $0.22 to $0.24. Is that what I'm hearing? Does that make sense?

Inclusive of a -- inclusive of half to -- half the platform delivering on high protein, but not adding any uplift from our USP program. Yes, that is correct.

Thank you. And our last question comes from the line of David Driscoll with DD Research. Your line is now open.

Great, thank you. Thanks for taking my questions. I appreciate it. I know what time it is. So here we go. On the utilization for the plants, Project 24, Todd, I think you said in the past that you expect, at the conclusion of Project 24, that your plants will be in the top 20% most efficient plants in the industry. If that's correct, then is it also correct to think that Green Plains should fairly consistently be running at a 100% utilization once Project 24 is done?

Yes. Because when Project 24 is done and we embark on protein across -- as we're embarking on protein across the whole system, our plants need to run every single day. So we are going to be a max run rate and at all times. The things that impacted, it wasn't just a decision to slow down last quarter because of the market. We had Madison down for permitting. We had Fairmont down for finishing up. We had, -- have to think -- a couple of Hereford down for market reasons. We had Atkinson down for market reasons and we had other ups and downs above that. So it wasn't just a market driven reduction because we did take some plants down for Project 24 upgrade. But, yes, you're correct to assume that as we push down into that $0.22 a gallon range OpEx and try to get lower and we are going to try and get lower, it meant to be in place so that we can run high protein every single day. And I would say to -- and we've made it very clear. You should not put -- you should not add on unless you can do that with your plant because you've got to be running every day. If you don't deliver to your pet food customer and they run out of product, you'll never get that customer back again and they will probably never buy from this industry again.

Makes sense. On the $75 million in financing, first off, congratulations on that. Very exciting to hear about your Wood River announcement. I think you said Wood River was a $50 million expenditure for that high protein, that would give you $25 million leftover. It seems like you have the cash on hand to add another $25 million to get you to $50 million to announce a third plant, but you haven't made that announcement. So I was just curious what is needed to make that next announcement for high pro number three? Is it engineering customer interest? Is it the money? So what's on your mind on that?

No. Basically, we said we're deciding where number three is. We're down to -- we are rank ordering our platform, but you have to assume the number three will get announced shortly when we make our decision. You can assume that the $25 million will get used -- the additional $25 million will get used for that, whether we monetize assets, whether we borrow more project level financing or any and all of the above, you should assume that number three is coming very quickly and now just depends. It depends on the site. If the site doesn't have a dryer, it's going to be more. If the site has a dryer, it will be around that level. If it's a smaller site, it would be lower than that level. So, we're going to make the best decision, but you should assume that that $25 million is already spent on site number three, and we're just back solving for the rest of it. But it's absolutely a forthcoming announcement. And the depth of demand is there. We have offtake -- our offtake in that we announced a few years ago is ready to take at least our first two or three or four plants and that doesn't include any of our aquaculture initiatives as well.

If I could sneak in one last one and I really appreciate those comments, Todd. One last one, just ethanol inventories, certainly look very tight to me. Ethanol prices only look OK. I'm curious, what's your thought process is on, are these ethanol prices enough to encourage idled capacity to come back on the market. I mean, for me, it feels like there is a -- it's a bit odd. Ethanol inventories look so tight, I'm surprised that may be ethanol prices aren't better, but just love to hear your thoughts on what's happening.

Well, the ability for ethanol to scale up very fast and have inventories go up very fast is well known. So, I think when you look at it, we've gone to 950 production. I think, we'll learn more about that, where we're at this week, but we've actually scaled too fast as an industry above demand. And without a big export program, I think the market is not going to give any credit to this industry to be disciplined, is not going to reward them at all in the forward curve, which is why I made those comments about government policy and getting away from undisciplined economics. So where we're at today is, while we are certainly around 20 million barrels, still adequate because of the size of the export program. While we're at 950,000 barrels a day of production, too high relative to demand, and the market knows it. And the market also knows the inability for this industry to maintain discipline. And those that we will make too much, too fast and build inventory way faster than anybody can think like we did earlier in the year and it's just that's why we will not see anything beyond a spot margin in times of tightness and we do need to have a rebuild of this export program at this point. We're very predictable as an industry.

Thank you. And this does conclude today's question-and-answer session. I would now like to turn the call back to Todd Becker for closing remarks.

Yeah, thanks everybody for coming on. I won't take any more time. It was a long call today. We covered a lot of things. We're making big moves as a company. You've got -- obviously, we're in transformation mode. We are still subject to volatility of our big business in ethanol, but you will see this company dramatically change and we hope you stick with us. So thanks for being on the call today and we'll talk to you soon. Thanks.

Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.