Ladies and gentlemen, thank you for standing by, and welcome to the Third Quarter 2019 Ingredion Incorporated Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speaker presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand the conference over to Director, Corporate Finance and Investor Relations, Ryan Koller.

Good morning and welcome to Ingredion's third quarter 2019 earnings call. On today's call, you will hear from Jim Zallie, our President and CEO; and Jim Gray, our Executive Vice President and Chief Financial Officer. Our results were issued this morning in a press release that can be found on our website ingredion.com in the Investor section. The slides accompanying this presentation can also be found on the website and were posted a few hours ago for your convenience. As a reminder, our comments within this presentation may contain forward-looking statements. These statements are subject to various risks and uncertainties. Actual results could differ materially from those predicted in the forward-looking statements, and Ingredion is under no obligation to update them in the future, as, or if circumstances change. Additional information concerning factors that could cause actual results to differ materially from those discussed during today's conference call, or in this morning's press release, can be found in the company's most recently filed annual report on Form 10-K and subsequent reports on Forms 10-Q and 8-K. During this call, we also refer to certain non-GAAP financial measures, including adjusted earnings per share, adjusted operating income, adjusted effective tax rate and adjusted cash flow from operations, which are reconciled to U.S. GAAP measures in Note 2 non-GAAP information included in our press release and in today's presentation's appendix. Now I'm pleased to turn the call over to Jim Zallie.

Thank you, Ryan, and welcome to everyone joining us today. I would like to begin today's call with my perspective on our third quarter performance. For the quarter, our global net sales were up slightly. Absent $52 million of negative foreign exchange impacts, net sales were up 4% versus the prior year. Our pricing actions delivered $50 million of favorability in the quarter, nearly offsetting all of the foreign exchange impacts versus the year ago period. Adjusted operating income for the quarter was up 2% year-over-year and up 7% absent foreign exchange translation impacts. I am pleased to share that North America returned to profit growth and delivered a 5% increase in adjusted operating income. During the quarter, production utilization increased throughout our network driven by greater reliability and operational efficiencies as the rebalancing of stock in volumes took full effect. Furthermore, our successful integration of Western Polymer contributed to North America's growth. We're pleased that specialty ingredients delivered net sales growth across all regions led primarily by starch-based texturizers and specialty sweeteners. Consumer-preferred demand continues to grow for specialty sweeteners including non-GMO sweeteners and natural reduce calorie sweeteners such as Stevia. To further align with consumer preference for natural sweeteners, we are excited about the opening in a few weeks of our new allulose production line at our San Juan del Río, Mexico facility. Our starch-based texturizers delivered solid growth led by specialty potato starches globally. We are formulating systems, which include specialty starches, plant-based proteins and hydrocolloids for consumer preferred clean labeled textural solutions. For example, we're working closely with customers both large and small to innovate and co-create by combining potato starch, pea protein, gums and curd extracts to formulate texturized meat alternatives. Capitalizing on this collaboration, we are actively filling our customer pipeline for plant based…

Thank you, Jim. Net sales of $1.457 billion were slightly up for the quarter. Gross profit margin was higher by 50 basis points, driven by favorable price mix partially offset by higher input costs. Reported and adjusted operating incomes were $155 million and $193 million respectively. Third quarter reported operating income was lower than adjusted operating income by $28 million, due to restructuring costs related to Cost Smart program. These costs were primarily attributable to the transition of our Australian operations to an import model and planned cessation of production at our Lane Cove facility. We also initiated a significant organizational restructuring in South America. Our reported and adjusted earnings per share were $1.47 and $1.82 respectively. Q3 net sales of $1.457 billion were up slightly from the same quarter last year. Unfavorable FX of $52 million was primarily attributable to weaker currency valuations. Higher volumes accounted for $9 million of sales increase or favorable price and product mix was a $50 million increase or 3% of net sales. In North America, volume was down year-over-year, driven by volume shed as we see ceased wet milling at our Stockton facility last November. Price mix in North America was up 1%, driven by product mix and the pass through of higher corn costs. In South America, net sales were up 3%, volume was up 5% across the region. Price and product mix were up 13% as our teams took price increases to recapture some of the foreign exchange impacts that we've been experiencing in Argentina and Colombia. APAC net sales declined 1% due to foreign exchange impacts and unfavorable price mix. This was partially offset by favorable volume driven by specialty growth. EMEA experienced lower net sales due to foreign exchange impacts, primarily in Pakistan that were only partially offset by…

Thanks, Jim. As you heard from us today, we are delivering on our strategy and are pleased that the business demonstrated growth. The network optimization moves that we have made are -- and our progress improving operational efficiencies are paying off. We delivered specialty net sales growth across all four regions and our team continues to advance our roadmap for driving growth. Our recent specialty investments provide new and expanded capabilities that position us even better to meet the growing consumer demand, serve our customers and deliver net sales growth. And as the leader in starch-based texturizers, combined with our new plant-based protein offerings, we are broadening our portfolio of consumer-preferred, clean-label ingredient systems and doing so enables us to increase our solutions capabilities to co-create with customers to successfully drive their growth and ours. And now, let's open the call for questions.

Thank you [Operator Instructions] And our first question comes from the line of Robert Moskow with Credit Suisse.

Hi, thank you. Jim and Jim, I know that you were in the progress earlier this year to try to educate customers about the impact of falling values for corn byproducts and what that might mean for pricing going forward on corn sweeteners. And I just want to know if you can give us an update on how that's being received? And whether you think that will help you take the pricing you need? And then secondly, does it open up any kind of a risk that byproduct values are pretty volatile? If they start rising again does it open the risk that those customers might demand that pricing to be revoked I guess? Thanks.

Okay. Let me take it first and then I'll turn it over to Jim Gray. So thanks Rob for the question. As we look ahead to 2020 to your point we continue to face three factors impacting our net corn costs. One is certainly the uncertainty of the crop size leading to higher gross cost of corn co-product values which remain at a structurally lower level than it has been historically and also the higher cost to move corn which is reflected higher basis costs. And all three of those factors will certainly be important considerations in our pricing actions. And specifically as it relates to the structurally lower corn co-product recoveries. We are carefully looking at all of our customers and analyzing our pricing requirements as we go into contracting for next year and where we need to make adjustments with how those pricing contracts are structured. And so we're looking to optimize against all three components of the corn cost increase. But in particularly what we're customers is educating customers and working with customers to share in the cost increase of something that has structurally impacted the entire industry. And so I think whatever model we come up with is meant to take into account what might happen in the future as well. So hopefully that answers your question. Jim, do you want to add anything in addition?

No. I mean, I would only add that I think when we were heading into 2019 having experienced some depressed values for corn gluten meal and for corn oil we viewed it really as something that was more temporal and we've continued to experience those lower co-product values throughout all of 2019. And so I think when we're having the conversation with the customers who understand corn and the corn structure quite well they're facing that choice which is we need to the able to figure out how we can't just take a one-sided impact to our cost of corn and that would differ traditionally what we have done in our business. And so very much to what Jim said and we are exploring different options with customers in order to make sure that as we go forward as -- hopefully as the U.S.-China trade dispute unwinds and there is more of a rebalancing of how soy ships out of the U.S. and we see some values for our corn co-products returns that is a benefit that -- not just to us but our customers as well.

Okay. Thank you very much.

Thanks, Rob.

Thank you.

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

Hey. Good morning, guys.

Hi, Ken.

Can you frame how much the U.S.-China and Japan-Korea trade issues have depressed 2019 operating profit?

For Asia-Pac?

For Asia-Pac regions?

No, no for the whole company. For the U.S.-China first is kind of the bigger one I think. And then you mentioned Korea-Japan. But -- I just want -- not just for APAC, but just for the company. Just so if there was a resolution what would return and what wouldn't return how to think about it I guess is kind of the framework on that. I think that's kind of where I'm looking to go.

Yes. I think we understand clearly your question. And Jim and I are discussing it here. It's actually a very good question because I think what we should do first is just breakdown for everyone the components of that. So U.S.-China trade dispute obviously impacts the soy complex and the impact on co-products and network costs. And then equally you have an increase in tariffs on imports going into China. You have a depression related to the economies in Northern Asia. You have trade disputes between Japan and Korea as well as between the U.S. and China. And we're seeing some macro economic impacts there. So Jim I'll I'm going to turn over to you to try to help quantify the perimeters around that.

Yes. Yes. I mean, I think Ken as we look to impact in the North America business from 2018 into 2019 in terms of the co-product values that we think have not been passed through that's probably in excess of $20 million impact to the region. On the flip side when we look at our Asia-Pac business clearly what we're seeing in China is as you have a higher tariff on the imported goods that's raising our need to try and price it's a competitive market in China lots of customers and couple of local options. And so I would say that that is putting some pressure on China. And then probably more of an impact for us has really been Korea. And the Korea -- with the Korea won showing some weakness. The producers in Korea buy corn off of the world market. That increases the transactional cost of that corn. And with the economy slow, it's very difficult to price through, the demand isn't there. So I mean, I would probably say that Asia-Pac impact, if I look kind of year-over-year it's struggling excess of $10 million right combined.

Yes.

Great. And then -- just my second question is, in the U.S. you said your utilization rates had gone up. Can you talk about where they were, where they are now? And then how that's impacting pricing into 2020? I'll leave it there.

I would just say that they have improved significantly based on the focus -- the intense focus that we have put on -- up on reliability improvements and operational efficiencies. And they are operating at higher levels of capacity utilization than they were certainly in 2018 and in the earlier part of the year. And so, with that along with the three factors that are contributing to the cost increases that are we think very well justified and understood and again we're doing some educating with customers specifically, it positions us as best as possible as it relates to pricing as we go into contracting for 2020.

Okay. Thank you.

Thank you.

Thank you. And our next question comes from the line of Brett Hundley with Seaport Global.

Hey good morning, guys. I wanted to dig in first on your volume performance in South America during the quarter. Can you just give us some added color on where this is coming from either from a countries or a product standpoint as you do take pricing across the region? And then how sustainable you think this is just given all the headline challenges in place across the region?

Yes. I'll just make a quick comment and turn it over to Jim. I think that one of the things that we were pleased about was that our -- in Brazil adjunct volumes for us were up mid to high single digits for the quarter. I think the brewing sector had a weaker quarter. But we did...

We feel positive on it.

We did pretty well on volumes. So that was one. And I would say what we've have not necessarily related to volume, but we've just done an exceptional job really the South American team in light of incredible ForEx headwinds have put through significant pricing to offset and to mitigate that ForEx impact specifically in Argentina and in Brazil. And obviously even Columbia has been impacted by ForEx devaluations. And we're doing that there is well. So Jim you want to make some additional comments?

I think maybe the only -- obviously into the -- in the growth that we saw in Brazil and in Andean. What may be surprising was just that you have to step back in Argentina to Q3 and Q4 in 2018 and the consumer was really shellshocked by the devaluation of the peso, it wasn't planned, it wasn't expected. It was post kind of the traditional national wage increases. And so I think it really left consumers in Argentina really tight on their pocket book. And what we've seen now here in Q3 and Q4 is actually some better volume into the types of beverage and food products, even though still uncertainty in the peso the return of the consumer to somewhat of the return of the consumer to the grocery store and what I might characterize as a normal grocery cart, I think that some of that's occurring because we are seeing volume increase in Argentina.

The other thing that I would just add to that is, just as it relates to the outlook, one of the things that I'm sure you all saw is the progress in Brazil that pension reform did pass and it now will become law. And so that's leading the government to now look to fiscal reform on top of pension reform. And so that has put a little bit of an upward trajectory from neutral I would say to positive because of the progress in Brazil. So we're hopeful that that stimulates economic growth not in the 1% range which has been for the last year or 2 but something a little bit higher as we head into next year. And that will stimulate more volume growth. So I would just -- that's what I would add to that.

I appreciate those comments. And then just my second question is actually on the M&A environment, so you guys obviously have your stated goal of mixing toward specialty over time and you're certainly affecting that strategy internally by developing capabilities on plant protein allulose etcetera. But obviously M&A does need to be a sizable part of that conversation at least in my opinion in an effort to derisk and grow the business on a faster time line while also acquiring new technologies and expertise. On the topic of maybe more meaningful M&A, do you guys think that the deal market has become more challenged in recent time? One of the main reasons I'm asking too is one of my other ingredient companies has had a hard time in acting a similar M&A strategy moving toward specialty, and it now appears they're going to go private with the help of private equity in order to compete better for future targets. So I wanted to get your perspective on the deal market for specialty ingredient companies right now. It seems like they're out there, but it also seems like there is a void of activity. Thank you.

Yeah. I mean I think that for us we remain very focused on building out the five growth platforms that we've identified that are very much on trend. And we're looking to add on to those value propositions that underpin each one of those growth platforms with either business acquisition M&A or through technology capabilities that we're adding. And as it relates to the market at large, I think that certainly over the last number of years multiples have increased and that makes it more challenging to get the math to work from a standpoint to making sure that you're deploying shareholders assets wisely to make sure that you're going to get a return. So -- but that all being said, what I would say for us is we have still a very active M&A pipeline when you think about five growth platforms that are very on trend. And so we are evaluating at any one time always a number of opportunities, and so we have active discussions and meetings, but at the same time want to make sure that the value and the terms and conditions would be beneficial to us. So, that's how I would answer it.

I mean, Brett, I would just add that sometimes it's easy to focus back on the U.S. market or the Western Europe market for ingredients companies. But our footprint and our connections with customers and with distributors and with other kind of other competitors around the world really leads us to a lot of different opportunities. So we absolutely are looking at Asia-Package, we're looking at South America, we're looking at the rest of the region through EMEA. And so when we think about very active discussions in our pipeline, we're looking at where we can add in those various geographies to our existing business. I think really the benefit of coming up with the driving growth roadmap and being very clear about where we want to go has really also then helped us align with other companies that may actually look at Ingredion as a strategic partner or ultimately someone to collaborate with.

Yeah. I mean and the other thing is that we are also looking to partners with companies and specifically in the area of allulose we partnered with a Japanese company that had great technology that enabled us to enter that market. So there's a variety of opportunities I think open to us to continue to grow both organically and inorganically.

Thank you.

Thanks, Brett.

Thank you. Our next question comes from the line of Heather Jones with Heather Jones. Your line is now open.

Good morning. Thank you for taking the question.

Sure. Good morning.

Hey, Heather.

Hi. So I had -- I guess I had two questions. And I was -- I wanted to start with could you give us a sense of -- based upon your analysis of the region -- your footprints region and all what are your thoughts about basis trends for corn in the U.S. market going into 2020? It's just I don't know if you -- did you finalize your thoughts but…

Yeah. We can answer that. I think we're sitting here in Chicago this morning on Halloween and it is snowing outside and some parts may get five inches of snow today. So -- and this is a second pretty significant snow storm here in the early part of the fall. So that has added to the late corn harvest, which everyone was worried about and now it's about being able to move and transport corn. So actually we're actually seen an increasing trend towards basis as we head into contracting in 2020. Jim, do you want to add something?

Yeah. I mean, it's -- I think it's spread a little broader, right? And that given the late plantings early on, I think there was some issues in the eastern part of the corn belt to move corn kind of maybe across summer. But obviously, as the moisture content is higher on the corn and farmers desire to leave it on the field and not pull it off necessarily and have to absorb any type of discount for that corn. What that is a bit of it to and fro is that, you need to dry field and you also need some lovely dry fall weather to dry out that corn. And so you've got a blizzard in the upper plain states. You're now having Chicago across the kind of a broader mid part of the corn belt. And so I just don't think that things are necessarily setting up for anything that's going improve immediate availability of corn in drive basis a little bit lower.

And remind me of how you purchase your specialty corn? I mean, do you have to deal with basis there as well? And if so how is the basis outlook for that?

Jim. Do you want to comment?

Yeah. So we -- generally with our different varietals of specialty corn, we're just – we're prearranging with farmers to make sure that they're dedicated the acres to planting that and they get a small premium for that commitment to us. And that corn is typically growing very close proximity to those plants that are specialty plants. So transportation cost can be a little bit lower in that regard yes.

Okay. And then going back to your comments about the contracting season for 2020 and your conversations with customers as far as the challenges on the byproduct recovery side. So in discussing this and sharing the burden of that challenge are – is Ingredion moving more towards higher tolling mix? Or I mean, is that essentially what you all are talking about because I think historically Ingredion's mix has been more fixed price less tolling. But with this – would this be shifting you more towards tolling? Are you talking about some other kind of arrangements?

Yeah. Just to kind of correct one of those assumptions. Historically, what we've said is about half of our business in U.S., Canada is fixed versus what we call fee or toll business. And what I said is the input cost increases that we're seeing and the industry is seeing is in some ways unprecedented in relationship to the decoupling of co-product values from the cost of corn. And so that does require us as we head into 2022 to look across the entire segmentation of our customers and where we have either fixed or toll and look at what makes the most sense based on those educational discussions and those exploratory discussions that we're having with customers to share in the cost increase, especially as it relates to the cost of co-product recoveries whereas any increases in gross corn cost or bases is clearly well understood. So I think I would just say that, we're taking a very analytical and methodical segmentation approach to our customers since we see something has structurally changed and it really requires us to do that and have those discussions with customers going forward.

Okay. And my final question is this is a big, if but if you assume the ForEx stabilized not any dollar weakness or – but just stabilized what could that add to 2020 earnings for you just to be able to catch up on price and not have to --- not constantly playing catch up? How much do you estimate that could add to 2020 EBIT?

Yeah. Let me make an opening comment and I'm going to turn it over to Jim. So I just want to remind everyone that, if you look at our year-to-date ForEx headwinds that we've had to offset in price, we've priced year-to-date through 75%. In the quarter, we had $50 million of price increase against $52 million of ForEx. So, we are getting through the pricing increases that we need to get through. So – and we've gotten, I don't know say better, but certainly stronger muscles in regards to dealing with something that's been such a significant headwind for us. If that were to stabilize, Jim going forward?

Well, I guess it depends on what point in time you choose to say okay the dollar is not going to move versus the variety of currencies in different territories in which we do business. Let's just say though that if you held it here we're still going to have some first half headwinds, if you look at the European currencies and a little bit in terms of where more than northern Asian currencies are those really have had kind of some additional weakness here more in the second half of 2019. And then, you always have our kind of two bigger movers, which are – what happens within Pakistan and what happens with Argentina. I would say that, Pakistan is a little more stable given the country's view towards the IMF and their choice of towards their monetary policy. But Argentina, I think is still always a question mark. So I'm going to hold off and trying to quantify it we can follow up on that because I think it's still a little early in the year to be calling 2020 impacts, due to FX. But I do – I very much appreciate the sentiment and it probably does weigh an investors' minds in terms of hey, when does this amazing strength in the dollar that we've seen start to just flatten relative to some other developed or emerging economy.

Yeah, yeah. Okay. That so much. I appreciate it.

Okay. Thank you.

Thank you, Heather.

Thank you. And our next question comes from the line of Ben Bienvenu with Stephens.

Good morning, guys.

Hey, Ben.

Good morning, Ben. Welcome.

Thank you. I want to ask if you could provide some follow-up color on your comments around the restructuring of South America's business. Any elaboration you can provide on whether that tends to capacity adjustments or otherwise would be helpful to give us a sense of understanding what's going on there?

Yes. Just a reminder over the last few years, we've taken some restructurings in relationship to some asset consolidations in South America. In fact, we closed two facilities back about three years ago that laid -- that led to $6 million to $8 million of savings if I remember. This is a more comprehensive and sweeping view across both operations and go to market. It does not involve any asset consolidations or closures...

Organizational.

It's much more around organizational agility reducing spans and layers, clarifying lines of accountability and also operating as one South America region, because we do have three subregions, one would be Brazil, the largest country, largest subregion. You have the southern corn and then you have the Andean region. And so what we've done is we have consolidated. An example would be around manufacturing and supply chain excellence to now have that operate as one operations function streamlining the direct lines of reporting to share best practice and drive one management operating system for manufacturing, operations, supply chain and procurement for example. And it's really been met with a lot of very positive receptivity. And that's going to be a major driver for us as we head into 2020 to not just deliver savings, but also drive efficiencies.

Great. Very helpful. Thanks. My second question relates to capital allocation. We've talked about M&A, but I'm curious what is your thought process on embracing a more aggressive buyback strategy in light of current challenging fundamentals weighing on valuation juxtaposed with still good cash generation and a pretty solid balance sheet.

Jim, do you want to take that?

Yes. Sure. So when we -- I think what I've described to yourself and investors is that we look at our overall cash from operations each year. And we're trying to target both first our capital investments necessary to maintain our existing plants, but are also putting some capital towards organic growth opportunity. Those organic growth opportunities tend to have very attractive returns and payback relative to the investment time line They're also kind of the least risky, because usually it's an area where our team has a lot of familiarity with the capabilities and capacities that we're adding. Second, we think very much about the dividends. And then we have the remainder which is typically 30% to 40% of our cash from operations. And that's going to the kind of more strategic cash flow. So if an M&A is available and it has appropriate synergies and an attractive return and it fits in our strategy, we'll pursue that because that's going to be a higher return than our WACC. But we'll also look at that cash flow and in conversations with the Board, think about how we approach share repurchase and enhance the total returns, the total payback to our shareholders. But generally, we're going to prioritize organic opportunities in growth and M&A that's attractive accelerating against the five growth platforms. First, that tends to be a better return for our overall shareholders. We're very attuned to the dividend as one way of reflecting the cash generative capabilities of our company and are quite proud of -- we are five years in a row now with consecutive dividend increase. And then, we'll always make sure that we're looking at the valuation of the stock and thinking about share repurchase.

Hey, fair enough, understood. Thanks for the color.

Okay. Thank you.

Thank you. And our next question comes from the line of Adam Samuelson with Goldman Sachs.

Yes. Thanks. Good morning everyone.

Good morning, Adam.

I was hoping first to really make sure we're clear on kind of the components of the tempered kind of full year outlook and it seems like most of that's baked into 4Q. And if you could just kind of bucket it amongst the key drivers of what became more pressured in the business between FX. Seems like FX higher corn costs in North America and kind of below the line financing tax components and the mix of earnings are biggest divers. But if you could bucket and quantify those a little bit and just maybe expand on how many -- how much of those we should think about as continuing into 2020 whether it's financing, whether it's kind of how corn costs look like they're laying into next year? And then a follow-up.

Yes, happy to Adam, because I think this is important. So as we finish the year, we expect our full year earnings guidance to be impacted really by three factors and in this order. So within our higher financing cost reported line item, you get the impacts of hedge, gains or losses. This is also where changes in balance sheets, particularly in Argentina were hyperinflation. Those changes in the balance sheet now under hyperinflation accounting impact the P&L. And that's where it impacts the P&L. So instead of going to all other comprehensive income, it impacts the P&L. So first is the impact of Argentina hyperinflation really, as a reminder, that we've revalued that balance sheet in Argentina pesos back to dollars. And so that's the first impact that will be felt really in -- a little bit in Q3 but in Q4. Number two then is just our effective tax rate really just due to the mix of earnings is really between 27% and 28%. So that's just -- I think it's a little net higher than where we previously guided. And that's just how the income generation is earning across the different businesses. And then finally, our adjusted operating income is expected to be flat to slightly down really driven by lower expectations for Asia-Pacific, really due to the higher raw material costs in Australia. It's a very expensive corn crop this year in Australia. And weaker gross margins across our northern Asian businesses due to higher input costs. So, each of those drivers are contributing approximately one-third of the change in our EPS guidance.

Okay. And just to be clear in North America then. So you're saying the impact of North America of the higher corn cost of delayed harvest basis and the freight cost that you're absorbing, that is not dramatically worse than you'd previously contemplated? I'm just making sure I'm clear on that point.

That's correct.

Yeah. That's correct. I mean in Q2 and we really talked about we're anticipating the North America might finish the year stronger where we kind of updated our outlook to -- for operating income to be down. What we were really considering was really just a higher net corn cost both in Q3 but particularly in Q4. So, I think we've previously had kind of guided to that.

Okay. That's helpful. And then follow-up, as we think about next year and there's been a lot of ground covered on contracting already, but just wanted to make sure, would you characterize -- how would you characterize the contracting progression kind of to date? I mean it's the end of October, would you say that we're on schedule? Things are slower than normal? Faster than normal? And just how kind of the receptivity to some of these changes on kind of co-product basis and the impact that that has on price just how do you feel that's being received by your customers?

Yeah. I mean I'll make a comment as best I can. Typically we don't make comments in relationship to contracting for the forward year. What I would say is that because of the corn situation in relationship to the uncertainty around the crop, the elevated bases levels, I think you're seeing customers moving more slowly in relationship to commitments that they would like to make in hope that there maybe some relief related to which way the weather would break or some of the input costs that they're being educated on and they do understand themselves. So, I would say the contracting is slower than it maybe against say a five-year historical norm. But it will get done -- it typically gets done in a flurry towards the end of the year. But I think it's slower this year, but then that will be catalyzed by, I think companies that have only so much supply to allocate, and we'll need to complete contracting in a more compressed time period. So -- but it's a little bit slower, I think out of the gate than -- for those reasons that I just described.

Maybe just to iterate, I mean customers, I think generally across the U.S., they do understand year-to-year change in just the growth cost of corn. They can look at what the forward strip might say and just the forward strip on corn is higher this year. And a lot of customers might just choose the wait for an opportune moment. So, we're not worried about it. We just think it's a little bit...

It's just a little bit slower, and it's human nature on the part of the customers to behave the way they are given the way corn has increased from a net corn standpoint in all of its components.

Yeah.

Okay. I appreciate that color. I’ll pass it on. Thanks.

Thank you. Thanks, Adam.

Thank you. And I'm showing no further questions at this time. I will now turn the call back over to President and CEO, Jim Zallie for closing remarks.

Thank you. I would just like to thank everyone today for their time, and we all hope to see you again in the very near future in our travels. So, thank you so much.

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