Jim Stark - VP, Investor and Media Relations Todd Becker – President and Chief Executive Officer Jerry Peters – Chief Financial Officer Jeff Briggs – Chief Operating Officer Steve Bleyl - EVP, Ethanol Marketing.

Sandy Klugman – Vertical Research Partners Adam Samuelson – Goldman Sachs Farha Aslam – Stephens Incorporated Brett Wong – Piper Jaffray Craig Irwin – ROTH Capital Partners Dan Rizzo – Jefferies Ethan Bellamy – Baird Selman Akyol – Stifel Pavel Molchanov – Raymond James.

Good day, everyone and welcome to Green Plains Incorporated and Green Plains Partners LP Third Quarter Results Conference Call. Today's call is being recorded. At this time, I would like to turn the call over to Jim Stark. Please go ahead..

Thanks, Jessica. Welcome to the Green Plains Inc. and Green Plains Partners' third quarter 2016 earnings call.

Participants on today’s call are Todd Becker, President and Chief Executive Officer; Jerry Peters, our Chief Financial Officer; Jeff Briggs, our Chief Operating Officer; Steve Bleyl, Executive Vice President of Ethanol Marketing; and Ken Simril, President and CEO of Fleischmann's Vinegar Company. 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 and other statements about future events.

These statements are based on current expectations and assumptions that are subject to risks and uncertainties.

Actual results could materially differ because of factors discussed in yesterday's earnings press release and the comments made during this conference call and in the risk factors section of our Form 10-K, Form 10-Q and other reports and filings with the Securities and Exchange Commission.

You may also refer to Page 2 of the website presentations for information about factors that could cause different outcomes. We do not undertake any duty to update any forward-looking statement. Now, I would like to turn the call over to Todd Becker..

Thanks, Jim, and thanks everybody for joining our call this morning. We reported a net income of $7.9 million or $0.20 a share. EBITDA was $49.1 million for the third quarter. We did come into the quarter a little over 50% hedged which had limit on our upside but we still participated in the margin expansion somewhat.

Even with that said we are set up well for the fourth quarter margin environment, which I will discuss with you later in the call. Each of our segments contributed to our operating results, ethanol production contributed $15.3 million of total segment operating income.

The partnership produced a record of $15.1 million of operating income, and our agribusiness segment had a really nice quarter was $6.3 million of operating income driven by continued strength of our cattle business. Our marketing and distribution segment operating income was a bit lower than expected but the fourth quarter looks strong.

So we should see a good finish for the year based on current conditions.

The consolidated ethanol crush margin which again is operating income before depreciation and amortization from the ethanol production segment including corn oil plus intercompany fees such as Green Plains Partners storage and transportation fees was $52.6 million, or $0.18 a gallon for the quarter.

During the quarter we produced 292 million gallons of ethanol, 790,000 tons of distillers grains and 72.2 million pounds of corn oil while processing nearly 3 million tons of corn. Our yield was 2.87 gallons of ethanol per bushel of corn for the quarter, excluding the three plants added last week of September.

Export sales accounted for 12% of the company's ethanol production for the third quarter. We also exported 18% of our distillers grains and 68% percent of the corn oil we sold. The ethanol margin environment was steady for the third quarter gasoline and ethanol demand continue to remain 3% higher year-over-year in the U.S.

In addition the ethanol blend into fuel supply is moving past the 10% mark. And based on the data for the first eight months of the year ethanol exports are on track to reach approximately 900 million gallons in 2016. Q4 exports look very strong at this point.

Ethanol inventories is averaging about 19.9 million barrels over the last five weeks or approximately 19.2 days of demand. It actually feels tight in some markets as we have seen index values firm during the last several weeks.

Production rates have dropped as plant maintenance shutdowns continue but we do expect that industry production run rates will move back into the million barrel per day range which we have previously expected these run rates to be in this range that which we discussed in the past, it shouldn’t be a surprise for anyone anymore.

As we have said before we still believe that strong exports and the higher demand levels we are experiencing require higher inventory levels which is why margins have firmed and expanded this quarter.

Green Plains Partners continues to perform well, we have increased our utilization rates, increased our quarterly cash distribution once again for the fourth consecutive quarter to $0.42 per share with a very strong coverage ratio of 1.19 times. And we remain on track to meet our growth and distribution objectives.

Since the IPO of 16 months ago at $15 a share our capacity has increased nearly 50% matching growth with Green Plains Inc. We continue to remain committed to the long-term strategy of this entity, [and then as for] [ph] Green Plains Inc.

in an advantaged position when looking at growth opportunities and we continue to seize the opportunity that the MLP structure has given us. I’ll come back on the call later to discuss in more detail the segments and what lies ahead for the rest of the year. In addition I’ll give you some updates on recent acquisitions we have announced as well.

Now I’ll turn the call over to Jerry to review both Green Plains Inc. and Green Plains Partners’ financial performance and then I'll come back further in the call to discuss our outlook..

Thanks, Todd. Good morning everyone. For Green Plains Inc. consolidated revenues were $842 million in the third quarter which was up $99 million or 13% from a year ago driven by higher volumes on products sold.

Volumes of ethanol sold for the quarter were up nearly 14% to $336 million gallons while the average realized price per gallon was 2.2% higher than last year's third quarter.

Our utilization rate for our ethanol production assets was approximately 92.5% for the third quarter of 2016 which was eight percentage points better than the third quarter a year ago. Consolidated operating income for the quarter was $30.6 million versus $19.8 million a year ago.

This $11 million improvement is primarily because of better performance in our ethanol production, agribusiness and our partnership segments. As Todd mentioned agribusiness results benefited from stronger cattle margins realized from sales during the third quarter of 2016.

Earnings before interest, income taxes, depreciation and amortization or EBITDA was up 35% over last year's third quarter at $49.1 million for the third quarter of 2016 compared to $36.3 million last year.

We ended the third quarter with total cash of $442 million, but it’s worth noting that shortly after quarter end on October 3, we spent approximately $120 million of that cash to close the Fleischmann's Vinegar acquisition, leaving about $320 million of cash going forward.

Total capital expenditures in the third quarter were about $7 million, and our estimate for full year growth capital expenditures, our forecast currently stands at about $50 million to $55 million. Total debt stands at $923.5 million at the end of the third quarter.

This balance includes $229.1 million on our commodity revolvers which are secured by significant working capital positions. To fund the Abengoa Ethanol plant acquisition and the Fleischmann's Vinegar acquisition, we issued $170 million in convertible notes during August which added about $130 million of debt on our balance sheet.

In addition, the partnership utilized its revolver to fund the $90 million acquisition of Abengoa Ethanol storage assets. That revolver now sits at $132 million drawn.

With acquisition activity and the variability in the ethanol crush, we’ve modified our leverage ratio included in the slide deck to pro forma the impacts of our acquisitions through a full year period and utilize the mid-cycle consolidated crush margin based on our actual experience over the last five years which is about $0.20 per gallon.

This is in line with the metrics we used to manage the balance sheet and shows our conservative approach to managing our leverage even as we have made nearly $500 million in acquisitions recently. Our leverage ratio on net basis is 2.6 times on our quarter-end term debt balance before considering cash.

Adding the Fleischmann's acquisition financing we're currently at 2.8 times on our term debt balance of $826 million as we sit today. For Green Plains Partners we reported adjusted EBITDA of $16.8 million, which was an increase of 28% from the third quarter of 2015 which was $13.1 million.

The primary driver being 36% higher throughput volumes on our ethanol storage assets. Green Plains Partners had 292 million gallons of throughput volume at our ethanol storage assets which was approximately 77 million gallons more than the third quarter of last year.

Distributable cash flow was $16.2 million or $3.4 million higher than the $12.8 million reported a year ago. Maintenance CapEx was about $77,000 in the third quarter of 2016, which is consistent with our expectations going forward. You all know we ramped up our distribution by a full cent from our previous rhythm of one half cent this quarter.

This was a result of our strong coverage ratio and expectations of additional DCF from the recent acquisitions. The partnerships distribution of $0.42 per unit results in a coverage ratio of 1.19 for the third quarter and 1.11 on a combined basis for the fourth quarter since the IPO. Now I'd like to turn the call back over to Todd..

Thanks, Jerry. So six weeks ago we announced the completion of the acquisition of the three Abengoa Ethanol plants which I'm happy to report we are successfully integrated into our platform already. I think it's important to point out that savings we generate when we acquire asset at Green Plains.

At these three locations on day one we are able to reduce annual expenses by $6 million on chemicals, insurance, railcar leases and other items that our purchasing power brings to the table. Now that we've had the opportunity for our team to be at these plants we are finding more opportunities to reduce cost and improve operational efficiencies.

The experience we have gained with our existing platform helps to realize further savings while driving operational improvements at these locations. We expect these plants to contribute nicely to the fourth quarter results.

The current ethanol margin environment has us locking away very little on the forward curve as a spot ormargin remains the best margin across our platform we came into the quarter with approximately 18% hedged for the fourth quarter production gallons.

And now have about 34% of the quarter hedged as of today mainly because we're done with the first month. We have not done any work beyond the current quarter. The consolidated crush margins have averaged in the high teens to low 20s for the first part of the fourth quarter. Yet the market remains highly inverted.

So if the rest of the quarter rolls up through the end of the year the ethanol business will see the best quarter overall for 2015 and 2016. I will talk about the company overall expectations across the board in a few minutes. Our thesis for 2016 remains intact.

We expect gasoline demand in the range of 145 to 146 billion gallons next year leading to about 14.6 billion gallons of ethanol demand at the 10% level. Exports next year should be approximately $1 billion gallons and we continue to believe the E15 adds 200 million gallons plus or minus of incremental ethanol demand in the U.S.

that totals 15.8 billion gallons of total demand for 2017 and year-to-date 2016 the annualized production run rate for the industry was just under 15.1 billion gallons. If the industry average is 1 million barrels per day next year that’s really only 15.3 billion gallons of production, our belief it’s a dynamics of the world sugar markets.

Brazil will produce ethanol for export next year than they did in 2016. So with that math you can see the world market could be structurally short product at the different times of the year. Distillers grains had the challenges over the last recent weeks and require watching for the rest of the year.

Even with the weakness we have seen are relative value the ethanol crush had compensated for this in some respect. We believe world demand for this quality of livestock feed product will remain high. As with the Chinese duty imposed a couple of months ago the stores will continue to find a home in the global feed supply.

Even with that said China is to still continue to execute on sales and we've seen small parcels trade recently into the market. And then finally with regard to corn supply the harvest continues to prove large and plentiful. The Western corn basis is very weak and the Eastern basis is unusually strong.

In fact we are starting to break trains over the gateways to address this issue. Yields remain solid and whether one bushel either way is the final number, we have a very high excessive stocks of corn that will need to find a home.

As we look out in 2017 there is no one insight for supplies that Argentina and Brazil expected increased production by at least 25 million tons of corn. So even with reduced next year U.S. planting acreage expectations and a possible drop in yield are ending stocks for corn would actually grow as will be plenty of export corn competition with the U.S.

So why am I talking about this because in an extended low corn price environment and a very stable and potentially stronger oil price environment. Our molecule we produced will remain a very competitive blend stock globally. I wanted to repeat a few comments for those who cannot join us a month ago or so on the Fleischmann's Vinegar call.

As you know we acquired the company for $250 million remain extremely excited about the acquisition. The company is a nationwide supplier of concentrated and specialty vinegars with a network that spans across United States as well as globally for some other products.

We believe this acquisition takes advantage of our platform and our expertise that we have been building over the last eight years. The main link comes from one interesting fact the primary raw material in the distilled white vinegar production process is food grade ethanol.

As we have spoken with you before moving into adjacencies that leverage our core capabilities between distribution and transportation. Logistics production risk management are part of our strategic roadmap.

It also broadens our reach into food ingredients markets building our higher margin production capabilities adding value to our end products which we have been working on over the last several years. This addition brings opportunities for ongoing consolidation in a relatively flat fragmenting global vinegar market.

And we also believe this supports our expansions into other developing markets off this platform more specifically in food pharma, food preservation and agriculture. The value proposition for Green Plains has always been the same reduce the volatility over the long-term and give our investors a stable and predictable earnings stream.

The vinegar business is a non-cyclical end market which has allowed Fleischmann's to maintain stable margins in volatile commodity markets. We believe Fleischmann's has above average growth capabilities mainly because of some of the on-trend products and other innovations that current leadership has developed over recent years.

The final and very exciting aspect of this as we have accelerated our plans to engineer and upgrade one of our plants to produced beverage great alcohol hopefully within the next year or so. Not only we have York, Nebraska we are selling B grade industrial alcohols as well. Let's talk a little bit about the fourth quarter which.

So for the fourth quarter we will have the first full quarter of Fleischmann's earnings that will contribute to our profitability overall.

Based on current markets and curves versus the third quarter, we expect top-line growth, better earnings per share and overall EBITDA which is tracking over 30% better in the fourth quarter than over the third for the total company. Keep in mind we have 66% open for the quarter at this point of the crush.

So there should be plenty of volatility but the fundamentals remains strong. The numbers are bigger than ever as our production levels will be a record for the company with the new plants added to these numbers. We will assess the situation very closely yet even with the potential U.S. demand starting to decrease with winter coming.

We have seen a spike in export interest which has kept our markets firm. We believe the industry has an interesting situation bring at some of the plants across the U.S. will have to slow towards the end of the quarter because they’ve reached their maximum win generating capacity.

We have seen some evidence of that and it could be a factor that keeps things interesting. While deploying nearly $0.5 billion as Jerry indicated earlier of capital and acquisitions. For a small company like Green Plains it is very meaningful, we can still look for additional opportunities to expand our company as our liquidity remains strong.

And our earnings power has yet to harness itself fully. The five points of capital allocation remain the same. The growth is key for us and we want to take advantage of our opportunities to add quality assets to our platform when those opportunities are available. As our history shows those opportunities can be lumpy.

In closing I want to leave a few metrics in everybody's mind. We ended the year with close to 1.5 billion gallons of ethanol production. 4 million tons of distillers grain production. We use 50 Bcf of natural gas in our process.

And we process 15 million tons of corn across all of our plants with that equal to about a third of all the corn being exported out of United States. We produced 363 million pounds of corn oil. We will produce 363 million pounds of corn oil in 2017.

And we expect to have somewhere in the range of 65 million to 70 million bushels of grain storage by the end of 2017. We have 72,000 head of cattle on feed and we expect to expand that to 80,000 head over the next six months. We're now the largest producer of industrial vinegar in the world. We have an MLP worth $670 million market cap this morning.

We ended the quarter with $440 million total cash with now around $320 million cash after the acquisition. So when a great liquidity position as well. So to close I appreciate the hard work and dedication of our employees who continue to meet the challenges of a growing business while maintaining a safe workplace for all of us.

I appreciate the confidence of our shareholders who trusting us be stewards of the capital invested in Green Plains as well. I’d like to thank everybody for joining the call today and I’ll ask Jessica to start the question-and-answer session..

Thank you. [Operator Instructions] We will take our first question from Sandy Klugman with Vertical Research Partners..

Good morning, of the $1 billion in ethanol exports that you’re anticipating for 2017 could you discuss what your expectations for China are?.

Yes, I mean China is in the number but I think it's driven by really a weighted between countries like China and Brazil and Southeast Asia and Canada. And so we haven’t really put those numbers out in total but we are starting to see a strong export pattern in Brazil all the way through March or April next year.

It is over a dollar – almost a dollar advantage to – on the arbitrage and open to about a dollar. We expect Brazil to continue to take our volumes which they have started to take this quarter.

And then we’ll expect some return from China as well next year as we saw strong first half from them a little bit less in the last half but they still have continued demand that they're going to need to buy.

So overall it will contribute, we don't have an expectation, final expectation for next year but we’d expect it to meet couple of 100 million gallons..

Okay, great. Thank you. And then in the past you mentioned that scale in ethanol is important as it provides an ability to run the plants to maximize margins.

With the new capacity that you've either brought online or acquired over the past year do you believe you're at a point now where you can achieve this goal and if not how much additional capacity would you anticipate needing to get there?.

I think we're approaching scale. I think what we have now is even when we have plants that I just illustrated to you that savings that we realize across our platform. And so I think we're approaching scale, I think we have still more to go.

I think scale in this industry should – is in excess of 2 billion plus gallons and obviously that's been a goal of ours as a minimum over the next couple of years. So we continue to search for opportunities and with scale comes opportunities around corn buying, producer programs.

The way we sell our ethanol and distribute our ethanol both domestically and globally building the Jefferson export terminal and using that to leverage off of our production base and so on.

So we think we believe that things like our corn oil production and distributing that globally can only happen the way we do it because of the size and scale of our platform being able to serve every market, in every corner or every market because of where we sit. So I would say we're starting to approach scale and it's also defensive.

I mean in a market where margins contract. And the market knows that we're willing to slow down our production. When you can slow down a bigger production total capability which would have a bigger impact overall we think that that's also part of the scale equation as well..

Thank you very much..

Thank you..

We will now take a question from Adam Samuelson with Goldman Sachs..

Yes, thanks. Good morning everyone..

Good morning, Adam..

Maybe first, Todd, on the forward sales in that export.

Just want to be clear you said you didn’t have much sold through November and December, so should we interpret that while you’re confident on the export opportunities for the industry you actually don’t have a lot of tons, lot of gallons committed to the export market for late this year or…?.

What I was saying is that we don't have a lot crushed for November and December but we do have a significant portion of our production sold physically for November and December in fact our ability to sell much more in the export markets I would say is somewhat limited, it will probably be a strong quarter for our export sales total overall as we're starting to see more and more interest and we're starting to convert sales that we had domestically into the export markets on all grades, which we can produce.

And so I would – to clarify we don't have a lot of crush on for the rest of the year but we do have a lot of physical sales on and a lot of that is targeted at the export markets..

Great, that's helpful. And then so then just thinking on 2017 you illustrated some of this in your closing remarks.

But can you talk about the projects that you have underway today that port Jefferson terminal the food grade ethanol some of the organic debottlenecks at your existing plants things that you have underway today that are not yet contributing to the base and just remind us of the timing and how much of that CapEx then rolls over into 2017?.

Yes, so when don’t we start with the Jefferson terminal. We expect the first production to be online there mid-2017 July, August somewhere in that range. We have finalized tank designs, we have started to let out certain contracts, we started to move dirt.

And we expect that project to contribute to the last half of 2017 food grade ethanol would be at earliest in the last quarter of 2017 probably takes us a year to retrofit and/or build out new capacity depending on which we – what our final decision is although we are going through engineering of both situations right now.

If people remember in the industry York used to make beverage grade, we don't know if that's where we'll put it or we'll put it at one of our other plants depending on not just the needs of placements but also logistical needs of other customers globally that have come to us for more B grade and more beverage grade alcohols.

Some of the organic projects that we're working on a lot of that has come online already this year and is in our production capacity; we still have some final projects yet to finish out. But in general most of what you're seeing in our 1.5 billion gallons would be a lot of the organic projects that came online already.

So you'll see that contribution in an expanded margin environment in - potential expanded margin environment through 2017. So a lot of what we completed, you're starting to see the benefit of those whether it's in yield with corn oil whether it's in corn oil as well and the things that we are doing there.

So our CapEx spend right now, Jerry, you want to comment on that in terms of where we are at..

Yes, I would I would say for 2017 we really haven't rolled up the numbers and done our final budget estimate but I think it should be somewhere about in the same category, same order of magnitude as this year. Probably around 30 million or so on our base business plus about 25 million to 30 million for the Jefferson terminal.

So I would say all totaled a reasonable number right now for expansion CapEx is about $50 million for the company..

That's helpful.

And then just one final one for me, on the slides on the liquidity and capital structure side this pro forma EBITDA that you've introduced that with $0.20 a gallon in crush margin, just want to be clear, that’s your ethanol crush EBITDA or that's a consolidated EBITDA or includes agribusiness marketing distribution, I just want to make sure what's in, what's not in that number?.

Yes, that's the consolidated crush EBITDA..

Exclusive of the other segments?.

Well, then what we do as we add in the other segments on a trailing 12 basis..

Got it. Okay, that's very helpful. I appreciate it..

Thank you..

We will take our next question from Farha Aslam with Stephens Incorporated..

Hey, good morning..

Good morning..

Good morning..

And just a clarification.

You mentioned the low teens, high 20s crush margin, was that what you’ve achieved, what you're achieving in the fourth quarter, could you give us more detail on crush margins that you're seeing in the fourth quarter?.

Yes, so quarter to-date. We have seen high teens, low 20s across our platform for the month of October. The month of November is rolling out to similar levels but it’s highly inverted. So if you go to December, it's about a $0.10 inverse from there. If not more based on the current market.

So and that's how we started out when we did October at $0.20 a gallon roughly let's just say in between a high teens, low 20s issues in average, November was $0.10 inverse and December was $0.10 inverse so its $0.10 in a negative when we are locking away October. Now that we're in November the forward the crush has rolled up to similar levels.

But we'll have to wait and see how full November rolls out there’s a lot of volatility but looks like it's trending our way to at least maintain those same levels. And then December still remains at least $0.10 discount to the spot market. If not more in some days so hopefully that will clarify for you..

That’s helpful. And so December inverse is that to do with DDGs, and the fact that we are going to have more restricted DDG markets because Vietnam might be added the market for U.S.

DDGs?.

No, DDGs are already all fully priced into the curve between November and December already and the market is pretty well flat for that it's all driven by the ethanol by the ethanol inverse.

And the difference there is when you look at the market you’ve got in no-Ds future’s inverse right now is showing $0.07 in a no-Jan future’s inverse is showing $0.125 that’s really driven by the fact that corn is flat [indiscernible] as it always typically has been. And ethanol is flat to an inverse that is always typically has been.

So the market doesn’t reward you beyond 30 to 60 days right now. But even though its continue to roll up for several years except fro few quarters we see some oversupply. So its really driven by the ethanol curve in total..

That’s helpful. And what do you think your production in the fourth quarter for ethanol will be and out into next year which would be model production for GPRE..

I think production will be over, it should be over 330 million gallons or so for the third quarter – for the fourth quarter and we’d use somewhere between depending on utilization rates somewhere between 1.42 to 1.475 probably just based in utilization but depending on utilization rates somewhere between 1.42 to 1.475 probably just based in utilization but depending on what we do on organic it could go higher than that.

So in general pushing towards 1.5 billion gallons, but if you want to be a little conservative you can use depending on shutdowns and maintenance issues, you could use 92% to 94% of the – in export. You have to remember that, we can push hard if we don’t export, we would run full out hard, but when we export we have to slowdown plants.

So we make certain specs, the reason we don’t in an – they export here, and if we’re a big participant in that, we won’t run our platform to 1.5 billion gallons because we have to slowdown and make all the difference specs. We get paid for that in the margin, but we won’t push as hard on the asset..

That’s helpful.

My final question, Jerry, interest expense what’s the convert for the fourth quarter and into next year?.

Interest expense – interest expense for the fourth quarter should be somewhere around $15 million and that would be a reasonable run rate going forward..

Okay. Great. Thank you very much..

Thank you, Farha..

Our next question will come from Brett Wong with Piper Jaffray..

Hey, guys thanks for taking my question. First, I just wanted to dig in the comment you had Todd, and based on your initial outlook into next year.

And you talked about the potential would be short product, is that exacerbated by the facility RIN generation capability limitations?.

No, I don’t think so. I think we’re just – we’re just plugging a million barrels a day. I think that’s got basically the RIN – that will be the RIN generating capability of the industry. Next year plus or minus a couple of 100 million gallons maybe but that can go for export.

It’s really what if you’re – if you’re pushing hard and you can’t make exports back and you reached your RIN limit and there are plants that cannot make exports back today out there. Then you probably – you have to slow down.

But in general we just took all that into consideration and plug in a million barrels a day for 2017, which is 15.3 billion gallons that’s the starting point. And then from there you can take all the other demand that we was in and see that the math doesn’t work very well..

And then following up on that, do you think that there’s going to be some appetite for building out margin improvement on that kind of a structure?.

No, building out more capacity..

Yes, yes..

Yes. It is one plant there is maybe one plant or so that’s on the board that is being built right now across the board, but I don’t think in general people have big plans to add lots of capacity from building new plants.

I mean there’s rumors of stuff going on but in general I’m not sure that the appetite at the banks to finance those type of projects as well on one-offs. And so our view is that we should be pretty steady at a million barrels a day without a significant plus or minus based on any new capacity..

Okay.

And would you guys be considering building new unit or you’re going to stick at looking at brownfield and M&A opportunities?.

Yes, zero consideration of building new capacity, greenfield capacity at all in the United States..

Okay. And then just one last one on the mandate I know, ethanol demand is driven by octane so really the mandate doesn’t matter, but obviously there’s a perception to it.

Just wondering your thoughts as we should be getting some determination or maybe not given the election around the 2017 our deal final, any thoughts there? And impact if you potentially seen decline to what that expectations would be?.

Yes. I think we have a commitment from both candidates that – still volatility around that the mandate will continue to move forward. Obviously what that number is, is still driven by what we’re seeing is a wrong gas demand plus to meet 15 demand so our view is that it will remain steady. And so from a RIN standpoint, there is no shortage of brewing.

This always RIN noise that out there is really driven by the haves and the have nots, who has RINs and who doesn’t have RINs and they’re all in the same industry.

So there’s inconsistency within their industry about whether you want to change the program or not or half of the refining industries so don’t change it because I’ve got downstream capabilities generator RIN and half the refining industries has change it. They don’t have it and it’s truly a zero sum game.

And it’s very interesting to watch this play out as they in fight with each other and don’t play with us at this point. So I think that’s a fascinating thing to watch in our industry play out.

So our view is that., we will have a number that makes sense for next year based on what the calculations have been around true demand for the product whether that pushes 15 billion gallons or not we have no – we have no say in that, but we are not unhappy with the last result. And I don’t believe we’ll be unhappy with the next result..

Very good, thanks so much..

Thanks..

We will take our next question from Craig Irwin with ROTH Capital Partners..

Good morning and thank you for taking my question. So Todd, over the last couple of years you’ve evolved the platform at Green Plains, really significantly write the MLP formation, the increased scale, some of the other new initiatives that you stepped into.

I wanted to inquire a little bit more about how this has evolved through M&A strategy and your thinking on M&A looking forward. So in your comments earlier on the call you mentioned 2 billion gallons as a scale you want to reach over the next couple of years.

But maybe can you talk a little bit about whether or not you see a ceiling on potential ethanol market participation for Green Plains in the U.S.

And then can you maybe help us understand your thinking about the balance between pursuing stable profitable businesses like Fleischmann, things that don’t have the traditional volatility in the – like the ethanol business. And the focus on extracting the synergies of the partnership to help grow your footprint in the ethanol markets..

Yes. So that’s – it’s been our strategy really if you go back of generally non-ethanol operating income to smooth out the results of the volatility of the ethanol platform which really has all of the earnings, real earnings upside power.

So if we can get through the volatile downsize of this market we’ve positioned ourselves very well for events that happen and we see them happen several times over the last eight or so years. And so if we address first the capacity that we have in the ethanol segment of 1.5 billion gallons with aspirations to get bigger in the business.

We believe long-term, this business is very solid and it’s well beyond now just producing ethanol.

I mean the amount of corn oil that we produce and distribute globally has significant impacts as on trend veg oil or veg diets happen in animal sectors moving away from beating animals to animals, we think that were a direct beneficiary of that in the world today by the best of oil as we produce as an industry in total it’s not just as Green Plains and that’s been a – when you have a base $0.05 cents a gallon of corn oil in your crush that is a pretty good starting point that we didn’t have eight years ago.

So when we talk about extracting all the synergies, I don’t think I don’t believe we’re done in doing that I think there’s still upside opportunities and moving up the value chain just in the things that we produce.

But in general when you look at the earnings power of our platform right now, if the crush moves every penny now over a 12 month period it means $15 million of earnings capacity obviously if it goes down at the opposite.

But it has significant scale, I mean it’s the law of large numbers which we’ve been basically saying since about 700 million gallons to watch law of large numbers and now we’re at 1.5 billion gallons and it becomes very meaningful very quickly and very small moves that can generate lots of free cash for our shareholders. So we like the business.

We believe in the long-term viability of the business. It’s been around for 8 years in the modern form or 10 years now. It’s not going away the industry is extremely healthy debt free in a very good competitive situation against the other molecules that are out there.

And we solve the world’s ability to be, we solve the world shortage of any agricultural products through technology of the corn plants. So we’re going to be flush with our raw material for years to come and there’s only one place in the world to get rid of it and that’s in the ethanol industry and potentially through expanded blends.

So we believe that this is a great business to be in. Its start out with 15 million tons of processing capacity, equivalent to the third of all the U.S. exports out of the United States to the world of corn and that’s just our company alone. And so just think about that across our industry.

So we believe in a long – we believe that we want to continue to acquire assets there. But on the other side, there’s always the ceiling. I don’t – I won’t say there’s a ceiling to what we want to do but obviously it still come, it’s always hard to buy healthy industry assets and good ones, that and they don’t come up for sale very often.

So you’ve got to be somewhat have the ability then to buy things that maybe some others don’t want, but you can fix them and we’ve been able to do, and we’ve developed a nice portfolio of assets across multiple sizes and multiple technologies that just seem to work for us overall of the portfolio.

So then you go on to the non-ethanol operating income which we’ve been focusing on our first goal was 100 million. I would say that our goal is significantly higher than that at this point.

So we’ve reached 100 million and obviously we’ve changed our segments a little bit, but we reached the 100 million two years ago and now with Fleischmann's, I think will surpass that and move into possibly higher goals and aspirations to non-ethanol.

And so all of that again plays out very well when you start out with a nickel gallon corn oil, before you can add any value to that and you add another 100 million potentially $200 million which is a possibility of non-ethanol that’s a great base place to start before you even get an ethanol margin over and above that.

So we have aspirations to grow both sides.

Our aspirations are have typically been bigger than our balance sheet in the past but we continue to find ways to bootstrap our way into acquisitions, continue to focus on debt repayment, continue to focus on allocation of capital and that model has worked very well and the markets have given us opportunities to do that.

So it’s all the same as it was five years ago. It’s just in bigger numbers now. A long answer to a short question I think so..

But a good answer. Thank you. So my second question is about the hedging strategy. So 1.5 billion gallons is very different than 1 billion gallons when you start thinking about potential margin call implications on your hedge positions and some of the balance sheet management issues that you have to handle to facilitate your hedging program.

With increased scale that you’ve seen in the last year do you foresee potentially changing your strategy around hedging volatility out of the P&L, do you see this maybe impacting your value at risk.

Can you maybe discuss this a little bit more broadly?.

I can go back all the way when we had 330 million gallons and we were worried about margin calls. So we also had a lot less cash on the balance sheet. So when we look at it today. Yes, I mean there’s no doubt we have to be a little bit more nimble and how we think about hedging out gallons and be very thoughtful about that approach.

And so we probably can’t hedge today a half a year of production and be responsible if the market would blow out $0.25 a gallon from our hedges and have to make margin calls and put the company at risk we will never do that. So while it adds more complexity, I would tell you it also adds more opportunities.

So will be hedgers, we’ll have to select our points now where we see the best opportunity to hedge but we’ll also not be able to as a percentage walk into a year at this point and hedge as big of a percentage as we might have been able to do in the past. Just because the need to manage the balance sheet in a expanding margin environment.

So yes, you are correct. But I think it also brings opportunities as well that have great earnings power capabilities and we can manage the downside.

So if we can get to that 100 million to 200 million gallons – $200 million consistently on non-ethanol we could add $0.05 a gallon but if you do that becomes a $75 million a year on corn oil roughly and the capability there.

We add that all together and you start that as your basing point with another $300 million to $400 million of cash on the balance sheet. I mean I think we have ability to hedge we may not get to those large percentages as we have in the past, but we’ll be selective on where we really feel like we get the bank – best bank for our buck.

But our value of risk certainly is increasing overall as a portfolio. We call that’s a natural position value at risk only because of the size and scope of our company at this point. Not because we’re putting more risk on..

Great. Thank you for that. My last question is around exports. So also on this call you’ve said that export gallons tend to be a little bit more profitable than domestic gallons. Can you maybe give us a little bit of color there and second part of the question is 12% this quarter you’ve had healthy numbers over the last several quarters.

Do you see – well maybe can you share with us an approximate range where Green Plains could achieve as far as percentage of gallons of export volumes in any individual quarter given the potential for much greater demand overseas..

Jeff, you can comment first on how many of our plants of the 2017 can make exports back then I’ll comment on what our capability is..

Yes, most of the Delta-T plants, actually all the Delta-T plants can make a variety of exports back to Canadian, European and Philippines back. And so roughly just under half of our existing fleet can do that. And even some of our existing ICM fleet can make some of the specs but not all.

And so one of the things that we have been doing is trying to make our fleet more robust to give us more optionality around the exports back opportunities that are out there and when we look at quoting opportunities, if we just call in terms of destination, origination as well as the local basis numbers that we have to have to make that switch where the reduced run rate that Todd talked about earlier..

Yes. So how we look at it is that. Our production breakout last quarter we produced of the 292 million gallons that we reported we were able to produce roughly 45 million gallons or so of exports back in all the different – in all different shapes and sizes.

So when we produce right now about 10% of the nation’s ethanol in our platform and we have exported more than that which would tell you that, we have the capability to do more. If you take half of our fleet which is a Delta-T, roughly Delta-Ts are more the bush [ph] as well, they have capabilities to produce a lot of exports.

So we could produce a significant portion of what’s needed out of the United States. But obviously we have competition to do that. So when we want – when somebody wants our product, so for example this quarter when we only exported 12% of our production.

With margins expanding, we weren’t willing to sell the spread because we felt that margins would expand through the need to slow down and we wouldn’t get – and we wouldn’t earn enough return on that investment to make a slowdown.

Even looking forward in this quarter that we’re in today people call it, our buyers are calling us today and not bidding enough for us to slowdown. Now whether they can go get it somewhere else, that’s up to them or they have to call it back and pay us more.

And we will slowdown so whether it’s a $0.03 premium or $0.05 premium or $0.10 premium which is all in the range of what you get for all these different specs. You want to be able to get paid for slowing down, otherwise. Losing the efficiency of running at full rate and at full quantities is not worth $0.005 or $0.01 here and there.

So you have to be really committed to making sure that you get paid enough to not risk the efficiency of slowing down the whole machine. Because when the machine slows down you lose other efficiencies as well. And so we watch that very closely. But we’re still focused on disappearing volumes out of the United States.

So we’re always an aggressive seller. But I would say we’re very sensitive to the value that we get and so it’s hard to quantify in any given quarter what – what the market’s going to do..

Great. Thank you very much for taking my questions..

Thank you..

Our next question will come from Laurence Alexander with Jefferies..

Good morning, this is Dan Rizzo on for Laurence. Just in terms of ethanol production as you look into the fourth quarter next year.

Do you expect any downtime in your facilities or in the industry?.

In the fourth quarter of this year?.

Yes, and into 2017..

Yes.

So we’re just finishing up our production downtimes for maintenance turnaround and the industry is still in the middle of some of that going on, we’ll still be turning around plants all the way through December as we push the maintenance off from the third quarter into the fourth quarter a bit, mainly driven by the inverted margin structure that we saw.

So we’re – but we’re still going to produce in that 330 million gallon plus range for the quarter with a big maintenance turnaround quarter. I think the industry on its own is in the middle of maintenance turnaround which is why we’re not producing a million a day, but we’ll probably pop back up to a million barrels a day a quite quickly.

The industry typically, historically has run in that 92% to 93% run rate across the whole industry. But what’s that driven by – it’s driven by downtimes unpredicted downtimes as well as maintenance turnarounds as well as some slow downs due to market conditions at any given time during the year.

So I think that will stay consistent throughout the year..

Thank you very much..

Thank you..

Our next question will come from Ethan Bellamy with Baird..

Hi, guys few questions.

On the Jefferson terminal what is the latest thought on the timing of dropping that down on the MLP?.

So we're in a marketing right now of Jefferson terminal at between ourselves and our partner. Once it's determined that we have good long-term contracts in place at that point I would anticipate we would offer that to the MLP for drop downs are somewhere in between now and completion.

I think we'll have the opportunity at the MLP to look at that asset and make a determination as well as at Green Plains to drop through off of that asset in the MLP, Jerry anything else on that..

No, that's exactly right. Yes..

Okay. That's helpful.

And then regarding the RIN compliance issue at the refineries, do I understand correctly that you guys are completely indifferent to where the point of compliance is or you better off when is the ethanol market better off if the status quo prevails?.

No, we're not indifferent. I can tell you that and I have everybody at their – everybody at the table around me making sure that I say that Steve you want to comment on where we're headed with that..

We just want to have growth energy to put out a later on it to the EPA and they were stating that we're looking at the point just to remain where it is with the original our investor right now. That's our stands on..

And what would the downside be if it shifted?.

The opening of the RFS..

Opening up of the whole regulation and so at this point we feel like it's worked so far, the zero sum game that we're talking about as we said is the haves and the have nots, the have nots are complaining about it and the haves are not. And the haves are very big oil refining and distribution companies.

So let's not – it’s all those are all business decisions, the last time anything happened as well. We pointed out those were business decisions made to get out of the – to get out of the distribution and/or retail business. And if you made a decision they weren't expecting that this would be the market that they made the decision in.

So the companies that made the decision to expand in those are the beneficiaries of that and the two of them are trading with each other and there's a winner and there's a loser. But I don't think that we have to be the, we're not to be the gatekeeper on that..

Okay.

And then lastly, perhaps somewhat related, are there any specific risks or opportunities around the election for you?.

I don't think so. I mean obviously both candidates have made a commitment that we support the renewable fuel standard and we're going to take them for their word. I think that’s depending on how Congress goes. Obviously there's always things that we watch there closely.

At times this is a Republican program, at times this is a Democrat program it's all depends with which way the winds are blowing but in general I think still think we have enough support to continue on with the program. So while we certainly are going to watch Ted Cruz’s antics when he returns back into real life.

I think that other than that there will be people that try to fight this renewable fuel standard, but I do believe we still have enough support for our program going forward. And Steve is going to comment one other thing..

One other thing on the point of obligation, we talked about I think worth considering and mentioning is, remember there has been investments by a lot of retailers now to where the point of obligation is for E15. So they have gone forward with the incremental blending.

So to change the point of obligation kind of cuts the legs out under those guys at this point to..

Understood. Thank you..

Thanks..

Our next question will come from Selman Akyol with Stifel..

Thank you. Good morning, Todd.

Just most have been asked and answered, but just going back to the Jefferson terminal would you say your outlook now is better than it was when you first started to make the JV or is it just about the same?.

Its about the same, I mean all of the assumptions we made are still intact.

Obviously world demand continues to increase for our product and we think it will be a highly efficient, the most efficient and best utilized terminal in the Gulf for our product, both inbound and outbound because of the multiple modes of transportation that can hit that terminal. We’ve a lot of interest during the open market season for it.

And with that said I think we're on track with all of the assumptions that we made. So I wouldn't say better or worse I just say on track..

Okay. Fair enough. And then just going back to the acquisition.

Do you see any additional plants coming for sales you look out into 2017, could there be another meaningful acquisition for you out there in terms of being able to pick up several plants at a time?.

I mean I still think there are plants that will trade. We don't know which ones are going to be or who's going to decide it's the right time to go market a plant. We continue to talk to lots of potential acquisition targets and anybody knows us, knows that we're focused on growing the business.

So but it's lumpy, I mean we can go a year and not getting and all of sudden get buy and that's what happened just here recently. But we are focused on acquisitions and continually looking for opportunities and we are – we are starting to see a few here and there start to at least test the waters again and walk away and see what happens..

All right. Thanks very much..

Thanks..

Our final question will come from Pavel Molchanov with Raymond James..

Hi, guys, just one from me kind of a regulatory issue you have 1.5 billion gallons of capacity you talked about targeting 2 billion, at some point if there are risk that you might get into and antitrust issue with having a larger than usual chunk of the industry's capacity?.

Not a 2 billion gallons in fact our report just came out that our industry became a less competitive than more competitive as of late because of the size of the growth of it getting to 15 billion gallons. So we have a long way to go before anybody.

I think reaches a point that anybody gets too worried about too much of – too much production in one company's hands. With all of us sitting around 1.5 billion to 1.7 billion that’s the largest, there isn't much worry from our standpoint of any issues there at all..

All right. Appreciate it..

Thank you..

And it appears there are no further questions at this time. Mr. Todd Becker, I'd like to turn the conference back to you for any additional or closing remarks..

Okay. Thank you and thank you everybody for coming on the call today, obviously lots going on at the company. We have some really exciting things happening. Looking forward to talking more at the end of Q4 and I will catch up with you then. Thanks for calling in today and have a good week..

This concludes today's call. Thank you for your participation. You may now disconnect..