Jim Stark – Investor Relations Todd Becker – President and Chief Executive Officer Jerry Peters – Chief Financial Officer Steve Bleyl – Executive Vice President of Ethanol Marketing.

Adam Samuelson – Goldman Sachs Ed Westlake – Credit Suisse Farha Aslam – Stephens Ken Zaslow – Bank of Montreal Sandy Klugman – Vertical Research Partners Brett Wong – Piper Jaffray Jeffrey Schnell – Jefferies Heather Jones – Vertical Group Pavel Molchanov – Raymond James Patrick Wang – Baird Selman Akyol – Stifel.

Good day, everyone and welcome to the Green Plains Inc. and Green Plains Partners First Quarter 2017 Results. Today's event is being recorded. At this time, I would like to turn the call over to Jim Stark. Please go ahead, sir..

Thank you. Welcome to the Green Plains Partners' and Green Plains Inc. first quarter 2017 earnings call. Participants on today's call are Todd Becker, President and Chief Executive Officer; Jerry Peters, our Chief Financial Officer; Jeff Briggs, Chief Operating Officer and Steve Bleyl, who is Executive Vice President of Ethanol Marketing.

There is a slide presentation for you to follow along. You can find this presentation on the investor page under the Events and Presentations link on both corporate websites. During this call, we will be making forward-looking statements, which are predictions, projections or other statements about future events.

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

Actual results could materially differ because of factors discussed in yesterday's earnings press releases and the comments made during this conference call and in the risk factors section of our Form 10-Qs and 10-Ks 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 statements. Now, I would like to turn the call over to Todd Becker..

Thanks, Jim and thanks for joining our call this morning. We reported a small net loss of $3.6 million or $0.09 a share for the first quarter. $We had 17.4 million of operating income which is a $40 million improvement over the first quarter of 2016 as the mark was better, but still on the weak side.

EBITDA was $43.8 million for the quarter which was almost a $50 million improvement from last year, as our results were driven by strong contributions from Ag and Energy Services, Food and Ingredients and the Partnership.

The EBITDA from these three segments in the first quarter of 2017 were more than doubled generating the first quarter of 2016 in the same three segments.

These results illustrate the diversification strategy to minimize the effects of a weaker Ethanol quarter while keeping the upside opportunity intact for when Ethanol margin trend higher and we can generate stronger free cash flows which would be a significant focus of ours going forward.

The consolidated Ethanol crush margin which 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 $0.12 a gallon for the quarter.

This is much improved over the roughly breakeven consolidated crush margin from last year first quarter. Our profit before tax and minority interest is only around $700,000 negative. Remember that while we have deduction from minority interest after that, we monetize our distribution assets through Green Plains Partners.

We still own 65% of that entity and today it is worth more than $400 million of equity value to the Green Plains Inc. shareholder. The Ethanol plan acquired late last year are running well and are contributing to the overall Ethanol platform.

Fleischmann's Vinegar is also performing better than expected and continues to see solid growth in its base business as well as the anti-microbial and specialty vinegar products. We produced, 326.4 million gallons of Ethanol or about 90% capacity utilization. We ran slower this quarter due to several factors.

Almost 20% of our production was exported and we slowed down to make that specification and we did slow down production in the middle part of the first quarter because of a weakened margin environment.

We are running harder for second quarter, but since this is a big seasonal plant maintenance quarter, we currently expect to run approximately 93% of stated capacity and that could possible get better as well. We also produced 877,000 tons of distillers' grains and 75.4 million pound or corn oil or processing over 3.2 million tons of corn.

Our yield was 2.88 gallons of Ethanol per bushel of corn for the quarter that tied to record setback in the fourth quarter of 2015. We continue to see yield improvements because of the investments we made over the years.

Green Plains Partners reported second best quarterly performance since the IPO reporting $17.6 million of adjusted EBITDA at a coverage ratio of $1.13 times for the quarter and 1.19 times for the last 12 months.

Our coverage ratios remain strong even with the plant slowdowns and as the plants continue to ramp up production, we expect another strong year for GPP. We increased our distribution against unit holders for the sixth straight quarter. We would expect that trend to continue.

The Ethanol margin environment was better in the first quarter of 2017 compared to the first quarter a year ago. Gasoline demand is trending better over the last few weeks and the Ethanol blend remains strong going back to September of last year We expect U.S.

Ethanol exports for the first quarter to be around 380 million gallons, which will be the second best quarter even only behind the fourth quarter of 2011. We believe the industry will still export between 1.1 billion and 1.2 billion gallons or more this year. Ethanol production inventory is something we continue to monitor very closely.

While we are the first to acknowledge as the numbers published are the numbers that drive the market, we do believe that weekly numbers are all a suspect but causing us to say this is the adjustments made for the month of January and February between a net 25,000 and 30,000 barrels per day correction in our favor as production was lower and demand was higher in the true-ups.

While stocks are not changing, the EIA is just playing with the in-transit number net of is less bearish than the weeklies are painting and there is a seasonal demand picks up, if production remains lower than the weekly numbers reported, the draws will be expect while we will need to prove each fundamentals out.

In addition with the better margin environment through the end of the first quarter this year versus the last, and the second quarter margin environment that started better than last year, this leads us to believe that spring seasonal maintenance of plants have been pushed deeper in the second quarter or further.

2017 is shaping up to a be a stronger year for us and the front half will be much better than last year's as the first quarter EBITDA of 2017 was more than our total first half of 2016. I'll come back later to discuss in more detail our segments, some recent announcement on expanding Green Plains Cattle company as well.

Now, I'll turn the call over Jerry to review both Green Plains Inc. and Green Plains Partners financial performance..

Thanks Scott. Good morning everybody. For Green Plains Inc. consolidated revenue was $888 million in the first quarter, which was up about $139 million or 18% from a year ago driven by increased Ethanol production because of the three plants we acquired in September of last year and the addition of Fleischmann's Vinegar company in October.

Consolidated volumes of Ethanol sold for the quarter were up 10% to 359 million gallons, while the average realized price per gallon was 12% higher than last year's first quarter. Our utilization rates for our Ethanol production assets was approximately 90% for the first quarter.

Consolidated operating income for the quarter was $17.4 million versus an operating loss of $22.6 million a year ago. This significant improvement is primarily due to a much better Ethanol crush, increased Ethanol production volumes from our acquisition, strong cattle margins and the addition of Fleischmann's Vinegar.

Earnings before interest, income taxes, depreciation and amortization or EBITDA to the first quarter was $43.8 million, which as Todd said was nearly $50 million improvement over last year.

For Green Plains, the CapEx was approximately $15 million in the first quarter including our normal maintenance capital expenditures as well as expenditures for growth projects including some nice customer driven expansion at Fleischmann's Vinegar.

We manage these projects based on an internal competition for capital focused on long-term project returns and cash flow generation from our operations. Our total debt now stands at $1.1 billion at the end of the first quarter.

This balance includes $336 million on our commodity revolvers which are secured by significant working capital or readily marketable inventory of about $395 million at March 31. Balances on our commodity revolvers can be somewhat seasonal and will continue to increase with the expansion of our business.

For example, we recently closed on an expansion and extension of our cattle revolver, ultimately taking lender commitments from $100 million to $300 million in anticipation of the working capital needs for acquisition of Cargill lots.

We expect to gradually draw on this revolver as we transition to company-owned cattle in the acquired feed lots over the next six or seven months. At the same time, we're focused on continuing to reduce our term debt.

We paid down about $29 million on our term loan B in the first quarter under the sweep structure in place and now have only $0.19 of debt per gallon on Ethanol plant, the lowest level in our history. As you can see on Slide 8 of the IR presentation, our pro forma from debt leverage ratio is 2.8 times at the end the first quarter.

Our liquidity was solid with $295 million in total cash on the balance sheet along with $129 million available on our revolvers.

Subsequent to the end of the first quarter, we entered into a privately negotiated agreement to exchange approximately $1.3 million shares of the Company's common stock for approximately $24 million in aggregate principal amount, of our 3.25% convertible notes that were due in 2018.

This is consistent with our strategy to delever our balance sheet and not – and should not be viewed as anything else. Because of this exchange, we will now account for both issues of convertible notes for earnings per share purposes on an as if converted basis instead of the treasury method that we used previously.

But since the 3.25% notes are convertible into stock at a strike price below our current trading value. The use of the if converted method has little effect on our EPS calculation.

Again the convertible note exchange occurred after quarter end which will result in additional reduction of about $24 million in term debt and when combined with the reduction in the term loan B, this quarter we will post at least $52 million reduction in terms debt from year-end levels.

For Green Plains Partners, we reported adjusted EBITDA of $17.6 million, an increase of 26% from the first quarter of 2015 which was $13.9 million, the primary driver being 29.7% higher throughput volumes on our Ethanol storage assets.

It is worth noting that because of the forward curve for Ethanol, Green Plains increased inventories by approximately 7 million gallons in the Partnership's storage facility. That resulted in the Partnership's deferred revenue balance to increase.

We expect the Partnership's financial results will benefit from a return to more normal inventory levels in the second quarter. Green Plains Partners had 321.1 million gallons of throughput volume at our Ethanol storage assets which was approximately 73.6 million gallons more than the first quarter of last year.

Distributable cash flow was $16.2 million or $2.8 million higher than the $13.3 million reported a year ago. Maintenance CapEx was $106,000 in the first quarter of 2017. The Partnership's distribution of $0.44 per unit results in a coverage ratio for the first quarter of 1.13 times.

On a last 12 month basis, adjusted EBITDA was $69.4 million, distributable cash flow was $65.5 million and declared distributions were $55.2 million resulting at 1.19 tons coverage ratio. We believe our coverage ratio along with our low debt balance provides considerable flexibility and opportunity for growth in distribution going forward.

I'll turn the call back over to Todd..

So thanks Jerry. Ethanol margins started the second quarter on a positive note. We have seen a little pullback recently, but we believe in relative terms, our hedging in the first quarter was helpful to the overall results.

We currently have approximately 50% of our total Q2 production open, but we did hedge a bit extra versus the spot market in May and June. We're just helping to shield the last few days weakness and we plan our remaining discipline in how we lock in margins as we move into summer driving season.

As Jerry mentioned, we did hold additional inventory coming out of the first quarter into the second, but we expect we will return to normal inventory levels by the end of the second quarter as we took advantage of the term structure of the curve to earn an extra return on the margin as well.

We continue to believe that gasoline demand will be flat to a slight increase over 2016. Exports are in-line with our estimates and we continue to see Ethanol blending not experienced in our industry in prior years. We believe that this is the effect of E15 present in the market and we continue to see more retailers sign up for E15.

Right now the industry has over 800 locations in 29 states selling this product including major national chains and the rollout still continues. We are pleased with the financial performance of our non-Ethanol segment in the first quarter.

Ag and Energy Services, Food and Ingredients and the Partnership generated $32.6 million of operating income before corporate activities.

Our cattle feeding had another solid quarter and with the announced expansion of our feeding operations, we believe this business can generate annual operating income before depreciation of $30 million to $45 million in 2018.

As they point to calibrate this, our 70,000 feedlot in Kansas generated approximately $19 million of operating income before depreciation in the last 15 months, which is probably toward the high end of that location's potential, but still valuable to illustrate the opportunity.

We believe that we are off the lows of cattle feeding cycle with recovery in the southern U.S. moisture level in recent years and global beef demand remain strong as U.S. is exporting more beef than expected this year.

Even during the cyclical lows of this feeding cycle, our lots performed well and it's all due to our risk management core competency applied to this business. So, back to our acquisition, currently Cargill owns all the cattle in the soon to be acquired feedlots.

But once the transaction is completed, and if Cargill brings their cattle to market, Green Plains will replace them with company-owned cattle at Leoti and Yum lots. This will be a slow ramp up of our working capital investment much like when we brought Supreme Cattle feeding operations.

And I should mention in a separate much smaller transaction in March, we acquired a 30,000 head in Hereford, Texas which is about 25 miles away from our Ethanol plant in Hereford. This acquisition was a very good value and a strategically located to take advantage of our feed production and corn origination capabilities.

Our philosophy for managing the cattle business is pretty – very straight forward. We treat it like any other processing business. We calculate the cattle crush margin and make decisions according to returns and profitability.

Having a strategic supply relationship with Cargill further stabilizes one side of that structure and we know what we need to do every day to operate profitably.

Having a cattle feed lot capacity of 255,000 head achieve scale and provides us with the ability based on current feed rations to use over 300,000 tons of company produced distillers grains and based on price and performance that number can go higher as well. In addition, we will use approximately 50 million pounds of corn oil annually at these lots.

In both cases, our cattle business will be either the largest customer or close to the largest for each of these commodities we produce across the Company. We had a strategic goal of becoming a 200,000 plus head cattle feeder and I'm pleased we can check off another one of our objectives while becoming the fourth largest in the United States.

To close out on our Food and Ingredients segment discussion.

When you look at the business we have put together, the segment today has the potential to generate between $60 million and $80 million of EBITDA per year consistently starting in 2018, which will be a full year for the cattle business and a continued realization of growth initiative in vinegar.

Our food grade corn oil business globally continues to contribute as well. The strategy revolves around capitalizing on the trend of protein demand growth globally, either food or feed and helping clear label trend in our vinegar business both industrial and retail.

We still remain focused on exploiting other adjacencies in our supply chain were common suppliers of raw materials or common customers the product produced exist and we are exploring many opportunities to do this both organic and external.

The Jefferson import export terminal is progressing well and we continue have significant interest in the open season contracting going on. This fact gives up the confidence that Ethanol exports remain strong in the near future.

We believe we are close to having customer's engaging contract and the build out of the terminal remains on schedule for opening mid to late 2017. We do an update on the Little Rock unit train terminal. Green Plains Partners and Delek have executed 50/50 joint venture agreement forming the North Little Rock Energy Logistics Partnership.

Recently the JV signed a lease with the Little Rock Port Authority to locate the terminal within their 2,600 acre industrial park. Two Class 1 railroad serve the terminal and there is quick access to major interstates that are near the Little Rock port.

The JV had also executed five year terminal put through agreements with customers to support the financial performance of the terminal. Initially, we anticipate this facility will handle two to three unit trains a month, approximately 100,000 barrels of storage will be built along with other infrastructure item.

The cost to the project is coming well below initial estimates, which should increase returns for the unit holders of GPP. Green Plain Partners will provide half the funding for the project and we anticipate the terminal to be completed in the first quarter 2018.

While this has taken several iterations and extra time, the outcome is far better than the original project announced and we are very excited about this development.

With our recent acquisitions and the expansion of our cattle feeding operation, [indiscernible] balance sheet management and maintaining a strong liquidity positions remains important to us. We believe that 2017 is set up well for our platform and we will take every opportunity to improve our term debt leverage.

We have reduced as Jerry mentioned debt on the balance sheet by $52 million. We believe that if we focus on this part of the balance sheet, we can make a significant dent on our overall debt level over the next 18 months. This benefit should ultimately accrue to the shareholders of Green Plains much like it has in the past under similar initiative.

As you know, we're a growth company and we continue to look for opportunities to expand across all the segments of our business and as we've done in the past, we will opportunistically take advantage of growth, we believe that's long term value of our shareholders, but we're also keenly focused on maintaining financial strength and flexibility.

Finally, we continue to focus our five stores of capital allocation as outlined in the past inclusive of return of capital to shareholders when appropriate. So thank you joining us on the call this morning. I'll turn it over to Rebecca to start the question and answer session..

[Operator Instructions] And your first question will come from Adam Samuelson with Goldman Sachs..

Yes. Thanks. Good morning everyone.

Maybe first talking about the Ethanol markets a little bit more and maybe looking in the rear view a little bit at the first quarter and even through April, the industry production levels which are still up pretty considerably year on year? I know Todd, in your prepared remarks you said the weekly data might be overstating things a little bit, but he can you talk about what it says for implied industry capacity as you think about the year-on-year production increases and certainly the exports have been good but the domestic demand growth it's come to come live with demand growth matching production.

So, how you think the plants are actually running and the sustainability of the run rates in the first quarter?.

Sure. So the original first quarter numbers have come down that were reported, were updated by EIA down 15,000 barrels a day to about 1025 on average for the quarter. If you annualize that and that was a winter quarter with a lot of production on over the industry, annualize that, that's about 15.8 billion gallons run rate per supply.

We think that's probably going to be the number with slowdowns in the second and third quarter on turnarounds and then coming back into the fourth quarter. So, when you look at that, your base number again is about $15.8 billion gallons of production. We don't see much more coming out from that perspective.

You know we'll see some weeks that are obviously better, but in general that's where we think we will be and we think we'll see continued addressment by EIA as well of those number.

So, if you start with that perspective, we think gasoline demand for the year will be in 143 billion to 144 billion gallon range somewhere same as last year or maybe a little bit better, maybe a couple of percent. So, we have to clear then 14 or 1.4 billion gallons somehow to not build stocks from year-end to year-end.

We believe right now, we're tracking very strongly towards the 1.1 billion gallon export number. But in recent days, we've been or recent weeks as well, we've been seeing demand growth from a lot of different areas. And I would say, there is a high probability that number can be better in that 1.1 billion to 1.3 billion gallon range.

And then you don't have much left over after that to get the 15.8 billion, so 14.4 billion plus 1.1 billion to 1.3 billion gallons, you are right at 15.7 billion gallons. And if you get in the other, more of blending which is what we're seeing, we think ultimately year end to year end, stocks will not grow very much and could actually be lower.

But in that cycle, you know we're going to see some very strong weeks of demand. And as the export pace continues overall, we think the numbers you see today will be kind of where – we'll start drawing our stocks down a little bit here and then maybe grow towards the end of the year.

So, overall that's our view of what we're seeing from Q1 through April..

That's very helpful. Then on that export side, can you talk about some of the markets there? I know there has been talk in Brazil of implanting a tariff on Ethanol imports. Any view on the likelihood if that goes through and or the other markets and maybe picking up the flash from Brazil as you move through the year..

It's interesting because the guys we talk to in Brazil that are buying are still buying and thinking about the whole year, and not really limiting it to half of a year or it's going to all stop in July.

So, our view is Brazil is going to remain strong throughout the year and any hiccup in sugar at all and though just keeping pushing it towards and they do have a structural short that that they need to fill. So, Brazil will definitely be a feature.

It's been very strong in the first quarter and we think that the numbers that repeat, the market thinks right operating from June are too low and even July, August, Sept as well and then from there.

Our internal sources are telling us that it's probably a 50/50 chance on this tariff, but I would only say that any tariff would be a something that I think the U.S.

is looking at closely as well from the other side, saying how would we react to that tariff whether coming on corn, beef or any other products that we would import even into California on some Brazilian against the Arab. So, in general I think while we're looking at it, I think in reports that we've seen down in Brazil, they know that the U.S.

has already made comments about doing the same on other products if they focus on Ethanol. So, hard to say what will happen, but the guys that we sell to or sell through to Brazil are still coming at us hard for offers all the way through the curve..

That's some very helpful color. I'll pass it on. Thanks..

Next we'll hear from Ed Westlake with Credit Suisse.

Yes. Good morning and congratulations on building up what looks like quite a large business in the cattle feeding. Just maybe some questions on a look back of that, that's obviously a sort of a bigger contributor to overall EBITDA.

I mean what has typically driven the lows and the highs of that business as you look back?.

A lot of its availability of feeders and beef demand overall. And so, when you had the drought a couple of years ago in the South, you know feeder and availability of feeders and high quality feeders to put into your lots. Basically, we've got them at 750 or so and we sell them at 1,350 pounds or so, an that's a job of the feedlots.

And so, couple of years ago, they were in the cycle when there is drought, it's harder to buy the feeder cattle.

Now with the recovery of the moisture in the Southern plains and really the larger buildup in those types of inventories, we are seeing better availability and on the other side packer margins have been pretty good for a while and demand is good and exports are good.

So, but I would tell you, even during – there is two ways to approach the cattle business. There is the old way that a lot of people still approach which is buy a cattle every day and deal with whatever the market is going to do and sell your cattle at the price that you get and not risk manage be the balance sheets aren't strong.

If you are a cattle feeder with a stronger balance sheet, you can treat it much like we treat Ethanol or any other type of production and we can hedge off.

And so, every single day when we purchase for our feedlots, we know exactly how much we're going to make on that lot of cattle and so, we can always make the decision because our overall fixed investment is very low whether we want to fill our lots or not and we don't to feed cattle, because we don't own a packer.

So, that's the different between kind of a cattle feeder integrated to a packer and a cattle feeder that is out on its own. The fixed investment is low, working capital investment is high, returns are good, but in general we don't have to buy cattle and lose money and we won't do that.

So, we've only been opportunistic in those lower markets that we'll buy and if we can make money and we – our lot in Supreme down in Kansas has been as low as 35,000 to 40,000 heads when margins were lower and we just ran and paid our expenses and then in times when it's good, we filled up to 72,000 heads.

So, we have the flexibility to do that and the financial strength to hedge and that's a differentiating factor in this business I think people don't understand. The historical viewpoint is that it's so volatile, whatever happens in cattle is just going to impact your margin, but that's only because you weren't hedging.

So, there is a process on the other side of that as well..

And so when you come back to the $60 million to $80 million of EBITDA from the combined larger business in 2018, that sort of like done at a sort of a low mid high kind of margin assumption?.

I would say that's kind of a 40 to 70 percentile or 80 percentile, kind of in that range of here is the 40 to 80 percentile of the business. You know it could always be lower and it could also a lot higher. I mean cattle margins have had better margins than even lower illustrating there as well.

So, what we want is kind of give you somewhere in the – in that range of 40% to 80% range of opportunities. The top end is obviously unlimited depending on what the margins do, but we think we can limit the bottom end as well by not having to fill our lots up one times or sometimes a little bit tighter in feeding.

So, which is what we've done and we now have three years of history to just about a worst cycle in cattle and the best cycle in cattle, all in the same time. So, we have a pretty good understanding of what our lots would do in both of those times. In a very good margin environment, we could be better than that.

And that also include Fleischmann's in there as well. So, that's $60 million to $80 million includes the Fleischmann's business and also our corn oil business – our food grade corn oil business..

So, all of the food business..

Yes. But it's a solid – has a solid predictable cash flow stream even with the volatility of the cattle business which is much less by multiples of the volatility of the Ethanol business I can tell you that..

And then, putting my thumbs on that question, or putting it onto you, any thoughts as we sit at this stage on corn appreciates early?.

On the – excuse me, on the what?.

On the harvest, corn?.

Yes. So, look I think in the market, we got lot of moisture hit us all at once. Looks like we have a few more cycles to come through of rain, but we'd also have a lot of windows. We have a lot of areas in the U.S.

that are hedged in plantings and we have some that are slightly behind and then a few areas that are definitely more behind like Minnesota and Michigan. We think – you could – Iowa state just released that you could plant to May 15 without a yield drag and so that's another 15 days or so.

So, I think over that time period, we'll make significant progress and we're right where the five year average is anyway. We're a little bit behind last year, but if you look at some of the data that's out there, we don't expect that you'd have significant yield drag.

We do have to get some of these colder areas where like Michigan and Minnesota plant is. But in general, we're focused on those two worst areas which is the South and other area just mentioned. So, I think we'll get it planted. I think the insurance date is late May and Early June, so we have a long time from that perspective.

The farmer is still focused on planting corn. I think the acres will go in and at that point it's just Mother Nature and so overall we're not going to change the acre numbers very much. We'll watch yields closely, but thus far we have no reason to drop that at this point either..

From Stephens, we'll go to Farha Aslam.

So the question we've gotten most this morning is really about the Ethanol forward margins. And we look at just the futures curves, it shows that Ethanol is barely profitable on an EBITDA basis. But your comment and ADMs this morning are very constructive about the margin profile you are seeing right now in Q2, Q3.

Could you help us bridge the difference?.

Yeah, I mean I think if you look at it today versus last four days, we've seen a definite set back in the margin structure just based on this – some of this weather in the corn market and a little bit of selling in the front end of the Ethanol curve.

For us, we are done with April, we are partially done with May and June, so we – obviously, we're watching it closely and we believe that the market is just waiting for one big draw and if that were to happen, I think we will at that point and we believe that will happen based on seasonal demand, exports, what we're seeing and also run rates coming down.

You know I think one draw gets people back into the mode of just and second continually lay on this Ethanol market. You know fundamentally, what we're seeing some strong regional demand for the product as we come on the driving seasons.

Export demand looks great, so I think that if you look at in a vacuum through today in the last three days, what we've lost in the market, I think just give us, we're one draw away from recovering most of that and demand remains good. I think that's why where the optimism comes from.

Coming into this time of the year and laying on the front of the this curve, that's not probably what I would do, but I think overall, you know coming out of winter, you get a hot summer. I think production levels what you've see in winter probably don't increase.

But demand levels do and we'll just step to see what happens, which I think is where the level of optimism comes from these levels. We came in five, six days ago and margins were in that range of $0.12 to $0.17, $0.18 a gallon all-in depending on where you have some higher, some lower depending on what type of volume you have, when in what location.

And we just got hit in the last few days on the margin structure, but I don't think anybody believes that's a sustainable hit..

And then just some more color on the export market. Could you share with us kind of here in the second quarter which markets are particularly strong that you are producing and shipping to and longer term, could you talk about the opportunity in Mexico and if you think China can come back to the U.S.

market?.

So, the strong, obviously Brazil is strong. We think it remain strong through April, May, June. There the program looks big, optically looks big. We'll have to make sure we execute through that.

Steve, you want to comment on Canada, Mexico and others that you are seeing as well?.

Canada has come back up towards the 10% blend level that we anticipate in 4% to 5% in the previous year, so we're seeing that lift from them. We're also seeing the India piece pretty much running at the rates we projected out going to replace into the industrial grade.

We are hearing there is some attempt to look at fuel grade into India, but right now it's all industrial grade going there. The Mexico piece that you mentioned, just generally there is conference on in now, the petroleum liberalization in Mexico is proceeding.

So, would say not fast enough, some would say and it's moving at a fast rate, but there is still a lot of uncertainty around that liberalization and point of getting Ethanol approved to go into the blend in the resource they are waiting for. .

Well, that's important for sure..

Any color on when we could get a decision from Mexico and what the size of Mexico could be?.

Well it's going to be 5.7 for the MTB blend rate now which would put at about 750 million gallons of demand, close to the 10% level, it's about 1.2 billion.

The message from the energy commission down there is somewhere in September, October they could make a ruling on that, but there is still a lot of infrastructure played in Mexico that has to be put in place to accommodate receiving of Ethanol into the market. Some is in there now, but there is still a lot to be built out.

The other thing China, we're holding China still at a very low level, zero to small leakage into the country. We don't project a lot going into China..

From Bank of Montreal, Ken Zaslow..

Hey just a quick question. I know you talked about how large the Food and Food Ingredients could be.

When you think about the Partnership, you know with the new facility in Jefferson coming online and anything about 2018, how do you think about that as terms of size of how big that could be as well?.

Jerry?.

So the Partnership, I mean it – increasing the size of the Partnership will depend large on additional drop down acquiring additional assets where we can drop the tanks down and then of course the Jefferson terminal. We'll work on the Jefferson terminal probably in mid-summer for a drop down.

You know that as we've mentioned that's a $55 million terminal with – we have 50% of that and so I think the – form a – we haven't given real specific guidance on that, but from an EBITDA multiple standpoint, you know we're probably in about the – once the drop down is done, we'll probably be in the 7 to 8 time range kind of whatever typical market be for a terminal like that.

But we haven't given that. We think it will be somewhere kind of a $6 million to $8 million addition to EBITDA in that business and then Little Rock should add another million or so..

Then, the other question I have is, on Food and Food Ingredients, so there is generally two underlying businesses. Obviously the cattle and the Fleischmann's, can either the two aspects of those business have different growth aspects, right.

The Fleischmann's as you should grow over time while the cattle kind of should move around that normalized margin. So is that the way to getting to that, so that $60 million to $68 million over time should actually should grow maybe not at the pace that it's grown, over the last years, but should grow because of the underlying growth.

Is that how to think about it too? Is that not the earnings powers but that's the earnings starting point in 2018?.

I mean if you look at obviously the volatility is going to be in more in the cattle side. Vinegar continues to grow and our pace – the estimates that we initially thought, we bought it at a sub, right on a sub 10 multiple.

We think we'll get at least a turn or two out of that over the next couple of years, but that will provide steady growth in a steady base business and then a steady growing business and then cattle will just be obviously the good year that we can make $40 million to $60 million in those lots and steadily make somewhere in the $30 million to $40 million range overall.

So, without going into specifics on all of this, but you can kind of extrapolate that. Vinegar will be the base and a growing base and cattle will be the one that really supercharges the returns..

When you gave Ethanol margins, not in 2017 but 2018 and 2019 as the supplies and you signed the imbalances, what would you – is there any reason it's not a return on investment business like 10% or how you think of a return on assets on that?.

I mean return on assets, I mean you could look at that and we've done a lot of work on that and looking at our free cash flows and so we're focused on that.

Obviously our return on that assets over last four or five years have average in the 5% to 7% range and we think over time as we get into a more balanced environment and demand continues to increase and E15 continues to pull in exports as well, you know we could push those return on net assets higher than that.

Whether we get to 10 or not, that's a probably and outsized year, but in general you know 6% to 8% return on net assets. I mean walkthrough that [indiscernible] and then move away to other return threshold as well..

I mean I think it's – when you go to steady $0.15 to $0.20 a gallon margin overall, we put that over our total gallons now and look at what we've invested, our return should continue to increase..

And our next question will come from Sandy Klugman with Vertical Research Partners..

Thank you. Good morning.

Given the increase size of your cattle feed operations, what percentage of your DDG projection do you expect to go into the merchant market? And then what's your outlook for the DDG market? Do you see prices moving higher given that they are trading at their largest discounts to corn in six or seven years? And are there any regions that you see potentially filling the demand gap created by [indiscernible]?.

When we look at our cattle production, we think that is a 300,000 to 400,000 ton opportunity over about 4 million tons that we produced. The other 3.6 million tons obviously are available to the market.

Our goal is not to sell to the merchant market and it's to sell to the end user direct and we have been eliminating that within our – with on our supply chain.

So, we export somewhere between 400,000 to 600,000 tons of distillers directly to customers around the world and then from there that leaves us another probably leave us somewhere around 3 million tons we sold domestically. The export market hit a high about 12.5 million tons a few years ago.

It will probably more like 10.5 million to 11 million tons going forward. We are seeing countries like Turkey make up some of their slack demand and other countries as well that are coming in and buying up the product. there is a chance be a normal return to the market, all be it a slower return as well which was a nice customer for us as well.

So, I think we are displacing China over a certain amount of time here not fully, but we're starting to see both at these price levels domestic inclusion rates pick up as well as exports business to other countries pick up and we're highly focused on that.

So, while we're trading at these levels, these feel like they are bottoming out and it feels like where you can fit this into your asking, the market is starting to increase inclusion rates across the board. .

Okay great and then just a follow-up, you teased an average yield of 2.88 gallons per bushel.

Do you see this moving higher in the near-term or is just a function of winter temperatures being more opt able, firm and patient?.

No, actually we've invested a lot into yield improvement and so while we ran a little slower, we still had to run for export back. So, overall our view is that this 2.85 to 2.9 is where we will be for a while to push through there.

Obviously, if we're going to run as hard as we run, all year long then, it probably be hard to push over 2.9 for a while, but we'll continue to look for opportunities to do that. But at this point, in this 2.85 to 2.90 level, I think that's consistent for the longer-term..

Thank you very much..

Thanks..

From Piper Jaffray, Brett Wong..

Todd, you first talked a lot already about the strong exports to Brazil what was happening there, but can you talk to what the arb opportunity looks like right now and at current prices what important tax would actually be needed as Ethanol going there and I'm of course assuming current prices in that sugar fundamentals are unchanged?.

Yeah, the arb is still open and if there was an export tax, it would probably be close to at times open depending on the geographic, but in other part of the country closed. So the export tax would definitely have some impact you know realistically. We believe there are structurally short and internal prices would react to anyways through that.

If that were to happen, but I do think it's part other trade issues if Brazil does moves to do that on the other side of stuff. I think it will raise a lot of red flags.

You know when they need to export their products out of their country, into our market again, you know what's going on in Washington, I think that would raise red flags much like the who biodiesel case going on right now.

And you basically – if you can wait to see what happens as we can biodiesel, but if the biodiesel industry wins, the case for putting import tax on biodiesel, it think at that point it probably sends at least a fair warning to the Brazilians that by then implementing an import duty on our Ethanol, it could spark an all out interesting event on other products coming in here and I think the industry will call for that.

So, and multiple industries will call for that and multiple farmer groups will call for that as well.

So, I don't know if that's the way they want to head, but if they did head that way, our belief is that we will still see some demand from there, but it will be probably a little muted during the last half, but right now everything we see out there, is demand continues to go on and they continue to buyout on the curve..

Okay. Thanks. We're definitely seeing all sort of trade relationship pressures I think in the cold region.

But then, my next question just wondering on the cattle business, did you see any impacts from the Brazilian beef scandal, obviously that impacted prices, but just wondering what kind of exports you saw there given exports fell off in Brazil and you know as we move – as that gets behind us and what are your expectations are for exports out of the U.S.

and how that impacts that business?.

You know I think that fixed itself pretty quick. Most of the countries that locked out Brazil opened up very quickly. Our view is just demand. There is a protein thesis out there whether it's protein from grains or protein from beef, the world just wants more.

And we're producing it and we have the availability to ship it and I think that's the bigger driven than the beef demand scandal – or the beef scandal in Brazil. You know that has a bit of an impact for a few days, but in general, obviously the world demand is growing. If we can get China to open up and take our beef, that's obviously helpful.

Our view is there is lot of loops to jump through to labeling and tracking and tracing and all that kind of stuff to make that happen.

That would be the thing that we're watching most closely in terms of the long-term demand thesis if we can make the breakthrough there and there is skepticism around that, but there is also optimism around that as well. .

Okay.

But in terms of if you look through the rest of this year, there was really a short-term impact which I agree with based on everything we hear, just from the issues out of Brazil that you wouldn't seriously impact that business as we look at the next few quarter?.

No. Not at all, I mean this just driven by good old fashion demand for beef around the world and we have it available and we are exporting it. .

From Jefferies, Laurence Alexander..

Hi, this is Jeff Schnell on for Laurence.

In a normalized environment, is there split of Ethanol to non-Ethanol assets you would be comfortable with in the event that multiples for Ethanol assets remained high, would you add a leg to the stool that doesn't have as clear of synergies that are as Fleischmann's or the cattle business?.

We're focused on adjacencies whether organic or external, whether horizontal or vertical. You know, as we said in the past, if we share sort of common customers on the front-end or the back-end, that becomes interesting for us whether it's farmers that sell soy or our feed customers that buy protein.

I would say it is colocation opportunities as we mention. We are always exploring whether around other types of commodities that production or processing capacity even to as far as soy processing down the road to look at colocation opportunities which would be explored with.

Third party using our industrial sites to do that, so I think at this point, you wouldn't see us ventures outside of what we do and what know and at this point the requirement is, there has to be an adjacency and we probably wouldn't bring in a business that we would introduce that would differentiate something that we've done in the past. .

Then just on the hedging, is there a theoretical maximum that you could hedge in any quarter without swaying or dipping the market?.

No, we could hedge whole quarter without, you know we could do that pretty easily of our production.

To hedge 375 million gallons, 350 million gallons or so is not – you know obviously you can't do it in a day and you got to kind of – you have to take the time and have a strategy around that which is what we did in the first quarter which is why I believe we were able to hedge off something before the drop on that January and partial part of February, we did that earlier in the fourth quarter.

So, we wish we had done more. But overall, we could hedge the whole quarter out I think over time. You can't get it all done in a day. .

And then lastly if I may, can you help with any rule of thumb or if you were to switch your production just from 20% of export to 50% or if it was export or industrial grade, what would be the impact on utilization rates? Is there any rule of thumb for that?.

Well, if we went to 50% of our platform, we'd be 80% to 70% of the market. So, I don't think that's going to happen. I think we are probably a 20% in the range of where we're going to be on the maximum side that we've seen over the years, and so we're really only 8% of U.S. production at this point. So, well some quarters, we more than doubled.

We are seeing other Ethanol producers get involved in the export market, direct as well and those starting to dis-intermediate those that going on production or you want to link up with those that are on production to make sure that you have supply for your exports.

So, overall, I don't think from our standpoint, while you will see much more from a sales percentage of our export grade to the market than what you saw in the first quarter..

Thank you..

From Vertical Group, we'll hear from Heather Jones..

Good morning. I wanted to clarify really quickly your comment on hedging. So, you said you are 50% hedged for Q2, but it sounds like that's more heavily weighted to May and June.

Did I understand that correctly?.

No. What I meant is when we look at 50%, obviously it's a third of its gunnery in April, so then there's only overall a 17% overall April, so around 50% hedge for the quarter total, so you have some May, June on, even heavily more towards weighted towards May.

So, we do have a little bit on right now, but obviously being impacted today by some of the weakness in the crush in the last few days waiting for tomorrow. In general, we do have a little bit of book on. I think that helps us – I think the point is that hedging does the work.

It definitely helps us in the first quarter by putting a big forward book on and having some of the second quarter hedges, well I think will help us overall, we still have plenty of work to do..

And then on the corn, specifically on corn, your physical ownership, so you've built out this storage capacity you have on the ground storage and all.

I mean how are you positioned in your physical ownership of corn right now, how should we think about that given with how corn has rallied recently?.

We don't need to buy much of anything for this quarter. We're done. You know obviously we hedge, we buy basis and we hedge it when we make it a flat price commodities when we sell Ethanol and we crush it in at that point. We don't have any – there is no area that we own an Ethanol plan in – that we have any worries about buying the last amount of corn.

There has been no problem buying corn from the farmer. In fact yesterday, on this rally was – we bought a 100% corn from the farmer on record purchases direct and that's been obviously something that we've been working on very hard. We've bought no commercial corn yesterday. We had almost a record day of direct purchases.

So, when we look at third quarter, same. We are well positioned from a storage standpoint to start bringing up all of our stores to get ready for harvest again and grind that. So, from – when we walk in everyday with our 50 million or 60 million bushels of corn that we have, you know you have to think about that.

That gives us a lot of capabilities to be patient on buying forward corn. We don't. We dis-intermediated lot of third parties from our supply chain, but I would say the market will have no problem buying base of corn through new crop at all. There is enough of it around, farm stocks are high and the farmer still has to market his corn.

It's overall I would say this industry and anybody that uses corn is in a very good position to buy what they need and be patient to do that. Any strength in the basis is met very heavily with commercial selling or farmer selling. .

I have two detailed questions. So, first, if I annualize your non-Ethanol businesses from Q1 and just give some pro-forma effect for your recent cattle acquisition, the Jefferson terminal, I'm getting somewhere in the 1.40 to 1.50 range pre – not allocated any corporate to that.

But it sounds as if from your comments that, it sounds as if that number could be low that you think is non-Ethanol businesses could accelerate from this level.

So, just wonder if you could speak to that analysis?.

So, Food and Ingredient when we look at that and then add in our added Energy Services and then including the – what are your non-Ethanol that you are using to get the number, then we can then try and at least compose to that?.

Okay, well this is going to same time. I don't want hog the time, so we can follow-up offline..

Okay. Thank you..

On the supply and demand side, so was wondering if you could give us a sense of where you, what you missed on the supply side where even with the EIA adjustments is coming in higher, then not only yours, but generally anyone anticipated.

Wondering , what was missed there if your 15.8 annualized and with maintenance shutdowns et cetera, if you have given effect to some of the new capacity that's in the pipeline and finally, just your take on why demand has been – domestic demand has been so sluggish to-date? So, just a really big picture question, but clearly it's what drives everything..

Yeah. So, the supply picture obviously you know we've seen more projects so add a fermenter here and add a fermenter there and what we started few years ago, was there is a lot fast followers to say, well they can do that, no we can do that.

So we were about – we figured the other day about six 10,000 barrels a day of that – no about 6,000 barrels a day of the added capacity that we've seen ourselves, about 150 million gallons which is about 500,000 gallons a day – no about 10,000 barrels a day is coming directly from Green Plains in this increase.

If you take that across the industry, we know others are doing similar projects and then we've done after we announced there is lot of fermentation projects to lot of projects that would add capacity. So, overall the industry continues to debottleneck and demand just has to keep up with it.

So, just a matter of ebbing and flowing, you know we believe that 2017 will be somewhere 1.25 million a day. If we look at 2018, it will probably more than that based on what we're seeing in debottlenecking projects across the U.S. and overall we just have to keep up with that on demand.

On the 125,000 a day, it's about 15.8 and then when we look at exports, we have to keep those going at a 1.1 billion to 1.3 billion and then it all comes down to E15. And E15 program continues to roll out significant across the country.

We're working with the government on the 1 pound waiver, we've seen legislation introduced to get a E15 blend sold all year around across the whole United States. But even without that, you know if you look at where we're at in 29 states and 800 stations, that's not even a rollout yet.

We have another 1,000 or so stations under construction for next year.

Steve, is that correct?.

We'll be – by year end, we'll probably be 1,100 to 1,200 stores up and running..

Up and running on E15 and more coming in 2018..

Correct. More build out continuing..

More build out continuing. So, and what we're seeing right now at E15 is that we are now getting retailers who said no and never saying yes I need it now, because the guy across the street is taking business from me.

Is that correct, Steve?.

I think the Dallas announcement with the Quiktrip recently is one of the best examples..

So, all we need is another 1% blend in United States pushing through 10% to 11% and you cleared all the access plus more and you don't have much left to export. I think that's the key number right. We're in this imbalance and let say the Mexico thesis continues or the Brazil thesis continues, you can reach a point here. We thought it would be mid-2017.

I think we're in balance on low for structurally short just because of some of the debottlenecking and the first quarter demand which is lilted bit lower based on (guestimate). We think that's picking up. We did 9.30 last week, so we think that's – were just starting summer driving season and demand is picking up.

So, overall imbalance but we need E15 to really to kick into sway that in our direction..

And just real quick on the clarification on 2018, you think it will go up in the 10.25 and you said based on debottlenecking, but you've taken into consideration, I assume you are some of the literally physical expansions that have happened to some plans and some of these proposed plans, I think there is a large one in Iowa.

Does your 2018, when you are looking at that, does it assume those happen as well?.

I think that plan probably comes on late 2018 at earliest and probably that's in 2019. And so beyond that, you have the one in Michigan that's starting up and there wasn't much stuff running and that's much out on the Board. Don't forget we started up New York and [indiscernible] was started because those were shut down last year.

Hopewell last year was shut down in the first quarter that we started back up and so, you already saw a lot of impact from new capacity already through the numbers into the first quarter. And most of our – most of our expansions were done as well. So, most of that was already in the numbers in the first quarter at a 1025 or so a day..

So the year-on-year increases that we've been seeing should began to moderate as the year progresses, because they rolled in as the year progressed in 2016?.

I think they've rolled in as the year progressed in 2017 and at the end of the year 16 and we'll still see fermenter projects come online and we'll still see added capacity. We know there is some other stuff happening, so but in general, we believe the whole average of the year will be in that range..

Okay. Thank you so much..

From Raymond James, Pavel Molchanov..

Hey guys. Just a quick one on the policy landscape, so it's been about two months since anyone has heard anything about the so-called icon or (Icon) RFA deal.

Given that we're already approaching the middle of the year, I guess number one if you have any tidbits to share on what those discussions in Washington look like and secondly if there is a change in the obligated parties, is that something that could be implemented in 2017 or would it have to wait until 2018?.

So, we don't believe anything is happening on the obligated party at this point and nor do we believe that will change anytime soon.

If it were to get – if there were something to come out and some ruling to come out that it's going to change, it's a multi-year implementation that long, Steve how many years do they think it would take?.

By that three years, maybe little further..

Over three year implementation just to get to that point from a government and regulatory standpoint..

Just legislative lease and then challenges..

And then the challenges and all those other things. So, our view is that there was a lot of fireworks and a lot of rhetoric. The deal was not made with the industry to do that.

Our customers don't want it and when you look at our customers and who they are as an industry, not necessarily some of that – that support the obligated part change, our customers don't want it and we want them to continue down the E15 implementation path and we believe keeping the obligated party the same, keeps them on that path of continuing to roll out higher blends with certainty that will have the market for us.

So, our view is there was a lot of fireworks and we're back to obligated party remains the same and we don't believe the White House has any initiative at all or any appetite at all to change that at this point..

Appreciate it. That covers it from me. Thank you..

We'll go to Patrick Wang with Baird.

Hey good morning, everyone. Thanks for fitting me in.

Just a quick one, moving back to the Jefferson terminal, it seems like people are appreciating the competitive benches there versus ship traffic? Do you have anything to update at this point on a potential Phase 2 on that project?.

Not at this point. I mean we're looking at it. I can tell you that, but we want to get Phase 1 under contract and then the terminal what we need to do for Phase 2. But we do believe there is a high probability of a Phase 2 expansion that would follow. But again, we want to make sure that Phase 1 goes well in contracting..

Okay. That makes sense. Great. That's it from me..

Your final question will come from Selman Akyol..

Thank you. Just a little bit of follow-up there.

In terms of thinking in terms of Little Rock, what changed to bring that back on?.

It was never off actually. It was just a function of the initial site that we chose met with and extreme resistance from part of the community and we were the pawn in negotiating other things that they wanted and we got in the middle and we decided we didn't want to be in the middle.

Location wise it was never a question in terms of geographic, it was always well – if we can't build there, what's the next best site. Working with the Port of Little Rock has been a great experience to relocate that site. It's a big industrial site. They wanted us there. There was no issue and we moved on that.

So, from our perspective, it was never off the table. We just had few relocate that site and we're in a much better situation based on the current choice and it's cheaper, so which is even better. So, from our perspective, it's win-win who is worth the wait and worth the hassle.

And I think the town that lost it, the town that is not being built in lost out on a great opportunity to bring the industrial complex in there and we were just a pawn in their arguments that they were having locally..

Got it and [indiscernible] I believe proposed $12 million and he said it's coming in less than expense or less….

It will less than $10 million and maybe even possibly even towards that $8 million range. We just want to get the final numbers..

Got you.

And then last question just, in terms of just thinking about Green Plains, do you have more of these sort of JV opportunities to see out there as everyone starts to in terms of describing future growth for Green Plains?.

We have a list of opportunities that we look at, some are JVs, some are organic, some are acquisitions and it's really just a function of when we look at it, we know we have in 2017 great industrial sites. We know that we have 10,000 customers that come into our plants.

We've got both customers in multiple different lines going out of our plans and so where do we – where can we take advantage of that supply chain and where could we enter into things that are good for our shareholders whether it's going to be an asset type opportunity, a JV opportunity or a new build opportunities. We look at all of those every day.

They are on the table, but I wouldn't say any has more probability than anything else..

Alright, thank you very much..

Okay everybody. Thanks a lot for coming on the call today. We appreciate it and we'll talk to you next quarter. Thanks for your support..

Ladies and gentlemen, this concludes today's presentation. We do thank everyone for your participation..