Doug Bruggeman - CFO Stuart Rose - CEO and Chairman.

Katja Jancic - Sidoti & Company Jeremy Hellman - Singular Research Paul Resnik - Uncommon Equities Timothy Conway - Wake Up Press Ethan Steinberg - REX American Resources.

Ladies and gentlemen, thank you for standing by, and welcome to the REX American Resources Fiscal Second Quarter Conference Call. During the presentation, all participants will be in a listen-only mode. Afterwards we will conduct the question-and-answer session.

(Operator Instructions) I would now like to turn the conference over to Doug Bruggeman, Chief Financial Officer. Please go ahead..

Good morning and thank you for joining REX American Resources’ fiscal 2014 second quarter conference call. We will get to our presentation and comments shortly as well as your Q&A, but first I will review the Safe Harbor disclosure.

In addition to historical facts or statements of current conditions, today's conference call contains forward-looking statements that involve risk and uncertainties within the meaning of the Private Securities Litigation Reform Act of 1995.

Such forward-looking statements reflect the Company's current expectations and beliefs, but are not guarantees of future performance. As such, actual results may vary materially from expectations.

The risks and uncertainties associated with the forward-looking statements are described in today's news announcement and in the Company's filings with the Securities and Exchange Commission, including the Company's reports on Form 10-K and 10-Q. REX American Resources assumes no obligation to publicly update or revise any forward-looking statements.

I would now like to turn the call over to Stuart Rose, Chairman of the Board..

Thanks Doug and thank you everyone for listening.

REX reported record earnings per share last quarter of $2.68 per share versus $0.71 per share in the corresponding quarter last year, income from continuing operations before taxes and non-controlling interest was approximately 40.7 million this year versus 10.3 million last year, after tax 21.9 million this year versus 5.8 million last year.

Cash on hand currently 152 million versus 105 million at the beginning of the year. Our sales for the quarter declined from 175 million in the corresponding quarter last year to 150 million -- a little more than 150 million this quarter. The sales decline was caused primarily by lower input prices.

This was offset by very strong crush margins, mostly related to the lower purchasing price of corn. We also had lower natural gas prices during this quarter than the first quarter which gave us a benefit over the first quarter in that area.

We not only had great gains but the industry had great gains in the quarter and a lot of it had to do with everybody’s ability to source corn at lower prices than the corresponding year, the year before, in terms of why we were able to outperform as we are in locations -- outperform the industry because we are in locations where corn on average can be bought below CBOT prices, some of our competitors had to pay higher than CBOT pricing, significantly higher.

We’ve also had a continued ability to get railcars again that gave us a benefit over our competitors who sometimes have had a little bit tougher time getting railcars, are selling ethanol lead times as we generally go pretty close and we don’t do a lot of hedging.

So this quarter we had a benefit of-- because of rising crush spreads, we had a benefit of not being hedged out as much, which gave us an advantage over our other ethanol competitors.

And last probably most important, we have large plants in the farm belt, we have what we consider the best technology and best plants in the industry and that has allowed us to again operate and do a little bit better than the rest of the industry.

In terms of ethanol itself, and I’ve said this before but I couldn’t be more proud than I am to be in this industry. It’s an industry that’s important to our country in many, many different ways. First thing and most obvious thing is it lowers the price of gas. We are selling ethanol significantly lower than wholesale gasoline.

Secondly cars burn cleaner, the air is cleaner because of ethanol. Without ethanol, we’d have far, far more pollution. We receive no direct government subsidies in this industry. People are -- one of the falsehoods that is told all the time is that the government is paying us directly to produce ethanol. We are not being paid.

The farmers are paying more in taxes, and they are receiving less aid because of ethanol, because it has helped them support the prices. There’s no bad economies in the farm markets; again the farmers have done very well because of ethanol. Balance of trade has improved because of ethanol. There is significantly less imported oil.

Everyone talks about fracking being the reason for less imported oil. Ethanol in my opinion is equally important, and we get none of the credit for it, but again something that has to be recognized. Defense issues not as much money is being sent to countries overseas, some of which are in South America, some of which are our enemies.

We’re keeping that money in the United States and lastly and the biggest thing that ethanol has proven to be a great benefit for everyone is it’s helping support corn prices. If it wasn’t for ethanol, corn prices will collapse right now.

We have had an amazing back to back harvest, and this one appears to be -- last year was an amazing harvest, it appears like it’s going to be back to back this year, and ethanol was the thing that’s kept the farm prices at least where -- the corn prices where they are.

Without ethanol, our opinion is corn prices will be significantly lower, which will be very detrimental to our farmers. The industry in the quarter continues to be profitable because of the corn and the lower corn prices.

DDGs and corn oil, two products that go with the corn are declining in price in the industry, and that is an issue that I’ll talk about a little bit later. Corn oil continues to be profitable for the industry.

One of the things that we think could be very interesting in the industry is a decent export market which could come about as more and more countries recognize not just that ethanol sells for less than wholesale gasoline, it also is very advantageous -- it’s very advantageous related to air quality.

REX going forward expects to earn at least 50% greater than they did -- going forward into the third quarter, we expect to earn at least 50% greater than we did last year. Last year, we earned $1.21. It could be significantly better than that. We don’t like to give and we don’t give forecasts, but we’re comfortable saying at least 50% better.

Crush margins right now are very strong, industry crush margins, published crush margins are about $0.84 which is better -- significantly better than we are going to report this quarter, and we have very little hedged out, we’re mostly around the spot market or very close to the spot market, not exactly on it, but we don’t have a lot hedged out.

So, if the spot prices rise we have the advantage -- better advantage than some of the other people in our industry. Natural gas which was a problem in the first quarter does not seem to be an issue right now. And there’s a strong supply of well-priced natural gas in our markets, so that’s a benefit.

In terms of areas that could be of risk, the biggest risk that I can see going forward is low DDG and corn oil prices as corn goes down in price. It is natural that DDG and corn will go down with it.

DDG is residual food product that comes from when we make ethanol, and again if corn prices continue to go down, that’s great for the crush spread but that can be harmful to the – the flipside is DDG and corn oil prices will go down with it, and if there’s a lot of corn, they can go down significantly. Other thing is there is a railcar shortage.

To-date, we’ve been managing to avoid it, but as more and more production takes place in North Dakota, that’s going to be an ongoing continuing issue, something we worry about and something that we have to watch all the time. The other risk is just general crush margins.

Related to the oil industry, related to the corn industry, crush margins have been good right now, but it’s something that we worry about. It could get better, it could get worse, and we’re totally, -- we’re totally dependent on commodity markets, some of which are completely outside of our control.

The other thing is the federal decision on RINs is expected sometime in the next couple of months, and to-date it looks like by the time they make it, it won’t be that big of an issue, but RINs are very, very important to us.

Some of our end customers are able to sell those RINs for $0.49 to $0.50 and ensure some market for our product, some of the customers that we have will prefer not to buy ethanol, and RINs make sure they do buy ethanol.

A decision on what level of RINs for this year could affect us, although the longer and longer it takes, the less it is lightened, the less it will affect us. In terms of cash, we currently have about $150 million on hand. First thing we’re going to do with it is pay off some of our debt. It stood at $62 million, we’re going to reduce that.

We’re also gradually doing what we can to increase ethanol production. We make capital improvements or making capital improvements in our plant related to grain storage, ethanol storage, DDG storage. That’s going to be roughly $8 million. We would like, although we haven’t found any to buy yet, we are actively looking to purchase other ethanol plants.

We’ve had no success to-date in that area as people continue to make good money on their plants and pay off their debt. There’s no natural demand to sell these plants. In the past, we’ve always made opportunistic purchases of plants at very attractive prices, and it’s hard to go away from that and at this state we don’t plan on going away from that.

The one thing again that we would like to do is look at buying out existing partners and plants, again no success at that either, because everyone is doing so well, and so we’re happy they’re doing well and certainly would never force the issue.

The other thing and probably the biggest thing that we’re looking at that’s different from my previous calls is we are actively exploring trying to build one or two or maybe more new ethanol plants.

We are good at it, we know how to run ethanol plants, we do it, we feel better than anyone else in the country, but it’s not easy to build a new ethanol plant today with all the EPA requirements, and we are not so sure it can be built, but we are making every effort to explore that option, and it’s something again that if we could do it, we would do it today, but it’s not -- we’re not sure it’s possible.

If it’s not possible, that’s actually on another side of the coin a good thing because no one else would be able to -- it would be hard for anyone else to build one either, and that’s very, very good news in increasing the value of the existing ethanol plants.

Finally we have a small investment in a proprietary patented process to make deep steam in the ground at the rate -- hopefully make deep steam in the ground at 3,000 feet or below. There’s billions and billions of barrels of oil in the United States at 3,000 feet or below, heavy oil that cannot be reached today.

Our technology hopefully has the ability to reach it. We hope to have a pilot plant up next year, and pilot plant will cost a couple of million dollars, and we will have a lot better idea of whether it works or doesn’t work, again its proprietary. I reiterate, as I have before, do not buy our stock based on this technology, it’s unproven.

If it does work out, it will be amazing, but we have no -- but it is totally unproven and it’s something we are working on, and it at least gives you the idea and gives someone the idea of the type of things that we work on outside of ethanol, but again don’t buy the stock on that, and ethanol is our business and where our earnings are coming from.

In conclusion, we just completed our best quarter ever in earnings per share. Crush margins were good. Crush margins appear to be improving. We don’t hedge a lot, so we can take advantage of those improving crush margins.

There is no guarantee that’s going to stay, but with unrest in the Mideast and with our product, the pollution advantages -- pollution control advantages of our product becoming well known, we feel comfortable that the next quarter will be a good quarter.

The other thing that we are hopeful for and it looks like it’s going to happen is a very, very strong harvest this year. We are in great corn producing areas. If there is a great harvest, the basis that we paid for our corn could go down, and again that’s beneficial to us.

Again, we feel strongly we have the best plants in the industry and best locations in the industry, but most importantly we feel we have the best people in the industry.

Our mangers and the people that work for us in my opinion are the finest around no one could do a better job than our people do, and that’s really what separates us not just from our industry but separates us from most companies in the United States as the people that work for us have made our company what it is today, and we really appreciate them.

And now I would like to leave the call open for questions..

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Thank you. (Operator Instructions) Our first question will come from the line of Katja Jancic with Sidoti & Company. Please proceed with your question..

I have a couple of questions.

First being, Stuart you mentioned you expect the third quarter to be 50% better -- at least 50% better than…?.

I have a couple of questions.

First being, Stuart you mentioned you expect the third quarter to be 50% better -- at least 50% better than…?.

I said we are comfortable saying 50% -- we are only one month into the quarter, we are comfortable as you know how we were comfortable saying that, but depending on what crush spreads do if they continue at this level it could be significantly better if they increase significantly.

It could be better if they go down, then it will be just, that would be -- that’s where -- 50% better the corresponding quarter of last year, which I believe was about 21..

So, we are looking at around at least $1.80 per share in that..

So, we are looking at around at least $1.80 per share in that..

Again, that’s only based on one month numbers, but that’s what we were telling people that we feel very comfortable with. And again it could be considerably better..

Now just regarding dry distiller grains, the prices have plummeted basically I think the last time I checked, they were around 125 per ton, now you’ve earned over 190, now this is a huge difference.

Just could you comment on that how are you selling them, what prices are you seeing right now? I know, you mentioned that’s a concern, but it doesn’t look like you are really concerned too much about it, could you comment on that?.

Now just regarding dry distiller grains, the prices have plummeted basically I think the last time I checked, they were around 125 per ton, now you’ve earned over 190, now this is a huge difference.

Just could you comment on that how are you selling them, what prices are you seeing right now? I know, you mentioned that’s a concern, but it doesn’t look like you are really concerned too much about it, could you comment on that?.

As long as that is plummeted crush spreads going up, it’s related to corn price, it is a direct substitute of corn, and we’re concerned about it, but we also know that if corn goes down in price that is going to go down in price. Historically, it’s covered about 30% and maybe a little more than 30% of our corn price.

And that’s still -- that dynamic is still pretty much in place. We have a little bit of hedged out but we are like most things substituted to spot market in DDGs. And when we buy corn below basis, we have to sell -- to answer your question, we have to sell DDG below basis as it the same market.

There is a little bit of an export market to China, but China has been very difficult on that right now, so we’re not -- we can’t count on that. It is a worry and it’s something that you should take into account in your numbers..

Yes because, I mean, mostly the decline was because of China, who are selling to? Could you comment on, who are you selling them to?.

Yes because, I mean, mostly the decline was because of China, who are selling to? Could you comment on, who are you selling them to?.

Again most of the decline in my opinion was based on just lower corn prices. Again, China is an issue. We sell ours to middleman who then mostly sell it local ag companies to use it as agricultural feed..

Okay.

One question regarding the second quarter SG&A sequentially declined almost 30%, could you comment on that how it’s going?.

Okay.

One question regarding the second quarter SG&A sequentially declined almost 30%, could you comment on that how it’s going?.

Doug, do you want to talk about that?.

Sure. A lot of that has to do, Katja, with how we book our incentive compensation and with earnings being how they have been. We’ve front ended some of that into the first quarter. There is a cap on incentive compensation, so some of that cap has been hit, so incentive compensation dropped in the second quarter versus quarter one because of that..

Just going forward, what would be a number we could look at that would be -- could you provide some guidance on that?.

Just going forward, what would be a number we could look at that would be -- could you provide some guidance on that?.

Sequentially, third quarter, I would expect to be down compared to second quarter a little bit, not significantly just a little bit just again because of the incentive compensation and more that being hit, but to be safe probably just go ahead and use second quarter for the third quarter as well..

And what about fourth quarter, just should this be kind of a run rate that we could look at right now?.

And what about fourth quarter, just should this be kind of a run rate that we could look at right now?.

Yes, it’s somewhat of a run rate, yes. Again, it may go down a little bit, but relatively speaking it’s a decent run rate..

Okay, now I know Stuart, you discussed possible investing opportunities, why is it so hard, you have interest in five facilities, could you form maybe a partnership with them or why is it -- I understand that they’re not willing to sell cheap, but you have so much cash right now that you could really invest?.

Okay, now I know Stuart, you discussed possible investing opportunities, why is it so hard, you have interest in five facilities, could you form maybe a partnership with them or why is it -- I understand that they’re not willing to sell cheap, but you have so much cash right now that you could really invest?.

And again, a lot of these companies that we invested in that we don’t have controlling interest enjoy running their own show there locally. They want to stay running their own show. They want to stay local. They don’t need the money. It’s not a question of money.

It’s a question of pride and community pride, and we’re happy that they have their community pride and we’re happy to be partners with them.

If the time ever comes where they do want to sell, I think us being good partners with them will be one of the people they talk to, but to just throw numbers out there when they’re not interest doesn’t do anyone any good..

Now regarding your new plant, I know that’s a huge issue, how far -- how much of research have you done?.

Now regarding your new plant, I know that’s a huge issue, how far -- how much of research have you done?.

We have done a lot of research. We have identified at least certainly one site that we’re working on diligently, but there’s definite EPA issues related to a new plant. We would love to build the new plant. We have the site now, but there is no guarantee that we can get passed. The EPA issues are different than it was years ago.

It’s a two-edged sword that makes it harder for anyone else to build the plant too, but if anyone who are experienced at it -- we know what we’re doing and we have the cash to do it.

If anyone can do it, we think we’ll be the people to be able to do it, and we would like to do it, but it is not easy and there is new requirements to make it possibly prohibitive, but we’re going to give it a go..

What are the major issues?.

What are the major issues?.

It’s related to issuing of RINs and by the EPA’s formula, they’re requiring more energy out than they did before versus energy in. There is also carbon problems with new carbon standards that everyone has to deal with them building a plant, but the biggest issue is what it takes to get RINs for these plants and that’s not easy..

Just one last question, capital expenditures for the next two years, what are the expectations?.

Just one last question, capital expenditures for the next two years, what are the expectations?.

Again, if we build a plant it could be huge, probably a couple of million on heavy oil and I’d relate it to the existing plants, I am not sure exactly. Doug, do you want to answer that, I am not sure what it will be next year..

For the rest of this year, we are estimating 5 million to 7 million. We really have not put a budget out for next year. This will increase the storage capacity at both the plants we consolidate. So we don’t have any current plant projects for next year but that could change..

Our next question will come from the line of Jeremy Hellman with Singular Research. Please proceed with your question..

So just a follow-up on the prior question just around the new build, just assuming you were able to take all those boxes, what would the general, if you want to put it in a range, what would the cost to build a Greenfield plant be? And is there external financing that is interested in the sort of thing if it can be done or would you really bear the burden of the entire cost? [Multiple Speakers]….

To answer your question, just a rough number, 200 million, but that’s rough, I wouldn’t use it. That’s just -- certainly, don’t hold me to that, but that would be a rough number. Whether there is financing, we think there would be some financing. We have a great relationship. The banks have done very well on our existing ethanol plants.

And so there should be some financing there, and then the rest we would have to bear, we pay. The good thing is if we can get one plant, we can probably get more than one plant built, and we certainly have the capital and experience to do that..

Second one, just help me, I am trying to line up corn prices relative to your income statement.

And so -- and correct me if I am thinking about this in a wrong way, but the corn you have on hand, how far out is a bushel of corn you buy today, when is that likely going to run through your plant in terms of -- is it a week from now, four weeks from now, eight weeks from now? And the backup to the questions just looking at September corn on CBOT and it’s off 30% roughly from the May high and so I am looking at the corn prices that you have, your average cost per bushel was actually up $0.11 sequentially.

And so I am wondering if there is kind of inherent lag in there that will show up in the Q3 margins?.

Second one, just help me, I am trying to line up corn prices relative to your income statement.

And so -- and correct me if I am thinking about this in a wrong way, but the corn you have on hand, how far out is a bushel of corn you buy today, when is that likely going to run through your plant in terms of -- is it a week from now, four weeks from now, eight weeks from now? And the backup to the questions just looking at September corn on CBOT and it’s off 30% roughly from the May high and so I am looking at the corn prices that you have, your average cost per bushel was actually up $0.11 sequentially.

And so I am wondering if there is kind of inherent lag in there that will show up in the Q3 margins?.

There is some lag in terms of corn prices. Basically we buy from the local market, so it’s not necessarily tied to CBOT – it is tied to CBOT, but we try in many cases we buy below basis, on average we buy below basis. But again, we are not on that day necessarily, ideally what we like to do is just lock in our corn at a certain amount.

This would be ideally a certain amount below basis, and not lock it in at a $1 price. Last year, when corn was in very tough supply, we had to scramble and were paying over basis, and we had to get it wherever we could get it. This year, with the harvest coming in, we can be a little more opportunistic and we will see what happens..

Jeremy we do do a little bit unlocking in like Stuart said, but when we will lock it in is we sell the ethanol and buy the corn at the same time. So you may get a little bit of a lag factor from that if we locked in 100% one of the plants 30 days out or something like that. So that’s I think a little bit a lag factor you are probably seeing. .

Right. And so where you talk about some of the CapEx you are spending is going to improve in your storage.

And just from more general sense then, a bushel of corn bought today kind of to the original question, a bushel of corn bought today or a railcar coming to one of your plants today, is that corn going into a silo or is it going right into production?.

Right. And so where you talk about some of the CapEx you are spending is going to improve in your storage.

And just from more general sense then, a bushel of corn bought today kind of to the original question, a bushel of corn bought today or a railcar coming to one of your plants today, is that corn going into a silo or is it going right into production?.

Combination, it doesn’t go immediately into production. We got about 3 million bushels of storage at one of our plants, the other plant we had about 1.5 million bushels of storage and we are increasing that right now.

So I would say I don’t have the exact time of when it goes into production but it could be a couple of weeks that it is at the plant before gets into production. We don’t have more than a month’s storage. So it gets into production pretty quickly..

Okay, I got you, that’s very helpful. What I am really trying to get a good sense on if I am looking at your top-line and as you talked about this in your prepared remarks you are at capacity and you are exploring ways to increase capacity, it certainly sounds like you are doing everything and turning over every stone.

But until you can find a breakdown on one of those explorations, you’ve got -- your top-line is somewhat constrained to the price of ethanol that’s going to be your variant and then your cost lines are going to drive your profitability and so what I’m trying to get my arms around is where -- you had this great quarter here but where does it go from here?.

Okay, I got you, that’s very helpful. What I am really trying to get a good sense on if I am looking at your top-line and as you talked about this in your prepared remarks you are at capacity and you are exploring ways to increase capacity, it certainly sounds like you are doing everything and turning over every stone.

But until you can find a breakdown on one of those explorations, you’ve got -- your top-line is somewhat constrained to the price of ethanol that’s going to be your variant and then your cost lines are going to drive your profitability and so what I’m trying to get my arms around is where -- you had this great quarter here but where does it go from here?.

Again at the moment crush spreads are better than they were in last quarter, DDG prices are worse than they were last quarter, natural gas is way better than it was the first quarter.

You’re right we recognize and know that to grow this company we have to either buy someone which has been really hard to do, increase, which is an opportunity maybe down the road but we’ve had no luck at it; increase our ownership in the plants where we have minority interest, or lastly and this is what we’re working the most on, is building a new plant.

We would like to build a new plant, again it’s difficult, that’s all I can tell you, this is difficult..

Sure. I appreciate that. In terms of the --.

Sure. I appreciate that. In terms of the --.

The other wildcard and please don’t, I’ll say it again, don’t buy the stock based on this but we are working on alternative energy that could be very, very big if it works; steam [inaudible] oil, and we’re not going to spend a lot of money on it but we hope to have next year a pilot plant up and running and we’ll know a lot more then..

Okay. And just one last follow-up from me then I’ll hop off.

Looking at acquiring additional ethanol assets, are you restricting your search to North America or you’ve been looking into South America for example at all?.

Okay. And just one last follow-up from me then I’ll hop off.

Looking at acquiring additional ethanol assets, are you restricting your search to North America or you’ve been looking into South America for example at all?.

To-date we’ve restricted our search to Fagen/ICM large Fagen/ICM American plants. Will we look outside of North America? In the past we’ve done a little exploring that side of North America and it’s the plant outside of North America at least historically earn us a profit [inaudible] ones in North America today.

So we’re pretty much focused on North America, that’s not to say we’ll never look anywhere else..

Okay. I appreciate the color. Thanks guys..

Okay. I appreciate the color. Thanks guys..

Thanks..

Our next question will come from the line of Stephen Dennis who is a Private Investor. Please proceed with your question..

Yes, good morning. I’m long-term shareholder way back to the electronic stores..

Thank you very much..

I’m sorry?.

I’ve said thank you for sticking with us..

Yes, thank you very much for this performance, it’s been incredible, but one thing bothers me, I actually got two questions, one thing bothers me and that’s the unrelentless insider selling, will it continue at the current level and should I be concerned with it, you’re going to sell until it is exhausted?.

First of all I think it’s actually been a benefit because one of the complaints we always had in the past was float to get the larger institutions involved so to-date it hasn’t hurt the stock price..

Okay..

People sell for a lot of reasons, in my case it’s a lot of better diversification; I have a lot in one asset and I’ve diversified a little bit..

Great reason..

Other people do it for college education, and we’ve been in this business a long time and people do it to pay bills and pay for whatever they have to do. Will it continue forever? No, there aren’t - there are significantly less insider shares just by the nature of people of selling shares so it can’t continue.

And again we’re dedicated, in my case anyway, I’m dedicated to the ethanol industry if you like I’m doing good in the industry for our shareholders and our country and a number of other reasons and that’s really what motivates me..

Currently sounds that way.

One fast question then, how about a stock split maybe 3 for 1?.

Again that’s a Board decision; stock splits aren’t in as much - you don’t see them as much today as you used to in the past but that would be a Board decision..

Okay. Thank you very much for the great quarter. Thank you..

Thank you very much..

Our next question will come from the line of Paul Resnik with Uncommon Equities. Please proceed with your question..

Good morning and many congratulations.

I have a couple of industry kind of questions, one, on top of all the current existing rail issues, there is a fair amount of talk about new government regulations regarding the shipment of liquid fuel by rail and of course the question most people think of in terms of oil but of course there is fair [inaudible] that that could involve – could affect ethanol as well.

Do you think there could be some further disruption in rail availability and capacity?.

Good morning and many congratulations.

I have a couple of industry kind of questions, one, on top of all the current existing rail issues, there is a fair amount of talk about new government regulations regarding the shipment of liquid fuel by rail and of course the question most people think of in terms of oil but of course there is fair [inaudible] that that could involve – could affect ethanol as well.

Do you think there could be some further disruption in rail availability and capacity?.

I have looked at that issue and I think there will be a long if anything I expect something will happen it will be a long-term phase and the government has no real motive in effecting short-term everyone shipping out of the product it’s hard enough of ship it out as it is and both oil, domestic oil and domestic ethanol are looked at by the government as benefits.

So I think it will happen but I think it will be a gradual phase in that would pretty much be seamless, but it will probably raise the cost of our acquiring railcars..

And the second one you pointed out the real difficulty in building a new ethanol plant, the current RFA figure for the capacity, nameplate capacity out there is about 14.9 billion gallons of which about 14.3 billion are actually operating, we’re talking -- we used to talk about 15 billion gallons of corn-based ethanol, our exports are 800 million, almost could get close to a billion at the rate we’re going and there are new markets opening up.

So my question is, I mean we don’t seem to have the capacity for the level for demand that we could see?.

And the second one you pointed out the real difficulty in building a new ethanol plant, the current RFA figure for the capacity, nameplate capacity out there is about 14.9 billion gallons of which about 14.3 billion are actually operating, we’re talking -- we used to talk about 15 billion gallons of corn-based ethanol, our exports are 800 million, almost could get close to a billion at the rate we’re going and there are new markets opening up.

So my question is, I mean we don’t seem to have the capacity for the level for demand that we could see?.

That’s my opinion also and that’s why I would really like to build more plants.

Otherwise and for a lot of - ethanol has the advantage in countries like India and China significantly making their air quality better, and a lot of the Asian countries, so there is a potential and our farmers have proven their ability to almost grow unlimited corn, I wouldn’t say unlimited corn but they are capable of and one like to see a better -- they like to see ethanol growing - have a better ethanol market for their corn.

But there is issues and there is serious issues related to EPA, EPA issues related to building a plant.

If there are no more plants built then export grows like crazy that’s good for us, so that’s the other side of the corn because then demand picks up, supply can’t pick up as you just mentioned, it can pick very little, it can pick up a little bit as everyone their plants a little better but if demand is growing faster than supply, that’s always a good thing..

(Operator Instructions) Our next question will come from the line of Timothy Conway with Wake Up Press. Please proceed with your question..

Good morning, Stuart, everyone, tremendous quarter. We’re very proud of you, many of us here on the investor have boards and so forth, a spectacular performance.

We are always so appreciative of your very humble under-promising over-delivering, so I almost had to tweak my models for realistic results you guys are going to post but I am always just so pleasantly surprised. I thank you immensely.

The question I have would be I was just stunned to see the high dry distiller grains and modified distiller grains prices you’re able keep into this quarter and my models I was estimating much lower, I think Jeremy illustrated why your corn prices weren’t even lower and of course we expect those to go down for Q3, but just a little bit of color if you could add on the reason you guys were able to sell DDG is a modified gains at such lovely higher price than some of us were modeling?.

Good morning, Stuart, everyone, tremendous quarter. We’re very proud of you, many of us here on the investor have boards and so forth, a spectacular performance.

We are always so appreciative of your very humble under-promising over-delivering, so I almost had to tweak my models for realistic results you guys are going to post but I am always just so pleasantly surprised. I thank you immensely.

The question I have would be I was just stunned to see the high dry distiller grains and modified distiller grains prices you’re able keep into this quarter and my models I was estimating much lower, I think Jeremy illustrated why your corn prices weren’t even lower and of course we expect those to go down for Q3, but just a little bit of color if you could add on the reason you guys were able to sell DDG is a modified gains at such lovely higher price than some of us were modeling?.

We were able to sell out a little bit longer in the DDG area than we did than we normally do. And because we hedged appropriately and that one we were able get the benefits of that..

If I am just one other….

If I am just one other….

Keep in mind some of our plants -- we got July 31st year end, but our quarter end but some of our plants have a June 30th quarter end, so the DDG….

Very interesting..

Very interesting..

The DDG in your modeling DDG will fall with corn. No question about it..

I was actually modeling much lower numbers and expect them to even lower for Q3. But your cross spreads look like they’re just killing, so I am quite reassured by that and of course we are all just waiting to see that that harvest comes in with no early frost in the northern regions or anything like that to really start taking this to the bank.

One quick question, I know in prior conference calls or any calls you - two things, one, you had mentioned the California permit process always is a bit difficult for getting that pilots plant for you future energy segment, heavy oil [inaudible] technology a little word on how the process is going?.

I was actually modeling much lower numbers and expect them to even lower for Q3. But your cross spreads look like they’re just killing, so I am quite reassured by that and of course we are all just waiting to see that that harvest comes in with no early frost in the northern regions or anything like that to really start taking this to the bank.

One quick question, I know in prior conference calls or any calls you - two things, one, you had mentioned the California permit process always is a bit difficult for getting that pilots plant for you future energy segment, heavy oil [inaudible] technology a little word on how the process is going?.

Process is going like as bad as I thought it would be in California, it’s probably worse..

Yes, I live here in California and so I am well aware of the difficulties, but the very fact that you’re promising a pilot plant next year bodes very well for getting….

Yes, I live here in California and so I am well aware of the difficulties, but the very fact that you’re promising a pilot plant next year bodes very well for getting….

Again, its California so let me say again we hope to have a pilot plant next year..

Yes, I appreciate that and anyway it’s just a lovely thing to have out there. We get to have a value and growth stock and also a spec play as well, a speculative play that could just be blue sky. So I guess I don’t have any more questions, I want to free up the line for anyone else. Thanks again guys.

You’ve just done an outstanding job and we really appreciate it..

Yes, I appreciate that and anyway it’s just a lovely thing to have out there. We get to have a value and growth stock and also a spec play as well, a speculative play that could just be blue sky. So I guess I don’t have any more questions, I want to free up the line for anyone else. Thanks again guys.

You’ve just done an outstanding job and we really appreciate it..

Our next question will come from the line of Ethan Steinberg with REX American Resources. Please proceed with your question..

Hello?.

…on the quarter, a couple of things I might have missed it.

So what were your crush margins for the quarter that you reported, what was the crush margin average?.

…on the quarter, a couple of things I might have missed it.

So what were your crush margins for the quarter that you reported, what was the crush margin average?.

We reported $0.58 using the 2.8 conversion..

2.58.

And then what was it a year ago in the same quarter?.

2.58.

And then what was it a year ago in the same quarter?.

Minus 17..

And then are they running around $0.80 right now, $0.82?.

And then are they running around $0.80 right now, $0.82?.

We really don’t talk about what we are running at. I mean that’s what the published crush spread is running at is around $0.80 to $0.85. You can look at where we historically have been versus the published crush spread kind of range where you think we would be..

Okay.

Yes, it usually [floats] [ph], what do you think the industry was versus the $0.58 in the quarter that you guys were?.

Okay.

Yes, it usually [floats] [ph], what do you think the industry was versus the $0.58 in the quarter that you guys were?.

Actually I think we are pretty close to the -- to what the published crush spread was. We were close to it, maybe just slightly above it but we are close to where published crush spread was I believe..

And so this is where I just - the comment about at least a 50% higher, I mean I’m getting to well over $3 a share for this quarter even with lower DDG prices.

So I am just trying to make sure I want to understand the comment about at least 50% higher because I am getting a lot more than 50% higher just if we [inaudible] today’s environment?.

And so this is where I just - the comment about at least a 50% higher, I mean I’m getting to well over $3 a share for this quarter even with lower DDG prices.

So I am just trying to make sure I want to understand the comment about at least 50% higher because I am getting a lot more than 50% higher just if we [inaudible] today’s environment?.

And I don’t know about the number you just threw out but again my comment was we’re only less than a month into the quarter, we are in a commodity business, we try to be conservative when I am on these conference calls. And so we are very comfortable with 50% higher and we again have the potential to do much better than that what it ends up.

I don’t know we’ve got the negatives going against us of lower DDG prices, lower corn oil prices.

So that -- but we do have a very good crush spread at the moment and we’d hope to have a very, very good harvest, what it’s going to end up we are in a commodity business, I can’t predict that, I can just try to give you the best guidance and conservative guidance that I can..

I appreciate that. The crush margins would have to come down quite a bit from today for you to end up being up 50%.

But I get it; is there -- so DDGs, can you talk about I understand what they are as a percentage of revenue, can you talk about how much operating profit or net income DDGs were in the quarter?.

I appreciate that. The crush margins would have to come down quite a bit from today for you to end up being up 50%.

But I get it; is there -- so DDGs, can you talk about I understand what they are as a percentage of revenue, can you talk about how much operating profit or net income DDGs were in the quarter?.

We don’t really break that out. In our mind when we produce the DDG is at the byproduct of producing the ethanol. So we don’t really publically disclose how we break out our cost of goods sold, the corn costs between DDGs and ethanol..

Okay. I am just wondering because it would help us understand that headwind that offsets some of that what at least is going on now with the benefits of the crush margins.

Other piece I wanted to ask you about was the chance to build a plant especially if there is financing out there, you’ve got a ton of cash just sitting on the balance sheet, why not do return some of that to shareholders either buyback or dividend?.

Okay. I am just wondering because it would help us understand that headwind that offsets some of that what at least is going on now with the benefits of the crush margins.

Other piece I wanted to ask you about was the chance to build a plant especially if there is financing out there, you’ve got a ton of cash just sitting on the balance sheet, why not do return some of that to shareholders either buyback or dividend?.

Historically we always have returned it in buybacks and we like doing that. But our strategy and that’s worked now for about 30 years, is to support the stock on dips and that’s hard to argue that we are having a dip right now.

We probably have done more buybacks percentage wise and 99.9% of -- maybe I doubt there is anyone that believes in it as much as we do..

Yes, I just think it’s been smart even whether you did around dips or on the stock being up, it’s been a good use of capital.

How does the valuation when you look at trying to buy out partners, how do those valuations look versus when you evaluate your own equity?.

Yes, I just think it’s been smart even whether you did around dips or on the stock being up, it’s been a good use of capital.

How does the valuation when you look at trying to buy out partners, how do those valuations look versus when you evaluate your own equity?.

I think we still own -- there is no partner. If we had a price we would look at it as a pickup in earnings per share; if we could get a decent pick up in earnings per share we would probably seriously consider it; it is just hard – there is just no interest right now. Everyone likes running their own show..

Okay. And just last thing….

Okay. And just last thing….

And the sad thing is the interest comes when no one -- and I guess it’s a human nature in general. The interest comes when the industry - last couple of years was not doing as well than more people were anxious to sell when it’s doing what it’s doing today.

They are just -- and they stuck in there through those hard times and the debt is being paid off and the plants are doing terrific. It’s really hard now to get them to consider it..

Yes. And I just don’t see that likely to change anytime soon. And so if ….

Yes. And I just don’t see that likely to change anytime soon. And so if ….

Right, so that goes back to - we’re working hard to try, we’re going to find out if anyone can build a plant, a big plant. .

If you can get some big numbers on how much cash is going to accumulate over the next few quarters, if this environment stays true, is there any willingness to do something other than what you laid out on the conference call?.

If you can get some big numbers on how much cash is going to accumulate over the next few quarters, if this environment stays true, is there any willingness to do something other than what you laid out on the conference call?.

I think that will be a Board decision and I wouldn’t - personally I think there probably could be but again other than what I laid out it would have to be a Board decision..

Okay, great. Well, thank you, very good job on the quarter and thanks for taking the questions..

Okay, great. Well, thank you, very good job on the quarter and thanks for taking the questions..

Thank you..

(Operator Instructions).

If there is no more questions I just like to thank everyone for listening to our call and we appreciate very much for being our shareholders. Thank you very much. .

Ladies and gentlemen, that does conclude the conference call for today. We thank you for your participation and ask that you please disconnect your lines. Have a great day everyone..