Andersons, Inc. Q3 FY2022 Earnings Call

Good morning, ladies and gentlemen. And welcome to the Andersons 2022 Third Quarter Earnings Conference Call. My name is Joe, and I will be your coordinator for today. At this time, all participants will be in a listen-only mode. Later we will facilitate a question-and-answer session. As a reminder, this conference is being recorded for replay purposes. I will now hand the presentation to your host for today, Mr. Mike Hoelter, Vice President, Corporate Controller and Investor Relations. Please proceed.

Thanks, Joe. Good morning, everyone, and thank you for joining us for The Andersons third quarter earnings call. We have provided a slide presentation that will enhance today's discussion. If you are viewing this presentation on our webcast, the slides and commentary will be in sync. This webcast is being recorded, and the recording and the supporting slides will be made available on the Investors page of our website shortly. Please direct your attention to the disclosure statement on Slide 2 as well as the disclaimers in the press release related to forward-looking statements. Certain information discussed today constitutes forward-looking statements that reflect the company's current views with respect to future events, financial performance, and industry conditions. These forward-looking statements are subject to various risks and uncertainties. Actual results could differ materially as a result of many factors, which are described in the company's reports on file with the SEC. We encourage you to review these factors. This presentation and today's prepared remarks contain non-GAAP financial measures. Reconciliations of non-GAAP measures to the most directly comparable GAAP financial measure are included within the appendix of this presentation. On the call with me today are Pat Bowe, President and Chief Executive Officer; and Brian Valentine, Executive Vice President and Chief Financial Officer. After our prepared remarks, we will be happy to take your questions. I will now turn the call over to Pat.

Thank you, Mike, and good morning everyone. Thank you for joining our call today to review our third-quarter results. We're excited to discuss our third quarter, which was our best ever adjusted third quarter from continuing operations. Both trade and renewables posted very solid improvements over last year, while plant nutrient results declined in their seasonally low quarter, our overall company performance was strong with trailing 12 months adjusted EBITDA from continuing operations totaling nearly $440 million. With this Q3 results, we anticipate a very strong year, potentially record-setting. Trade group results were record third quarter on an adjusted basis and reflect improvement in many areas. Our Louisiana assets performed well during the corn harvest, capturing strong elevation margins. Lead ownership in our grain terminal assets is earning space income. In merchandising, our new profit centers have contributed more than $5 million this quarter to our pretax earnings. We continue to have very strong results in our western greenbelt in animal feed ingredient merchandising as well as in our food and specialty ingredients businesses. In particular, our UK subsidiary again delivered strong results with our organic feed business. Renewables had another solid quarter. Our Eastern ethanol plants delivered positive results on weaker corn basis despite declining ethanol prices and inflation in natural gas and other production costs. Our Kansas plant experienced high corn bases due to the ongoing drought in the region. We continue to benefit from strong values of coal products, particularly distillers corn oil used as a renewable diesel feedstock. All the plants have now completed their planned fall maintenance shutdowns. Plant nutrient follows a very strong first half with mixed results; our agricultural product lines performed well for the typically slow third quarter on good margins and well-positioned inventory. Within our manufactured lawn products, we were challenged with lower demand, inflation, and production costs and took an inventory write down in the quarter. Brian will now cover some key financial data. After that, I'll be back to discuss our outlook for the remainder of 2022 and into 2023.

Thanks, Pat. And good morning, everyone. We're now turning to our third quarter results on slide number five. In the third quarter of 2022, the company reported net income from continuing operations attributable to the Andersons of $17 million, or $0.50 per diluted share. This compares to adjusted net income from continuing operations attributable to the company of $5 million, or $0.15 per diluted share in the third quarter of 2021. Gross profit increased 34% despite this being a seasonally low quarter. EBITDA for the third quarter of 2022 was $83 million compared to adjusted EBITDA of $56 million in the third quarter of 2021. Trailing 12 months adjusted EBITDA was almost $440 million. All of these measures exclude discontinued operations. Our effective tax rate varies each quarter based primarily on the amount of income or loss attributable to the non-controlling interests. We recorded taxes from continuing operations for the quarter at a 28% effective tax rate. We still expect a full-year effective tax rate between 18% and 21%. Next, we'll move to slide number six to discuss cash, liquidity and debt. We generated quarterly cash flow from operations before changes in working capital of $51 million in 2022, compared to $56 million in 2021. High relative commodity prices and business growth are the primary causes of our continuing higher working capital and related short-term borrowing levels compared to the third quarter of 2021. The short-term debt balance of approximately $650 million at September 30 is supported by readily marketable inventories of over $1.1 billion. At the end of the third quarter, we had available short-term borrowing capacity of over $1.3 billion. We continue to have good support from our banks, as they understand the key role that we play in the ag supply chain. We continue to take a disciplined approach to capital spending, which we expect will be approximately $100 million for the year, about half of which will be related to maintenance capital. Our long-term debt to EBITDA remains well below our stated target of less than 2.5 times. We recently announced two separate bolt-on acquisitions: Bridge Agri in the trade group, and Mote Farm Services in plant nutrient. We continue to evaluate growth projects in our pipeline, including additional M&A opportunities. We have a balance sheet that will support growth investment for those that meet our strategic and financial criteria. We also have begun to utilize our previously announced share repurchase program, executing over $7 million of share repurchases in the quarter. We continue to repurchase shares during October, bringing the total cash used to date for this program to about $12 million. Now, we'll move on to the review of each of our business segments beginning with trade on slide number seven. Trade reported pretax income of $41 million compared to adjusted pretax income of $28 million in the same period of 2021. Our merchandising profit centers had a great quarter with gross profit and pretax earnings growth of more than 40% over last year. This includes solid contributions from our new businesses that Pat mentioned earlier. The food and specialty ingredients business continued their strong results, and our assets had improved gross profit, capturing increased elevation margins. With current global supply disruptions, yield reductions due to the western U.S. drought are significant and should continue to keep grain markets volatile. Fortunately, we are experiencing a good harvest in our elevator dry areas with the majority of our assets located in the eastern greenbelt. This tight supply environment is conducive to continued merchandising opportunities. Trade's EBITDA for the quarter was $61 million, up from adjusted EBITDA of $44 million in the third quarter of 2021. Moving to slide 8, renewables had third-quarter pretax income attributable to the company of $8 million, which was a significant improvement from the third quarter 2021 pretax loss of $4 million. The renewable segment results reflected strong ethanol margins early in the quarter, combined with solid plant operations. Co-product values, and in particular corn oil, remain high and have added to plant profitability. Renewable diesel feedstock merchandising activities continue to expand and also contributed to the positive quarterly results. Renewables had EBITDA of $34 million in the third quarter of 2022, an increase of almost $15 million from the third quarter of last year. Turning to slide 9, the plant nutrient business reported a pretax loss of $12 million in the third quarter, compared to a pretax loss of $6 million in the third quarter of 2021. The third quarter in this business is typically our lowest quarter due to the crop cycles. In our ag product lines, we continue to experience good margins on well-positioned inventory, although with lower volumes. The higher year-over-year loss was nearly all related to our manufactured lawn products business, where we have lower demand, production challenges, and recorded some excess and obsolete inventory reserves. Plant nutrients EBITDA for the quarter was a loss of $3 million, compared to EBITDA of $2 million in the third quarter of 2021. And with that, I'll turn things back over to Pat for some comments about our outlook.

Thanks, Brian. We remain optimistic about our outlook. Strong global market fundamentals, including supply chain disruptions should exist for some time, keeping commodity prices historically high. Worldwide supplies are projected to remain tight for the next few years. Our trade business outlook remains very positive. In addition to production and transportation challenges globally, demand remains strong for grains and oilseeds. The U.S. dollar strength and logistics concerns with low water levels on the Mississippi River may keep more grain in the U.S. than was expected. Our inland grain elevators that shipped by rail, and our domestic merchandising teams are well prepared for this volatile environment. Our international team is also meeting the challenge of finding additional sources of supply amid the complicated logistics and lost production due to the ongoing conflict in Ukraine. We're investing in our North American infrastructure to provide better service to our customers. We continue to evaluate M&A opportunities that align with our strategy, such as the recently announced Bridge Agri acquisition, which expands our presence in the pet food ingredient space. We knew it would be challenging to match last year's strong second-half trade group results. However, at this point, we see the potential for another strong fourth quarter and a possible improvement over the second half of 2021. In our renewable segment, we've experienced an overall margin decline, unlike the significant margin expansion in the fourth quarter of 2021. We believe that our eastern ethanol plants are favorably located, while western plants are facing much higher corn bases. We continue to see strong demand and good values for coal products, particularly distillers corn oil, which supports our overall margins. In addition, our renewable diesel feedstock merchandising business is performing well. And we're evaluating additional renewable diesel low carbon intensity feedstock opportunities. We don't expect to be able to match last year's outsize fourth quarter ethanol crush margins, but we'll continue to operate our plants efficiently and profitably as well as grow our third-party merchandising opportunities. The plant nutrient business outlook is mixed; with strong farm income and a need to cover lost worldwide grain production, we expect continued strong global demand. That should keep prices higher than historical averages. We have favorable harvest weather that should allow for good fall application. With more stable supply as compared to the fourth quarter of 2021, we do not expect to repeat last year's record fourth quarter fertilizer results where we capitalized on an outsized margin environment. Overall, our strategy remains focused on our key role in serving the needs of our customers in the North American ag supply chain. We've announced recent acquisitions of Bridge Agri and Mote Farm Services, each of which align closely to our growth strategy, and are expected to be accretive in 2023. With a strong balance sheet, sustainable operating cash flows, and this strategic focus, we expect to continue to grow profitably in these dynamic ag markets. We continue to evaluate growth projects that are centered around our core grain, renewables, and fertilizer segments, and are a mix of capital investments and M&A. We remain committed to adding value for our customers, managing risk, and operating safely and efficiently. We're on a path to end this year strongly and could achieve a new earnings record through improvements in our base operations, combined with gross investments. I'm very proud of our team for their outstanding performance to date in 2022, and remain excited about our future growth prospects. With that, I'd like to hand the call back to Joe, and we'll be happy to entertain your questions.

We will now begin the question-and-answer session. And our first question will come from Ben Bienvenu with Stephens. Please go ahead.

Hey, thanks. Good morning and congrats on the quarter.

Good morning, Ben.

So I want to ask on a follow-up on a comment you made Pat related to low water levels we're seeing on the Mississippi River. Can you talk about the opportunities that presents for you guys with port terminals in places like Port Houston, Great Lakes exposure? Does that give you guys an advantaged position? Are you still grappling with the same logistical challenges that your larger peers who send more product out of the Gulf might be? How should we think about your relative positioning with respect to that dynamic?

Yeah, I think you pointed out a very good point, Ben; we are well positioned given this environment. We're not a river shipper, and we don't ship a lot of our rail terminal assets to the Gulf. We did have a very good Louisiana harvest early and shipped a lot of that product already. That goes to various domestic and Mexican markets. The Houston asset for exports is well positioned, and we're in a good position for exports out of that terminal. So that's doing well. And we've recently had some really nice sales out of the Great Lakes. So we've seen some margin improvement into Lake shipments. So we're well positioned. We continue to have very good business on our rail supply to crushers and cattle feeders, and with the shortfalls of Western production, there are going to be great movements into those feedlot markets that may be different than would normally happen because of the drought conditions out West. So to answer your question, yes, we're very well positioned given the Mississippi River challenges.

Okay, great. Thanks for that. And then maybe thinking about M&A. You guys have done a number of bolt-ons. You mentioned that they would be accretive in 2023. Forgive me, you might have said that; I just missed it. Was that to EPS or to EBITDA? And then also when you think about sizing the contribution, maybe EBITDA would be helpful of M&A you've done over the last, let's say 12 months. Can you give us a ballpark for how we should be thinking about the contribution just with the total bucket of bolt-ons you've done?

Yeah. So Ben, this is Brian. It's a great question. I think the two that we've most recently announced, Bridge Agri and Mote Farm Services, I would say on an EBITDA basis for 2023, I would put it in the range of about $5 million to $7 million. And if we think about a year ago this time, I think when we were talking about Capstone and some of the international expansion, we said we expected that to contribute in the range of $10 million to $15 million, and kind of on a run rate for 2022, I would say we are tracking above that right now. So that's kind of the range that we originally were talking about, and then, again, doing better than that on those two.

Ben, I would like to add on to the comments Brian made, which were right on the money. I think you recall, there might have been the last call, we talked about our strategy on M&A. I was using the baseball analogy of singles and doubles. While we've looked at some pitches for home runs on big M&A deals, we haven't seen a valuation that is something that we were attracted to. But these recent ones in the case of Mote Farm Services, it's a Farm Service Center in our region, Indiana, Ohio, as well as Bridge Agri, which is in the pet food ingredients space that we really like these into what you'd call singles and doubles that are very attractive for our strategy and on point with where we're headed. We have others like that in the pipeline. And again, it's the World Series going on right now. Maybe we're not going to hit as many home runs as the Phillies, but I'll be happy that plenty of singles and doubles of solid acquisitions are close to our strategy.

That's great. I have one more question regarding the debt profile of the business. How should we view your goals for debt repayment moving forward, especially concerning your long-term debt, disregarding the fluctuations we expect in working capital?

I would say our long-term target for debt to EBITDA is below 2.5 times. Currently, on a trailing 12-month basis, we are actually a little below 1.5 times. So, we feel that our balance sheet is well positioned to support growth and the smaller acquisitions that Pat mentioned. As you pointed out, short-term fluctuations can occur due to changes in working capital and commodity inventory. Therefore, I would not anticipate a significant long-term debt pay down strategy, if that's what you're inquiring about. Overall, we believe we are well positioned to fund growth.

Okay, great. Good luck with the fourth quarter.

Thank you, Ben.

Our next question will come from Ben Klieve with Lake Street Capital Markets. Please go ahead.

All right, congratulations on a good quarter here and thanks for taking my questions. A couple of questions. Pat, you commented within the trade group on new facilities contributing about $5 million to earnings in the quarter? I think I know the answer to this, but I want to clarify that $5 million is inclusive of the acquisitions that you're actually just talking about? Or is any material amount of that $5 million due to organic growth from new facilities? If you could elaborate on that, that'd be helpful.

Hey, Ben. This is Brian, good question. That $5 million is actually related to new businesses that were announced back in 2021. So we'd be thinking about swing trading office Capstone and some of the other new profit centers that would not include anything from the recently announced stuff or call it base organic growth.

It does include Capstone now?

To be clear, that number is a pretax number, not an EBITDA number.

Got it.

I just kind of want to add on that, just linking it back to the strategy. As we said a year ago with the opening of our office in Switzerland, we were really looking at how we could expand to the growth of population markets of the Middle East and Africa, kind of the strategy of skating to where the puck is going to be. That's worked out very well for us. It's been a very complicated time. As you can imagine, with the Ukraine conflict and lots of challenges to the supply chain. I got a photo from one of our traders who was flying from the airplane over the Black Sea. And it showed right now, there's 109 vessels waiting in Istanbul to pass the Bosphorus to go into load in Ukraine. And there's 57 loaded vessels awaiting inspection again at the Bosphorus to get out into the Black Sea. So this on again off again, what's happening with Ukraine exports where the Russians said they're going to pull out of the joint agreement with the UN in Turkey. Now this morning, they said they will continue to operate under that agreement. Russian loaded vessels from Russian origins are coming out just fine. But there's a very active international trade going on, especially to the Middle East and Africa. So we have a normal, complicated environment with a strong dollar and different crop conditions around the world. But we believe this Ukrainian conflict has created a very robust environment for trading. And so far, we've fared very well and we're glad that we made the move when we did.

Yeah, I hear that. I didn't catch that the news this morning. That's good to hear that that's the better grooves back up and running. I'd like to pivot over to your comments on renewable diesel. And I have two questions, and I'm going to get back to the queue. My first question, Pat, you mentioned that merchandising opportunities in the space are growing at a nice clip. My first question here is given that so many of these facilities are still coming online, still ramping to capacity. I'm wondering the degree to which this growth rate that you're seeing is nice on a raw dollar basis or more just on a percentage basis, given the kind of entry-level position here in this space. How material a contributor is today.

Right, completely understand where you're coming from. Renewable diesel demand is really picked up and the feedstock demand for that going in will continue into '23. So with that, it should have a very positive impact across margins for the soybean crushers and for our corn oil demand. As we mentioned before, we put in new technology to clean up finished corn oil products to make those more readily usable for renewable diesel. We're looking to also sell those to third parties, so we're kind of excited about that piece of technology. We've also been able to add both used cooking oil and other renewable diesel feedstock ingredients to our portfolio. And so that marketplace has been robust, and our trading team is doing quite well in growing the volume in that segment. So we see this renewable diesel feedstock impact to be a very bullish signal to the oilseed complex in North America, and that's going to continue well into '23.

Okay, and you might have just answered my second question here. In your prepared comments, you noted efforts in expanding the renewable diesel feedstocks. And so, I was curious if you could kind of characterize that a bit further? And you just did, but I'm also wondering the degree to which you're looking at new crush facilities coming online as a source of volume for you, and the degree to which you're looking at kind of new crops that are emerging, new oilseed crops that are emerging that can participate in this play. Are you looking at all of the above? Is there any kind of source of more intense focus on?

Yeah. The answer is all of the above. We don't have any intentions to enter into the oil crushing industry. There are lots of our colleagues in the industry that are very strong in that space and have multiple plants that have been added for many, many years and do a great job there. There are some newer plants that are coming online or have expanded. And those are opportunities for us to get originations from those facilities as well. As you mentioned, other cover crops and new oilseed products that are coming to the marketplace, specialty seeds that add to one, the carbon recovery at the farm and then can be crushed and used as a feedstock. So those are early days, and they're relatively small in acreage but show some promise. We're having good discussions with people in that space. And in general, this convergence of energy and agriculture is really exciting for our industry. With not just the renewable diesel demand, but where the future of ethanol is going and higher inclusion rates as well as sustainable aviation fuel and other potential products, we’re quite bullish on the segment in a broad basis.

Very good. Very exciting. All right, well thanks for taking my question. And congratulations again on a good quarter, and I'll get back to you.

Thanks very much.

Our next question will come from Ken Zaslow with Bank of Montreal. Please go ahead.

Hey, good morning, guys.

Good morning, Ken.

A couple questions. One is, can you talk about the Inflation Reduction Act? How is that going to impact you guys, and how do you see it playing out? It seems like there are a lot of nuances to it. And maybe this may not be the call to get into all the nuances, but I feel like there are a lot of things that maybe you could kind of shed some light on.

I don't think specifically in the near term. There were things a while back that related to tax structures, etc., and a little bit of the payments that occurred in ethanol last year. Going forward, the money that is going into trying to decarbonize ag supply chains is a plus. We've not personally benefited from that at this point. There could be opportunities on new technologies as we get into '23 and '24, where you could capitalize on some government programs that help that decarbonization happen. So those are things that we're interested in, but nothing to announce at this time.

Okay. And I know it's a little early for 2023. But can you talk about the puts and takes as you see them now? And again, I'm not looking for exact guidance, but what do you see kind of laying out from the returns on your investment? I know you have the $10 million to $15 million, but can you kind of lay out some sort of picture of what the puts and takes are for 2023?

Sure, Ken. Let's first start with our merchandising grain business where we see attractive fundamentals going into '23. We continue to have global problems not just because of the Ukraine situation, but we have had weather issues. We've had a good crop now in Australia with some rains; however, it's very dry in Argentina early, so we'll have to see how things progress with the continuation of a La Niña environment. We had a very difficult drought in the Western U.S., so that's going to create merchandising opportunities for us to move grain domestically to locations that are short this year due to the drought. The good part for the Andersons with our traditional Eastern assets, in particular, we call the Tristate area (Indiana, Ohio, Michigan), we had really good crops. So harvest has progressed well this year. The national average for corn is about 76%; in the East, we're probably about 50% done so far but have great weather. We look to make some really good progress on corn harvest here in early November, and beans nationally are 88%; we're 80% done in the East. We had good yields in our tributary areas on soybeans. Farmers are in a very good position; they’ve sold probably maybe 30-40% ahead of time when markets rallied earlier this year. But we'll have grain to sell, and they're very well off, as you know, with high commodity prices and storing quite a bit of grain on farms. But there should be some movements that will happen in Jan-Feb-March, mainly to make fertilizer payments. So we fundamentally feel very good about our grain business. We like the opportunities in international trade that we've gotten into and where our assets are positioned to supply that. Hence, feeling very positive about our overall trade business.

And Ken, just to frame that in an overarching way. As you know, we had strong EBITDA in 2021 with EBITDA just north of $350 million. And we expect to exceed that this year in 2022. I think, as Pat was just summarizing, our 2023 outlook is really expecting continued strong fundamentals. So in total, we believe we should be able to maintain these levels of EBITDA looking ahead to 2023, which aligns really with our original targets that we outlined back in late 2020.

Okay, just one more, maybe two more.

Go ahead.

How can we address the write down? What is the amount of the write down? Why is it treated as an echo item?

Yeah, so the amount of the write down was about $4 million in the quarter. We didn't line it out as an extraordinary item, just because it was slow-moving obsolete. But you're right, we don't anticipate a recurrence of that item.

Because you reset the lawn business. I'm assuming it's like next year, you won't get that; it's not a reset, right? It's just a write-off.

Correct. The way you're thinking about it is correct.

And then my really my last question is, the $100 million, you said $50 million is maintenance? What are you spending the other $50 million for growth on? Can you talk about some of the projects, not the least illustratively?

Yeah, so if you think about it, it's really all of these strategic areas that we've been talking about. If you think about some of the things Pat mentioned on renewables, some of the investments that are happening; there's a lot of things going on with additional corn oil extraction in the facilities. If we think about the renewable side of the business, it's all on operating efficiency and extracting more things in the corn oil space. If you think about our plant nutrient side of the business, it could be things that are going to be in the organic space and in a variety of other areas in some of the newer fertilizers. And I don’t know, Pat, if you want to talk about some of the things in trade.

Yeah, no, that's terrific. We can just strengthen our assets; we're catching up on capital deployment in our core grain elevators and fertilizing, as Brian mentioned. We also have some projects in organics that are interesting. We like this pet food ingredient segment, we announced this acquisition in the last couple of days. We think there will be opportunities for additional growth in that segment, which is a high-margin growth sector. Another area is in our food segment; we put more capital into our corn assets as we make food-grade corn for chip manufacturers— that’s been a solid growth segment for us. So we are strengthening our assets by putting more investment there. Brian mentioned the opportunities that look interesting are anything related to the organic space, let’s say renewable diesel feedstock business. So we’ve had some growth opportunities there we’re evaluating. We'd like to maybe partner and align with other people where we can get additional volumes of feedstocks to this really solidly growing category. So that's an area of focus for us going into next year.

And Ken, one other one that I would mention, and this is particularly in the plant nutrients side of the business. There's some projects that we're looking at from an automation perspective of automating some things in our facilities that previously those numbers didn't work; but with what's been happening with markets and margins, and inflation, some of those projects now make a lot more economic sense.

Also to clarify in that lawn segment, while sales really slowed during the quarter, we had some obsolete inventory. We still see this as a very attractive business. It's historically been a good margin and growth business for us. And we would look to grow in that segment if we see the right opportunities.

And you would argue that if you go back to pre-COVID now, even if you take out that $4 million, the business has grown over those years. It just grew too quickly, and then you're just resetting it a little bit. Is that correct?

Yeah. It had kind of a rapid rise up and then inventory got oversupplied during that period.

Yeah, thanks, guys. And congratulations on the quarter. So just a couple. You've alluded to some of the things Pat, I think that are relevant to this question. But late in the third quarter, we saw bases weaken pretty sharply in the eastern Corn Belt. Bases in the western Corn Belt are off the charts. And I guess I thought maybe that would have a negative impact on your third quarter basis appreciation in the grain business and your trade business. And then I'm looking at $1.3 billion of available liquidity, and I think it was only about a $0.5 billion at the end of the last quarter. Are you not seeing with these low eastern Corn Belt, with a favorable basis that you should be buying cheap grain on? Are you not seeing those opportunities to put more business on your books? Or what am I missing here?

Eric, I think you pointed out at the very beginning. The drought in the West caused basis levels to rise pretty dramatically quickly, especially in the desert southwest and into those feedlot markets. That is actually a good opportunity for us from a merchandising standpoint. And what we call our Midwest truck segment that sells to those markets has done very well with this appreciation of the basis. So actually, that's a good thing. The one area it hurt us is in our Kansas ethanol plant, which has high basis levels, and that has made margins very difficult in Kovich. A little bit higher also in Denison, Iowa, as Iowa basis levels are a little bit higher. It's really a Kansas-Nebraska phenomena. When it comes to the East, as you pointed out, we had a good book on early with growers in the East. I'd say it's been a normal harvest activity in the last month with a steady supply and steady selling of grain; nothing like backlog and huge lines, anything like that. So it's been kind of a very orderly progression this harvest. We're in very good shape. We like the position we're in. We're gaining storage on wheat in the delivery market here in Toledo for soft red wheat, which is a nice ability to clip some coupons there. And we really like our ownership and basis levels have been firm for export sales, and we like the position we're in. The simple answer to your question is: it's going quite well. And then we have good volumes and a very healthy farmer; so it's a good environment for us.

Okay, good. No, I mean, that sounds great. And it sounds like there is a - and I know that the east is not as far along on harvests as the west is, but the weather has been just phenomenal. We're progressing pretty quickly, I think, around the whole country. So if you're only, let's say, 50%-55% harvested, should that not give you more opportunities in the fourth quarter? Maybe you've answered this; should you not be able to pick up some really good cheap grain and have some pretty good momentum going into the first half of next year? Is that a fair way to look at it?

Yeah. As of the Monday's crop report, we're 50% in the Indiana, Ohio, and Michigan market. So harvest is progressing rapidly right now because the weather is perfect. We're hoping to capture quite a bit of grain here in the second half of the harvest. So it's a good outlook on both for fertilizer application and for corn coming straight out of the field. Beans were very dry. And so corn is probably normal right now. Our drying and blending of corn is probably on a normal basis right now. So it's a good year, especially in the East. So we're very pleased with the Eastern harvest thus far.

So what kind of moisture levels are you seeing in corn right now?

Kind of it's sort of spotty, Eric. So kind of in the high teens, some spots low twenties. Most that's why growers have waited. They took the beans; they're almost done, I think we're 80% of beans and that'll be done probably by this week. Some growers have waited to get corn dried down in the field. It's beautiful; 60 degrees sunny days here; probably the best Halloween we've seen in a long time. So we've had just beautiful weather this fall.

Yeah, no, it's the same here. We're going to set record highs today. It's just beautiful weather perfect for harvest, perfect for fall application stuff. So, all good seems to be on the agricultural front. So thanks for your comments, Pat and Brian and Mike.

Thanks, Eric. Good luck with the rest of your harvest.

This concludes our question-and-answer session. I would like to turn the conference back over to Mike Hoelter for any closing remarks.

Thanks, Joe. We want to thank you all for joining us this morning. Our next earnings conference call is scheduled for Wednesday, February 15, 2023, at 11 am Eastern Time, when we will review our fourth quarter results. As always, thank you for your interest in the Andersons, and we look forward to speaking with you again soon.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines.