Earnings Call Transcript - ANDE Q1 2022

Operator, Operator

Good morning, ladies and gentlemen, and welcome to The Andersons 2022 First Quarter Earnings Conference Call. My name is Matthew and I will be your coordinator for today. At this time, all participants are 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'd now hand the presentation over to your host today, Mr. Mike Hoelter, Vice President, Corporate Controller and Investor Relations. Please proceed.

Mike Hoelter, Vice President, Corporate Controller and Investor Relations

Thanks, Matthew. Good morning, everyone and thank you for joining us for The Andersons first quarter 2022 earnings call. If you are viewing this presentation via 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 at andersonsinc.com shortly. Please direct your attention to the disclosure statement on Slide 2 of the presentation, 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.

Operator, Operator

Pardon me, ladies and gentlemen; it appears that we are having connection issues to our speaker lines. Please standby as we troubleshoot. Thank you. Pardon me, ladies and gentlemen. It appears that we have reconnected our speaker lines. Mr. Hoelter, please proceed with your conference.

Mike Hoelter, Vice President, Corporate Controller and Investor Relations

Thanks, Matt. I apologize for the technical difficulty experienced. We are going to just start over from the beginning. Thank you for joining us for The Andersons first quarter 2022 earnings call. We have provided a slide presentation that will enhance today's discussion. If you are viewing this presentation via 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 at andersonsinc.com shortly. Please direct your attention to the disclosure statement on Slide 2 of the presentation, 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'll be happy to take your questions. I'll now turn the call over to Pat.

Pat Bowe, President and CEO

Thank you, Mike, and good morning, everyone. Thank you for joining our call this morning to review our first quarter results. We're saddened by the news and images coming from the war zone, and our thoughts and prayers remain with the people of Ukraine, and those who have family impacted by this unfortunate conflict. Global Ag markets in the first quarter were significantly impacted by the war in Ukraine. We saw an extreme run-up in grain futures prices, which also drove basis values lower. Global fertilizer supplies remain tight with prices up further due to the conflict in Ukraine. I'm very proud of our team for managing through these resulting unprecedented price volatility and logistical challenges, while maintaining focus on serving our customers. Our Trade Group results declined from last year, in large part due to the decline in corn and soybean basis sizes. While our inventories needed to be reduced to mark these lower basis values to market, we want to note that this pricing environment has allowed our teams to enter into new ownership positions and improve basis values. This we believe will position us well for the remainder of this year and into 2023 as these are historically good ownership values. Last year, we accumulated solid wheat positions in our Midwest grain assets and expect it will provide storage income moving forward. Growth in our international supply chain business contributed to our results in spite of the impact of the Ukraine war on supply and logistics. Our Renewable segment performed well in the quarter, ethanol board crush margins improved from the first quarter of last year, and higher commodity prices kept feed and corn oil values high. Third-party merchandising of low CI renewable feedstocks and other co-products was up significantly from the first quarter of 2021 as that business continues to grow. Our results also include an $8.3 million mark-to-market hedge loss, most of which is expected to reverse in the second quarter. We've now completed our spring maintenance shutdowns in all of our five ethanol facilities and we're well-positioned to meet the seasonal increase in driving demand. Plant Nutrient reported a record first quarter. Our strong results reflect well-positioned inventory in this much higher priced and limited supply market. Improved margins more than offset lower volumes across most product lines. I also wanted to provide a brief update on the divestiture of our rail repair business. You may have seen our announcement last night on the sale of this business to Cathcart. With this transaction expecting to close this summer, it will finalize our previously announced strategic exit from the Rail segment with the larger rail leasing business sale closing back in August. I'm now going to turn things over to Brian to cover some key financial data. When he's finished, I'll be back to discuss our outlook for the balance of 2022.

Brian Valentine, Executive Vice President and CFO

Thanks, Pat and good morning, everyone. We're now turning to our first quarter results on Slide number 5. In the first quarter of 2022, the company reported net income attributable to The Andersons from continuing operations of $6.1 million or $0.18 per diluted share. This compares to $12 million or $0.36 per diluted share in the first quarter of 2021. As Pat mentioned, Plant Nutrient and Renewables had strong first quarter results offset by a decline in the Trade Group's year-over-year results. EBITDA for the first quarter of 2022 was $55.8 million, compared to adjusted EBITDA of $63.2 million in the first quarter of 2021. Both of these measures exclude discontinued operations. We recorded taxes for the quarter at an effective rate of 38.7%, which reflects the impact of non-deductible mark-to-market losses and the tax treatment of non-controlling interests. While this rate is higher this quarter, we are still forecasting a full-year effective tax rate between 22% and 25%. Next, we'll move to Slide 6 to discuss cash, liquidity and debt. We generated quarterly cash flow from operations before changes in working capital of $40 million in 2022, compared to $89 million in 2021. The majority of the difference relates to the timing of tax refunds and credits. Futures price inflation in the grain markets is the primary cause of our significant increasing working capital and related short-term borrowing levels. The short-term debt balance of $1.5 billion at March 31 is supported by readily marketable inventories of $1.4 billion and cash margin deposits of $400 million. In order to manage through these rising commodity prices, we amended and extended our short-term borrowing agreements with committed capacity of $2.1 billion. We have strong support from our banks and continue to proactively monitor our liquidity. We also continue to take a disciplined approach to capital spending, which we expect to be roughly $100 million to $125 million for the year, about half of which we expect will be related to maintenance capital. As we've previously noted, we have reduced long-term debt by over $300 million over the last 12 months and remain well below our stated long-term debt to EBITDA target of less than 2.5x. With the stronger balance sheet, we are well-positioned to invest in our core agricultural businesses. Now we'll move on to a review of each of our businesses beginning with Trade on Slide 7. Trade reported pre-tax income of $3.7 million compared to adjusted pre-tax income of $14.3 million in the same period of 2021. The significant run-up in commodity prices resulting from the conflict in Ukraine and the smaller South American crop caused a dramatic drop in basis values, primarily in corn and soybeans. While the lower basis values allowed us to buy new bushels at favorable basis levels, existing domestic positions experienced large basis reductions, which impacted first quarter results. We also experienced a decline of approximately $4 million in our propane merchandising business. That business continues to perform well; however, the extreme cold in February of 2021 that impacted much of the Midwest and Texas allowed for very strong returns in the first quarter of last year. Trades EBITDA for the quarter was $20.8 million compared to adjusted EBITDA of $32.5 million in the first quarter of 2021. Moving to Slide 8, Renewables' first quarter pre-tax income attributable to the company of $5.5 million was up $2.6 million compared to the first quarter of 2021. While the first quarter experienced lower winter driving demand, board crush margins were higher than the prior period. We also continue to see strong co-product values, including high protein feed, distillers corn oil, and DDGs that contributed to increased gross profit. Third-party ethanol, feed, and renewable diesel feedstock merchandising results were more than double the 2021 results. The Group's results also included mark-to-market losses of $8.3 million in the quarter, nearly all of which is expected to reverse in the second quarter. Ethanol recorded EBITDA of $24.4 million in the first quarter of 2022, an increase of 10% from the first quarter of last year. Turning to Slide 9, the Plant Nutrient business recorded record pre-tax income of $10.7 million in the first quarter, up from $8.5 million in the first quarter of 2021. Continuing the story from last year, well-positioned inventory led to improved margin per ton in our agricultural product lines, and in particular for our specialty liquid products. Fertilizer prices have also continued to rise due to the conflict in Ukraine. Our Turf and Specialty business continues to be challenged by supply chain difficulties, inflation in raw materials, and labor constraints. Plant Nutrient's EBITDA for the first quarter was $18.8 million, an increase from $16 million in the first quarter of 2021. And with that, I'll turn things back over to Pat for some comments about our 2022 outlook.

Pat Bowe, President and CEO

Thanks, Brian. While our first quarter overall financial results did not meet our strong performance of 2021, we continue to believe that our agricultural business outlook remains strong. We are anticipating elevated commodity prices for some time, due to the relatively low worldwide stocks. But with the disruptions in the Black Sea region and the smaller South American crop, we expect demand to stay high into 2023 and beyond. Planting across the country has started slowly and is currently a week behind the five-year national average. It's been wet across the Midwest this week, and we do know that farmers are anxious to get into their fields as soon as they can. We expect them to ramp up activities quickly when possible. Fundamentals in the grain business continue to remain positive. Worldwide supplies are projected to be tight into the foreseeable future, and we're very pleased with our ownership positions at good values. Storage income opportunity has returned to wheat, and we're able to accumulate large wheat inventories with the expectations for reduced supply from Ukraine. U.S. fall harvest will reduce but not eliminate the impact of strong worldwide demand on all our primary crops. With these markets, and at this time of year, we're very focused on monitoring the impact of the Safrinha harvest in Brazil and the planting progress and growing conditions in the U.S. As always, we're working to support our farmer customers with grain marketing plans. In ethanol, gasoline demand has improved but has not yet returned to the pre-pandemic levels. Board crush margins have recently moved favorably for the second and third quarters of this year. U.S. ethanol stocks remain fairly high despite the spring shutdown season but are expected to decline on growing seasonal domestic and export demand. The strong demand and good values for co-products continue to support our overall margins. In addition, our low CI renewable diesel feedstock merchandising business is performing very well and adding to our results. All five of our ethanol plants have now completed their spring shutdown successfully and are ready to meet the increased summer driving demand. Two of our facilities are operating successful high protein feed product lines and marketing them to a wide array of customers. We expect Plant Nutrients to continue to perform very well through the spring planting season in an ongoing period of tight supply and high market prices. We received good support from our North American suppliers and continue to have inventories in position for the spring application season. We've seen a reduction in fertilizer volumes in the first quarter, but it's been more than offset by increased margins supported by high commodity prices and strong farmer income. With a positive nearby outlook for Ag market fundamentals, we're excited about our prospects for growth, particularly in sustainable opportunities. We remain committed to adding value for our customers, managing risk, and operating safely and effectively. Now I'd like to turn to Slide 11, about our investment thesis. We introduced our refresh strategy last year and are continuing to focus on both grain and fertilizer growth projects. We're mentioning this again today as we're working on our growth pipeline, which includes both organic projects, as well as potential acquisitions that are within and adjacent to our current position in the U.S. Ag supply chain. Recent examples from this past year include our growing renewable diesel feedstock business, our purchase of Capstone Commodities in the Dairy Feed supply business, and our grain supply chain extension to Africa and the Middle East. The Andersons play a key role in the Ag supply chain, servicing customers from farm to fork. We'd like to draw your attention to our recently published 2022 Sustainability Review, a copy of which is on our recently refreshed website. We are firmly entrenched in U.S. Ag supply chain and see many opportunities to continue to grow. With our focus on our two trees symbolized on this piece of paper, or strategic verticals, stronger balance sheet, sustainable cash flow, and tighter strategic focus, we expect to be able to grow profitably in this exciting Ag economy. With that, I'd like to hand the call back to Matt and we'll be able to entertain your questions.

Operator, Operator

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

Ben Bienvenu, Analyst

I want to start with my first question about the Trade business. We clearly saw a sharply rising market, and you mentioned some basis value changes that impacted your numbers in the first quarter. You indicated that this puts you in a strong position regarding the price changes heading into the next few quarters. I understand this business is challenging to model and track from our perspective. Can you help us understand the underperformance compared to our expectations in the first quarter? Do you believe the positions you have in place for the next couple of quarters will allow you to achieve results similar to last year and recover from some of the losses in the first quarter? Additionally, it seems the stock reacted quite negatively to the news today, which raises questions about whether the earnings potential has shifted suddenly. Could you help clarify if we are still on the same path and whether the short-term dynamics in the first quarter were tied to the significant movements in grain markets? What should we keep in mind as we progress through the coming quarters?

Pat Bowe, President and CEO

Sure, Ben, that's a great question with a lot to consider. First off, I'm surprised by the market reaction this morning, especially since we had a record quarter in our fertilizer business and a strong profitable quarter in ethanol, unlike some others in the industry. We performed well in ethanol. In grain, when commodity prices are high, it’s typical to see basis levels weaken, which can be negative as it requires marking to market our inventories. We recognized about $8 million to $10 million in that in this quarter, but we are purchasing grain at lower basis levels and have built up inventory at historically good prices. We're basis traders, and our advantage is to buy at discounted basis levels, which we can then elevate and ship in a rising demand market like we're seeing this year. Even though some in the industry have noted timing differences or basis depreciation, this presents a good opportunity for us. When futures prices spike and farmers sell, the basis weakens, which we view as a positive strategic indicator that should rebound later this year. I can’t guarantee the exact timing of that, but historically, this has been a strong position for us, especially with a solid export and domestic demand expected later in the year. Additionally, we faced some tough comparisons from last year. In 2021, we had our best year in a decade, with notable performance in Trade, particularly in propane, where last winter saw very high selling prices. We're likely $4 million to $5 million lower compared to last year, but it’s still a profitable business. Overall, we're very optimistic about our position in the industry and the favorable conditions across all segments. We just finalized the sale of our rail shops in the Rail segment, putting us in a strong position with a solid balance sheet and confidence in our future outlook. I believe the market's reaction this morning reflects an overreaction to the sensitivity in commodity markets.

Ben Bienvenu, Analyst

Yes, that makes sense. As a follow-up, the stock is currently trading at book value, a situation we've only seen during the onset of COVID and the Great Recession. In contrast, your public peers are trading at twice that value. You have a share repurchase program in place and are generating significant cash. While there is short-term working capital demand, how do you prioritize share repurchase among the various capital allocation options available?

Brian Valentine, Executive Vice President and CFO

Yes. Ben, this is Brian. Good question. And it won't surprise you, something that we've been talking about ourselves this morning, so you're correct. We have a program that is in place. And we obviously have closed windows and periods when we're not able to purchase and then periods when we're able to. So I would say, it is certainly one of the levers within our toolkit and something that we will continue to evaluate closely.

Ben Bienvenu, Analyst

Okay. And last question for me. Ethanol margins, industry ethanol margins have improved materially heading into the second quarter. Do you have the ability to lock in forward selling and secure margins? Have you done any of that? Just any color you could give us around your positioning on your ethanol business would be helpful?

Pat Bowe, President and CEO

Sure. We've always been hedging positions when we find opportunities to create value. We have done some for the second quarter early this year, have done some on energy as well as corn. So we're in a good position. We think that the ethanol market is going to have a nice finish. Will the fourth quarter of this year be as strong as was in the fourth quarter of 2021? This is all dependent on driving. What is the condition going to look like for the balance of the year? We're optimistic. It feels like it's in a good position, and exports are starting to be more of a factor. So ethanol value is low and can help the economy by blending lower cost ethanol into gasoline. So we think this is a good time for ethanol to really shine here this year. So we're well-positioned. Our plants are all up from their shutdowns and co-product values, both corn oil and feed have been very strong. So we think ethanol is in a good position.

Operator, Operator

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

Ken Zaslow, Analyst

I don’t want to repeat myself, but I’d like to clarify two points. First, if you were to disregard the first quarter and look back to three months ago when you shared your outlook for 2022, do you believe the next three quarters will differ based on what occurred this quarter?

Pat Bowe, President and CEO

No, I don't think so, Ken. Maybe a little bit better because of the grain ownership we have and some of the carries coming into the wheat market. So that could improve a bit. I tend to dislike this time of year because we haven't planted corn yet, and this period is crucial for predicting the fall harvest for the U.S. crop. However, overall, we feel confident about all of our positions and our standing in the market. So I would say, yes, I think those levels are slightly higher.

Ken Zaslow, Analyst

Okay. You mentioned comparing yourself to other companies discussing mark-to-market. Is this a non-cash item or a cash item? I want to clarify because I think it had an impact, or am I misunderstanding your comparison with your peers?

Pat Bowe, President and CEO

Yes. All grain merchants adjust as the basis levels move. Once you're hedged, you're locked in on futures, and when the basis declines at the end of the month, we adjust the month to the new basis level. Therefore, the grain we own must be marked down. When it goes back up, we will mark it back up when we elevate and ship it. While I shouldn't speak for other companies, some have mentioned timing differences in their public releases related to this. This is normal in the soybean crush and grain elevation businesses, and it can be beneficial. We look for scenarios where futures markets spike and the basis weakens, allowing us to buy at lower basis levels, which we see as a positive. Unfortunately, this creates a timing issue for the month it occurs.

Ken Zaslow, Analyst

But it is a cash or non-cash item, I guess that, but so you're comparing it to the basis, not the mark-to-market on the crush margins. Is that making sure I'm understanding it?

Pat Bowe, President and CEO

Correct. We're not involved in the soybean business, so we don't have a crush margin. It's really about your inventory; you're adjusting to a different level each month. We highlight this in our quarterly results, and we believe that as we ship those products at higher basis levels later, it will recover.

Brian Valentine, Executive Vice President and CFO

Regarding the ethanol point, that is a non-cash mark-to-market adjustment of those positions that we expect to decrease.

Pat Bowe, President and CEO

Yes, ethanol is separate. Yes, I'm sorry.

Ken Zaslow, Analyst

Yes. Okay. And then the last part of my question is, when I think about out, obviously, the tragedy of Ukraine and Russia and you don't ever want to benefit from it in this quarter, obviously, you didn't. But for the next year to two years, if it extends that Ag cycle, how does it play out through your results? And how do you navigate and potentially elevate your earnings power from this? Or do I think of it more as more transitory that you could have these good things and bad things that happened? Or is it more about a sustainable level of earnings?

Pat Bowe, President and CEO

So I think it is a sustainable level of earnings. If anything, it's probably extended it, it's about a time issue. So before, without any political disruption, maybe we could have Mother Nature come back in Brazil and have a better crop next year, and we have a better crop next year. And in one to two years, you could have gotten to normal balance in S&D. Now, the supply and demand of global grains is out of balance and very tight and likely to extend as to crop years. And so this let's call rally that's happening in the Ag markets is likely to continue longer being a demand-driven rally because of short supplies in other places of the world. Very good prices for U.S. farmers, incentives for farmers globally to plant. So we should have volumes that Ag companies can ship. And with the economy where it is, even with higher interest rates, demand is still strong for food products and global food demand. So we continue to have a very good fundamental basis across the Ag sector. And that should extend maybe longer because of this crisis, unfortunately, over the people in Ukraine, but it's going to have an impact that will linger more than one year or one season.

Ken Zaslow, Analyst

Great. Just maybe trying to understand it, I'm sorry just go back to this point, kicks on my head, you did not sell your grain position or you were not forced out of your grain positions, right, just look around anything, and you were set up.

Pat Bowe, President and CEO

First time. At this time, when we've had a rise in prices on the futures market, it gives us the opportunity to accumulate grain inventories at lower basis levels. That's a fundamentally really good thing to do. And we're really pleased to do that. We have good positions of wheat that we bought last year; we're buying grain from our farmers when the market rallies, which is a good thing for us and a good thing for them. We're well-positioned to take advantage going forward. So we like the position we're in.

Operator, Operator

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

Ben Klieve, Analyst

All right, thanks for taking my questions. First, Pat, just a quick follow-up on the comments you're just making on the inventory position, can you guys break down the especially in the Trade Group, the inventory position on a volume basis ending the quarter?

Pat Bowe, President and CEO

I'm not sure I understand your question. But we have our volume that we own is higher than last year, same time of grain inventories. And we're able to have purchases at this time of year that was better than previous time. But that the point is back to marking basis levels down, that is good ownership that we can turn around and elevate later. It's a good opportunity for us. That's the point.

Ben Klieve, Analyst

Can you describe the performance of the Trade Group in the first part of the quarter compared to the second half? I'm interested in the trajectory of that business in mid-February and how it ended the quarter.

Pat Bowe, President and CEO

Sure, I think initially, when the war broke out, there's a little bit of a shock to the grain system when wheat markets particularly spiked and so we had to get back to a kind of a normal alignment. And then as we got to the end of the quarter, margins improved and our trading profits improved, once it started to normalize. It's not normal at all, but starting to calm down a little bit. Also, we're able to sort out shipments that were on the water or not, and how those things were going to work out logistically. So we and others in the industry have been able to navigate those challenges due to the war in Ukraine, and it's actually providing the volatility that is something we'd like in commodity markets. And why I mentioned that is getting back to that basis levels, it gives us a chance to buy at discounted values that we wouldn't have seen otherwise. So that's a very good thing for our business. That flows right through to ethanol and into our other businesses. Again, a record quarter in fertilizer, a good outlook in fertilizer. Strong quarter with a record EBITDA in our Renewables business. And that included an $8.3 million mark-to-market that should come back in the next quarter. So we're very optimistic about our outlook.

Ben Klieve, Analyst

Got it. And one other one for me, and kind of related to that last comment the outlook and the optimism that you are clearly communicating here. Earlier in the call, you talked about kind of the ability to potentially repeat the most recent fourth quarter performance in ethanol. There's a lot going on in that segment. And I'm wondering if you can kind of characterize your optimism into two buckets. I mean, to what degree is that optimism fueled by just kind of a general strength in the market with high-value co-products, with strong ethanol margins in the current environment, versus kind of an expanded organic capacity and greater efforts on the renewable diesel side, things of that nature? I mean, how much of that optimism is the state of the market versus your internal capabilities?

Pat Bowe, President and CEO

Yes, that's a great observation. We achieved record-setting EBITDA for the quarter. Our Q1 crush margins were better than last year, and we expect margins to continue improving in Q2 and Q3 as we approach the spring-summer driving demand. Stock levels are slightly higher than typical for this time of year after the shutdown season. Demand for exports is strong and looks promising for the year ahead. Ethanol remains a valuable blend for gasoline, especially with Biden's support for increased E15 usage. While it's not a game changer for the business, it will be beneficial. Additionally, high corn oil prices and favorable feed values contribute positively. Overall, there are many favorable factors for the ethanol industry. It's important to note that the fourth quarter of 2021 had very high margins, so matching those in the upcoming fourth quarter may be challenging. Nonetheless, we anticipate that ethanol margins will improve throughout the year, leading to a solid earning period in 2022.

Ben Klieve, Analyst

Got it. Okay, that's all helpful commentary. And I think that's a good place for me to leave it. Thanks for taking my questions. I'll get back in queue.

Pat Bowe, President and CEO

Thank you.

Operator, Operator

Our next question will come from Eric Larson with Seaport Research Partners. Please go ahead.

Eric Larson, Analyst

Yes, good morning, everyone. Thanks for taking my questions. So Pat, you talked a little bit about, we know about the shortfall in South American soybean production. Now we're starting to hear last week or two so and starting to see investments come down pretty sharply in kind of the Central Brazilian Safrinha growing crop areas, which will not be offset by some little bit better growing conditions in the southern part of the country. But talk about that a little bit. And I don't know if people are really focused on the South American Safrinha crop at this point. And it looks like that could actually give us reason to think that maybe corn prices in the U.S. could go even higher. So what are your thoughts on that?

Pat Bowe, President and CEO

You make a good point, Eric. I know you monitor this closely as a farmer. The conditions associated with La Niña lead to warmer and drier weather, particularly in the Central Brazilian regions like Mato Grosso and Goiás. I’ve operated a plant in Uberlândia and Minas, where we've noticed a tendency for the area to become drier during La Niña periods, which has been the case recently. It’s not a complete drought, but conditions have been dry enough that we might struggle to finish the Safrinha. As you know, the Safrinha is the smaller second harvest that has become nearly as significant as the main harvest. This situation could negatively impact Brazilian production and may, in turn, support U.S. soybean and corn exports and prices, as you mentioned. Additionally, we have experienced some wet weather in the Midwest recently. The latest crop report indicated that we are about a week behind the usual schedule. We might not recover significantly because of the wet conditions this week, possibly falling 20% to 25% behind by next week. However, American farmers are incredibly efficient and can plant corn quickly once conditions improve. It’s still too early to panic. The corn planting will occur as soon as we have a dry spell, and it’s important for us to see progress in the fields, as that’s what the market is keenly watching now. This situation is advantageous for the U.S., and we need to ensure we get the crops planted to achieve a strong U.S. production.

Eric Larson, Analyst

We've seen a significant increase in both future and cash values for global crops. Are you noticing any signs of demand weakness? There are a few indications, but they seem minor, possibly related to flu or bird flu, amounting to about $25 million to $30 million bushels. It appears that the demand floor is minimal. Can you share if you're experiencing any demand issues?

Pat Bowe, President and CEO

No, I think the big disruption a lot is ready for the Black Sea, right? So countries that would normally be getting shipments from Ukraine or in some cases from Russia, these paths have changed. And even right away when wheat is coming out of the Pacific Northwest to go to other parts of the world, we’re seeing different traffic patterns. But also remember, that's on top of high ocean freight already. So the global prices, unfortunately, the poorest people on the planet are going to be paying food inflation, especially in Africa. But what we do see is we haven't turned off demand. Because protein markets are strong. Crush margins are very good. Ethanol markets, margins are there. And then your beef, pork, chicken demand by consumers is still solid in North America. So North American demand for feeding and for the processing is still very good. I mean, wheat milling was up 2% in the quarter. So there's good consistent demand domestically here. And now you add on top of it these pockets of shortfall that Ukraine would normally fulfill, that's disrupting the normal shipping patterns of exports. And the U.S. is going to take part in that. China's been a little bit quiet here off late, but we still see China being a very significant buyer of U.S. commodities.

Eric Larson, Analyst

I have one more question about demand. Fuel prices are significantly higher this summer compared to last year. Many people have shifted to RV travel and other gas-intensive vehicles. Do you believe that gasoline demand could decrease this summer? If that happens, could the export market for ethanol be strong enough to compensate for any domestic decline if gas prices remain too high?

Pat Bowe, President and CEO

Yes, that's the big question that remains unanswered. Will someone take an RV trip across the country? It's likely cheaper than flying to Australia. The data shows improvement in recreational road travel compared to general road travel, and it appears to be returning to pre-pandemic levels. With more people going back to work full-time in offices, we anticipate that as COVID concerns lessen, driving demand for commuting will increase. For summer, we expect recreational travel to rise, alongside a recovery in aviation fuel demand. Unless gas prices significantly increase, we foresee solid demand driven by driving miles. Regarding ethanol exports, we anticipate higher levels this year. We have the lowest-priced oxygenates globally, positioning us well for ethanol exports. While the volume might depend on demand in certain countries and ocean freight conditions, the outlook for ethanol exports is positive. However, I would caution that achieving peak margins like we saw in the fourth quarter would be challenging, but if we do, it would be a welcome outcome.

Eric Larson, Analyst

Thank you, Pat. My final question is for Brian. You were quite proactive in establishing grain positions in the first quarter, which I find very logical considering the future values you can derive from your trading operations. Looking at your balance sheet, if other market opportunities arise today, how much additional potential do you have to take advantage of those opportunities with your current financial resources?

Brian Valentine, Executive Vice President and CFO

Well, I mean as we sit today, we have about $0.5 million of available liquidity, and as you saw we amended and extended our credit agreements in the first quarter. We continue to have really strong support from our bank group and our relationships. Because, candidly, to your point, Eric, they understand the key role that The Andersons plays in the North American Ag supply chain. And really that that key function and so back to the whole point on readily marketable inventories and some of those margin calls, a lot of that is, can be temporary and timing differences. I think you also know, we tend to see sort of our peak borrowing in the first and second quarters, and then it'll start to taper as we get closer to harvest. So I would say we feel good about our position to capitalize on opportunities as they present.

Pat Bowe, President and CEO

We feel really good about having our real strong balance sheet not just to deal with short-term borrowing but also being positioned for the growth projects that we're working on. I think it's Eric, you've been around about as long as I have. And if you think about corn futures trading above $8, it's only happened 42 days in the long history of trading at the Board of Trade. The last time that happened was around 4th of July, you'll remember back in 2012, during the middle of a severe drought and when it traded there numerous times. But when I started in the 80s, corn was a $1.75. And under loan, it didn't move a dime all year. So this is unprecedented to have these elevated prices for a long period of time. It's great for our growers, and good for our industry. We're there as U.S. to supply these shortfalls in the global market. So this is a really good time for U.S. agriculture to kind of spread its wings and show what we can do. So it's a great time for our industry. Although it's volatile and prices are high, this is a really good thing.

Eric Larson, Analyst

Yes, well corn prices you've captured, corn prices a couple or three bucks just not too long ago. So you talked about a $1.75, we've had some pretty weak corn prices in the last couple of years too. So it’s very volatile stuff?

Pat Bowe, President and CEO

Currently you get your crops planted in Wisconsin, in Minnesota, Eric, that'll make us happy.

Eric Larson, Analyst

We haven't put a seed in the ground yet. So thanks, guys.

Pat Bowe, President and CEO

Thank you, Eric.

Mike Hoelter, Vice President, Corporate Controller and Investor Relations

Thanks, Matthew. We want to thank you all for joining us this morning. Our next earnings conference call is scheduled for Wednesday, August 3rd, 2022 at 11 AM Eastern Daylight Time, when we will review our second quarter results. As always, thank you for your interest in The Andersons and we look forward to speaking with you again soon.

Operator, Operator

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