Good day, ladies and gentlemen, and welcome to the Archer-Daniels-Midland Company Third Quarter Fiscal 2008 Earnings Call. My name is Eric, and I'll be your coordinator for today. At this time, all participants are in a listen-only mode. We will facilitate a question-and-answer session towards the end of the conference. (Operator Instructions) I would now like to turn your presentation over to your host for today's call, Mr. Dwight Grimestad, Vice President, Investor Relations. Please proceed sir.

Thank you, Eric. Good morning and welcome to ADM's third quarter earnings conference call. Before we begin, I would like to remind you that we are webcasting our call, and that you can access it at ADM's website, www.admworld.com. The replay will also be available at that address. For those following the presentation, please turn to slide 2, the company's Safe Harbor statement, which says that some of the comments constitute forward-looking statements that reflect management's current views and estimates of future economic circumstances, industry conditions, company performance and financial results. The statements are based on many assumptions and factors, including availability and prices of raw materials, market conditions, operating efficiencies, access to capital, and actions of government. Any changes in such assumptions or factors could produce significantly different results. To the extent permitted under applicable law, the company assumes no obligation to update any forward-looking statements as a result of new information or future events. Slide 3 lists the matters we will discuss in our conference call today, and with that I'll turn the call over to our Chairman and Chief Executive Officer, Pat Woertz.

Thanks Dwight, and good morning everyone. I would like to first start with a safety moment. In April, ADM held its second Annual Global Safety Week, where all of our colleagues, our contractors, employees, everyone took the time to stop and discuss safety. This fiscal year, we do have total reportable injuries down 12%, and lost work day rates down 24%, and while that is an improved performance, we do remind ourselves that it's not about statistics, but indeed about people, and we will continue to work hard toward our zero injuries, zero incident goal. This morning, we announced third quarter earnings, that's $517 million, up 42% from the third quarter of 2007, and diluted earnings per share of $0.80 up 43% over the same period. Last quarter on our call, I did highlight the significant positive momentum we were seeing, and our third quarter results today I think demonstrates the ability of our balanced operations, our global network and our strong balance sheet to deliver shareholder value, amid this very fluid market. Volatility in commodity markets did present some unprecedented opportunities as we said in our press release, and our team leveraged those opportunities through our financial flexibility, our global asset base. And once again, I think, the combination of the physical assets and intellectual assets combined to capitalize on market conditions. There is a reason for some optimism in the supply fundamentals of world crops. South American farmers are gathering a good harvest. In Europe, we are seeing better crop conditions than we’ve seen in a few years, and globally wheat supplies look to be rising. Here in the US, the USDA predicts increased soybean production in 2008. However of course, planting is just getting started, so we will wait and see. These changing supply dynamics will present, as every year does, different challenges and different opportunities going forward. I am confident however, that we have the right portfolio, the right network and the right people to capitalize on these opportunities and deliver value to our shareholders. I would like to turn the call now over to Steve Mills, who took over as CFO at the 1st of March. Steve is a veteran here of ADM, and most recently he held our lead role in strategic planning efforts. Many of you already know him well, and I hope you’ll join me in congratulating him in his new role. Steve, if you’ll take us through the third quarter results.

Thanks Pat and good morning everyone. You will see that we have updated the slide deck a bit to help bring some additional clarity to our numbers. So I’d like to move to slide four, where you’ll see our statement of earnings highlights for this quarter. Net sales and other operating income increased 64% in this quarter to $18.7 billion. Nearly 90% of this increase was attributable to increases in selling prices, primarily resulting from the significant increase in underlying commodity prices. The remaining 10% of this increase in sales revenue was due to higher volumes. Gross profit for the quarter grew 55% to $1.2 billion, as overall operating margins improved. Partially offsetting these improvements in gross profit, were significantly higher net corn costs and rising energy prices. Selling, general, administrative expenses increased $84 million or 29% this quarter from a year ago, due principally to higher global personnel costs, including the effects of foreign currency translation, accruals and further organizational realignment expenses. Our financing costs net, which consist of interest expense less investment income, rose to $66 million for the quarter. This increase reflects higher average debt levels that were used principally to finance our additional working capital requirements. Our effective tax rate this quarter was 31.5%, down about 3% from last year's rate for the quarter, but in line with the rate we've been estimating for this fiscal year, as well as being in line with the full year rate from 2007. Last year's tax rate included a cumulative catch-up effect related to updated estimates of geographical mix of earnings back in 2007. And as Pat mentioned, net earnings and earnings per share increased 42% and 43% respectively, reflecting strong underlying industry fundamentals, together with some exceptional merchandizing opportunities that we were able to capture this quarter. Turning…

Thank you, Steve and good morning everyone. I'll be discussing the information on slide 15. This period of unprecedented growth has proven to be challenging as we said before. We've experienced substantial delays due to weather, steel shipments and the ability to access available craft labor. We've retested these projects and we are optimistic about there investments. We also believe they will be very close to our original construction costs estimate at $2.5 billion. Our Columbus, Nebraska; ethanol facility is scheduled to be online in the third quarter of calendar 2009. The Cedar Rapids, Iowa; ethanol facility is scheduled to be online, first quarter of calendar 2010. These plants will each produce $275 million gallons of ethanol and are being built next to our existing corn wet milling operations to lower plant operation cost and the benefit from our extensive logistics network. We are converting two of our plants from natural gas to coal co-generation, one in Clinton, Iowa; where we are building our PHA plant and the other in Columbus, Nebraska; where we are building one of our dry ethanol mills. These plants will come on line in phases. In Clinton, there will be three phases for the three boilers and three turbines. Phase one for Clinton will be completed in the third quarter of this year, and the full project will be completed by the end of the first quarter of calendar 2009. Phase one at Columbus will be completed in the third quarter of next year, with the full project completed in the fourth quarter. Together, these plants will reduce our projected energy costs close to $200 million per year based on current natural gas and coal costs. Our PHA biodegradable plant expects to have commercial PHA product in the second quarter of calendar 2009. We look forward to producing commercial quantities of this unique product. Our cocoa plants first phase will be operational during the fourth quarter of calendar of 2008, and it will be fully operational in the third quarter of calendar of 2009. This state-of-the-art plant will deliver improved production efficiencies, as well as offering the opportunity to expand our chocolate product line. Finally, the Decatur, Propylene Ethylene Glycol plant will also be on online at the third quarter of next year. This plant adds a new product to our overall product portfolio, adding an additional processing option to our value chain. And we are looking forward to completing these projects and capturing additional value to our shareholders. Thank you. I'll turn it back over to you Pat.

Thank you, John. And operator we'll be happy to take question if you would open the call line for questions?

(Operator Instructions) Your first question comes from the line of Eric Katzman with Deutsche Bank. Please proceed.

Hi, good morning everybody.

Good morning, Eric.

Good morning, Eric.

I guess, my first question, John has to do with the project delays, I mean you kind of noted some shorter term issues, but how much of the ethanol delays coupled with the comments about capacity in the industry. I mean how much of the delays is a function of all that excess capacity coming online versus kind of the short-term stuff you mentioned.

It was all of the short-term stuff. I mean, we still look at the returns on these two ethanol plants we are building. We feel very positive just because of the cost advantage we feel and the logistics advantage, but we did experience a lot of cold weather delays. I think I mentioned in the last call that I was up in one of the plants and the wind was blowing 40 - 50 miles an hour with a 50 below windshield and it's just tough to operate and also our steel shipments from China were delayed and they were just not production from the Chinese plants but also just the shipments and getting them through customs ended up delaying the projects also.

Okay. And then to switch to second to the ethanol business, did you say that -- I think you said that volumes overall for the segment were down a few percent. But did you also say that ethanol volumes were up. Did I get that right?

Our volumes are up.

For both?

For ethanol.

Okay. But overall in the quarter, I thought that you said that the volume -- production volumes were down three.

Overall production and when we speak to that, it's about the corn grind itself for the whole complex.

Okay. So the ethanol was up, but the overall segment volumes were down.

From our production perspective.

Okay. And then I guess the last question, Pat, I mean, as the industry, kind of moves its focus from North America to South America. When you would say that the Ag service results where kind of unprecedented, are you kind of signaling to us that because of the natural shift and where your assets are more concentrated, that the opportunities are reduced given the volumes that flow through your system in the move from North to South America?

Well, Eric, first of all, it's not a signal. It was a statement that these had been, the volatility this quarter was unprecedented, it was higher than we had ever seen before in any crops. What I was trying to say about the world crop situation, well sometimes you read that a panic associated with crops. I think that supply fundamentals of world crops are improving and as we move to South American harvest and a large soybean crop et cetera. Opportunities present themselves differently in different regions. So John, do you want to add anything to that?

The only thing I would add, Eric is, as everybody is well aware these are unprecedented times in the commodities markets. We have seen wheat go from $5.5 then you get to the Minneapolis exchange on a synthetic basis got to $25, now it's back to $10, Chicago wheat is around $8. So we are always going to have a little bit of disruptions, which we have seen this last year. So it's always tough to say what the next quarter is going to look at, because a lot of different government policies may come into play and growing conditions also.

And just one last thing and then it will pass it on. I think you have stated in your prepared remarks that the health of the South American farmer is pretty good, but Christina went down there recently, and I think that, I mean they look pretty good but not -- isn't like that breakeven level on soybeans not, you know price isn't that much above kind of breakeven. So in your opinion they're actually in better shape or kind of how do I judge that comment?

Well, I was just down there also about two or three weeks ago. The big issues down there right now are obviously the currency and then the input cost. But I guess my read was that we did not see anybody talk about not expanding there. I still believe there'll still be a little bit more expansion on the crop for next year. And also, I'm hearing a lot more talk about people growing more double crop corn and even single crop corn. So I think we'll have to see what commodity prices look like when their planting season comes, but I guess I'm not looking for any decrease in acreage at all and looking at actually a little bit of increase in acreage.

Okay. Thank you. I'll pass it on.

Your next question comes from the line of David Driscoll with Citi Investment Research. Please proceed.

Thank you. Good morning, everyone.

Good morning, David.

Good morning, David.

Well, first off, congratulations on a great quarter, couple of questions. Can you tell us what the average selling price was for ethanol during the quarter?

No. We do not give that information out. We usually talk about it on a spot basis. Right now, there's more demand than supply. We see that going on until probably about the middle of third quarter calendar year, and then we see more supply coming on.

Well, is it fair to say that the result should be improving because the spot market curve has continued to improve? So from our seat, the only thing we know is that you guys are contracting your volumes ahead of time. So it seems logical that that it's hard to say where any one quarter where your numbers exactly were, but yet these prices in the spot market have moved up materially. So again given where the corn costs are versus where the ethanol prices are, does it stand to reason that ethanol profitability should sequentially improve, is that true?

No, I think your description is pretty accurate there. David, that spot prices have been moving up and it's a good way to think about it.

I appreciate that.

David, one thing you said; there isn't a lot more spot business. Going forward we are not seeing, we are seeing a little bit of more contracting going forward, but still a majority of the business seems to be spot within a two or three month period.

Okay. On Ag services, Eric was trying to get after this a little bit, but this result here was, it was extraordinary, almost $370 million. There is nothing to say about that other than this is absolutely fantastic. What it always leaves everybody out there wondering is what happens next? Can you give us, do you have any visibility on this next quarter or is the volatility -- Pat, may be you can just simply comment on the characteristics that drove these results, do they continue to exist right now?

It's always a hard question, David as you know, and we tried to describe the current situation as continued volatility and depending upon how one takes that word. What it means for us is that, markets continue to move and we see that, we are still seeing quarters, where we have not seem them like this before and as we sat in the same conference call last quarter, we said we can just see continued volatility but frankly we didn't know how high or how much. So I think we are trying to describe our current conditions as, certainly describing which crops have already come to market, which ones are containing to fill out and that globally our network, and certainly our intellectual capability should be able to capitalize on whatever opportunities we see and we should be good at doing that.

So is it fair to say that conditions are good. We just don't know how good, until the results play out.

I think that's the fair way to say it, and I think that's the fair to say it.

And my last question and I'll pass it on. Here I want to go back to Brazil. John you made an interest income in only about somewhat of a little acreage increase or just a slight acreage increase, maybe not exactly the words you used, but the global Ag prices really do seem to indicate that farmers around the world need to increase production. Inventories are very tight, it’s just that my basic gut reaction on these things is that the market signal should indicate the farmers for massive increases in production because of grain stock, Brazil seems to be the major lynchpin on how we are going to do this, we want to see acreage expansion. How firm are you or how convinced are you that acreage is just going to expand slightly. So kind of can you give us a little bit of your rationale to this and maybe some bigger broad picture color on the global grain market?

Well, on the Brazil side it's more led to how we feel fertilizer prices and the Real is going to be at any given time. And then also just watching the corn, soy bean spread with the acreage of fodder in the United States we are expecting a lot bigger stocks in the US and also Brazil. So I won't be surprised to see the southern hemisphere actually expand a little bit more corn and our wheat acreage, so I think the soy bean supply and demand next year looks very well balanced, so I don't think that's going to be the issue and I think it's just going to be what other crops they can grow and they are also looking at expanding a little more sugar down there. But or when you look a the total crops, oil seeds looks to be very good, wheat looks to be very good and we have, as everybody is well aware, we're behind on corn planting this year.

Okay. I appreciate the comments. Now I'll pass it on. Thank you.

Thank you, David.

Next question comes form the line of Diane Geissler with Merrill Lynch. Please proceed.

Good morning.

Good morning, Diane.

Good morning, Diane.

Congratulations on your quarter.

Thank you.

Just a question on the ethanol side. It seems like the volume has been ratcheted up here, kind of a food versus fuel debate, obviously not new to our space. But I guess with the current iteration of the farm bill some of the changes made in the tax -- the tax incentive there, could you talk a little bit about how you would view changes in the tax incentive, temporary removal of the RFS standard this year and kind of current economics with where crude is versus the demand picture you have. Could you just comment on that?

Diane, let me kind of that from little bit of a higher plane and the come down to your question a bit. This whole debate we hear about, first of all I emphasize with the consumers who are paying a way more for certainly fuel at the pump and more for food. However, the food prices are driven as we know by record energy cost. That's the major contributors for higher food cost. Energy, the dollar, demand for food in China, etcetera. And I actually find it’s sad and maybe even a little ironic that these misguided attacks on biofuels is directed at the one alternative, we actually have today, to transportation fuel. We have other alternatives that people are working on for other types of energy but for transportation fuels, biofuel is the only thing that exist today and it actually increasing fuels supplies and by doing so reducing the price of fuel, and improving energy security. So, bio fuels are really a real solution to real problems. And I think retreat, which is what you are asking about in changes. Retreat from biofuels is wrong, it’s foolish I think it's dangerous, it's a mistake. Retreat from biofuels is just an anti-gesture, people talk about it. That they won't fill anybody's stomach and won't fill any gas tanks. Having said that if you think about some of the debate that is going on, again, I think it's misguided. Some day with the base of corn ethanol, for example in this country and the base of biofuels from food feedstock, which most go to food anyway 90%, 95%, when we move from the base today to second generation and third generation, farmers will plant more, we'll have more food, we'll have more fuel. I just think its misguided to think about changes in the energy bill are over-traction over retreat. And anyway, again I think it's an anti-gesture. John, do you want to add anything.

Couldn't agree with you more, Pat. In terms of the market you had asked about the volumes. We do keep seeing the volumes increase and keep seeing more demand, more markets opening up. Ethanol is very cheap compared to gasoline right now. So it makes sense for the blenders to be adding ethanol at a faster rate as they can. And I see the market keep growing, we will have this Brazilian sugar harvest and ethanol coming into the United States probably right around June. We are starting to see a little bit more coming now and even with the tariffs that works coming into the United States. So as far as the -- you asked about the tax on the tariff side. It works now I don't know why we need to take it off while we are trying to expand our industry here in the United States.

Could you comment on at what level the economics would no longer work and here I'm really talking about the tax credit?

I'd just say really don't know how to answer to that question. It's all relationship on the price of gas, the price of corn you know the blender, I mean there is a lot of different scenarios in there. So, if you have $2 gas it's going to be one scenario as opposed to $3.5 to $4 gasoline.

Okay, but given the current environment we are in, and here I'm really speaking to the change that's in the current farm billing and to be honest with you it seems like the farm bill is changing day-to-day. In terms of what they intend to do with the tax credit. That seems to be the focus that I have from clients. So I was wondering if you could comment on the proposed change in the Farm Bill.

I guess that is a proposed change, since ethanol prices can still go higher relative to gasoline, I could see that happening and the margins staying the same.

And, Diane, I think you are right that, daily we see that House and Senate leaders are working to determine the final, both the cost, the scope of the final Farm Bill. So I think the debate is ongoing, and the current state of flux is probably, to think about what it is today wouldn't be as fair to comment on as what it was yesterday and what it might be tomorrow, it's still in fluxed.

Okay, alright, well I appreciate that. Thank you.

Thank you.

Thank you, Diane.

Your next question comes from the line of Ken Zaslow with BMO Capital Markets. Please proceed.

Hello?

Hi Ken.

Hi, Ken.

Just two questions, one is on the crop conditions, it seems like the plating in the US on corn seems to be a little bit behind history. Does that worry you at all or does that create more opportunities and how do you look at it going forward?

Well, it's a good question. It's always, whenever crops are delayed, whether they are in the United States, South America you always do get a little bit concerned, but we always seem to be able to get the crops in the ground. We are 10% behind last year on corn. If we get some dry weather here in the next four or five days, with the equipment everybody has it's amazing how fast we get the crops on the ground and it won't really be a concern until you get to the end of May. Now you get to the middle of May, there is a talk that maybe you will lose a little bit of yield, but with corn prices I think everybody is going to make sure they would try to get the corn in the ground. And the only area that I hear is that's real wet is eastern Iowa.

And does it create opportunity given the volatility again. Does it extend the spread between corn here and around the world and how's that play out or does it not have an impact on Ag services?

Well, sure, Ken. We will look at last year with the wheat prices, nobody’s seen around the world. They started to use it in flour and they fed more corn. This year with what we are seeing in the wheat we could actually see more wheat being fed and less corn. So, I mean it's really like Steve Mills, I said it's really Econ 101, the supply and demand scenario and everything. But it does create a lot of opportunities for us. Yes.

And then the other question I have is on the crushing environment. Do you see any inflection point, any changes on the meal side or the vegetable oil side would either be positive or negative. Can you give us some clue on any deltas coming down the pike?

On the protein meal side we hear talk, but to keep looking at the layers and the swine and cattle, we are starting to see a little cut back in cattle. It's going to affect corn, more than it does protein meals. But worldwide demand we are seeing very good demand on that and the oil demand even though we have very large oil stocks just because of the biodiesel is keeping the demand strong also.

Great, I appreciate it.

Thanks, Ken.

Your next question comes from the line of Pablo Zuanic with JPMorgan. Please proceed.

Good morning, everyone.

Good morning, Pablo

Pablo.

Just a very specific question may be for John. When I think of Ag services in very simplistic terms is high prices. Are high prices by far the main driver of earnings growth in that division? Because you keep using the word "volatility and dislocation" but isn't just a fact that prices are so much higher that are driving earnings there? And related…

Yeah basically, I am sorry, go ahead.

Go on, go on

It's really more of the opportunities globally, because of our global foot print of being able to move crops from one area to the other. We also get into our barge freight our elevation at the Gulf, vessel freight and being able to deliver to our customers and giving our customers flexibility in whatever products they want. And if they buy wheat and they want to switch over to corn or corn gluten feed. That's really what drives it, just gives us a lot of opportunity, just not purely high flat prices.

Okay, but on that point gentlemen, if I compare the environment say to a year ago, two years ago when your earnings in the division were much lower. I could make an argument that your food print, your lower footprint was already there. But the main difference in the meantime, it's really prices. I mean, their volatility and dislocation we had droughts back then and we also had some form of volatility. I mean, what has it really changed or what are you gaining volume share. Is the high price environment resulting in working capital paying for small traders and that also gives you opportunities? I am just trying to understand what has changed, because your lower footprint was there two years ago also, right?

Well, higher volatility and our strong balance sheet obviously comes into play into that. We are able to buy more crops, be able to use our capital. To be able to not back out of markets when the volatility is high and be able to take on more ownership at any given time and then being able to sell them to our customers. But like I mentioned earlier, we saw wheat has gone from $22.50 in the Minneapolis to $25 down to $10. So I mean it's just not all price. The volatility also plays into the profitability there.

Okay. And then just on volumes, again on that division. You don't disclose volumes. For Ag services, but roughly, how important is volume growth there or is not really a relevant piece?

Well, volume is very important. I mean, as we pick up volume in South America, we had a huge corn crop here in the United States. We handled additional volume there. It affects our barge line and also it affects ocean freight. So yes, volume does come into play.

Okay and just a couple of follow ups, moving onto ethanol. Given that the ethanol business, now you're saying there is more of a two to three months support basis compared to I understand six, nine months before. Does that mean that you also have changed your corn hedging policies, that perhaps you were longer corn for ethanol before and now you're shorter corn, only two-three months positions given the type of contracts you have?

No, we haven't changed our philosophy on corn hedging. And on the ethanol side, just looking at the supply and demand scenario, which is always constantly changing as long as ethanol is very cheap to gasoline, we may see markets expand quicker than what we see. But right now, looks like we'll have excess supply in about the third or fourth quarter of this year, but it's not just the US supplies, it's also the Brazilian supply coming into the United States.

Right.

These markets are constantly changing. It can be, all of a sudden, some of these new ethanol could have working capital issues and not be able to start up. We've seen those problems.

Right. And on that point, besides you announcing the relation of these two plants today, are you aware of other large projects are being delayed, because of a credit crunch. Is that something you can talk about that you know?

Just for a clarification, Pablo. Ours is not due to any credit crunch.

That's right.

These are the delays that we talked about. We have seen some other announcements of delays, but any future ones, I can't say.

Okay and one last one. I mean, given this discussion on Brazilian sugar ethanol. Can you give us an update in terms of your plans to try to expand there. I mean Bunge is doing it on a greenfield basis, smaller scale basis. I mean, how are you thinking of that market, if you go in, would you go in large scale or would you start on a greenfield basis, piece meal basis, can you talk about that part?

Yeah, it's probably all of the above are opportunities for us, which means we could go in with a partner. What we do think about is something that could grow to the scale to be a significant contributor to ADM's shareholder value. So whether that's greenfield with a partner, expanding some production that already occurs toady, but looking at the market we have established a trading operation. We do understand the infrastructure and the ability to move in the region. So, stay tuned, we are evaluating all opportunities there.

Okay. And one very last one then I'll pass it on. I mean, I'm surprised on the sweetener side, your earnings are not striking as well as those of say Corn Products International. I'm just wondering, can you talk about your model there? I mean there is one that's on the tolling basis right, that's cost plus. So there I suppose corn is not a factor, and then on the fixed price side, I always made assumption, that in the fall you would hedge most of your corn, so your margins on the fixed priced contracts will be pretty much set for the year, and the only valuable there would be co-products, but corn prices have moved up, so earnings on co-products would be up. I'm just surprised about the weakness in sweetener earnings. I could conclude from it that maybe you are not as hedged as aggressively or you don't lock spreads on fixed priced contracts and you leave corn un-hedged there. Can you comment on that?

Most of our business is flat priced. We do have tolls and some people have two to three year tolls also. But the majority of our businesses is flat priced, co-products can also have a timing issue on when they are actually sold and when they are shipped and how that effects the net corn price, but our basic philosophy is always stay hedged on corn. So that has not changed.

Thank you.

Thank you, Pablo.

Your next question comes from line of Vincent Andrews with Morgan Stanley. Please proceed.

Good morning, everyone.

Good morning, Vincent.

Just kind of a follow-up one of the things from earlier, but isn't it reasonable that just having a lot of maybe too much attention being played to the mandate in ethanol relative to the fact that it's, blending is really we are going to blend above the mandate again this year as we did last year and that's really a function of economics in other words the oil price, the RBOB price and the ethanol price rather than a government mandate?

Yeah and that's the kind of rates it’s supporting again that it's swelling supplies and it's good economically, yes.

Okay, what happened in Asia in oilseed this quarter that it was down?

I think this is Steve, Vincent. We do pick up our share of Wilmar and it’s somewhat of an apples and oranges comparison. As you know Wilmar has been transitioning with its combination with cocoa and grain. And so that's just a combination of what was available to pick up to report last year and this year it's going to take a few more quarters to get a) apples-on-apples and also we are always a quarter behind and picking up their results. So it's kind of a mix and we just had a different ownership mix a year ago than we do today and that's going sort itself out.

Okay. And then on corn costs and corn processing is there any relation to Ag services there. In other words, is there some scenario by which you have higher corn costs in corn processing because you see more opportunities to move corn around in Ag services and there is some offset there because you just are kind of picking a different piece of the value change to earn a better margin. Does that make any sense?

Yes. But it doesn't. We don't really look at it that way.

Okay.

We, I mean…

The question makes sense…

But, Ag services has their own, they'll look at it more on a global basis on the corn and moving the corn from the elevator system. Now they will sell to the corn processing division, but really that's how we manage our business that way.

And we sell it over at market prices. Now the question was good but we run them separately and there is no offset here.

Okay. And lastly I think what are you seeing in terms of Mexican high fructose corn syrup?

We still see that market coming around this year we're making shipments down there as the first three months of this year domestically just because of the weather fructose demand was a little lower. But we still feel very positive that any loss we have in the United States and volume will be picked up in Mexico.

So in another words it's early days on that line. Okay, I'll pass it along.

Thank, Vincent.

Thanks, Vincent.

Your next question comes from the line of Christine McCracken with Cleveland Research. Please proceed.

Good morning.

Good morning.

Hi, Christine.

Just wanted to check on the impact that the strike in Argentina might have had on the quarterly results. It didn't get mentioned and I was just wondering if it actually helped you during the quarter or not yet?

Well, we have operations and we are exporting corn and soybeans out of South America. That was really right before the harvest started. We did see some other opportunities in other parts of the world, because people are worried about getting their ships loaded in South America. So you may have little blips that help you in that kind of situation, but long term it's not very good to have Argentina not exporting in to the world market.

Do you see that situation getting resolved do you have any additional color from your visit or otherwise?

I don't know.

I think, I'll just jump in briefly. Exporting grain in Argentina is important for that country. It is one of their critical currencies, so just kind of go back to the fundamental of why I think it will sort it self out down the time, but I don't think we have much additional color then what's you're reason?

Alright and then just in terms of the other countries, several other countries have put some more protectionist policies in place, kind of hording grain as it were as things get tight. How do you manage I guess your trades flows do you kind of anticipate political disruption and dislocations and how do you work around that when historical trade flows are disrupted?

Well, those are always very tough at least for me to anticipate. Just like last year, the Ukraine quit exporting wheat. So that gave some other opportunities around the world, now during the last week the Ukraine is going to export wheat again because they feel better with their supply and demand. So it's always moving supply and demand scenario around the world.

One of the things I might add, Christine, is that that's the benefit of our global system is that even though you might not be able to anticipate, and I think it is hard to anticipate who is going to pull a new -- introduce a new export ban or a tariff or something of that sort. But with the global system that we have, we have the ability to react quickly and react to support both the customer and the markets that are needed.

Fair enough. And then just secondly, Pat, with all due respect, I do take modest exception with your comments that that ethanol has had no impact on fuel cost inflation, because

Oh, I didn't say no. I just said it wasn't the major contributor like energy or the dollar, the demand for food, but go ahead with you question. Thanks.

Well, I'm just wondering, when we look at the losses in the livestock industry that we are seeing right now and realizing that they are your major customers here domestically. How do you go to those customers and say to them that your other major business is having a limited impact as it were, on their cost of production when in fact ethanol has increased its consumption of corn and there are limited supplies?

It's a great question, Christine, and I think it's helpful to have the intellectual debate that you are asking the question about. What I was trying to get to and particularly is not only do I empathize with the customer, but with those that are paying higher costs for feed as you mentioned, for ultimate packaged food et cetera. But to those that think about retreating from the policy is a way to fix that. It won't fix the problem and in fact it may have higher energy cost as a result of that or it may have higher even short term costs, let alone the long term impact of sending signals to the market where you want to encourage more growing of food and more growing of crops that could produce energy et cetera. By retreating from biofuels policies that can help with the long term, by making some short term gestures is called that I don't think would solve that problem is what I was trying to address. So, I think it's worse having the debate about what we can do and what people can do to help both with increasing the supplies of food and fuel and products that lead to both, I think that's where the discussion and the debate should happen. So, I appreciate your question and asking it in the way if there's some short term issues and then there is some longer terms to focus policy on. And I was trying to address the policy focused on long term should be important to keep the trend and keep the faith and keep the force.

I am sure there will be years of lively debate on that. Thank you.

Yes. Thank you.

Your next question comes from the line of Robert Moskow with Credit Suisse. Please proceed.

Hi, thank you. You mentioned that in Europe, wheat conditions are much better this year that the crop should be very, very strong. My perception of one of the biggest drivers of the Ag services out-performance was that a lot of grain got shipped from North America and South America into Europe, because we didn't have wheat so they needed to substitute corn to feed their animals there. So, I keep thinking about the sustainability of what Ag services is doing and you yourself are describing it as exceptional. So I guess the question is, if wheat production is back to normal again in Europe and maybe some of these countries are going to stop like the Ukraine, they are going to stop the bans they put on exports. Doesn't that mean that you have fewer opportunities and fewer exceptional opportunities for profit in Ag services? Thank you.

That was a lot of it in there, Rob. So it’s this it’s that and I think there is some scenario kind of planning that could take you down a line of less opportunity and another that takes you down to more about the same and I guess what we are trying to say it's hard to tell. And every time you think one part of the crop or the globe is normal, something else seems to have a blip. So, whether it's weather related or other, I think your example what something is obviously away one of the scenarios that could unfold.

John Rice, do you have any opinion on that?

Yes, I mean…

Probably the grain part…

I totally agree with what Pat was saying, you know you always have different opportunities. This year we have an inverse in the soybean market here in United States, but South America has a very large crop. So I mean there is all these world dynamics that are constantly changing nowadays and we are always looking at those different opportunities.

Okay and let me ask one question on bio fuels. If blenders are now find it economically viable to blend ethanol, because ethanol is now priced below wholesale gas. What is the necessity than in your opinion of the $0.51 blender credit? I mean, do we need that credit any more? And do we also need the $0.54 import tariff on sugar ethanol?

I think as long as we are building this industry, we are still in the early stages of building this industry. It's very important to keep the import tariff. They are already shipping ethanol with it and then also through the Caribbean they can ship it without the tariff. But I think it has really helped with more corn production in building of the industry. So yes, I do think it's important.

Thank you.

Thank you, Rob.

(Operator Instructions). Your next question comes from the line of Ann Gurkin with Davenport. Please proceed.

Good morning.

Good morning, Ann

Good morning, Ann

Good morning, Ann

Most of my questions have been answered. I just wanted to get an update on GMO grains getting shipped to Europe. Can we just get an update on that? Any changes?

I'm not aware of any changes here in the last two, three weeks. They haven't asked the question. But you know, they're still going through their process of -- it's just a slower process. So there's nothing new that I'm aware of.

We didn't have process would speed up given the still tight supply of grains globally.

You would think so but we just haven't seen that happen over there. You know, especially with a better crop in Europe, they may not have the need to speed that process up to make sure they can have more imports.

Right. That's all I have. Thanks.

Thanks, Ann.

Thanks, Ann.

Your next question comes from the line of John Roberts with Buckingham Research. Please proceed.

Good morning.

Good morning, John.

Good morning, John.

Pat, I think you've earlier said that ADM would be interested in substantially increasing its presence in Brazil including the possibility of a transaction. Could you just maybe characterize the deal market there, in light of the credit conditions, the sugarcane market changes and so forth?

Yeah. I might start but I'd ask on Steve to add to it in his role with strategy work. I guess he has the most updated information. But we've been able to look at several possibilities of which, we're open to a variety of transactions, but again, waiting as well for the right market conditions, the right partner, the right infrastructure work, and our own evaluation of those opportunities. As far as the deal market, Steve, do you want to comment there?

Well, I think in this particular area, with Brazil's sugar ethanol, as Pat mentioned, we've been looking for sometime had a lot of discussions and I really don't see the credit side of the world having much impact here. I think there are still good opportunities and I think there is still real interest there. We talk to people, I won't say everyday but on a regular basis. So, I don't see that's really changing much.

Is the value gap between buyers and sellers large? Has it increased over the past year or decreased?

What did you ask, John?

In negotiations or discussions, is there a large gap between -- there is just an unwillingness to do transactions or is there a large value gap?

I think it's, you know, for us it's always a value discussion. We're looking to make a long-term investment, get good returns for the shareholder. We're also sitting here in a time of moving markets. And just like any negotiation in a market that has some heat to it, which the sugar ethanol has had, you sometime get some differences of opinion in the values. So I would say it's more on the value side.

Thank you.

Thank you, John.

Your next question is a follow-up question from the line of Eric Katzman with Deutsche Bank. Please proceed.

Thanks for taking the follow-up. Pat, I guess I just want to go back to the comments that you've made on ethanol. I mean, it just seems that, the corn lobby and the ethanol lobby has really dominated in Washington. On the one hand, you have Grassley jumping out of his seat when the 35 billion gallon mandate was first talked about and you have Dick Bond of Tyson talking to CAGNY that it's criminal what's going on. And so there is a lot of politics in everything and there is a lot of lobby in going on towards Bush is talking about food and fuel at 10:30 this morning. But I guess as shareholders -- why shouldn't we be just much more concerned about this business if things are coming up for debate whether it's the level of the mandate, the amount of tariffs, sugar coming in with billions of dollars of capital that you have on the line in building into these dry mill dedicated facilities. I mean it just seems to me that as a shareholder, we just have to be more concerned about that stream of profits -- with the understanding it's part of the business, it's not everything. Can you comment on that?

Yeah, Eric. Thank you for the question. And as a shareholder and as shareholders, I think one should always be challenging and questioning both the investments and philosophy and the operations of the business. A quick correction it's not billions for the ethanol business it's millions. And I think what -- why I bring it up is a good intellectual discussion to have is that while there is debate and while there is challenge about energy policy, energy itself is quite a complex set of discussions about what drives $110 and $120 crude oil prices, later on what drives gasoline and diesel margins, later on what drives agricultural products and commodity prices and I think having -- if people worry about unintended consequences and policy for the longer term, I think having a lack of certainty versus some certainty. And certainly this last ground of the energy build allowed some certainty for investors like ourselves particularly those that can do large scale projects and provides significant supplies of fuel to the system, that certainty is important for investors to count on and to have in the longer term. And so it's worth asking the questions as you're doing as -- can I have that certainty? And why we're commenting about how that certainty is even more important even under some challenging short-term conditions, it's important to stay the course. And the course will provide in the longer term the bigger volumes that come from whether second generation, third et cetera, which is why policymakers put it in place in the first place. So retreating on it, again, is something that I think is misguided and misinformed. And again, high energy prices and high energy cost incorporated in fuel prices is one of the thing that actually, again, ethanol or other biofuels can now mitigate.

And then, just as a quick follow-up, maybe, somewhat related in terms of capital allocation is the lack of share repurchase this quarter, a function of the working capital usage and not a function of your view on the value of the stock?

We consider a use of cash every quarter. And as you know, this quarter large amount of that went to not only increases in working capital but our continued capital projects, dividend, share repurchases always one of the items in the mix, and so it always will be.

Okay. Alright. I'll pass alone. Thank you.

Thanks, Eric.

(Operator Instructions). Your next question is a follow-up question from the line of Ken Zaslow with BMO Capital Markets. Please proceed.

Great. Thank you very much for taking the follow on. Were you profitable on lysine?

Yes.

Yes.

So, if I kind a do a calculation of your ethanol business as a percentage of your overall profitability, it might be less than either 9%, is that fair?

I don't know the answer there. I'll stop here. We don't -- we haven't looked at it that way. We're always looking at what opportunities and products we can make. And right now, we're seeing with the feed demand globally. We're seeing lot better returns on lysine. So we're, as a matter of fact, have an expansion going on our lysine plants, a smaller expansion.

If I look forward, I mean, do you expect ethanol to be going out in three to four year -- I mean by my back of the envelope calculation, again, I see it as being less than 10% of your profit this quarter. But even though now, I mean, is it -- do you ever expect it to be more than a quarter of your earnings or do you still expect to be doing other business besides ethanol?

It's always a mix. So it's one of the great thanks about our franchise that we make it all across the board. And I'd never say that it wouldn't be at certain percentage or not at certain percentage. We're hoping the whole tie gets bigger.

Great. I appreciate it. Thanks.

Thanks, Ken.

We're showing no more questions in queue. At this time, I'd like to turn the call over to Patricia Woertz for his closing remarks.

Okay. That's it for our end. Thank you so much for your interest and your great questions and we'll see you next quarter.

Thank you for your participation in today's conference. This concludes our presentation. You may now disconnect and have a good day.