Good day, ladies andgentlemen, and welcome to the Third Quarter 2007 Pacific Ethanol, Inc. EarningsCall. My name is Lauren and I will be your coordinator for today. At this time,all participants are in listen-only mode. (Operator Instructions). I would nowlike to turn the presentation over to your host, Mr. Gregory Pettit of Hill& Knowlton.

Good morning and welcome tothe Pacific Ethanol third quarter conference call. Before we get started, I'dlike to point out that slides to accompany this call are available in PDFformat on the company's home page, at www.pacificethanol.net. Audio and audio webcastreplays of this call will be available beginning two hours after this call andcontinuing for the next two weeks. I will now briefly go over some Safe Harborlanguage and we'll proceed. With the exception ofhistorical information, the matters discussed in this call are forward-lookingstatements that involve a number of risks and uncertainties. The actual futureresults of Pacific Ethanol could differ from those statements. Factors thatcould cause or contribute to such differences include, but are not limited to,the ability of Pacific Ethanol to successfully and timely complete in acost-effective manner construction of its ethanol plants under construction,the ability of Pacific Ethanol to obtain all necessary financing to completethe construction of its other planned ethanol production facilities, theability of Pacific Ethanol to timely complete its ethanol plant build-outprogram and to successfully capitalize on its internal growth initiatives, theability of Pacific Ethanol to operate its plants at their planned productioncapacities, the price of ethanol relative to the price of gasoline, the effectof federal and state governmental regulations on the demand for ethanol, andthe factors contained in the Risk Factors section of Pacific Ethanol's Form10-K filed with the Securities and Exchange Commission on March 12, 2007. With that I'll now turn thecall over to the company's President and CEO, Neil Koehler.

Thank you, Gregory. Welcome,everyone, to Pacific Ethanol's investor call to discuss our 2007 third quarter financialresults. I'd like to begin on a global note. At this time, oil prices are at ahistoric high, approaching $100 per barrel. Tensions in Iraq, Pakistanand Iranare at heightened levels, pushing oil markets ever higher, and the demand fortransportation fuels continues to outpace available fuel supplies. The fuels market isdesperate for alternatives to an ever-growing and dangerous dependence on oil,and for fuels that reduce climate change emissions. Ethanol stands today as theonly commercially viable alternative to gasoline in the internal combustionengine that can accomplish the twin objectives of reducing dependence on oiland reducing CO2 emissions. For these reasons, despite arecent and we believe temporary challenging margin environment, the importanceof ethanol in the transportation fuel supply has never been greater. Today weare pleased to report record sales of $118 million on a record volume of 50million gallons of ethanol sold in the third quarter. We are not so pleased toreport that we incurred a net loss of $4.8 million. A combination of fallingethanol prices and high corn costs, along with inventory and derivativeadjustments, contributed to the negative net income. Both our sales and gallonssold have nearly doubled over the prior year periods. This growth has outpacedthe rapid growth of the ethanol industry overall, which we believe is a strongendorsement of our business strategy. Our gross profit for thethird quarter was a positive $4.8 million. Cash flow contributed fromoperations totaled $21 million through the first nine months of 2007. John willbe providing greater details on these results in a few moments. We continue to successfullyexecute on our differentiated business strategy to be the leader in destinationethanol production and marketing. This strategy allows for low-cost, low-carbonethanol production, and high-value ethanol and co-product feed marketing. In the quarter, wesuccessfully started up our Boardman, Oregonethanol plant. I am thankful to the dedicated effort of our operations groupthat concluded a remarkably smooth start-up. Less than one month afterstart-up, we certified the Boardman facility at a 40 million gallon annualoperating rate, which triggered the Oregon 10% ethanol mandate to begin inJanuary 2008. The announcement of the start date for the Oregonrenewable fuel standard was made by Oregon'sGovernor Kulongoski at our Boardman plant dedication on October 5th. Our wholly-owned Madera ethanol facility and minority-owned Windsor, Colorado plantcontinue to operate above design basis, and construction is continuing onschedule at our Burley, Idaho; Stockton, California; andCalipatria, California sites. Operating costs were reducedon a per-gallon basis at our operating facilities compared to the secondquarter. We remain on track to achieve our stated goals of 220 million gallonsof annual production capacity in 2008 and 420 million gallons in 2010. Wecontinue to evaluate new opportunities to grow both the production andmarketing operations of our business. With that I'd like to nowturn it over to John to run through the financial and operating details of our thirdquarter results.

Q3, as Neil summarized, wasone where we made very good progress on our game plan, despite encountering adifficult market environment. And again, to reiterate, our strategy consists ofgrowing our market share and keeping our total sales well ahead of ourproduction volume. Then we add low-cost production capacity in locations wherewe believe we have a sustainable economic advantage. I will refer back to thosetwo themes to show the progress we achieved during the quarter as some of theimportant Q3 numbers are presented. Slide 2 has a list of theitems we will cover. On slide 3, we've summarized the income statement. As youcan see, our net sales increased to $118.1 million in Q3 '07 from $61.1 millionin Q3 '06, a 93% year-over-year increase. Going to slide 4, we showour net sales and gallons sold. We sold 50 million gallons of ethanol in Q3'07, up 120% from 22.7 million gallons in Q3 '06, and also up 14% over theprior quarter. We have continued to show a steady increase in sales volume overthe last two years, up 70 million gallons during the first nine months of thisyear compared to the same period last year. Our third party purchasesaccounted for 40% of this growth. This is evidence of the ongoing success ofour marketing activities to continue to grow our market out ahead of ourproduction capacity. And again, going back to our objectives to increase salesvolumes and market share, we view Q3 as a step in the right direction during adifficult market period. Moving to slide 5, wegenerated a positive gross profit of $4.8 million for the quarter, a decreasefrom $7.4 million in Q3 '06 due to a volatile commodity environment ofdeclining ethanol prices and higher corn costs. Going back to slide 3, Iwould like to point out some of the special items included in our…

Thank you, John. There's beena great deal of commentary lately about a surplus of ethanol. We do notactually see this. Looking at the most recent EIA data from August, supply anddemand are balanced, with ethanol ending stocks on hand of 22 days, which isactually below average over the last two years. Just this week, the EIAreported that discretionary ethanol blending is up 58% year-to-date. Demand iskeeping up with supply, and the market today is actually experiencing somesupply tightness as new demand is being created by the need for incrementalsupplies of transportation fuel, combined with the very compelling economics ofethanol blending. Ethanol prices haveincreased about $0.30 per gallon in the last six weeks. Then why did we seesuch a precipitous fall in ethanol prices in August and September, whengasoline prices were rising? We believe that a slower than expected move toethanol blending in the Southeast, and continued ethanol imports from earliertransacted business, created a short-term supply link, and a perception that asnew plants came online that this link would grow relative to demand. Current market conditionshave shown this to be in fact more perception than reality. Imports havedwindled to a trickle and new incremental ethanol blending in the Southeast andelsewhere are beginning in earnest as specification and infrastructure issuesare being addressed. We also remain confident that elevated levels of ethanolblending in Californiawill begin in 2008. As it relates toinfrastructure and market development, we believe it is important for ethanolcompanies to be active participants. Our business model is to buildstrategically located production facilities, invest in distribution assets, andto focus on new market development by working collaboratively with ourcustomers. Our Boardman ethanolfacility is a good example of this. We built a facility that has significantethanol storage and has the logistical ability to ship out by barge, truck orrail. In addition, we have downstream storage at three terminals in Oregon. We are proud ofthe fact that the majority of ethanol shipped from our Boardman facility issupporting new ethanol blending in a local market that did not exist before webuilt the plant, delivering real value to our oil company customers, gasolineconsumers, and the regional economy. We continue to believe thatthe economic and environmental imperatives will drive new demand of ethanolsteadily towards 10% ethanol volume in all US gasoline over the next severalyears. We were also encouraged by recent comments from Energy Secretary, Bodmanthat the country needs to move towards higher level blends between 12% and 20%by volume to help address the severe energy challenges ahead. As I said on the lastquarterly call, we stand behind our moniker that we are in a business that willbe driven by new demand for decades to come. Operator, at this time Johnand I would be happy to answer any questions. Operator?

(Operator Instructions). Andyour first question comes from the line of Mike Judd with GreenwichConsultants.

Hi, guys. Good morning.

Good morning.

A question about yourcapacity, and the production numbers that you gave us for the Septemberquarter. I believe you said that you started up the new plant -- was that thebeginning of September?

Yes. That's correct.

Okay. I guess what I'mtrying to get a sense for is what the overall -- if you include your 42% ofFront Range Energy, what was sort of the -- in the third quarter, what was theblended operating rate for basically the three assets that you're involved inright now?

If what you're asking iscoming out of the quarter into the fourth quarter, we are --

Actually I was just tryingto figure out what the actual operating rate on an average basis was for thethird quarter, given the percentages that you own of Front Range, and also the two other plants.

As we reported, the volumewas 15.4 million gallons of sales of production, and the plants were running ata rate that was about 110% of design capacity.

Okay. I guess I've got aproblem with my math, because if I basically put your capacity, take yourannualized capacity and put it on a quarterly basis, I come up with around 18.6million gallons and basically, producing 15.4 only gives me an 83% operatingrate. So I was hoping you could help me reconcile that, please.

I think the math can bereconciled without doing it here myself, but the Boardman plant was onlyrunning for one month.

Okay. All right. That's allI have it in there. But anyway, okay. In terms of the current industryconditions in the December quarter, do you still plan to run the plants atabove nameplate capacity, or do you think that you might be backing off alittle bit here? What are the plans?

We have no plans at presentto run the plants any slower than we are.

Okay. Thanks for the help.

And your next question comesfrom the line of Eitan Bernstein with FBR.

Good morning gentlemen.

Good morning Eitan.

Real quick, to follow-up onthe previous question, did production and sales equal or did you build someinventories?

We did build someinventories, so that actually might have helped address the last question ofMike's.

I guess what I'm wonderingis, is that sort of a view that ethanol prices will get better, so you held offon some sales, or was it just more difficult to move the product?

It was a combination. Wewere in start-up mode in Boardman. So to make sure that we were makingdeliveries actually out by barge, we did collect some inventory in Oregon. So that was acombination. We also did feel that the pricing was lower than it should be. Andin retrospect that's turned out to be the case.

Out of curiosity, are youseeing -- obviously, we had some production increases out of the Midwest. Are you seeing them come into the West Coast, orare they predominately staying in the Midwestfrom what you can tell?

I'm sorry, the imports?

No, not the imports,although that is a good question. Just production in the Midwest,as it's been ramping up over the past few months, are you seeing more volumescome into your markets?

Our market share has grown.So, relative to the overall growth in the market, our share is growing.Obviously, the incremental growth that we're seeing nationally is primarily onthe coast. We are seeing some new blending in the Midwest,so that product is going wherever that new demand is being created. And that'sreally throughout the country.

Okay. And then just lastone, if I can. You were talking about imports in August. It looked like theywere about 64 million gallons, below comparable year-ago levels, but higherthan what we saw earlier this year. Any thoughts or outlook on what's going oncurrently?

That's a very dynamicsituation. From the best of our knowledge, the imports have slowed down quite abit through the balance of the year. It's the hour for imports given currentmarket pricing, has been relatively shut. There have been -- when we talk aboutplants that are slowing down or shutting down, we have in fact seen that in theCBI; a number of facilities have stopped producing. And the word out of Brazilis that not a lot of ethanol is being exported from there in this currentmarket as well.

Do you have any thoughts onwhere the number may go sort of in the normalized basis, or is that a littletoo speculative?

That's a little toospeculative because it really is that it depends a lot on, obviously, all sortsof international market conditions. But under the current market, we are seeingvery little in the way of imports.

Okay. Great. I think that'sit for me. Obviously, I would love any additional sort of outlooks on fourthquarter, but I think that's all the questions I've got. Thank you much.

It's John. I'd like to goback quickly to Mike's question, and partly addressing Eitan as well. Thenumbers that we report are sales. And so, if you look at our actual productionin the quarter, it was about 2 million gallons higher than the 15.4.

And your next question comesfrom the line of Ron Oster with Broadpoint Capital.

Good morning. I had aquestion on your corn basis differentials. They were a bit higher than we hadexpected, and I noticed they've trended up over the last three quarters. I wasjust wondering if you could kind of comment on what we should expect goingforward if this upward trend is going to continue in terms of modeling thatinto the next several quarters.

What we have seen generallyis that the tariff rates for moving corn and moving ethanol from the Midwest to our market have increased. Our whole model isbased upon a spread analysis between those various commodities, and I can tellyou that the rates for moving ethanol have increased at a rate that is fasterthan moving the corn. So, that is one factor. Another is that the overall basisin the Midwest has gone up. So rather than significantdiscounts to CBOT for Midwest locations, we've actually seen that basis come upcloser to the Chicagonumbers. So that, obviously, would impact our delivered basis as well. So, Ithink, the freight surcharges, fuel surcharges, on top of tariff rates, arealso contributing to the higher freight rates, which impacts basis.

I guess to summarize, weshould expect the basis to increase but to be offset by higher realized ethanolprices versus the benchmark?

Correct, and higherco-product values as well.

My second had to do withyour construction plans. You mentioned you're proceeding at this time. I wasjust kind of curious, should you decide to curtail or suspend construction, canyou comment -- well, first of all, how much costs are remaining? And secondly,how much of those costs are recoverable? In other words, how much of that isgoing to be a sunk cost if you were to curtail construction?

The project that we wouldlook at would be the Imperial project in Southern California.The costs related to suspension of construction there would not be significant.We have purchased all the equipment. That equipment still has good value. So wewouldn't expect that there would be any significant write-down on that project.We believe that project is well-located, and eventually we would go ahead andbuild it. So I think suspending it for a quarter or two quarters would notcause us to take a write-down on the project at this point in time.

Can you quantify how muchsavings you would have in terms of your capital spending should you suspendthat indefinitely?

I don't know that we wouldgo to an indefinite suspension on it, but we would -- the spend rate on thatproject, we've got probably about a third of the money spent on that project interms of equipment, so we have about two-thirds of it to go. That would give usa savings of perhaps 50 or $60 million over whatever timeframe we decided tosuspend the activities on the project.

Okay. Last one. I know youdon't break out a lot of the cost of goods sold numbers, but can you justcomment in general on how per gallon transportation costs or natural gas costsare shaking out, if you're seeing any movement there?

Our transportation costs arerelatively low; that's part of our model. You see the bulk of ourtransportation costs contained in moving the corn to our facilities. We havelocal distribution of all products. We actually sell all of our co-products (inaudible)our plant. So there's no freight cost there. We have relatively minimalsingle-digits per gallon freight costs to move our ethanol, natural gas as abasis and a regional difference, we haven't really seen the actualtransportation costs of the natural gas move much at all.

And overall conversion costsremain pretty steady?

Actually have reduced, gonedown, as we've become more efficient operators, as we've gotten morecomfortable with our facilities.

Great. Thank you.

I'd like to just add toJohn's comment on Burley and Calipatria plant. We do have options if we were tosee a sustained period of margin compression, and that's one example of what wecould do. But I want to make it clear that at this point, we have made no plansto be suspending any of our projects.

And your next question comesfrom the line of [Ying Min Lu] withArdour Capital.

Hi, good morning.

Good morning.

My question first one iswhat's the yield of ethanol per bushel of corn?

We do not break that outspecifically, but I can tell you that our yield is better than industrystandard.

Okay. That answers that. Mynext question is related to your corn costs. From the 3Q '07 (inaudible) spot corncost is well below 350, but in early quarter in 2Q '07 that spot price was wayabove 350. Then why the costs for your corn cost increased significantly in 3Q'07?

That has to do with our riskmanagement. So, given what you just described is what was an extremely volatilecorn environment, it was not clear to us what direction, whether corn wouldcorrect significantly downward or would continue to be high and going higher.So, we did lock in a fair amount of corn that, in retrospect, were at numbersthat ended up to be higher than what the average market price was. So that explains it, havingto do with the forward positions that we took. I think it's important to lookat our overall corn performance in a longer period of time, and that's what welaid out here in some of our prepared remarks, that if you look at it on anannualized basis, we continue to perform at a corn cost that is lower than ifwe had been taking market price on a daily basis.

Okay. My last question iscan you look beyond 2008? Are you going to still build out your own plants, orare you going to acquire more ethanol plants?

That is an area that issubject to constant evaluation and comparison. We have a very bullish view overthe growth of the ethanol business from roughly 7 plus billion annualized rateof production today, to 15 to 30 to 60 billion gallons of production over thenext 10, 20 years. So, there is a lot of growth in this business. We intend tobe one of the leading producers and marketers. So we will be involved ineither the construction or the acquisition of assets, and we would assume thatover a longer period of time it will be both. Certainly we've seen, given thecurrent margin environment, the opportunities to buy assets come in a lotcloser and, in some cases, below the cost of new construction. So, we are certainlyevaluating those opportunities.

Okay. Thanks.

And your next question comesfrom the line of Ian Horowitz with Soleil Securities.

Good morning everyone.

Good morning Ian.

I've got to say that theethanol price this quarter seems to be extremely strong relative to what wewere seeing at the rack level. And kind of, albeit a short history, but yourhistory with the premium to rack, was this just an issue of timing or customerdemand? How do you kind of quantify this really good price?

The really good price of ourthird quarter, or what you're seeing the spot market today, to clarify?

The $2.11 a gallon. It lookslike West Coast rack didn't even come close to that throughout the quarter. Youguys have done about a $0.05 premium to average quarterly rack prices. But thiswas a lot higher than that.

Hats off to our expertmarketing team. But in seriousness, Ian, it was a combination of contracts thatwere transacted before the prices fell off, so we had some fixed prices thatended up higher than market. We also, with the rapid run in gasoline, we hadsome gas-related numbers that helped that as well. And I would say that we werepretty disciplined, and that's part of why we did build some inventory. Wereally were rather shocked at how far prices did come off, and didn't think itwas a fair reflection of the actual market dynamics.

Okay. And then, yournon-equity production in the slide presentation is 34.6 million gallons for thequarter. How much of that was just spot transactions?

I can take that off-line,Ian, in terms of the actual number, but it was -- there is the amount that wemarket for the plants that is certainly about half of that, if not a littleover. The rest comes from other third party purchases. Most of those gallons,whether they were from our marketing partners or from the third parties that wewere buying from, were contracted, and that did cause us some issues in thequarter. If you look at our numbers,I think, it's fair to say, while we don't break out marketing versusproduction, that when a market price is falling, we carry inventory to makesure that we have just in-time inventory, and they're very responsive to ourcustomers' needs. So we very definitely, just as we took a write-down at theend of the quarter, did take a hit on selling our third party ethanol in thequarter with inventory chasing a fall in price.

So your Kinergy volumehasn't increased, right? The delta was on kind of third party spottransactions.

Well, the Kinergy markets allof the ethanol, whether it be produced by Pacific Ethanol or our contractedpartners or the open market, but if you strip out our equity production, theamount that we marketed outside actually did increase quarter-over-quarter.

And then, can you give us alittle bit of an update on Front Range? Localpapers are talking about some labor issues. We had a resignation from yourboard from one of the co-founders, if you can just give us kind of an update onwhere that plant is in this situation.

We cannot comment on theactivities of Front Range in regard to thoseitems. In terms of the board resignation, Dan Sanders filled the role very welland very capably for a year. His own interests are extensive. And he was askedto resign and did, so that's the reason for that. But the ongoing activitieswith regard to the labor situation in Front Rangeare we cannot comment on at this point.

Okay. But are youcomfortable with having volumes from that facility over the fourth quarter, oris there a risk to that, to those volumes?

No risk whatsoever. Thatplant is an excellent plant, performs exceedingly well, much better thanindustry standard in terms of efficiencies, and we have a great and growingrelationship with the primary owners of the Front Rangefacility.

Okay. And one last questionand I'll get back in queue. CapEx for your fourth quarter or for 2008?

CapEx in terms of theprojects, or in terms of the operating projects, or in terms of the overallbuild program, which one are you thinking about?

I guess I'd take both. Butthe build --

We think about it in the twobuckets. In terms of the operating plants, since they are all new, there isrelatively little CapEx that is aimed at those facilities. In terms of thebuild-out program, about 200, 250 million will be spent over the next year to18 months.

No breakout beyond that?

No breakout beyond that.

Other than to say we'reabout 50% of the way through the build-out program.

I'll get back in queue.Thanks.

Thank you.

Your next question comesfrom the line of Richard Dearnley with Longport Partners.

Just so I understand, you'dsaid that the $203 million of equity contribution was enough to get you to the220 million gallons by the end of '08. And you have $51 million of debt drawn,and you have to spend $200 million to $250 million over the next 12 to 18months. Does that then tell me that to finish the 220 million gallons you'regoing to increase your debt by 200 or $250 million?

Basically that is right. Theremaining funds will come from our debt facility.

Okay.

That's delayed draw debtfacility. It's all in place, and we spend the equity first and the debt followsin behind.

Right. Okay. Thank you.

And your next question is afollow-up from the line of Mike Judd with Greenwich Consultants.

Yes, thanks for takinganother question. Just a question on the freight. What's been going on with thefreight of shipping corn from the Midwest out into California? If you could just talk aboutsome of the recent changes in pricing. And also, what's your forecast lookingout, perhaps, into next year?

As I think I alluded toearlier, the freight increases we're seeing across the board, whether it beethanol, distillers grain or corn. But what we have seen is that the rates --and this has really been a trend since we initiated our business. And it wasone that we anticipated, and that's why we feel very good about our overallbusiness model. It's that the rates for the shuttle movement of corn continueto increase at a rate that is slower than the movement of ethanol anddistillers grain. So it's all a relative basis analysis, and we feel that we'rein a very advantageous position.

Great. Thanks a lot.

(Operator Instructions). Andyour next question comes from the line of [Ajay Mehra] with Third EyeInvestment.

Hi guys. This is actually[Carl Pombar]. I'm not sure if I missed this, so I was just curious if youcould give a little more color on this $2.7 million loss and it's not beenshowing interest in, I assume, at the Front Range JV?

That is not a loss. That iswhere we deduct the piece of the business that we do not own. So we consolidatethe results of Front Range, and then deductout the 58% that we do not own.

Okay. I'm wondering if youcould talk a little bit about the restricted cash line item. I think Iunderstand what that's related to, but if you could just tell me why exactlythat's restricted, and kind of the dynamics of how you have access to that, orif you don't.

Are you talking about therestricted cash?

Longer term?

42 million?

Correct.

That 42 million is proceedsfrom our construction loan that's dedicated to the plant constructionactivities.

And you have access to thatas needed?

No. We have to complete theplants, and then, as Neil pointed out, run the test on the plants, which we didat Boardman, and then draw against the construction loan.

Okay.

And it goes into thatrestricted account, and then we use that for build-out on the -- for cash forthe build-out of the subsequent plants.

Okay. Thanks guys.

And your next question is afollow-up from the line of Ian Horowitzwith Soleil Securities.

Two quick questions, Neil. Ihaven't fed a cow in a very long time. Is there any difficulty with wetdistillers at the Boardman plant through the wintertime? Or is that, I'mthinking about freezing and everything like that. Is that not really an issue?

That is not really an issue.It comes off very warm from the process and moves fairly quickly out to thedairies and the feedlots. It is a preferred feed compared to the dry products.

Right.

So, no, that is not an issue.Wet distillers grain is also fed locally in the Midwest without difficulty,where it's much colder than Boardman, Oregon.

Okay. Great. You have abetter look than any of us into the ethanol business in general. And it lookslike you're fine from a cash flow standpoint in your balance sheet. But whenyou look across at your competitors, or even your marketing alliancebusinesses, how does it look on these smaller plants? What are you seeing interms of the difficulties and the cash constraints that some of these peoplemay be having?

I don't want to comment oncompetitors, because we don't have that much visibility. I would say on anaggregate basis, there are some plants that are more marginal than others, and,just like in any commodity business, if we were to continue to see a very lowor negative margin environment, that at some point something would have togive. There would be some plants that would either slow down or shut down for aperiod of time. We're a little moreoptimistic about, as I said in my prepared remarks, on the growing demand forthe fuel. So we don't really see the situation where there's no homes for theethanol. We do see the possibility that margins could be pretty choppy over thenext years as the new plants are coming online. So, a little hard to anticipateexactly what would happen. But we do see that one, we think, fairly inevitableresult is that we will see some continued consolidation, both at the productionand the marketing.

Have you seen any increasein properties for sale, or have you seen any kind of prior sale asking pricesyet? Or do you think that's on the come?

I would say no, we haven't.We certainly have -- I would say there are more operators out there that areinterested in considering selling and being part of a larger network. Andrelative to asking prices a year ago, they certainly have come down. But that'sabout all I can say to that.

Bud do you think the bid/askspread is still wide enough to really not facilitate many transactions?

Clearly, that is the casetoday. We've seen a few transactions, but not many.

Okay. Great. Thanks

Your next question comesfrom the line of Ron Oster with Broadpoint Capital.

I just had one quickfollow-up on your co-product returns. I think you've recaptured 25% of yourcorn cost this quarter, which has been trending down. Is that due in part tothe start-up of the new facility maybe not having quite the advantage of theothers, or is that more market pricing conditions that kind of caused thattrend downward?

I would say that there's acouple points there. We have with a lot of new plants, I think relative to corncosts overall across the industry. We have seen distillers grain slip in value.That has been a trend. We actually of late have seen that trend reversingitself. As soybean and other sources of protein have gotten very expensive,distillers grain, relative to those and relative to corn, has actually beencoming back in price. And that's very encouraging to us. The other factor is thatgiven our risk management on corn, and where in the quarter we ended up withhigher corn costs relative to market, yet distillers grain is really moretracking those market numbers, that in part explains why our own co-productpercentage slipped a bit, was because we were -- it's a basis against our actualcorn cost, which was higher than market in the quarter.

Okay. Thank you.

Your next question comesfrom the line of [Barry Lou] with Mizuho Corporate Bank.

Hi. This is Barry Lou. Couldyou go over real quick -- summarize real quickly -- hello?

Good morning, Barry.

Hi, can you summarize realquickly how Maderaperformed in the third quarter?

We don't break out theplants on an individual basis. The plants, as I said, overall, operated atabout 10% above the nameplate capacity. We don't give individual performancenumbers out.

What we did say was that allof our assets collectively performed at about 10% over design rate.

You also mentioned that inthe third quarter, the average ethanol price was $2.11. With the plants thatare ethanol plants -- the plants that are in commercial operations and theplants that are going to be in commercial operation next year, can you go over --what are the ethanol prices based on? Is it based on the spot price, or is itbased upon the hedge contracts, or a combination of both?

It's a combination of both.

If it's based on a spotprice, is there any premium above the spot price, or is it just simply built onbased on the spot price?

That's a pretty generalquestion. But, our markets tend to be spot in the Midwestplus freight; that's a balanced market. And then we also, given our strategiclocation of our facilities where we are delivering product to areas thatcompeting ethanol has to come in through large rail hubs and then beredistributed out, and there's cost to terminal it and transport it, then weend up with higher realized prices because of our strategic advantage in beingcloser to these more remote locations.

Right. Do you knowapproximately what the premium, what that is per barrel?

No, we don't. Again, youjust need to look at our overall numbers and come to your own conclusions onthat analysis.

Would you be able todisclose what the average ethanol price was for Madera in the third quarter?

No. We don't do that.

If I may talk a little bitabout the plants under construction, I understand that the next plant that isexpected to be completed is in Burley, Idaho.Can you talk about the source of the funding that's available for the borrowerto meet the required equity contribution for Burley? Would that depend oninternal sources?

Burley is being built. Thebank facility is put in place with the idea that we put in a certain amount ofequity and then begin drawing, construction, funding for each of the projects.And we are in that process right now. We have the equity nearly in on thatproject, and we will begin drawing the construction funding shortly.

Okay. Great. Thank you verymuch.

(Operator Instructions). Andyour next question comes from the line of [Taylor Roche] with CIFC.

Hello, good morning.

Sorry, I didn't mute, excuseme. I was just interested in thinking about the blender situation and theblender build-out around the Boardman facility, if you see that as sort ofkeeping up with the pace of construction around the area, or if that's going tobe a cause for depressed prices in the future.

No. And as I said earlier,we spend a lot of time and effort working with our customers to develop marketsin advance of bringing our plants into operation, and Boardman was a greatexample of that. We had built the market so that the majority of the plant wassold to new incremental blending opportunities in the local market in advanceof production. In fact, I can tell you thatwe're selling more ethanol in the Oregon andthe Pacific Northwest than Boardman is supplying.So it's -- and that's even before the mandate kicks in January, 10% mandate. Toput that in a context for you, it's equivalent to about 165 million gallons ofannual demand that will be required in Oregonstarting in January of '08, and our 40 million gallon plant, obviously, is onlyproviding a portion of that. So, opportunity to buildadditional assets in the area, and opportunity now for us to market volumesfrom outside of our Boardman plant to satisfy that market, which is what we'redoing today.

Do you see sort ofindependent sort of blenders coming into the market? Or do you see sort oflarger players?

We see both, and it's beenreally a strategic direction of ours from the beginning to work with both majoroil companies and the independent oil marketers. We are a very valuable sourceof supply to both.

Okay. That's great. I mean,I just want to go back real quickly to slide 7 about the corn prices. Do youtypically see this $0.67, that's the sort of transportation increase over CBOTprices that the average basis you're seeing? That's your transportation?

Correct. That is averagebasis. Yes.

The $3.87 that you saw, thatwas just sort of the volatility in the corn market, so you just locked in thosefuture trades that ended up not working in your favor, correct?

Right. I wouldn't. You cansay it that way. We say that it was our efforts to balance our corn purchasesand our ethanol sales in an effort to mitigate volatility. So that will notalways mean that we have the lowest priced corn, but it does mean that we aretrying to manage volatility and manage risk, which is all about managingmargins.

Would you have not lockedinto some of those contracts if you weren't able to get such favorable priceson ethanol?

We evaluate bothindividually and collectively, and have a very sophisticated risk managementprogram to evaluate that on a daily basis with formal weekly meetings where wemake our best decisions on how to proceed. And clearly, hindsight is 20/20; youcan look back and say we may have done that differently, or we think that was agreat decision. So that's it. We have been trying to calibrate our futuredecisions accordingly.

Just sort of quickly, on wetdistillers grains, sort of spot prices in the area in Californiaand Oregon, Iwas just sort of wondering what the spot prices you see for those are?

We've seen them trend upwith not only the higher price of corn, but the higher price of proteingenerally. So, we are seeing dry distillers grain prices come up into ourregion $150, $160 a ton. Wet distillers grain largely tracks at on a dry/wetbasis parity with dry distillers grain. So that would be in the range of $50 aton for wet distillers grains.

Okay. All right.

This concludes ourquestion-and-answer session. I'll now turn the call back over to Mr. NeilKoehler for closing remarks.

Thank you, operator, andthank you all for participating in our investor call. We appreciate thequestions, appreciate the support of our shareholders and investors, and lookforward to speaking to you next quarter.

Thank you for yourparticipation in today's conference. This concludes the presentation and youmay now disconnect. Good day.