Good morning, everyone, and welcome to the Darling Ingredients Conference Call to discuss the Company's Second Quarter 2017 Financial Results. With us today are Mr. Randall Stuewe, Chairman and Chief Executive Officer of Darling Ingredients; and Mr. Patrick Lynch, Executive Vice President and Chief Financial Officer. After the speakers' opening remarks, there will be a question-and-answer period and instructions to ask a question will be given at that time. Today's call is being recorded. I would now like to turn the call over to Melissa Gaither, Vice President, Investor Relations and Global Communications for Darling Ingredients. Please go ahead.

Thank you, Allison. Good morning, everyone, and thank you for joining us to discuss Darling's earnings results for the second quarter 2017 ended July 1, 2017. To augment management's formal presentation, please refer to the Presentation section of our IR website for the earnings slide deck. Randall Stuewe, our Chairman and CEO, will begin today's call with an overview of our second quarter operational and financial performance focusing on year-over-year comparisons and discuss some of the trends impacting our business. Patrick Lynch, Executive Vice President and Chief Financial Officer will then provide additional details about our financial results. Please see the full disclosure of our non-US GAAP measures in both our earnings release at the end of this earnings slide presentation. Finally, Randy will conclude the prepared portion of the call with some general remarks about the business and the rest of the year ahead, after which we will be happy to answer your questions. Now for the Safe Harbor statement. This conference call will contain forward-looking statements regarding Darling Ingredients' business opportunities and anticipated results of operations. Please bear in mind that forward-looking information is subject to many risks and uncertainties and actual results may differ materially from what is projected. Many of these risks and uncertainties are described in Darlings' annual report on the Form 10-K for the year ending December 31, 2016, our recent press release announced yesterday and our filings with the SEC. Forward-looking statements in this conference call are based on our current expectations and beliefs and we do not take any duty to update any of the forward-looking statements made in this conference call or otherwise. With that, I would like to turn the call over to Randy.

Thanks, Melissa. Good morning, everyone, and thank you for joining us today. Overall, we delivered an improved performance sequentially in light of some challenges facing us in the food segment. Global fat pricing remained strong while protein prices were marginally weaker. Our quarterly results were highlighted by solid operational performances in our feed and fuel segments; however, pressure in the food segment, specifically the gelatin business in South American, and scheduled down time in North American operation caused some gross margin compression. Diamond Green Diesel excelled operationally delivering on its financial promise and posted $0.61 per gallon of EBITDA even without the blenders tax credit in 2017 versus 2016. SG&S variants in the quarter came largely from equity award accounting and the absence of a foreign exchange gain in second quarter 2016. Overall, profitability was negatively impacted by the absence of the lenders tax credit of approximately $22 million EBITDA or about $0.09 per share. Patrick will highlight our financial position in a little more detail, but another key point for the quarter is our strong free cash flow, which led to continued debt reduction of 45 million. Now let’s go to some segments-specific updates. The feed segment achieved improved returns and maintained steady margins. Globally, our rendering business posted a strong quarter. USA and Canada contributed nicely with Europe remaining one of our strongest markets. Global fat pricing remained firm during the quarter, although demand trended lower late in the quarter in correlation with the declining palm oil pricing. In North America, protein markets were mixed with strong pet food demand, offset by continued pressure on meat and bone meal finished product pricing. Overall, rendering raw material and volumes improved with tonnage growth primarily from the beef and pork sectors. In the food segment, Rousselot, our four continent gelatin…

Thanks, Randy. Half way through 2017, we continue to focus on debt reduction, margin enhancement, improving working capital, cost reductions in both operating and SG&A expenses, and monitoring CapEx deployment. We achieved the following results in Q2 2017. During the quarter, our cash position improved to $124 million, up $10 million from $115 million at the end of the fiscal year. We paid down $45 million in debt, consistent with our goal to reduce our debt by at least $100 million for the full year. That brings our current debt ratio to 3.59 times at the end of 2Q compared with 4.1 times at the same period 2016. Liquidity remained strong with approximately $1 billion available on a revolving credit faculty. Our ongoing focus on working capital management continues to be successful with metrics approving across all categories. We continue to target $15 million to $30 million worth of positive cash flow for the full year from working capital in 2017. CapEx spending this quarter was $65.5 million compared to $56 million in Q2 of 2016. Significant CapEx deployment is related to Darling's six organic growth projects currently underway. We're still on track with our CapEx target of $240 million to $250 million for the full year of 2017. Our gross margin in the second quarter 2017 was 22% compared with 22.8% for the same period last year. The year-over-year change was largely driven by margin compression in the food and fuels segments. In the food segment, gross margin declined primarily as a result of the previously mentioned challenges in our Rousselot gelatin business, particularly in South America, in the absence of the U.S. blenders tax credit depressed margins in our fuel segment during the quarter and the first half of 2017. For Q2 2017, SG&A expenses totaled $85.5 million…

Thanks, Patrick. As we’ve reached the half way point in the year, our teams are managing through fluctuations in our pricing environment and seasonality trends that typically impact the third quarter, especially in Europe. In this hot summer weather we experienced that North America can and will present challenges for our rendering business. Overall though, we expect an improved and more normalized result from our global gelatin business and a consistent result for Diamond Green Diesel. We are preparing our platform to capitalize on a world of growth opportunities we see ahead of us. Our approach continues to balance operational efficiencies and service with a continual focus on creating opportunities to diversify prudently and to strengthen our earnings stream and deliver shareholder value. Our goal of deleveraging the company by another $100 million in 2017 remains on track, and we are excited about the impact of a deleveraged Diamond Green Diesel and what impact it will have on our snow-forward strategy. With that, Allison, let’s go ahead and open it up to questions.

Thank you. We will now begin the Question-and-Answer Session. [Operator Instructions] And our first question today will come from Adam Samuelson with Goldman Sachs. Please go ahead.

Maybe first, a, could you talk about the food business a little bit and maybe put a little finer point on some of the issues that affected the quarter in South America? Anyway to quantify kind of was EBITDA positive in South America in the quarter and maybe contextualize kind of how big that business has been in the past and just how much of the pressure you’re feeling there?

I mean, obviously we don’t break out the Rousselot business per se for competitive reasons, but I’ll try to give you some data points out here on the business. I mean, as we look around the horn, Europe had a pretty nice performance in the quarter. It’s facing increasing raw material price as China just seems to have an insatiable demand for pork right now. As we always say, while the pig skin price rose because of the demand for pork, you see a little bit of an offset in our casings business in the sense that the demand continues to grow because there is less hogs producing runners for the casings, natural casings business. So that’s Europe. In North America, they had a little bit of margin compression once again because of the spillover of the increasing raw material prices. It just takes time. It takes 60 to 90 days to move your finished product process up to re-attain the spread. And so as you think about the gelatin business, you‘re forward-selling into the consumer and pharmaceutical markets anywhere from 90 days to a 180 days, depending on the account; you’re then procuring the raw materials of hides, bones and skins against that to obtain your spread. And so anytime you get the volatility of a rising raw material market, you get a little compression there. So North America felt that along if we took some downtime and debut turnaround maintenance that was scheduled. China was normal, continues to have a little bit of a shortage of pig skin over there, but we've been able to move prices up there slowly and to order -- to recapture some margin there. South America, as you pointed out, there is really two distinct businesses down there. There is the two plants…

That's helpful color. Maybe just switching gears, we've got this Commerce Department making a decision on the Argentina and Indonesia biodiesel trade case in a couple weeks, and just want to get your thoughts on kind of potential market impacts and what you're watching to think about for the fat markets moving forward?

Well it's -- we did, we completed a board meeting this week, looked at the timeline. I was kind of surprised that they are targeting August 22, which is a special day for me. That's my 55th birthday. So it couldn't be a better birthday present for me or for the company and for the shareholders if they would impose that. The real question now, I think, as you look at it, there is a couple kind of data points that you got to get your mind around is typically when the ITC rules on something, which I did five to zero, it isn't whether they are going to put a countervailing duty and it’s what's the size of that countervailing duty. I don't really have a feel for that, but at the end of the day it's going to be significant and it will be deter the amount of Argentine biodiesel coming back into the U.S. So in 2016, and I think it was around 440 million gallons, if you convert that back to fat, that's about 3.5 billion pounds of fat that's going to have to be converted in the U.S. to make fuel here. So I think overall it can be and will be fairly bullish if the countervailing duty is what we think it will be. Now I always like to tell people the offset to that you're going to have -- should then be you're going to get a rise or we expect the rise in RINs to help offset the rise in feedstock but also then you’ve got an obligation then with -- the EPA will probably have to look at balancing RVO a little bit against whatever they decide to do with the countervailing duty. So there is a lot of moving pieces, but on the surface itself, it is absolutely bullish not only our feedstocks but also soyabean oil in the U.S.

Our next question will come from Heather Jones with Vertical Group. Please go ahead.

Good morning. Hi. Just a detailed question really quick on the Texas plant, is there going to be another poultry plant?

Of course, it is, Heather.

Okay, I just wanted to clarify. So first on your outlook for Diamond Green and for the second half, I fully understand, given the volatility in the space that needs to be conservative, but I wanted to go through how the market developments if we seen them and just regard us does seem conservative. So since the end of the quarter, with that announcement from CARB and the quarter deficits outpace and credits, you’ve seen a pretty big jump and the low CARB and credit. Diesel prices have moved higher. And rents, I mean, they haven’t been amazing, but they’ve been okay. So it would seem like you should be able to do better on a per gallon basis than you did in Q1. I mean, not in Q1, in Q2. So is it conservatism on your part? Or is there some other factor that will cause the second half to be below Q2?

No, I think we’re looking at Q3 to be similar to Q2, possibly a little bit better, maybe even a lot better. I mean, obviously you’ve seen the LCFS credits jump from $75 to about $90 now and then we’ve seen RINs run up to about 12, back off to about 6. We’re running wide open. As you know, we keep trying to remind people that the facility was build three or four years ago. It was put with pipeline contracts off of Gulf harbor. So a portion of our product continues to move the low-carbon fuel markets and more and more each quarters moving there. So by Q1 of ’18, all of it will be moving there. So we’re just not able to capture all of that. I think the second thing I’m just going to say, it is conservative. We’ve seen it move up here, but we’re taking kind of a conservative approach for nothing more that what we’ll see at the LCFS premium holds there for the quarter, which we think it will.

That totally makes sense. I was wondering if you could just update us. So backend of spring, you had a slide and one of your presentations that gives various scenarios of what free cash flow and EBITDA generation could be for Diamond Green in different scenarios. And given what you’re generating now and then the possibility of a favorable duties, all of your production go into low-carbon markets, just I was wondering if you could walk us through how we could envision getting to north of a dollar a gallon for the Diamond Green venture?

I think the slide is in our investor deck out there. There is about three pathways and not to be confused with LCFS to get there. I mean, number one, the facility on a trajectory even at the current run rates without the BTC to be delevered here in Q1 with all of the expansion paid for. So, I mean, that's just the fact given the current environment and that was assuming about a $0.60 per gallon run rate for the quarter. Next year, as I said, in 2018, we anticipate making around 200 million gallons -- 195, 200, somewhere in there. It just depends on how long we're down, how long we run at the 160 million rate before we come back up with the 275 million. Construction and start-ups are pretty fluid. The Valero team masters that getting this thing ramped up. So I have huge confidence in the team down there. And then we have just arbitrarily chosen right now for the slide $1 in a quarter a gallon. And if you look at with carbon where it's at today, we think carbon will go higher next year especially since the biodiesel additive is in the process of being accepted here, and so internally we're using somewhere around $1 in a quarter. We can make a case, and you'll notice John Bullock is not on the call because I won't let him talk because he is so bullish about this thing, because the market’s setting up for pretty significant margins whether or not you get the countervailing duties, whether you get the blenders tax credit, whether you get a producer's tax credit just the way the carbon markets are setting up and the ability to serve. I mean, keep in mind that in none of our projections, although we say we're optimistic and truly believe in the blenders tax coming back, that is not in the cash flow projections. Otherwise, that would be another $160 million of cash that will come in early in probably Q2 late March or early April of next year. So it's a very optimistic picture right now from what we can see where we're sitting.

So just to clarify. Just based upon the fact that in 2018 you will be sending virtually all of your product to low-carbon markets, given where you think the credit price is going to go, you don't need the duties, you don't need a surge in rent price, you don't need a blenders tax credit to get to a bullish scenario north of the dollar, just what you see for those low-carbon markets get you there?

That would be correct. If we were able to service to all the low-carbon markets today, we'd be pretty close to that right now.

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

Why did the LCFS credit go higher? What was the driver behind it?

The California Resource Board was - let me back up. Part of the litigation challenging out in California was brought by the POET Group, and it was called, the litigation was entitled POET 1 challenging that the incorporation of biodiesel into the mix of fuel alternatives are options in California did not reduce NOX and therefore was adverse to the California Environmental Quality Act. They ruled on that back, and I don't know March or April, and said that they were open to reconsidering allowing biodiesel to fulfill the CARB obligation if they could present an additive that actually showed a reduction in NOX for biodiesel versus regular fossil diesel. I want to say, in July here, that was announced that they had accepted an additive and now that makes now biodiesel back viable and gives the California Air Resource Board the authority to go back and now move the biodiesel part of the mandate to 5% next year. So CARB credits immediately reacted from their LCFS credits from $75 to $90 a ton.

Okay, perfect. The second question I had is how much do you expect to allocate to the repo side? Given the debt paydown is on its way, how do you think about the repurchase -- and given the optimistic outlook, why would you not be more aggressive on the repo side?

Well, it’s certainly a consideration and it’s certainly we had that dialogue at the board meeting as well. But right now I think our near-term focus is to continue to delever and that’s been our focus over the last 24 to 36 months. But it is a growing consideration for sure internally as we consider our capital allocation choices.

Kim, just to add to what Patrick said, it was a big discussion point. Like we side, when we believe the blenders tax credit will be retro, it looks like it’s setting up for a November timeframe, a December timeframe, again, as it’s been in the past. That’s all we’re out there. If all of a sudden you get that and we got a plethora of cash in the war chest to continue to do things. So the board wanted to re-up the opportunity and to have the fire power here to go ahead in a repurchase program if they deem it to be right here.

Because as I think about it, I guess long time -- in 2018, I think you at least directionally put us in the EBITDA will go towards that $600 million. You get some of these positive developments. You’re going to be flushed with a lot of cash, and I am assuming your capital project as much as you can put cash to capital projects, you’ll have a surplus of cash. Is that not how to think about in 2018?

You’ll have a surplus of opportunities that the cash can either go to buy back a dividend or acquisition or build-out here.

And you still believe that going towards the $600 million EBITDA in 2018 is viable?

With the Diamond Green Diesel run rate and a deleverage Diamond Green, if you’re aggregating both together, yes.

Right, appreciate it. Thank you, guys.

Our next question will come from Tom Palmer with JPMorgan. Please go ahead.

Just to add first a quick on the feed segment, could you give us a bit of perspective on how we should look at results going forward? It seems like fat and protein prices have generally gotten a bit better. Are there offsets we should be thinking about? Or is it right in what going in the -- third quarter is perhaps been a bit stronger than we saw here in the second?

Let me talk around the horn here in the feed segment a little bit. I mean, fat prices were pretty firm in the second quarter. They’re holding on pretty nice here in July. Tom, in North America we deal with -- it’s been a lot of hot days that we’ve been trying to burn up a little bit of a corn crop and a bean crop. And so always we end up discounting some of the fats that we’re making in the third quarter. That’s the exciting part of Diamond Green’s expansion is that it is going to be set up now to process more of these high-acid fats when we’re online. The protein side, the pet food side, pet grade products continue to be exported in pretty significant quantity to China to the aquaculture business and markets. So that should hold in there. The meat and bone mill, as we said in our press release, is the only one that we have any heart burn over right now as the market serve -- we see some diets in North America moving to vegan or all veg diets, and so we're having to fight for more and more share around the world to export that product, especially with the strong cattle slaughter in the U.S. In Europe, we had a -- our rendering businesses had a very strong second quarter. We have seen a tempering of fat prices there as palm oil prices came down over there, but protein prices remained steady. So, I mean, I don't expect a significant decline if you will in the feed segment in Q3. There is just some cautionary flags here just because of summer time quality that we get into here in July and August as we move forward.

Okay, thank you for that detail. I wanted to switch over to Diamond Green Diesel. At least how we look at, it seems like a lot of the strength in the second quarter here was driven by some lower costs in terms of the operational structure. I know some of that is simply you produced 25% more than you did last quarter. But have there been any changes in LCFS economics or other factors that are also certain to flow through more so to the bottom line?

There weren’t. I mean, I think you picked up on it. First quarter at 18 days down, second quarter we ran at capacity. The LCFS markets were in that mid-70s, the once-a-week of service. RIMs were bouncing all around in the quarter and heating oil hit lows and highs in the quarter. So there are a lot of volatility there. Remember, these are the index sales that price, when they ship. So any given day it can be a pretty good move there. So I mean as we're setting up for third quarter, I saw spot margins at Diamond Green this last week in the $0.85, $0.90 a gallon. That doesn't mean that we shipped everything there, but those were like daily spot margin. So we should see some improvement in Q3. It's just depending on timing there.

I guess just a follow-up there on the cost side. Have you seen -- and maybe you could help quantify this. Have shipping costs, now that you have the rail line dropped down quite a bit between the first quarter and the second quarter or the portion that you're sharing with the blender, has that materially changed at all?

No, that really hasn't, Tom. Like we said, that's -- you'll start to see an increase there probably late fourth quarter early Q1.

Our next question will come from David Cater with Baird. Please go ahead.

You touched on this briefly, but I was hoping to hear a little more about Argentina. It seems like some of the macro issues there are political in nature. So what gives you confidence that you might see some more strength there in Q3 or Q4?

I don't know that I would call it. David, I would call it strength. We're in a kind of a “burn the furniture mode” down there in cost reductions and efficiencies and trying to manage a very difficult environment. I mean, obviously the inflation side, it drives wages. We're coming off of a winter time. So the energy bills should go down a little bit. We continued to try to work with the labor unions to reduce labor down there. So there is a business improvement plan down there, and while I wouldn’t call it “get it make it stronger,” it’s try to get it back to with its head above water here. It’s a very big challenge down there. As I said, and you picked up on, it is political in nature. The Marquee has decided that he thinks that he is trying to globalize Argentina now, not to make a political speech but we could now land gelatin that we make in Brazil for anywhere from $0.50 to $1 a kilogram cheaper than we can make it in Argentina. So that’s putting us into the mode of having to trying to rearrange and readjust the business model down there. I’m not certain we can get there, but we’re going to give it our best shot here and try to take some very dramatic actions to get there.

Our next question will come from Craig Erwine with Roth Capital Partners. Please go ahead.

So, Randy, the past couple of months we’ve seen a strike of biodiesel imports from Argentina. Everybody is sort of rushing to get the last gallons in before commerce goes out and gives [indiscernible] on the duties. I guess that’s in two weeks. Two questions on this. Does this impact your outlook for Diamond Green in the third quarter? Do we see the front end of the quarter impacted by this? And the second is you obviously do a lot of business in Argentina, other have said that the votes that were lining up in ports down there to dumped into North America pretty much disappeared. Any thoughts on this and knock-on impact to either you biodiesel business or business down in Argentina?

No, I think - Craig, you got to frame very well there. I mean, obviously there is the game here to get the product in before the countervailing duty retroactive date is established. And then I was involved in some discussion there. I don’t know that I have a clearer opinion on what the last day is you can bring it in, but clearly the imports have slowed down I think. But they were still fairly material up for now 250 million gallons or so. So at the end of the day, I think the world truly believes that that’s common and its going to take it’s a pretty big risk to be import of record. We’re starting to see the blenders back away from wanting to take that risk. So I don’t know that that’s going to drive anything in the near term, but it might temper some of the seasonality here that’s what I call the biodiesel industry, not the renewal diesel industry in Q4. I mean, clearly to me it’s most bullish feedstock if it happens, and then after that, the marketplace has to figure out if it can truly produce enough to meet the RVO for 2018.

Great. My second question is again about the trade action. So just geography alone means that your facility in Louisiana has probably stepped on probably the hardest or one of the hardest versus other facilities in the country at the original hearing at ITC in Washington. One that the peoples testify was a small producer from New England complaining that basically the dumping has pushed him out of market. The reality is there is a lot of transportation costs from the Gulf of Mexico all the way up to New England. I’m surprised you’re not wildly bullish on the fourth quarter and again the back half of the year this third quarter. Can you maybe just give us a little more color on your conservatism and why someone like myself that might be more in [indiscernible] camp here should be careful about the way we look at the third and fourth quarters.

It's very simple for me and I make an eye contact at Patrick, because I've been wrong before. Right now I share the enthusiasm with what I see out there that you do, we're just taking a very 90-day approach here. Obviously, Craig, I mean we think the 2018, and that's the reason the board allocated the money for the expansion of Diamond Green is that we're very friendly the potential returns in earnings at Diamond Green can give you. I mean the cautionary side that we take here is as you've got Scott Pruitt EPA, to a degree you got Donald Trump at the helm, and you've got the ITC now involved. And if they're all talking, not talking, we're not sure. So we're sitting here waiting for whatever the mandates to be finalized and then to find out what the countervailing duty is and then you can ask me if I am wildly bullish or not. Right now I am wildly concerned that we don't know what the final rule is.

Our next question will come from David Cook with Wells Fargo. Please go ahead with your question.

Good morning. I just wanted to touch on the Black Soldier Fly facility. I think you all said you would complete that in late 2017. Did you give us an indication in terms of maybe sales or EBITDA contribution and the pace at which that should ramp?

Yeah. And, David, this is Randy. Intrexon held their earnings call the other day, we're looking for an early - some time early to mid-‘18 startup of that facility. It truly is a scaled-up pilot plan. We think we got something special here. At the end of the day we're going to put our, I don't know, $15 million, $16 million of total capital between Intrexon and us into the plan. It has the ability to go up to several thousand times. As we expanded out, there are some very sophisticated machinery and incubators or whatever that they're importing to do this. We're not expecting it to be anything what I would even call remotely accretive in the sense to material for Darling at this time. This is something that we think has some very, very interesting applications, whether it's in aquaculture, whether it's in pet food, whether it's in animal pharmaceuticals. So there is a -- this is a very scaled-up pilot plant that we think if it works, then we're in a whole different discussion, and whether you're building 10 of them or 50 of them, who knows? But it will be another year or so till we get real operational data from moving form pilot plant to full scale here.

I understood. Thanks. And then regarding your share repurchase program extension, just curious when you would maybe be more aggressive with repurchases that maybe when you get more towards the lower end of your target leverage range?

Yeah, that's a fair assessment. Yeah, I think we're just going to continue to be judicious with our capital redeploy it primarily back into the business and then secondarily delever and then considerations from there, but probably another six to nine months kind of time horizon before we’re really in a position to strongly consider those options.

Our next question will come from Carla Casella of JPMorgan. Please go ahead.

Hi, most of my questions have been answered but did you say what the benefit from the blenders tax credit was in second quarter last year?

About $20 million to $23 million in the aggregate between Diamond Green Diesel and our other biodiesel businesses, about $0.09 a share effectively.

Yeah, what was interesting, Carla, was with the dollar a gallon last year, we recognized $18.3 million and this year without that we had $12.4 million. So that’s the fun part as we look forward in this business. Even without the $1 at gallon the facility is doing well, and as Patrick says, with the $1 a gallon it would have even been better than last year.

Okay, great. And then on the poultry rendering plant that you’re building, are you seeing more of the cap is excluding the rendering piece of the business? Or is there opportunities for you to partner with or to create more of these offsite facilities for some of those that have been captively doing their own rendering?

I think that the answer is yes, yes and yes. I mean, at the end of the day, given the footprint that we have across North America today, we’ve been looking at areas and geographies where we can save transportation cost for the processor whether it’s beef, whether it’s pork, whether it’s chicken, and then we try to then make our pitch of being partners in a facility and build it. And we’ve been successful now. This will be our third one. The Texas one, however, will be a freestanding rendering plant, and in the middle of 250 acres, it will be the kind of the first free-stander built here in, I don’t know, decades. So this one is a little being built with a pretty significant capacity for additional growth for the future, but the answer is, yes, we’ve seen the opportunity that there could be a couple more of these in the U.S. builds over the next couple of years.

Our next question will come from Bill Baldwin with Baldwin Anthony Securities. Please go ahead.

Got to time in to the poultry rendering plants that you’re doing it in partnership with the processors. Do you have -- to the degree you can talk about it, do you have any kind of an arrangement that on the rendering product, the poultry rendering products that go into feed and then so forth. Are those remarket is back to the process, or are you just take those products and go after the marketplace with them?

Bill, this is Randy. Those agreements go the whole spectrum like our relationship with as we do these agreements with people are there the multi-year five or 10 year agreements and they’re geared at maximizing returns for both parties and then making them the processor more competitive. And if it means they want to buy back the fat or the protein that’s clearly an option. But they participate in the decision of where that product should go in the intra-maximization of value and return form. So in the industry it’s commonly called the buyback, yes, there is buyback option and then there is a straight marketing options here. So it’s a little bit of everything.

And secondly, Randy with the headwinds apparently coming out of the meat and bone meal area, I guess you've got like you said you've had good raw material growth in that area and then demand is being somewhat impacted by [indiscernible] products. What do you think there the medium the long term picture is for that product? What are your options there in the meat and bone meal area?

It's traditionally what's happened, you've got a couple things Bill, number one if you've seen the cattle slaughter in North America be very strong and then we'll talk about Europe in a minute. You've seen an increase in the all veg diets. You've got the antibiotic for your all veg diets out there, so more and more of the products happen to go internationally and typically there are the market for that is the Pacific Rim countries from Indonesia to Vietnam to the Philippines over in that part of the world predominantly for poultry production. If meat and bone meal gets too cheap relative to soybean meal in the U.S. it will work its way back into swine diet here. So, we're nowhere near at that level. What's interesting now in the world today and what's pressuring the little bit of the export values is, is that there is been a liberalization in Europe that started here in second quarter, what we call CAT 1 and CAT 2 material, but the CAT 2 material can now be exported out of Europe and that's meat and bone meal. Now, while I think most of that was being exported anyway, there are now more tons of meat and bone meals competing for the same customers in the Pacific Rim countries today. And so, overall it's just another ingredient that's out there that has to find a home so I don't fear a significant issue here. It, the volatility against soybean meal it went to and what I'd call it went to a $100 under to $50 over in the quarter, so a lot of basis risk here that we haven't seen in a lot of years, but it will find it's home given it's ingredient value.

And for there are now ladies and gentlemen this will conclude our question-and-answer session. I would like to turn the conference back over to Mr. Stuewe for any closing remarks.

Thanks, Allison. Thanks everyone for joining us and look forward to talking to you in November and telling you how we did for third quarter.

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