Andersons Inc

NASDAQ:ANDE

Earnings Call Transcript 2022-Q1

[Operator]

Good morning, ladies and gentlemen, and welcome to The Andersons 2022 First Quarter Earnings Conference Call. My name is Matthew and I will be your coordinator for today. At this time, all participants are in a listen-only mode. Later we will facilitate a question-and-answer session. [Operator Instructions]. As a reminder, this conference is being recorded for replay purposes.

I'd now hand the presentation over to your host today, Mr. Mike Hoelter, Vice President, Corporate Controller and Investor Relations. Please proceed.

[Mike Hoelter, VP, Corporate Controller & IR]

Thanks, Matthew. Good morning, everyone and thank you for joining us for The Andersons first quarter 2022 earnings call. [Technical Difficulty]. If you are viewing this presentation via our webcast, the slides and commentary will be in sync. This webcast is being recorded and the recording and the supporting slides [Technical Difficulty] andersonsinc.com shortly.

Please direct your attention to the disclosure statement on Slide 2 of the presentation, as well as the disclaimers in the press release related to forward-looking statements. Certain information discussed today constitutes forward-looking statements that reflect the company's current views with respect to future events, financial performance and industry conditions. These forward-looking statements are subject to various risks and uncertainties.

[Operator]

Pardon me, ladies and gentlemen; it appears that we are having connection issues to our speaker lines. Please standby as we troubleshoot. Thank you.

Pardon me, ladies and gentlemen. It appears that we have reconnected our speaker lines. Mr. Hoelter, please proceed with your conference.

[Mike Hoelter, VP, Corporate Controller & IR]

Thanks, Matt.

I apologize for the technical difficulty experienced. We are going to just start over from the beginning.

Thank you for joining us for The Andersons first quarter 2022 earnings call. We have provided a slide presentation that will enhance today's discussion. If you are viewing this presentation via our webcast, the slides and commentary will be in sync. This webcast is being recorded and the recording and the supporting slides will be made available on the investors' page of our website at andersonsinc.com shortly.

Please direct your attention to the disclosure statement on Slide 2 of the presentation, as well as the disclaimers in the press release related to forward-looking statements. Certain information discussed today constitutes forward-looking statements that reflect the company's current views with respect to future events, financial performance and industry conditions. These forward-looking statements are subject to various risks and uncertainties. Actual results could differ materially as a result of many factors, which are described in the company's reports on file with the SEC. We encourage you to review these factors.

This presentation and today's prepared remarks contain non-GAAP financial measures. Reconciliations of non-GAAP measures to the most directly comparable GAAP financial measure are included within the Appendix of this presentation.

On the call with me today are Pat Bowe, President and Chief Executive Officer; and Brian Valentine, Executive Vice President and Chief Financial Officer. After our prepared remarks, we'll be happy to take your questions.

I'll now turn the call over to Pat.

[Pat Bowe, President & CEO]

Thank you, Mike, and good morning, everyone. Thank you for joining our call this morning to review our first quarter results.

We're saddened by the news and images coming from the war zone. And our thoughts and prayers remain with the people of Ukraine, and those who have family impacted by this unfortunate conflict.

Global Ag markets in the first quarter were significantly impacted by the war in Ukraine. We saw an extreme run-up in grain futures prices, which also drove basis values lower.

Global fertilizer supplies remain tight with prices up further due to the conflict in Ukraine. I'm very proud of our team for managing through these resulting unprecedented price volatility and logistical challenges, while maintaining focus on serving our customers.

Our Trade Group results declined from last year, in large part due to the decline in corn and soybean basis size. While our inventories needed to be reduced to mark these lower basis values to market, we want to know that this pricing environment has allowed our teams to enter into new ownership positions and improve basis values. This we believe will position us well for the remainder of this year and into 2023 as these are historically good ownership values.

Last year, we accumulated solid wheat positions in our Midwest grain assets and expect it will provide storage income moving forward. Growth in our international supply chain business contributed to our results in spite of the impact of the Ukraine war on supply and logistics.

Our Renewable segment performed well in the quarter, ethanol board crush margins were improved from the first quarter of last year and higher commodity prices kept feed and corn oil values high. Third-party merchandising of low CI renewable feedstocks, and other co-products was up significantly from the first quarter of 2021 as that business continues to grow.

Our results also include an $8.3 million mark-to-market hedge loss, most of which is expected to reverse in the second quarter. We've now completed our spring maintenance shutdowns in all of our five ethanol facilities and we're well-positioned to meet the seasonal increase in driving demand.

Plant Nutrient reported a record first quarter. Our strong results reflect well-positioned inventory in this much high priced and limited supply market. Improved margins more than offset lower volumes across most product lines.

I also wanted to provide a brief update on the divestiture of our rail repair business. You may have seen our announcement last night on the sale of this business to Cathcart. With this transaction expecting to close this summer, it will finalize our previously announced strategic exit from the Rail segment with the larger rail leasing business sale closing back in August.

I'm now going to turn things over to Brian to cover some key financial data. When he's finished, I'll be back to discuss our outlook for the balance of 2022. Brian?

[Brian Valentine, EVP & CFO]

Thanks, Pat and good morning, everyone.

We're now turning to our first quarter results on Slide number 5. In the first quarter of 2022, the company reported net income attributable to The Andersons from continuing operations of $6.1 million or $0.18 per diluted share. This compares to $12 million or $0.36 per diluted share in the first quarter of 2021.

As Pat mentioned, Plant Nutrient and Renewables had strong first quarter results offset by a decline in the Trade Group's year-over-year results.

EBITDA for the first quarter of 2022 was $55.8 million, compared to adjusted EBITDA of $63.2 million in the first quarter of 2021. Both of these measures exclude discontinued operations.

We recorded taxes for the quarter at an effective rate of 38.7% which reflects the impact of non-deductible mark-to-market losses and the tax treatment of non-controlling interests. While this rate is higher this quarter, we are still forecasting a full-year effective tax rate between 22% and 25%.

Next we'll move to Slide 6 to discuss cash, liquidity and debt. We generated quarterly cash flow from operations before changes in working capital of $40 million in 2022, compared to $89 million in 2021. The majority of the difference relates to the timing of tax refunds and credits.

Futures price inflation in the grain markets is the primary cause of our significant increasing working capital and related short-term borrowing levels. The short-term debt balance of $1.5 billion at March 31 is supported by readily marketable inventories of $1.4 billion and cash margin deposits of $400 million.

In order to manage through these rising commodity prices, we amended and extended our short-term borrowing agreements with committed capacity of $2.1 billion. We have strong support from our banks and continue to proactively monitor our liquidity.

We also continue to take a disciplined approach to capital spending, which we expect to be roughly $100 million to $125 million for the year, about half of which we expect will be related to maintenance capital.

As we've previously noted, we have reduced long-term debt by over $300 million over the last 12 months and remain well below our stated long-term debt to EBITDA target of less than 2.5x. With the stronger balance sheet, we are well-positioned to invest in our core agricultural businesses.

Now we'll move on to a review of each of our businesses beginning with Trade on Slide 7. Trade reported pre-tax income of $3.7 million compared to adjusted pre-tax income of $14.3 million in the same period of 2021. The significant run-up in commodity prices resulting from the conflict in Ukraine and the smaller South American crop caused a dramatic drop in basis values, primarily in corn and soybeans. While the lower basis values allowed us to buy new bushels at favorable basis levels, existing domestic positions experienced large basis reductions, which impacted first quarter results.

We also experienced a decline of approximately $4 million in our propane merchandising business. That business continues to perform well. However, the extreme cold in February of 2021, that impacted much of the Midwest and Texas allowed for very strong returns in the first quarter of last year.

Trades EBITDA for the quarter was $20.8 million compared to adjusted EBITDA of $32.5 million in the first quarter of 2021.

Moving to Slide 8, Renewables first quarter pre-tax income attributable to the company of $5.5 million was up $2.6 million, compared to the first quarter of 2021. While the first quarter experiences lower winter driving demand, board crush margins were higher than the prior period. We also continue to see strong co-product values, including high protein feed, distillers corn oil in DDGs that contributed to increased gross profit.

Third-party ethanol, feed, and renewable diesel feedstock merchandising results were more than double the 2021 results.

The Group's results also included mark-to-market losses of $8.3 million in the quarter, nearly all of which is expected to reverse in the second quarter.

Ethanol recorded EBITDA of $24.4 million in the first quarter of 2022, an increase of 10% from the first quarter of last year.

Turning to Slide 9, the Plant Nutrient business recorded record pre-tax income of $10.7 million in the first quarter, up from $8.5 million in the first quarter of 2021. Continuing the story from last year, well-positioned inventory led to improved margin per ton in our agricultural product lines, and in particular for our specialty liquid products. Fertilizer prices have also continued to rise due to the conflict in Ukraine. Our Turf and Specialty business continues to be challenged by supply chain difficulties, inflation in raw materials, and labor constraints.

Plant Nutrient's EBITDA for the first quarter was $18.8 million, an increase from $16 million in the first quarter of 2021.

And with that, I'll turn things back over to Pat for some comments about our 2022 outlook.

[Pat Bowe, President & CEO]

Thanks, Brian.

While our first quarter overall financial results did not meet our strong performance of 2021, we continue to believe that our agricultural business outlook remains strong. We were anticipating elevated commodity prices for some time, due to the relatively low worldwide stocks. But with the disruptions in the Black Sea region, in the smaller South American crop, we expect demand to stay high into 2023 and beyond.

Planting across the country is started slowly and is currently a week behind the five-year national average. It's been wet across the Midwest this week. And we do know that farmers are anxious to get into their fields as soon as they can. We expect them to ramp up activities quickly when possible.

Fundamentals in the grain business continue to remain positive. Worldwide supplies are projected to be tight into the foreseeable future. And we're very pleased with our ownership positions at good values.

Storage income opportunity has returned to wheat. And we're able to accumulate large wheat inventories with the expectations for reduced supply from Ukraine.

U.S. fall harvest will reduce but not eliminate the impact of strong worldwide demand on all our primary crops. With these markets, and at this time of year, we're very focused on monitoring the impact of the Safrinha harvest in Brazil and the planting progress and growing conditions in the U.S. As always, we're working to support our farmer customers with a grain marketing plans.

In ethanol gasoline demand has improved but has not yet returned to the pre-pandemic levels. Board crush margins have recently moved favorably for the second and third quarters of this year. U.S. ethanol stocks remain fairly high despite the spring shutdown season, but are expected to decline on growing seasonal domestic and export demand.

The strong demand and good values for co-products continues to support our overall margins. In addition, our low CI renewable diesel feedstock merchandising business is performing very well and adding to our results. All five of our ethanol plants have now completed their spring shutdown successfully and are ready to meet the increased summer driving demand.

Two of our facilities are operating successful high protein feed product lines and marketing them to a wide array of customers.

We expect Plant Nutrients to continue to perform very well through the spring planting season in an ongoing period of tight supply and high market prices. We received good support from our North American suppliers and continue to have inventories in position for the spring application season.

We've seen a reduction in fertilizer volumes in the first quarter. But it's been more than offset by increased margins supported by high commodity prices and strong farmer income. With a positive nearby outlook for Ag market fundamentals, we're excited about our prospects for growth, particularly in sustainable opportunities. We remain committed to adding value for our customers, managing risk and operating safely and effectively.

Now I'd like to turn to Slide 11, about our investment thesis. We introduced our refresh strategy last year and are continuing to focus on both grain and fertilizer growth projects. We're mentioning this again today as we're working on our growth pipeline, which includes both organic projects, as well as potential acquisitions that are within and adjacent to our current position in the U.S. Ag supply chain.

Recent examples from this past year include our growing renewable diesel feedstock business, our purchase of Capstone Commodities in the Dairy Feed supply business and our grain supply chain extension to Africa and the Middle East.

The Andersons play a key role in the Ag supply chain, servicing customers from farm to the fork. We'd like to draw your attention to our recently published 2022 Sustainability Review, a copy of which is on our recently refreshed website. We are firmly entrenched in U.S. Ag supply chain and see many opportunities to continue to grow. With our focus on our two trees symbolized on this piece of paper, or strategic verticals, stronger balance sheet, sustainable cash flow, and tighter strategic focus, we expect to be able to grow profitably in this exciting Ag economy.

With that, I'd like to hand the call back to Matt and we'll be able to entertain your questions.

[Operator]

Thank you. We will now begin the question-and-answer session. [Operator Instructions].

And our first question will come from Ben Bienvenu with Stephens. Please go ahead.

[Ben Bienvenu, Stephens]

So I want to start, my first question on the Trade business. So obviously, we had a sharply rising market. You talked about some of the basis positions that -- basis value changes that hit your numbers in the first quarter. You characterize that as putting yourselves in a good position relative to where prices have gone heading into the next several quarters. I think this business is inherently difficult to model and track from the outside from our seat. Can you help us think about relative to maybe the underperformance versus what we would've expected in the first quarter? Do you think the positions that you have in place through the next couple of quarters position you to deliver similar results to last year, make up for some of what you might have lost in the first quarter and maybe just help us make sense of the stock is making a pretty severe reaction to the news today, really in the sense that like maybe the earnings power has changed all of a sudden, it doesn't seem like it has. And so I'm curious, could you try to dimensionalize for us? Are we just on the same track and there were some short-term dynamics in the first quarter associated with the sharp move in grain markets and what we should be thinking about as we move through the next several quarters?

[Pat Bowe, President & CEO]

Sure, Ben, and that's a very good question, a lot of pieces to unpack there. First of all, yes, I'm very surprised with the market action of this morning because we had a record quarter in our fertilizer business, a strong profitable quarter in ethanol, where others maybe didn't quite do as well in the industry. We had a very good quarter in ethanol. And in grain, when you have a high flat price, commodities price spike like that, it's quite normal to see basis levels weaken. That's a bad thing where you have to mark-to-market, what you own, the inventories can reduce that and you take that mark. And we've done that. And in the quarter, it's probably about $8 million to $10 million, but we are buying lower basis levels and have accumulated grain at historically good values. So we're basis traders and the benefit of our business is to buy discounted basis levels that you can then elevate later and ship them in a rising demand market like we have this year.

So other than the industry also commented public companies about their timing differences, or if you want to call it basis depreciation, this is a good thing. So this is an opportunity to get ownership on when futures prices spike and farmers sell and the basis weakens. That's like we're buying in a better value. So we see that as a very positive strategic sign for us that that will come back later in this year.

Now, can I guarantee the date and time and month that it's going to happen? No, but that's historically very good ownership for us and we feel good about that. And think that puts us in a very strong position with an export demand, that's going to be solid and domestic demand that will be solid later in the year.

Another thing to think about is just some of the lapping we had last year. So we -- 2021 was our best year in 10 years and we had some really strong performance in Trade. One of them was propane. Last winter had a very high selling prices and probably we're about $4 million to $5 million lower than what we had last year, still a profitable, very good business, but not the spike it had in the first quarter last year. So that was a tough match to meet from 2021.

Bottom line, we are very positive about where we position in the industry. We like the tailwinds we have behind us in all of our segments. And we just announced the sale of our rail shops. We completed that final transaction in the Rail segment. So in very good position, strong balance sheet, and feel very good about what's in front of us. So I think maybe just some overreaction this morning because of sensitivity with commodity markets.

[Ben Bienvenu, Stephens]

Yes. Okay. That makes good sense. Maybe as a follow-up, the stock is now -- and I know it's our job to think about what the stock is worth. It's your job to run the business and try to maximize cash flow in the business. The stock is now trading at book value, which it's really only done during the start of COVID and during the Great Recession, your peers -- public peers are trading at two times book value. You have a share repurchase program. You're generating plenty of cash. I know there's working capital demand on the business short-term. But when you think about rank ordering capital allegation and capital spending, how do you think about where share repurchase fits within the set of opportunities that you have?

[Brian Valentine, EVP & CFO]

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

[Ben Bienvenu, Stephens]

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

[Pat Bowe, President & CEO]

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

[Operator]

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

[Ken Zaslow, Bank of Montreal]

Not to beat the dead horse. I just want to clarify two things. One is, if you were to exclude the first quarter and you were to kind of go back to three months ago, when you provided some sort of outlook for 2022, would you think quarter -- the next three quarters would be any different based on what happened in this quarter?

[Pat Bowe, President & CEO]

No, I don't think so, Ken. Maybe a little bit better because of the grain ownership we have and some of the carries they're coming into the wheat market. So that could pick up a little bit. It's -- this, I hate this time of the year because we haven't planted corn in the ground and we're -- this is such an important time for the U.S. crop to guess what the fall harvest would be. But in general, we feel pretty good about all of our positions and where we're at in the market. So I would say, yes, I think those levels are a little higher.

[Ken Zaslow, Bank of Montreal]

Okay. And then just continue on this. You said you compared yourself to the other companies out there that talk about mark-to-market. Is this a non-cash item that happened or is it a cash item? And I just want to -- because I think it impacted -- or am I misunderstanding what you were implying between you and your peers?

[Pat Bowe, President & CEO]

Yes. Just all grain merchants, you adjust -- as the basis levels moves. So once you're hedged, you're locked in on futures and then as the basis goes lower at the end of a month, we bring the month down to that new basis level. So the grain we own, we had to mark down and then when it goes back up, we mark it back up when we elevate it and ship it. And I shouldn't talk about other companies, but other companies mentioned that their public releases about timing differences related to that this is normal in soybean crush businesses or grain elevation businesses. And it's actually a good thing. We look for times where futures market spike, and then the basis weakens and you can accumulate at lower basis levels. We think that's a very good thing. Unfortunately, it causes a timing issue that the month that happens,

[Ken Zaslow, Bank of Montreal]

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

[Pat Bowe, President & CEO]

Correct. And we're not in the soybean business, so we don't have a crush margin, but it's just -- it's your inventory, you're marking to a different level out on the basis each month. And we bring that out the quarterly results. And that we feel will come back as we ship those products at higher basis levels later.

[Ken Zaslow, Bank of Montreal]

Okay. And then in terms of --

[Brian Valentine, EVP & CFO]

Just Ken on the -- Ken on the -- and to your point on the ethanol one, that is a non-cash mark-to-market of those positions that we expect to reduce.

[Pat Bowe, President & CEO]

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

[Ken Zaslow, Bank of Montreal]

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

[Pat Bowe, President & CEO]

So I think it is a sustainable level of earnings of anything, it's probably extended it, it's about a time issue. So before without any political disruption, maybe we could have Mother Nature come back in Brazil has a better crop next year, and we have a better crop next year. And in one to two years, you could have gotten to normal balance in S&D. Now, the supply and demand of global grains is out of balance, and very tight and likely to extend as to crop years. And so this let's call rally that's happening in the Ag markets is likely to continue longer being at demand driven rally because of short supplies in other places of the world.

Very good prices for U.S. farmers, incentives for farmers globally to plant. So we should have volumes that Ag companies can ship. And with the economy, where it is even with higher interest rates, demand is still strong for food products, and global food demand. So we continue to have a very good fundamental basis across the Ag sector. And that should extend maybe longer because of this crisis, unfortunately, over the people in Ukraine, but it's going to have an impact that will linger more than one year or one season.

[Ken Zaslow, Bank of Montreal]

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

[Pat Bowe, President & CEO]

First time.

[Ken Zaslow, Bank of Montreal]

Okay, I just want to make sure I appreciate it guys. Thank you.

[Pat Bowe, President & CEO]

No, first time effect. At this time, when we've had a rise in prices on the futures market it gives us the opportunity to accumulate grain inventories at lower bases levels. That's a fundamentally really good thing to do. And we're really pleased to do that. We have good positions of wheat that we bought last year, we're buying grain from our farmers when the market rallies, which is a good thing for us and a good thing for them. We're well-positioned to take advantage that going forward. So we like the position we're in.

[Operator]

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

[Ben Klieve, Lake Street Capital Markets]

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

[Pat Bowe, President & CEO]

I'm not sure I understand your question. But we have our --

[Ben Klieve, Lake Street Capital Markets]

The tons and storage, I mean.

[Pat Bowe, President & CEO]

Yes. So our volume that we own is higher than last year, same time of grain inventories. And we're able to have purchases at this time of year that was better than previous time. But that the point is back to marking basis levels down, that is good ownership that we can turn around and elevate later. It's a good opportunity for us. That's the point.

[Ben Klieve, Lake Street Capital Markets]

Okay, got it. Got it. Okay, the -- another question and the kind of first quarter performance within the Trade Group, can you kind of characterize the performance within that Group in the first part of the quarter versus the second half of the quarter, when the extreme volatility really set in, I mean curious if you could elaborate kind of on the trajectory that you think that business would have been in mid-February versus what the -- how the Group ended the quarter?

[Pat Bowe, President & CEO]

Sure, I think initially, when the war broke out, there's a little bit of a shock to the grain system when wheat markets particularly spiked and so we had to get back to a kind of a normal alignment. And then as we got to the end of the quarter margins improves and our trading profits improves so kind of started at once it's normalized, it's not normal at all, but starting to calm down a little bit. Also, we're able to sort out shipments that were on the water or not, and how those things were going to work out logistically. So we and others in the industry been able to navigate those challenges due to the war in Ukraine, and it's actually providing the volatility that is something we'd like in commodity markets.

And why I mentioned that is getting back to that basis levels, it gives us a chance to buy at discounted values that we wouldn't have seen otherwise. So that's a very good thing for our business. That flows right through to ethanol and into our other businesses. Again record quarter in fertilizer, good outlook in fertilizer. Strong quarter with a record EBITDA in our Renewables business. And that included an $8.3 million mark-to-market that should come back in the next quarter. So we're very optimistic about our outlook.

[Ben Klieve, Lake Street Capital Markets]

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

[Pat Bowe, President & CEO]

Yes. Very good point out there. But -- so, again we're going to say we had a record setting EBITDA for the quarter. Our Q1 crush margins were better than previous year. And the margins have improved for Q2 and Q3, as you start to ramp up into spring summer driving demand. So stocks are a little higher than in the market, as you'd like to see them coming off the shutdown season. But export demand is strong, and looks like that's going to perform well this year.

The absolute value of ethanol, as a blend for gasoline is there and now with Biden's actions to help encourage E15 usage that's a help. And it is that's not a homerun for the business. But that's going to help. Export demand is going to help. High corn oil values are going to help and good feed values are going to help. So in general there's a lot of positive tailwinds in the ethanol industry. I just was pointing out the fourth quarter of 2021 had very high margins. So to lap those in the fourth quarter might be a high bar to clear. But we think that ethanol margins will improve the balance of the year and have a nice earning period for 2022.

[Ben Klieve, Lake Street Capital Markets]

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

[Pat Bowe, President & CEO]

Thank you.

[Operator]

[Operator Instructions].

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

[Eric Larson, Seaport Research Partners]

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

[Pat Bowe, President & CEO]

Yes, good point out Eric. I know you watch this closely as a farmer. The Lavinia conditions cause those warmer, drier conditions, especially as you pointed out the Central Brazilian area, Mato Grosso, Goiás and that area. I mean I operated a plant at Uberlândia and Minas and that region is particularly can shift dry in a Lavinia period which is what we've seen there. Now not a total drought, but just enough that we don't get maybe quite to finish to Safrinha. And people know, Safrinha is the little softer the small harvest, which used to be little as a second harvest. Now it's just as big as the full harvest. So it's really important for Brazilian production. So that could be stemmed a little bit. And that is bodes well for U.S. soybean exports and corn and corn prices as you mentioned. As you also know Eric, we're a little bit wet with this recent rains across the Midwest. On Monday, the crop report was we'd be a week behind normal, we will probably not recover much because it's wet week maybe get to 20% to 25% behind by next week.

But as you well know the American farmers are amazing and they can plant corn really fast. So we -- it's too early to hit the panic button. That's likely the corn we'll get in as soon as we get a dry patch. It would be nice to see good field progress for corn planting. I think that's a key thing that the market is looking for now. So that, it's favorable to the U.S. as you said and now we just need to get the crop in the ground and make a good U.S. production.

[Eric Larson, Seaport Research Partners]

So we've obviously seen a huge increase in not only future values, but cash values for global crops. Are you seeing any signs of demand weakness? I mean, there's a few things that we're seeing, but it seems to be pretty minor, maybe a little bit for flu, bird flu a little $25 million, $30 million bushels or something? It seems like the demand the floor demand is minimal. And are you -- talk to me about are you seeing any demand issues yet?

[Pat Bowe, President & CEO]

No, I think the big disruption a lot is ready for the Black Sea, right. So countries that would normally be getting shipments from Ukraine or in some cases from Russia, these paths have changed. And even right away when wheat is coming out of the PNW to go to other parts of the world that would normally go to, we're seeing different traffic patterns. But also remember, that's on top of high ocean freight already. So the global prices, unfortunately, the poorest people on the planet are going to be paying food inflation, especially in Africa.

But what we do see is we haven't turned off demand. Because protein markets are strong. Crush margins are very good. Ethanol markets, margins are there. And then your beef, pork, chicken demand by consumers is still solid in North America. So North American demand for feeding and for the processing is still very good. I mean, wheat milling was up 2% in the quarter. So there's good consistent demand, domestically here.

And now you add on top of it, these pockets of shortfall that Ukraine would normally fulfill, that's disrupting the normal shipping patterns of exports. And the U.S. is going to take part in that. China's been a little bit quiet here off late, but we still see China being a very significant buyer of U.S. commodities.

[Eric Larson, Seaport Research Partners]

So just one more demand question. You obviously have substantially higher fuel prices going into this summer versus last. And I know that a lot of people had transitioned to RV travel, summer travel, kind of really heavy gas usage type vehicles. Do you think that there's -- that demand could actually soften for gasoline demand this summer? And if so, would ethanol the export side of it be strong enough to maybe offset some domestic softness if gas prices are too high?

[Pat Bowe, President & CEO]

Yes, and that's the million dollar question that we don't know. I mean, will someone take an RV trip across the country? It's probably chip cheaper than flying to Australia or something. So the question is, those numbers have shown improvement in recreational road travel over the road travel would have been returned to pre-pandemic levels, is it -- can you -- levels. People going back to work full time in offices. And is that going to start to pick up more as the COVID concerns ease, because that's the biggest source of driving demand usages commuting.

So summer, we think we'll see the recreational travel, you're seeing a return in aviation fuel, travel. So demand on that side should be pretty good. Unless gas prices really go back up again, really strong that could meet demand. But we should see a pretty, pretty good demand, just from driving miles.

On your question of ethanol exports, we see will be higher this year. We're the lowest price oxygenates on the planet. We have good opportunities to export ethanol as an industry. And we think exports will be up again, how much that will be depending on demand and some of those countries and what happens with ocean freight, et cetera. So how much for ethanol looks to be pretty good. And like I said, I cautioned about will it be as great as the margins really peaked in fourth quarter, that would be a high bar, but if we got there, we would all be very happy.

[Eric Larson, Seaport Research Partners]

Okay, thanks Pat. So final question I have is really for Brian, so you guys were pretty aggressive in putting grain positions on in the first quarter which makes a lot of sense to me, what I'm seeing does make great sense in terms of your future basis values that you can actually pull out of your trading business. When you look to balance sheet, if you saw other opportunities in the market today, how much further could you bring up your short-term, I mean what -- how much upside do you have to take advantage of market opportunities with your balance sheet?

[Brian Valentine, EVP & CFO]

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

[Pat Bowe, President & CEO]

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

[Eric Larson, Seaport Research Partners]

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

[Pat Bowe, President & CEO]

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

[Eric Larson, Seaport Research Partners]

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

[Pat Bowe, President & CEO]

Thank you, Eric.

[Operator]

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

[Mike Hoelter, VP, Corporate Controller & IR]

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

[Operator]

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