William Krueger: Yes, I will start with that one also, Ben. If you look at Q1 exports up 25-plus percent year-on-year, we believe that calendar 2024 ethanol exports will see an increase over 2023. We expect that to continue. As everyone knows, we did get the waiver passed on E15. So we’ll see that continued demand. And we really view our ethanol plants as some of the best-in-class and are able to continue to manage really strong results through production capabilities, our risk management and kind of more importantly, being able to really target the opportunities that we see towards the end of this year. And so we do feel pretty positive on the renewables section. Pat hit on our renewable diesel feedstock business continues to grow in volume.
Our customers there have seen margin compression due to the slow uptake or ability for some of the RD plants to come online and run at full capacity. But we continue to see our value, in that part of the supply chain, continue to bring this growth in volume.
Patrick Bowe: And maybe over the long run, I think [indiscernible] and Bill can comment more on this. We were — like what we saw out of the government last week as far as regenerative ag and the outlook for programs for SaaS down the road. And our big focus for us is position our ethanol plants to be low CI, big scale, high-volume quality assets can be important assets to supply the sustainable aviation fuel market. And maybe, Bill, you want to add some more to that?
William Krueger: Yes. We have been working aggressively the last 18 months and longer in a couple of situations in making sure that we have a pathway to achieve 45Z. We have good geological footprint in the East. We have — obviously, the pipeline runs very close to our Denison, Iowa plant. So we feel like we have a pathway for all of our ethanol plants. Some are closer than others to being executed, but we’re choosing very selectively the pace that we want to move at and the plants that will bring us the most value the quickest. And we do feel like we have some good opportunities there.
Operator: And our next question comes from Ben Klieve at Lake Street Capital Markets.
Benjamin Klieve: I’d like to continue this conversation a little bit here with the ethanol to jet opportunity. It’s interesting that there’s a lot of different takes on this opportunity, it seems very wide ranging. And I’m curious, you talked about your kind of enthusiasm for the news out of the administration last week regarding regenerative ag practices supporting the ethanol to jet opportunity. I’ve also heard a lot of thought that this isn’t really going to be practically implementable for some time. Do you really get the sense that your farmers within the footprint of your existing ethanol facilities are going to be implementing all the various initiatives that are encouraged over the next few years? Or is that something that they’re pretty kind of indifferent or just not going to participate in?
William Krueger: Well, I think all producers will be focused on what they can do to enhance their profitability. The negative comments that you have likely heard from the administration’s 40B are primarily related around bundling, which means that you have to use all 3 practices of — and that, we hope will be unbundled in the 45Z. And geographically, whether you talk about the enhanced efficiency fertilizer cover crop or no-till are going to be different in each of our geographies on which 1 of the 3 the producers can use. But where they’re able to — making the assumption that they are unbundled, where they’re able to apply those 3 optionality, I believe that they are going to utilize them, and they’re also going to be able to continue to look at other practices and risk management that we’ve been pretty good at providing over the last several years.
So in general, bundling is going to be a challenge if it’s not decoupled in the 45Z, but our belief today is that it likely will be.
Patrick Bowe: And maybe, Ben, this is Pat. It’s a first goal here, right? So for the first time, carbon modeling schemes are being recognized by the administration and farming technologies to reduce CI is part of the program. So it’s good to have that out there in writing. And the use of the GREET Model, again, there are several of those, but having the GREET Model used for federal tax policy, it’s the first time we’ve seen that. We feel that’s a good step, right? And industry associations and grower associations will be working with the government and trying to get the next bill to go around this to maybe be more friendly to applications at the grower level. I think the simple strategy for a company like The Andersons, we really like our 3 eastern plants, how they’re positioned, and we like the geology that they have to do potential for CCUS at our sites and we want to take advantage of that.
So those who have the biggest, most efficient, modern ethanol plants with the lowest CI scores will be the winners, and that’s our focus. And so this isn’t an overnight thing that all of a sudden everyone is going to be producing ethanol to jet tomorrow, it’s going to be a journey. You got to take the steps one at a time to be positioned for success. And that’s where we’re positioning ourselves.
Benjamin Klieve: Got it. Very helpful. And Pat, you touched on kind of my follow-up question is around the carbon sequestration out of your 3 eastern plants. Do you have any material CapEx included in that $150 million to $175 million number associated with that type of initiative?
Patrick Bowe: Yes. So we mentioned before, and Brian can chime in here. So we said about 50-50 of our capital expenditures would be on base spending versus M&A, and we project that to be the same. That includes some plans for CCUS or ethanol plants…
Brian Valentine: Yes. And I would say, Ben, I think some of that will be — I can see it being this year, and I can see it then certainly going into ’25 and even beyond.
Patrick Bowe: And that’s part of the point. These things don’t happen overnight, right? These involve permitting and working with neighbors, and then you got to buy the equipment, then you got to get it installed. So we’re working through that process with some really good advisers, and we’ll be confident to be able to announce something when we have those really firm plans in place.
