Andersons Inc Q2 2010 Earnings Conference Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Farha Aslam - Stephens Incorporated - Analyst : Hi, good morning.

Question: Farha Aslam - Stephens Incorporated - Analyst : Congratulations on a great quarter.

Question: Farha Aslam - Stephens Incorporated - Analyst : A couple of questions for you, Mike. Starting out with, you discussed the drop-off in the wheat basis, but this year the crop is coming in much earlier than it did last year. Can you balance kind of those two factors for the grain group?

Question: Farha Aslam - Stephens Incorporated - Analyst : Right.

Question: Farha Aslam - Stephens Incorporated - Analyst : Okay. And then just the changes in the wheat contract, how does that affect the Andersons?

Question: Farha Aslam - Stephens Incorporated - Analyst : Okay, that's helpful. And then when you look at your Plant Nutrients Group, in the quarter, was there any material benefit from the mark-up of inventory?

Question: Farha Aslam - Stephens Incorporated - Analyst : Okay. And when you look at the demand, I mean, with the grain prices, we're hearing farmers are really being active booking, is there going to be something unusual in the fiscal third quarter versus normal? Or do you think it's really going to be in the fourth quarter where this farmer interest in applying nutrients shows up?

Question: Farha Aslam - Stephens Incorporated - Analyst : Okay. And my final question, I'm going to pass it on, is on rail. How many rail cars did you scrap and do you anticipate to continue to scrap rail cars post the quarter?

Question: Farha Aslam - Stephens Incorporated - Analyst : Great. Thank you very much.

Question: Heather Jones - BB&T Capital Markets - Analyst : Good morning.

Question: Heather Jones - BB&T Capital Markets - Analyst : Good morning. Very good quarter.

Question: Heather Jones - BB&T Capital Markets - Analyst : I have some questions on wheat. Before I go there, you talked about rail leasing activity picking up, it sounds like rates have stabilized but you may scrap -- scrap activity may not be as pronounced in the second half. So, do you believe that you could generate profits in Rail in the back half?

Question: Heather Jones - BB&T Capital Markets - Analyst : Okay. And in the Plant Nutrient, it looks like you had a negative price mix for the quarter. And first, am I -- is that analysis correct? Because it looks like your volumes were up a third but I thought sales were only up like 15% or something.

Question: Heather Jones - BB&T Capital Markets - Analyst : Right, right.

Question: Heather Jones - BB&T Capital Markets - Analyst : Okay. Then moving on to wheat, just wondering, because if you just look at the face of it, there was significant basis contraction in Q1 and Q2. And in the last --

Question: Heather Jones - BB&T Capital Markets - Analyst : Right. In the last five or six weeks it's widened considerably and on the face of it looks like it could be a pretty substantial hit, but it sounds -- your comments sound as if what you've been doing is buying in wheat as the basis has weakened so that it's not going to be as big a marked-to-market hit as it would look on the face of it. Am I understanding that correctly?

Question: Heather Jones - BB&T Capital Markets - Analyst : Yes.

Question: Heather Jones - BB&T Capital Markets - Analyst : Well, I mean, not that you have your druthers, but if you had your druthers, would you prefer that the demand actually materialize in the U.S. and so you actually -- the basis contracts very quickly and you ship it out? Or would you prefer to hold it for a while and just wait for the basis to take care of itself over time?

Question: Heather Jones - BB&T Capital Markets - Analyst : Right.

Question: Heather Jones - BB&T Capital Markets - Analyst : Right. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.

Question: Heather Jones - BB&T Capital Markets - Analyst : Okay. And then --

Question: Heather Jones - BB&T Capital Markets - Analyst : I guess my two final questions, you're talking about how full you are on wheat, is, first, do you have ample room for what's going to -- looks like it's going to be a very big corn harvest.

Question: Heather Jones - BB&T Capital Markets - Analyst : Okay. And it doesn't seem likely, but suppose we have a situation like '08, '09 where there's -- I mean the basis spread for wheat gets very large. Is there any talk about -- on this variable storage rate with the CBOT, allowing you to become more aggressive in raising the storage rate so that you don't have it languish at $1, $2 bushel discounts like it did for a while.

Question: Heather Jones - BB&T Capital Markets - Analyst : Okay. Okay. Thank you. Congratulations again.

Question: Eric Larson - Soleil Securities - Analyst : Yes, good morning, everyone.

Question: Eric Larson - Soleil Securities - Analyst : Grain prices up as high as they are, can you -- you know, obviously you're going to have the finance these inventories, can you give any idea of what -- how your financing costs might look in 2H? And what is your incremental financing rate for crop inventories?

Question: Eric Larson - Soleil Securities - Analyst : Yes. No, I'm less concerned of your ability to finance it. What -- interest expense, what do you think the incremental increase in interest expense could be over the next six months or so?

Question: Eric Larson - Soleil Securities - Analyst : Right.

Question: Eric Larson - Soleil Securities - Analyst : Absolute basis.

Question: Eric Larson - Soleil Securities - Analyst : Sure. We talked a lot about the wheat basis this morning. But the corn basis, particularly just a month ago was very, very wide. And that incrementally has to be of value as well. Can you give me any more flavor of what you're looking out on the corn basis going forward?

Question: Eric Larson - Soleil Securities - Analyst : Yes. No, there's no doubt. The only issue with corn right now is it's actually maturing a little bit too quickly. So already a lot of it's already dented in July. We've never seen corn dented that early. So I guess the question --

Question: Eric Larson - Soleil Securities - Analyst : There might be some areas in the north that are harvesting not too far away from Labor Day which is basically unheard of.

Question: Eric Larson - Soleil Securities - Analyst : It will.

Question: Eric Larson - Soleil Securities - Analyst : Yes, it's the same old story, it's just a different -- it's just a different month for the same old story, right?

Question: Eric Larson - Soleil Securities - Analyst : All right, thanks, guys.

Question: Brent Rystrom - Feltl and Company - Analyst : Yes. Hi, guys, how are you? My congrats as well. A couple of quick questions for you. When I was out there a couple of weeks ago, we were talking about, down in Hart and Logan County, Hancock, starting to see the effects of the nitrogen leaching, particularly on those corn stocks. I would assume that you're feeling pretty good about fertilization sales. I'm wondering, are your agronomy centers seeing guys start to lock in prices right now, particularly what's going on the last couple of days with pricing?

Question: Brent Rystrom - Feltl and Company - Analyst : Okay. From a regional perspective, looking basically in the three states the core of your company operates in. I'm kind of doing a back-of-the-envelope pricing, but where wheat is right now, it looks like for a farmer it could be as much as 40%, 50% more profitable, not from a revenue perspective but when you consider all the inputs. Has that happened historically in your region? And when it has happened, have you seen massive shifts in kind of the percent of planting to various crops? Have you seen those shifts significantly --

Question: Brent Rystrom - Feltl and Company - Analyst : You'd have to come back to like '73 or something, right?

Question: Brent Rystrom - Feltl and Company - Analyst : You mean beyond the 4 million rolling off in September?

Question: Brent Rystrom - Feltl and Company - Analyst : Yes. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies.

Question: Brent Rystrom - Feltl and Company - Analyst : Out of curiosity, are you guys seeing any discussions, you know, what we've been seeing here in the upper Midwest is test weights down in the 51-pound kind of range for corn. Are you guys hearing anything about how the corn is looking this year relative to --

Question: Brent Rystrom - Feltl and Company - Analyst : All right, so the test weights should recover back maybe to 55, 56?

Question: Brent Rystrom - Feltl and Company - Analyst : All right. All right. And then just a broad-based question but I think kind of an interesting one given the investment in LTG, obviously they tend to go a little more long and short on these things. How are they feeling about these moves in the last month?

Question: Brent Rystrom - Feltl and Company - Analyst : All right. And then final question, I know they operate geographically a little broader area, have they had any particular benefit from the soybean shortage in Eastern Nebraska and Western Iowa?

Question: Brent Rystrom - Feltl and Company - Analyst : All right. I'll follow up with you.