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Green Plains Inc (GPRE 1.13%)
Q3Â 2020 Earnings Call
Nov 6, 2020, 11:00 p.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Operator
Good morning and welcome to the Green Plains Inc. and Green Plains Partners Third Quarter Earnings Conference Call. Following the company's prepared remarks, instructions will be provided for Q&A. [Operator Instructions]
I will now turn the conference call over your host Boggs Senior Vice President, Investor Relations and Treasurer Mr. Boggs. Please go ahead.
Phil Boggs -- Senior Vice President, Investor Relations and Treasurer
Good morning and welcome to Green Plains Inc. and Green Plains Partners third quarter 2020 earnings call. Participants on today's call are Todd Becker, President and Chief Executive Officer; Patrich Simpkins, Chief Financial Officer; and Walter Cronin, Chief Commercial Officer. There is a slide presentation available, and you can find the presentation on the Investor page under the Events and Presentations link on both corporate websites.
During this call, we will be making forward-looking statements, which are predictions, projections or other statements about future events. These statements are based on current expectations and assumptions that are subject to risks and uncertainties. Actual results could materially differ because of factors discussed in yesterday's press releases, in the comments made during this conference call and in the Risk Factors section of our Form 10-K and 10-Q and other reports and filings with the Securities and Exchange Commission. We do not undertake any duty to update any forward-looking statement.
Now I'd like to turn the call over to Todd Becker.
Todd Becker -- President, Chief Executive Officer and Director
Thanks, Phil. And thanks everybody for joining the call this morning. For the quarter we reported a net loss of $34.5 million or $1 per diluted share. This loss included a $13.8 million non cash tax adjustment related to charges in our deferred tax assets. Without that non cash adjustments, the net loss would have been much narrower or closer to 60 cents a share. More importantly, we are free cash flow positive for the quarter including another strong quarter of cash distributions from green plains Cattle Company. We reported 8.8 million and adjusted even though for the quarter. And our consolidated crush margin was eight cents a gallon which included almost six cents a gallon of negative absorption from plants that were shut down due to regional market conditions, Project 24 upgrades and normal scheduled plant turnarounds are plants that were operating earn almost 14 cents a gallon consolidated crushed margin as the completed project. 24 upgrades helped improve the whole portfolio. We look forward to the completion of all our upgrades which should reduce plant downtime that affected this quarter. Another impact of q3 was the movement of sales from this quarter to q4 and q1 of industrial alcohol from York, Nebraska, that customers elected to wait to receive USP great alcohol as our upgrade is almost fully completed.
This not only solidified our sales book but expanded it as well. I'm happy to report that we have begun to make USP grade but not just not just at the maximum rate yet. We expect to achieve full rate by late December. When we take all this into consideration. q4 is looking to be better than previous quarters based on current market conditions, higher operating rates, less negative absorption, and the completion of your upgrade. We are trying to do what we can to lock down the quarter with a more active hedge program. So as you can see, there's a lot of noise in our numbers but generating precaster all of that is what we are trying to accomplish as we achieve our path to 2023. Let me take a minute to review the accomplishments on the total transformation that we achieved that we have achieved over the past few months, including enhancing our liquidity which we expect to help accelerate our transformation. We were excited to close on our met on our $75 million protein financing with MetLife during the quarter and continue to have ongoing discussions with additional parties to finance the balance of our protein initiative. We believe this will result in more financing alternatives that way than we have seen in the past and secure our path to transforming our platform. As we recently announced we also sold the remaining 50% interest in our cattle business for $80 million. While we strongly believe in the future of this business, we are utilizing this capital to invest in a more creative and predictable earnings streams. When combined with a $75 million MetLife financing, as well as the estimated $56 million tax refund we expect to receive from the IRS in the near future. We expect to have over $200 million in incremental liquidity to fund the protein build out including our strong cash position. You can see we're in great shape financially, maybe the best shape and yours are turned up limited to our convertible bonds and some project based financing.
And with that said we are basically net termed at zero. In addition other than security for our MetLife loan, none of our assets are encumbered or used as any collateral for any financings. During the third quarter we were also pleased to break ground on our wood river ultra high protein projects and their second installation and we are excited to have them join Shenandoah and producing value added ultra high protein upon us expected start late q2 2021. We are off. We have also announced that we have chosen to buy in Tennessee location to be our third facility to receive the flu equip MSC technology, which will bring our total capacity with flu Eclipse technology, over 200,000 tonnes and behold ultra high protein annually. We want to thank the state of Tennessee as well, especially the governor's office who have motivated us to finish to do this project. And we will continue to work with them to get this up and running as quick as we can. At an estimated initial 15 to 20 cents a gallon uplift we will be adding 45 to 60 million in incremental e VA from just these three locations. Buying has been one of our best and most profitable locations over the years. And this technology will firmly cemented as a top performing biorefineries if not the best performing in our company in the industry. The $60 million Orion project is expected to come online by the end of 2021. We are also announcing that we are up further upgrading our York location to alcohol purities above USP.
While we expect your USP project to be completed in the fourth quarter, and have several customers excited to take that product, we believe that we needed to take the next step. We have contracted with the flu equip again to upgrade the York location to produce grain neutral spirits or GNS, which firmly establishes that location is a long term participants in various high value alcohol markets. Our Mount Vernon location is well under way with its Project 24 upgrade and is expected to be complete in the first quarter of 2021. We have also received word from the state of Illinois that our Madison location should receive its permit soon, allowing us to proceed with Project 24 upgrade at that site. Given the success we have seen at our other location, we anticipate meeting or even beating our platform our next target of 24 cents a gallon by the second quarter of 2021. But Project 24 is complete. So as you can see all these initiatives, we are continuing to execute on our strategy and are adding speed to our escape velocity to transform this company, and less than less than the reliance on the ethanol crush. During the quarter we produced approximately 180 9 million gallons of ethanol, which put us at a 67% utilization rates. margins have mostly been contained in the spot market and remain inverted in the future. We the weekly EIA data has been neutral to supportive toward margins, as production has maintained levels below 950,000 barrels per day range until this week, ball inventory stocks have been consistently around 20 million barrels. This stock number supports positive spot margins as well. But the weekly numbers are something we are watching closely.
Green plains partners continued with stable operations protected by long term minimum value commitments in place and benefit from the rate adjustment that went into effect in July. During the third quarter, we began to amortize the term loan we put in place in June and pay down 12 and a half million dollars of bad debt.
Now let's turn the call over the Patrick to review both green plains Inc and green plains partners for national performance. I'll then come back on the call to talk more specifically about our ongoing initiatives to transform the company to our gnf alcohol, protein and aquaculture initiatives and a little more on markets and policy in the election. Patrick?
Patrich Simpkins -- Chief Financial Officer
Thank you, Todd and good morning everyone. Green plains consolidated revenues were $424.1 million in the third quarter, down $208.3 million or 33% from the third quarter a year ago, driven primarily by lower ethanol production run rates as compared to the third third quarter of 2019. For the quarter, our run rates were 66.8% of capacity compared to an 84.2% run rate for the prior year third quarter. The difference in run rates between yours was primarily due to a combination of Project 24 upgrades and production adjustments for regional market conditions. Our consolidated net loss for the quarter was $34.5 million, slightly favorable to a net loss of $39 million in the third quarter last year. As Todd stated at the top of the call this loss does include a non cash tax charge of $13.8 million related to a valuation adjustment or deferred tax asset. adjusted EBIT da for the second quarter was a positive $8.8 million up from an adjusted EBIT da loss of $13.4 million for the same period a year ago. For the quarter or sgma cost for all segments was of $19.9 million was planned dollars higher than the $18.5 million report q3 of 2019. Adjusting for a one time benefit of $1.2 million and sgma in q3 of 2019 related to the reversal of property tax accruals sgma for q3 2020 is generally in line with q3 2019. consolidated interest expense for the company was $10.2 million, which was lower by point $3 million. Then the $10.5 million in q3 of 2019 due primarily to decrease In overall interest rates and slightly lower balances on working capital lines. on five nine of our investment deck, we present a summary of our balance sheet highlights, we had $226 million of cash and working capital net working capital financing at the end of the third quarter compared to $288 million for the prior year quarter.
The net difference is $62 million between q3 2020 and q3 2019. is attributable mainly to a change of cash of approximately $72 million primarily driven by our capital expenditure program, with the remaining variants resulting from changes to net working capital financing. The cash and net working capital amount for q3 2020 does not include proceeds from the recent sale of our capital business for $80 million. Our liquidity position at the end of the quarter consisted of $182.3 million in cash cash equivalents and restricted cash, along with approximately $349.8 million available primarily under our working capital version delayed term loan. This amount also includes $4.3 million available under the current credit facility of the partnership. Cap x for the third quarter was $21.9 million, including $3.4 million of maintenance capex with a balance of $18.5 million being allocated to growth capital primarily for Project 24 and our high protein initiatives. Given support of the MetLife loan agreement, we expect four year cap x to be closer to the upper end of our guidance of $120 million from 2020. This estimate includes $26 million of cap x spin related to our wood river protein installation.
The majority of obeisance capital expenditures for the announced protein technology installation will occur in 2021. For green plains partners, we had 189 point 6 million gallons of throughput volume at our ethanol storage assets during the quarter, which was down 49 million gallons at 21% in the third quarter of 2019 as a result of lower production rates at Green plains plants. However, as a result of the minimum volume commitment contracts with green plains trade the partnership build trade group for 235 point 7 million gallons of throughput. Accordingly, the partnership reported and adjusted EBIT da of $13.9 million for the quarter up slightly from the $13.3 million reported in third quarter of 2019, mainly due to a 6% increase in throughput rates charged by GPP offset slightly by other ancillary costs. For the partnership distributed cash flow was $11.3 million per quarter, compared to $11.1 million for the same quarter of 2019. On the last 12 month basis, adjusted EBIT da was $53.7 million, distributable cash flow was $45.2 million in declared distributions when $19.8 million, resulting in a 2.28 times coverage ratio. The coverage ratio was 3.97 times for the third quarter. Our coverage ratio excludes any adjustments for the 12 and a half million dollars in required principal payments amortize during the quarter.
I'd like to turn the call back over to Todd.
Todd Becker -- President, Chief Executive Officer and Director
Thanks, Patrick. So our total transformation plan is executing on all cylinders right now and has a multi pronged approach. Our goal to achieve 24 cents, or below of operating costs per gallon at expected utilization rates is within reach. And we anticipate hitting that mark during the first quarter, even before all the projects are done. Second, we have been focused on the high grade alcohol market. We have been able to quickly adapt our York production facility to serve as high quality customers such as Lysol and have continued to ship product during the year with strong contributions to our results. While there has been some shipping delays once our USP upgrade is complete, we expect customers to quickly execute on existing open contracts. Additionally, our wood river USP upgrade is now anticipated to be finished during the first half of 2021. Even more important is an upgrade to GNS that you are because of the design and quality already in place with the existing plant. USP upgrades are using some of the equipment Hopewell as well. We believe we can quickly get all the way to GNS opening the door to additional markets. We believe this will be an important step and as is added, as it is clear to us that higher quality alcohols produce longer term optics and better customers.
Third, and most importantly, their strategy to upgrade our bio refineries to produce sustainable ultra high protein at each of our locations. In a year where soybean carriers are shrinking and protein prices are screaming. We cannot move fast enough as this has been a 20 year trend of protein demand growth that is beginning to accelerate. In fact, this may be a record year over year growth in demand and the risk is truly there won't be enough. Even with our Obi an announcement as a third location. Don't be surprised if we are quickly back to announce additional locations as we seek ways to accelerate the rollout. Once Obiang is complete, we will be capable of producing over 200,000 tonnes annually. General at generating 50% or greater protein levels, we are very happy to announce that we are almost sold out of Shenandoah 2021 production to the pet food space and continue to work with customers and pet aquaculture and dairy to take the remaining production over the next few weeks. What we are producing is a better and higher protein with very unique amino acid profiles and characteristics and others are producing in the space. More importantly, our fiber and fat content is low which is extremely important in the pet and Aqua space. So that means all protein is not equal and are certainly has an interesting advantage we learn about every day. There's a lot of confusion out there, but I can tell you our customers are not confused. We are we are already establishing Shenandoah and green plains as the go to company for the highest quality control, quality assurance and lastly, consistency and quality of the product.
We don't believe we will ever commoditize what we produce. We have completed several aquaculture trials that are world class road class Aqua lab and Shenandoah and he's had some very interesting results and taste and rate of gain. We are starting several more as we speak for our for ourselves and customers who are also using our lab for trials. In dairy. We have very interesting amino acid profiles that have proven to increase milk yields and studies already. That's on top of the yeast benefits in our ultra high protein products. Finally, we have inclusion in all vege animal feeding diets as a custom consumer is tired of seeing animals being fed to animals, and our high protein products will help solve that dilemma. Which brings me to our partnership with novo designs and now Hi Ashley Connie that are going to distinguish our protein production from competing technologies and other proteins. We believe we can move quickly to higher protein purity levels, and even more important added nutritional upgrades unmatched by other technologies and producers. This all adds to our confidence that we're on the right path to transform the company and lessen the reliance on traditional ethanol economics. And additional benefits that often goes overlooked is that the protein production from the fluid cars process also increases corn oil capacity by an additional 50%. As a result, we could see our platform capacity increased from about 300 million pounds of porno production to over 400 and 50 million pounds. Much of our corn oil is sold as a low carbon feedstock into the renewable diesel industry.
And with the growth in that industry, we believe there is plenty of demand for additional corn oil in the market, which can lead to an uplift and additional margins as a result, as we are not just going to give this away and watch those markets earn outsized returns, and one of the lowest ci score feedstocks in the market even lower than soybean oil. For your information. corn oil is 27 to 30 ci and soybean oil is around 53 to 54. I believe this is not being paid attention to from a green plains valuation perspective. If you look at the margin per gallon that renewable diesel producers are achieving in the back of our feedstock when we produce over 400 and 50 million pounds, or almost 60 million gallons of low Civ feedstocks, that is a future opportunity of its own. Lastly, I want to touch briefly on how our recently announced IOC county partnership validate and support the long term direction of providing sustainable high value proteins and novel ingredients to support the growing global demand in human and animal nutrition. Last quarter, I talked a little about our wholly owned optimal Aqua venture and how our ultra high protein can serve as a high quality ingredient delivery mechanism. Partnering with heishi County proves just that in trials already we have seen our ultra high protein product in combination with hi Ashley Connie technologies provide potential Aqua feed solutions that meet the specific needs of our as customers challenged by their species selection water quality and infrastructure, allowing us to better tailor products for improved feed conversion ratios and better cleaner tasting fish and seafood consumer products. Additionally, we believe our protein will ultimately find its way back into additional markets through Hayashi Connie as well.
So what is all mean? We are focused on 2023 for a completion of our transformation. While that is a few years away, time goes fast and we continue to see real proof points of this happening. With that said we will define what that means and baseline 2023 earnings for green plains. When protein upgrades are completed, we will be producing over 700,000 tonnes of ultra high protein with a baseline earnings at 50% protein of 150 to $200 million of baseline EBITDA, that is on a capital investment of approximately 400 to 400 and $50 million. And on top of that York and wood river USP GNS production of 75 million gallons a year at a historical dollar to $1 50 Premium per gallon to fuel grade that would equate to 75 to 100 and $10 million of additional baseline earnings. On top of that, of course, is our project 24 benefits of approximately $80 million per year. But even with a zero baseline ethanol margin, we could we could achieve 225 to 300 and $30 million baseline EBITDA before you even add the fuel margin on top of that. Even more exciting to these numbers is the fact that we are producing higher protein purity already, which only increases these numbers. For example, we believe when we hit 55% protein, this adds another 70 million to 100 million in earnings over the 50% protein baseline at 58% protein, another hundred and 70 million over the 50% baseline and at 60% protein based on the current market market for 60% protein products, such as fish meal, and additional 300 and $70 million over 80% baseline.
These are based on additional markets that are trading today. And all of this is outlined in the slides in the deck. I will give you an example at 60% protein if you use 1200 dollars a ton replacement cost that is over $1,000 time premium to the traditional distillers grains today. For each hundred dollars a tonne. That equates to a six cent a gallon uplift to margins, or almost 60 cent a gallon total uplift in total margins at 60% protein that is not pie in the sky. We have the capability today, as we speak to mechanically produce 54% protein at Shenandoah, and effect have produced on average of over fit of over 52% mechanically separated only protein already over the past three months. The importance of our partnerships with everyone from Novozymes to hash economy, to our exclusive pet food relationships all give us confidence, we can produce unique value added ingredients. And it's as it's not just all about the protein that will transform our earnings power of green plains. And we are working on other partnerships as we speak. And we'll be excited to announce each one of them as we complete them. We are thinking very differently about this and expect to achieve escape velocity of the J curve that we've previously previously discussed with you. Finally on this topic, think about what is happening if you look at traditional processing that is taking place a corn wet Mills, these plants owned by some of the biggest agribusiness and food companies in the world.
They produce over 200 products from each kernel of corn. A traditional dry mill for perspective produces three ethanol distillers grains and corn oil. What we have discovered is how to isolate a high protein fraction from the corn kernel, giving us a real fourth product was significant value. And now USP and GNS alcohol giving us five and six, only 194. Other product opportunities exist for us to go after. And when we are done with this one, we can pick and choose the next highest value in the corn kernel. And I can assure you there are companies and technologies that will emerge from this thought process. And we expect to be one of the leaders pursuing this path. I'm sure nobody has put it this way before as a focus. It's always been ethanol, ethanol ethanol, but I think there's a dramatic shift coming to the dry milling industry. Once again, our employees continue to inspire my confidence in our transformation path. But I invite all of you to come see what is happening in Shenandoah York or wood River. And you'll get a complete view of where we heading where we are heading across the whole platform.
Thanks for joining the call today and we'll get started to q&a.
Questions and Answers:
Operator
[Operator Instructions] Our first question is from Adam Samuelson with Goldman Sachs.
Adam Samuelson -- Goldman Sachs -- Analyst
Yes, thank you. Good morning, everyone. Hey, Adam, how are you? I'm good, Todd. So I a lot of ground that was covered in those paired remarks. And maybe I'm just trying to think through the the EBIT da layout that you provided here. And I want to make sure that those numbers right so a $400 million total capital investment to reach that kind of 2024 run rate, run rate earnings, you think about kind of the value uplift on the high protein side. What do you think the upper limit like where he be clear where you are today in terms of both technology in terms of production, in terms of sales and where you have very clear line of sight between on the technology and customer formulation in terms of value realization?
Todd Becker -- President, Chief Executive Officer and Director
Yeah, so where we're at today is obviously Shenandoah is now producing at full rate, we expect So he's about four months start-up, we think wood river will take us about a month. So it takes a little bit longer as we're just learning how to use the system. where we're at today is is mechanically before we even kick in other relationships, we're producing an average of 52 to 53% protein as high as 54% protein. What's really important is what I said in the call, was the fact that we are almost sold out for 2021, out of Shenandoah, our pet food relationships are beginning to reformulate around these products and are starting to accelerate the demand. And we've seen that already. So while we're very excited about that, it's only one of our addressable markets. But actually, I think we're seeing more and more companies potentially start to reformulate around our products, our product is different than products that others are producing as well because of our protein purity, but also because some of the other characteristics so we focus on quality, quality, quality, but we are also innovating with these customers using our relationships with Hayashi, Connie and Novozymes as well. So we see the path, which is you know, when you think about the how the value chain works, it's obviously human nutrition first, which we don't think will hit right now there is an opportunity for that at some point in the future. But then it goes to pet food Aqua, and then everything below that.
So we're not even exhausting the Aqua space and are being sold out in one, you know, one plant and we think when we bring out a second plant, we'll probably hit the continue to sell out to the pet market and maybe a little bit more into Aqua. But we are also seeing a lot of interest in dairy as well. And it's really just a function of what is the substitution that your that your your product is being used for, for example, in our dairy customers they build, they're going to formulate around the level of protein, the level of yeast, the level of fat and the level of fiber, and then the amino acid profile. So we're not, when when we first talked to a dairy for example, they think, Oh, I'm just going to substitute for traditional distillers grains, and then they look at the product and and then look at themselves and say, no, this could be substituted for a blood meal, it could be substituted for other very high value, corn gluten meal type products. So we're very excited about that we're starting to see that as well in dairy markets, and it's all about level of protein, and how to reformulate so all of these numbers that we're giving you are really just replacement products in the formulation, I think, in 2021 will be on a path to a higher protein, consistent higher protein at Shenandoah. And our customers will formulate continue to formulate around those higher proteins and then you get paid for those higher proteins as well. So while you might sell a baseline protein of 50, there is scales above that much like you see in some of the wheat markets that you would formulate around as well.
So we're very confident around these numbers, we're very happy that we were able to get the forward sales on the books for Shenandoah, the repeat sales as well, that they can and we're very happy to see customers starting to formulate long term around those products on the on the label. So as we bring on more we believe every plant that we will bring on will have basically can be sold out if that's the way we choose to approach the market.
Adam Samuelson -- Goldman Sachs -- Analyst
Okay, and then if I get squeezed just one near term, ethanol market question in June, as we get into the winter and the slow driving season, how do you kind of have you see the supply demand relationship old and methanol inventories ticked off have ticked up a little bit off the lows but aren't that bad yet? But how are we? How are we creating this supply demand balance and pass utilization over the next three to six months?
Patrich Simpkins -- Chief Financial Officer
Yeah, I mean, I think right now we've probably seen the lows in the numbers on the EIA data for stocks, and probably production for a little while as we get into into winter driving. The interesting thing, though, is we're coming into the fourth quarter, really still at a pretty narrow level of stocks below 20 million barrels. A while we expect probably over the next three to four months as as driving may slow has historically slowed down, we would expect to see those stocks build the only difference this year is that obviously with COVID we continue to see draws almost done hopefully continued to see draws almost on a weekly basis as driving demand continues to pick up in terms of just week over week, you know, year over year, even in terms of people flying less. But I think what's also important is what we're not seeing in the numbers, which we believe is the expanded blend rates that are taking place with e 15 being rolled out in several states and even summit some of these demand that we're seeing increased from from blends as well.
That's not inclusive have a little bit of a continued export program pace overall. And we can potentially that could pick up over the winter if China decides to engage once and for all on on ethanol, of which we only seen a little bit a little bit of inkling of that but nothing I would I would make a bet on at this point. So I think overall, we probably go into winter like everyone expecting to see growth in stocks. And probably an uptick in in supply as well, in terms of production, as you run as plants that were running are probably running more efficient and better with the cooler temperatures. So overall, you know, overall, but if you look at the data, and you've plugged it into the models, this data still supports a positive spot margin. But that's all we're really getting as an industry, maybe spot to 20 to 30 days. And after that, you just have to wait and see what happens.
Adam Samuelson -- Goldman Sachs -- Analyst
All right, I appreciate all that color. I'll pass it on. Thank you.
Operator
Thank you. Our next question comes from Craig Irwin with ROTH Capital Partners.
Craig Irwin -- ROTH Capital Partners -- Analyst
Good morning, and thank you very much for taking my questions to talk. You know, I love the slide, slide number 10. From your presentation, it really lays out for us. The progress over the next few years that we can we can expect. But difficult thing from from our side is you didn't give us 2020. Can you maybe help us sort of sketch out? What the 21 increase is over 20 on an operating basis? Where are we at? With the chief savings on 24? The base USP and then different protein and and USP upside potential Can you can you just share the numbers with us now. So we see sort of the step up sequentially moving into 21.
Todd Becker -- President, Chief Executive Officer and Director
Yeah, I mean, I think we're gonna have a stronger finish to the year based on at least the spot ethanol margin, running at higher rates, moving some of our alcohol sales, high quality alcohol sales from q3 to q4, and q1, you know, that market has certainly changed over the last six months from really aggressively taking the low b grade. And a lot of those products that we saw probably didn't make it to market all the way through us increasing our quality of alcohol. So I think we're still gonna have a stronger finish. You know, on paper today, it would definitely be our best quarter, and could be a very good quarter for us. Again, we don't want to give very specific guidance except to say that it's definitely trending higher, and it comes through the final executions of our high quality alcohol, our protein, we still continue to have a good protein margin as well. So I mean, I think that we'll finish the year strong. I think when we look at the baseline going into baseline 2021, you can see that, you know, we're predicting some of the 20 Project 24 upgrades that come through. And that's a zero equivalent margin. And we'll just take the upgrades as the baseline margin, we've got on top of that, just a baseline USP at $1 premium, but the market is higher than that. We know that and USP upside is of beyond that the markets even on the higher side of that today, but there's a lot of USB coming on. So we're going to be conservative in our estimates going forward on predicting what high quality alcohols will be until we fully go to GNS, which we believe that at that point, we can, we can get longer term, even longer term contracts on.
But there's too much USP, I believe coming out to the market. But from from the standpoint of us getting there very quickly with York, because we already made 80% of what we shipped out of York was already USP grade, but the other 20% just didn't make it. So we would not sell USP as a company, while others would take the risk and do that and sell a lower quality and we weren't willing to, to substitute and take the risk of that. So it doesn't take much to get to the final stage of that. And even GNS. That's New York used to be a beverage facility Anyways, we're just putting it back in some of the some of that technology. So it doesn't take very much to get back to you GNS. But I think that's the long term what you have to go with all of your product, I don't believe that. I think USP will be the old b grade and GNS will be the old USP grade. And I think that's how the market is going to go. And so we're also seeing a lot of customers that again, initially, we saw delays in shipments because of the build up and some of the some of the stuff that was being sold into the consumer markets. But now we're seeing a lot of that clear the shelves and potentially stabilizes demand back to a better level. And then from there on top of that, obviously is if we get premiums over 50% pro 253 to 54 to 55 as we continue to finally start to execute on some of our other biotechnology upgrades.
And obviously the Hashi county partnership is very important. So I think what we've laid out is a small contribution from ethanol, a baseline contribution from alcohol, a good contribution protein as we're rolling it out. But even more importantly than that, obviously there's other parts of our business like our agribusiness segments and others that have contributed as well. So you know, I we just wanted to kind of lay out what like for life would be year over year uplift, and, you know, I think we'll finish 2024 stronger, or 20 I'm sorry, 2020 stronger. Again, lots of moving pieces, you know, cornmarket starting to rally a bit, but ethanol is keeping up with it. So So correlations are still high. And if we can, and I think just the stock number is something we have to watch at the ethanol industry increases production significantly or build stock significantly, obviously, that could pressure margins.
But at this point, we're still have a, a spot margin available to us. In addition, we're also seeing Craig an uplift in distillers corn oil values, decio values into the the diesel and biodiesel, renewable diesel markets, we are not willing to for contract at this point, at the same levels, we were we believe the market will continue to move higher for that product, our product is very important in in especially with some of the start-ups that are happening around renewable diesel. And when somebody is earning over $2 a gallon on a product that we're selling, because our CI score is so low, we're going to be very stingy with with who and what we sell and how far we go out on as well. Because there's other ways to skin that cat. So I think we'll just we'll watch those markets as well.
Craig Irwin -- ROTH Capital Partners -- Analyst
Great, great. So then, you know, high protein, can you maybe describe for us the breadth of field trials that you're doing right now? You know, I know you have your own sophisticated aquaculture lab and that they're doing great work to help educate your customers and show, you know, quantitative late, what HIePRO can do. But where do we stand right now as far as active trials and potential trials for products you're developing with no designs and other partners? And, you know, what's the body of work we need to see before some of these large potential customers start bidding much higher prices than than what we've seen. I mean, is there are there specific milestones you can share with us that we should look for.
Patrich Simpkins -- Chief Financial Officer
I think we're gonna do a lot more of that in the next several conference calls as we as we continue to get the results. We have ongoing Aqua trials today. Thus far every all the trials both commercially at customer sites, as well as in our lab have proven successful in terms of great of gain, taste, texture, and things like that using HIePRO alone or as well as HIePRO. Combined with our partners technology, we've seen better fillet colors already. In terms of what we're getting out of, you know, a traditional Aqua diet by using high protein ultra high protein that we produce in Shenandoah, we already are seeing that customers are seeing that they're already seeing better taste profiles, we'll get much more deep into the technology side of the business. In the next several quarters in q1. We are starting palatability trials continued our increases in palatability trials for pets, because I think this product will get fully the first several of our plants could fully stay into the pet food market. And they're really trying to innovate and reformulate around this product especially as we move into higher protein Remember, this is a yeast product it while we talk about protein, this is 25% yeast so we're really feeding it for yeast, a dried distillers yeast a high old inclusive of ultra high protein. Beyond that, we're gonna have our first yeast for Aqua and in the second quarter that's going on, we continue to work with every single one of our partners, whether it's dairy, whether it's Aqua, whether it's pet, on innovating around these products, and what that really means is that it's not just going to be around levels of protein.
We can sit there with a customer today with our partners from from Novozymes, especially in Hashi, Connie, and go to a pet food customer and say, what characteristics do you need? So that increases palatability or increases gain or it those type of things. And so, while people look at a nova zine to say Oh, nobody is just going to help you increase protein levels that's, that's very short sighted. I mean, basically today we're already mechanically able to produce 54. And working with our partners at fluid club, we believe week we're going to be able to mechanically increase before you even have to worry about enzymatic increases at all. And so really, it's about now bringing in the Nova zines library on top of that to help our Aqua and our pet customers develop and formulate products that can we can also innovate with them. And I think that's really where you start to think about the transformation of green plains. Look, if you think about a wet mill, as I've, as I gave you the example they still make ethanol, but nobody really cares about that. It's just a product. They make, because they have the other hundred and 99 products that they make are all very high value products. And I think that's where we're going to head and drive Millie over a long period of time, not everybody is going to adopt this. It takes a lot of capital.
And it takes a lot of commitment. I mean, you just can't roll out ultra high protein without having nutritionists without having sales teams without having marketing without having innovation without having partnerships, like we've announced and more that are coming, I can assure you. So I think we're really on a path. Look, in the meantime, we are transitory. You saw it last quarter, we ate a lot of negative cost absorption, I think we'll eat a lot less this quarter. In fact, I know we will. Going into 2021 as we continue to roll out, Project 24, our negative absorption continues to go go down, we really want to get Madison started back up. But we you know, state of Illinois is going to give us our permit to get Project 24 done and we haven't been running that plant, you know, we're still looking at our total portfolio to say is there things we would swap out and even within our portfolio as well, things that don't really fit. And and there is still a market for ethanol plants, I can tell you we've seen active participation in some more active partition participation in the long term thinking about ethanol, and I don't think anybody's transacting at this point. But if you think about even ethanol, its contribution to renewable diesel, there's a lot of there's a lot of potential partnerships that are going to take place there as well. So look, I, as I said, we are transitory, it's going to take a little while we're gonna have a lot of noise, we are in some of the best financial shape we've ever been in, I think we'll have plenty of access to capital that we will need to build out the rest of this high protein. And we continue to talk with with partners on that.
And, you know, I think we're on a really good path, notwithstanding the fact that we're going to have noises in quarters like this. But if you think about this quarter, what's the most important thing we've generated free cash flow, you can look at all the numbers or accounting numbers, you could put in a quarter like that we were positive EBITDA and cashflow positive. That's a good place to be. Well, congratulations on on the execution, the difficult environment. And we look forward to the hypro progress, and all the other initiatives. Thanks.
Craig Irwin -- ROTH Capital Partners -- Analyst
Thank you.
Operator
Thank you. Our next question comes from Ben Bienvenu with Stephens. Please go ahead.
Ben Bienvenu -- Stephens -- Analyst
Hey, good morning, everybody. Good morning. I've got one short term question and one long term question. On the short term question, the the six ounce of negative absorption, you called out three buckets of the scheduled maintenance, the project 24 upgrades and the regional market conditions Anyway, you can size those within the sixth sense. And then tagi kind of teased this in the last answer. But you know, how much of that six cents should we expect to linger in the fourth quarter? Or is all going away?
Todd Becker -- President, Chief Executive Officer and Director
Yeah, I was coming on. And Patrick will comment on more of that. But one thing I think we also missed this, some of our quarter was impacted by the role of our high quality alcohol from quarter to quarter. I think that was part of it. Bella Patrick talked about the other three buckets. Go ahead, Patrick.
Patrich Simpkins -- Chief Financial Officer
Yeah, I think generally, as you break down the absorption, two thirds of it is, is plants purposely offline relative to market conditions, a third element to project 24. However, when you think of that other two thirds, remember, these plants will actually get Project 24. So if you're thinking about it, in terms of future, those are plants that actually would have been on that negative sorption would not have been there had they had Project 24, which in fact, they will. So so it's a it's a little bit of chicken and egg. I mean, if you just look at the strict numbers with respect to q3, that's the breakup. But when you think about actually layering on Project 24, that negative absorption effectively goes away in 2021. Got it? Okay. My long term or intermediate term question is as it relates to HIePRO, and the financing of these projects, just based on the current pace, which is at a solid pace of getting these projects up and going.
Ben Bienvenu -- Stephens -- Analyst
It seems like you could kind of get to sell funding by mid or late 2022. Is that too early? Is that a realistic timeline? How are you thinking about the threshold at which you'll start to be able to self fund these projects?
Todd Becker -- President, Chief Executive Officer and Director
Yeah, if we if we go slower, we could probably sell fund the projects by the middle of 2022. But it also depends on the protein price if the if we move up the J curve quicker, they sell fun quicker, but we want to build them quicker. I think our goal would be to get obviously wood river done, O'Brien done and we want to get a fourth or a fifth even done in 2021. So that would be five total done. Try to do five the next year. Those probably kind of sell fun themselves, but they, they will probably need some excess funding as well. So that we want to move as fast as we can because the demand is so deep Remember, the numerator for World protein demand is 325 to 350 million tons. By the time we get there, that's that's our the denominator without denominator. That's what we believe the mart addressable market, we will be able to go into if green plains build out their total build out their total platform, we're going to add 700,000 tons of supply total into a 12 to 15 million tonne, growing market per year on a 325 to 350 million ton total addressable market. And so you know, we can't build it fast enough.
And our customers are telling us, you can't build it fast enough. You need redundancy, and you need volume, so to reformulate, you have to have volume and redundancies. And so we're talking to major feeders major industry participants that they don't want 40,000 tonnes from Shenandoah, they want 250,000 tons a year. And they won't, they won't reformulate until you get volume, and you get redundancy. And that's why we can't move fast enough. So while we could certainly start self funding, sometime in 2022, obviously we want to be well under construction projects five through 10 by the time we get there.
Ben Bienvenu -- Stephens -- Analyst
Yep. Okay, great. Makes sense. Thanks.
Operator
Thank you. Our next question comes from Ken Zaslow with Bank of Montreal.
Ken Zaslow -- Bank of Montreal -- Analyst
Thank you guys. Okay. So when you get through these projects in, you know, over the next, you know, three, four years, what's the end game? Are you looking to just stay as is and just kind of run this in, or expand or be sold? Like, what is the end goal here, as you develop this, you have a very concrete plan that has a an end to it. And then what happens after that?
Todd Becker -- President, Chief Executive Officer and Director
Well, I think that's just to get you to all of our plants built out. But that doesn't include additional value added from optimal Aqua as well. So I mean, we want to be an end to end solution for customers that are growing, the growing demand in in, in diet and protein around the world. I mean, we don't want to make, we don't want to grow the fish necessarily, but we want to as we see the increase in inland fish production, they're going to need unique products to continue to innovate, and what they do as well. So I think what you're seeing number one, the question is, how far do we go up the J curve on protein. And then number two, what products move on the next level of formulation. So I mean, optimal Aqua, which we've talked about is all about, you know, feed production ingredient production and innovation, especially with the highest economy partnerships. I mean, somebody needs to meet the challenges of RF, and there's not a lot of innovation that's taking place. In addition, somebody has to meet, somebody has to meet the challenges of the fact that when you grow agriculture systems inland, there's a taste challenge. And we believe that's the importance of our partnership with with our cut our highest makhani, as well as NOAA designs that we already believe we have products to address some of those today.
So while certainly you have to have your base load of products and your base load of earnings, there's there's addressable businesses beyond that, which we're already starting to build with our partners. So, you know, I think it's more of let's get this done first. And obviously, on parallel path, we're building an ingredient, production business as well and innovation business, because you have to do both at the same time, where it leads if we can get all the way up to the top of the J curve. And you know that you know, that that number, obviously, is very large. And on top of that you can continue to innovate ingredients. I just think there's Canas, you know, and you've seen it in soy crushing. There's a big protein hole in the world today. And there's not enough protein production in the next five years to meet it. And you're seeing it play out this year, as China in steps up their purchases, you know, you have a very good chance of having not very many soybeans left in United States, and maybe not a lot of meal left in the world to sell.
And I think that's, that's the, if you think about it, there's not a height a soybean crushing plant isn't innovating the higher proteins like we are today, so we're not just filling the fit 48% protein gap that's existing and that's why so I crushed margins have enjoyed the last five years of demand pill pull from protein and probably enjoyed the next five years after that. we're innovating to higher proteins, and you're not seeing that anywhere else in any other industry today.
Ken Zaslow -- Bank of Montreal -- Analyst
Getting another question just the short term, what percentage of the capacity do you think will not come back? After we get through all this, you have heard a variety of answers and curious to see what your answer would be?
Patrich Simpkins -- Chief Financial Officer
Well, there's a lot of capacity, this can still probably come back if the demand increases. And so you know, if we get into thinking about the politics of what we're seeing today, you know, there's a president today that is in office that favors the internal combustion engine, which I think is good for green plains a good for the Iowa farmer. And there's a potential President if the other guy wins, that favors obviously easy, but I think also favors a low carbon fuel standard, which potentially means less. Left gasoline, but more ethanol, because because what you're seeing today is ethanol is reducing seeis all over the place, whether it's through carbon sequestration, whether it's through what we're doing on Project 24, which already lowered RCI scores, and less energy use, less water use, or even our ability to supply renewable diesel with a very low ci, corn oil. I think what we're seeing is that, as the economies recover around the world, and people drive more, they're still, you know, 200 and 50 million internal combustion engines on the road and, or more in, in the US and all over the world. And while Evie is coming, I think, depending who makes who comes into office, it's all probably pretty good for ethanol demand longer, you know, at least for the next three to five years. In either in either party.
But But more importantly, you know, I think what ethanol will become part of is potentially potentially a California s global carbon fuel standards movement. But albeit, that is an expensive thing to do. And we'll see if that really happens. But I think overall, as the economy recovers out of COVID, and we get back to more normal driving patterns and more normal demand, and I think we'll get there, obviously, I think that's all probably pretty good for supply for demand growth for ethanol, especially with higher blends. But don't don't don't, let's not get ourselves. The ethanol industry has capacity, and they can move very quickly with that capacity. And and hasn't shown a lot of discipline over the years. But maybe this time, we will.
Ken Zaslow -- Bank of Montreal -- Analyst
Great, thank you very much.
Operator
Thank you. Our next question comes from Jordan Levy with Truist Securities.
Jordan Levy -- Truist Securities -- Analyst
Tried to touch on something you just hit on as well, as kind of projects when the floor gets wrapped up. And what that does to the carbon intensity of the plant. And the fuel coming out of it is there potential there to, you know, target specific markets on the fuel ethanol side, whether it's you looking to get those to California and realizing the uplift pay or something along those lines, or to the economics just, you know, make sense to just sell the way you guys normally do?
Todd Becker -- President, Chief Executive Officer and Director
You know, what we've seen is, is the traditional ethanol industry made too much low ci for the, for the California market, and gave away a lot of that margin, I think that's ltfs, spreads, potential spreads, then there probably won't, there'll be an opportunity to earn more of that margin back on those ci scores. You know, today, we're focused more on protein and protein development and let f and I'll be what ethanol is, and it'll be a contributor, but it won't be the story. And so we're not going to spend a lot of money right up front on deciding if we want to just be the lowest ci producer, because that really hasn't paid off. yet. Although there are several co2 projects that are starting to take shape. We've seen them in Texas, we've seen some up north, and I think that'll help lower the CI scores a lot. But again, it's gonna be about discipline. And where does the margin go to I think what we've seen is obviously in, in bio and renewable diesel, they keep a lot of that. And ethanol, we haven't been able to, but because we just made too much. So, you know, overall, we're not going to put our bet around low ci, as much as we are about putting all of our future into, into into protein and innovation. You know, we have a big economic is a very classic ESG industry that doesn't get any credit for we use less power, we use less gas, we use less water, and we do a horrible job of selling our ESG story to the world as an industry and we're trying to change that. And I think the industry needs to start to change that because we are really the lowest carbon fuel One of the lowest carbon fuels produced in the world today, and get no credit for that because our story was hijacked, as you've heard me say in the past. So we're gonna try and do a lot more around our ESG story.
And what we're doing at Green plains is so significant. even think about protein, let's go back to protein and talk about ESG. And what we're doing. Remember, the more we replace our product into agriculture, and you think about land use, it takes a little over one pound of feed to make one pound of gain in agriculture, versus the cattle business we just sold, it's like five, six pounds of feed, to make one pound of gain and think about the land use, reduction and making protein out of our high protein products that we can even discuss as part of our story. It's a pretty big part of the story.And I think that's part of the reason why we have such attractiveness from not only our customers, but potential investors and even financing around our lower lower ESG or better ESG story. And I think you're gonna see more and more of that come out, especially out of green plains. And we're excited to tell that part of the story, but I think it's a land use, play around ESG with this high protein as much as it is.
And I would put my investment into that before I just think seaflo ci tours is the way that is the way to Nirvana. So totally makes a lot of sense. And then just as my follow up on on the optimal, and the recent agreement as well, on the agricultural market. In terms of the high protein, you know, how how the plants roll out, is there by Is there a time where you get to that point of, you know, redundancy in volumes where you know, you're at the scale you need, or is that something that can be done, you know, as wood river gets brought online, and you don't, you don't need a ton of plants online to really target specific customers in that market.I mean, I'll give you an example. It really just depends on how many products that were going into. But for example, one of the largest poultry companies really doesn't even notice you until you have 1000 tonnes a day of something as an industry. And today, you know, the US ethanol and our a we don't across all of our plants and others that are building, we're getting closer to 1000 tonnes a day. But that's just 800 to 1000 times a day, that's just one customer. And so I don't know that we'll ever get to a point and or even need to get to a point where all of our plants have to be running. But I will tell you, the more we produce, the more we see inclusion rates.
And you know, we can't really even get into big time animal production systems with our product because we don't have the redundancies and and green plains are our first three or four or five plants could end up in pet and maybe in the UK Well, before we even get into other markets, although I will tell you, we are developing the other markets and would sell those markets as well. And I think we will do some of that, especially dairy, there's really a big dairy impact in terms of meat milk yields from our refining levels and our amino acid levels that we're already seeing milk yields go higher. And we can already replace high value products like like a blood meal or something like that, and dairy. And so we've run we worked on the Cornell studies, you know, this is a this is truly what we think is traditional dairy feed just has soy pass in it because of the way that it's structured.
This has actually performed better than soy pass and dairy trials as well. So you know, we're very excited about it, I think that it's going to be even our 700,000 tonnes doesn't make a dent on the world protein demand or world protein supply, but it makes a dent on our company. And as an even if the whole industry rolled this out, which I don't think they will, because I think it takes billions and billions of dollars to do that. So take a long time. Even if the whole industry rolled this out, we probably produce somewhere between 7 million and 8 million tons total as an industry in a 15 million ton growing demand per year. So we can only produce as an industry half the total demand growth in protein per year. And I think that's why we're so excited about this. And again, it's just like if you think about a windmill, there's 100 and 200 products and we're gonna have five and six now. And one of those products competes with what you know some of the high protein that they do, but the demand is so big.
Jordan Levy -- Truist Securities -- Analyst
Okay, Thanks so much. colors.
Operator
Thank you. And our next question comes from Eric Stine with Craig-Hallum.
Eric Stine -- Craig-Hallum -- Analyst
Hi, everyone that you've covered a lot so I just I'll just go with one but you mentioned a USP and that your can be upgraded DNS, just curious and thoughts on doing that at wood river and when you may, if you do that when when that may come online.
Todd Becker -- President, Chief Executive Officer and Director
Yeah, I think from the industrial alcohol business upgraded GNS is necessary, especially at at York because the cost, it just doesn't cost very much because it was already a beverage grade facility. And our quality of our product is so good even before we do anything that we know we'll get there very quick with some of the highest quality and and hopefully at that point, now we're going to protect the relationships for sure that we have the customers that have really helped us along as we develop this, you know, they're going to have long term potential. And we're going to really try and make sure that we maintain those relationships first, but I think beyond that, I don't see us hiring a bunch of GNS salespeople. I think we'll work with other companies that that do this. And we're talking to others about just basically using their their distribution channels, because I don't see, I don't see, again, putting a bunch of GNS salespeople out there. But I do believe that will participate in some of those end use markets that that take this highest quality market or highest follow alcohol, whether drinking or pharmaceutical, or, or even or beyond that.
In terms of wood river, we're going to we're going to go to the USP first. You know, let's see how we do in the GNS market. There's plenty of USB demand and consumer products today that we're seeing that are I'm sorry, USB demand that we're seeing consumer products today. And we have a lot of these major CPG companies that have done business with us now that are waiting for the upgrade in wood river as well. So I don't think we need to go all the way there because it's going to be costly to do that. If we see the value to to do that we will again the benefit for us was the fact that York was already a beverage great facility at one point and make such a high quality product already. That our path to GNSS is much faster and cheaper than it would be taken taking wood River.
Eric Stine -- Craig-Hallum -- Analyst
That's very helpful. Thanks. All right, thank you very much.
Operator
Thank you. And so I'm not showing any further questions in the queue.
Todd Becker -- President, Chief Executive Officer and Director
All right, everybody, thanks for coming on the call. I know we talked a lot, probably spend a little more on on on our future, then we have in the past in terms of outlining the numbers, but I think it's important for everybody to see that there's a lot of other information around page 10 that we'd love to share with you. We continue to make great progress on our on our sales programs, and the interest and innovation and again, a lot of transitory stuff going on as well. But we're on a path and we believe in the path. And I think we're gonna accelerate this as quickly as we can to transform and and and hopefully you can read back through what we what we presented today. And any questions please give us a call. And we're very excited about the future. So thanks a lot for coming on the call today and we'll talk to you next quarter.
Operator
[Operator Closing Remarks]
Duration: 63 minutes
Call participants:
Phil Boggs -- Senior Vice President, Investor Relations and Treasurer
Todd Becker -- President, Chief Executive Officer and Director
Patrich Simpkins -- Chief Financial Officer
Adam Samuelson -- Goldman Sachs -- Analyst
Craig Irwin -- ROTH Capital Partners -- Analyst
Ben Bienvenu -- Stephens -- Analyst
Ken Zaslow -- Bank of Montreal -- Analyst
Jordan Levy -- Truist Securities -- Analyst
Eric Stine -- Craig-Hallum -- Analyst
