Q3 2025 Earnings Call Transcript

Good morning, and welcome to the ADM Third Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded. I'd now like to introduce your host for today's call, Kate Walsh, Director, Investor Relations for ADM. Ms. Walsh, you may begin.

Welcome to the third quarter earnings conference call for ADM. Our prepared remarks today will be led by Juan Luciano, Chair of the Board and Chief Executive Officer; and Monish Patolawala, our EVP and Chief Financial Officer. We have prepared presentation slides to supplement our remarks on the call today, which are posted on the Investor Relations section of the ADM website and through the link to our webcast. Some of our comments and materials may constitute forward-looking statements that reflect management's current views and estimates of future economic circumstances, industry conditions, company performance and financial results.

These statements and materials are based on many assumptions and factors that are subject to numerous risks and uncertainties. ADM has provided additional information in its reports on file with the SEC concerning assumptions and factors that could cause actual results to differ materially from those in this presentation and the materials. Unless otherwise required by law, ADM assumes no obligation to update any forward-looking statements due to new information or future events. In addition, during today's call, we will refer to certain non-GAAP or adjusted financial measures.

Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures are available in our earnings press release and presentation slides, which can be found in the Investor Relations section of the ADM website. I will now turn the call over to Juan.

Thank you, Kate. Hello, and welcome to all who have joined the call. Please turn to Slide 4. Today, ADM reported adjusted earnings per share of $0.92 and total segment operating profit of $845 million for the third quarter. Our trailing 4-quarter adjusted ROIC was 6.7% and cash flow from operations before working capital changes was $2.1 billion year-to-date.

With a challenging industry-wide operating environment, we remain flexible, adapting plans where needed, taking action on what is in our control and investing for long-term growth. A key part of this dynamic environment relates to the status of highly anticipated U.S. biofuel policy. We believe progress on this front will drive significant biofuel and renewable diesel demand and lead to elevated pricing, volumes and margins across several of our key operating areas, which we expect will set up a constructive environment over the long run. But based on the current short-term environment, our AS&O business is significantly impacted.

Against this backdrop, we have made good progress with our self-help agenda. We made strides in improving our plant efficiency. We've entered into numerous strategic transactions, which advance our portfolio optimization objectives, and we are accomplishing cost savings through several targeted streamlining initiatives. These actions have generated robust cash flow this quarter and strengthen our business going forward.

Our strong balance sheet, driven by a disciplined capital allocation process, give us flexibility to invest for growth and continue to return value to shareholders. Following our second quarter earnings call, we announced our 375th consecutive quarterly dividend. Please turn to Slide 5. Let me share some specific examples of how our team continues to drive simplification, optimization and execution excellence across our segments through our self-help agenda. For Ag Services and Oilseeds, results for the third quarter were sequentially in line and aligned to the expectations we set out in our second quarter earnings call.

The team continued to focus on operational excellence, which was reflected in crush volumes increasing 2.6% sequentially and 2.2% compared to the third quarter of last year, albeit in a lower-than-expected margin environment. Our Ag Services subsegment executed a robust export program during the quarter, supported by strong corn and meal programs. We achieved the best total export volume for the month of September since 2016, which helped offset some of the weakness we experienced in our crush business. For Carbohydrate Solutions, the business delivered sequentially steady results overall with lower global demand for sweeteners and starches, offset by strength in ethanol pricing and exports.

We achieved a key milestone in our decarbonization strategy, connecting our Columbus, Nebraska dry corn mill plant into Tallgrass's Trailblazer CO2 pipeline and are commencing CO2 injections. This marks the second ADM facility that is reducing its carbon footprint by CO2 sequestration. And for Nutrition, the team drove another quarter of sequential improvement, led by our Flavors and Animal Nutrition portfolios. Flavors North America achieved record quarterly revenue in the third quarter and Flavors internationally recently won a notable contract that is connected to a deep AS&O customer relationship.

We're engaging directly with major customers of AS&O and Carbohydrate Solutions on our Nutrition portfolio, highlighting the power of our interconnected value chain. Our Specialty Ingredients subsegment is expected to benefit from the Decatur East plant being back online and consistently producing white flake. During the quarter, we announced network simplification in Specialty Ingredients to streamline our production footprint, and we expect results to improve as this takes hold and we build back our third-party sales business. Within our Animal Nutrition portfolio, our turnaround continues to deliver better results with more progress to come.

In Q3, we announced plans for a North American animal feed joint venture with Alltech to further transition our Animal Nutrition business into higher-margin Specialty Ingredients, and we expect this JV to commence operations in 2026. Through these efforts and several other initiatives we have undertaken this year, we remain on track to achieve our targeted $200 million to $300 million in cost savings in 2025 as well as our aggregate cost savings of $500 million to $750 million over the next 3 to 5 years. Strong cash management allows us to continue to invest in areas of innovation where we see attractive growth potential.

For example, we are developing the next generation of flavor systems for our growing energy drinks portfolio. Our cutting-edge energy emulsion technology provides enhanced product stability, consistent quality and a simplified supply chain. Additionally, there is a strong demand momentum behind our natural colors portfolio, and we are exploring accretive opportunities to expand both products and geographies in this business. Another area of attractive growth for us is postbiotics, where ADM is investing in innovation.

Recently, we were honored with an innovation award at a global premier trade event for our proprietary postbiotic formulation designed to support human immunity and digestive wellness. We also launched our second pet-focused postbiotic. These are examples of the diverse in-house research and development expertise we've developed in the biotics space. We're also underway with advancing ethanol production performance improvements.

Through close collaboration between R&D and operations, we've implemented advancements that are delivering improved yield gains. Rollout to additional plants is in progress and further enhancements are in testing designed to drive ongoing optimization across our facilities. We're also investing in side stream valorization as part of our continuous efforts to optimize our production processes and add value to our byproducts. As we close out 2025, we will continue to action our self-help agenda while adapting to evolving trade policy and remaining flexible to offset the impact of challenging dynamics to the best of our ability.

Given the deferral in U.S. biofuel policy and other global movements, it is difficult to predict the timing of when we will see a structural increase in biofuel demand. As a result, we are lowering our expectations for full year 2025. We now expect adjusted earnings per share to be between $3.25 to $3.50, down from the approximately $4 per share as we discussed last quarter. Monish will review this in more detail. Overall, the recent progress with the trade deal with China, coupled with our expectation of gaining U.S. biofuel policy clarity within the next several weeks or months is an encouraging setup for next year.

We expect 2026 will offer a more constructive environment for both the industry and the American farmer, and that should create both positive economic opportunities and drive additional long-term investment throughout our business and the agricultural sector. With that, let me hand it over to Monish to share a deeper dive into third quarter financial results and our full year 2025 outlook.

Thank you, Juan. Please turn to Slide 6. AS&O segment operating profit for the third quarter was $379 million, down 21% compared to the prior year quarter. The deferral of U.S. biofuel policy and the evolving global trade landscape continued to impact demand for AS&O, primarily in our Crushing and Refined Products businesses. In the Ag Services subsegment, operating profit was $190 million, representing an increase of 78% compared to the prior year quarter.

The increase was driven primarily by higher export activity in North America with support from our operations in South America. South America improved year-over-year as the prior year quarter was negatively impacted by higher costs related to logistics take-or-pay contracts. Additionally, there were net positive timing impacts of approximately $54 million year-over-year. In the Crushing subsegment, operating profit was $13 million, down 93% from the prior year quarter.

Both global soybean and canola crush execution margins were significantly lower than the prior year quarter. Both soybean and canola crush margins were down most significantly in North America, driven by global trade evolution and reduced biofuel production. There were net positive timing impacts of approximately $41 million in the third quarter of 2025 compared to the prior year quarter. Partially offsetting the net timing benefit year-over-year were insurance proceeds of $24 million in the prior year quarter.

In the Refined Products and Other subsegment, operating profit was $120 million, down 3% compared to the prior year quarter as positive timing impacts helped offset lower biodiesel and refining margins. There were net positive timing impacts of approximately $12 million year-over-year. Equity earnings from our investment in Wilmar were $56 million for the quarter, down 10% compared to the prior year quarter and excluding specified items. We typically record our share of Wilmar's financial results on a 3-month lag basis with the exception of material transactional events that occur during the intervening period that materially affect the financial position or results of operations.

During the third quarter, we recorded $163 million charge related to the penalty imposed on Wilmar by the Indonesian Supreme Court and for our AS&O segment, have presented this as a specified item. Turning now to Slide 7. For the third quarter, Carbohydrate Solutions segment operating profit was $336 million, down 26% compared to the prior year quarter. In the Starches and Sweeteners subsegment, operating profit was $293 million, down 36% compared to the prior year quarter, primarily due to a decline in global S&S demand, which impacted both volumes and margins. This is a continuation of consumer buying trends we have been experiencing throughout 2025 with softness in demand in sweeteners and a reduction in starches demand primarily from less consumption of packaged goods and corrugated paper.

Additionally, in EMEA, S&S volumes and margins continue to be impacted by persistent high corn costs related to crop quality issues we discussed in the last quarter. Global wheat milling margins and volumes were fairly stable in the third quarter relative to the prior year quarter. Additionally, the prior year quarter benefited from approximately $45 million of insurance proceeds. In the Vantage Corn Processor subsegment, operating profit was $43 million, up from a $3 million loss in the prior year quarter, driven by strong export activity, coupled with industry downtime for scheduled maintenance, decreased ethanol inventory stocks and strengthened pricing.

Overall, ethanol EBITDA margins per gallon for the quarter were approximately double and the volumes were roughly flat compared to the prior year quarter. Now turning to Slide 8. In the third quarter, Nutrition segment revenues were $1.9 billion, up 5% compared to the prior year quarter, including foreign exchange gains that accounted for approximately 2% of the increase. Human Nutrition revenue increased by 6% and the Animal Nutrition revenue increased by 3% compared to the prior year quarter. Foreign exchange gains accounted for approximately 2% of the increase in Human Nutrition revenue and approximately 1% of the increase in Animal Nutrition revenue.

Nutrition segment operating profit was $130 million for the third quarter, up 24% compared to the prior year quarter. Human Nutrition operating profit was $96 million, up 12% compared to the prior year quarter as a result of strong Flavors growth and an uptick in biotic demand. The third quarter of 2024 also benefited from approximately $25 million of insurance proceeds as compared to $10 million in the third quarter of 2025. Animal Nutrition operating profit was $34 million for the quarter, up 79% compared to the prior year quarter as a result of the combination of an increased focus on higher-margin product lines, disciplined cost control and progress with ongoing portfolio streamlining initiatives.

Turning now to Slide 9. The strength of the ADM model is that we generate strong cash flow through multiple commodity cycles. For the first 9 months of the year, ADM generated cash flow from operations before working capital of approximately $2.1 billion, down by $254 million relative to the prior year quarter as a result of lower overall total segment operating profit. We continue to maintain a solid cash position and have made good progress in improving our working capital efficiency. For example, we reduced inventory by $3.2 billion year-to-date compared to $1.2 billion during the prior year period, largely driven by sharpening our inventory management practices.

We continue to be very disciplined in the areas in which we invest. During the first 9 months of 2025, we invested $892 million and maintain our expectations of full year 2025 CapEx to be in the range of $1.3 billion to $1.5 billion. Year-to-date, we have distributed $743 million in dividends. The last point I'll mention on this slide is that our net leverage ratio as of the end of September was 1.8x, improved from last quarter and in line with our previously communicated year-end target ratio of approximately 2x.

Now turning to Slide 10. We have provided details on our revised 2025 outlook. Earlier today, as Juan mentioned, we revised our full year 2025 adjusted EPS expectations. Taking into account our year-to-date results and the continued softness primarily in crush margins, we now expect adjusted earnings per share to be in the range of $3.25 to $3.50 per share for full year 2025, down from the approximate $4 per share guide we provided during our second quarter earnings. I will now provide some color on several assumptions that are underpinning our revised guidance range.

First, with our self-help agenda, we remain on track to deliver between $200 million to $300 million in cost savings for 2025. Second, for AS&O, as we have previously discussed, as we move through each quarter, we increasingly lock in our book of business for the upcoming quarter. Based on the portion of our business already booked plus our view of the market, we are expecting continued softness in global soybean crush margins, which is a step down from our expectations last quarter when we were expecting global soybean margins to be in the range of approximately $60 to $70 per metric ton. Our Ag Services subsegment is expected to benefit from the robust harvest season we are having in North America.

But given trade dynamics, results are projected to be weaker than we had forecasted at the time of our second quarter earnings, and the team will continue to progress our advancements related to plant uptime, manufacturing efficiencies and working capital improvement. We expect insurance proceeds of $10 million in the fourth quarter as compared to $50 million in the prior year quarter. Thirdly, for Carbohydrate Solutions, on the Sweeteners and Starches front, we expect a continuation of the same pressure from softer demand trends that we have experienced throughout 2025 and expect high corn costs to persist in EMEA.

Ethanol export flows are projected to drive similar sequential demand throughout the fourth quarter. However, margins are expected to be lower than the highs we experienced during third quarter. Ethanol EBITDA margins for fourth quarter 2025 are expected to be roughly 10% lower than the fourth quarter of 2024 EBITDA margin. We expect insurance proceeds of approximately $20 million in the fourth quarter of 2025 as compared to approximately $40 million in the prior year quarter.

And lastly, for our Nutrition segment, we continue to take action on our portfolio optimization and are making sequential progress in network streamlining and cost improvements. In Human Nutrition, Flavors typically experience seasonal softness in the fourth quarter given our product concentration in the beverage categories. This is expected to be partially offset by improvement in Specialty Ingredients now that our Decatur East plant is returning to planned utilization rates. In Animal Nutrition, we will continue to pursue our ongoing turnaround actions, which includes the transition into higher-margin specialty ingredients.

We expect insurance proceeds of approximately $5 million in the fourth quarter of 2025 as compared to $45 million in the prior year quarter. Insurance proceeds at the segment level for fourth quarter 2025 are expected to be funded roughly half by a captive insurer and half by third parties as compared to third parties funding the vast majority of insurance proceeds in the prior year quarter. As Juan mentioned, we have continued to make good progress on our self-help agenda, focusing on strategic portfolio optimization, cost reductions and improved working capital management, all of which are strengthening our cash flow.

Further, we have refined our digital strategy and are pivoting away from large global implementations and are directing our resources to prioritize regional and more agile projects and accelerating our data journey while continuing to invest the appropriate amount in cybersecurity and network and application resilience. To conclude, I want to take a moment to thank all our ADM colleagues for their focus, adaptability and contributions to the company's long-term success. These efforts are integral to our ability to navigate the current dynamic environment. Back to you, Juan.

Thanks, Monish. Let me wrap up by saying, overall, we will continue to drive operational excellence and strong cash flow through our focus on manufacturing efficiencies, portfolio simplification and cost streamlining. In AS&O, our team is positioning our asset network to maximize opportunities from the expected improvement in market conditions, primarily as a result of global trade evolution and the pending U.S. biofuels policy. In Carbohydrate Solutions, we will continue to drive operational excellence and closely monitor softening consumer demand trends and broader economic signals while maintaining momentum around our decarbonization strategy, which we expect will open value opportunities in low carbon solutions.

And for Nutrition, we expect steady progress across our portfolio with additional opportunities in natural colors. With that, we'll take your questions now. Operator, please open the line.

[Operator Instructions] Our first question for today comes from Ben Theurer of Barclays.

So first of all, on crush and the outlook, obviously, a lot of things have changed. But can you help us reconcile a little bit the sequential decline in the third quarter for crush versus what you had in the second quarter and to a degree in the first quarter when actually the crush environment was, I would say, lower, but I mean, more stable, but at a lower level. So just help us reconcile like how much was like maybe locked in, carried into it and how we should think about crush sequentially, just crush on a stand-alone basis into the fourth quarter, just given the uncertainty that you've mentioned on biofuel.

And then I have a very quick follow-up on those insurance numbers.

Sure, Ben. Listen, as you remember, soybean board crush rally sharply post the RVO announcements. And if you recall, at the time of our last earnings calls, board crush was about like $2.25. Then after that, it has moved lower because of a variety of factors. We had a little bit of a decrease in acres in the U.S.

Then there was this chatter about the trade deal with China that made a pickup in beans basis here. And certainly, we have the uncertainty about biofuels policy. There was a large amount of SREs granted in the period with the supplemental proposal to at least partially relocate that, but it is in common period until the end of October and now a little bit delayed because of the government shutdown. So then in the period also, Argentina has a tax holiday that create the potential for increased crush in October, November, December period.

So we saw that $2.25 turning into something like $1.20 and now currently bounce back to about $1.50. So in Q4, we expect board crush to remain in the current range, if you will. And as we are here today, we're probably booked about 80% of Q4. So certainly, the $4 range is out of range right now with no extra policy. And so that's what we're seeing at the moment. So the plants are ready to crush harder.

We still see with optimism 2026. The team has executed well in everything they could do in this environment, especially in the inventories when Monish reported $3.2 billion lower in inventory helping our cash position. That was basically a lot of that is the heavy lifting of the AS&O team trying to make improvements out of a difficult condition. So we still feel very strong about 2026. All these things that are under in motion right now, whether it's the RVO finalization, the RVO is positive for domestic feedstocks and certainly, the trade deal potentially to have more sales to China is also positive.

But all those things need to be finalized during the next 60, 90 days or something like that, then we will have more clarity about where margins will move.

Okay. And then, Monish, just real quick on those insurance gains, you said half and half to come from. So that half that's kept us that's somehow then reflected in the other segment. Just wanted to confirm that.

That's right, Ben. And similar to last year. So last year, our total insurance proceeds in the fourth quarter were $135 million. Most of that was funded by third-party insurance. This year, it's, give or take, $35 million. Half of it right now is funded by captive, and we assume that the other half will be funded by third party.

Our next question comes from Manav Gupta of UBS.

My first question is on your September announcement of forming a JV with Alltech. Help us understand how this came together and help us understand the benefits of this JV and how it helps ADM.

Yes. Thank you, Manav. Listen, if you recall, our strategy in Animal Nutrition has 2 phases, if you will. One is what we call fit for growth, and that has been driving operational improvements.

And we have seen, I think, sequential improvements in operations for the last like 8 consecutive quarters in Animal. But the ultimate objective was to execute a pivot toward more specialties in Animal Nutrition. And so we basically combine here the compound feed businesses of ADM, one of the leaders of the market, which is Alltech and combine really 2 powerhouses here, combining decades of experience and unparalleled capability with production expected to come in 2026. And with that, the ADM part that remains is more concentrated on Specialty Ingredients or premixes. And basically, we're going to be playing a little bit the Human Nutrition playbook, which is to have a specialty pipeline that can grow faster than maybe the big commodities that we have put in the joint venture.

So we expect big synergies from that joint venture, big operational improvement, and we expect then the remaining Animal Nutrition in ADM to be a high-margin, high-growth type of segment, if you will.

Manav, I would add to Juan's piece on -- one is you asked for the JV, but I also want to just look, credit Ismael and Ian and the team on the progress they've made in general on Animal Nutrition. You can see the results showing from the operational side, which is the fit for growth that Juan mentioned. So overall, really good progress by that team on execution.

Perfect. Sir, my quick follow-up is, and I understand there's a lot of policy non-clarity here. But the pieces which are on the table and not fully solved are a much higher RVO, a scenario in which there is no production tax credit for imported renewable diesel only 50% RINs for imported feedstocks and the possibility of removing that indirect land use penalty clause, which will make soybean oil very competitive in terms of production tax credits with tallow and other waste oil. So when you put all these things together, eventually when the policy comes around, you see a very, very strong '26 and '27, whereby you will have to make more renewable diesel in the U.S. and make it more with domestic feedstocks and more like domestic soybean oil.

If you could talk about all those policies which are on the table, I understand they're not finalized, but they create a very strong momentum for you if they do come together. If you could talk about that.

Yes. I think that you highlighted it correctly. All those pieces came very favorable, as I said in my initial remarks to domestic feedstock. So we expect as these policies are enacted and finalized.

And again, there are many aspects of that, that needs to be finalized. We need to have the final RVO numbers. We need to have the treatment of the SREs. So there are many of those things that needs to be enacted.

But when all that is finalized, you can see a scenario in which RINs will probably pop first. So it's going to be a gradual improvement. But the way we have seen it in the past is RINs need to climb to allow renewable diesel plants to have margins for them to run. That in line will pull on more demand for soybean oil.

That, in turn, will demand for us to crush more and to run our assets harder, which increases crush margins. And then as demand stabilizes and times go by, you can see margin coming up into biofuels as well. So that's kind of the way we see it running through our P&L. You have to remember that in crush, the big problem we have is this oil leg that is relatively soft right now that will be addressed by the RVOs whenever they are ready.

In the other leg, meal has been very strong. Growth in meal has been like globally like 8.5%. We're expecting at about a very strong 6% still for next year. U.S. continues to be very competitive meal and meal continues to buy themselves into Russian.

So most of the customers of meal in the protein sector are showing profitability and good times. So that side of the leg is strong. If we can strengthen the RVOs and bring more clarity there, we expect strong crush margins going forward. And that's why I think if you remember last quarter, we said that we were setting up our footprint of plants to make sure that we will be able to run harder, and we are demonstrating that.

So we are pleased with the setup. It's just from here to there, there is a lot of clarity that needs to happen that doesn't depend on us. We like to talk more about the things that we can do to improve. We have improved the company in terms of cost, in terms of cash, in terms of portfolio.

We've been running this CCC that we call it cost, cash and capital since 2014 when we launched it. And I think the organization has this memory that we need to act into that. They quickly go and help us with the cost reduction targets, with the cash targets. And certainly, we make consistent and steady improvements in our portfolio optimization.

So we look at '26 with optimism. We just don't know if it's 12 months of '26 with optimism or 9 months of '26 with optimism because that depends on the government.

Our next question comes from Heather Jones of Heather Jones Research.

I wanted to go back to crush, Juan. And I understand all that you were saying as far as the crush curve, et cetera. But in the U.S., real basis was pretty strong throughout Q3 and has been stronger than expected in early Q4. And just based on our data and anecdotal reports, cash margins were strong for much of Q3 and into early Q4. So given the performance you'll put up for Q3 and crush and then the outlook for Q4, just wondering if you could just break out where you think the big differences were? Was it -- did you have like most of your physical meals sold before the rally?

Were you all short beans? Or just -- I was just hoping you could help us understand reconcile the 2, if you could.

Yes. I think it's a little bit of both. But for the most part, when we get into the quarter, by the time we do earnings calls, we are like 75% sold for the next quarter. So we probably were sold before that rally.

And then the rally didn't last that much -- that long, to be honest. So then today, where we are booking is very much similar in Q4 to what we booked in Q3. So -- so I don't see a significant improvement. There is a lot of variability. And I think that when I look at the performance of the commercial team, they've been -- they've done very well.

So I can't pinpoint to one thing that we really regret in the business. I would say Ag Services was a little bit softer, but not much. I think that we have a good meal and corn program exporting from the U.S. Of course, we didn't have any beans going to China, but the volumes kind of held, if you will.

In -- there was the difference that we didn't have the take-or-pays in Latin America that impacted us last year. So that was a little bit of a compensation for the lack of maybe exports to China. But in crush, we are seeing, again, an environment for us, for our business in Q4 kind of similar to what we booked in Q3. But maybe Monish can give more granularity on the numbers.

Yes, sure. So Heather, what Juan said is absolutely correct. So there was a period of time, if you look at when we had earnings last time and board was high, replacement margins were high at that point, too. And then as the quarter progressed, which is when we do a lot of our books for Q4, you actually saw replacement margins come down.

And that's why crush margins right now, what we are seeing is flat to slightly up depending on the geography you look at. I think North America, you're seeing crush margins will be slightly higher than Q3. But then you've got to remember, we got a global business. So then you've got all these other business -- other regions. And depending on how basis plays out in those, you would actually see a lower number.

So net-net, when we put it all together, Heather, we are saying it's somewhere flattish to a little higher. We'll see where it actually lands. As Juan said, we are decent-sized booked coming into Q4. But of course, there are spot deals still available for the balance of the book. And as I know Greg and the team, they're going to take every opportunity to get what they can.

And so that's what we are going to work on. But nothing changes from the fact that the team is very focused on driving value, driving inventory, driving cost out. And as Juan has mentioned, when the crush comes, our plants are ready. And he talked about that, too, is we are seeing plant operations better.

So hopefully, as all these things come together, the team can continue to keep executing and keep driving more than where we are right now. But that's where we see it right now, and that's why we're calling it as is.

Yes, Heather, one thing that I noticed, and I've been running ADM for like 10 years, is that right now, both farmers and customers are very reluctant to book long. So farmers are kind of selling reluctantly and buyers are kind of hand to mouth, if you will. So that doesn't allow for a full orderly flow of the chain, if you will, that we normally see. And because of all this uncertainty, nobody knows exactly what's going to happen with soybean basis and all that based on the trade deal and nobody knows exactly what's going to happen with the oil leg because of the policy uncertainty.

So everybody is like trying to go hand to mouth. And that makes it a little bit more difficult for us to reflect some of the conditions in the P&L. That may be one thing I noticed from the past.

That's helpful. And just my quick follow-up is just as we extrapolate forward, I know the hope is that we get a finalized RVO before the end of the year, but I think prudence would say it's probably coming in Q1. So just wondering how are you thinking about replacement margins for Q1? And like you said, farmers and customers are hand in mouth. But as much visibility as you do have, what are you seeing on that front?

Yes. So Heather, I'll take a stab at this. So Juan, when Manav asked the question on how he sees policy play out, again, it depends on timing of clarity. So whether it's a 6 months or 9 months.

But sitting today, since we still don't have clarity, the book that we are booking at for Q1 right now is, I would say, flattish to Q4. But again, we are open. So it's not like we have already booked all of our Q1. But I think the timing of when the policy comes in will actually have an impact. You're seeing right now, I think, the oil leg leaking with the current where soybean prices have gone up, but let's see how that plays itself out. So to answer your question succinctly on Q1, right now, we haven't seen a big pop in margins.

But hopefully, post regularity clarity, you will start seeing that to move up. The question is whether you see it for the first quarter, you see it for 2 quarters. It will all depend on the timing of the policy and also what's in that policy.

Our next question comes from Andrew Strelzik of BMO.

I wanted to start by asking about your outlook for Ag Services. And the third quarter was stronger than we anticipated. You mentioned the trade deal with China, but you're talking about 4Q maybe being a little bit softer than you had originally anticipated. So I guess, was there a timing dynamic in the third quarter?

What else has changed for the fourth quarter? And as you think about maybe that bit more subdued outlook, is that really a 4Q issue? Or does that linger as well into '26?

Listen, I think Ag Services, it was higher in Q3, as you noticed. And I would say versus last year, we had good volumes in North America when you consider our export of meal and of corn, our system worked well. And last year, we had the problem of the take-or-pay in Brazil that we sold for this year. So that has a delta there.

As we look forward, I think that the market right now is all about -- so we also have good destination marketing operations and our global trade operated well. We expect those things to continue, but margin opportunities are more difficult right now. I would say we really need this clarity on the trade deal. But although on the surface, it is possible, it is positive for ADM and for grain in general.

We haven't seen yet a joint document highlighting the details of this. So we really -- it's a big difference whether the 12 million tons of soybeans will happen in calendar year or in marketing year, of course. And whether that's counted the material that is sold versus the material that is shipped at what prices that will happen. So a lot of that is still in the air.

So that's what I was telling Heather before that there's a lot of people going hand to mouth and the farmers as well. If you look globally, farmer selling has been slow when you compare to historical average, probably with the exception of Argentina when they have the tax holiday because farmer wants to see what's happened next. And I think that at this point in time, the 2 big events that will move commodity prices will be clarity on the China trade deal and regulatory clarity on the biofuels policy. And until then, things are going to be a little bit hand to mouth for a while.

Andrew, I would just add one more on AS&O and across the business is execution. So that was the other thing in 3Q. Greg and his team continue to drive good cost control, very good job on inventory management, as you can see from the results. And that cost control or the self-help that Juan has mentioned was across all the businesses.

So when you put all that together, that's how we came in with the adjusted EPS of $0.92. And I would say we continue that journey on self-help, including in the fourth quarter. So to answer -- you had a second part to your question, which is, is this just a fourth quarter issue or not. So as I think about it, good execution in 3Q. Once policy clarity comes in, in 2026, that sets us up great for '26 and '27, as Manav also said.

And so this is just that transition quarter, and the team will continue to drive every self-help idea they can operationally to keep getting better.

Our next question comes from Pooran Sharma of Stephens.

Sorry to just belabor on this point, but maybe wanted to just talk about some of the moving pieces here for clarity in the biofuel policy. I think you have the SRE kind of comment period out of the way. And I know you have some noise with the government shutdown. But we've been hearing reports that the EPA has prioritized the RVO through the shutdown and that maybe you could see something in the hands of the OMB by early to mid-December, which then could set the 2025 compliance date towards the end of Q1. And if you think about what the industry would do like the obligated parties would then need to shore up their 2025 books.

So do you kind of see a -- from a timing benefit as it stands right now, this being kind of an early to mid-Q1 event? Or how should we think about kind of the moving pieces here?

Thank you, Pooran. Listen, let me tell you what we know. We know that EPA is aligned with the agricultural industry to support American agriculture and energy dominance through strengthening of the domestic demand for domestic feedstock and prioritizing that. I don't want to speculate on who's working on what at the EPA.

I think that the EPA is committed to that. And as quickly as they can, they're going to resolve that because they know the industry needs that and the agricultural industry needs that. So our role is to be prepared, and we will be prepared. You will see, as I explained before, in the gradual improvement of these, whenever the market will detect that there is movement, you're probably going to see RINs popping up.

And then eventually, we're going to see crush margins popping up. And so we're ready to do that. Other than that, I will be speculating and I have no basis to do that, Pooran. So I will leave it there.

Okay. Great. I appreciate the color there. Maybe just shifting over to Starches and Sweeteners.

I think we're approaching that time of the year where you get into contracting season. And just was wondering how we should think about the moving pieces here. I think you have buyers pushing for lower prices amid a larger carryout. And I think you and others have noticed -- noted some softness in demand in the industry.

But at the same time, you have really good export volumes. So I was just wondering if you could tell us how negotiations have been faring? And do you think there's the potential for this contracting season to get stretched out like it did last year?

I would say we are maybe 20, 30 days away from knowing what happened in the contract season. So negotiations are happening right now. So I won't comment on that. I would say corn is plentiful and the U.S. will have a very large crop based on good yields and higher acreage.

I think that Brazil will have a record crop. Argentina will have another 50 million ton crop. So I would say raw material will be plentiful, but there has been good demand for corn around the world. Corn, I think, is being used in many ways, of course, in feeding, but also in biofuels policy.

And if you think about the U.S. is competitive to -- in ethanol to Brazil, and Brazil has E30. There are governments out there that are enacting like E10 for next year. We have E15 all year rounds in California. So ethanol continues to be the cheapest oxygenate out there. So 2 billion gallons of export this year, maybe 2.2 billion, 2.3 billion for next year.

So I think there's going to be a lot of corn, but demand is robust as well. As you said, in general, in the products in carb solutions, we have seen some softness, both in Sweeteners and Starches and -- and yes, in sweeteners and also in starches due to corrugated boxes and cardboard. So we'll have to see. Our team produces more than 20 products from the wet mills from corn.

So we balance that equation as we go into the negotiating contracts. So we continue to feel good about the negotiation. As I said, we are doing it now. Contracting is coming along nicely, and we normally report this in February.

That's where we finish every year. We have, as you heard me saying over the years, we have avoided the cliff that we used to have in which every contract will end at the same time. So we have a more balanced portfolio of contracts that makes us this time of the year less concerning for at least ADM. But as I said, I think that contract season is going normal.

I wouldn't describe anything else, but we will have more to say in February.

Our next question comes from Tom Palmer of JPMorgan.

I wanted to ask on the Nutrition business. You cited seasonality is, I think, the main quarter-over-quarter headwind to think about. But at the same time, I think previously, you had a bit more of a sequential improvement embedded in the outlook. So curious about what might have shifted and to what extent seasonality is normal versus maybe there are some extra factors this year?

Sure, Tom. Yes. I think what we see in Nutrition is sequential improvement in operational capabilities of the Nutrition business. We've been fixing things, and now we're very happy that the East plant is back up.

So -- and you saw Animal Nutrition continues to be sequentially improving. I think that Flavors is a big part of the business, of course, and Flavors, we are heavily tilted towards beverages and beverages sold more in the summer. So as the Northern Hemisphere faces the winter now and enters into the winter, we normally see about a 15% reduction in our volumes as we go into Q4. So that will be partially offset by the fact that we will have a full quarter, hopefully, of operations of the East plant that will bring our cost down as we are producing white flakes versus buying it from competitors. But we are in the process of recovering customers there.

So you have those puts and takes. But I would say the business continue its path to improve to operational improvements.

Okay. And I did have a clarification question just on Ag Services. There was the export window in Argentina late in 3Q. To what extent was that a benefit in 3Q? And will there be -- just curious how the booking works, right, with shipments versus arrivals. Will there be a boost to think about in 4Q from that as well?

So the way it works is that we did get a piece of that export license. I'll have to go back and check memory, but some of our shipments did happen in Q3, and you're going to see some of that in Q4. But that will be -- that's already reflected in our export numbers and in our guide that we have given you, Tom. So no delta on there.

And I would say we continue to watch that, Tom, in Argentina because, of course, after this holiday and after the election success, farmer have not been selling that much as there has been no devaluation in Argentina. So we will have to see how the commercialization will happen. We think it's going to be tight commercialization until the end of the year. So we're watching that closely.

Our next question comes from Steven Haynes of Morgan Stanley.

I was hoping you could maybe put a finer point on the crush outlook for 4Q. I think you mentioned before that the margins are going to kind of be stable and that volumes might be higher quarter-over-quarter. Maybe just to frame it versus last year would also help in terms of the actual segment dollars. I think it was around $200 million.

Would you expect the fourth quarter to be above that or in line or maybe a bit below? If you could just help frame it that way, that would be helpful.

And just so I get your question right, Steven, you're talking about AS&O or crush? You're talking about crush, right? So if you look at crush, crush margins are going to be lower on a year-over-year basis. Just based on where we've talked about already about all the factors impacting it, where it's flat to slightly up from Q3, but still down on a year-over-year basis.

So based on that, we would expect that crush on a year-over-year basis would definitely get impacted. Secondly, just remember that in our results, we normally mark-to-market our derivative positions at the end of every quarter. So depending on where crush margins or basis ends up being on 31st December, you could see a positive mark or a negative mark. At the end of the day, all that mark is doing is moving money between quarters, but it doesn't change the overall economics.

So that's how we'll have to figure out and then figure out how board crush timing goes because that also has an impact. But if you just look at pure execution margins on a year-over-year basis, it is lower. And therefore, as a result of that, execution margins in crush will be lower in dollars also on a year-over-year basis, even though Greg and team are continuing to drive higher volume in the factories as can be evidenced by the work that you saw in Q3, where we have managed to have production greater than 2% on a year-over-year basis. I would also add canola into that same complex, Steven, just so that you know it's the same dynamic.

Even canola is down on a year-over-year basis. So that will also have an impact. So it's both of those show up in crush.

Our final question for today comes from Salvator Tiano of Bank of America.

I'm just wondering, you got a lot of questions about next year's crush margin and what could happen. I'm just wondering on trade dynamics and the potential new -- the higher demand, assuming the RVOs are approved as they're proposed right now, whether it's in Q1 or Q2, could we see the U.S. at that point becoming a net importer of soybean oil? And if that happens, given that we have a bunch of tariffs, assuming the same place, what kind of move could we see in domestic soybean oil prices that could go into your bottom line as a domestic producer?

Yes. A lot of speculation in that question. We do, as you suggest, we run scenarios all the time, and there are many things that could happen. So let's chop it by pieces here.

On RVOs, we know whenever the policy is enacted, we're going to be crushing more and soybean oil will be more demanded. We have the beans to take care of that today. But of course, you bring the possibility of 12 million to 25 million tons exports to China, and that moves the equation. If the 12 million tons is on a calendar -- a marketing year basis, it's a different pipeline that is a different carryout that we have in the U.S. versus if it's on a -- that needs to be shipped all in 2025. So all those things are put into the consideration.

I would say markets tend to adjust. So there is going to be a strong crush in Argentina. There's going to be a strong crush in Brazil. If the U.S. has more demand than we can supply internally, then prices will come up, and we will attract other productions, and we could end up importing soybean oil.

At this point in time, we are exporting the soybean oil. So it will be a significant change, but that significant change will be brought by policy and RINs popping up and the things that we described before. So it is a possibility. And before that, we're ready to crush very, very hard to supply domestically before imports come in.

I think, Salvator, you need to reflect on the fact that we have improved our operations to supply exactly this kind of environment. I think our Ag Services and Oilseeds is ready to tackle any commitment that the U.S. or China will make in terms of exporting and ADM has a big percentage of all those exports and the capabilities to do so. And ADM has the plants ready to crush very hard and supply the policy -- the domestic policy that the EPA is supportive. So we got ourselves ready to do that.

The company is in good shape from a cash and cost perspective, and we are continuing to adjust our portfolio. So we look at '26 and '27 with a lot of optimism.

At this time, I'll now hand it over to Kate Walsh for any further remarks.

Thank you all for joining the call today. If you have additional questions, please feel free to reach out directly to me. We appreciate your continued interest and support and wish you a great rest of your day.

Thank you all for joining today's call. You may now disconnect your lines.