Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from analyst John Bridges – JP Morgan
[Ankush Alawanahan] for John Bridges – JP Morgan
I have two questions. One I just wanted to make sure we understand it correctly when you say that the Q1 fertilizer sales were impacted due to the weather and you don’t expect that to be representative going forward. Then would it be fair to assume that this means that seasonality that we saw in Q1 of '09 was a deviation from the historical seasons past and do you expect this deficit to be made up during the reset of the year in the following quarters?
John Diesch
Yes, I definitely do. It was related to weather conditions with a late harvest which pushed in to cold weather as well as we had some wet weather right towards the end and the farmers just couldn’t get in the field to apply the nitrogen. The farmer makes a decision in the fall what he's going to put in for the following year for a crop and he absolutely has to put nitrogen down. So what he doesn’t get down in the fall he's going to put down in the spring time.
So we fully expect that nitrogen that was not put down in the fall to be put down and applied in the spring. And this actually is probably – it's our expectation is to create some bottlenecks in the transportation systems because there's limited access to be able to move tons around the country which is positive for us because we sit in the middle of the Corn Belt.
We don’t have to deal with those transportation issues because the majority of our production moves out by truck. So we fully expect to see all the nitrogen that was not applied in the fall to be applied in the spring time.
[Ankush Alawanahan] for John Bridges – JP Morgan
Okay. Then on the margins, you said you've logged in now, you've pre-sold 2/3 the sales on the fertilizer business and if you look at the 10-Q it seems that the gas prices logged in are even logged in even a much lower percentage of gas. So do you expect to benefit out of the falling gas prices and do you expect the margins to expand as we progress through the year?
Dan J. Cohrs
We will exceed margin expansion through the year we believe, because having taken that 1$0.1 million write-down now effectively we'll be bringing the cost of sales through in future periods at lower prices than we actually contracted for. So we're effectively recognizing those higher prices now by taking that write-down so future periods will be showing prices closer to the market prices.
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