Good morning ladies and gentlemen and welcome to the AGI 2021 First Quarter Results Conference call. At this time, all lines are in a listen-mode. Following the presentation, we will conduct a question-and-answer session. [Operator Instructions] This call is being recorded on May 12th, 2021. I would now like to turn the conference over to Tim Close President and CEO. Please go ahead.

Good morning. Thank you for joining Jim Rudyk and I this morning to discuss our first quarter results and the outlook for the balance of 2021. Today, I will make a few brief remarks on the quarter and our overall strategic progress, provide some comments on what we are seeing in our global supply chain, and give an update on our outlook for 2021. I will then hand the call over to Jim for a more detailed recap of our first quarter and we'll open the call for questions. Like the rest of the world, we are optimistic on the prospects for emerging from the COVID pandemic. The difference in pace of regional reopening is leading to an uneven rebound in activity across AGI. The US is making solid progress on vaccinations and activity is rebounding accordingly across all segments. Canada is well behind the vaccinations, which is impacting some activity in the commercial segment but generally not affecting the farm segment. Activity in EMEA and APAC continues to be impacted across the commercial segment with a notable impact on site access and travel which is serving to delay some meaningful projects. The world is closely following the crisis in India which is quite severe and the region is in perhaps the worst outbreak globally since the start of the crisis. Despite significant ongoing challenges the daily operations, our business continues to safely operate as our local team in India remains vigilant. We will continue to closely monitor the situation in India and support our team and customers in every way past. Brazil is also dealing with a very difficult environment but we continue to operate effectively in that location as well. Across AGI we continue to follow strict adherence to our safety protocols in all regions and expect to continue to do so for the foreseeable future. In certain regions, these protocols make our facilities some of the safest places for our local teams to be. Turning to our supply chain, the impact and volatility of steel price and availability is unprecedented and expected to impact our business on a global basis for the remainder of the year. The steel markets have been impacted by a perfect storm including mill specific production issues, trade actions, mill supply chain interruptions, and severe volatility in demand which initially led to mill shutdowns the constricted supply immediately prior to significant rebounds in real and anticipated demand across many industries. These dynamics have led to unprecedented price and steel availability across all our markets. In February, we had expected pricing supply to moderate. However, pricing continued to rise and product availability became even more unpredictable. The severe conditions in steel markets have pressured pricing across many industries and we are dealing with the same issues across AGI. We have implemented multiple price increases across all products and markets as steel mills are increasing pricing frequently and sometimes without much notice. This extreme environment will lead to an impact of the margins for the rest of 2021 as we manage pricing across both our farm and commercial markets. Despite the environment we continue to actively mitigate to minimize this margin impact. Turning to our first quarter 2021 results. We are pleased with Q1 results which posted trade sales up 12% year-over-year and adjusted EBITDA up 52% year-over-year along with strong margin performance. Order intake accelerated in the quarter resulting in backlogs up 40% year-over-year at the end of Q1. These solid results were driven by broad-based strength across AGI. Of note in the quarter was our adjusted EBITDA margin which came in at 15.3% versus 11.2% year-over-year. Product and segment mix total sales volume and slightly reduced SG&A from lower travel and related expenses as well as continued progress in capturing operational efficiencies, all combined to deliver the 410 basis point increase in the quarter. A quick note here that Q1 is an interesting year-over-year comparison as Q1 2020 was pre-COVID and Q1 2021 is prior to FX and steel dynamics impacting our business. Our year-over-year Q1 comparison represents a relatively clean view of our progress in achieving operational productivity gains growing market share in those markets and diversifying revenue into our shorter quarters of Q1 and Q4. Some additional details to highlight for the quarter. Farm segment sales were strong in the quarter increasing 14% with solid margins. Order intake was very strong with backlogs up 75% year-over-year in Farm. Demand for Farm segment equipment has been robust as dealers and customers focus on securing their critical products ahead of price increases or any issues on product availability given the supply -- the steel supply issues. Commercial segment sales were up 8% in the quarter with increased margins. Within the Commercial segment Food platform sales were up 30% a great example of contribution from our diversification strategy. Total Commercial segment backlog is up 17% year-over-year, a solid rebound in activity in the US and internationally were offset by the ongoing slowdown in Canada. Recent investments continue to perform well and contribute meaningfully. Our operations in Brazil continue to make progress, and we are pleased to see sustainable contributions from this business. In local currency, sales were up 50% in Q1, as demand for our products within Brazil remained strong, despite a top COVID environment. Note that this growth in Q1 is after our sales grew 82% in 202, again in local currency. While activity investment in grain infrastructure continues to increase throughout the Brazilian market, similar to our other markets supply chain is a key issue, as pricing and availability of steel are notable challenges in this market as well. Our business in India continues to be a very solid contributor. Trade sales were up 12% year-over-year with backlogs up 44% at Q1, despite the substantial impact COVID is having on the region. A favorable monsoon season and an increase in rice exports are key drivers to the strong backlog. Our operations in EMEA also contributed with a strong quarter as trade sales were up 28% year-over-year. And we expect the momentum in the region to continue with backlogs up 34%. The turning to our Technology segment, throughout the first quarter, we completed extensive work in our Technology business to facilitate accelerated growth. Historically, our IoT products have been sold mostly through our direct sales team. We are now launching the product to our existing dealers and onboarding new dealers, focused on our IoT products. This represents a massive expansion of our reach to customers and is a much more scalable sales model. At the same time, we are expanding our strategic sales team, which focuses on commercial customers including Ag Retailers, Grain Traders and Food Processors. We also continue to trial various sales models including product bundling options such as our SmartBin initiative, which aims to make connected grain bins a standard in the industry. This iterative process of program refinement is extremely important, as we better understand customer priorities and distribution strategies in these product lines. To help accelerate the overall pace of growth, we engaged a consultant firm to complete a broad mandate focused on optimizing our IoT products, our production and to bring significant expertise to our sales channel development. The work with the third-party is extensive. And we have spent $1.9 million in the first quarter on this initiative. The engagement and onetime expense will continue into the second quarter, as we further position our platform for accelerated growth. Given the sales program changes, our sales on a retail equivalent basis actually fell 36% in the quarter. That was anticipated, due to the program changes. This pause in sales growth will be temporary and more than offset through substantially expanded sales channels going forward, supporting our expectation for robust growth for the full year. For example, Technology sales in the month of April were up more than 100% year-over-year, as we launched our new sales programs. While we expect this growth to moderate, it serves to validate our expectation that sales growth will continue to ramp-up through the rest of the year and then, outpace, our 2020 Technology growth rate. Further contributing to our positive outlook for the Technology segment, is our recent acquisition of Farmobile. Farmobile has market-leading products with unique capabilities to capture and verify all field activity data. This data is crucial for operating a farm and needed by all stakeholders in the developing carbon and traceability markets. Farmobile is simply the easiest and best way to capture this data, and will be a key pillar of our Technology platform going forward. Moving on to our outlook, overall, AGI has many letters coming together that will continue to create growth. From our expanded business in North America, to our more recent investments in new geographies like Europe, Brazil and India or new platforms like Food and Technology AGI is set-up for a period of continued sustainable growth. Global demand continues to rise for the infrastructure required to support, sustained increases in grain supply and food and feed consumption. Near-term visibility remains strong with the backlogs at robust levels. While steel prices and FX will be persistent near-term headwinds, overall, the outlook for 2021 is strong relative to 2020. I will turn the call over to Jim, for a review of the quarter for further discussion of our 2021 outlook.

Thanks, Tim and hello everyone. For today's earnings call, I'd like to cover four topics. First, I want to take some time to explain the additional disclosure, we have provided in our MD&A this quarter. Second, I'll provide a brief overview of our financial results. Third, I'll discuss our balance sheet. And finally, I'll provide an update on our outlook for the coming quarters and 2021 overall. So building off our expanded disclosure process initiated last quarter, you'll notice that we have provided more detailed information about our business. Recall last quarter, we began to disclose information specific to some of our new and exciting businesses, those being our Food and Technology platforms. We also broke out, our trade sales by geographies or Farm, Commercial Food and Technology. In addition, we began disclosing more details about our backlogs, again by segment and geography. Our aim is to provide readers with richer detail about our business, so the growth trajectory and key trends within each can be better understood. Given, we manage these segments as operating divisions, in addition to managing them on a geographic basis, the new disclosure generally mirrors how we are organized within AGI. To extend the visibility into our business, this quarter we have included further disclosure on adjusted EBITDA by segment and geography to again provide visibility into how our business is performing. We believe this new information will help readers to better understand our business and assess how AGI is performing going forward. One another housekeeping item to note, many of you will have noticed that within our Commercial segment, we have delineated between the Commercial platform and Food platform. This is just nomenclature designed to provide greater clarity about when we talk about these two together, at the segment level or individually at the platform level. Our Commercial platform still consists of the grain and fertilizer infrastructure business, consistent with how we would have described this in the years past prior to the addition of the Food platform. Turning to our first quarter 2021 results. Tim outlined the strong performance for sales, adjusted EBITDA and margins in the quarter. I'd like to go into slightly more detail about our segmented EBITDA and EBITDA margins, given they are new disclosures for AGI. In our Farm segment, adjusted EBITDA margins for the quarter improved to 25.3% from 20.3% year-over-year, a favorable product mix weighted towards portable versus permanent handling in addition to favorable supply dynamics contributed to the margin performance in the quarter. As discussed elsewhere, moving forward, steel prices are expected to have an impact on the Farm segment margin profile. In our Commercial segment, adjusted EBITDA margins for the quarter also improved to 12.4% from 8.1%, as increased sales were paired with a slightly slimmer Commercial segment SG&A base. Improving our margins in Commercial has been a focus and to that end, we know progress on several initiatives, which supported our results for the quarter and will continue to provide benefits as we move forward. We have consolidated and streamlined our sales team and processes. In addition, we have consolidated products to concentrate production and benefit from scale in each manufacturing location. This also helps to optimize and simplify production going forward. Overall, we believe the Commercial segment is well positioned to grow with an improving margin profile. Our Technology segment adjusted EBITDA results of negative $1.4 million improved year-over-year from negative $2 million. We note that we have completed a significant amount of work in support of our Technology business. We've expanded the team, revamped production processes, refine the product, all in preparation for significant growth. With strong gross margins in these product lines, approximately 40% to 50% for both hardware and software, we expect meaningful EBITDA contribution this year as our sales grow. Of note, our segmented EBITDA now includes a role for other costs. These primarily represent head office expenses as well as other miscellaneous corporate costs that aren't directly allocated to any of our reportable segments. Now let's take a look at our balance sheet. In the first quarter, we continue to make progress at reducing our senior debt-to-EBITDA ratio, which now sits at 2.36 times versus 2.53 times at the end of Q4 2020 and 3.16 times at the end of Q1 2020. We have over $190 million in available undrawn credit facilities and approximately $49 million of cash on hand. While we closely monitor our liquidity position, we do not have any bank covenant concerns. A disciplined capital management approach in combination with our strong results and growing EBITDA will naturally reduce our leverage ratios over the coming quarters and years. Finally, a recap of our outlook. Order intake continues to be robust with solid backlogs providing good visibility to sales growth. However, over the remainder of 2021, we do expect a negative impact to EBITDA margins on a year-over-year basis, as we respond to the rapid rise in steel costs in addition to overall FX-related headwinds. Despite these challenges though, our full year trade sales and adjusted EBITDA expectations continues to be strong and above fiscal year 2020 levels. Thank you very much for your time. And with that, we will turn it back to the operator to take any questions.

Thank you. Ladies and gentlemen, we will now begin the question-and-answer session. [Operator Instructions] First question comes from Jacob Bout at CIBC. Please go ahead.

Good morning.

Good morning, Jacob.

Just – maybe I'll start off just on your comments about higher steel costs in FX. Can you just review maybe the impact of Farm versus Commercial? I always thought of Commercial as being pass-through and locked in at the time of sale and it was really more of an impact on the Farm. What is the typical lag? And what's different this time?

Yes. Good morning, Jacob. Well, what's different is really the extent that the price increases and the timing of those increases there -- the mills are breaking those prices frequently. And just to put it in perspective steel gears up anywhere between 75% and 100% depending on the region that you're talking about. And those moves have been very, very frequent and sometimes with very little notes. And so you'll remember that our typical in the past our commercial quotes would be valid for 30 days. That doesn't work in this environment. So we're not going to make across the whole industry. We're having to update those quotes more frequently or there can be movement in steel between even when we're -- we've committed to or when we're receiving that steel. So really unprecedented dynamics in steel that are having an impact. Now we are passing through that -- those price increases. The extent of those and the different dynamics where we're not always passing through 100% of it in all cases all it on every project. And then in the Farm side where we pass-through as well there. You'll know there's always been a bit of a lag and in a more retail environments in portable for instance or some of our storage components. And in that space as well we've had more price increases more frequent and more in terms of an amount than what we have had in the past. So we continue to pass-through and those different lags between both in Farm and Commercial will have an impact on margin over the year.

But you said it was primarily a second quarter and third quarter it feels like that's kind of a longer impact than what we've seen historically?

Well, yes. I mean in February we did expect for that to moderate at least somewhat and it really hasn't moderated. It's been -- continues to price continues to move unpredictably. And so I would say that the margin impact would be across the remainder of this year. We do expect some moderation in both supply and price into next year. But these dynamics are not going away anytime soon.

Okay. My other question is just on the Technology side. So it sounds like you're backing away from the subscription model. Why are you doing this now?

We're fine-tuning it. What our customers love the ability to pay post-harvest and that will retain, but they also want to fundamentally own the hardware on the farm. And so we're retooling that program to make those two objectives. So we took the chance in a light quarter for this product line in Q1 to do that. And then we'll more than catch up as we introduce the new revised programs. And probably more importantly, we took Q1 to substantially expand our dealer networks in our IoT devices. We've onboarded a significant amount of dealers and that channel will -- which is much more scalable we'll see that accelerated growth through the remainder of the year. So opportunistic time. There's -- the -- on the Farm market nobody is looking to put the cables in the vein during January and February. But we took that time to retool the programs and then set up to really accelerate growth through the remainder of the year.

So that retooling explains the drop in the retail equivalent IoT devices?

Yes, exactly. So the benefit of that subscription plan -- one of the benefits was that it would bring forward sales in the IoT space. So you're happy to take to purchase that or to sign on that IoT program in January because the first payment isn't until December and we have a number of months to go due to the ice -- windstorm. So as we retool those we fully expected a drop in that year-over-year because that subscription plan being in place last Q1. We knew that would happen, but we also knew that as we introduced the revised programs we'd see a significant jump up and exactly what we saw in April and continue to see us we market forward. So very confident on surpassing our growth rate from last year in Technology as we get through to Q2 through to the end of the year.

And just lastly here. Is the plan here just to take much more of a bundled approach to Technology?

Absolutely. Yes. Our smart bin programs have been launched very successful and re-canvassing actually recent sales as well to bundle those the products in and then going forward the goal overall is to have everything going out as this market.

All the best. Thanks very much, guys.

Okay.

Thanks, Jacob.

Thank you. Next question comes from David Newman at Desjardins. Please go ahead.

Good morning, gentlemen.

Good morning, David.

So in 2021 if I look at it's contained to -- it looks like it's relatively contained on the steel price again and FX to -- well FX is longer but to 2Q and 3Q. If I go back to 2018 the downside on EBITDA margin was in the range of two points to three points overall. But this is obviously far more extensive than that period. Any frame or reference there in terms of what we should expect on margin compression? I'm not asking for guidance but just directionally.

Yes. So I could address that. So there will be definitely an impact on the margin. Now the extent in 2018, I think, it was more drastic. We've been able to -- as we build up and develop better operational processes and manage the supply chain much more effectively, and also react from a pricing perspective, we have ability to mitigate that impact much more significantly this time around. And so while we do see some margin pressure this year, it will not be anywhere near as extensive as it was in 2018.

I’ll add congrats. Thank you. And then if I look at the sort of supply chain issues around the world some of it just kind of as the economy kind of comes back. And obviously, you point out steel availability and things like that. But in other markets things like India, Brazil obviously with the extensive pandemic and the severe issues that they're facing. Are you at all concerned that; a, you can get the product into those markets in terms of raw materials; or b, that there could be any sort of impacts on your facilities? You do flag it in the press release, but just maybe some thoughts around that in terms of how things look in those markets and just in supply chain in general in steel?

Yes. It's a great question. India is certainly a very tough environment, but we continue to operate there. So we've had very extensive protocols in place that we are very confident and keep our staff very safe in our facilities. There's very little indication of any transmission in our facilities globally and India is the same. So we continue to operate when we continue to talk with the team there every day, obviously, throughout the day, but we are confident we'll continue to operate. As an essential service and really a key part of the food supply chain in India, we're confident that we'll continue to operate our customers will continue to operate. And yes, supply chain is tough, but we're managing through it and talking to our suppliers also daily in order to mitigate and forecast availability.

Okay. And then – go ahead. Sorry.

No, you’re good.

Okay. Good. And on the technology side, just what was the high level thoughts on bringing in the consultant in? In other words what were you -- when you looked at your portfolio of technology offerings what was it that you thought you needed to sort of build -- fill the gap in like what was the reason for bringing them on board? And what shortcomings in the offering were you trying to, I guess, address in the go-to-market strategy?

Yes. So, two key work streams here is our products and then our sales channels effectively. And in the products side, we saw some good opportunity to look at our production, our automation, our time and labor involved in the production side and then the architecture of our products to be able to look at making those products easier to manufacture or easier to install and the proper architecture for ongoing development of those products. So with that, we needed to leverage additional resources to accelerate that process. So that we can -- we have those products in market much sooner than doing it organically. And just the pace of developing the pace of our sales growth -- expected sales growth in that we needed to prioritize that speed to market on the product side. And then sales channel development is an extensive task across our whole business as we leverage our dealer networks and our sales teams to introduce IoT to a new product and a different product a different way to sell our product with prior across that platform. So bringing in expertise that has done across other industrial markets that have digitized was again about acceleration and leveraging learnings and expertise from other places. And again that will -- that is just a substantial impact on speed and of the development of those sales channels. So that breaks just a significantly -- really significantly expanded in more scalable sales channels for us.

Excellent. And last one if I could squeeze one in here. Just on the -- on your facilities in commercial. It sounds like you've taken this period to kind of think about properly aligning production and consolidation of products by facilities, et cetera so that your go-to-market and your production and operations are all aligned to get the best execution. What was the thinking on the commercial side on that front?

Yes. So it's part of an ongoing initiative that we've been working on over the past year. We've done a number of acquisitions over the past several years. And 2020 and 2021 the intention was always to revisit, how we're set up, how we're operating and how we're producing and to take advantage of opportunities to improve efficiencies, whether it's through combining product lines, moving product lines to different facilities. So that's something that has been in the works for a few quarters now. We're starting to see the benefits, but we still have opportunities going forward to continue to do that and get even more benefits.

Excellent. Thanks, Tim. Thanks, Jim. Go ahead, if you have any other comments or?

No, no.

Perfect. Thanks, guys.

I appreciate it.

Thank you. Next question comes from Steve Hansen at Raymond James. Please go ahead.

Yeah. Good morning, guys. Just a couple for me. Tim, on the lead time in the sector today, I mean how should we think about orders that you're taking in today versus planned delivery? Are you starting to stretch out here in the late fall into next year? Like how do we think about that opportunity for the demand side right now? I know on the other aspect of the equipment channel they're already booking well out into next year here, but just trying to get a sense for your product sets right now?

Yes. Well, backlogs are high obviously. So we've got production that is slotted accordingly. So backlog or lead times are little bit longer across the board than a typical year. One of our advantages, I mean we've modest of investment into automation, into capacity in most places. I'd say we are -- from our monitoring our lead times are shorter than the industry and most of our competition.

So that brings you to your answering part of my next question would be, is this an opportunity here particularly in some of the newer markets? Like I know the Brazilian market in particular you often quick to point out your automation advantages. Are you able to take some share in this market as an opportunity?

Yes. No, exactly. I think we're gaining share certainly in Brazil and where our market share has moved really substantially over the last year, 1.5 years. And well I think that's equally true in most other markets.

Okay. Helpful. I just want to circle back on this dealership expansion undertaking that you're doing in SureTrack. Can you perhaps just describe this exactly who these new dealers are, Tim? I'm trying to understand the Technology side distribution relative to your current distribution for your more traditional equipment and whether or not they're the same channels I guess is the first part? And then the second part is if they are different then how does that work when you're talking about bundling your product? I'm just trying to understand you're adding all these new dealers? Are they just adding your SureTrack product, or are they -- just maybe give us some better color that a bit confusing to me?

Yes. Well to clarify, it's a bit of both. So we're taking IoT product lines to all of our existing dealers and then bundling with bins with all of our existing dealers. And then we're onboarding new bin dealers and bundling there as well. And then we're also taking the IoT products to other dealers both our other bin dealers not carrying our product lines and non-bin dealers. So there's -- we assess each dealer opportunity and look at the customer base they have, the regenerator products that they're in and the capability they have around install and then we're onboarding those dealers as well. So those events are not AGI bin dealers though, we are still bundling with products like fans, board, portable or other product combinations.

And so is this an opportunity for you for the balance of the business then? I'm just trying to again -- trying to understand is this sort of a thin edge of the wedge to get into new dealerships and then bring in more products over time of your more traditional nature?

Exactly. That's one of the main goals of the technology platform.

Understand. Okay. That’s helpful. And then just want to circle back one more time on the margin question. I know it's been beaten at a little bit here. But just trying to think about where you think the more acute here is going to be on the Farm side or the Commercial side. The margins actually held in frankly quite well in Q1 here. So I'm just trying to get a sense. It sounds like it's going to be more on the Farm side, but just want to get some sort of sense for your expectation? And will the duration be same on both sides as well?

Yes. So just to clarify is your question more on where you feel -- where the impact will be and for how long?

Correct, by segments and sort of duration -- impact by segment and duration by segment.

Yes. Okay. So the bigger impact will definitely be in our Farm segment. That's where the more immediate impact in terms of the steel headwinds and the FX that we're seeing, we will see more prominently. And so we expect -- while we had very strong Farm margins in Q1, we expect that to normalize a bit through Q2, Q3 and in parts of Q4. Farmers are -- they'll react to what they're seeing out there and they'll place larger orders. And so we talk about our backlog being up quite significantly, which is great. And then -- and through Q1 we've been able to -- we had steel where we procured earlier that we were able to flow through. And so we benefited from that. But now as we're out there purchasing steel at the much higher prices and steel continues to increase, it does squeeze our margin. Even though we are passing on price increases, but the price increases are for the newer orders not -- they don't affect the orders that are in backlog. So we'll see that run through and impact us through Q2 and Q3 a small part of Q4. But on the Commercial side not as big of an impact. We do see impact though. The impact more is on supply chain management. And so what we expect to see there is working with suppliers to make sure we get the steel in time. And so you may see delivery times be pushed out as we work with customers and suppliers to manage that whole process. There will be slight impact but not anywhere near a significant in Farm in terms of the pressure on our margin in the commercial. Tim mentioned earlier on one of the questions that we typically only leave orders our quotes open for a shorter period than we used to. We used to have more than 30 days that's now tightened up quite significantly. However, with the steel drop are increasing weekly. So dramatically, you still have a little bit of exposure there.

That’s very helpful guys. Thanks. And appreciate the additional disclosure. That’s great. Thanks.

Thank you. Next question comes from Michael Doumet at Scotiabank. Please go ahead.

Hey, good morning guys. We already talked about the steel thing a bunch. But just to clarify, I mean, you commented that you don't expect the 2% to 3% margin compression in Q2 that you saw in 2018. Is that strictly from steel, or does that include headwinds from FX and offsets from volumes? I mean, can we use that 2% to 3% max margin compression as a guidance for Q2? And then just as a quick follow-up, I mean, how much of an improvement can we expect sequentially into Q3?

Yeah. So just to clarify the 2% to 3%, well, I think was a full year impact that was talked about in 2018 versus -- as opposed to just Q2. There will be some variability through the quarters in Q2 and Q3 from a margin perspective. But for the full year, we don't expect anywhere near that big of an impact 2% to 3%.

Okay. And can you comment on Q2 specifically?

Well, yeah. So based on our visibility right now what we see based on the forecast, or the consensus estimates that are out there, we do see a little bit of pressure versus consensus in Q2. Still for the full year though we're -- despite these headwinds. So, yeah, I think it's clearly remarkable. Despite the steel challenges we have and the cost increases and despite the FX, which is fairly significant, we expect to come in at/or above consensus right now based on what people are showing out there.

That’s great. And then when you're talking to at consensus number does that the EBITDA dollar amount or the margin percentage?

The dollar amount.

Okay, perfect. That’s incredibly helpful. I guess, just as a follow-up are you finding some of your customers at this point might be deferring purchases until steel prices moderate? I mean is that the risk to the second half demand? And have you seen any of that so far, or is it just too early?

Yeah. I mean, generally speaking no. I mean, we've always repeated our underlying demand really isn't the price. It's helpful in your favorable conditions. But it really relates to volume of product, volume of grain on the farm, volume of grain being traded, volume of inputs being used. Those are all up. And it is driving -- it speaks to the infrastructure comment or characterization of our offerings. It needs to be there and it needs to be invested in to facilitate that those businesses through low crop prices and through high crop prices and through high steel and low steel. So we've seen very resilient demand across the -- across our business despite pretty significant price increases.

All right guys, so those are my question. Thank you.

Thanks, Michael.

Thank you. Next question comes from Andrew Wong at RBC Capital Markets. Please go ahead.

Hey good morning. Just I want to go back on Tech, just to ask a little bit more about that. The rework on the Tech distribution model sounds like it's a lot on the Farm side and all the focus is on the Farm side right now. Is that right? I think I recall if the Tech business had an interesting model where there's basically like an ecosystem that connects Farm and commercial. Can you talk more about the commercial side? Are there any changes on the commercial side and what the sales growth is? Thanks.

Yeah. Well, the subscription -- the change in that subscription model it is mostly far. And on the commercial side though we've expanded what we call a strategic sales team quite a bit. And now we have an amended process really around focusing customized strategies for each commercial customer. So we look at that what storage they have whether they be a grain buyer or a co-op or otherwise or a retailer. And we -- and the types of programs they have with growers and whether they're prioritizing traceability or grain content or -- and ultimately then who their customers are. And then we customize a program on IoT digital program for each strategic customer. So that has changed significantly over the last three, five months and the team has changed. We're continuing to build that out to ramp up our -- those partnerships with the commercial customers.

Okay. That’s great. I do want to ask one more thing on the steel side. Steel prices have risen in some cases like two three, three times versus last year, when the rise is pretty steep. Can you just talk about what AGI has been doing differently now in terms of steel procurement versus say in like 2018, so that the impact may not be as high as back then on the margin? Thank you.

Yes. Well, we buy steel -- well what we've said early in four key markets, it's probably or it's expanded our supply chain it's expanded in order to get it to augment our total supply. Conversations around pricing probably went from weekly to daily. And then, price increases have been much more frequent and for larger amounts than really than any year in the past. So, I just -- I guess I just repeat that we continue to stay closer on both sides of that equation on the supply side and then on the pricing side in order to mitigate these sort of unprecedented movements.

Okay. That’s great. And just last one I guess on the Canadian FX. Can you just talk about how that -- can you help quantify that impact? It's been a pretty big change over the quarter? What's that impact for the rest of the year? Thank you.

Yes. So from an FX perspective, from an impacting results perspective, we have a net -- we're net long I'd call it and we've talked about this before, net long for an annual base of about US$100 million. And so, you can think about the impact on our results based on the change in the rate year-on-year with that kind of rough order magnitude there. So any quarter, if it’s a $100 million into what your estimate of the quarter is versus the year. And that's approximately what you'll see is a year-on-year impact.

Okay. Thanks.

Thank you. Next question is from Ron Lydall at Lydall Financial [ph]. Please go ahead.

Good morning. I would like to know here with the increased commodity prices here. Are you still in the acquisition mode at all you own many different brands? It's my observation that many of these smaller grain manufacturers probably time for their exit strategy? And if that's the case, I was wondering about the size of the firms and manufacturers that you consider acquiring? And secondly, I wanted to know if carbon fiber at all is a type of material that you would consider in the manufacture of grain that's considering the steel prices going up? And then lastly, some of the products if you acquired new vendors or manufacturers. Would this work or they would combine their sources or combine their company’s two different companies to buy the steel and hopefully give us a lower price?

Yes. Good question. Thank you for those. So let me just run through these. I guess fairly short answers on these ones. The acquisition side, I mean we've just come through a pretty heavy investment phase with M&A as we expanded our product lines around the world and then geographic expansion as well. So, we're very much focused just on expansion and leveraging those investments. So the shorter answer on the grain side is that we don't expect acquisitions in the short term. On the target 5%, that's an interesting comment. We have seen some work on a grapping attraction into our products. Then I guess maybe not exactly like ours, but as a replacement for steel I don't see it happening anytime soon to be honest. And we do expect steel prices to drop in the relatively near future and moderate or normalize and steel still being -- having a lot of advantages across the network. I think there's some interesting work that could and will be done on alternative products going into the future. And we do track and pay attention to those as we do that.

Thank you.

Thank you. The next question is a follow-up from Steve Hansen at Raymond James. Please go ahead.

Yeah. Just a follow-up quickly guys on the liability exposure. It looks like you drew down $7 million to $8 million on the $70 million. Is that the pace we should expect to see going forward, or how should we think about the evolution there?

No. I think you'll see it pick up a bit through the next three, four months as we work to remediate the one of the customer sites. And so -- but from a total dollar result is $70 million we would expect still to have amounts remaining on that towards -- through the end of the year.

So any update on the insurance side there, whether or not there's going to be any opportunity to recover?

No, no. That's still -- we don't expect any insurance. We expect to receive insurance proceeds from it. But in terms of the timing of that that likely will be early next year.

Okay. Pretty helpful. That's it. Thanks.

Thank you. Next question is from Michael Robertson at National Bank. Please go ahead.

Hey, good morning gents. I figured I'd be real original and asked a question on the steel front. I was just sort of pondering. I know you guys in previous discussions have noted that a lot of the price increases are more or less prominent. Now with this sort of rapid rise, I believe you've already said, we don't expect that to be as reflected this time around. Just sort of thinking based on your commentary there that you expect steel prices to normalize a bit eventually moving forward. Is there an opportunity maybe to capture back some of that margin on the backside of that, if you've got price increases more permanently baked in?

Yeah. It's a good point and interesting dynamics. I mean, we're -- there's always a component of that. Margins tend to normalize over time. And so we'd expect that. I mean we are using surcharges in this instance across the board more so than usual just given the -- how unusual these markets are. We wouldn't typically use surcharges. We use sort of incremental pricing increases. But in this instance, there's much more of that surcharge which is more of a temporary increase given the environment.

Got it. Thanks. Appreciate it. I'll turn back.

Thank you. There are no further questions at this time. You may proceed.

Okay. Thanks everybody for your time this morning. And we'll end the call here.

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and we ask that you please disconnect your lines. Enjoy the rest of your day.