UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
FOR
THE FISCAL YEAR ENDED JANUARY 31, 2026 COMMISSION FILE NO. 001-09097
REX AMERICAN RESOURCES CORPORATION
(Exact name of registrant as specified in its charter)
Registrant’s telephone number, including
area code (937) 276-3931
Securities registered pursuant to Section 12(b)
of the Act:
Title of each class Trading Symbol(s) Name of each exchange on which registered
Common Stock, $.01 par value REX New York Stock Exchange
Indicate by check mark if the registrant is a
well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐No☑
Indicate by check mark if the registrant is not
required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐No☑
Indicate by check mark whether the registrant
(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements
for the past 90 days. Yes☑ No ☐
Indicate by check mark whether the registrant
has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during
the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes☑ No ☐
Indicate by check mark whether the registrant
is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company.
See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”
and “emerging growth company” in Rule 12b-2 of the Exchange Act. (check one):
Large accelerated filer☑ Accelerated filer ☐ Non-accelerated filer ☐ Smaller reporting company ☐ Emerging growth company ☐
If an emerging growth company, indicate by check
mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting
standards provided pursuant to Section 13(a) of the Exchange Act ☐
Indicate by check mark whether the registrant
has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial
reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or
issued its audit report. Yes ☑ No ☐
If securities are registered pursuant to Section
12(b) of the Act, indicated by check mark whether the financial statements of the registrant included in the filing reflect the correction
of an error to previous issued financial statements. Yes ☐ No ☑
Indicate by check mark whether any of those error
corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the registrant’s
executive offices during the relevant recovery period pursuant to §240.10D-1(b). Yes ☐ No ☑
Indicate by check mark whether the registrant
is a shell company (as defined in Rule 12b-2 of the Exchange Act) Yes ☐ No ☑
At the close of business on July 31, 2025, the
aggregate market value of the registrant’s outstanding Common Stock held by non-affiliates of the registrant (for purposes of this
calculation, 2,311,509 shares beneficially owned by directors and executive officers of the registrant were treated as being held by affiliates
of the registrant), was $743,279,294.
There were 32,937,718 shares of the registrant’s
Common Stock outstanding as of March 27, 2026.
Documents Incorporated by Reference
Portions of REX American Resources Corporation’s
definitive Proxy Statement for its Annual Meeting of Shareholders on May 28, 2026 are incorporated by reference into Part III of this
Form 10-K.
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Commonly Used Defined Terms
Corporate Structure:
NuGen NuGen Energy, LLC – REX owns 99.7%
One Earth One Earth Energy, LLC and subsidiaries – REX owns 76.1%
Big River Big River, LLC, and subsidiaries – REX owns 10.3%
Industry Terms:
CI Carbon Intensity
CO2 Carbon dioxide
DDGS Dried distillers grains
E-10 Gasoline blended with up to 10% ethanol by volume
E-15 Gasoline blended with up to 15% ethanol by volume
E-85 Gasoline blended with up to 85% ethanol by volume
EACs Energy Attribute Certificates
EISA Energy Independence and Security Act of 2007
EPA United States Environmental Protection Agency
FEOC Foreign Entity of Concern
GHG Greenhouse Gas
ICC Illinois Commerce Commission
IRA Inflation Reduction Act
IRC Internal Revenue Code of 1986, as amended
IRS Internal Revenue Service
LCFS Low Carbon Fuel Standard
OBBBA One Big Beautiful Bill Act
PHMSA Pipeline and Hazardous Materials Safety Administration
RFA Renewable Fuels Association
RFS/RFS II Renewable Fuel Standard/Renewable Fuel Standard II
RIN(s) Renewable Identification Number(s)
RVOs Renewable Volume Obligations
Section 45Q/45Q Section 45Q of the Internal Revenue Code
Section 45Z/45Z Section 45Z of the Internal Revenue Code
SB Illinois Senate Bill
SAF Sustainable Aviation Fuel
SRE(s) Small Refinery Exemption(s)
USDA United States Department of Agriculture
USMCA United States-Mexico-Canada Agreement
Accounting and General Business Terms:
ASC Accounting Standards Codification
ASC 280 ASC 280, “Segment Reporting”
ASC 323 ASC 323, “Investments-Equity Method and Joint Ventures”
ASC 360-05 ASC 360-05, “Impairment or Disposal of Long-lived Assets”
ASC 740 ASC 740, “Income Taxes”
ASC 815 ASC 815, “Derivatives and Hedging”
ASC 820 ASC 820, “Fair Value Measurements and Disclosures”
ASU Accounting Standards Update
FASB Financial Accounting Standards Board
RSU Restricted stock unit
SG&A Selling, general, and administrative
TSR Total shareholder return
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Forward-Looking
Statements
This Form 10-K contains or may
contain forward-looking statements as defined in the Private Securities Litigation Reform Act of 1995. Such statements can be
identified by use of forward-looking terminology such as “may,” “expect,” “believe,”
“estimate,” “anticipate” or “continue” or the negative thereof or other variations
thereon or comparable terminology. Readers are cautioned that there are risks and uncertainties that could cause actual
events or results to differ materially from those referred to in such forward-looking statements. These risks and
uncertainties include the risk factors set forth from time to time in the Company’s filings with the Securities and
Exchange Commission and include among other things: the impact of legislative and regulatory changes, the price volatility
and availability of corn, distillers grains, ethanol, distillers corn oil, gasoline and natural gas, commodity market risk,
ethanol plants operating efficiently and according to forecasts and projections, logistical interruptions, success in
permitting and developing the planned carbon sequestration facility near the One Earth Energy ethanol plant, changes in the
international, national or regional economies, the impact of inflation, the ability to attract employees, weather, results of
income tax audits, changes in income tax laws or regulations such as the OBBBA, the impact of U.S. foreign trade policy and
tariffs, changes in foreign currency exchange rates, the effects of terrorism, wars and other conflicts, and the effect of
pandemics on the Company’s business operations, including impacts on supplies, demand, personnel and other factors. The
Company does not intend to update publicly any forward-looking statements except as required by law. Other factors that could
cause actual results to differ materially from those in the forward-looking statements are set forth in Item 1A.
Available
Information
REX makes available free of charge on its Internet
website its annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports as
soon as reasonably practicable after such material is electronically filed with or furnished to the SEC. REX’s Internet website
address is www.rexamerican.com. The contents of the Company’s website are not a part of this report.
PART
I
Item 1. Business
References to
“we”, “us”, “our”, “REX” or “the Company” refer to REX American Resources
Corporation and its majority owned subsidiaries.
Fiscal Year
All references in this report to a particular
fiscal year are to REX’s fiscal year ended January 31. We refer to our fiscal year by reference to the calendar year immediately
preceding the January 31 fiscal year end date. For example, “fiscal year 2025” means the period February 1, 2025 to January
31, 2026.
Corporate History and Background
REX was incorporated in Delaware in 1984 as a
holding company. Our principal offices are located at 7720 Paragon Road, Dayton, Ohio 45459. Our telephone number is (937) 276-3931.
In 2006, we started investing in ethanol production
facilities. We are currently invested in three ethanol production entities – One Earth Energy, LLC, NuGen Energy, LLC, and Big River
Resources, LLC. We own a majority interest in One Earth and NuGen.
General Overview
We reported net income attributable to REX common
shareholders of approximately $83.0 million in fiscal 2025 compared to approximately $58.2 million in fiscal 2024. The current year has
benefitted from reductions in our effective tax rate resulting from the impact of 45Z tax credits earned associated with our ethanol production.
Gross profit in fiscal year 2025 was higher than fiscal year 2024, primarily a result of higher crush spreads. The two largest drivers
of ethanol profitability are corn and ethanol pricing, both of which experienced significant volatility within the year. Chicago Board
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of Trade corn prices per bushel ranged from a
low of $3.72 in August 2025 to a high of $5.02 in February 2025. S&P Global Platts ethanol pricing per gallon ranged from a low of
$1.50 in January 2026 to a high of $2.09 in September 2025.
The form and structure of our ethanol investments
are tailored to the specific needs and goals of each project and the local farmer group or investor with whom we partner. We generally
participate in the oversight of our projects through our membership on the board of managers of the limited liability companies that own
the plants. We provide management oversight and direction with respect to most aspects of plant operations for our consolidated ethanol
companies. We have equity investments in three entities engaged in the production of ethanol as of January 31, 2026. The following table
is a summary of our ethanol entity ownership interests at January 31, 2026:
Entity Location REX’s Current Ownership Interest
One Earth Energy, LLC Gibson City, IL 76.1%
NuGen Energy, LLC Marion, SD 99.7%
The three entities own a total of six ethanol
production facilities, which in aggregate shipped approximately 722 million gallons of ethanol over the twelve-month period ended January
31, 2026. REX’s effective ownership of ethanol gallons shipped for the twelve-month period ended January 31, 2026, was approximately
294 million gallons.
Our ethanol operations are highly dependent on
commodity prices, especially prices for corn, ethanol, distillers grains, distillers corn oil and natural gas, and availability of corn.
As a result of price volatility for these commodities, our operating results can fluctuate substantially. The price and availability of
corn is subject to significant fluctuations depending upon several factors that affect commodity prices in general, including crop conditions,
the amount of corn stored on farms, weather, federal policy, foreign trade, tariffs and international disruptions caused by wars or conflicts.
Because the market prices of ethanol and distillers grains are not always directly related to corn prices (for
example, demand for crude and other energy and related prices, the export market demand for ethanol and distillers grains, soybean meal
prices, and the results of federal policy decisions, trade negotiations, and tariffs can impact ethanol and distillers grains prices),
at times ethanol and distillers grains prices may not follow movements in corn prices and, in an environment of higher corn prices or
lower ethanol or distillers grains prices, reduce the overall margin structure at the plants. As a result, at times, we may operate our
plants at negative or minimally positive operating margins.
We expect our ethanol plants to produce approximately
2.9 gallons of denatured ethanol for each bushel of corn processed in the production cycle. We refer to the actual gallons of denatured
ethanol produced per bushel of corn processed as the realized yield. We refer to the difference between the price per gallon of ethanol
and the price per bushel of corn (divided by the realized yield) as the “crush spread.” Should the crush spread decline, it
is possible that our ethanol plants will generate operating results that do not provide adequate cash flows for sustained periods of time.
In such cases, production at the ethanol plants may be reduced or stopped altogether in order to minimize variable costs at individual
plants.
We attempt to manage the risk related to the volatility
of commodity prices by utilizing forward corn and natural gas purchase contracts, forward ethanol, distillers grains and distillers corn
oil sale contracts, and commodity futures agreements, as management deems appropriate. We attempt to match quantities of these sales contracts
with an appropriate quantity of corn purchase contracts over a given period of time when we can obtain an adequate gross margin resulting
from the crush spread inherent in the contracts we have executed. However, the market for future ethanol sales contracts generally lags
the spot market with respect to ethanol prices. Consequently, we generally execute fixed price ethanol contracts for no more than four
months into the future at any given time and we may lock in our corn or ethanol price without having a corresponding locked in ethanol
or corn price for short durations of time. As a result of the relatively short period of time our fixed price contracts cover, we generally
cannot predict the future movements in our realized crush spread for more than four months; thus, we are unable to predict the likelihood
or amounts of future income or loss from the operations of our ethanol facilities.
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See “Item 7. Management’s
Discussion and Analysis of Financial Condition and Results of Operations” for details on the Company’s ongoing carbon sequestration
and plant expansion projects. These projects are part of the Company’s efforts to maximize the benefits of the federal 45Z tax credits
and, subsequent to the expiration of the 45Z tax credits, federal 45Q tax credits, and are subject to ongoing regulatory changes.
We plan to seek and evaluate various investment
opportunities including energy related, carbon sequestration, agricultural and other ventures we believe fit our investment criteria.
We can make no assurances that we will be successful in our efforts to find such opportunities. We have a stock buyback program with an
authorization level of an additional 2,357,186 shares at January 31, 2026 through open market transactions, privately negotiated transactions,
or transactions by other means in accordance with applicable securities laws. We typically repurchase our common stock when our stock
price is trading at prices we deem to be a discount to the underlying value of our net assets.
Ethanol Industry
Ethanol is a renewable fuel produced by processing
corn and other biomass through a fermentation process that creates combustible alcohol that can be used as a fuel additive to reduce vehicle
emissions from gasoline, as an octane enhancer to improve the octane rating of gasoline with which it is blended and, to a lesser extent,
as a gasoline substitute. The majority of ethanol produced in the United States is made from corn because of its wide availability and
ease of convertibility from large amounts of carbohydrates into glucose, the key ingredient in the fermentation process that is used in
producing alcohol. Ethanol production can also use feedstocks such as grain sorghum, switchgrass, wheat, barley, potatoes and sugarcane
as carbohydrate sources. Most domestic ethanol plants have been located near large corn production areas, such as Illinois, Indiana, Iowa,
Minnesota, Nebraska, Ohio and South Dakota. Railway access and interstate access are vital for ethanol facilities due to the large amount
of raw materials and finished goods required to be shipped to and from the facilities. An adequate supply of natural gas is key to maintaining
optimal operating levels.
According to the RFA, the United States ethanol
industry produced an estimated 16.4 billion gallons of ethanol in 2025, compared to 16.1 billion gallons in 2024, and approximately 2.2
billion gallons were estimated to have been exported from the United States in 2025. According to the RFA, the United States ethanol industry
consists of 198 plants in 24 states with an annual capacity of approximately 18.5 billion gallons of ethanol production.
Domestic demand for ethanol is highly dependent
upon federal and state legislation and regulations. On December 19, 2007, the Energy Independence and Security Act of 2007 (the “Energy
Act of 2007”) was enacted. The Energy Act of 2007 established new levels of renewable fuel mandates, including two different categories
of renewable fuels: conventional biofuels and advanced biofuels. The federal government mandates the use of renewable fuels under RFS
II, established in October 2010. Corn-based ethanol is considered a conventional biofuel. There were mandated volumes established as part
of the RFS II for conventional and advanced biofuels through the year 2022. After 2022, RFS volumes are to be determined by the EPA in
coordination with the Secretaries of Energy and Agriculture. The mandated volumes for conventional biofuel were to reach 15.0 billion
gallons in 2015 and maintain that level until 2022.
The EPA has set conventional
renewable fuel volumes of 15.0 billion gallons for 2023 through 2025. Additionally, in 2023, the EPA restored 250 million
gallons previously waived. On March 27, 2026, the EPA issued RVOs for 2026 and 2027 of 15.0 billion gallons of
conventional ethanol for each year.
The EPA has the authority to waive the biofuel
mandate, in whole or in part, if there is inadequate domestic renewable fuel supply or the requirement severely harms the domestic economy
or environment. In addition, under RFS II, a small refiner that processes fewer than 75,000 barrels of oil per day can petition the EPA
for a waiver of their requirement to submit RINs. The EPA, through consultation with the United States Department of Energy and the USDA,
can grant the refiner a full or partial waiver, or deny the waiver. The waiving of a refiner’s obligation effectively lowers the
amount of renewable fuels required to be blended, and by extension the amount of RINs that need to be retired, which can impact their
values and ultimately blending levels of renewable fuels. There are multiple ongoing legal challenges to how the EPA has handled SREs
and RFS rulemaking. On August 22, 2025, the EPA ruled on much of the backlog of SREs, issuing 63 full exemptions, 77 partial exemptions
of 50%, 28 denials and 7 ruled as ineligible. On November 7, 2025, the EPA issued two 100% waivers, twelve 50% waivers and two denials.
As of March 19, 2026, there were 37 SRE petitions pending from compliance years 2023-2025.
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Ethanol Production
The plants in
which we have invested are designed to use the dry milling method of producing ethanol. In the dry milling process, the entire corn kernel
is first ground into flour, which is referred to as “meal,” and processed without separating out the various component parts
of the grain. The meal is processed with enzymes, chemicals and water, and then placed in a high-temperature cooker. It is then transferred
to fermenters where yeast is added and the conversion of sugar to ethanol begins. After fermentation, the resulting liquid is transferred
to distillation columns where the ethanol is separated from the remaining “stillage” for fuel uses. The anhydrous ethanol
is then blended with a denaturant, such as natural gasoline, to render it undrinkable and thus not subject to beverage alcohol tax. With
the starch elements of the corn consumed in the above-described process, the principal by-product produced by the dry milling process
is dry distillers grains with solubles, or DDGS. DDGS is sold as a protein used in animal feed, which utilizes a portion of the corn value
not absorbed in ethanol production. Depending on market and operating conditions, we may also sell modified distillers grains, or wet
distillers grains, by removing less liquid content compared to DDGS. We also generate revenues from the sale of distillers corn oil produced
at our facilities. Distillers corn oil is sold to the animal feed market, as well as biodiesel and other chemical markets.
The Primary Uses of Ethanol
Blend component. Today,
much of the ethanol blending in the U.S. is done to meet the RFS. Most regular gasoline is produced using blendstock with an octane
rating of 84, which is then increased to 87 (the minimum octane rating required in most states) by adding 10% ethanol according to
the RFA. The industry is attempting to expand ethanol blending above the current 10% for most vehicles in use. The EPA has approved
the use of E-15, which has an octane rating of 88, in gasoline for cars, SUV’s and light duty trucks made in 2001 and later.
Previously, the EPA had not granted E-15 the same Reid vapor pressure waiver as E-10 so it could only be sold from September 16
through May 31 for those vehicles in most markets. The EPA issued emergency waivers to allow the sale of E-15 for the summer months
in the years 2022 through 2026. Eight Midwest states (Illinois, Iowa, Minnesota, Missouri, Nebraska, Ohio, South Dakota, and
Wisconsin) petitioned the EPA to allow year-round sales of E-15 in their states. The EPA approved this request beginning in 2025 but
will consider requests from individual states to delay implementation by one year. Ohio
and South Dakota previously requested a one-year delay, which the EPA has approved. Ohio has since opted out of the agreement.
Clean air additive. Ethanol
is employed by the refining industry as a fuel oxygenate, which when blended with gasoline, allows engines to combust fuel more completely
than gasoline that has not been oxygenated and thus reduce emissions from motor vehicles. Ethanol contains 35% oxygen, which results in
more complete combustion of the fuel in the engine cylinder. Oxygenated gasoline is used to help meet certain federal and air emission
standards.
Octane enhancer. Ethanol
increases the octane rating of gasoline with which it is blended. Octane is a measure of fuel performance. Ethanol is used by gasoline
suppliers as an octane enhancer both for producing regular grade gasoline from lower octane blending stocks and for upgrading regular
gasoline to premium grades.
Legislation
The United States ethanol industry is highly dependent
upon federal and state legislation. See Item 1A. Risk Factors for a discussion of legislation affecting the U.S. ethanol industry.
Refined Coal Facility
On August 10, 2017, we purchased, through a 95.35%
owned subsidiary, the entire ownership interest of an entity that owned a refined coal facility. We began operating the refined coal facility
immediately after the acquisition. Using licensed technology, our plant applied two separate chemicals to convert feedstock coal into
refined coal, which was sold to the end user of the refined coal. The refined coal operating results were subsidized by federal production
tax credits through November 18, 2021, subject to meeting qualified emissions reductions as governed by Section 45 of the IRC. We ceased
operating the facility on November 18, 2021 and subsequently sold the facility. The federal production tax credits received through ownership
of this facility, approximately $58.2 million, remain under IRS audit. That audit is in the process of being finalized, with the Company
expecting to retain all federal production tax credits claimed.
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Facilities
As of our fiscal year end, our consolidated ethanol
entities owned a combined 1,591 acres of land and two facilities that shipped a combined quantity of approximately 294 million gallons
of ethanol in fiscal year 2025. We also own our corporate headquarters office building, consisting of approximately 7,500 square feet,
located in Dayton, Ohio.
Human Capital Resources
The
attraction, retention and development of employees is critical to our success. We accomplish these objectives through a variety of actions,
including our competitive compensation policies, discretionary stock award programs, training initiatives, and growth opportunities within
our Company. At January 31, 2026, we had 132 employees at our two consolidated ethanol plants and at our corporate headquarters. None
of our employees are represented by a labor union. We expect this employment level to remain relatively stable, subject to changes upon
startup of the carbon sequestration facility. We consider our relationship with our employees to be good.
We conduct regularly scheduled
safety meetings and require all employees to go through safety training. We evaluate employee safety incidents monthly and investigate
such incidents promptly. In addition, we conduct periodic safety audits performed by an independent third party. A portion of our incentive
compensation plan rewards employees for attaining certain safety goals.
We believe we offer market competitive
compensation and benefit programs for our employees. In addition to competitive base wages, all employees are eligible for an incentive
compensation program, a Company matched 401(k) plan, healthcare benefits, and paid time off.
Service Marks
We have registered the service marks “REX”
and “Farmer’s Energy” with the United States Patent and Trademark Office. We are not aware of any adverse claims concerning
our service marks.
Item 1A. Risk Factors
We encourage you to carefully consider the risks
described below and other information contained in this report when considering an investment decision in REX common stock. Any of the
events discussed in the risk factors below may occur. If one or more of these events do occur, our results of operations, financial condition
or cash flows could be materially adversely affected. In this instance, the trading price of REX stock could decline, and investors might
lose all or part of their investment.
Risks Related to our Ethanol and By-Products
Business
The financial returns on our ethanol investments
are highly dependent on commodity prices, which are subject to significant volatility, uncertainty and regional supply shortages, so our
results could fluctuate substantially.
The financial returns on our
ethanol investments are highly dependent on commodity prices, especially prices for corn, natural gas, ethanol, distillers grains, distillers
corn oil and gasoline, and availability of corn. As a result of the volatility of the prices for these items, our returns may fluctuate
substantially and our investments could experience periods of declining prices for their products and increasing costs for their raw materials,
which could result in operating losses at our ethanol plants.
The gross margin at our ethanol
plants depends principally on the spread between ethanol, distillers grains, distillers corn oil, and corn prices. Fluctuations in the
spread are likely to continue to occur. A sustained narrow or negative spread, whether as a result of sustained high or increased corn
prices or sustained low or decreased ethanol prices, would adversely affect the results of operations at our ethanol plants.
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Our returns on ethanol
investments are highly sensitive to corn prices.
Corn is the principal raw material
our ethanol plants use to produce ethanol and by-products. As a result, changes in the price of corn can significantly affect our businesses.
Rising corn prices result in higher production costs of ethanol and by-products. Because ethanol competes with non-corn-based fuels, our
ethanol plants may not be able to pass along increased grain costs to our customers. At certain levels, grain prices may make ethanol
uneconomical to produce.
The price of corn is influenced
by weather conditions and other factors affecting crop yields, transportation costs, farmer planting decisions including input costs,
exports, foreign production, the value of the U.S. dollar, and general domestic and foreign economic, market and regulatory factors, including,
but not limited to, the impacts from the Russian-Ukraine and Middle Eastern conflicts as well as other conflicts and political unrest,
both foreign and domestic. These factors include government policies and subsidies with respect to agriculture, international trade and
tariffs, and global and local demand and supply. The significance and relative effect of these factors on the price of corn is difficult
to predict. Any event that tends to negatively affect the production and/or supply of corn, such as adverse weather or crop disease, could
increase corn prices and potentially harm the business of our ethanol plants, to include intermittent production slowdowns or stoppages.
Increasing domestic ethanol production could boost the demand for corn and result in increased corn prices. International demand for corn
could also result in higher or lower corn prices. Our ethanol plants may also have difficulty, from time to time, in physically sourcing
corn on economic terms due to regional supply shortages, transportation issues, delays in farmer marketing decisions or unfavorable local
pricing. Such a shortage or price impact could require our ethanol plants to suspend operations which would have a material adverse effect
on our consolidated results of operations.
Our risk management strategies
may be ineffective and may expose us to decreased profitability and liquidity.
In an attempt to partially offset
the impact of volatility of commodity prices, we enter into: i) forward contracts to sell a portion of our ethanol, distillers grains,
and distillers corn oil production and to purchase a portion of our corn and natural gas requirements and; ii) commodity futures and swap
agreements. The financial impact of these risk management activities is dependent upon, among other items, the prices involved and our
ability to receive or deliver the commodities involved. Risk management activities can result in financial loss when positions are purchased
in a declining market or when positions are sold in an increasing market. In addition, we may not be able to match the appropriate quantity
of corn contracts with quantities of ethanol, distillers grains and distillers corn oil contracts. Further, our
results may be impacted by a mismatch of gains or losses associated with the positions during a reporting period when the physical commodity
purchase or sale has not yet occurred. We vary the amount and type of risk management techniques we utilize, and we may choose
not to engage in any risk management activities. Should we fail to properly manage the inherent volatility of commodity prices, our results
of operations and financial condition may be adversely affected.
The market for natural
gas is subject to market conditions that create uncertainty in the price and availability of the natural gas that our ethanol plants use
in their manufacturing process.
Our ethanol plants rely upon
third parties for their supply of natural gas, which is consumed as fuel in the production process. The prices for and availability of
natural gas are subject to volatile market conditions. These market conditions often are affected by factors beyond the ethanol plants’
control, such as weather conditions, overall economic conditions, export market, governmental regulation and foreign and domestic relations,
including, but not limited to, the impacts from the Russian-Ukraine and Middle Eastern conflicts. Significant disruptions in the supply
of natural gas could impair or completely prevent the ethanol plants’ ability to economically manufacture ethanol for their customers.
Furthermore, increases in natural gas prices may adversely affect results of operations and financial position at our ethanol plants.
Fluctuations in the selling price of commodities
may reduce profit margins at our ethanol plants.
Ethanol is marketed as a fuel additive to reduce
vehicle emissions from gasoline, as an octane enhancer to improve the octane rating of gasoline with which it is blended and, to a lesser
extent, as a gasoline substitute. As a result, ethanol prices are influenced by the supply and demand for gasoline, and our ethanol plants’
results of operations and financial position may be materially adversely affected if gasoline demand decreases or the price of gasoline
declines making ethanol less economical.
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Distillers grains compete with other protein-based
animal feed products. The price of distillers grains may decrease when the prices of competing feed products decrease. The prices of competing
animal feed products are based in part on the prices of the commodities from which these products are made. Historically, sales prices
for distillers grains have tracked along with the price of corn and soybean meal. However, there have been instances when price increases
for distillers grains have lagged increases in corn prices.
The production of distillers grains has increased
as a result of increases in dry mill ethanol production in the United States. This could lead to price declines in what we can sell our
distillers grains for in the future. Such declines could have a material adverse effect on our results of operations.
Pricing of distillers corn oil is primarily driven
by the demand from renewable diesel, biodiesel, and to some extent, synthetic aviation fuel markets. Distillers corn oil is marketed as
a low-carbon feedstock to be used in these markets which may see expanded demand due to the extended blending tax credit, credits included
in the IRA and LCFS markets, resulting in an impact to distillers corn oil demand. With a lower CI score, distillers corn oil may see
improved pricing compared to heating oil and soybean oil, which it has traditionally tracked closely in price. Alternatively, other feedstocks
such as cooking oil and animal fats, with lower CI scoring, could be preferred over distillers corn oil. A decrease in the price of or
demand for distillers corn oil could negatively impact our results of operations.
Inflation could impact the
cost and/or availability of material, labor and other input, which could adversely affect our operations.
We have experienced inflationary impacts on key
production inputs, labor costs consisting of both wages and other labor-related costs, services, equipment and other inputs. These inflationary
pressures could continue or worsen in future periods and may be beyond our control. We may not be able to pass these increased costs along
to our customers through the products we sell. As a result, inflation and higher prices could negatively impact our results of operations.
We are currently working on carbon sequestration
and plant expansion projects at the One Earth plant. We have experienced permitting delays which could lead to inflationary pricing increases
on the construction.
The price of ethanol and distillers grains
may decline as a result of trade restrictions, duties or tariffs on ethanol and distillers grains exports from the United States or from
unfavorable foreign currency exchange rates.
Ethanol and other products that we produce are
sold into various other countries with trade agreements with the United States. If the United States were to withdraw from or materially
modify certain international trade agreements, our business, financial condition and results of operations could be materially adversely
affected. In addition, there have been increased threats of tariffs on imports by the current Trump administration. If tariffs lead to
retaliatory actions by countries that are markets for our products, it could have material adverse effect on our business, financial condition
and results of operations.
The United States exported an estimated 2.2 billion
gallons of ethanol in 2025, up from approximately 1.9 and 1.4 billion gallons in 2024 and 2023, respectively. 36% of the 2025 exports
of ethanol were sold in Canada. Further, in 2025 and 2024, an estimated 11.6 and 12.1 million metric tons, respectively, of distillers
grains were exported by the United States, which represented approximately 36% and 37% in 2025 and 2024, respectively, of U.S production.
Of the total United States exports of distillers grains in 2025, 20% were exported to Mexico. If producers and exporters of ethanol and
distillers grains are subjected to trade restrictions, or additional duties or tariffs are imposed on U.S. exports, particularly by Canada
and Mexico, it may make it uneconomical to export these products. The industry has experienced various trade policy disputes, tariffs
and investigations in foreign countries that have adversely impacted the international demand for our products. Reduced international
demand could lead to further oversupply and reduce pricing.
Increased ethanol production
or decreases in demand for ethanol may result in excess production capacity in the ethanol industry, which may cause the price of ethanol,
distillers grains and distillers corn oil to decrease.
According to the RFA, domestic
ethanol production capacity is approximately 18.5 billion gallons per year. Under RFS II, there were mandated volumes through 2022 for
conventional and advanced biofuels. After 2022, RFS volumes are to be determined by the EPA in coordination with the Secretaries of Energy
and Agriculture. The EPA has set conventional
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renewable fuel
volumes of 15.0 billion gallons for 2023 through 2025. In addition, for 2023 the EPA restored 250 million gallons previously
waived. On March 27, 2026, the EPA issued RVOs for 2026 and 2027 of 15.0 billion gallons of conventional ethanol for
each year. The excess capacity over the EPA proposed
volumes could have an adverse effect on the results of our operations. In a manufacturing industry with excess capacity,
producers have an incentive to manufacture additional products for so long as the price exceeds the marginal cost of
production (i.e., the cost of producing only the next unit, without regard for interest, overhead or fixed costs). This
incentive could result in the reduction of the market price of ethanol to a level that is inadequate to generate sufficient
cash flow to cover costs.
A decrease in demand for ethanol
may also result in excess capacity, which could result from a number of factors, including, but not limited to, regulatory developments,
reduced U.S. gasoline consumption, and increases in gasoline prices. Reduced gasoline consumption could occur as a result of increased
prices for gasoline or crude oil, which could cause businesses and consumers to reduce driving or acquire vehicles with more favorable
gasoline mileage or acquire non-gasoline powered vehicles. In addition, decreased overall economic activity could also lead to reduced
gasoline consumption.
In addition, because ethanol
production produces distillers grains and distillers corn oil as by-products, increased ethanol production will also lead to increased
supplies of distillers grains and distillers corn oil. An increase in the supply of distillers grains and distillers corn oil, without
corresponding increases in demand, could lead to lower prices or an inability to sell our ethanol plants’ distillers grains and
distillers corn oil production. A decline in the price of distillers grains or distillers corn oil could have a material adverse effect
on the results of our business, financial condition, and results of operations.
Future demand for ethanol is uncertain and
changes in overall consumer demand for transportation fuel could affect demand.
There are limited markets for ethanol other than
what is federally mandated. Increased consumer acceptance of E-15 and E-85 fuel is likely necessary in order for ethanol to achieve significant
market share growth beyond federal mandate levels.
Consumer demand for gasoline may be impacted by
emerging transportation trends, such as hybrid and electric vehicles. Some automobile manufacturers have announced plans to phase out
internal combustion engine production by the mid-2030s. There also have been pledges to ban the sale of internal combustion engines in
countries such as Japan and the United Kingdom by 2035, as well as a statewide ban in California, which several states are imitating.
If realized, these bans would accelerate the decline of liquid fuel demand and by extension demand for ethanol, biodiesel and renewable
diesel. Recent federal legislation seeks to address the ever-increasing demand for electric vehicle infrastructure. Reduced demand for
ethanol could cause our results of operations to be materially impacted.
We may not successfully develop our planned
carbon sequestration facility near the One Earth Energy ethanol plant.
The Company has committed significant time and
resources towards a carbon sequestration project near the One Earth Energy ethanol plant. The completion and start-up of this project
requires numerous government approvals. If we are not successful in obtaining all these approvals, we may not be able to complete this
project and could result in a significant write off of our commitments and investment, which totals approximately $58.9 million as of
our most recent year-end. Recent delays in permitting could result in increased costs to complete the project.
If we are not successful on this project, our
ethanol plant could be at a disadvantage in the industry as our inability to sequester our carbon could result in a higher CI score than
our competitors if they are able to sequester their carbon. If we are unable to reduce our CI score, we may not be able to participate
in the state and federal clean fuel programs, including federal tax credits outlined in the IRA and OBBBA.
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Carbon capture and sequestration projects are
subject to federal, state, and local regulations.
In addition to our planned carbon sequestration
facility near our One Earth Energy ethanol plant, we have signed an agreement to deliver our carbon from the NuGen Energy facility to
an outside party. These projects may not result in any realized benefit due to delays or suspended operations. Investments being made
in these projects are based on regulatory guidelines, such as modeling for CI reductions, that may be adjusted outside of our control
and could deviate from our current strategy. Delays in the issuance or regulations or the elimination of clean fuel and other incentives
at the federal, state or local level could adversely affect our business. New legislation limiting our ability to sequester carbon could
be adopted at the federal, state or local levels.
We have secured land easements from all necessary
landowners to allow the construction of the CO2 connector pipeline on their land from the ethanol plant to the first two
injection wells for our carbon sequestration project near the One Earth Energy ethanol facility. We also have landowner subsurface easements
for the first injection well with capacity sufficient to allow for carbon sequestration for our One Earth plant for an estimated 15 years.
In July 2024, the governor of Illinois signed the Safety and Aid for the Environment in Carbon Capture and Sequestration Act. This legislation
imposes additional safety, environmental and other requirements on obtaining permits and approvals for carbon capture and sequestration
facilities in Illinois, including CO2 pipelines. Further, the legislation imposes a moratorium on the issuance of new certificates
of authority for the construction of CO2 pipelines until the earlier of the date federal CO2 pipeline safety standards
are finalized by the federal PHMSA or, subject to certain other conditions, July 1, 2026. As a result of this legislation, the ICC dismissed
our pipeline application without prejudice, and we will be required to resubmit an application after rules are finalized or subsequent
to July 1, 2026. The delays and additional requirements imposed as a result of this act could have an adverse impact on the cost and completion
of our project.
In March 2025, South Dakota enacted
a law that bans the use of eminent domain in connection with carbon dioxide pipelines. In addition, in March 2026, a North
Dakota Court voided the permits issued to Summit Carbon Solutions for underground storage of carbon dioxide as the Court has
deemed the law the permits were issued under to be unconstitutional. Our NuGen ethanol plant has a contract to be a part of
this project. Summit Carbon Solutions is analyzing the decision and is contemplating next steps. These actions could make
the sequestration project for the NuGen facility more difficult for Summit Carbon Solutions to complete.
Our ability to generate 45Z production tax
credits involves regulatory and market uncertainties.
We expect our consolidated ethanol
plants will be able to claim 45Z tax credits for 2025 based on current laws and proposed regulations. Guidelines issued by
the U.S. Department of Treasury are still being finalized. Costs associated with 45Z compliance, including prevailing wage and apprenticeship requirements, could become material. Changes in these requirements, as well as
changes in CI score modeling, could have a material impact on the amount of credits we are able to claim.
45Z tax credits can be utilized by the taxpayer
to reduce income tax payments or the credits can be monetized externally. Fluctuations in demand, uncertainty within the tax credit market
and changes in regulations can all impact our ability to monetize the credits, or impact the value at which the credits can be monetized.
We depend on our partners to operate certain
of our ethanol investments.
Our investments currently represent both majority
and minority equity positions. Day-to-day operating control of minority owned plants generally remains with the local investor group.
We do not have the ability to directly modify the operations of these plants in response to changes in the business environment or in
response to any deficiencies in local operations of the plants. In addition, local plant operators, who also represent the primary suppliers
of corn and other crops to the plants, may have interests, such as the price and sourcing of corn and other crops, that may differ from
our interest, which is based solely on the operating profit of the plant. The limitations on our ability to control day-to-day plant operations
could adversely affect plant results of operations.
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We may not successfully acquire or develop
additional ethanol investments or expansion.
The growth of our ethanol business
depends on our ability to identify and develop new ethanol investments. Any expansion strategy will depend on prevailing market conditions
for the price of ethanol and the cost of corn and natural gas and the expectations of future market conditions. Additional financing may
also be necessary to implement any expansion strategy, which may not be accessible or available on acceptable terms. In addition, failure
to adequately manage the risks associated with additional ethanol investments could have a material adverse effect on our business.
Our ethanol plants may be adversely affected
by technological advances and efforts to anticipate and employ such technological advances may prove unsuccessful.
The development and implementation of new technologies
may result in a significant reduction in the costs of ethanol production. For instance, any technological advances in the efficiency or
cost to produce ethanol from inexpensive cellulosic sources such as corn stalk, wheat, oat or barley straw could have an adverse effect
on our ethanol plants, because our plants are designed to produce ethanol from corn, which is, by comparison, a raw material with other
high value uses. We cannot predict when, or if, new technologies may become available, the rate of acceptance of new technologies by competitors
or the costs associated with new technologies. In addition, advances in the development of alternatives to ethanol could significantly
reduce demand for or eliminate the need for ethanol.
Any advances in technology which require significant
unanticipated capital expenditures to remain competitive or which reduce demand or prices for ethanol would have a material adverse effect
on the results of our ethanol operations.
In addition, alternative fuels, additives and
oxygenates are continually under development. Alternative fuel additives that can replace ethanol may be developed, which may decrease
the demand for ethanol. It is also possible that technological advances in engine and exhaust system design and performance could reduce
the use of oxygenates, which would lower the demand for ethanol. Reduced demand for ethanol could cause our results of operations to be
materially adversely affected.
The U.S. ethanol industry is highly dependent
upon a myriad of federal and state legislation and regulation and any changes in legislation or regulation could materially and adversely
affect our results of operations and financial position.
The renewable fuel standard program was authorized
under the Energy Policy Act of 2005 and was expanded under the EISA. EISA increased the amount of renewable fuel required to be blended
into gasoline with RFS II and required a minimum usage of corn-derived renewable fuels of 12.0 billion gallons in 2010, increasing annually
by 600 million gallons to 15.0 billion gallons in 2015 through 2022, with no specified volume subsequent to 2022. After 2022, RFS volumes
are to be determined by the EPA in coordination with the Secretaries of Energy and Agriculture. The EPA has the authority to assign the
mandated amounts of renewable fuels to be blended into transportation fuel to individual fuel blenders. RFS II has been a primary factor
in the growth of ethanol usage. Over the past several years various pieces of legislation have been introduced to the U.S. Congress that
were intended to reduce or eliminate ethanol blending requirements. To date, none of the bills have been successful but they are an indication
of the continued effort to undermine the EISA.
The EPA has set conventional
renewable fuel volumes of 15.0 billion gallons for 2023 through 2025. Additionally, for 2023, the EPA restored 250 million
gallons previously waived. On March 27, 2026, the EPA issued RVOs for 2026 and 2027 of 15.0 billion gallons of
conventional ethanol for each year.
Obligated parties use RINs to show compliance
with RFS-mandated volumes. RINs are attached to renewable fuels by producers and detached when the renewable fuel is blended with transportation
fuel or traded in the open market. The market price of detached RINs affects the price of ethanol in certain markets and influences the
purchasing decisions by obligated parties. As a result of fluctuations in RINs pricing, certain obligated parties have petitioned the
EPA and filed court actions to change the point of obligation or to seek relief from their obligation. The EPA has the authority to waive
the biofuel mandate, in whole or in part, if there is inadequate domestic renewable fuel supply or the requirement severely
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harms the domestic economy or environment. In
addition, under RFS II, a small refiner that processes fewer than 75,000 barrels of oil per day can petition the EPA for a waiver of their
requirement to submit RINs. The EPA, through consultation with the United States Department of Energy and the USDA, can grant the refiner
a full or partial waiver, or deny the waiver. The waiving of a refiner’s obligation effectively lowers the amount of renewable fuels
required to be blended, and by extension the amount of RINs that need to be retired, which can impact their values and ultimately blending
levels of renewable fuels. There are multiple ongoing legal challenges to how the EPA has handled SREs and RFS rulemaking. On August 22,
2025, the EPA ruled on much of the backlog of SREs, issuing 63 full exemptions, 77 partial exemptions of 50%, 28 denials and 7 ruled as
ineligible. On November 7, 2025, the EPA issued two 100% waivers, twelve 50% waivers and two denials. As of March 19, 2026, there were
37 SRE petitions pending from compliance years 2023-2025.
Flexible fuel vehicles (“FFVs”) receive
preferential treatment in meeting federally mandated corporate average fuel economy (“CAFE”) standards for automobiles manufactured
by car makers. High blend ethanol fuels such as E-85 result in lower fuel efficiencies. Absent the CAFE preferences, car makers would
not likely build flexible-fuel vehicles. In recent years, automobile manufactures have lowered the production of FFVs for the U.S. Any
change in CAFE preferences could reduce the growth of E-85 markets and result in lower ethanol prices.
Unfavorable changes in legislation or regulations
could materially and adversely affect our results of operations and financial position.
The inability to generate or obtain RINs could
adversely affect our operating results.
Virtually all our ethanol is sold with RINs that
are used by customers to comply with RFS II. If our production does not meet EPA requirements for RIN generation, as an efficient producer,
in the future, we would have to purchase RINs in the open market or sell our ethanol at substantially lower prices, such as on the export