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What changed in REX AMERICAN RESOURCES Corp's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of REX AMERICAN RESOURCES Corp's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+220 added−228 removedSource: 10-K (2023-03-30) vs 10-K (2022-04-06)

Top changes in REX AMERICAN RESOURCES Corp's 2023 10-K

220 paragraphs added · 228 removed · 170 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeDDGS is sold as a protein used in animal feed, which recovers 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.
Biggest changeDepending 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 non-food grade corn oil produced at our facilities. Non-food grade corn oil is sold to the animal feed market, as well as biodiesel and other chemical markets.
We refer to the difference between the price per gallon of ethanol and the price per bushel of grain (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.
We refer to the difference between the price per gallon of ethanol and the price per bushel of grain (divided by the realized yield) as the “crush spread.” Should the crush 4 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 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. 7 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.
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. 8
We ceased operating the facility on November 18, 2021 and subsequently sold the facility. We began to report these results as discontinued operations in the third quarter of 2021.
We ceased operating the facility on November 18, 7 2021 and subsequently sold the facility. We began to report these results as discontinued operations in the third quarter of 2021.
The following table is a summary of our ethanol entity ownership interests at January 31, 2022: Entity REX’s Current Ownership Interest One Earth Energy, LLC 75.8% NuGen Energy, LLC 99.7% Big River Resources, LLC: Big River Resources W Burlington, LLC Big River Resources Galva, LLC Big River United Energy, LLC Big River Resources Boyceville, LLC 10.3% 10.3% 5.7% 10.3% The three entities own a total of six ethanol production facilities, which in aggregate shipped approximately 699 millions gallons of ethanol over the twelve-month period ended January 31, 2022.
The following table is a summary of our ethanol entity ownership interests at January 31, 2023: Entity REX’s Current Ownership Interest One Earth Energy, LLC 75.8% NuGen Energy, LLC 99.7% Big River Resources, LLC: Big River Resources W Burlington, LLC Big River Resources Galva, LLC Big River United Energy, LLC Big River Resources Boyceville, LLC 10.3% 10.3% 5.7% 10.3% The three entities own a total of six ethanol production facilities, which in aggregate shipped approximately 691 millions gallons of ethanol over the twelve-month period ended January 31, 2023.
We also own a majority interest in an entity that owned and, until November 18, 2021, operated a refined coal facility. As we have ceased operating the refined coal facility, we began classifying the financial results of the operating segment as discontinued operations.
We own a majority interest in One Earth and NuGen. We also own a majority interest in an entity that owned and, until November 18, 2021, operated a refined coal facility. As we have ceased operating the refined coal facility, we began classifying the financial results of the operating segment as discontinued operations.
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, training initiatives and growth opportunities within our Company. At January 31, 2022, we had 124 employees at our two consolidated ethanol plants and at our corporate headquarters.
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, training initiatives and growth opportunities within our Company. At January 31, 2023, we had 122 employees at our two consolidated ethanol plants and at our corporate headquarters.
REX’s effective ownership of gallons shipped, for the twelve-month period ended January 31, 2022, by the ethanol production facilities in which we have ownership interests was approximately 282 million gallons. Our ethanol operations are highly dependent on commodity prices, especially prices for corn, ethanol, distillers grains, non-food grade corn oil and natural gas.
REX’s effective ownership of gallons shipped, for the twelve-month period ended January 31, 2023, by the ethanol production facilities in which we have ownership interests was approximately 271 million gallons. Our ethanol operations are highly dependent on commodity prices, especially prices for corn, ethanol, distillers grains, non-food grade corn oil and natural gas, and availability of corn.
However, in July 2021, the U.S. Court of Appeals for the D.C. Circuit overturned the EPA ruling and stated the EPA had exceeded its authority. Clean air additive.
However, in July 2021, the U.S. Court of Appeals for the D.C. Circuit overturned the EPA ruling and stated the EPA had exceeded its authority.
Facilities As of our fiscal year end, our consolidated ethanol entities owned a combined 1,122 acres of land and two facilities that shipped a combined quantity of approximately 278 million gallons of ethanol in fiscal year 2021. We also own our corporate headquarters office building, consisting of approximately 7,500 square feet, located in Dayton, Ohio.
Facilities As of our fiscal year end, our consolidated ethanol entities owned a combined 1,342 acres of land and two facilities that shipped a combined quantity of approximately 266 million gallons of ethanol in fiscal year 2022. We also own our corporate headquarters office building, consisting of approximately 7,500 square feet, located in Dayton, Ohio.
After 2022, RFS volumes are to be determined by the Environmental Protection Agency (“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.
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, through consultation with the Department of Energy and the Department of Agriculture, can grant the refiner a full or partial waiver, or deny the waiver. The EPA issued 85 refinery exemptions for 2016-2018 compliance years, undercutting the statutory renewable fuel volumes by a total of 4.0 billion gallons. In 2020, the U.S.
The EPA, through consultation with the Department of Energy and the Department of Agriculture, can grant the refiner a full or partial waiver, or deny the waiver. The EPA issued 88 refinery exemptions for 2016-2018 compliance years, undercutting the statutory renewable fuel volumes by a total of 4.3 billion gallons.
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.
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.
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, weather, federal policy and foreign trade.
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 and international disruptions caused by wars or conflicts.
We began operating the refined coal facility immediately after the acquisition. As the plant was no longer eligible to receive federal production tax credits beginning on November 18, 2021, we ceased operations on that date. We began classifying this operation as discontinued operations in the third quarter of fiscal 2021.
As the plant was no longer eligible to receive federal production tax credits beginning on November 18, 2021, we ceased operations on that date and subsequently sold the facility. We began classifying this operation as discontinued operations in the third quarter of fiscal 2021.
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. For example, “fiscal year 2021” means the period February 1, 2021 to January 31, 2022.
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.
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.
We can make no assurances that we will be successful in our efforts to find such opportunities. 5 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.
Approximately 1.2 billion gallons were exported from the United States in 2021. According to the RFA, the United States ethanol industry consists of 208 plants in 25 states with an annual capacity of approximately 17.7 billion gallons of ethanol production. 4 Domestic demand for ethanol is highly dependent upon federal and state legislation and regulations.
According to the RFA, the United States ethanol industry consists of 199 plants in 25 states with an annual capacity of approximately 17.9 billion gallons of ethanol production. Domestic demand for ethanol is highly dependent upon federal and state legislation and regulations.
Risk Factors for a discussion of legislation affecting the U.S. ethanol industry. 6 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.
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.
The EPA has approved the use of 15% ethanol (“E-15”), which has an octane rating of 88, in gasoline for cars, SUV’s and light duty trucks made in 2001 and later.
The industry is attempting to expand ethanol blending above the current 10% for most vehicles in use. The EPA has approved the use of 15% ethanol (“E-15”), which has an octane rating of 88, in gasoline for cars, SUV’s and light duty trucks made in 2001 and later.
We own 60% and our partner owns 40% of the entity named Future Energy, LLC, an Ohio limited liability company. We have no current plans to operate this technology and are maintaining patents in limited countries. 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 have no current plans to operate this technology and are maintaining patents in limited countries. 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 now have one reportable segment, ethanol and by-products. 2 General Overview We reported net income attributable to REX common shareholders of $52.4 million in fiscal 2021 compared to approximately $3.0 million in fiscal 2020.
We now have one reportable segment, ethanol and by-products. 3 General Overview We reported net income attributable to REX common shareholders of $27.7 million in fiscal 2022 compared to approximately $52.4 million in fiscal 2021. Our ethanol business had reduced profits in fiscal 2022 compared to fiscal 2021 as a result of lower crush spreads in fiscal 2022.
As a result, at times, we may operate our plants at negative or minimally positive operating margins. We expect our ethanol plants to produce at least 2.8 gallons of denatured ethanol for each bushel of grain processed in the production cycle. We refer to the actual gallons of denatured ethanol produced per bushel of grain processed as the realized yield.
We expect our ethanol plants to produce approximately 2.9 gallons of denatured ethanol for each bushel of grain processed in the production cycle. We refer to the actual gallons of denatured ethanol produced per bushel of grain processed as the realized yield.
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 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.
In such cases, production at the ethanol plants may be reduced or stopped altogether in order to minimize variable costs at individual plants. 3 We attempt to manage the risk related to the volatility of commodity prices by utilizing forward grain purchase, forward ethanol, distillers grains and non-food grade corn oil sale contracts, and commodity futures and swap agreements, as management deems appropriate.
We attempt to manage the risk related to the volatility of commodity prices by utilizing forward grain and natural gas purchase contracts, forward ethanol, distillers grains and non-food grade corn oil sale contracts, and commodity futures agreements, as management deems appropriate.
In 2006, we started investing in ethanol production facilities. We are currently invested in three ethanol production entities – One Earth Energy, LLC (“One Earth”), NuGen Energy, LLC (“NuGen”), and Big River Resources, LLC (“Big River”). We own a majority interest in One Earth and NuGen.
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 (“One Earth”), NuGen Energy, LLC (“NuGen”), and Big River Resources, LLC (“Big River”).
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.
It is then transferred to fermenters where yeast is added and the conversion of sugar to ethanol begins.
During fiscal year 2013, we entered into a joint venture to file and defend patents for eSteam technology. The patented technology is an enhanced method of heavy oil recovery involving zero emissions downhole steam generation. To date, we have not successfully had a field operation nor demonstrated that the technology is commercially feasible.
The patented technology is an enhanced method of heavy oil recovery involving zero emissions downhole steam generation. To date, we have not successfully had a field operation nor demonstrated that the technology is commercially feasible. We own 60% and our partner owns 40% of the entity named Future Energy, LLC, an Ohio limited liability company.
We utilize derivative financial instruments, primarily exchange traded commodity future and swap contracts, in conjunction with certain of our grain procurement activities and commodity marketing activities. On August 10, 2017, we purchased, through a 95.35% owned subsidiary, for approximately $12.0 million, the entire ownership interest of an entity that owned a refined coal facility.
On August 10, 2017, we purchased, through a 95.35% owned subsidiary, for approximately $12.0 million, the entire ownership interest of an entity that owned a refined coal facility. We began operating the refined coal facility immediately after the acquisition.
We refer to our fiscal year by reference to the year immediately preceding the January 31 fiscal year end date. 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.
We refer to our fiscal year by reference to the year immediately preceding the January 31 fiscal year end date. For example, “fiscal year 2022” means the period February 1, 2022 to January 31, 2023. Corporate History and Background REX was incorporated in Delaware in 1984 as a holding company.
Because the market prices of ethanol and distillers grains are not always directly related to corn prices, at times ethanol and/or distillers grains prices may lag movements in corn prices. In an environment of higher corn prices or lower ethanol/distillers grains prices, the overall margin structure at the plants could be reduced.
In an environment of higher corn prices or lower ethanol or distillers grains prices, the overall margin structure at the plants could be reduced. As a result, at times, we may operate our plants at negative or minimally positive operating margins.
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.
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 recovers a portion of the corn value not absorbed in ethanol production.
According to the Renewable Fuels Association (“RFA”), the United States ethanol industry produced an estimated 15.0 billion gallons of ethanol in 2021. Although this is an increase of 1.2 billion gallons over the COVID-19 impacted 2020 volume, it is still below the estimated 15.8 billion gallons produced in 2019.
According to the Renewable Fuels Association (“RFA”), the United States ethanol industry produced an estimated 15.4 billion gallons of ethanol in 2022, compared to 15.0 billion gallons in 2021. Approximately 1.4 billion gallons were exported from the United States in 2022.
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 management of our projects through our membership on the board of managers of the limited liability companies that own the plants.
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 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, 2022.
We have equity investments in three entities engaged in the production of ethanol as of January 31, 2023.
Chicago Board of Trade corn prices per bushel ranged from a low of $5.10 in September 2021 to a high of $7.40 in April 2021. S&P Global Platts ethanol pricing per gallon ranged from a low of $1.64 in February 2021 to a high of $3.80 in November 2021.
The two largest drivers of ethanol profitability are corn and ethanol pricing, both of which experienced significant volatility within the year. Chicago Board of Trade corn prices per bushel ranged from a low of $5.64 in July 2022 to a high of $8.18 in April 2022.
The EPA implemented a public notice and comment process on this announcement. 5 Ethanol Production The plants we have invested in are designed to use the dry milling method of producing ethanol.
The EPA has not granted any small refinery waivers for 2019-2022 and has continued that stance in the proposed volumes for 2023-2025. There remain multiple ongoing legal challenges on how the EPA has handled the small refinery waivers. Ethanol Production The plants we have invested in are designed to use the dry milling method of producing ethanol.
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Our ethanol business bounced back strongly in fiscal 2021 particularly in the fourth quarter in comparison to fiscal 2020, which was impacted by the COVID-19 pandemic. The two largest drivers of ethanol profitability are corn and ethanol pricing, both of which experienced significant volatility within the year.
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S&P Global Platts ethanol pricing per gallon ranged from a low of $1.99 in February 2022 to a high of $2.88 in June 2022. 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.
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We can make no assurances that we will be successful in our efforts to find such opportunities.
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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 and trade negotiations) , at times ethanol and distillers grains prices may not follow movements in corn prices.
Removed
The EPA has the authority to waive the mandates in whole or in part if one of two conditions are met: 1) there is inadequate domestic renewable fuel supply, or 2) implementation of the mandate requirement severely harms the economy or environment of a state, region, or the United States.
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In such cases, production at the ethanol plants may be reduced or stopped altogether in order to minimize variable costs at individual plants.
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In 2014, 2015 and 2016, the EPA took action to reduce the volumes for both conventional biofuels and advanced biofuels. The U.S. Federal District Court for the D.C. Circuit ruled on July 28, 2017 against the EPA related to its decision to lower the 2016 volume requirements.
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Through our affiliate, One Earth Energy, LLC, we are in the exploratory stage of a carbon sequestration project near the One Earth Energy ethanol plant. A test well has been drilled to a total depth of approximately 7,100 feet, in which almost 2,000 feet of Mt. Simon Sandstone was encountered, which represents the region’s primary carbon storage resource.
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As a result, the Court vacated the EPA’s decision to reduce the total renewable fuel volume requirements by 500 million gallons for 2016 through its waiver authority.
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Three-dimensional seismic testing has been performed, as well as geological modeling for predicting the movement of injected carbon and the plume area to determine maximum injection pressure, reservoir quality and storage capacity for the potential wells. We have applied for a Class VI injection well permit for three wells with the U.S. Environmental Protection Agency (“EPA”).
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Court of Appeals for the 10 th Circuit vacated decisions by the EPA to extend exemptions of renewable fuel obligations to three small refineries. The Court ruled the extensions should not have been granted because the three refineries were not already in possession of exemptions.
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In addition, we have signed a construction contract to capture, dehydrate, and compress carbon to a state suitable for sequestration for the One Earth Energy ethanol plant. We are currently working on an engineering design study for a short pipeline to deliver carbon from the ethanol plant to the sequestration site.
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In addition, the Court ruled the economic hardship should be determined by whether compliance with RFS II alone created the hardship, not compliance with RFS II amongst other factors. Two of the refiners appealed the decision to the U.S. Supreme Court.
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Although we have made meaningful progress, we continue to complete documents required from various government agencies and obtain other approvals with no assurances of ultimate success.
Removed
On June 25, 2021, the Supreme Court ruled in favor of small refiners and reversed the interpretation of “extension” of a waiver but not the economic hardship portion of the decision.
Added
If successful, we believe we would qualify for tax credits under section 45Q of the Internal Revenue Code (“45Q”) and section 45Z of the Internal Revenue Code (“45Z”) as outlined in the Inflation Reduction Act. During fiscal year 2013, we entered into a joint venture to file and defend patents for eSteam technology.
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On December 7, 2021, the EPA issued proposed volumes for 2021 and 2022 and reduced the previously finalized volumes for 2020 to account for challenges for that year including the COVID-19 pandemic. The proposed volumes for conventional biofuels were 13.32 billion gallons and 15.0 billion gallons for 2021 and 2022, respectively.
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The EPA has proposed conventional renewable fuel volumes of 15.0 billion gallons for 2023 and 15.25 billion gallons for both 2024 and 2025. Additionally, the proposal for 2023 also restores the remaining 250 million gallons previously waived in 2016.
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The 2020 volumes were proposed at 12.5 billion gallons, down from the previously finalized 15.0 billion gallons. In addition, the EPA proposed denying 65 pending applications for small refinery exemptions (“SREs”) in response to the 2020 decision by the U.S. Court of Appeals for the 10 th Circuit.
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After fermentation, the resulting liquid is transferred to distillation columns where the ethanol is separated from the remaining “stillage” for fuel uses. 6 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.
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The EPA also proposed adding 250 million gallons of “supplemental obligation” to the 2022 proposed volumes and stated its intent to add another 250 million gallons to 2023 to address the remand of the 2016 waiver by the D.C Circuit.
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Then in April 2022, the EPA issued an emergency waiver to allow the sale of E-15 through May 20, 2022, and ultimately extended the waiver multiple times to allow for E-15 to be used throughout the remainder of the 2022 summer months. Certain Midwest states petitioned the EPA to allow year round sales of E-15 in their states.
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We also generate revenues from the sale of non-food grade corn oil produced at our facilities. Non-food grade 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.
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On March 1, 2023, the EPA proposed a rule to allow this to occur in eight states beginning in 2024. A public comment period on the proposed rule will be open for 45 days. Clean air additive.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeIn certain past years the EPA has taken action to reduce the mandated gallons called for under EISA for both conventional and advanced renewable fuels. 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.
Biggest changeRINs 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.
In February 2010, the EPA released its final regulations on the Renewable Fuel Standard program. We believe our plants are grandfathered up to certain operating capacity, but recent plant expansion requires us to meet a 20% threshold reduction in greenhouse gas (GHG) emissions from a 2005 baseline measurement to produce ethanol eligible for the RFS II mandate.
In February 2010, the EPA released its final regulations on the Renewable Fuel Standard program. We believe our plants are grandfathered up to certain operating capacity, but plant expansion requires us to meet a 20% threshold reduction in greenhouse gas (GHG) emissions from a 2005 baseline measurement to produce ethanol eligible for the RFS II mandate.
Some investors, including certain public and private fund management firms, pension funds, university endowments and family, have in recent years, begun adding stated policies to reduce or eliminate fossil fuel equities and encouraging additional consideration of ESG practices in a manner that could negatively impact our stock price.
Some investors, including certain public and private fund management firms, pension funds, university endowments and family offices, have in recent years, begun adding stated policies to reduce or eliminate fossil fuel equities and encouraging additional consideration of ESG practices in a manner that could negatively impact our stock price.
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. 9 Distillers grains compete with other protein based animal feed products.
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. Distillers grains compete with other protein-based animal feed products.
No assurance can be given that our ethanol plants will be able to compete successfully or that competition from larger companies with greater financial resources will not have a materially adverse impact on the results of our ethanol operations. 16 We may face competition from foreign producers. There is a risk of foreign competition in the ethanol industry.
No assurance can be given that our ethanol plants will be able to compete successfully or that competition from larger companies with greater financial resources will not have a materially adverse impact on the results of our ethanol operations. We may face competition from foreign producers. There is a risk of foreign competition in the ethanol industry.
We have had to obtain numerous permits to construct and operate our plants. Regulatory agencies could impose conditions or other restrictions in the permits that are detrimental, or which increase our costs. More stringent 14 federal or state environmental regulations could be adopted which could significantly increase our operating costs or require us to expend considerable resources.
We have had to obtain numerous permits to construct and operate our plants. Regulatory agencies could impose conditions or other restrictions in the permits that are detrimental, or which increase our costs. More stringent federal or state environmental regulations could be adopted which could significantly increase our operating costs or require us to expend considerable resources.
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. 8 Increasing domestic ethanol production could boost the demand for corn and result in increased corn prices.
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.
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.
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 13 blending requirements. To date, none of the bills have been successful but they are an indication of the continued effort to undermine the EISA.
Although many trade groups, academics and governmental agencies have supported ethanol as a fuel additive that promotes a cleaner environment, others have criticized ethanol production as consuming considerably more energy and emitting more greenhouse gases than other biofuels and as potentially depleting water resources.
Although many trade groups, academics and governmental agencies have supported ethanol as a fuel additive that promotes a cleaner environment, others have criticized ethanol production as consuming considerably 14 more energy and emitting more greenhouse gases than other biofuels and as potentially depleting water resources.
The inability of a customer to make payments to us for our accounts receivable may cause us to experience losses and may adversely impact our liquidity and our ability to make our payments when due. We may not be able to hire and retain qualified personnel to operate our ethanol plants.
The inability of a customer to make payments to us for our accounts receivable may cause us to experience losses and may adversely impact our liquidity and our ability to make our payments when due. 17 We may not be able to hire and retain qualified personnel to operate our ethanol plants.
If the public became concerned about the impact of distillers grains in the food supply or as an acceptable animal feed, the market for distillers grains could be negatively impacted, which would have a negative impact on our results of operations.
If the public became concerned 16 about the impact of distillers grains in the food supply or as an acceptable animal feed, the market for distillers grains could be negatively impacted, which would have a negative impact on our results of operations.
Such risk remains even after production ceases at an operation to the extent the environmental damage can be traced to the types of chemicals or compounds used or operations conducted in connection with the use of refined coal.
Such risk remains even after production ceases at an operation to the extent the 19 environmental damage can be traced to the types of chemicals or compounds used or operations conducted in connection with the use of refined coal.
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.
The price of distillers grains may decrease when the prices of competing feed products decrease. The prices of competing animal feed products 10 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.
The limitations on our ability to control day-to-day plant operations could adversely affect plant results of operations. 11 We may not successfully acquire or develop additional ethanol investments. The growth of our ethanol business depends on our ability to identify and develop new ethanol investments.
The limitations on our ability to control day-to-day plant operations could adversely affect plant results of operations. We may not successfully acquire or develop additional ethanol investments. The growth of our ethanol business depends on our ability to identify and develop new ethanol investments.
Global climate change continues to receive significant attention from the public and the scientific community concerning the impacts from human activity, particularly the impact of greenhouse gas emissions, such as those from carbon dioxide and methane. The Biden administration’s focus on environmental issues has added pressure to take action domestically where there was already a heavier focus internationally.
Global climate change continues to receive significant attention from the public and the scientific community concerning the impacts from human activity, particularly the impact of greenhouse gas emissions, such as those from carbon dioxide and methane. The current federal administration’s focus on environmental issues has added pressure to take action domestically where there was already a heavier focus internationally.
The construction and operation of refined coal operations are subject to Federal, state and local laws, regulations and potential liabilities arising under or relating to the protection or preservation of the environment, natural resources and human health and safety.
The construction and operation of refined coal operations were subject to Federal, state and local laws, regulations and potential liabilities arising under or relating to the protection or preservation of the environment, natural resources and human health and safety.
If we are unable to produce the products due to economic conditions, business interruption, or other factors, we may incur additional costs or have to obtain commodities at unfavorable prices to meet our contractual commitments. This could have a material adverse effect on our results of operations. 15 We may have commitments to purchase commodities.
If we are unable to produce the products due to economic conditions, business interruption, or other factors, we may incur additional costs or have to obtain commodities at unfavorable prices to meet our contractual commitments. This could have a material adverse effect on our results of operations. We may not be able to meet commitments to purchase commodities.
We may not be able to obtain a suitable replacement for antibiotics, should this be required, which would also negatively impact the market for distillers grains. An estimated 36% of distillers grains produced in the United States were exported in 2021. The price of distillers grains has benefitted from the exports of the product.
We may not be able to obtain a suitable replacement for antibiotics, should this be required, which would also negatively impact the market for distillers grains. An estimated 34% of distillers grains produced in the United States were exported in 2022. The price of distillers grains has benefitted from the exports of the product.
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 and distillers grains production and to purchase a portion of our corn and natural gas requirements and; ii) commodity futures and swap agreements.
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 non-food grade corn oil production and to purchase a portion of our corn and natural gas requirements and; ii) commodity futures and swap agreements.
Although most restrictions have been lifted, if in the future the virus continues to mutate, it could lead to prolonged production stoppages at our ethanol plants and could result in an adverse material impact on the results of operations and on our financial position.
Although most restrictions have been lifted, if in the future the virus continues to mutate or other viruses surface, it could lead to prolonged production stoppages at our ethanol plants and could result in an adverse material impact on the results of operations and on our financial position.
Our lack of diversification could have a material negative impact on our results of operations, financial position and future cash flows should our ethanol plants operate unprofitably. We may have commitments to produce and sell ethanol. We may, at times, sell our products with forward contracts.
Our lack of diversification could have a material negative impact on our results of operations, financial position and future cash flows should our ethanol plants operate unprofitably. We may not be able to meet commitments to produce and sell ethanol. We may, at times, sell our products with forward contracts.
We believe that our tax return positions are fully supportable. However, certain positions may be successfully challenged by federal, state and local jurisdictions. We are currently undergoing a federal income examination for the years ended January 31, 2015 through 2020.
We believe that our tax return positions are fully supportable. However, certain positions may be successfully challenged by federal, state and local jurisdictions. We are currently undergoing a federal income examination related to tax credits claimed for the years ended January 31, 2015 through 2020.
In 2021 and 2020, the industry produced approximately 15.0 and 13.8 billion gallons, respectively, with the reduction from the peak year reflecting industry conditions. Thus, there have been significant changes in the supply and demand of ethanol over a relatively short period of time which could lead to difficulty in maintaining profitable operations at our ethanol plants.
In 2022 and 2021, the industry produced approximately 15.4 and 15.0 billion gallons, respectively, with the reduction from the peak year reflecting industry conditions and reduced demand. Thus, there have been significant changes in the supply and demand of ethanol over a relatively short period of time which could lead to difficulty in maintaining profitable operations at our ethanol plants.
An Indirect Land Use Charge is included in this lifecycle GHG emission calculation. This standard could have an adverse impact on the market for corn-based ethanol in California if corn-based ethanol fails to achieve lifecycle GHG emission reductions and in other states if they adopt similar standards. This could have a negative impact on our financial performance.
An Indirect Land Use Charge is included in this lifecycle GHG emission calculation. This standard could have an adverse impact on the market for corn-based ethanol in California if corn-based ethanol fails to achieve lifecycle GHG emission reductions and in other states if they adopt similar standards.
If tariffs were raised on the foreign-sourced goods that lead to retaliatory actions, it could have material adverse effect on our business, financial condition and results of operations. 10 The United States exported approximately 1.2 billion gallons of ethanol in 2021, down from approximately 1.3 and approximately 1.5 billion gallons in 2020 and 2019, respectively.
If tariffs were raised on the foreign-sourced goods that lead to retaliatory actions, it could have material adverse effect on our business, financial condition and results of operations. The United States exported approximately 1.4 billion gallons of ethanol in 2022, up from approximately 1.2 and approximately 1.3 billion gallons in 2021 and 2020, respectively.
If we were to lose these tax credits, it could have a material impact on our results of operations. 18 Our refined coal operation and its by-products may result in environmental and product liability claims and environmental compliance costs.
This operation is currently under audit by the IRS and if we were to lose these tax credits, it could have a material impact on our results of operations. Our refined coal operation and its by-products may result in environmental and product liability claims and environmental compliance costs.
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.
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.
Reduced demand for ethanol could cause our results of operations to be materially adversely affected. 12 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 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 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, governmental regulation and foreign and domestic relations.
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, governmental regulation and foreign and domestic relations, including, but not limited to, the impacts from the Russian-Ukraine conflict.
As part of the operations, we paid a license fee for patented technology. If our third party operator is subject to patent infringement claims, we may incur legal fees to defend our position and be subject to additional costs and fees. Risks Related to our eSteam investment eSteam testing methods and results are not known.
As part of the operations, we paid a license fee for patented technology. If our third-party operator is subject to patent infringement claims, we may incur legal fees to defend our position and be subject to additional costs and fees.
The EPA granted 85 total SREs for 2016 through 2018 totaling approximately 4.0 billion gallons. This action led to reduced values for RINs, and further action could decrease RIN values and ethanol pricing. In January 2020, the U.S Court of Appeals for the 10 th Circuit overturned the EPA’s granting of refinery exemptions to three refineries on two separate grounds.
This action led to reduced values for RINs, and further action could decrease RIN values and ethanol pricing. In January 2020, the U.S Court of Appeals for the 10 th Circuit overturned the EPA’s granting of refinery exemptions to three refineries on two separate grounds.
Our ethanol business may become subject to various environmental and health and safety and property damage claims and liabilities. Operation of our ethanol business exposes the business to the risk of environmental and health and safety claims and property damage claims, such as failure to comply with environmental regulations.
This could have a negative impact on our financial performance. 15 Our ethanol business may become subject to various environmental and health and safety and property damage claims and liabilities. Operation of our ethanol business exposes the business to the risk of environmental and health and safety claims and property damage claims, such as failure to comply with environmental regulations.
The failure of these systems to operate effectively, problems with transitioning to upgraded or replacement systems, or a breach in security of these systems through a cyber-attack or otherwise could cause delays and/or interruptions in plant operations, product sales, reduced efficiency of our operations and delays in reporting our financial results.
While we have taken appropriate precautions to protect our systems, and to date, we have not experienced any material adverse events related to a security breach or cyber-attack, the failure of these systems to operate effectively, problems with transitioning to upgraded or replacement systems, or a breach in security of these systems through a cyber-attack or otherwise could cause delays and/or interruptions in plant operations, product sales, reduced efficiency of our operations and delays in reporting our financial results.
Acquisitions and similar transactions involve many risks that could harm our business, which include: ● The anticipated benefits of these transactions may not be fully realized, or take longer to realize than expected, ● Future acquisitions could result in operating losses or loss of investment, ● Future acquisitions may involve incurring debt to complete these transactions, which could have a material adverse effect on our financial condition, and ● Future acquisitions may require us to invest a significant portion of our excess cash, which could have a material adverse effect on our financial condition.
Acquisitions and similar transactions involve many risks that could harm our business, which include: ● The anticipated benefits of these transactions may not be fully realized, or take longer to realize than expected, ● Future acquisitions could result in operating losses or loss of investment, ● Future acquisitions may involve incurring debt to complete these transactions, which could have a material adverse effect on our financial condition, and ● Future acquisitions may require us to invest a significant portion of our excess cash, which could have a material adverse effect on our financial condition. 20 Rising focus on environmental, social and corporate governance matters from investors and regulators may increase our operating costs, bring down the value of our products and assets, and impact our ability to access capital markets.
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.
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.
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 E15 and E85 fuel is likely necessary in order for ethanol to achieve significant market share growth beyond federal mandate levels.
There are limited markets for ethanol other than what is federally mandated. Increased consumer acceptance of E15 and E85 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 electric vehicles.
Security breaches of employee information or other confidential or proprietary data could also adversely impact our reputation and could result in litigation against us or the imposition of penalties. 17 We are exposed to potential business disruption from factors outside our control, including natural disasters, severe weather conditions, accidents, pandemic diseases, international disputes, and unforeseen operational failures any of which could negatively affect our transportation operations and could adversely affect our cash flows and operating results.
We are exposed to potential business disruption from factors outside our control, including natural disasters, severe weather conditions, accidents, pandemic diseases, international disputes, and unforeseen operational failures any of which could negatively affect our transportation operations and could adversely affect our cash flows and operating results.
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.
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. Our risk management strategies may be ineffective and may expose us to decreased profitability and liquidity.
These types of claims could also be made against our ethanol business based upon the acts or omissions of other persons. Serious claims could have a material negative impact on our results of operations, financial position and future cash flows. Our business is not diversified. Our financial results depend heavily on our ability to operate our ethanol plants profitably.
These types of claims could also be made against our ethanol business based upon the acts or omissions of other persons. Serious claims could have a material negative impact on our results of operations, financial position and future cash flows. During the early months of 2020, a new strain of COVID-19 spread into the United States and other countries.
Any of these events can have a significant impact on our operations or quality of raw materials we purchase, resulting in increased costs.
Any of these events can have a significant impact on our operations or quality of raw materials we purchase, resulting in increased costs. At this time, we are unable to determine the financial impact of any potential adverse weather events caused by climate change.
The price of corn is influenced by weather conditions and other factors affecting crop yields, transportation costs, farmer planting decisions, exports, foreign production, the value of the U.S. dollar, and general economic, market and regulatory factors. These factors include government policies and subsidies with respect to agriculture and international trade and global and local demand and supply.
The price of corn is influenced by weather conditions and other factors affecting crop yields, transportation costs, farmer planting decisions, 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 conflict.
The significance and relative effect of these factors on the price of corn is difficult to predict.
These factors include government policies and subsidies with respect to agriculture and international trade and global and local demand and supply. The significance and relative effect of these factors on the price of corn is difficult to predict.
Supreme Court, and on January 25, 2021, the Supreme Court partially ruled in favor of the small refiners, but only as to the interpretation of “extension” of a waiver.
Supreme Court, and on January 25, 2021, the Supreme Court partially ruled in favor of the small refiners, but only as to the interpretation of “extension” of a waiver. Flexible fuel vehicles (“FFVs”) receive preferential treatment in meeting federally mandated corporate average fuel economy (“CAFE”) standards for automobiles manufactured by car makers.
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.
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 granted 88 total Small Refinery Exemptions (“SREs”) for 2016 through 2018 totaling approximately 4.3 billion gallons.
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 .
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.
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. The spread between ethanol and corn prices can vary significantly. The gross margin at our ethanol plants depends principally on the spread between ethanol and corn prices.
The corn harvest near our NuGen facility 9 for 2022 was negatively impacted by dry weather and we expect will impact the supply of corn until the 2023 harvest. 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.
We idled our NuGen and One Earth ethanol plants for portions of fiscal year 2020, largely due to the impact of the pandemic. 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 idled our NuGen and One Earth ethanol plants for portions of fiscal year 2020, largely due to the impact of the pandemic. Our business is not diversified. Our financial results depend heavily on our ability to operate our ethanol plants profitably.
At this time, we are unable to determine the financial impact of any potential adverse weather events caused by climate change. 20 Incremental to legislative and regulatory pressure, institutional investors have continued to adopt environmental, social and governance guidelines (ESG).
Incremental to legislative and regulatory pressure, institutional investors have continued to adopt environmental, social and governance guidelines (ESG).
In 2021, approximately 11.6 million metric tons of distillers grains were exported, which represented approximately 36% of U.S. production. However, the export market may be jeopardized if foreign governments impose trade barriers or other measures to protect the foreign local markets.
In 2022 and 2021, approximately 11.4 11 and 11.6 million metric tons, respectively, of distillers grains were exported, which represented approximately 34% and 36%, respectively, of U.S production. If producers and exporters of ethanol and distillers grains are subject to trade restrictions, or additional duties are imposed on exports, it may make it uneconomical to export these products.
The proposed volumes for conventional biofuels were 13.32 billion gallons and 15.0 billion gallons for 2021 and 2022, respectively. The 2020 volumes were proposed at 12.5 billion gallons, down from the previously finalized 15.0 billion gallons. Excess capacity in the ethanol industry could have an adverse effect on the results of our operations.
The EPA has proposed conventional renewable fuel volumes of 15.0 billion gallons for 2023 and 15.25 billion gallons for 2024 and 2025. In addition, the proposal for 2023 also restores the remaining 250 million gallons previously waived in 2016. The implied excess capacity over the EPA proposed volumes could have an adverse effect on the results of our operations.
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.
In addition, failure to adequately manage the risks associated with additional ethanol investments could have a material adverse effect on our business. 12 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.
Such business disruptions may result in our inability to meet customer demand or contract delivery requirements, as well as the potential loss of customers. Rail cars used to transport ethanol may need to be modified or replaced to meet proposed rail safety regulations.
Such business disruptions may result in our inability to meet customer demand or contract delivery requirements, as well as the potential loss of customers. 18 We ship much of our products and receive a portion of our corn via rail, which involves risks involving potential regulatory changes that could adversely affect our cash flows and operating results.
The EPA implemented a public notice and comment process on this announcement. 13 Flexible fuel vehicles 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.
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 backtracked in 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.
According to the RFA, domestic ethanol production capacity is approximately 17.7 billion gallons per year. On December 7, 2021, the EPA issued proposed RFS volumes for 2021 and 2022 and reducing the previously finalized volumes for 2020 to account for challenges for that year including the COVID-19 pandemic.
According to the RFA, domestic ethanol production capacity is approximately 17.9 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.
Removed
Our risk management strategies may be ineffective and may expose us to decreased profitability and liquidity.
Added
The spread between ethanol and corn prices can vary significantly. The gross margin at our ethanol plants depends principally on the spread between ethanol and corn prices. Fluctuations in the spread are likely to continue to occur.
Removed
If producers and exporters of ethanol are subject to trade restrictions, or additional duties are imposed on exports, it may make it uneconomical to export ethanol. Brazil, China and the European Union all have trade barriers or tariffs against fuel ethanol.
Added
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. Future demand for ethanol is uncertain and changes in overall consumer demand for transportation fuel could affect demand.
Removed
In 2013, the European Union imposed a five year tariff of $83.33 per metric ton on U.S. fuel ethanol to discourage competition. Effective January 1, 2017, China indicated its intention to raise its 5% tariff on U.S. and Brazil fuel ethanol to 30%.
Added
Most automobile manufacturers have made varying levels of commitments to phase out internal combustion engine production, such as General Motors with a target date of 2035 to phase out the production of gasoline and diesel-powered vehicles and Nissan targeting the early 2030s to convert their entire fleet to electric vehicles.
Removed
On April 1, 2018, China raised their tariff rate to 45%, and later raised it to 70% in the U.S. and China trade war. On September 1, 2017, Brazil imposed a 20% tariff on U.S. fuel ethanol imports in excess of 150 million liters, or 39.6 million gallons per quarter.
Added
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.
Removed
The tariff was extended several times but lapsed in December 2020 and a 20% tariff now applies to all U.S. ethanol exported to Brazil. This could result in an oversupply of ethanol in the United States, which could have a material adverse effect on the results of our ethanol operations.
Added
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 depend on our partners to operate certain of our ethanol investments . Our investments currently represent both majority and minority equity positions.
Removed
Exports to China were approximately 4% of U.S. global shipments in 2021 versus approximately 51% in 2015, due to punitive tariffs established beginning January 2017. If producers and exporters of distillers grains are subjected to trade barriers when selling distillers grains to foreign customers, there may be a reduction in the price of distillers grains in the United States.
Added
The completion of this project requires numerous government and landowner 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 write off of our commitments and investments.
Removed
In addition, foreign currency exchange rate fluctuations could reduce the demand for United States exports of distillers grains. Declines in the price we receive for our distillers grains could lead to decreased revenues and may result in our inability to operate our ethanol plants profitably.
Added
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 carbon intensity (CI) score than our competitors if they are able to sequester their carbon.
Removed
During the early months of 2020, a new strain of COVID-19 spread into the United States and other countries.
Added
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 Inflation Reduction Act. Our ethanol plants may be adversely affected by technological advances and efforts to anticipate and employ such technological advances may prove unsuccessful.
Removed
Consumer demand for gasoline may be reduced by transportation related technological advances such as electric and hybrid vehicles. Several automobile manufacturers have announced target dates into the 2030s for ceasing production of gasoline vehicles and shifting production to electric vehicles.
Added
The EPA has proposed conventional renewable fuel volumes of 15.0 billion gallons for 2023 and 15.25 billion gallons for both 2024 and 2025. Additionally, the proposal for 2023 also restores the remaining 250 million gallons previously waived in 2016. Obligated parties use RINs to show compliance with RFS-mandated volumes.
Removed
In addition, countries such as Japan and the United Kingdom as well as the state of California have pledged to ban the sale of vehicles with internal combustion engines over time. The Biden administration, in its early stages, appears to have placed an increased emphasis on electric vehicles.
Added
Significant capital investments could be required to remediate any such problem. Security breaches of employee information or other confidential or proprietary data could also adversely impact our reputation and could result in litigation against us or the imposition of penalties.
Removed
Recent federal legislation seeks to address the ever-increasing demand for electric vehicle (EV) infrastructure. On November 15, 2021, the Infrastructure Investment and Jobs Act (IIJA) was signed into law. The IIJA specifically allocates $7.5 billion specifically for EV infrastructure programs and grants on a national level.
Added
A large portion of our ethanol and distillers grains sales are shipped via rail. In addition, we receive some corn via rail. Given the notoriety of recent major train derailments, it is possible that additional regulations could be enacted.
Removed
Under EISA, the EPA has the authority to waive or modify the mandated RFS II requirements in whole or in part.
Added
Any changes to existing laws and regulations, or new laws and regulations, including voluntary measures taken by the rail industry, could result in higher shipping costs, or new requirements for the design, construction or operation of tank cars that transport hazard materials, such as ethanol.
Removed
In order to grant a waiver, the EPA administrator must determine in consultation with the Secretaries of Agriculture and Energy, that one of the following two conditions has been met: i) there is inadequate domestic renewable fuel supply or ii) implementation of the requirement would severely harm the economy or environment of a state, region or the country.
Added
In addition, any derailments involving our products could result in legal claims being brought against us that could involve significant liabilities. We operate in a capital intensive industry. Limitations on external financing could adversely affect our financial performance.

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Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeName Age Position Stuart Rose 67 Executive Chairman of the Board* Zafar Rizvi 72 Chief Executive Officer and President* Douglas Bruggeman 61 Vice President-Finance, Chief Financial Officer and Treasurer Edward Kress 72 Secretary* *Also serves as a director. Stuart Rose was elected our Executive Chairman of the Board in 2015. Mr.
Biggest changeName Age Position Stuart Rose 68 Executive Chairman of the Board* Zafar Rizvi 73 Chief Executive Officer and President* Douglas Bruggeman 62 Vice President-Finance, Chief Financial Officer and Treasurer Edward Kress 73 Secretary* *Also serves as a director. Stuart Rose was elected our Executive Chairman of the Board in 2015. Mr.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeOn August 31, 2021, our Board of Directors increased our share repurchase authorization by an additional 500,000 shares.
Biggest changeDividend Policy The Company has no history of paying cash dividends on our common stock. 22 Issuer Purchases of Equity Securities On August 31, 2021, our Board of Directors increased our share repurchase authorization by an additional 1,500,000 shares (split-adjusted). At January 31, 2023, a total of 876,786 shares remained available to purchase under this authorization.
The graph assumes an investment of $100 in our Common Stock and each index on January 31, 2017 and reinvestment of all dividends.
The graph assumes an investment of $100 in our Common Stock and each index on January 31, 2018 and reinvestment of all dividends.
Performance Graph The following graph compares the yearly percentage change in the cumulative total shareholder return on our Common Stock against the cumulative total return of the S&P 500 Stock Index and a peer group comprised of Alto Ingredients, Inc. and Green Plains, Inc. for the period commencing January 31, 2017 and ended January 31, 2022.
Performance Graph The following graph compares the yearly percentage change in the cumulative total shareholder return on our Common Stock against the cumulative total return of the S&P 500 Stock Index and a peer group comprised of Alto Ingredients, Inc. and Green Plains, Inc. for the period commencing January 31, 2018 and ended January 31, 2023.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities SHAREHOLDER INFORMATION Our common stock is traded on the New York Stock Exchange under the symbol REX. As of April 5, 2022, there were 62 holders of record of our common stock, including shares held in nominee or street name by brokers.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities Shareholder Information Our common stock is traded on the New York Stock Exchange under the symbol REX. As of March 29, 2023, there were 71 holders of record of our common stock, including shares held in nominee or street name by brokers.
At January 31, 2022, a total of 449,413 shares remained available to purchase under this authorization. 22 Equity Compensation Plans Refer to Item 12 – Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters for information regarding shares authorized for issuance under equity compensation plans.
There were no share repurchases in the fourth quarter of fiscal year 2022. Equity Compensation Plans Refer to Item 12 – Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters for information regarding shares authorized for issuance under equity compensation plans.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

70 edited+25 added−21 removed33 unchanged
Biggest changeNet Income As a result of the foregoing, including results from both continuing and discontinued operations, net income attributable to REX common shareholders was approximately $52.4 million and approximately $3.0 million for fiscal years 2021 and 2020, respectively. 30 Comparison of Fiscal Years 2020 and 2019 See “Item 7 Management’s discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended January 31, 2021.
Biggest changeComparison of Fiscal Years 2021 and 2020 See “Item 7 Management’s discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended January 31, 2022. Liquidity and Capital Resources Our primary sources of cash have been income from operations.
However, the market for future ethanol sales contracts generally lags the spot market with respect to ethanol price.
However, the market for future ethanol sales contracts generally lags the spot market with respect to ethanol price.
The Company ceased operation of its refined coal business as tax credits could no longer be earned on its operation beginning November 18, 2021. Beginning in the third quarter of fiscal year 2021, the results of the operation of the refined coal business have been recognized as discontinued operations.
Discontinued Operations The Company ceased operation of its refined coal business as tax credits could no longer be earned on its operation beginning November 18, 2021. Beginning in the third quarter of fiscal year 2021, the results of the operation of the refined coal business have been recognized as discontinued operations.
In recent years, there has been much uncertainty on the enforcement of 25 RFS II. When it was originally established, RFS II required the volume of “conventional” or corn derived ethanol to be blended with gasoline to increase each year until it reached 15.0 billion gallons in 2015 and was to remain at that level through 2022.
In recent years, there has been much uncertainty on the enforcement of RFS II. When it was originally established, RFS II required the volume of “conventional” or corn derived ethanol to be blended with gasoline to increase each year until it reached 15.0 billion gallons in 2015 and required that it remain at that level through 2022.
As a result, we performed a recoverability test for the One Earth and NuGen asset groups (the lowest level at which 33 related cash flows can be identified) and determined that there was no impairment as the gross undiscounted future cash flows substantially exceeded the respective carrying values.
As a result, we performed a recoverability test for the One Earth and NuGen asset groups (the lowest level at which related cash flows can be identified) and determined that there was no impairment as the gross undiscounted future cash flows substantially exceeded the respective carrying values.
Consequently, we generally execute fixed price 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 28 durations of time.
Consequently, we generally execute fixed price 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.
We attempt to manage the risk related to the volatility of commodity prices by utilizing forward grain and natural gas purchase contracts, forward ethanol, distillers grains and non-food grade corn oil sale contracts and commodity futures and swap agreements as management deems appropriate.
We attempt to manage the risk related to the volatility of commodity prices by utilizing forward grain and natural gas purchase contracts, forward ethanol, distillers grains and non-food grade corn oil sale contracts and commodity futures agreements, as management deems appropriate.
Our ethanol operations are highly dependent on commodity prices, especially prices for corn, ethanol, distillers grains, non-food grade corn oil and natural gas. As a result of price volatility for these commodities, our operating results can fluctuate substantially.
Our ethanol operations are highly dependent on commodity prices, especially prices for corn, ethanol, distillers grains, non-food grade corn oil, and natural gas, and availability of corn. As a result of price volatility for these commodities, our operating results can fluctuate substantially.
We recorded no impairment charges in fiscal years 2021, 2020, and 2019. During fiscal year 2020, we concluded the impact of the COVID-19 pandemic on our industry and our operating results was an indicator that impairment may exist related to certain of our long-lived assets.
We recorded no impairment charges in fiscal years 2022, 2021, and 2020. During fiscal year 2020, we concluded the impact of the COVID-19 pandemic on our industry and our operating results was an indicator that impairment may exist related to certain of our long-lived assets.
In addition, under RFS II, a small refiner that processes less than 75,000 barrels of oil per day can petition the EPA for a waiver of their requirement to submit renewable identification numbers (“RINs”).
In addition, under RFS II, a small refiner that processes less than 75,000 barrels of oil per day can petition the EPA for a waiver of their requirement to submit renewable identification numbers (“RINs”) for the oil they process.
REX’s effective ownership of gallons shipped, for the twelve-month period ended January 31, 2022, by the ethanol production facilities in which we have ownership interests was approximately 282 million gallons. Trends and Uncertainties Renewable Fuel Standard II (“RFS II”), established in October 2010, has been an important factor in the growth of ethanol usage in the United States.
REX’s effective ownership of gallons shipped, for the twelve-month period ended January 31, 2023, by the ethanol production facilities in which we have ownership interests was approximately 271 million gallons. Trends and Uncertainties Renewable Fuel Standard II (“RFS II”), established in October 2010, has been an important factor in the growth of ethanol usage in the United States.
As a result, at times, we may operate our plants at negative or minimally positive operating margins. We expect our ethanol plants to produce at least 2.8 gallons of denatured ethanol for each bushel of grain processed in the production cycle. We refer to the actual gallons of denatured ethanol produced per bushel of grain processed as the realized yield.
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 grain processed in the production cycle. We refer to the actual gallons of denatured ethanol produced per bushel of grain processed as the realized yield.
The EPA, through consultation with the Department of Energy and the Department of Agriculture, can grant the refiner a full or partial waiver, or deny the waiver. The EPA issued 85 refinery exemptions for 2016-2018 compliance years, undercutting the statutory renewable fuel volumes by a total of 4.0 billion gallons.
The EPA, through consultation with the Department of Energy and the Department of Agriculture, can grant the refiner a full or partial waiver, or deny the waiver. The EPA issued 88 refinery exemptions for 2016-2018 compliance years, undercutting the statutory renewable fuel volumes by a total of 4.3 billion gallons.
Inventory increased approximately $4.8 million, primarily a result of larger quantities of finished goods and higher per unit costs at January 31, 2022. Prepaid expenses and other assets decreased approximately $0.2 million, primarily a result of a slight change in fair values of forward purchase contracts.
Inventory increased approximately $4.8 million, primarily a result of larger quantities of raw materials and higher per unit costs at January 31, 2022. Prepaid expenses and other assets decreased approximately $0.2 million, primarily a result of a slight change in fair values of forward purchase contracts.
As the plant was no longer eligible to receive federal production tax credits beginning on November 18, 2021, we ceased operations on that date. We began classifying this operation as discontinued operations in the third quarter of fiscal 2021.
As the plant was no longer eligible to receive federal production tax credits beginning on November 18, 2021, we ceased operations on that date and subsequently sold the facility. We began classifying this operation as discontinued operations in the third quarter of fiscal 2021.
Aggregate minimum lease payments under the operating lease agreements for future fiscal years as of January 31, 2022 totaled $11.7 million, with $5.0 million payable in the next twelve months. Refer to Note 7 – Leases included in the notes to consolidated financial statements for more information.
Aggregate minimum lease payments under the operating lease agreements for future fiscal years as of January 31, 2023 totaled $17.0 million, with $5.6 million payable in the next twelve months. Refer to Note 7 – Leases included in the notes to consolidated financial statements for more information.
However, if a material adverse change in the financial position of One Earth or NuGen should occur, or if actual sales or expenses are substantially different than what has been forecasted (because of the COVID-19 pandemic or other factors), One Earth’s and NuGen’s liquidity, and ability to fund future operating and capital requirements could be negatively impacted.
However, if a material adverse change in the financial position of One Earth or NuGen should occur, or if actual sales or expenses are substantially different than what has been forecasted, One Earth’s and NuGen’s liquidity, and ability to fund future operating and capital requirements could be negatively impacted.
We expect our equity method investee to limit the payment of dividends based upon working capital needs. We are investigating various uses of our excess cash. We have a stock buyback program with an authorization level of an additional approximately 449,000 shares at January 31, 2022.
We expect our equity method investee to limit the payment of dividends based upon working capital and capital expenditure needs. We are investigating various uses of our excess cash. We have a stock buyback program with an authorization level of an additional approximately 877,000 shares at January 31, 2023.
We utilize derivative financial instruments, primarily exchange traded commodity future contracts and swaps, in conjunction with certain of our grain procurement and commodity marketing activities. We reported net income attributable to REX common shareholders of $52.4 million in fiscal 2021 compared to approximately $3.0 million in fiscal 2020.
We utilize derivative financial instruments, primarily exchange traded commodity future contracts and swaps, in conjunction with certain of our grain procurement and commodity marketing activities. We reported net income attributable to REX common shareholders of $27.7 million in fiscal 2022 compared to approximately $52.4 million in fiscal 2021.
The following table is a summary of our ethanol entity ownership interests at January 31, 2022: Entity REX’s Current Ownership Interest One Earth Energy, LLC 75.8% NuGen Energy, LLC 99.7% Big River Resources, LLC: Big River Resources W Burlington, LLC Big River Resources Galva, LLC Big River United Energy, LLC Big River Resources Boyceville, LLC 10.3% 10.3% 5.7% 10.3% The three entities own a total of six ethanol production facilities, which in aggregate shipped approximately 699 millions gallons of ethanol over the twelve-month period ended January 31, 2022.
We are invested in three entities as of January 31, 2023, utilizing equity investments. 25 The following table is a summary of our ethanol entity ownership interests at January 31, 2023: Entity REX’s Current Ownership Interest One Earth Energy, LLC 75.8% NuGen Energy, LLC 99.7% Big River Resources, LLC: Big River Resources W Burlington, LLC Big River Resources Galva, LLC Big River United Energy, LLC Big River Resources Boyceville, LLC 10.3% 10.3% 5.7% 10.3% The three entities own a total of six ethanol production facilities, which in aggregate shipped approximately 691 millions gallons of ethanol over the twelve-month period ended January 31, 2023.
The amount of these credits earned in future periods will vary depending on the level of qualifying research expenditures at our ethanol plants. The provision for uncertain tax positions increased our effective tax rate 10.9% (approximately $8.3 million) and 24.8% (approximately $1.0 million) in fiscal year 2021 and 2020, respectively, from the statutory rate.
The amount of these credits earned in future periods will vary depending on the level of qualifying research expenditures at our ethanol plants and changes in tax law. The provision for uncertain tax positions increased our effective tax rate 4.8% (approximately $2.3 million) and 10.9% (approximately $8.3 million) in fiscal year 2022 and 2021, respectively, from the statutory rate.
Big River paid dividends to REX of approximately $3.5 million during fiscal 31 year 2020. Accounts receivable increased approximately $6.7 million, primarily a result of the timing of products shipped and the receipt of customer payments at One Earth and NuGen.
Big River paid dividends to REX of approximately $6.3 million during fiscal year 2022. Accounts receivable decreased approximately $0.7 million, primarily a result of the timing of products shipped and the receipt of customer payments at One Earth and NuGen.
During fiscal year 2020, operating cash flow was provided by net income from continuing operations of approximately $4.8 million and adjustments of approximately $21.9 million, which consisted of depreciation, amortization of operating lease right-of-use assets, stock based compensation expense, income from equity method investments, interest income from investments, and the deferred income tax provision.
During fiscal year 2022, operating cash flow was provided by net income from continuing operations of approximately $37.9 million and adjustments of approximately $14.6 million, which consisted of depreciation, amortization of operating lease right-of-use assets, stock-based compensation expense, income from equity method investments, interest 31 income from investments, and the deferred income tax provision.
Net Income from Continuing Operations – As a result of the foregoing, net income from continuing operations was approximately $56.8 million for fiscal year 2021 versus approximately $4.8 million for fiscal year 2020.
Net Income from Continuing Operations – As a result of the foregoing, net income from continuing operations was approximately $37.9 million for fiscal year 2022 versus approximately $56.8 million for fiscal year 2021.
As of January 31, 2022, we had contracted future purchases of grain, natural gas, natural gas pipeline and other contracts valued at approximately $107.0 million, with $103.1 payable in the next twelve months. Refer to Note 11 – Commitments included in the notes to consolidated financial statements for more information.
As of January 31, 2023, we had contracted future purchases of grain, natural gas, natural gas pipeline lease and other contracts for capital expenditures at our ethanol plants valued at approximately $87.7 million, with $75.1 payable in the next twelve months. Refer to Note 11 – Commitments included in the notes to consolidated financial statements for more information.
Selling, General and Administrative (“SG&A”) Expenses – SG&A expenses for fiscal year 2021 were approximately $28.5 million (3.7% of net sales and revenue), an increase of approximately $10.9 million or 61% from approximately $17.6 million (4.7% of net sales and revenue) for fiscal year 2020.
Selling, General and Administrative (“SG&A”) Expenses – SG&A expenses for fiscal year 2022 were approximately $29.0 million (3.4% of net sales and revenue), an increase of approximately $0.5 million or 2% from approximately $28.5 million (3.7% of net sales and revenue) for fiscal year 2021.
Financing Activities – Net cash used in financing activities was approximately $11.1 million during fiscal year 2021 compared to approximately $22.4 million for fiscal year 2020. During fiscal year 2021, we purchased approximately 84,000 shares of our common stock for approximately $6.6 million in open market transactions.
Financing Activities – Net cash used in financing activities was approximately $17.0 million during fiscal year 2022 compared to approximately $11.1 million for fiscal year 2021. During fiscal year 2022, we purchased approximately 471,000 shares of our common stock for approximately $13.0 million in open market transactions.
The price and availability of corn is subject to significant fluctuations depending upon a number of factors that affect commodity prices in general, including crop conditions, weather, federal policy and foreign trade.
The price and availability of corn is subject to significant fluctuations depending upon a number of factors that affect commodity prices in general, including crop conditions, the amount of corn stored on farms, weather, federal policy, foreign trade and international disruptions caused by wars or conflicts.
Grain accounted for approximately 84% ($568.9 million) of our cost of sales during fiscal year 2021 compared to approximately 78% ($274.6 million) during fiscal year 2020. Natural gas accounted for approximately 4% ($29.4 million) of our cost of sales during fiscal year 2021 compared to approximately 5% ($17.7 million) during fiscal year 2020.
Grain accounted for approximately 83% ($667.4 million) of our cost of sales during fiscal year 2022 compared to approximately 84% ($568.9 million) during fiscal year 2021. Natural gas accounted for approximately 6% ($47.4 million) of our cost of sales during fiscal year 2022 compared to approximately 4% ($29.4 million) during fiscal year 2021.
Ethanol Investments In fiscal year 2006, we entered the ethanol industry by investing in several entities organized to construct and subsequently operate, ethanol producing plants. We are invested in three entities as of January 31, 2022, utilizing equity investments.
Ethanol Investments In fiscal year 2006, we entered the ethanol industry by investing in several entities organized to construct and subsequently operate, ethanol producing plants.
Results of Operations The following table summarizes our results from operations (amounts in thousands): Fiscal Year 2021 2020 Net sales and revenue $ 774,802 $ 372,664 Cost of sales 677,242 353,131 Gross profit $ 97,560 $ 19,533 Income before income taxes $ 75,838 $ 4,212 (Provision) benefit for income taxes $ (19,031 ) $ 546 Net income attributable to REX common shareholders (continuing operations) $ 47,572 $ 1,880 Net income attributable to REX common shareholders (discontinued operations) $ 4,792 $ 1,121 26 The following table summarizes net sales and revenue by product group: Fiscal Year 2021 2020 Ethanol $ 613,597 $ 284,191 Dried distillers grains 125,009 71,774 Non-food grade corn oil 38,852 15,066 Modified distillers grains 9,104 2,626 Derivative financial instruments losses (12,109) (1,167) Other 349 174 Total, continuing operations $ 774,802 $ 372,664 Refined coal (discontinued operations) 1 $ 400 $ 182 1 Refined coal sales were recorded net of the cost of coal as the Company purchased the coal feedstock from the same customer to which the processed refined coal was sold.
Results of Operations The following table summarizes our results from operations (amounts in thousands): Fiscal Year 2022 2021 Net sales and revenue $ 855,000 $ 774,802 Cost of sales 800,269 677,242 Gross profit $ 54,731 $ 97,560 Income before income taxes $ 47,479 $ 75,838 Provision for income taxes $ (9,542) $ (19,031) Net income attributable to REX common shareholders (continuing operations) $ 27,697 $ 47,572 Net income attributable to REX common shareholders (discontinued operations) $ - $ 4,792 27 The following table summarizes net sales and revenue by product group (amounts in thousands): Fiscal Year 2022 2021 Ethanol $ 649,501 $ 613,597 Dried distillers grains 139,118 125,009 Non-food grade corn oil 55,595 38,852 Modified distillers grains 11,579 9,104 Derivative financial instruments losses (1,024) (12,109) Other 231 349 Total, continuing operations $ 855,000 $ 774,802 Refined coal (discontinued operations) 1 $ - $ 400 1 Refined coal sales were recorded net of the cost of coal as the Company purchased the coal feedstock from the same customer to which the processed refined coal was sold.
The following table summarizes selected operating data: Fiscal Year 2021 2020 Average selling price per gallon of ethanol (net of hedging) $ 2.21 $ 1.30 Gallons of ethanol sold (in millions) 277.8 217.1 Average selling price per ton of dried distillers grains $ 197.86 $ 144.73 Tons of dried distillers grains sold 631,818 495,915 Average selling price per pound of non-food grade corn oil $ 0.50 $ 0.26 Pounds of non-food grade corn oil sold (in millions) 77.2 58.9 Average selling price per ton of modified distillers grains $ 85.19 $ 64.80 Tons of modified distillers grains sold 106,864 40,521 Average cost per bushel of grain $ 5.99 $ 3.73 Average cost of natural gas (per MmBtu) $ 4.27 $ 3.00 Comparison of Fiscal Years 2021 and 2020 (Consolidated Results) Continuing Operations Net Sales and Revenue – Net sales and revenue in fiscal year 2021 increased approximately 108% compared to fiscal year 2020.
The following table summarizes selected operating data: Fiscal Year 2022 2021 Average selling price per gallon of ethanol (net of hedging) $ 2.44 $ 2.21 Gallons of ethanol sold (in millions) 265.8 277.8 Average selling price per ton of dried distillers grains $ 232.98 $ 197.86 Tons of dried distillers grains sold 597,126 631,818 Average selling price per pound of non-food grade corn oil $ 0.71 $ 0.50 Pounds of non-food grade corn oil sold (in millions) 77.8 77.2 Average selling price per ton of modified distillers grains $ 123.66 $ 85.19 Tons of modified distillers grains sold 93,637 106,864 Average cost per bushel of grain $ 7.24 $ 5.99 Average cost of natural gas (per MmBtu) $ 6.66 $ 4.27 Comparison of Fiscal Years 2022 and 2021 (Consolidated Results) Continuing Operations Net Sales and Revenue – Net sales and revenue in fiscal year 2022 increased approximately 10% compared to fiscal year 2021.
The increase in the benefit for income taxes primarily results from higher production in fiscal year 2021 compared to fiscal year 2020. Loss related to noncontrolling interests was approximately $0.4 million and $0.3 million during fiscal years 2021 and 2020, respectively. This amount represents the other owner’s share of the pre-tax loss of refined coal operations.
The benefit for income taxes was approximately $13.3 million This amount includes the benefit of Section 45 production tax credits and a benefit related to operating loss before income taxes. Loss related to noncontrolling interests was approximately $0.4 million during fiscal year 2021. This amount represents the other owner’s share of the pre-tax loss of refined coal operations.
None of our consolidated subsidiaries or the parent company has restricted net assets at January 31, 2022. 32 Contractual Obligations and Commitments In the ordinary course of business, we enter into agreements under which we are legally obligated to make future cash payments. These agreements include obligations related to purchasing inventory and leasing rail cars.
Contractual Obligations and Commitments In the ordinary course of business, we enter into agreements under which we are legally obligated to make future cash payments. These agreements include obligations related to purchasing inventory and natural gas and leasing rail cars.
Approximately 2.8% of our net assets are restricted pursuant to the terms of various loan agreements of our equity method investee as of January 31, 2022.
Approximately 2.6% of our net assets are restricted pursuant to the terms of various loan agreements of our equity method investee as of January 31, 2023. None of our consolidated subsidiaries or the parent company has restricted net assets at January 31, 2023.
During fiscal year 2020, we used cash of approximately $96.2 million for purchases of short-term investments and received cash of approximately $86.3 million related to maturities of these investments as certain of these investments remained outstanding at January 31, 2021.
During fiscal year 2022, we used cash of approximately $399.4 million for purchases of short-term investments and received cash of approximately $216.7 million related to maturities of these investments as certain of these investments remained outstanding at January 31, 2023. Net cash provided by investing activities was approximately $5.3 million during fiscal year 2021.
Provision (Benefit) for Income Taxes – Our effective tax rate was a provision of 25.1% and a benefit of 13.0% for fiscal years 2021 and 2020, respectively. Our effective rate is impacted by the noncontrolling interests of the companies we consolidate, as we recognize 100% of their income or loss before income taxes and noncontrolling interests.
Our effective rate is impacted by the noncontrolling interests of the companies we consolidate, as we recognize 100% of their income or loss before income taxes and noncontrolling interests. However, we only provide an income tax provision or benefit for our portion of the subsidiaries’ income or loss.
Accounts payable increased approximately $16.0 million, primarily a result of the timing of inventory receipts and vendor payments. Refundable income taxes increased $1.1 million as a result of the timing of estimated tax payments. Accrued expenses and other liabilities increased approximately $0.5 million, which was primarily a result of operating lease payments and higher incentive compensation in fiscal year 2021.
Accounts payable increased approximately $16.0 million, primarily a result of the timing of inventory receipts and vendor payments. Refundable income taxes increased $1.1 million as a result of the timing of estimated tax payments.
Capital expenditures in fiscal year 2020 totaled approximately $10.4 million, the majority of which were various projects at One Earth’s and NuGen’s ethanol plants.
Capital expenditures in fiscal year 2022 totaled approximately $15.6 million, the majority of which were various projects at One Earth’s and NuGen’s ethanol plants, including approximately $10.6 million related to the carbon sequestration project near the One Earth Energy ethanol plant.
Both the grain and natural gas dollar increases were primarily attributable to an increase in the cost per unit. Incrementally, the higher production levels incurred in fiscal year 2021 compared to fiscal year 2020 also contributed to the increase.
Both the grain and natural gas dollar increases were primarily attributable to an increase in the cost per unit.
Noncontrolling Interests (continuing operations) – Income attributable to noncontrolling interests (continuing operations) was approximately $9.2 million and $2.9 million during fiscal years 2021 and 2020, respectively, and represents the other owners’ share of the income of NuGen and One Earth. 29 Net Income Attributable to REX Common Shareholders (continuing operations) – As a result of the foregoing, net income attributable to REX common shareholders (continuing operations) was approximately $47.6 million for fiscal year 2021 compared to $1.9 million for fiscal year 2020.
Noncontrolling Interests (continuing operations) – Income attributable to noncontrolling interests (continuing operations) was approximately $10.2 million and $9.2 million during fiscal years 2022 and 2021, respectively, and represents the other owners’ share of the income of NuGen and One Earth.
Our investment in Big River, which has interests in four ethanol production plants, represents an effective ownership of approximately 365 million gallons of ethanol shipped in the trailing twelve months ended January 31, 2022. Big River’s 2020 financial results were impacted by reduced ethanol demand related to the COVID-19 pandemic.
Our investment in Big River, which has interests in four ethanol production plants, represents an effective ownership of approximately 38.0 million gallons of ethanol shipped in the trailing twelve months ended January 31, 2023.
Discontinued operations used cash of $6.7 million in fiscal year 2021. Net cash provided by operating activities was approximately $8.6 million for fiscal year 2020.
Operating Activities – Net cash provided by operating activities was approximately $54.8 million for fiscal year 2022 compared to approximately $91.7 million in fiscal year 2021.
Because the market price of ethanol is not always directly related to corn prices, at times ethanol prices may not follow movements in corn prices and, in an environment of higher corn prices or lower ethanol prices, reduce the overall margin structure at the plants.
Because the market price 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 and trade negotiations 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 prices, reduce the overall margin structure at the plants.
However, we only provide an income tax provision or benefit for our portion of the subsidiaries’ income or loss. During fiscal years 2021 and 2020, our effective tax rate decreased 6.8% (approximately $5.2 million) and 47.7% (approximately $2.0 million), respectively, from the statutory rate, as a result of research and experimentation credits earned by our ethanol plants.
During fiscal years 2022 and 2021, our effective tax rate decreased 5.4% (approximately $2.5 million) and 6.8% (approximately $5.2 million), respectively, from the statutory rate, as a result of research and experimentation credits from our ethanol plants.
Accounts payable decreased approximately $2.6 million, primarily a result of the timing of inventory receipts and vendor payments. Accrued expenses and other liabilities decreased approximately $3.5 million, which was primarily a result of operating lease payments and lower incentive compensation in fiscal year 2020. Discontinued operations used cash of $2.8 million in fiscal year 2021.
Accrued expenses and other liabilities increased approximately $0.5 million, which was primarily a result of higher incentive compensation in fiscal year 2021, offset partially by operating lease payments made. Discontinued operations used cash of $6.7 million in fiscal year 2021.
Investing Activities – Net cash provided by investing activities was approximately $5.3 million during fiscal year 2021 compared to net cash used of approximately $20.8 million during fiscal year 2020. Capital expenditures in fiscal year 2021 totaled approximately $5.1 million, the majority of which were various projects at One Earth’s and NuGen’s ethanol plants.
Capital expenditures in fiscal year 2021 totaled approximately $5.1 million, the majority of which were various projects at One Earth’s and NuGen’s ethanol plants. During fiscal year 2021, we used cash of approximately $88.9 million for purchases of short-term investments and received cash of approximately $99.3 million related to maturities of these investments.
Income from Continuing Operations Before Income Taxes – As a result of the foregoing, income from continuing operations before income taxes was approximately $75.8 million for fiscal year 2021 versus approximately $4.2 million for fiscal year 2020.
Income from Continuing Operations Before Income Taxes – As a result of the foregoing, income from continuing operations before income taxes was approximately $47.5 million for fiscal year 2022 versus approximately $75.8 million for fiscal year 2021. Provision for Income Taxes – Our effective tax rate was a provision of 20.1% and 25.1% for fiscal years 2022 and 2021, respectively.
During fiscal year 2021, we used cash of approximately $4.8 million to purchase shares from and pay dividends to noncontrolling members of the entities that own One Earth’s and NuGen’s ethanol plants. During fiscal year 2021, we received approximately $0.3 million in capital contributions from the minority investor in the refined coal business which is now classified as discontinued operations.
During fiscal year 2022, we used cash of approximately $4.0 million to purchase shares from and pay dividends to noncontrolling members of the entities that own One Earth’s and NuGen’s ethanol plants. Net cash used in financing activities was approximately $11.1 million during fiscal year 2021.
S&P Global Platts ethanol pricing per gallon ranged from a low of $1.64 in February 2021 to a high of $3.80 in November 2021. 24 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.
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.
Revenue Recognition – We recognize sales of ethanol, distillers grains and non-food grade corn oil when obligations under the terms of the respective contracts with customers are satisfied; this occurs with the transfer of control of products, generally upon shipment from the ethanol plant or upon loading of the rail car used to transport the products.
Management believes that the following accounting policies are the most critical to aid in fully understanding and evaluating our reported financial results, and they require management’s most difficult, subjective or complex judgments, resulting from the need to make estimates about the effect of matters that are inherently uncertain. 33 Revenue Recognition – We recognize sales of ethanol, distillers grains and non-food grade corn oil when obligations under the terms of the respective contracts with customers are satisfied; this occurs with the transfer of control of products, generally upon shipment from the ethanol plant or upon loading of the rail car used to transport the products.
Net income attributable to REX common shareholders from discontinued operations, net of tax, for fiscal year 2021 was approximately $4.8 million, an increase of $3.7 million from the net income attributable to REX common shareholders from discontinued operations, net of tax, of approximately $1.1 million for fiscal year 2020.
Net income attributable to REX common shareholders from discontinued operations, net of tax, for fiscal year 2021 was approximately $4.8 million. Net Income As a result of the foregoing, including results from both continuing and discontinued operations, net income attributable to REX common shareholders was approximately $27.7 million and approximately $52.4 million for fiscal years 2022 and 2021, respectively.
The increase in ethanol selling price resulted primarily from an increase in demand and an increase in commodity prices. Dried distillers grains sales increased 74% in fiscal year 2021 compared to fiscal year 2020 as the number of tons sold increased 27% and the average selling price per ton increased 37%.
The increase in the non-food grade corn oil selling price resulted primarily from an increase in demand from the biodiesel industry. Modified distillers grains sales increased 27% in fiscal year 2022 compared to fiscal year 2021 as the average selling price per ton increased 45%, offset partially by a 12% decrease in the number of tons sold.
The primary contributor to the increase in gross profit was the increased crush spread and improved pricing for distillers grain and corn oil. The crush spread for fiscal year 2021 was approximately $0.16 per gallon of ethanol sold compared to approximately $0.03 per gallon of ethanol sold during fiscal year 2020.
The crush spread for fiscal year 2022 was approximately $0.02 per gallon of ethanol sold compared to approximately $0.16 per gallon of ethanol sold during fiscal year 2021.
We expect capital expenditures to be in the range of approximately $15 million to $20 million in fiscal year 2022 for various projects at our consolidated ethanol plants and our carbon sequestration project. However, actual capital expenditures could vary from this range for unexpected expenditures as our plants continue to age or potential projects materialize.
However, actual capital expenditures could vary from this range for unexpected expenditures as our plants continue to age or potential projects materialize. We expect to fund these capital expenditures with available cash at our ethanol plant subsidiaries.
During fiscal year 2020, we used cash of approximately $2.9 million to purchase shares from and pay dividends to noncontrolling members of the entities that own One Earth’s and NuGen’s ethanol plants. During fiscal year 2020, we received approximately $0.1 million in capital contributions from the minority investor in the refined coal business which is now classified as discontinued operations.
During fiscal year 2021, we received approximately $0.3 million in capital contributions from the minority investor in the refined coal business which is now classified as discontinued operations.
Our ethanol business bounced back strongly in fiscal 2021 particularly in the fourth quarter in comparison to fiscal 2020, which was impacted by the COVID-19 pandemic. The two largest drivers of ethanol profitability are corn and ethanol pricing, both of which experienced significant volatility within the year.
Our ethanol business had reduced profits in fiscal 2022 compared to fiscal 2021 as a result of lower crush spreads in fiscal 2022. The two largest drivers of ethanol 24 profitability are corn and ethanol pricing, both of which experienced significant volatility within the year.
Inventory increased approximately $2.3 million, primarily a result of larger quantities of finished goods and higher per unit costs at January 31, 2021. Prepaid expenses and other assets increased approximately $3.2 million, primarily a result of higher fair values of forward purchase contracts.
Inventory increased approximately $6.5 million, primarily a result of larger quantities of work-in-process materials and higher per unit costs at January 31, 2023.
Modified distillers grains sales increased 247% in fiscal year 2021 compared to fiscal year 2020 as the number of tons sold increased 164% and the average selling price per ton increased 31%. Losses on derivative financial instruments were approximately $12.1 million during fiscal year 2021, compared to $1.2 million in fiscal year 2020.
The increase in the modified distillers grains selling price resulted primarily from an increase in corn prices as distillers grain pricing often correlates with corn pricing. Losses on derivative financial instruments were approximately $1.0 million during fiscal year 2022, compared to $12.1 million in fiscal year 2021.
The Company is working with the University of Illinois and is in the exploratory stage of a carbon sequestration project near the One Earth Energy ethanol plant. A test well has been drilled and three-dimensional seismic testing has been performed.
One Earth Sequestration, LLC, a wholly owned subsidiary of One Earth Energy, LLC, is in the exploratory stage of a carbon sequestration project near the One Earth Energy ethanol plant. A test well has been drilled to a total depth of approximately 7,100 feet, in which almost 2,000 feet of Mt.
Outlook – Our cash and short-term investments balance of approximately $255.7 million at January 31, 2022 included approximately $212.8 million held by One Earth and NuGen. We expect that One Earth and NuGen will use a majority of their cash for working capital needs, capital expenditures, general corporate purposes and dividend payments.
We expect that One Earth and NuGen will use a majority of their cash for working capital needs, capital expenditures, general corporate purposes and dividend payments. One Earth Energy is currently working on a carbon sequestration project and is expected to have related capital expenditure needs.
Equity in Income of Unconsolidated Ethanol Affiliates – During fiscal years 2021 and 2020, we recognized income of approximately $6.6 million and $0.5 million, respectively, from our equity investment in Big River Resources, LLC (“Big River”).
These increases were partially offset by a decrease in outbound freight expense as fewer sales contracts provided for shipping to be paid by us compared to fiscal year 2021, as well as a decrease in rail car lease expense. 29 Equity in Income of Unconsolidated Ethanol Affiliates – During fiscal years 2022 and 2021, we recognized income of approximately $8.7 million and $6.6 million, respectively, from our equity investment in Big River Resources, LLC (“Big River”).
Net cash used in financing activities was approximately $22.4 million during fiscal year 2020. During fiscal year 2020, we purchased approximately 315,000 shares of our common stock for approximately $19.6 million in open market transactions.
During fiscal year 2021, we purchased approximately 252,000 shares of our common stock for approximately $6.6 million 32 in open market transactions. During fiscal year 2021, we used cash of approximately $4.8 million to purchase shares from and pay dividends to noncontrolling members of the entities that own One Earth’s and NuGen’s ethanol plants.
Chicago Board of Trade corn prices per bushel ranged from a low of $5.10 in September 2021 to a high of $7.40 in April 2021.
Chicago Board of Trade corn prices per bushel ranged from a low of $5.64 in July 2022 to a high of $8.18 in April 2022. S&P Global Platts ethanol pricing per gallon ranged from a low of $1.99 in February 2022 to a high of $2.88 in June 2022.
During fiscal year 2021, we used cash of approximately $88.9 million for purchases of short-term investments and received cash of approximately $99.3 million related to maturities of these investments. Net cash used in investing activities was approximately $20.8 million during fiscal year 2020.
Investing Activities – Net cash used in investing activities was approximately $198.5 million during fiscal year 2022 compared to net cash provided by investing activities of approximately $5.3 million during fiscal year 2021.
Interest and Other Income – Interest and other income for fiscal year 2021 was approximately $0.1 million compared to approximately $1.8 million for fiscal year 2020. Interest income decreased as yields on our excess cash decreased in fiscal year 2021.
Interest and Other Income – Interest and other income for fiscal year 2022 was approximately $13.0 million compared to approximately $0.1 million for fiscal year 2021. During the second quarter of 2022, the Company’s consolidated plants received COVID-19 relief grants from the USDA totaling approximately $7.8 million based on reduced production in 2020.
Liquidity and Capital Resources Our primary sources of cash have been income from operations. Our primary uses of cash have been capital expenditures at our ethanol plants, stock repurchases and contributions to fund refined coal operating losses.
Our primary uses of cash have been capital expenditures at our ethanol plants, stock repurchases, payments to noncontrolling interests holders and, in prior years, contributions to fund refined coal operating losses. Outlook – Our cash and short-term investments balance of approximately $280.9 million at January 31, 2023 included approximately $238.8 million held by One Earth and NuGen.
Gross Profit – Gross profit for fiscal year 2021 increased approximately $78.0 million, or 399%, over fiscal year 2020. Gross profit in fiscal year 2021 was 12.6% of net sales and revenue, versus approximately 5.2% of net sales and revenue in fiscal year 2020.
Gross profit in fiscal year 2022 was 6.4% of net sales and revenue, versus approximately 12.6% of net sales and revenue in fiscal year 2021. The primary contributor to the decrease in gross profit was the decreased crush spread and higher natural gas prices.
As a result, we resumed production at the One Earth ethanol plant in May of 2020 and at the NuGen ethanol plant in June of 2020. In addition, stronger commodity pricing during fiscal year 2021 contributed to the increase in sales between the two fiscal years.
Quantities sold at our consolidated plants during fiscal year 2022 did not change significantly from fiscal year 2021. Stronger commodity pricing in fiscal year 2022 contributed to the increase in sales between the two fiscal years.
In addition, stronger commodity pricing in fiscal year 2021 contributed to the increase in sales between the two fiscal years. 27 Ethanol sales increased in fiscal year 2021 compared to fiscal year 2020 as the number of gallons increased 28% and the average selling price increased 70% over the same period.
Ethanol sales increased in fiscal year 2022 compared to fiscal year 2021 as the average price per gallon increased 10%, offset partially by a decrease in gallons sold of 4%. The increase in ethanol selling price resulted primarily from an increase in commodity prices.
Removed
We are working on simulation models to predict the movement of carbon dioxide injection into the subsurface, additional testing and completion of a class VI permit application.
Added
Simon Sandstone was encountered, which represents the region’s primary carbon storage resource. Three-dimensional seismic testing has been performed, as well as geological modeling for predicting the movement of injected carbon and the plume area to determine maximum injection pressure, reservoir quality and storage capacity for the potential wells.
Removed
A front-end engineering design study has been completed for a carbon dioxide liquification facility for the One Earth Energy plant, and we plan to begin seeking bids once we have completed additional engineering work. At this time we do not know total cost to complete or the feasibility of the project.
Added
We have applied for a Class VI injection well permit for three wells with the EPA. In addition, we have signed a construction contract to capture, dehydrate, and compress carbon to a state suitable for sequestration for the One Earth Energy ethanol plant.
Removed
On December 7, 2021, the EPA issued proposed volumes for 2021 and 2022 and reduced the previously finalized volumes for 2020 to account for challenges for that year including the COVID-19 pandemic. The proposed volumes for conventional biofuels were 13.32 billion gallons and 15.0 billion gallons for 2021 and 2022, respectively.
Added
We are currently working on an engineering Design study for a short pipeline to deliver carbon from the ethanol plant to the sequestration site. Although we have made meaningful progress, we continue to complete documents required from various government agencies and obtain other approvals with no assurances of ultimate success.
Removed
The 2020 volumes were proposed at 12.5 billion gallons, down from the previously finalized 15.0 billion gallons. In addition, the EPA proposed denying 65 pending applications for SREs in response to the 2020 decision by the U.S. Court of Appeals for the 10 th Circuit.
Added
On December 1, 2022, the EPA issued proposed Renewable Fuel Standard volume obligations for calendar years 2023-2025. The proposed volumes from conventional biofuels (which includes corn-based ethanol) were 15.0 billion gallons for 2023 and 15.25 billion gallons each for 2024 and 2025.
Removed
The EPA also proposed adding 250 million gallons of “supplemental obligation” to the 2022 proposed volumes and stated its intent to add another 250 million gallons to 2023 to address the remand of the 2016 waiver by the D.C Circuit. The EPA implemented a public notice and comment process on this announcement.
Added
They also proposed an additional 250 million gallon supplemental obligation for 2023 to make good on the shortfall from the 2016 compliance year. The USDA reported United States corn harvest in 2022 was 13.7 billion bushels, a decrease of 9% from the prior year.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeAt January 31, 2022, One Earth and NuGen had combined sales commitments for approximately 47.7 million gallons of ethanol, 97,000 tons of distillers grains and 14.5 million pounds of non-food grade corn oil.
Biggest changeAt January 31, 2023, One Earth and NuGen had combined sales commitments for approximately 46.5 million gallons of ethanol, 101,000 tons of distillers grains and 9.9 million pounds of non-food grade corn oil. Not all of our commitments are at fixed price.
At January 31, 2022, One Earth and NuGen combined had purchase commitments for approximately 19.3 million bushels of corn, the principal raw material for their ethanol plants. At January 31, 2022, One Earth and NuGen combined had purchase commitments for approximately 1.8 million MmBtu of natural gas.
At January 31, 2023, One Earth and NuGen combined had purchase commitments for approximately 18.0 million bushels of corn, the principal raw material for their ethanol plants. At January 31, 2023, One Earth and NuGen combined had purchase commitments for approximately 2.7 million MmBtu of natural gas.
Our exposures to market risk, which include the impact of our risk management activities, are based on the estimated effect on pre-tax income starting on January 31, 2022, are as follows (amounts in thousands): Commodity Estimated Total Volume for the Next 12 Months Unit of Measure Decrease in Pre-tax Income From a 10% Adverse Change in Price Ethanol 280,000 Gallons $61,039 Corn 100,000 Bushels $51,948 Distillers Grains 745 Tons $11,714 Non-food grade Corn Oil 79,000 Pounds $ 3,981 Natural Gas 7,400 MmBtu $ 2,430 35
Our exposures to market risk, which include the impact of our risk management activities, are based on the estimated effect on pre-tax income starting on January 31, 2023, are as follows (amounts in thousands): Commodity Estimated Total Volume for the Next 12 Months Unit of Measure Decrease in Pre-tax Income From a 10% Adverse Change in Price Ethanol 284,000 Gallons $60,787 Corn 101,429 Bushels $68,587 Distillers Grains 730 Tons $14,581 Non-food grade Corn Oil 82,435 Pounds $5,200 Natural Gas 7,400 MmBtu $2,067 35

Other REX 10-K year-over-year comparisons