Company: REX
Filing Date: 2025-09-02
Form Type: 10-Q
Source: 0000930413-25-002856
Chunk: 87

Company: REX AMERICAN RESOURCES Corp
Filing Date: 2025-09-02
Form: 10-Q
Item: Part I, Item 8
Chunk 87
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 grains prices
may not follow movements in corn prices and, in an environment of higher corn prices or lower ethanol or distillers grains prices, reduce
the overall margin structure at the plants. As a result, at times, we may operate our plants at negative or minimally positive operating
margins.

We expect our ethanol plants to produce approximately
2.9 gallons of denatured ethanol for each bushel of corn processed in the production cycle. We refer to the actual gallons of denatured
ethanol produced per bushel of corn processed as the realized yield. We refer to the difference between the price per gallon of ethanol
and the price per bushel of corn (divided by the realized yield) as the “crush spread”. Should the crush spread decline, it
is possible that our ethanol plants will generate operating results that do not provide adequate cash flows for sustained periods of time.
In such cases, production at the ethanol plants may be reduced or stopped altogether in order to minimize variable costs at individual
plants.

We attempt to manage the risk related to the volatility
of commodity prices by utilizing forward corn and natural gas purchase contracts, forward ethanol, distillers grains and distillers corn
oil sale contracts, and commodity futures agreements, as management deems appropriate. We attempt to match quantities of these sales contracts
with an appropriate quantity of corn purchase contracts over a given period of time when we can obtain an adequate gross margin resulting
from the crush spread inherent in the

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contracts we have executed. However, the market for future ethanol
sales contracts generally lags the spot market with respect to ethanol prices. Consequently, we generally execute fixed price contracts
for no more than four months into the future at any given time and we may lock in our corn or ethanol price without having a corresponding
locked in ethanol or corn price for short durations of time. As a result of the relatively short period of time our fixed price contracts
cover, we generally cannot predict the future movements in our realized crush spread for more than four months; thus, we are unable to
predict the likelihood or amounts of future income or loss from the operations of our ethanol facilities.

One Earth Energy, LLC Carbon Sequestration and Plant Expansion

One Earth Sequestration, LLC, a wholly owned subsidiary
of One Earth Energy, LLC, is in the developmental stage of a carbon sequestration project near the One Earth ethanol plant. In October
2022, we applied to the EPA for a Class VI injection well permit