Company: REX
Filing Date: 2025-06-04
Form Type: 10-Q
Source: 0000930413-25-001941
Chunk: 71

Company: REX AMERICAN RESOURCES Corp
Filing Date: 2025-06-04
Form: 10-Q
Item: Part I, Item 8
Chunk 71
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 in general,
including crop conditions, the amount of corn stored on farms, weather, federal policy, foreign trade, tariffs, and international
disruptions caused by wars or conflicts. Because the market prices of ethanol and distillers grains are not always directly related
to corn prices (for example, demand for crude and other energy and related prices, the export market demand for ethanol and distillers
grains, soybean meal prices, and the results of federal policy decisions 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 or distillers grains prices, reduce the overall margin structure at the plants. As a result,
at times, we may operate our plants at negative or minimally positive operating margins.

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

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

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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