REX AMERICAN RESOURCES Corp (REX) FY 2024 MD&A

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Overview

We have been an investor in ethanol production
facilities beginning in 2006 and were an investor in a refined coal production facility during the period from 2017 through November 2021.
We currently have equity investments in three ethanol production entities, two of which are majority ownership interests. Our refined
coal business ceased operations in November 2021 and the facility was subsequently sold. We have classified the refined coal business
as discontinued operations. We may make additional alternative energy investments in the future and are currently working on a carbon
sequestration project near our One Earth Energy location.

Our ethanol operations are highly dependent on
commodity prices, especially prices for corn, ethanol, distillers grains, distillers corn oil and natural gas, and availability of corn.
As a result of price volatility for these commodities, our operating results can fluctuate substantially. The price and availability of
corn is subject to significant fluctuations depending upon several factors that affect commodity prices in general, including crop conditions,
the amount of corn stored on farms, weather, federal policy, foreign trade, 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 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.

We reported net income attributable to REX common
shareholders of $60.9 million in fiscal 2023 compared to approximately $27.7 million in fiscal 2022. Our ethanol business had increased
profits in fiscal 2023 compared to fiscal 2022 as a result of higher crush spreads in fiscal 2023. 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 $4.40 in January 2024 to a high of $6.85

25

in February 2023. S&P Global Platts ethanol
pricing per gallon ranged from a low of $1.52 in January 2024 to a high of $2.67 in June 2023.

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. 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.

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 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 is the geological formation that is 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. In October 2022, we applied for a Class VI injection well permit for three wells with the
U.S. Environmental Protection Agency (“EPA”). In addition, we have begun construction of a facility to capture,
dehydrate, and compress carbon dioxide from the One Earth Energy ethanol plant to a state suitable for sequestration. We expect to
complete construction by July 31, 2024, at which time testing of the facility could commence, upon completion of other
infrastructure. In October 2023, we submitted an application with the Illinois Commerce Commission to build a short pipeline to
deliver carbon dioxide from the ethanol plant to the sequestration site. We continue to pursue obtaining a county special-use zoning
permit. Although we have made meaningful progress and significant investments in this project, we continue to complete required
documentation for various government agencies and obtain permits and other approvals with no assurances of ultimate success.

NuGen Energy, LLC, our majority owned ethanol plant in Marion, South Dakota,
signed an agreement to be part of Summit Carbon Solutions’ carbon capture and storage pipeline. Should Summit Carbon Solutions be
able to obtain all necessary permits and approvals, the agreement would allow NuGen to share in the economic benefits of tax credits through
the sale of the carbon dioxide output of its ethanol production facility for sequestration, as well as reduce its net carbon emissions.

We plan to seek and evaluate various investment
opportunities including ethanol and/or energy related, carbon sequestration, agricultural or other ventures we believe fit our investment
criteria. We can make no assurances that we will be successful in our efforts to find such opportunities.

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, 2024, utilizing equity investments.

The following table is a summary of our ethanol
entity ownership interests at January 31, 2024:

The three entities own a total of six ethanol
production facilities, which in aggregate shipped approximately 716 million gallons of ethanol over the twelve-month period ended January
31, 2024. REX’s effective ownership of gallons shipped, for the twelve-month period ended January 31, 2024, by the ethanol production
facilities in which we have ownership interests was approximately 290 million gallons.

26

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. In recent years, there
has been much uncertainty in 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. There are no established congressional target volumes beginning in 2023. The EPA has the authority
to waive the biofuel mandate, in whole or in part, if there is inadequate domestic renewable fuel supply or the requirement severely harms
the domestic economy or environment. In addition, under RFS II, a small refiner that processes 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”). 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. 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,
including on November 22, 2023, the Fifth U.S. Circuit Court of Appeals (the “Court”) ruled against the EPA on six SREs the
EPA had previously denied. The Court remanded those six petitions back to the EPA and each refinery will continue to operate under temporary
SREs previously offered to them by the Court.

The EPA has issued Renewable Fuel Standard
volume obligations for calendar years 2023-2025. The volumes from conventional biofuels (which includes corn-based ethanol) were 15.0
billion gallons for 2023 through 2025. Additionally, in 2023, the EPA restored 250 million gallons previously waived.

The Inflation Reduction Act of 2022 will likely
impact our business by creating a new Clean Fuel Production Credit, section 45Z of the Internal Revenue Code (“45Z”), available
for years 2025 to 2027. The Clean Fuel Production Credit is established at approximately $0.02 per ethanol gallon per CI point reduction
below a 50 CI score threshold. The Act also raises the carbon capture tax credit from $50 per metric ton to $85 per metric ton, under
section 45Q of the Internal Revenue Code (“45Q”). Taxpayers may elect to be treated as making a payment against tax for 100%
of the value of the 45Q credit (“direct pay”) for the first five years, starting with the year a qualifying carbon sequestration
facility is placed in service, but not beyond December 31, 2032. Companies may elect either the 45Q credit or the 45Z credit in periods
in which both tax credits are available. Other potential impacts include (a) extending the biodiesel tax credit, which could impact our
renewable corn oil values, as this co-product serves as a low-carbon feedstock for renewable diesel and biomass based diesel production;
(b) creating a new tax credit for sustainable aviation fuel; (c) funding biofuel refueling infrastructure which could impact the availability
of higher level ethanol blended fuel; and (d) providing for production and purchase credits for electric vehicles, which could impact
the amount of internal combustion engines on the road over time, and ultimately reduce the demand for gasoline, diesel fuels and ethanol.

Should these trends and uncertainties continue,
our future operating results could be impacted.

27

Results of Operations

The following table summarizes our results from operations (amounts
in thousands):

The following table summarizes net sales and revenue by product group
(amounts in thousands):

The following table summarizes selected operating data:

28

Comparison of Fiscal Years 2023 and 2022 (Consolidated
Results)

Net Sales and Revenue – Net
sales and revenue in fiscal year 2023 decreased approximately 3% compared to fiscal year 2022. While quantities sold at our consolidated
plants during fiscal year 2023 did increase from 2022, weaker pricing across all our products in fiscal year 2023 contributed to the overall
decrease in sales between the two fiscal years.

Ethanol sales decreased in fiscal year 2023 compared
to fiscal year 2022 as the average price per gallon decreased 9%, offset partially by an increase in gallons sold of 8%. The decrease
in ethanol selling price resulted primarily from a decrease in commodity prices.

Dried distillers grains sales remained nearly
flat for fiscal year 2023 compared to fiscal year 2022, increasing $55,000 year-over-year, as the average price per ton sold decreased
8%, offset by an increase in tons sold of 9%. The decrease in the dried distillers
grains selling price resulted primarily from a decrease in corn prices as dried distillers grains prices often correlate with corn pricing.
The increase in tons sold was a result of increased ethanol production during fiscal year 2023.

Distillers corn oil sales decreased 5% in fiscal
year 2023 compared to fiscal year 2022 as the average selling price per pound decreased approximately 15%. The
decrease in the distillers corn oil selling price resulted primarily from a decrease in commodity prices. The price decrease was partially
offset by an increase in pounds sold of 12%.

Modified distillers grains sales decreased 52%
in fiscal year 2023 compared to fiscal year 2022 as the number of tons sold decreased 42%, coupled with a 16% decrease in the average
selling price per ton. The decrease in the modified distillers grains selling price resulted primarily from a decrease in corn prices
as distillers grain pricing often correlates with corn pricing. Our consolidated plants’
decisions to sell modified or dried distillers grains fluctuate from time to time based upon market conditions.

Losses on derivative financial instruments were
insignificant during fiscal year 2023, compared to losses of $1.0 million in fiscal year 2022. Losses
are related to our risk management activities and were impacted by the price movements and types of contracts entered into at one of our
consolidated ethanol plants.

Cost of Sales – Cost of sales
for fiscal year 2023 decreased approximately $71.2 million, or 9%, over fiscal year 2022. Corn accounted for approximately 80% ($584.2
million) of our cost of sales during fiscal year 2023 compared to approximately 83% ($667.3 million) during fiscal year 2022. The cost
of corn decreased due to lower corn prices, offset by an increase in corn used between the two periods. Natural gas accounted for approximately
4% ($31.7 million) of our cost of sales during fiscal year 2023 compared to approximately 6% ($47.4 million) during fiscal year 2022.
The natural gas dollar decrease was primarily attributable to a decrease in the cost per unit.

Gross Profit – As a result
of the foregoing, gross profit for fiscal year 2023 increased approximately $49.6 million, or 102%, over fiscal year 2022. Gross profit
in fiscal year 2023 was 11.8% of net sales and revenue, versus approximately 5.7% of net sales and revenue in fiscal year 2022.

We attempt to match quantities of ethanol, distillers
grains and distillers corn oil sale contracts with an appropriate quantity of grain purchase contracts over a given period of time when
we can obtain an adequate margin resulting from the crush spread inherent in the contracts we have executed. However, the market for future
ethanol sales contracts generally lags the spot market with respect to ethanol price. 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

29

cannot predict the future movements in our realized
crush spread for more than four months. We utilize derivative financial instruments, primarily exchange traded commodity future contracts
and swaps, in conjunction with our grain procurement and commodity marketing activities.

Selling, General and Administrative (“SG&A”)
Expenses – SG&A expenses for fiscal year 2023 were approximately $29.4 million (3.5% of net sales and revenue), an increase
of approximately $6.6 million or 29% from approximately $22.8 million (2.7% of net sales and revenue) for fiscal year 2022. The increase
was primarily related to the increase in performance bonus expense as a result of higher net income in 2023. In addition, the increase
was also impacted by restricted stock awards granted to certain executive officers in the second quarter of 2023, which were expensed
upon issuance.

Equity in Income of Unconsolidated Ethanol
Affiliates – During fiscal years 2023 and 2022, we recognized income of approximately $13.9 million and $8.7 million, respectively,
from our equity investment in Big River Resources, LLC (“Big River”). Our investment in Big River, which has interests in
four ethanol production plants, represents an effective ownership of approximately 38.4 million gallons of ethanol shipped in the trailing
twelve months ended January 31, 2024.

We expect the operating experience of Big River
to be generally consistent with the trends in crush spread margins described in the “Overview” section as Big River’s
results are dependent on the same key drivers as our other ethanol investments (ethanol, corn, dried distillers grains and natural gas
pricing).

Interest and Other Income –
Interest and other income for fiscal year 2023 was approximately $15.7 million compared to approximately $13.0 million for fiscal year
2022. 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. Each plant received an additional
payment from that program in 2023, combined totaling approximately $1.0 million. The remaining increase is primarily due to an increase
in interest income as yields on our excess cash increased during fiscal year 2023 compared to fiscal year 2022.

Income Before Income Taxes –
As a result of the foregoing, income before income taxes was approximately $98.5 million for fiscal year 2023 versus approximately $47.5
million for fiscal year 2022.

Provision for Income Taxes –
Our effective tax rate was a provision of 22.9% and 20.1% for fiscal years 2023 and 2022, 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 and only provide an income tax provision or benefit for our portion of the subsidiaries’ income or loss.
During fiscal years 2023 and 2022, our effective tax rate increased 2.2% (approximately $2.2 million) and 1.1% (approximately $0.5 million),
respectively, as a result of section 162M compensation limitations. During fiscal year 2022, our effective tax rate decreased 5.4% (approximately
$2.5 million) from the statutory rate, as a result of research and experimentation credits from our ethanol plants. 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. We did not perform any qualifying research in fiscal year 2023. The provision for uncertain tax positions was insignificant
in fiscal year 2023 and increased our effective tax rate 4.8% (approximately $2.3 million) in fiscal year 2022 from the statutory rate.

Net Income from Continuing Operations
– As a result of the foregoing, net income from continuing operations was approximately $75.9 million for fiscal year 2023 versus
approximately $37.9 million for fiscal year 2022.

Noncontrolling Interests (continuing operations)
– Income attributable to noncontrolling interests (continuing operations) was approximately $15.0 million and $10.2 million
during fiscal years 2023 and 2022, respectively, and represents the other owners’ share of the income of NuGen and One Earth.

30

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 $60.9 million for fiscal year 2023 compared to $27.7 million for fiscal year 2022.

Net Income

As there was no discontinued operations activity
in fiscal years 2023 and 2022, net income attributable to REX common shareholders was the same as net income attributable to REX common
shareholders (continuing operations).

Comparison of Fiscal Years 2022 and 2021

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,
2023.

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 and carbon sequestration project, 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 $378.7 million at January 31, 2024 included approximately $331.1 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. One Earth Energy is currently working on a carbon sequestration project and is expected to have related
capital expenditure needs. We expect our equity method investee to limit the payment of dividends based upon their working capital and
capital expenditure needs.

We are investigating various uses of our excess
cash. We expect capital expenditures related to the construction at the One Earth
facilities to approximate $165 million to $175 million,
inclusive of the carbon sequestration project and plant capacity expansion and ongoing efforts to reduce CI scoring, which we currently
plan to pay from our available cash. As of January 31, 2024, we have spent $25.8 million since inception and are contractually committed
to spend an additional $22.6 million toward the carbon sequestration project. As of January 31, 2024, we have spent $12.8 million since
inception and are contractually committed to spend an additional $12.3 million toward plant capacity expansion and CI scoring reduction
efforts. For all projects, we plan to spend $125 million to $150 million during
fiscal year 2024.

We have a stock buyback program with an authorization
level of an additional approximately 877,000 shares at January 31, 2024. We typically repurchase our common stock when our stock price
is trading at prices we deem to be a discount to the underlying value of our net assets. We plan to seek and evaluate various investment
opportunities including ethanol and/or energy related, carbon sequestration related, agricultural or other ventures we believe fit our
investment criteria.

Operating Activities – Net
cash provided by operating activities was approximately $128.0 million for fiscal year 2023 compared to approximately $54.8 million in
fiscal year 2022. During fiscal year 2023, operating cash flow was provided by net income from continuing operations of approximately
$75.9 million and adjustments of approximately $20.2 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, loss on sale of property
and equipment, and the deferred income tax provision. Big River paid dividends to REX of approximately $12.0 million during fiscal year
2023. Accounts receivable decreased approximately $2.0 million, primarily a result of the timing of products shipped and the receipt of

31

customer payments at One Earth and NuGen. Inventory
decreased approximately $21.8 million, primarily a result of smaller quantities of work-in-process materials and lower per unit costs
at January 31, 2024. Prepaid expenses and other assets increased approximately $4.5 million, primarily a result of increases in spare
parts of approximately $1.3 million, prepaid insurance of $0.3 million, refundable property taxes of approximately $0.5 million, hedging
of $1.8 million and the fair values of forward purchase contracts of approximately $0.5 million. Accounts payable increased approximately
$7.9 million, primarily a result of the timing of inventory receipts and vendor payments. Refundable income taxes increased $2.8 million
as a result of the timing of estimated tax payments. Accrued expenses and other liabilities decreased approximately $4.5 million, which
was primarily a result of operating lease payments of approximately $5.4 million and a decrease in accrued income taxes of $2.0 million,
partially offset by an increase in accrued payroll of approximately $3.8 million.

Net cash provided by operating activities was
approximately $54.8 million for fiscal year 2022. 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 income from
investments, and the deferred income tax provision. 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. 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. Prepaid expenses and other assets increased approximately $0.5 million, primarily
a result of an increase in spare parts of approximately $1.1 million and in prepaid insurance of $0.3 million, offset by a decrease in
the fair values of forward purchase contracts of $0.9 million. Accounts payable increased approximately $1.5 million, primarily a result
of the timing of inventory receipts and vendor payments. Refundable income taxes decreased $3.7 million as a result of the timing of estimated
tax payments. Accrued expenses and other liabilities decreased approximately $2.8 million, which was primarily a result of operating lease
payments of approximately $5.0 million partially offset by an increase in accrued income taxes of approximately $2.0 million.

Investing Activities – Net
cash provided by investing activities was approximately $28.4 million during fiscal year 2023 compared to net cash used in investing activities
of approximately $198.5 million during fiscal year 2022. Capital expenditures in fiscal year 2023 totaled approximately $37.7 million,
primarily for various capital projects at our consolidated ethanol plants, including $14.4 million for expansion and CI scoring reduction
projects at the One Earth facility and $15.5 million for the carbon sequestration project. During fiscal year 2023, we used cash of approximately
$448.5 million for purchases of short-term investments and received cash of approximately $514.6 million related to the maturity of these
types of these investments.

Net cash used in investing activities was approximately
$198.5 million during fiscal year 2022. 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. 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.

Financing Activities – Net
cash used in financing activities was approximately $4.3 million during fiscal year 2023 compared to approximately $17.0 million for fiscal
year 2022. During fiscal year 2023, we used cash of approximately $4.3 million to 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
$17.0 million during fiscal year 2022. During fiscal year 2022, we purchased approximately 471,000 shares of our common stock for approximately
$13.0 million

32

in open market transactions. 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.

Based on our forecasts, which are primarily based
on estimates of plant production, prices of ethanol, corn, distillers grains, distillers corn oil and natural gas as well as other assumptions,
management believes that cash flow from operating activities together with working capital will be sufficient to meet One Earth’s
and NuGen’s respective liquidity needs. 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.

Approximately 2.2% of our net assets are restricted
pursuant to the terms of various loan agreements of Big River, our equity method investee, as of January 31, 2024. None of our consolidated
subsidiaries or the parent company has restricted net assets at January 31, 2024.

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. Aggregate minimum lease payments under the operating lease agreements for future fiscal
years as of January 31, 2024 totaled $14.7 million, with $5.1 million payable in the next twelve months. Refer to Note 7 – Leases
included in the notes to consolidated financial statements for more information. As of January 31, 2024, we had contracted future purchases
of corn, natural gas, natural gas pipeline lease and other contracts for capital expenditures at our ethanol plants valued at approximately
$126.3 million, with $123.0 million payable in the next twelve months. Refer to Note 11 – Commitments included in the notes to consolidated
financial statements for more information.

Seasonality and Quarterly Fluctuations

Our business is directly affected by the supply
and demand for ethanol. The demand for ethanol typically increases during the spring and summer months and during holiday travel.

Critical Accounting Policies

We believe the application of the following accounting
policies, which are important to our financial position and results of operations, require significant assumptions, judgments and estimates
on the part of management. We base our assumptions, judgments, and estimates on historical experience, current trends and other factors
that management believes to be relevant at the time our consolidated financial statements are prepared. On a regular basis, management
reviews the accounting policies, assumptions, estimates and judgments to ensure that our financial statements are presented in accordance
with generally accepted accounting principles (GAAP). However, because future events and their effects cannot be determined with certainty,
actual results could differ from our assumptions and estimates, and such differences could be material. Further, if different assumptions,
judgments and estimates had been used, the results could have been different and such differences could be material. For a summary of
all of our accounting policies, including the accounting policies discussed below, see Note 1 to the Consolidated Financial Statements.

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 distillers 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.

Impairment of Long-Lived Assets –
We review our long-lived assets, consisting of property and equipment, equity method investments and operating lease right-of-use assets,
for impairment whenever events or changes in circumstances indicate the carrying amount of the asset may not be recoverable. We assess
long-lived assets for impairment by first determining the forecasted, undiscounted cash flows the asset group is expected to generate.
If this total is less than the carrying value of the asset, we will then determine the fair value of the asset group. An impairment loss
would be recognized in the amount by which the carrying amount of the asset exceeded the fair value of the asset. Significant management
judgement is required to determine the fair value of long-lived assets, which includes discounted cash flows. Such estimates could be
significantly affected by future changes in market conditions. We recorded no impairment charges in fiscal years 2023, 2022, and 2021.

Income Taxes – Income taxes
are recorded based on the current year amounts payable or refundable, as well as the consequences of events that give rise to deferred
tax assets and liabilities based on differences in how those events are treated for tax purposes, net of valuation allowances. We base
our estimate of deferred tax assets and liabilities on current tax laws and rates and other expectations about future outcomes. Changes
in existing regulatory tax laws and rates and future business results may affect the amount of deferred tax liabilities or the valuation
of deferred tax assets over time. We have established valuation allowances for certain state net operating loss carryforwards. We assessed
all available positive and negative evidence to determine whether we expect sufficient future taxable income will be generated to allow
for the realization of existing federal deferred tax assets. We believe there is sufficient objectively verifiable income for management
to conclude that it is more likely than not that the Company will utilize available federal deferred tax assets prior to their expiration.
However, realization of these deferred tax assets is not certain. Changes in our current estimates for factors such as unanticipated market
conditions and legislative developments could have a material effect on our ability to utilize deferred tax assets.

New Accounting Pronouncements

For information related to recent accounting
pronouncements, see Note 1 of the Notes to the Consolidated Financial Statements.

34