What changed in this filing

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Item 1A. Risk Factors

2022-05-03 compared with 2021-11-04 · 37 added, 55 removed, 44 unchanged (68% of the section changed)

7 unchanged sentences

Our operating results are highly sensitive to the spread between the corn and natural gas we purchase, and the ethanol, including industrial-grade alcohol, distillers grains, Ultra-High Protein and corn oil we sell.

Price and supply are subject to various market forces, such as weather, domestic and global demand, shortages, export prices, crude oil prices, currency valuations and government policies in the United States and around the world, over which we have no control.

Price and supply are subject to various market forces, such as weather, domestic and global demand, global political or economic issues, including but not limited to the war in Ukraine including sanctions associated therewith, shortages, export prices, crude oil prices, currency valuations and government policies in the United States and around the world, over which we have no control.

Price volatility of these commodities may cause our operating results to fluctuate substantially.

7 unchanged sentences

Should our combined revenue from ethanol, including industrial-grade alcohol, distillers grains, Ultra-High Protein and corn oil fall below our cost of production, we could decide to slow or suspend production at some or all of our ethanol plants, which also could adversely affect our results of operations and financial position.

The commodities we buy and sell are subject to price volatility and uncertainty.

The products we buy and sell are subject to price volatility and uncertainty.

Our operating results are highly sensitive to commodity prices.

3 unchanged sentences

Ethanol plants, livestock industries and other corn-consuming enterprises put significant price pressure on local corn markets.

In addition, local corn supplies and prices could be adversely affected by prices for alternative crops, increasing input costs, changes in government policies, shifts in global markets, supply or demand, or damaging growing conditions, such as plant disease or adverse weather, including drought.

Our revenues are dependent on market prices for ethanol which can be volatile as a result of a number of factors, including:

In addition, local corn supplies and prices could be adversely affected by, but not limited to, prices for alternative crops, increasing input costs, changes in government policies, shifts in global markets, supply or demand, global political or economic issues, including but not limited to the war in Ukraine including sanctions associated therewith, or global damaging growing conditions, such as plant disease or adverse weather, including drought, as well as global conflicts.

Our revenues are dependent on market prices for ethanol which can be volatile as a result of a number of factors, including but not limited to:

the price and availability of competing fuels;

1 unchanged sentence

the price of gasoline, crude oil and corn;

and government policies.

global political or economic issues, including but not limited to the war in Ukraine including sanctions associated therewith, and government policies.

Ethanol is marketed as a fuel additive that reduces vehicle emissions, an economical source of octanes and, to a lesser extent, a gasoline substitute.

2 unchanged sentences

Ethanol imports also affect domestic supply and demand.

Imported ethanol is not subject to an import tariff and, under the RFS II, sugarcane ethanol from Brazil is one of the most economical means for obligated parties to meet the advanced biofuel standard.

Industrial-grade alcohol is produced by further distillation processing of the 200-proof alcohol.

Imported ethanol is not subject to an import tariff and, under the RFS, sugarcane ethanol from Brazil is one of the most economical means for obligated parties to meet the advanced biofuel standard.

Industrial-grade alcohol is produced by further distillation processing of 200-proof alcohol.

Further distillation removes impurities which allows it to be used as an ingredient for sanitation products.

Should industrial-grade alcohol prices or demand decrease significantly, our results of operations could be negatively impacted.

Distillers Grains.

Increased U.S.

dry mill ethanol production has resulted in increased distillers grains production.

Should this trend continue, distillers grains prices could fall unless demand increases or other market sources are found.

The price of distillers grains has historically been correlated with the price of corn.

Occasionally, the price of distillers grains will lag behind fluctuations in corn or other feedstock prices, lowering our cost recovery percentage.

Additionally, exports of distiller grains could be impacted by the enactment of foreign policy.

Distillers grains compete with other protein-based animal feed products.

Downward pressure on other commodity prices, such as corn and soybeans, will generally cause the price of competing animal feed products to decline, resulting in downward pressure on the price of distillers grains.

The price and availability of natural gas are subject to volatile market conditions.

These market conditions are often affected by factors beyond our control, such as weather, drilling economics, overall economic conditions and government regulations.

Significant disruptions in natural gas supply could impair our ability to produce ethanol.

Furthermore, increases in natural gas prices or changes in our cost relative to our competitors cannot be passed on to our customers, which may adversely affect our results of operations and financial position.

Industrial corn oil is generally marketed as a renewable diesel and biodiesel feedstock;

therefore, the price of corn oil is affected by demand for renewable diesel and biodiesel.

Expanded profitability in the renewable diesel and biodiesel industry due to the extended blending tax credit and low carbon fuels standards could impact corn oil demand.

In general, corn oil prices follow the prices of heating oil and soybean oil.

Decreases in the price of corn oil could have an unfavorable impact on our business.

Business disruptions due to unforeseen operational failures or factors outside of our control could impact our ability to fulfill contractual obligations.

Natural disasters, pandemics, transportation issues, significant track damage resulting from a train derailment or strikes by our transportation providers could delay shipments of raw materials to our plants or deliveries of ethanol, including industrial-grade alcohol, distillers grains, Ultra-High Protein and corn oil to our customers.

If we are unable to meet customer demand or contract delivery requirements due to stalled operations caused by business disruptions, we could potentially lose customers.

Shifts in global markets, supply or demand changes, as well as adverse weather conditions, such as inadequate or excessive amounts of rain during the growing season, overly wet conditions, an early freeze or snowy weather during harvest could impact the supply of corn that is needed to produce ethanol.

Corn stored in an open pile may be damaged by rain or warm weather before the corn is dried, shipped or moved into a storage structure.

Should industrial-grade alcohol prices or demand decrease significantly, or competition and supply increase, our results of operations could be negatively impacted.

Government mandates affecting ethanol could change and impact the ethanol market.

Under the provisions of the Energy Independence and Security Act (EISA), Congress expanded the Renewable Fuel Standard (RFS II).

The RFS II mandates the minimum volume of renewable fuels that must be blended into the transportation fuel supply each year which affects the domestic market for ethanol.

Each year the Environmental Protection Agency (EPA) is supposed to undertake rulemaking to set the Renewable Volume Obligation (RVO) for the following year, though at times months or years pass without a finalized RVO.

Under the provisions of the Energy Independence and Security Act of 2007, as amended, Congress expanded the RFS.

The RFS mandates the minimum volume of renewable fuels that must be blended into the transportation fuel supply each year which affects the domestic market for ethanol.

Each year the EPA is supposed to undertake rulemaking to set the RVO for the following year, though at times months or years pass without a finalized RVO.

Further, the EPA has the authority to waive the requirements, in whole or in part, if there is inadequate domestic renewable fuel supply or the requirement severely harms the economy or the environment.

After 2022, volumes shall be determined by the EPA in coordination with the Secretaries of Energy and Agriculture, taking into account such factors as impact on environment, energy security, future rates of production, cost to consumers, infrastructure, and other factors such as impact on commodity prices, job creation, rural economic development, or impact on food prices.

According to the RFS II, if mandatory renewable fuel volumes are reduced by at least 20% for two consecutive years, the EPA is required to modify, or reset, statutory volumes through 2022;

According to the RFS, if mandatory renewable fuel volumes are reduced by at least 20% for two consecutive years, the EPA is required to modify, or reset, statutory volumes through 2022;

the year through which the statutorily prescribed volumes run.

3 unchanged sentences

It is unclear when or if they will propose a reset rulemaking.

The EPA has stated an intention to propose a post-2022 ‘set’ rulemaking by the end of 2021.

The EPA has stated an intention to propose a post-2022 ‘set’ rulemaking as required by statute.

Volumes can also be impacted as small refineries can petition the EPA for an SRE which, if approved, waives their portion of the annual RVO requirements.

1 unchanged sentence

A small refinery is defined as one that processes fewer than 75,000 barrels of petroleum per day.

Our operations could be adversely impacted by legislation, administration actions, EPA actions, or lawsuits that may reduce the RFS II mandated volumes of conventional ethanol and other biofuels through the annual RVO, the 2022 set rulemaking, the point of obligation for blending, or small refinery exemptions.

A recent Supreme Court ruling held that the small refineries can continue to apply for an extension of their waivers from the RFS II, even if they have not been awarded a continuous string of exemptions.

Our operations could be adversely impacted by legislation, administration actions, EPA actions, or lawsuits that may reduce the RFS mandated volumes of conventional ethanol and other biofuels through the annual RVO, the 2022 set rulemaking, the point of obligation for blending, or SREs.

A recent Supreme Court ruling held that the small refineries can continue to apply for an extension of their waivers from the RFS, even if they have not been awarded a continuous string of exemptions, though the EPA has proposed denying all SRE applications.

A recent D.C.

Circuit Court of Appeals ruling held that the EPA overstepped its authority in extending the one pound Reid Vapor Pressure waiver for 10% ethanol blends to 15% ethanol blends in the summer, effectively limiting summertime sales of ethanol blends above 10% to flex fuel vehicles (FFVs) from June 1 to September 15 each year.

Notwithstanding, on April 12, 2022, the President announced that he has directed the EPA to issue an emergency waiver to allow for the continued sale of E15 during the June 1 to September 15 period.

Similarly, should federal mandates regarding oxygenated gasoline be repealed, the market for domestic ethanol could be adversely impacted.

Economic incentives to blend based on the relative value of gasoline versus ethanol, taking into consideration the octane value of ethanol, environmental requirements and the RFS II mandate, may affect future demand.

A significant increase in supply beyond the RFS II mandate could have an adverse impact on ethanol prices.

Moreover, changes to RFS II could negatively impact the price of ethanol or cause imported sugarcane ethanol to become more economical than domestic ethanol.

Likewise, national, state and regional low carbon fuel standards (LCFS) like that of California, Oregon, Brazil or Canada could be favorable or harmful to conventional ethanol, depending on how the regulations are crafted, enforced and modified.

Future demand may be influenced by economic incentives to blend based on the relative value of gasoline versus ethanol, taking into consideration the octane value of ethanol, environmental requirements and the value of RFS II credits or Renewable Identification Numbers (RINs).

A significant increase in supply beyond the RFS II mandate could have an adverse impact on ethanol prices.

Moreover, any changes to RFS II, whether by legislation, EPA action or lawsuit, originating from issues associated with the market price of RINs could negatively impact the demand for ethanol, discretionary blending of ethanol and/or the price of ethanol.

Recent actions by the EPA to grant small refiner exemptions without accounting for the lost gallons, for example, resulted in lower RIN prices.

Similarly, reducing annual RVO levels could also lead to lower RIN prices.

Congress first enacted CAFE in 1975 to reduce energy consumption by increasing the fuel economy of cars and light trucks.

FFVs, which are designed to run on a mixture of fuels, including higher blends of ethanol such as E85, used to receive preferential treatment in the form of corporate average fuel economy (CAFE) credits.

There are approximately 21 million FFVs on the road in the U.S.

today, 16 million of which are light duty trucks.

FFV credits have been decreasing since 2014 and were completely phased out in 2020.

Absent CAFE preferences or manufacturing tax credits, auto manufacturers may not be willing to build FFVs, which has the potential to slow the growth of E85 markets.

However, California’s Low Carbon Fuel Standard program (LCFS) has driven growth in E85 usage, and other state/regional LCFS programs have the potential to do the same.

A significant increase in supply beyond the RFS mandate could have an adverse impact on ethanol prices.

Moreover, changes to RFS could negatively impact the price of ethanol or cause imported sugarcane ethanol to become more economical than domestic ethanol.

Likewise, national, state and regional LCFS like that of California, Oregon, Brazil or Canada could be

favorable or harmful to conventional ethanol, depending on how the regulations are crafted, enforced and modified.

A significant increase in supply beyond the RFS mandate could have an adverse impact on ethanol prices.

Moreover, any changes to RFS, whether by legislation, EPA action or lawsuit, originating from issues associated with the market price of RINs could negatively impact the demand for ethanol, discretionary blending of ethanol and/or the price of ethanol.

Recent actions by the EPA to grant SREs without accounting for the lost gallons, for example, resulted in lower RIN prices.

Similarly, proposals from the current EPA to reduce annual RVO levels could also lead to lower RIN prices.

To the extent federal or state laws or regulations are modified and/or enacted, it may result in the demand for ethanol being reduced, which could negatively and materially affect our financial performance.

The ability or willingness of OPEC and other oil exporting nations to set and maintain production levels and/or the impact of sanctions on Russia related to the war in Ukraine may have a significant impact on oil and natural gas commodity prices.

The Organization of Petroleum Exporting Countries and their allies (collectively, OPEC+), is an intergovernmental organization that seeks to manage the price and supply of oil on the global energy market.

Actions taken by OPEC+ members, including those taken alongside other oil exporting nations, have a significant impact on global oil supply and pricing.

For example, OPEC+ and certain other oil exporting nations have previously agreed to take measures, including production cuts, to support crude oil prices.

In March 2020, members of OPEC+ considered extending and potentially increasing these oil production cuts, however these negotiations were unsuccessful.

As a result, Saudi Arabia announced an immediate reduction in export prices and Russia announced that all previously agreed oil production cuts expired on April 1, 2020.

These actions led to an immediate and steep decrease in oil prices.

Conversely, sanctions imposed on Russia in the last few months have increased prices.

There can be no assurance that OPEC+ members and other oil exporting nations will agree to future production cuts or other actions to support and stabilize oil prices, nor can there be any assurance that sanctions or other global conflicts will not further impact oil prices.

Uncertainty regarding future sanctions or actions to be taken by OPEC+ members or other oil exporting countries could lead to increased volatility in the price of oil, which could adversely affect our business, future financial condition and results of operations.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1A. Risk Factors