REX AMERICAN RESOURCES Corp (REX)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Ethanol and By-Products

At April 30, 2026, we had investments in three
ethanol limited liability companies, in two of which we have a majority ownership interest. The following table is a summary of ethanol
entity ownership interests at April 30, 2026:

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, 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

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, 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 for three wells, and we continue to provide information to the EPA upon request during
the technical review of our application. We currently expect the EPA to prepare a draft permit by July 2026 and make a final permit decision
by November 2026, according to the EPA’s Class VI Permit Tracker Dashboard on their website. We also must obtain certain state and county
permits for the sequestration site and connector pipeline. We have completed the construction of the capture and compression facility
to capture, dehydrate, and compress carbon dioxide from the One Earth ethanol plant to a state suitable for sequestration. Testing has
not yet been completed and we cannot begin construction of the CO2 connector pipeline between the One Earth compression facility
and the sequestration well until further permits and approvals are received.

Although we have made meaningful progress and significant
investments in the carbon sequestration project at One Earth, we continue to work with the various government agencies involved to obtain
all required permits and approvals, with no assurance of the ultimate success or timing of the project. Also see the discussion under
“Trends and Uncertainties” relating to the impact of certain recently adopted legislation and certain recently proposed legislation
that, if enacted, could affect our carbon sequestration project.

We are also expanding the One Earth ethanol plant.
We received a construction permit from the EPA to increase production from 150 million gallons of ethanol per year to 175 million gallons
of ethanol per year. Once we achieve that level of production, we intend to apply for another permit to increase production to 200 million
gallons per year. We continue to work to identify ways to further reduce our CI score at the One Earth plant with the intention of maximizing
tax credits available under the IRA and OBBBA.

We currently budget capital expenditures for both
the expansion and sequestration projects at One Earth to be approximately $220 million to $230 million, subject to further refinement
as we move forward, including impacts from inflation. We plan to pay for all expenditures from available cash. As of April 30, 2026, we
had spent $58.7 million since inception toward the carbon sequestration project and were contractually obligated to spend an additional
$0.2 million. If the carbon sequestration project is successful, we believe we will qualify for tax credits under section 45Q, based on
tons of carbon sequestered, and section 45Z, based on gallons of ethanol produced, as outlined in the IRA and OBBBA. Companies may elect
either the 45Q credit or the 45Z credit in periods in which both tax credits are available. As of April 30, 2026, we had spent $117.7
million since inception and were contractually committed to spend an additional $9.2 million toward plant capacity expansion at One Earth.

The IRA created a new Clean Fuel Production Credit,
available for calendar years 2025 – 2027 which, based on proposed rulemaking by the U.S. Department of Treasury, established a tax
credit that utilizes a sliding scale where credits can be earned incrementally between $0.02 and $0.20 ($0.10 and $1.00 if prevailing
wage and apprenticeship requirements are met) per gallon of non-SAF fuels based on an ethanol plant’s GHG reduction below a 50 CI score
threshold, with the first two or ten cents credit earned upon achieving a CI score below 47.5, to incentivize further increases in plant
efficiencies within the industry. The OBBBA extended the time period during which 45Z credits can be claimed by two years, through December
31, 2029. The. U.S. Department of the Treasury issued proposed rules on February 3, 2026 on qualification for 45Z tax credits. Based on
proposed regulations, we recognized approximately $31.7 million and $7.5 million in 45Z tax credits through our consolidated subsidiaries
for fiscal year 2025 and the first quarter of fiscal year 2026, respectively. Public hearings were held on
the proposed rules in 2026.

In May 2023, NuGen, 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 CO2 output of its ethanol production facility for sequestration, as well as to reduce
its net carbon emissions. In March 2025, South Dakota enacted a law that bans the use of eminent domain in connection with CO2
pipelines. In addition, in March 2026, a North Dakota Court voided the permits issued to Summit Carbon Solutions for underground storage
of carbon dioxide as the Court has deemed the law under which the permits were issued to be unconstitutional. Summit Carbon Solutions
is analyzing the decision and is contemplating next steps. These actions have delayed and could make the sequestration project for the
NuGen facility more difficult for Summit Carbon Solutions to complete.

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.

Refined Coal

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. Using licensed technology, our plant applied two separate chemicals to convert feedstock coal into
refined coal, which was sold to the end user of the refined coal. The refined coal operating results were subsidized by federal production
tax credits through November 18, 2021, subject to meeting qualified emissions reductions as governed by Section 45 of the IRC. We ceased
operating the facility on November 18, 2021 and subsequently sold the facility. The approximately $58.2 million in federal production
tax credits received through the ownership of this facility remain under IRS audit. That audit is in the process of being finalized, with
the Company expecting to retain all federal production credits claimed for this project.

Critical Accounting Policies and Estimates

During the three months ended April 30, 2026, we
did not change any of our critical accounting policies as disclosed in our 2025 Annual Report on Form 10-K as filed with the Securities
and Exchange Commission on March 30, 2026.

Fiscal Year

All references in this report to a particular fiscal
year are to REX’s fiscal year ended January 31. The Company refers to its fiscal year by reference to the year immediately preceding the
January 31 fiscal year end date. For example, “fiscal year 2026” means the period February 1, 2026 to January 31, 2027. The
Company includes the results of operations of One Earth in its Consolidated Statements of Operations on a delayed basis of one month as
One Earth has a fiscal year end of December 31.

Results of Operations

Trends and Uncertainties

Renewable Fuel Standard II, established in October
2010, has been an important factor in the growth of ethanol usage in the United States. There has been much uncertainty in the enforcement
of RFS II. When it was originally established, R

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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. We currently have equity investments in three ethanol production entities, two of which are majority ownership
interests. 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, 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, trade negotiations, and tariffs 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 approximately $83.0 million in fiscal 2025 compared to approximately $58.2 million in fiscal 2024. The current year has
benefitted from reductions in our effective tax rate resulting from the impact of 45Z tax credits earned associated with our ethanol production.
Gross profit in fiscal year 2025 was higher than fiscal year 2024, primarily a result of higher crush spreads. 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 $3.72 in August 2025 to a high of $5.02 in February 2025. S&P Global Platts ethanol
pricing per gallon ranged from a low of $1.50 in January 2026 to a high of $2.09 in September 2025.

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. In October 2022, we applied to the EPA for a Class VI injection well permit for three
wells, and we continue to provide information to the EPA during the technical review of our application. We currently expect the EPA to
prepare a draft permit by May 2026 and make a final permit decision during the third quarter of 2026, according to the EPA’s Class
VI Permit Tracker Dashboard on their website. We also must obtain certain state and county permits for the sequestration site and connector
pipeline. We have completed the construction of the capture and compression facility to capture, dehydrate, and compress carbon dioxide
from the One

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Earth ethanol plant to a state suitable for sequestration.
Testing has not yet been completed and we cannot begin construction of the CO2 connector pipeline between the One Earth
ethanol plant and the sequestration site or a sequestration well until further permits and approvals are received.

Although we have made meaningful progress and
significant investments in the carbon sequestration project at One Earth Energy, we continue to work with the various government agencies
involved to obtain all required permits and approvals, with no assurance of the ultimate success or timing of the project. Also see the
discussion under “Trends and Uncertainties” on pages 25 and 26 of certain recently proposed legislation that, if enacted,
could impact our carbon sequestration project.

We are also expanding the One Earth ethanol plant.
We received a construction permit from the EPA to increase production from 150 million gallons of ethanol per year to 175 million gallons
of ethanol per year. Once we achieve that level of production, we intend to apply for another permit to 200 million gallons per year.
We continue to work to identify ways to reduce our CI score at the One Earth plant with the intention of maximizing tax credits available
under the IRA.

The IRA created a new Clean
Fuel Production Credit, available for calendar years 2025 – 2027 which, based on proposed rulemaking by the United
States Department of Treasury, established a tax credit that utilizes a sliding scale where credits can be earned
incrementally between $0.02 and $0.20, or $0.10 and $1.00 if prevailing wage and apprenticeship requirements are met, per
gallon of non-SAF fuels based on an ethanol plant’s GHG reduction below a 50 CI score threshold, with the first two or
ten cents earned upon achieving a CI score below 47.5, to incentivize further increases in plant efficiencies within the
industry. In July 2025, Congress passed the OBBBA, which was subsequently signed into law by the President. The law extended
the time period which 45Z credits can be claimed by two years, through December 31, 2029. The U.S. Department of the Treasury
issued proposed rules on February 3, 2026 on qualification for 45Z tax credits. Based on these proposed regulations, we
recognized approximately $28.1 million in 45Z tax credits through our consolidated subsidiaries for fiscal 2025.

We currently budget capital
expenditures for both the expansion and sequestration projects at One Earth to be approximately $220 million to $230 million,
subject to further refinement as we move forward. We plan to pay for all expenditures from available cash. As of January 31,
2026, we had spent $58.4 million since inception toward the carbon sequestration project and were contractually committed to
spend an additional $0.6 million. If the carbon sequestration project is successful, we believe we will qualify for tax
credits under section 45Q, based on tons of carbon sequestered, and section 45Z, based on gallons of ethanol produced, as
provided in the IRA and OBBBA. Companies may elect either the 45Q credit or the 45Z credit in periods in which both tax
credits are available. As of January 31, 2026, we had spent $107.6 million since inception and were contractually committed
to spend an additional $15.5 million toward plant capacity expansion and ongoing efforts to reduce our CI scoring at One
Earth.

In May 2023, NuGen, 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
CO2 output of its ethanol production facility for sequestration, as well as to reduce its net carbon
emissions. In March 2025, South Dakota enacted a law that bans the use of eminent domain in connection with
CO2 pipelines. In addition, in March 2026, a North Dakota Court voided the permits issued to Summit Carbon
Solutions for underground storage of carbon dioxide as the Court has deemed the law the permits were issued under to be
unconstitutional. Summit Carbon Solutions is analyzing the decision and is contemplating next steps. These actions could make
the sequestration project for the NuGen facility more difficult for Summit Carbon Solutions to complete.

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 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, 2026, utilizing equity investments.

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The following table is a summary of our ethanol
entity ownership interests at January 31, 2026:

The three entities own a total of six ethanol
production facilities, which in aggregate shipped approximately 722 million gallons of ethanol over the twelve-month period ended January
31, 2026. REX’s effective ownership of ethanol gallons shipped for the twelve-month period ended January 31, 2026, was approximately
294 million gallons.

Trends and Uncertainties

Renewable Fuel Standard II, established in October
2010, has been an important factor in the growth of ethanol usage in the United States. 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

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