REX American Resources: Ethanol Giant Catches a Chill—Is This the Winter of Commodities?
REX American Resources froze in place. Since August, the stock has plummeted by 42.8%—the kind of move that leaves investors wondering if the North Wind is here for good, or if spring might follow.
Margin Mirage: When More Corn Means Less Gold
On the surface, REX is busy: ethanol sales volumes jumped to 70.6 million gallons in the latest quarter, up from 65.1 million a year prior. But volume is a hollow victory when price collapses. The average selling price slipped to $1.75/gallon from $1.79. Dried distillers grains, a lucrative byproduct, fetched only $143.63/ton—down sharply from $164.45/ton.
The result? Gross profit margin narrowed to 13.2% (down from 14.5% last year), and net income margin shriveled to 7.9%. Three years ago, free cash flow to EBITDA was a robust 85.7%. This year, it’s a lean 16.3%. The numbers speak: more gallons, less profit.
Winter Wheat, Frozen Assets: The Macro Is Not Your Friend
Inflation, once the farmer’s enemy, has become the ethanol producer’s nightmare. Input costs—corn, seed, fertilizer—are stubbornly high, and the cost of producing corn hovers near a decade-high watermark. Meanwhile, fertilizer prices, once a rocket, have settled back to Earth, but not enough to thaw the chill. The entire chemicals sector, which should be a playground for REX, has lagged global indexes since 2022. Tech stocks fly; commodities crawl.
This isn’t just a local frost. U.S. trade policy, from fresh tariffs to shifting agricultural agreements, has muddied export prospects. Eleven percent of U.S. corn heads abroad as ethanol, but when global buyers hesitate, domestic producers catch pneumonia.
Carbon Dreams and Political Realities: When Green Turns to Gray
REX’s answer is bold: carbon capture and sequestration (CCS) at the One Earth Energy facility, expansion of ethanol production, and a 2-for-1 stock split to reward shareholders. The CCS project’s compression phase is done, but the EPA’s Class VI injection well permitting remains stuck in regulatory snowdrifts—now delayed until March 2026 thanks to an Illinois moratorium.
Even Uncle Sam’s 45Z tax credit, extended in the “One Big Beautiful Bill Act,” is only a partial thaw. Policy tailwinds help, but they don’t erase bottlenecks or revive prices. For now, green ambitions are more press release than profit center.
Puzzle Pieces and Price Plunges: The Market’s Verdict
The board’s recent buyback—over 650,000 shares in 2024—and a $310.5 million cash war chest might look like confidence. But Wall Street isn’t buying it. Analyst forecasts peg next year’s earnings at $1.34/share, down 54% from $2.93, and the rating is a lukewarm “Moderate Buy.”
The market sees the puzzle: rising input costs, shrinking margins, regulatory delays, and a sector-wide chill. Over the past 3 months, the stock is down a brutal 42.8%. Over 6 months, -23.9%. One year? -27.1%. Investors want a heat lamp, not just a thicker blanket.
The Commodity Winter: Who Survives, Who Thaws?
REX American Resources stands as a microcosm of the commodity winter: even with operational discipline, cash reserves, and expansion plans, macroeconomic headwinds and shifting global trade freeze out gains. The industry’s old playbook—grow volume, cut costs—no longer guarantees warmth.
Will REX’s spring come with regulatory approvals and a rebound in ethanol margins? Or will the chill linger as commodity cycles, global politics, and sector trends conspire to keep value locked beneath the ice? For now, investors are left staring at the thermometer—and hoping for a break in the clouds.