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Agronomy.
We have agronomists on staff who consult and provide services to our customers. The agronomy division
also sells dry and liquid fertilizer and agricultural inputs, such as chemicals, seed and supplies that we buy wholesale, and
provides application services to area producers. Having these experts on staff, coupled with the wide variety of agricultural
products we offer, allows us to provide customized attention and build long-term relationships with our customers.
Petroleum.
A portion of our business consists of selling diesel, soydiesel, blended gasoline and propane that we buy
wholesale, primarily to agricultural producers and consumers. We believe this business line demonstrates our ability to
provide a range of fuel products that support the local communities in which we are located.
Seasonality is present within our agribusiness operations. The spring planting and fall harvest periods have the largest
seasonal impact, directly impacting the quarterly operating results of our agribusiness segment. This seasonality generally
results in higher revenues and stronger financial results for this segment during the second and fourth quarters while the
financial results of the first and third quarters generally will reflect periods of lower activity with low to negative margins.
Marketing and Distribution Segment
We have an in-house marketing business responsible for the sale, marketing and distribution of all ethanol, distillers
grains and corn oil produced at our nine ethanol plants. We also market and distribute ethanol for third-party ethanol
producers. Assuming full production capacity at each of our plants and those of our third-party ethanol producers, we would
market and distribute more than one billion gallons of ethanol on an annual basis. Additionally, within the marketing and
distribution segment, we operate nine blending or terminaling facilities, with approximately 625 mmgy of total throughput
capacity, allowing us to source, store, blend and distribute biodiesel and ethanol, including our production and that of other
producers, across multiple states.
Marketing
We market our ethanol and that of our third-party producers to many different customers on a local, regional and national
basis. In addition, we purchase ethanol from other independent producers to realize price arbitrages that may exist. To
achieve the best prices for the ethanol that we market, we sell into local, regional and national markets under sales
agreements with integrated energy companies, jobbers, retailers, traders and resellers. Under these agreements, ethanol is
priced under fixed and indexed pricing arrangements. Local markets are the easiest to service because of their close proximity
to the related production facility. Deliveries to the majority of the local markets, within 150 miles of the plants, are generally
transported by truck, and deliveries to more distant markets are shipped by rail using major U.S. rail carriers.
The market for distillers grains generally consists of local markets for wet, modified wet and dried distillers grains, and
national markets for dried distillers grains. If our plants operate at full capacity and all of our distillers grains were marketed
in the form of dried distillers grains, we expect that our ethanol plants would produce approximately 2.1 million tons of
distillers grains annually. In addition, the market can be segmented by geographic region and livestock industry. The bulk of
the current demand is for dried distillers grains delivered to geographic regions without significant local corn or ethanol
production. Our market strategy includes shipping a substantial amount of distillers grains as dried distillers grains to regional
and national markets by rail.
Most of our modified wet distillers grains are sold to midwestern feedlot markets. Our dried distillers grains are
generally shipped to feedlot and poultry markets, as well as to Texas and west coast rail markets. Some of our distillers grains
are shipped by truck to dairy, beef, and poultry operations in the eastern United States. Also, at certain times of the year, we
transport product to the Mississippi River to be loaded on barges. We also ship by railcars into Eastern and Southeastern feed
mill, poultry and dairy operations, as well as to domestic trade companies. Access to these markets allows us to move product
into markets that are offering the highest net price.
Transportation and Delivery
To meet the challenge of marketing ethanol and distillers grains to diverse market segments, five of our plants have
extensive rail siding capable of handling more than 150 railcars at their production facilities and the other four plants have
rail siding that can accommodate approximately 90 railcars at their locations. At certain of our locations, we have large loop
tracks which enable loading of unit trains of both ethanol and dried distillers grains, as well as spurs connecting the site’s rail
loop to the railroad mainline or spurs that allow movement and storage of railcars on-site. These rail lines allow us to sell our
products to various regional and national markets. The rail providers for our ethanol plants can switch cars to most of the
other major railroads, allowing the plants to easily ship ethanol and distillers grains throughout the United States. Our railcar