Cardinal Ethanol, LLC engages in the production and sale of fuel-grade ethanol, distillers grains, corn oil and carbon dioxide near Union City, Indiana and sells these products throughout the continental United States.
During the year ended September 30, 2023, the company produced approximately 138,800,000 gallons of ethanol. In addition, the company procures, transports, and sells grain commodities through grain operations.
The company engaged Capstone Energy Services, LLC (Capstone) to provi...
Cardinal Ethanol, LLC engages in the production and sale of fuel-grade ethanol, distillers grains, corn oil and carbon dioxide near Union City, Indiana and sells these products throughout the continental United States.
During the year ended September 30, 2023, the company produced approximately 138,800,000 gallons of ethanol. In addition, the company procures, transports, and sells grain commodities through grain operations.
The company engaged Capstone Energy Services, LLC (Capstone) to provide it with on-going energy management services. Capstone manages the procurement and delivery of energy to the company's location.
Segments
The company operates through two segments: ethanol production through its Ethanol division; and the trading of agricultural grains through its Trading division.
Ethanol division
The division markets and sells ethanol and its co-products (distillers grains and corn oil) primarily in the continental United States using third party marketers. In 2020, the company obtained a new Title V air permit allowing it to increase its annual ethanol production to 175 million gallons. Its annual ethanol production rate for the year ended September 30, 2023, was approximately 135 million gallons annually, which is approximately 35% above the nameplate capacity for the plant. Murex, LLC markets all of the company's ethanol. Its distillers grains are marketed by CHS, Inc. It markets and distributes all of the corn oil it produces directly to end users and third-party brokers.
Principal Products
The principal products in the company's Ethanol Division are fuel-grade ethanol and distillers grains. In addition, it is extracting corn oil and capturing a portion of the raw carbon dioxide it produces for sale.
Ethanol
The company's primary product is ethanol. Ethanol is ethyl alcohol, a fuel component made primarily from corn and various other grains. The ethanol that the company produces is manufactured from corn. The principal markets for its ethanol are petroleum terminals in the northeastern United States.
Distillers Grains
The principal co-product of the ethanol production process is distillers grains, a high protein, high-energy animal feed supplement primarily marketed to the dairy, beef, poultry and swine industries. Dry mill ethanol processing creates three forms of distillers grains: Distillers Wet Grains with Solubles (DWS), Distillers Modified Wet Grains with Solubles (DMWS) and Distillers Dried Grains with Solubles (DDGS). DWS is processed corn mash that contains approximately 70% moisture. DWS has a shelf life of approximately three days and can be sold only to farms within the immediate vicinity of an ethanol plant. DMWS is DWS that is dried to approximately 50% moisture. DMWS have a slightly longer shelf life of approximately ten days and are often sold to nearby markets. DDGS is DWS that has been dried to 10% to 12% moisture. DDGS has an almost indefinite shelf life and may be sold and shipped to any market regardless of its vicinity to an ethanol plant.
Corn Oil
The company is separating some of the corn oil contained in its distillers grains for sale.
Carbon Dioxide
The company is selling some of the carbon dioxide gas produced at the plant. The company has engaged with an unrelated third party to pursue the possible joint development of integrated carbon dioxide facilities, transportation infrastructure and a carbon sequestration site for the carbon dioxide emissions produced by its plant (the CCS Project).
Ethanol, Distillers Grains, Corn Oil and Carbon Dioxide Markets
The company markets and distributes its ethanol and distillers grains through third parties. Its ethanol and distillers grains marketers make all decisions, in consultation with management, with regard to where its products are marketed. The company's ethanol and distillers grains are predominately sold in the domestic market. Specifically, the company ships a substantial portion of the ethanol it produces to the New York harbor. The company expects its ethanol and distillers grains marketers to explore all markets for its products, including export markets.
Distribution Methods
Ethanol: The company entered into an Ethanol Purchase and Sale Agreement with Murex, LLC (Murex) for the purpose of marketing and distributing all of the ethanol it produces at the plant. Under the terms of the agreement, Murex markets all of its ethanol unless it chooses to sell a portion at a retail fueling station owned by it or one of its affiliates. Under the agreement, Murex is responsible for all transportation arrangements for the distribution of the company's ethanol. Murex handles all RIN activity, submits regulatory reports, and leases the company a minimum number of tank cars for rail transportation and manages the tank car fleet in exchange for a monthly payment.
In September 2022, the company executed an amendment to extend the term until December 31, 2024, subject to automatic renewals thereafter for one-year periods unless either party gives notice of non-renewal at least 90 days prior to the end of the current term. The amendment will be effective on December 1, 2022.
Distillers Grains
The company has entered into an agreement with CHS, Inc. to market all distillers grains it produces at the plant. CHS, Inc. is a diversified energy, grains and foods company owned by farmers, ranchers and cooperatives. CHS, Inc. provides products and services ranging from grain marketing to food processing to meet the needs of its customers around the world. The company receives a percentage of the selling price actually received by CHS, Inc. in marketing its distillers grains to its customers. The agreement remains in effect unless otherwise terminated by either party with 120 days notice. Under the agreement, CHS, Inc. is responsible for all transportation arrangements for the distribution of its distillers grains.
Corn Oil
The company markets and distributes all of the corn oil it produces directly to end users and third party brokers. Its corn oil is mainly used as an animal feed ingredient and as a feedstock in biodiesel production.
Carbon Dioxide
Air Products purchases a portion of the carbon dioxide gas produced at the company's plant. It entered into a Carbon Dioxide Purchase and Sale Agreement with Air Products and Chemicals, Inc. (Air Products) under which Air Products was obligated to purchase a minimum of 98,700 tons of carbon dioxide gas. In addition, the company executed a Site Lease Agreement with Air Products under which Air Products leased a portion of its property, on which it is operating a carbon dioxide liquefaction plant.
Patents, Trademarks, Licenses, Franchises and Concessions
The company was granted a license by ICM, Inc. to use certain ethanol production technology necessary to operate its ethanol plant. In addition, the company was granted a license by ICM, Inc. to use certain corn oil technologies necessary to extract corn oil during its plant operations. The company has also engaged ICM, Inc. to install a system to produce high protein feed and expect to license from ICM the technology to use, operate and maintain the system once the project is complete.
Seasonality of Ethanol Sales
The company experiences some seasonality of demand for ethanol. Since ethanol is predominantly blended with conventional gasoline for use in automobiles, ethanol demand tends to shift in relation to gasoline demand. As a result, the company experiences some seasonality of demand for ethanol in the summer months (year ended September 2023) related to increased driving. In addition, it experiences some increased ethanol demand during holiday seasons related to increased gasoline demand.
Trading division
This division procures, transports, and sells grain commodities.
Principal Products
The company has and expects to continue to buy primarily soybeans and corn from producers relying principally on forward purchase contracts to ensure an adequate supply of grain. However, it occasionally also purchases grain the day of delivery.
Grain Markets and Distribution Methods
The company's sales are made to grain processors and export markets in the southeastern United States. Its grain sales are generally made by contract for delivery in a future period.
Seasonality
The company's grain operations are somewhat seasonal in nature in that the grain it procures is harvested in October and November. The largest portion of the grain is delivered by producers in the fall although it buys and sells a significant portion of its grain throughout the year.
History
The company was founded in 2005. The company was incorporated in 2005. It was formerly known as Indiana Ethanol, LLC and changed its name to Cardinal Ethanol, LLC in 2005.
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