UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-K

 

COMMISSION FILE NUMBER 000-53036

(Exact name of registrant as specified in its charter) 

1554 N. County Road 600 E., Union City, IN 47390

(Address of principal executive offices)

(765) 964-3137

Registrant's telephone number, including area code

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act:

As of March 31, 2021,2022, the aggregate market value of the membership units held by non-affiliates (computed by reference to the most recent offering price of such membership units) was $48,765,000.$48,160,000. There is no established public trading market for our membership units. The aggregate market value was computed by reference to the price at which membership units were last sold by the registrant ($5,000 per unit).

The information required in Part III of this Annual Report is incorporated herein by reference to the Company's definitive proxy statement to be filed with the Securities and Exchange Commission within 120 days of the close of the fiscal year ended September 30, 2021.2022.

INDEX

CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS

AVAILABLE INFORMATION

    Information about us is also available at our website at www.cardinalethanol.com, under "Financials and SEC Filing Information" which includes links to the reports we have filed with the Securities and Exchange Commission. The contents of our website are not incorporated by reference in this Annual Report on Form 10-K.

PART I

    The ethanol industry experienced industry-wide record low ethanol prices throughout most of 2018On January 20, 2022, we entered into an Equipment Purchase and 2019Installation Agreement (the "EPC Agreement") with ICM, Inc. pursuant to which ICM has agreed to engineer, procure, construct, and install its high protein feed system and license to us its proprietary, patent-protected technology to use, operate and maintain the system. Pursuant to the EPC Agreement and subsequent adjustments due to reduced demand and high industry inventory levels. This continued into 2020 and the situation was compoundedchange orders executed by the crisis associated with the 2019 novel coronavirus disease (“COVID-19”). In responseparties, we expect to these unfavorable operating conditions and a slowdown in global and regional economic activity and a disruption in transportation fuel demand resulting from the COVID-19 pandemic, we reduced our ethanol production rate bypay approximately 20% in April of 2020. However, beginning in May of 2020, we returned to full production and have since been operating at an ethanol production rate of approximately 135 million gallons annually$50,000,000, including recent change orders, which is approximately 35% abovepayable in installments. This price is subject to further adjustment in the nameplate capacityevent additional change orders are executed. We will also pay license fees of $10 per ton of PROTOMAX™ produced by the system for a period of 10 years. We expect to fund the plant.project from operations and from our current credit facilities as amended. We were able to hold these production levels throughoutbegan installation of the system during the fourth quarter of our fiscal year ended September 30, 2021.2022. This project is expected to be completed by Fall of 2023.

    Operating segments are defined as components of an enterprise for which separate financial information is available that are evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. Based on the nature of the products, services and operations and the expected financial results, we review our operations within the following two separate operating segments: (1) ethanol production through our Ethanol Division; and (2) trading of agricultural grains through our Trading Division. We currently do not have or anticipate we will have any other lines

of business or other significant sources of revenue other than the sale of ethanol, distillers’distillers grains, corn oil and and the trading of agricultural grains. 

Ethanol Division

    Our revenues are primarily derived from the sale of our ethanol, distillers grains and corn oil. We market and sell ethanol and its co-products (distillers grains and corn oil) primarily in the continental United States using third party marketers. Murex, LLC markets all of our ethanol. Our distillers grains are marketed by CHS, Inc. We market and distribute all of the corn oil we produce directly to end users and third party brokers.    

    

Principal Products

Ethanol

Distillers Grains

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

Carbon Dioxide

    Since March 2010, we have been selling some of the carbon dioxide gas produced at the plant.

Ethanol

must be met by certain “advanced” renewable fuels. These advanced renewable fuels include ethanol that is not made from corn, such as cellulosic ethanol and biomass based biodiesel. The use of these advanced renewable fuels increases each year as a percentage of the total renewable fuels required to be used in the United States.

    

    Small refineries can petition the EPA annually for an exemption from their ethanol use requirements for the prior compliance year. The EPA granted significantly more small refinery waivers in 2018 and 2019 than in past years and did not reallocate the waived gallons to other refiners. These actions resulted in decreased ethanol demand which led to reduced market ethanol prices and negative operating margins in the ethanol industry. In January 2020, the Tenth Circuit Court of Appeals ruled that small refinery exemptions may only be granted to refineries that had secured them continuously each year since 2010. Consistent with this ruling, in September 2020, the EPA denied certain small refinery exemption petitions filed by oil refineries in 2020 seeking retroactive relief from their ethanol use requirements for prior years. In June 2021, the U.S. Supreme Court reversed the decision finding that a small refinery may obtain a hardship exemption even if its earlier exemption had lapsed in one or more previous years. It is unclear at this point what impact this decision will haveIn June 2022, the EPA announced the denial of 69 small refinery exemption petitions for one or more compliance years between 2016 and 2021 on the RFS andgrounds that the Biden administration's management ofpetitioners had failed to show that the program.EPA had a basis to approve them.

    A blender pump is a gasoline pump that can dispense a variety of different ethanol/gasoline blends. Blender pumps typically can dispense E10, E20, E30, E40, E50 and E85. These blender pumps accomplish these different ethanol/gasoline blends by internally mixing ethanol and gasoline which are held in separate tanks at the retail gas stations. Many in the ethanol industry believe that increased use of blender pumps will increase demand for ethanol by allowing gasoline retailers to provide various mid-level ethanol blends in a cost effective manner and allowing consumers with flex-fuel vehicles to purchase more ethanol through these mid-level blends. However, the expense of blender pumps has delayed their availability in the retail gasoline market.

Effect of Governmental Regulation

plant. It is possible that more stringent federal or state environmental rules or regulations could be adopted, which could increase our operating costs and expenses. It also is possible that federal or state environmental rules or regulations could be adopted that could have an adverse effect on the use of ethanol. For example, changes in the environmental regulations regarding the required oxygen content of automobile emissions could have an adverse effect on the ethanol industry. Plant operations are governed by the Occupational Safety and Health Administration (“OSHA”). OSHA regulations may change such that the costs of operating the plant may increase. Any of these regulatory factors may result in higher costs or other adverse conditions affecting our operations, cash flows and financial performance.

    In late 2009, California passed a Low Carbon Fuels Standard ("LCFS"). The California LCFS requires that renewable fuels used in California must accomplish certain reductions in greenhouse gases which is measured using a lifecycle analysis, similar to the RFS. On December 29, 2011, a federal district court in California ruled that the California LCFS was unconstitutional which halted implementation of the California LCFS. However, the California Air Resources Board ("CARB") appealed this court ruling and on September 18, 2013, the federal appellate court reversed the federal district court finding the LCFS constitutional and remanding the case back to federal district court to determine whether the LCFS imposes a burden on interstate commerce that is excessive in light of the local benefits. On June 30, 2014, the United States Supreme Court declined to hear the appeal of the federal appellate court ruling and CARB recently re-adopted the LCFS with some slight modifications. The LCFS could have a negative impact on demand for corn-based ethanol and result in decreased ethanol prices affecting our ability to operate profitably.    

U.S. FUEL ETHANOL PRODUCTION CAPACITY

BY TOP PRODUCERS

Producers of Approximately 750

million gallons per year (mmgy) or more

        

    A number of automotive, industrial and power generation manufacturers are developing alternative clean power systems using fuel cells, plug-in hybrids, electric cars or clean burning gaseous fuels. Electric car technology has recently grown in popularity, especially in urban areas. While in the past there were a limited number of vehicle recharging stations, making electric cars not feasible for all consumers, there has been an increased focus on developing these recharging stations which have made electric car technology more widely available. This additional competition from alternate sources could reduce the demand for ethanol, which would negatively impact our profitability.

Distillers Grains

The primary consumers of distillers grains are dairy and beef cattle. In recent years, an increasing amount of distillers grains have been used in the swine and poultry markets. Numerous feeding trials show advantages in milk production, growth, rumen health, and palatability over other dairy cattle feeds. With the advancement of research into the feeding rations of

Sources and Availability of Raw Materials

    The major raw material required for our ethanol plant to produce ethanol, distillers grain and corn oil is corn. To produce 135 million gallons of ethanol per year, our ethanol plant needs approximately 47 million bushels of corn per year, or approximately 129,000 bushels per day, as the feedstock for its dry milling process. Traditionally, corn grown in the area of the plant site has been fed locally to livestock or exported for feeding or processing and/or overseas export sales.

    In an attempt to minimize the effects of the volatility of corn costs on operating profits, we take hedging positions in corn futures markets. Hedging means protecting the price at which we buy corn and the price at which we will sell our products in the future. It is a way to attempt to reduce the risk caused by price fluctuation. The effectiveness of hedging activities is dependent upon, among other things, the cost of corn and our ability to sell sufficient amounts of ethanol and distillers grains to utilize all of the corn subject to the futures contracts. Hedging activities can result in costs to us because price movements in grain contracts are highly volatile and are influenced by many factors beyond our control. These costs may be significant.

    High corn prices have a negative effect on our operating margins unless the price of ethanol and distillers grains out paces rising corn prices. Corn prices were higher during the fiscal year ended September 30, 2021,2022, compared to the same period in 20202021 due primarily to a smaller crop carryout in some areas from the 2021 harvest and concerns relatedregarding predictions of the corn crop for fall of 2022. In addition, global economic uncertainty, rising inflation, market disruptions and increased volatility in commodity prices contributed to the COVID-19 pandemic.higher corn prices. On October 12, 2021,2022, the USDA released a report estimating the 20212022 corn crop in the United States at approximately 1513.9 billion bushels, up 6%down 8% from last year's production, with yields averaging 176.5171.9 bushels per acre. The USDA forecasted area harvested for grain at 93.380.8 million acres, up 3%down 5% from 2020.2021. The Indiana corn crop is estimated to be approximately 1 billion944 million bushels, updown approximately 4%8% from 2020.2021. Yields in Indiana are expected to be approximately 194187 bushels per acre, updown approximately 4% from 2020.2021. Management will continue to monitor the availability of corn in our area.

Utilities

natural gas requirements of 34,000,000 therms. For all gas received for and redelivereddelivered to us by Ohio Valley, we pay a throughput rate in the amount of $0.0138 per therm for the first five years of the contract term, and $0.0138 increased by the compounded inflation rate as established and determined by the U.S. Consumer Price Index - All Urban Consumers for Transportation for the following five years. In addition, we pay a service charge for all gas received for and redelivereddelivered to us by Ohio Valley in the amount of $750 per delivery meter per billing cycle per month for the first five years of the contract term and $750 increased by the compounded inflation rate over the initial rate as established and determined by the U.S. Consumer Price Index - All Urban Consumers for Transportation for the following five years. The initial term of the contract was ten years. Provided neither party terminates the contract, the contract will automatically renew for a series of not more than three consecutive one year periods.

Electricity

    We require a significant supply of water. Engineering specifications show our plant's water requirements to be approximately 774 gallons per minute, 1.1 million gallons per day, depending on the quality of water. We have assessed our water needs and available supply and have determined that we have an adequate supply. Union City Water Works is supplying the water necessary to operate our plant.

         Recycling water back into the process minimizes discharge water. This will have the long-term effect of lowering wastewater treatment costs. Our plant design incorporates the ICM/Phoenix Bio-Methanator wastewater treatment process resulting in a zero discharge of plant process water. There are, however, certain areas of production where fresh water is needed.

Patents, Trademarks, Licenses, Franchises and Concessions

    We do not currently hold any patents, trademarks, franchises or concessions. We were granted a license by ICM, Inc. to use certain ethanol production technology necessary to operate our ethanol plant. The cost of the license granted by ICM, Inc. was included in the amount we paid to Fagen, Inc. to design and build our ethanol plant. In addition, we were granted a license by ICM, Inc. to use certain corn oil technologies necessary to extract corn oil during our plant operations.

Seasonality of Ethanol Sales

    We experience 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, we experience some seasonality of demand for ethanol in the summer months related to increased driving. In addition, we experience some increased ethanol demand during holiday seasons related to increased gasoline demand.

    As discussed above, we have entered into a marketing agreement with Murex for the purpose of marketing and distributing our ethanol and have engaged CHS, Inc. for the purpose of marketing and distributing our distillers grains. We rely on Murex for the sale and distribution of our ethanol and CHS, Inc. for the sale and distribution of our distillers grains. Therefore, although there are other marketers in the industry, we are highly dependent on Murex and CHS, Inc. for the successful marketing of our products. Any loss of Murex or CHS, Inc. as our marketing agent for our ethanol and distillers grains, respectively, could have a significant negative impact on our revenues.

Trading Division

    We procure, transport and sell grain commodities through our Trading Division, which began operations at the end of our fourth fiscal quarter of 2017.

    

    We have and expect to continue to buy primarily soybeans and corn from producers relying principally on forward purchase contracts to ensure an adequate supply of grain. However, we occasionally also purchase grain the day of delivery. Grain prices are typically comprised of futures prices on the Chicago Mercantile Exchange ("CME") and local basis adjustments.

Grain Markets and Distribution Methods

    Grain shipments are made by rail and truck. Our sales are made to grain processors and export markets in the southeastern United States. Our grain sales are generally made by contract for delivery in a future period. Income is expected to be earned on grain bought and sold, the appreciation or depreciation in the basis value of the grain held and the appreciation or depreciation between the futures contract months.

Competition

    We primarily compete in the purchase of grain on a local or regional basis although there are some larger national and international companies that maintain regional grain purchase and storage facilities. We compete in the sale of grain with other

Seasonality of Grain Purchases and Sales

    Our grain operations are somewhat seasonal in nature in that the grain we procure is harvested in October and November. The largest portion of the grain is delivered by producers in the fall although we buy and sell a significant portion of our grain throughout the year.

    We manage the futures price risk of changing commodity prices by entering into exchange-traded futures contracts on the CME. The CME is a regulated commodity futures exchange that maintains futures markets for the grain we trade. Futures prices are determined by worldwide supply and demand.

    We entered into a Risk Management Agreement with John Stewart & Associates ("JS&A") under which JS&A provides risk management and related services pertaining to grain hedging, grain pricing information, aid in purchase of grain, and assistance in risk management as it pertains to ethanol, co-products and soybeans. In exchange for JS&A's risk management services, we pay JS&A a fee of $1,500 per month. We are currently on a month to month basis for this contract with JS&A. The agreement may be terminated by either party at any time upon written notice.

    

    We have 5866 full-time employees as of November 19, 2021.December 1, 2022. We employ individuals in the local region around our one facility. Many of our employees require some technical or professional background and we compete for them via wages and benefits. We attract them from schools and colleges within our region, which are numerous. There are several other ethanol plants within a fifty mile radius of our facility. Individuals with ethanol specific skills are available to us because of this proximity. However, this competition for resources also presents a challenge in retaining those with specialized skills.

            

in rapidly rising markets. Increased costs of inventory and prices of raw material would decrease our profit margins and adversely affect our results of operations. While we attempt to manage the risk associated with commodity price changes for our grain inventory positions with derivative instruments, including purchase and sale contracts, we are unable to offset 100% of the price risk of each transaction due to timing, availability of futures and options contracts and third-party credit risk. Furthermore, there is a risk that the derivatives we employ will not be effective in offsetting all of the risks that we are trying to manage. This can happen when the derivative and the underlying value of grain inventories and purchase and sale contracts are not perfectly matched. Our grain derivatives, for example, do not perfectly correlate with the basis component of our grain inventory and contracts. (Basis is defined as the difference between the local cash price of a commodity and the corresponding exchange-traded futures price.) Differences can reflect time periods, locations or product forms. Although the basis component is smaller and generally less volatile than the futures component of our grain market price, basis moves on a large grain position can significantly impact the profitability of the Trading Division. Our futures, options and over-the-counter contracts are subject to margin calls. If there are large movements in the commodities market, we could be required to post significant levels of margin, which would impact our liquidity. There is no assurance that the efforts we have taken to mitigate the impact of the volatility of the prices of commodities upon which we rely will be successful and any sudden change in the price of these commodities could have an adverse effect on our business and results of operations.

        

    

spread between the price of gasoline and the price of ethanol which can discourage discretionary blending, dampen the export market and result in a downwards market adjustment in the price of ethanol. If oil and gasoline prices were to remain lowdecrease for a significant period of time, it could hurt our ability to profitably operate the ethanol plant which could decrease the value of our units.

    

    

    

require expensive pollution control equipment or operational changes to limit actual or potential impacts to the environment.  A violation of these laws and regulations or permit conditions can result in substantial fines, damages, criminal sanctions, permit revocations and/or plant shutdowns.  In the future, we may be subject to legal actions brought by environmental advocacy groups and other parties for actual or alleged violations of environmental laws or our permits.  Additionally, any changes in environmental laws and regulations, both at the federal and state level, could require us to spend considerable resources in order to comply with future environmental regulations. The expense of compliance could be significant enough to reduce our profitability and negatively affect our financial condition.

    

    

    None.

PART II

    

    As of November 19, 2021,December 1, 2022, we had approximately 14,606 membership units outstanding and approximately 1,0541,058 unit holders of record. There is no public trading market for our units. However, we have established through FNC Ag Stock, LLC a Unit Trading Bulletin Board, a private online matching service, in order to facilitate trading among our members.  The Unit Trading Bulletin Board has been designed to comply with federal tax laws and IRS regulations establishing an “alternative trading service,” as well as state and federal securities laws.  Our Unit Trading Bulletin Board consists of an electronic bulletin board that provides a list of interested buyers with a list of interested sellers, along with their non-firm price quotes.  The Unit Trading Bulletin Board facilitates matches between potential sellers and buyers and assists the sellers and buyers with transfers.  We do not become involved in any purchase or sale negotiations arising from our Unit Trading Bulletin Board and have no role in effecting the transactions beyond approval, as required under our operating agreement, and the issuance of new certificates.  We do not give advice regarding the merits or shortcomings of any particular transaction.  We do not receive, transfer or hold funds or securities as an incident of operating the Unit Trading Bulletin Board.  We do not receive any compensation for creating or maintaining the Unit Trading Bulletin Board.  In advertising our alternative trading service, we do not characterize Cardinal as being a broker or dealer or an exchange.  We do not use the Unit Trading Bulletin Board to offer to buy or sell securities other than in compliance with the securities laws, including any applicable registration requirements.

    The following graph shows a comparison of cumulative total member return since September 30, 2016,2017, calculated on a dividend reinvested basis, for the Company, the NASDAQ Composite Index (the “Composite”) and the NASDAQ Clean Edge Green Energy Index (the "CELS"). The graph assumes $100 was invested in each of our units, the Composite and the CELS on September 30, 2016.2017. Data points on the graph are annual. Note that historic unit price performance is not necessarily indicative of future unit price performance.

Pursuant to the rules and regulations of the Securities and Exchange Commission, the performance graph and the information set forth therein shall not be deemed to be filed for purposes of Section 18 of the Securities Exchange Act of 1934, and shall not be deemed to be incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

Revenues

    We have two reportable segments-the Ethanol Division and the Trading Division. Our revenues from operations from our Ethanol Division come from three primary sources: sales of fuel ethanol, distillers grains and corn oil. Revenues from operations of our Trading Division are derived from procuring, transporting and selling grain commodities. Revenues in each division also include net gains or losses from derivatives related to products sold.

    The following table shows the sources of our total revenue from the two segments and the approximate percentage of revenues to total revenues in our consolidated statements of operations for the fiscal years ended September 30, 20212022 and 2020:2021:

Ethanol Division

    The following table shows the sources of our ethanol division revenue for the fiscal years ended September 30, 2022 and 2021:

    The following table shows the sources of our total revenue from the two segments and the approximate percentage of revenues to total revenues in our consolidated statements of operations for the fiscal years ended September 30, 2021 and 2020:

Ethanol

    

    Our revenues from ethanol increased for our fiscal year ended September 30, 2021, as compared to our fiscal year ended September 30, 2020. This increase in revenues is primarily the result of a higher average price per gallon of ethanol sold and an increase in gallons of ethanol sold for the fiscal year ended September 30, 2021, as compared to the same period in 2020. Revenue also includes the net gains or losses from derivatives related to the commodities purchased.

    

    Our average price per gallon of ethanol sold for the fiscal year ended September 30, 2021, was 53.2% higher than our average price per gallon of ethanol sold for the same period in 2020. Ethanol market prices have beenwere higher for the fiscal year ended September 30, 2021 due to an increase in fuel demand, lower ethanol production due to some plants in certain areas curtailing production in response to poor market conditions, and higher oil and corn prices during the period. In addition, ethanol prices were negatively impacted in the fiscal year ended September 30, 2020 by industry-wide production in excess of demand due to a variety of factors including the granting by the EPA ofgranting small refinery waivers, trade barriers resulting from

    We experienced an increase in ethanol gallons sold of 4.2% for the fiscal year ended September 30, 2021, as compared to the same period in 2020 resulting primarily from increased ethanol production rates. We are currently operating at a rate of approximately 135 million gallons annually.  In addition, we have installed an ethanol recovery system which we expect will be fully operational during the winter of 2021/2022 and which we anticipate will result in an increase in efficiencies allowing us to achieve higher ethanol production rates. However, management continues to monitor economic conditions carefully. If market conditions worsen affecting our ability to profitably operate the plant, we may be forced to reduce our ethanol production rate or even temporarily shut down ethanol production altogether.     

    Our revenues from distillers grains increased in the fiscal year ended September 30, 2021, as compared to the same period in 2020. This increase in revenues is primarily the result of an increase in the average price per ton of distillers grains sold for the period ended September 30, 2021, as compared to the same period in 2020.

    The average market price per ton of distillers grains sold for the fiscal year ended September 30, 2021, increased by 34.0% compared to the average price per ton of distillers grains sold for the same period in 2020. This increase in the market price of distillers grains is primarily due to higher corn and soybean meal prices which resulted in end users seeking out distillers grains as the lower cost alternative during the fiscal year ended September 30, 2021.

    Management anticipates that distillers grains prices will continue to be affected by the price of corn and soybean meal. If there continues to be an oversupply of soybean meal, that could have a negative effect on the price of distillers grains. An increase in supply as certain ethanol plants return to higher production levels as operating conditions improve could also have a negative effect on distillers grains prices. In addition, if trade disputes with foreign countries such as China are not favorably resolved, this could have a negative effect on distillers grains prices unless additional demand can be sustained from domestic or other foreign markets.

    Our revenues from corn oil sales increased by 86.4% in the fiscal year ended September 30, 2021, as compared to the same period in 2020 which was mainly the result of increased volume of sales and an increase in the average price per pound of corn oil sold for the period ended September 30, 2021, as compared to the same period in 2020. We experienced an increase of 13.5% in pounds of corn oil sold during the fiscal year ended September 30, 2021, as compared to the same period in 2020 due to higher corn oil yield on average resulting in higher corn oil production for the period.

Trading Division

    The following table shows the sources of our revenues from our Trading Division for the fiscal year ended September 30, 2021 and 2020:

Soybeans

    During the fiscal year ended September 30, 2021, revenues from our Trading Division were derived primarily from transporting and selling soybeans. Our revenues from soybean sales increased for the fiscal year ended September 30, 2021, as a result of an increase in bushels of soybeans sold of 61.3% during the fiscal year ended September 30, 2021, as compared to the same period in 2020. The increase in bushels of soybeans sold is primarily due to more conducive market conditions for selling for the fiscal year ended September 30, 2021.

    We also experienced an increase of 41.3% in the average price per bushel of soybeans sold for the fiscal year ended September 30, 2021, as compared to the same period in 2020 primarily due to smaller carryout for the 2020 harvest driving the remaining stock price higher. The presence of exports to China during the fiscal year ended September 30, 2021 was also a contributing factor to higher prices. The average price per bushel of soybeans sold was $12.96 based on sales of approximately 5,834,000 bushels for the fiscal year ended September 30, 2021.

Ethanol Division

    Our cost of goods sold for this division as a percentage of its total revenues was 90.1% for the fiscal year ended September 30, 2021, as compared to 98.3% for the same period in 2020. This decrease in cost of goods sold as a percentage of revenues was the result of increased ethanol prices relative to the price of corn and natural gas for the fiscal year ended September 30, 2021, as compared to the same period in 2020. Our two largest costs of production are corn and natural gas. Cost of goods sold also includes net gains or losses from derivatives related to commodities purchased.

Natural Gas

    Our natural gas cost was higher during our fiscal year ended September 30, 2021, as compared to the fiscal year ended September 30, 2020. This increase in the cost of natural gas for the fiscal year ended September 30, 2021, as compared to the same period in 2020 was primarily the result of an increase of 13.5% in the average price per MMBTU of natural gas primarily due to increased demand. In addition, natural gas prices were higher towards the end of the period as a result of an increase in the price of crude oil. We also used 5.7% more MMBTUs of natural gas for the fiscal year ended September 30, 2021, as compared to the same period in 2020 which was primarily due to higher ethanol production.

Rail Car Rehabilitation Costs

    We lease 180 hopper rail cars under a multi-year agreement which ends in November 2023. Under the agreement, we are required to pay to rehabilitate each car for "damage" that is considered to be other than normal wear and tear upon turn in of each car at the termination of the lease. We have evaluated the condition of the cars and believe that it is probable that we may be assessed for damages incurred. Management has estimated total costs to rehabilitate the cars at September 30, 2021, to be approximately $1,751,000. During the year ended September 30, 2021, we have recorded an expense in cost of goods of $298,000. We accrue the estimated cost per railcar damages over the term of the lease.

Trading Division

    The following table shows the costs incurred to procure various agricultural commodities for our Trading Division for the fiscal year ended September 30, 2021 and 2020:

Soybeans

    During the fiscal year ended September 30, 2021, our cost was primarily the procurement of soybeans for sale.sold. During the fiscal year ended September 30, 2021, our average price paid per bushel of soybeans was 23.5% more as compared to the same period in 2020 due to concerns over a smaller crop and smaller ending stocks from the 2020 harvest. We also purchased 58.9% more bushels of soybeans during the fiscal year ended September 30, 2021, as compared to the same period in 2020.

    Our operating expenses as a percentage of revenues were 1.8% for the fiscal year ended September 30, 2021, as compared to operating expenses of 2.8% of revenues for the same period in 2020. Operating expenses include salaries and benefits of administrative employees, insurance, taxes, professional fees, depreciation of trading division fixed assets, property taxes and other general administrative costs. Our efforts to optimize efficiencies and maximize production may result in a decrease in our operating expenses on a per gallon basis. These expenses generally do not vary with the level of production at the plant; we expect our operating expenses to remain consistent with 2021 into and throughout our 2022 fiscal year.

    Our income from operations for the fiscal year ended September 30, 2021, was 6.8% of our revenues compared to operating loss of 0.6% of revenues for the same period in 2020. The increase in operating income for the fiscal year ended September 30, 2021, was primarily the result of a positive corn to ethanol spread.

Other Income (Expense)

    The following table highlights the changes in our financial condition for the fiscal years ended September 30, 20212022 and 2020:2021:

    We experienced an increase in our current assets at September 30, 20212022 as compared to September 30, 2020.2021. This increase was primarily driven by an increase in our cash, cash equivalents, and restricted cash at September 30, 2022 compared to September 30, 2021 due to improved profitability along with varying cash requirements with derivative trading counter-parties. This increase was partially offset by a decrease in accounts receivable and inventories at September 30, 20212022 compared to September 30, 2020. The increase in cash and restricted cash was because of the varying cash requirements with derivative trading counter-parties.2021. Accounts receivable increaseddecreased due to the timing of rail shipments of ethanol and soybeans. Inventory values also increaseddecreased due to a slower start to the market conditions and prices related to ourharvest season resulting in lower inventory on hand at September 30, 2021,2022, as compared withto September 30, 2020.2021.

    We experienced an increase in our current liabilities at September 30, 2021,2022, as compared to September 30, 2020.2021. This increase is primarily due to the increase in our grain accounts payable at September 30, 2021,2022, as compared to September 30, 2020,2021, which resulted from higher commodity prices as well as the timing of harvest for the fiscal year ended September 30, 2021,2022, as compared to September 30, 2020.2021.

    We experienced a decreasean increase in our long-term liabilities as of September 30, 2021,2022, as compared to September 30, 20202021 as a result of obtaining additional financing to fund the amortization related to the long-term portionconstruction and installation of the operating lease liabilityhigh protein feed system as of September 30, 2021 because of the implementation of ASC 842. Our Payroll Protection Program Loan was forgiven as of April 6, 2021 by the Small Business Administration, further reducing our long term liabilities.2022.

    We and the ethanol industry ashave engaged ICM, Inc. to install a whole, experienced adverse conditions throughout most of 2019 and 2020, as a result of industry-wide record low ethanol prices duesystem to reduced demand andproduce high industry inventory levels. These factors, which are compounded by the recent impact of COVID-19, resulted in negative operating margins, lower cash flow from operations and net operating losses. In response to the low margin environment, we reduced our ethanol production rate by approximately 20% in March 2020.  However, as margins improved in May 2020, we returned to full production and are currently operating at approximately 135 million gallons annuallyprotein feed which is currently expected to cost approximately 35% above$50,000,000, including recent change orders. The agreement calls for a down payment and scheduled payments at key points during the nameplate capacity forconstruction and installation process, which began during the plant.fourth quarter of fiscal 2022.

Comparison of Cash Flows for Fiscal Years Ended September 30, 2021 and 2020