Summary of REX AMERICAN RESOURCES CORP

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

Historically, we were a specialty retailer in the consumer electronics/appliance industry serving small to medium-sized towns and communities. In addition, we have been an investor in various alternative energy entities beginning with synthetic fuel partnerships in 1998 and later ethanol production facilities beginning in 2006.

We completed our exit of the retail business as of July 31, 2009. Going forward, we expect that our only retail related activities will consist of the administration of previously sold extended service plans and the payment of related claims. All activities related to extended service plans are classified as discontinued operations. In addition, we have owned real estate remaining from our former retail store operations. The real estate consists of 18 former retail

stores and one distribution center which we include in our real estate segment.

At October 31, 2012, we had equity investments in four ethanol limited liability companies, two of which we have a majority ownership interest in. We may consider making additional investments in the alternative energy segment in future periods. The following table is a summary of ethanol gallons shipped at our plants at October 31, 2012:

                                                                              Current
                                                                             Effective
                                                                             Ownership
                                                                                of
                                                Trailing 12                 Trailing 12
                                                  Months         REX's        Months
                                                  Ethanol       Current       Ethanol
                                                  Gallons      Ownership      Gallons
                   Entity                         Shipped      Interest       Shipped
--------------------------------------------    -----------    ---------    -----------
One Earth Energy, LLC                               109.4 M           74 %       81.0 M
NuGen Energy, LLC                                   113.0 M           99 %      111.9 M
Patriot Holdings, LLC                               117.0 M           27 %       31.6 M
Big River Resources W Burlington, LLC                97.8 M           10 %        9.8 M
Big River Resources Galva, LLC                      102.2 M           10 %       10.2 M
Big River United Energy, LLC                        107.6 M            5 %        5.4 M
Big River Resources Boyceville, LLC (1)              47.2 M           10 %        4.7 M
Total                                               694.2 M                     254.6 M

(1) Our current effective annual gallons sold represents ten months of ownership of Big River Resources Boyceville, LLC.

Our ethanol operations are highly dependent on commodity prices, especially prices for corn, ethanol, distillers grains and natural gas. 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 a number of factors that affect commodity prices in general, including crop conditions, weather, federal policy and foreign trade. Because the market price of ethanol is not always directly related to corn prices, at times ethanol prices may lag movements in corn prices and, in an environment of higher prices, reduce the overall margin structure at the plants. As a result, at times, we may operate our plants at negative or marginally positive operating margins.

We expect our ethanol plants to produce approximately 2.8 gallons of denatured ethanol for each bushel of grain processed in the production cycle. We refer to the difference between the price per gallon of ethanol and the price per bushel of grain (divided by 2.8) 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 expect these decisions to be made on an individual plant basis, as there are different market conditions at each of our ethanol plants.

We attempt to manage the risk related to the volatility of grain and ethanol prices by utilizing forward grain purchase and forward ethanol and distillers grains sale contracts. We

attempt to match quantities of ethanol and distillers grains sale contracts with an appropriate quantity of grain 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 is not a mature market. Consequently, we generally execute fixed price contracts for no more than three months into the future at any given time. As a result of the relatively short period of time our contracts cover, we generally cannot predict the future movements in the crush spread for more than three months; thus, we are unable to predict the likelihood or amounts of future income or loss from the operations of our ethanol facilities.

Critical Accounting Policies and Estimates

During the three months ended October 31, 2012, we did not change any of our critical accounting policies as disclosed in our 2011 Annual Report on Form 10-K as filed with the Securities and Exchange Commission on April 9, 2012. All other accounting policies used in preparing our interim fiscal year 2012 Consolidated Condensed Financial Statements are the same as those described in our Form 10-K.

Fiscal Year

All references in this report to a particular fiscal year are to REX's fiscal year ended January 31. For example, "fiscal year 2012" means the period February 1, 2012 to January 31, 2013.

Results of Operations

For a detailed analysis of period to period changes, see the segment discussion that follows this section as this is how management views and monitors our business.

Comparison of Three Months and Nine Months Ended October 31, 2012 and 2011

Net sales and revenue in the quarter ended October 31, 2012 were approximately $179.0 million compared to approximately $84.5 million in the prior year's third quarter, representing an increase of approximately $94.5 million. Net sales and revenue do not include sales from real estate operations classified as discontinued operations. The increase was primarily caused by higher sales in our alternative energy segment of approximately $94.4 million. Net sales and revenue from our real estate segment were approximately $0.5 million in the third quarter of fiscal year 2012 and approximately $0.4 million in the third quarter of fiscal year 2011.

Net sales and revenue for the first nine months of fiscal year 2012 were approximately $483.1 million compared to approximately $239.5 million for the first nine months of fiscal year 2011. This represents an increase of approximately $243.6 million. The increase was primarily caused by higher sales in our alternative energy segment of approximately $243.4 million.

Net sales and revenue from our real estate segment were approximately $1.2 million in the first nine months of fiscal year 2012 and approximately $0.9 million in the first nine months of fiscal year 2011.

The following table reflects the approximate percent of net sales for each major product and service group for the following periods:

                       Three Months Ended       Nine Months Ended
                          October 31,              October 31,
Product Category       2012         2011        2012         2011
----------------     ---------    ---------   ---------    ---------
Ethanol                     74 %         82 %        76 %         81 %
Distillers grains           23           17          21           18
Other                        3            1           3            1
                     -- ------    -- ------   -- ------    -- ------
Total                      100 %        100 %       100 %        100 %
                     -- ------    -- ------   -- ------    -- ------

Gross profit for the third quarter of fiscal year 2012 was approximately $3.6 million (2.0% of net sales and revenue) which was approximately $5.4 million lower compared to approximately $9.0 million of gross profit (10.7% of net sales and revenue) for the third quarter of fiscal year 2011. Gross profit for the third quarter of fiscal year 2012 decreased by approximately $5.3 million compared to the prior year from our alternative energy segment. Gross loss for the third quarter of fiscal year 2012 was approximately $39,000 compared to gross profit of approximately $53,000 for the third quarter of fiscal year 2011 from our real estate segment.

Gross profit for the first nine months of fiscal year 2012 was approximately $16.1 million (3.3% of net sales and revenue) which was approximately $2.6 million higher compared to approximately $13.5 million (5.6% of net sales and revenue) for the first nine months of fiscal year 2011. Gross profit for the nine months ended October 31, 2012 increased by approximately $1.5 million compared to the prior year as a result of operations in the alternative energy segment. Gross loss for the first nine months of fiscal year 2012 decreased by approximately $1.1 million compared to the prior year from our real estate segment.

Selling, general and administrative expenses for the third quarter of fiscal year 2012 were approximately $3.0 million (1.7% of net sales and revenue), an increase of approximately $0.7 million from approximately $2.3 million (2.8% of net sales and revenue) for the third quarter of fiscal year 2011. The increase was primarily caused by higher expenses in our alternative energy segment of approximately $0.6 million. Selling, general and administrative expenses were approximately $9.2 million (1.9% of net sales and revenue) for the first nine months of fiscal year 2012 representing an increase of approximately $2.6 million from approximately $6.6 million (2.8% of net sales and revenue) for the first nine months of fiscal year 2011. For the first nine months of fiscal year 2012, these expenses increased approximately $2.5 million compared to the prior year in the alternative energy segment.

During the third quarter of fiscal years 2012 and 2011, we recognized income of approximately $1.5 million and $6.3 million, respectively, from our equity investments in Big River, Patriot and NuGen. During the first nine months of fiscal years 2012 and 2011, we

recognized income of approximately $1.5 million and $15.8 million, respectively, from these investments. Effective November 1, 2011, we acquired an additional 50% equity interest in NuGen, which operates an ethanol producing facility in Marion, South Dakota which shipped approximately 113 million gallons of ethanol in the trailing 12 months ended October 31, 2012. As of November 1, 2011, we ceased using the equity method of accounting for NuGen and began consolidating their results prospectively. We acquired our initial 48% ownership interest in NuGen on July 1, 2010. We currently have a 99% equity interest in NuGen. Big River has an effective ownership of ethanol gallons shipped in the trailing twelve months ended October 31, 2012 of approximately 301 million gallons. Patriot has one plant which shipped approximately 117 million gallons of ethanol in the trailing 12 months ended October 31, 2012.

Due to the inherent volatility of the crush spread, we cannot predict the likelihood of future operating results from Big River and Patriot being similar to historical results.

During the first nine months of fiscal year 2011, we recognized income of approximately $2.9 million from the sale of a synthetic fuel partnership we sold in fiscal year 2005. This income represents one final payment for synthetic fuel production occurring during fiscal year 2008. We will not recognize any additional income from this investment.

Interest income was approximately $42,000 and $92,000 for the third quarter of fiscal years 2012 and 2011, respectively. Interest income was approximately $132,000 and $364,000 for the first nine months of fiscal years 2012 and 2011, respectively. The decline is primarily related to lower levels of excess cash invested and lower yields earned during fiscal year 2012 compared to the prior year.

Interest expense was approximately $1.2 million for the third quarter of fiscal year 2012 compared to approximately $0.6 million for the third quarter of fiscal year 2011, an increase of approximately $0.6 million. Interest expense was approximately $3.7 million for the first nine months of fiscal year 2012 compared to approximately $1.9 million for the first nine months of fiscal year 2011, an increase of approximately $1.8 million. These increases were primarily attributable to the alternative energy segment as we consolidated NuGen in fiscal year 2012 which had approximately $0.6 million of interest expense in the third quarter of fiscal year 2012 and approximately $1.8 million of interest expense for the first nine months of fiscal year 2012.

We recognized losses of approximately $0.1 million and $0.5 million during the third quarter of fiscal years 2012 and 2011, respectively, related to a forward interest rate swap that One Earth entered into during fiscal year 2007. We recognized losses related to the swap of approximately $0.4 million during the first nine months of fiscal year 2012 compared to approximately $1.2 million during the first nine months of fiscal year 2011. In general, declining interest rates have a negative effect on our interest rate swaps and vice versa, as our swaps fixed the interest rate of variable rate debt. Should interest rates decline, we would expect to experience losses on the interest rate swaps. We would expect to incur gains on the interest rate swaps should interest rates increase. We cannot predict the future movements in interest rates; thus, we are unable to predict the likelihood or amounts of future gains or losses related to interest rate swaps.

As a result of the foregoing, income from continuing operations before income taxes was approximately $0.9 million for the third quarter of fiscal year 2012 versus approximately $11.9 million for the third quarter of fiscal year 2011. Income from continuing operations before income taxes was approximately $4.5 million for the first nine months of fiscal year 2012 versus approximately $22.9 million for the first nine months of fiscal year 2011.

Our effective tax rate was 15.1% and 34.0% for the third quarter of fiscal years 2012 and 2011, respectively. Our effective tax rate for the first nine months of fiscal year 2012 was 27.4% compared to 36.0% for the first nine months of fiscal year 2011. The fluctuations in the effective tax rate primarily relate to the presentation of noncontrolling interests in the income of consolidated subsidiaries as noncontrolling interests are presented in the Consolidated Condensed Statements of Operations after the income tax provision or benefit. The noncontrolling interests in the income of One Earth and NuGen was a higher proportion of consolidated pre-tax income in fiscal year 2012 compared to fiscal year 2011.

As a result of the foregoing, income from continuing operations was approximately $0.8 million for the third quarter of fiscal year 2012 versus approximately $7.9 million for the third quarter of fiscal year 2011. Income from continuing operations was approximately $3.2 million for the first nine months of fiscal year 2012 versus approximately $14.6 million for the first nine months of fiscal year 2011.

During fiscal year 2009, we closed our remaining retail store and warehouse operations and reclassified all retail related results as discontinued operations. As a result, we had income from discontinued operations, net of tax, of approximately $0.1 million in the third quarter of fiscal year 2012 compared to approximately $0.2 million in the third quarter of fiscal year 2011. We had income from discontinued operations, net of tax, of approximately $0.4 million for the first nine months of fiscal year 2012 compared to approximately $0.9 million for the first nine months of fiscal year 2011. Two properties classified as discontinued operations were sold during the third quarter of fiscal year 2012, resulting in a gain, net of taxes, of approximately $30,000 compared to approximately $267,000 during the third quarter of fiscal year 2011. Five properties classified as discontinued operations were sold during the first nine months of fiscal year 2012, resulting in a gain, net of taxes, of approximately $80,000 compared to approximately $425,000 during the first nine months of fiscal year 2011.

Income related to noncontrolling interests was approximately $0.5 million and $1.8 million during the third quarter of fiscal years 2012 and 2011, respectively, and approximately $1.5 million and $2.4 million for the nine months ended October 31, 2012 and 2011, respectively, and represents the owners' (other than us) share of the income of NuGen (fiscal year 2012) and One Earth (fiscal years 2012 and 2011).

As a result of the foregoing, net income attributable to REX common shareholders for the third quarter of fiscal year 2012 was approximately $0.4 million, a decrease of approximately $6.1 million from approximately $6.5 million for the third quarter of fiscal year 2011. Net income attributable to REX common shareholders for the first nine months of fiscal year 2012 was approximately $2.1 million, a decrease of approximately $11.4 million from approximately $13.5 million for the first nine months of fiscal year 2011.

Business Segment Results

We have two segments: alternative energy and real estate. The following sections discuss the results of operations for each of our business segments and corporate and other. As discussed in Note 15, our chief operating decision maker (as defined by ASC 280, "Segment Reporting") evaluates the operating performance of our business segments using a measure we call segment profit. Segment profit includes gains and losses on derivative financial instruments. Segment profit excludes income taxes, indirect interest expense, discontinued operations, indirect interest income and certain other items that are included in net income determined in accordance with GAAP. Management believes these are useful financial measures; however, they should not be construed as being more important than other comparable GAAP measures.

Items excluded from segment profit generally result from decisions made by corporate executives. Financing, divestiture and tax structure decisions are generally made by corporate executives. Excluding these items from our business segment performance measure enables us to evaluate business segment operating performance based upon current economic conditions.

The following table sets forth, for the periods indicated, sales and profits by segment (amounts in thousands):

                                              Three Months Ended         Nine Months Ended
                                                  October 31,               October 31,
                                               2012          2011        2012         2011
                                            -----------    --------    ---------    ---------
Net sales and revenue:
Alternative energy                          $   178,495    $ 84,144    $ 481,938    $ 238,557
Real estate                                         455         380        1,184          926
                                            -- --------    - ------    - -------    - -------
Total net sales and revenues                $   178,950    $ 84,524    $ 483,122    $ 239,483
                                            -- --------    - ------    - -------    - -------
Segment gross profit (loss):
Alternative energy                          $     3,686    $  8,965    $  16,224    $  14,694
Real estate                                         (39 )        53         (117 )     (1,171 )
                                            -- --------    - ------    - -------    - -------
Total gross profit                          $     3,647    $  9,018    $  16,107    $  13,523
                                            -- --------    - ------    - -------    - -------
Segment profit (loss):
Alternative energy (1)                      $     1,586    $ 12,394    $   6,478    $  22,827
Real estate                                         (91 )         7         (277 )     (1,306 )
Corporate expense                                  (603 )      (521 )     (1,751 )     (1,738 )
Interest expense                                    (21 )       (25 )        (65 )        (87 )
Income from synthetic fuel partnerships               -           -            -        2,883
Investment income                                    19          74           68          289
                                            -- --------    - ------    - -------    - -------
Income from continuing operations before
income taxes                                $       890    $ 11,929    $   4,453    $  22,868
                                            -- --------    - ------    - -------    - -------

(1) Includes income from equity method investments of $1,542,000 and $6,284,000 in the quarters ended October 31, 2012 and 2011, respectively. Includes income from equity

method investments of $1,503,000 and $15,827,000 in the nine months ended October 31, 2012 and 2011, respectively.

Alternative Energy

The alternative energy segment includes the consolidated financial results of NuGen (fiscal year 2012) and One Earth (fiscal years 2012 and 2011), our equity method investments in ethanol facilities, the income related to those investments and certain administrative expenses. One Earth became fully operational during the third quarter of fiscal year 2009. Effective November 1, 2011, we obtained a controlling financial interest in NuGen. Thus, we began consolidating the results of NuGen prospectively as of the acquisition date. Prior to November 1, 2011, we used the equity method of accounting to account for the results of NuGen. The following table summarizes sales by product group (amounts in thousands):

                      Three Months Ended       Nine Months Ended
                         October 31,              October 31,
                       2012         2011       2012        2011
                    -----------   --------   ---------   ---------

Ethanol             $   132,557   $ 69,460   $ 366,348   $ 194,970
Distillers grains        41,027     14,684     102,543      43,587
Other                     4,911          -      13,047           -
                    -- --------   - ------   - -------   - -------
Total               $   178,495   $ 84,144   $ 481,938   $ 238,557
                    -- --------   - ------   - -------   - -------

The following table summarizes certain operating data:

                                              Three Months Ended         Nine Months Ended
                                                  October 31,               October 31,
                                               2012          2011         2012         2011
                                            -----------    --------    ----------    --------

Average selling price per gallon of
ethanol                                     $      2.38    $   2.70    $     2.21    $   2.51
Average selling price per ton of dried
distillers grains                           $    267.63    $ 203.13    $   227.07    $ 193.47
Average cost per bushel of grain            $      7.95    $   7.05    $     6.96    $   6.89
Average cost of natural gas (per mmbtu)     $      3.47    $   4.95    $     3.63    $   4.66

Segment Results - Third Quarter Fiscal Year 2012 Compared to Third Quarter Fiscal Year 2011

Net sales and revenue increased approximately $94.4 million over the third quarter of fiscal year 2011 to approximately $178.5 million in the third quarter of fiscal year 2012, primarily a result of consolidating NuGen in fiscal year 2012. We accounted for the results of NuGen using the equity method of accounting until the fourth quarter of fiscal year 2011, at which time we obtained a controlling financial interest in NuGen, and thus, began consolidating the results. Ethanol sales increased from approximately $69.5 million

in the third quarter of fiscal year 2011 to approximately $132.6 million in the third quarter of fiscal year 2012. The average selling price per gallon of ethanol decreased from $2.70 in the third quarter of fiscal year 2011 to $2.38 in the third quarter of fiscal year 2012. This negative pricing impact on sales was more than offset as our ethanol sales were based upon approximately 55.8 million gallons in the third quarter of fiscal year 2012 compared to 25.6 million gallons in the third quarter of fiscal year 2011. The increase in gallons of ethanol sold resulted primarily from including the results of NuGen in the current year but not in the prior year before consolidation. Distillers grains sales increased from approximately $14.7 million in the third quarter of fiscal year 2011 to approximately $41.0 million in the third quarter of fiscal year 2012. Three positive factors impacting distillers grains sales were that the average selling price per ton of dried distillers grains increased from $203.13 in the third quarter of fiscal year 2011 to $267.63 in the third quarter of fiscal year 2012, our dried distillers grains sales were based upon approximately 124,000 tons in the third quarter of fiscal year 2012 compared to approximately 71,000 tons in the third quarter of fiscal year 2011 and that our sales of modified distillers grains increased approximately $7.7 million in the third quarter of fiscal year 2012 compared to the third quarter of fiscal year 2011. The increase in tons of dried distillers grains sold and the increase in modified distillers grains sold resulted primarily from including the results of NuGen in the current year but not in the prior year before consolidation. Non-food grade corn oil sales were approximately $4.5 million in the third quarter of fiscal year 2012. The first quarter of fiscal year 2012 was the first period that our plants produced and sold non-food grade corn oil. We expect that net sales and revenue in future periods will be based upon annual production of 200 million to 230 million gallons of ethanol and 580,000 to 620,000 tons of dried distillers gains. This expectation assumes that One Earth and NuGen will operate at or near nameplate capacity, which is dependent upon the crush spread realized and operational factors.

Gross profit from these sales was approximately $3.7 million during the third quarter of fiscal year 2012 compared to approximately $9.0 million during the third quarter of fiscal year 2011. The crush spread for the third quarter of fiscal year 2012 was approximately ($0.46) per gallon of ethanol sold compared . . .