UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
(Mark one)
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ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||||
For the fiscal year ended September 30, 2021
| TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | |||
For the transition period from _________ to __________
Commission file number 000-53041
SOUTHWEST IOWA RENEWABLE ENERGY, LLC | |||
(Exact name of registrant as specified in its charter) | |||
Iowa | 20-2735046 | ||
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | ||
10868 | 51503 | ||
(Address of principal executive offices) | (Zip Code) | ||
Registrant’s telephone number (712) 366-0392
Securities registered under Section 12(b) of the Exchange Act: | None. | ||||||||||
Title of each class | Name of each exchange on which registered | ||||||||||
Securities registered under Section 12(g) of the Exchange Act: | |||||||||||
Series A Membership Units | |||||||||||
(Title of class) | |||||||||||
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. Yes ☐ No ☒
Indicate by check mark whether the issuer (1) filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the 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. Yes ☒ No ☐
Indicate by check mark whether the registrant has submitted electronically on its corporate Website every Interactive Data File required to be submitted 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). Yes ☒ No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.
| Large accelerated filer ☐ | Accelerated filer ☐ |
| Non-accelerated filer ☐ | Emerging growth company ☐ |
| Smaller reporting company ☒ |
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Indicate by check mark whether the registrant has | |||
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act) ☒ |
As of March 31, 2017,2021, the aggregate market value of the Membership Units held by non-affiliates (computed by reference to the last price at which the Membership Units were sold) was $46,763,600.
As of September 30, 2017,December 22, 2021 the Company had 8,9938,975 Series A 3,334 Series B and 1,000 Series C Membership Units outstanding.
DOCUMENTS INCORPORATED BY REFERENCE—NonePortions of the registrant's definitive proxy statement to be filed with the Securities and Exchange Commission with respect to the 2022 annual meeting of the members of the registrant are incorporated by reference into Part III of this Form 10-K.
CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS This Annual Report on Form 10-K of Southwest Iowa Renewable Energy, LLC (the “ • Changes in the availability and price of corn, natural gas, and steam; • Negative impacts resulting from the regulatory uncertainty surrounding the renewable fuel volume requirements • Our inability to comply with our credit agreements required to continue our operations; • Negative impacts that our hedging activities may have on our operations; • Decreases in the market prices of ethanol and distillers grains; • Ethanol supply exceeding demand and corresponding ethanol price reductions; • Changes in the environmental regulations that apply to our plant operations; • Changes in plant production capacity or technical difficulties in operating the plant; • Changes in general economic conditions or the occurrence of certain events causing an economic impact in the agriculture, oil or automobile industries; • Changes in other federal or state laws and regulations relating to the production and use of ethanol; • Changes and advances in ethanol production technology; • Competition from larger producers as well as competition from alternative fuel additives; • Changes in interest rates and lending conditions of our loan covenants; • Volatile commodity and financial markets; • Decreases in export demand due to the imposition of duties and tariffs by foreign governments on ethanol and distillers grains produced in the United States; • Disruptions, failures or security breaches relating to our information technology infrastructure; • Trade actions by the Biden Administration, particularly those affecting the biofuels and agriculture sectors and related industries; and • Disruptions caused by health epidemics, such as the ongoing COVID-19 pandemic, and the adverse impact of such epidemics on global economic and business conditions. These forward-looking statements are based on management’s estimates, projections and assumptions as of the date hereof and include various assumptions that underlie such statements. Any expectations based on these forward-looking statements are subject to risks and uncertainties and other important factors, including those discussed below and in the section titled The Company is an Iowa limited liability company located in Council Bluffs, Iowa, formed in March 2005. The Company is permitted to produce 140 million gallons of ethanol. Our production facility (the “ Financial Information Please refer to Operations Throughout most of 2020 and the first part of 2021, the Company, and the ethanol industry as a whole, experienced significant adverse conditions as a result of industry-wide record low ethanol prices due to reduced demand and high industry inventory levels, primarily attributable to the decrease in travel brought on by the COVID-19 pandemic. These factors led us to elect to reduce ethanol production at our plant by approximately fifty percent in April 2020. During May and June 2020, we operated our plant at lower-than-normal ethanol production levels. In June 2020, however, we ramped up production to normal operating levels, and have thus far maintained operations at normal levels for all of 2021. Limiting ethanol production in 2020 also resulted in a corresponding decrease in distillers grains and corn oil production as the production of those co-products are directly correlated with ethanol production. In response to the COVID-19 pandemic and pursuant to temporary regulatory relief issued by the U.S. Food and Drug Administration (“FDA”), several ethanol plants and industrial chemical companies found ways to process ethanol into hand sanitizer for medical and consumer applications in early 2020. During our period of reduced production in 2020, the Company found several customers seeking ethanol in bulk for use in hand sanitizers; so the Company bottled "SIREtizer" hand sanitizer for local distribution. Given the economic conditions and the unprecedented decrease in the price and demand for blended gasoline, the Company was able to command a higher margin supplying ethanol for use in hand sanitizer products than for its conventional ethanol product during that time, and the Company produced and sold ethanol-based hand sanitizer as a new line of business in the months of April and May. However, in June 2020, the FDA tightened the temporary regulatory language such that certain ethanol plants, including the Company, halted production and cancelled supply agreements for ethanol used in hand sanitizer. Supply and Demand Impact Although we continue to regularly monitor the financial health of companies in our supply chain, financial hardship on our suppliers or sub-suppliers caused by the COVID-19 pandemic and new or emerging variants could cause a disruption in our ability to obtain raw materials or components required to produce our products, adversely affecting our operations. Additionally, restrictions or disruptions of transportation, such as reduced availability of truck, rail or air transport, port closures and increased border controls or closures, may result in higher costs and delays, both on obtaining raw materials and shipping finished products to customers, which could harm our profitability, make our products less competitive, or cause our customers to seek alternative suppliers. Paycheck Protection Program Loan On April 14, 2020, the Company received $1.1 million under the new Paycheck Protection Program ("PPP Loan") legislation passed in response to the economic downturn triggered by COVID-19. Our PPP Loan may be forgiven based upon various factors, including, without limitation, our payroll cost over an eight-to-twenty-four week period starting upon our receipt of the funds. Expenses for approved payroll costs, lease payments on agreements before February 15, 2020, and utility payments under agreements before February 1, 2020 and certain other specified costs can be paid with these funds and eligible for payment forgiveness by the federal government. At least 60% of the proceeds must be used for approved payroll costs, and no more than 40% on non-payroll expenses. PPP loan proceeds used by a borrower for the approved expense categories will generally be fully forgiven by the lender if the borrower satisfies certain employee headcount and compensation requirements. The Company has applied for forgiveness on the PPP loan from the Small Business Administration ("SBA") and as of December 18, 2021, is awaiting a response on our request. On January 28, 2021, the Company received an additional $1.1 million under Phase II of the PPP legislation (the "Second PPP Loan"). As in the original PPP loan, expenses for approved payroll costs, lease payments on agreements and utility payments under agreements and certain other specified costs can be paid with these funds and eligible for payment forgiveness by the federal government. At least 60% of the proceeds must be used for approved payroll costs, and no more than 40% for non-payroll expenses. PPP loan proceeds used by a borrower for the approved expense categories will generally be forgiven by the lender if the borrower satisfies certain employee headcount and compensation requirements. The Company applied for forgiveness of the Second PPP Loan in September of 2021. As of December 18, 2021, we are still awaiting a response on our request. Rail Access We own a On March 24, 2019, the Company entered into an amendment to The Railcar Agreement was amended to 110 hopper cars effective November 2019 and effective July 17, 2020, Bunge sold their tankers to Trinity Leasing. Trinity Leasing entered into a lease agreement with the Company which incorporates the terms of the original Bunge Railcar Agreement but reduced the ethanol car level to 320 ethanol cars. Under the Railcar Agreement, Employees We had Throughout the COVID-19 pandemic we have taken proactive action to protect the health and safety of our employees, customers, partners and suppliers. We enacted appropriate safety measures, including implementing social distancing protocols, staggered schedules and shifts, as appropriate, and frequently disinfecting our workspaces. We expect to continue to implement health and safety measures for the health of our employees and our business, and we may take further action as government authorities require or recommend or as we determine to be in the best interests of our employees, customers, partners and suppliers. Principal Products The principal products we produce are ethanol, distillers grains, distillers corn oil, and carbon dioxide (" Ethanol Our primary product is ethanol. Ethanol is ethyl alcohol, a fuel component made primarily from corn and various other grains, which can be used as: (i) an octane enhancer in fuels; (ii) an oxygenated fuel additive for the purpose of reducing ozone and carbon monoxide vehicle emissions; and (iii) a non-petroleum-based gasoline substitute. More than 99% of all ethanol produced in the United States is used in its primary form for blending with unleaded gasoline and other fuel products. The principal purchasers of ethanol are generally wholesale gasoline marketers or blenders. Ethanol is shipped by truck in the local markets, and by rail in the regional, national and international markets. We produced Distillers Grain The principal co-product of the ethanol production process is distillers grains, a high protein, high-energy animal feed marketed primarily to the beef and dairy industries. Distillers grains contain by-pass protein that is superior to other protein supplements such as cottonseed meal and soybean In Fiscal Corn Oil Our system separates corn oil from the post-fermentation syrup stream as it leaves the evaporators of the ethanol plant. The corn oil is then routed to storage tanks, and the remaining concentrated syrup is routed to the plant’s syrup tank. Corn oil can be marketed as either a feed additive or a biodiesel feedstock. We sold Carbon Dioxide In April 2013, we entered into a Carbon Dioxide Purchase and Sale Agreement (the “ Air Products pays us a base price per ton, which acts as a floor price, Air Products will pay us an additional amount based on Air Products profits above a minimum targeted margin. The CO2 Agreement also contains a take or pay obligation pursuant to which Air Products agrees to pay us for a minimum number of tons each year. CO2 was Principal Product Markets As described below in “ Our ethanol, distillers grains and distillers corn oil are primarily sold in the domestic market; however, as markets allow, our products can be, and have been, sold in the export markets. We explore all markets for our distillers grains and corn oil products, and we expect Bunge to explore all markets for our ethanol, According to the U.S. Energy Information Administration (the "EIA"), in the first Brazil moved from second place to seventh place, as tariffs implemented by Brazil on U.S. ethanol imports have significantly reduced Brazilian demand. Brazilian demand fell in recent years due to the impact of tariffs on U.S. ethanol imports. The effect of the tariff has been exacerbated by the expiration of a rate tariff quota that previously allowed 750 million liters of ethanol annually to be shipped into Brazil before the tariff applied. This has made ethanol imports more expensive than domestically produced Brazilian ethanol. Despite exports to Brazil being at a decade low, the U.S. Department of Agriculture ("USDA") anticipates that there may be significant gains in this market during Fiscal 2022 due to the Brazilian drought and frost damage that lowered sugarcane yields and raised sugar prices, exacerbated by ongoing fuel recovery demand. The increase in Chinese imports of ethanol produced in the United States appears to be primarily attributable to a weak crush margin for Chinese producers coupled with Chinese demand rebounding to near 2019 levels. Although Chinese biofuel and trade policy remains uncertain, and import levels have significantly decreased in the latter half of Ethanol export demand is more unpredictable than domestic demand, and tends to fluctuate over time as it is subject to monetary and political forces in other nations. For instance, a strong U.S. Dollar is an example of a force that may negatively impact ethanol exports from the United States. In addition, Distillers grains have become more accepted as animal feed throughout the world and therefore, distillers grains We market and distribute all of the corn oil we produce directly to end users Distribution Methods On December 5, 2014, the Company entered into an Amended and Restated Ethanol Purchase Agreement with Bunge which was further amended and restated on October 23, 2017 to include specific provisions for loading and shipment of ethanol by truck (the “ We were a party to Rail lease charges are the monthly lease payment for rail cars along with all administrative and tax filing fees for such leased rail cars. We market and distribute all of the distillers corn oil we produce directly to Raw Materials Corn Requirements The principal raw material necessary to produce ethanol, distillers grain and corn oil is corn. We are significantly dependent on the availability and price of corn which are affected by supply and demand factors such as crop production, carryout, exports, government policies and programs, risk management and weather. With the volatility of the weather and commodity markets, we cannot predict the future price of corn. Because the market price of ethanol is not directly related to corn prices, we, like most ethanol producers, are not able to compensate for increases in the cost of corn through adjustments in our prices for our ethanol although we do see increases in the prices of our distillers grain during times of higher corn prices. However, given that ethanol High corn prices have a negative effect on our operating margins unless the Our management expects that corn prices will Our Facility Energy Requirements The production of ethanol is an energy intensive process which uses significant amounts of electricity and steam or natural gas as a heat source. Presently, about In September 2019, the Company went on line with the Whitefox Integrated Cartridge Efficiency (ICE) system to push towards more efficient operations in our plant. This technology benefits the plant through energy reduction, purity flexibility and debottlenecking of the distillation and dehydration processes. Energy efficiency improved by approximately 1,000 BTU's per gallon of ethanol Steam We Natural Gas Natural gas accounted for approximately Electricity Our Facility requires a large continuous supply of electrical energy. In Fiscal Water We require a supply of water typical for the industry for our Patents, Trademarks, Licenses, Franchises and Concessions SIRE Seasonality of Sales We experience some seasonality of demand for our 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. Risk Management and Hedging Transactions The profitability of our operations is highly dependent on the impact of market fluctuations associated with commodity prices. We use various derivative instruments as part of an overall strategy to manage market risk and to reduce the risk that our ethanol production will become unprofitable when market prices among our principal commodities and products do not correlate. In order to mitigate our commodity and product price risks, we enter into hedging transactions, including forward corn, ethanol, distillers grain and natural gas contracts, in an attempt to partially offset the effects of price volatility for corn and ethanol. We also enter into over-the-counter and exchange-traded futures and option contracts for corn, ethanol and distillers grains, designed to limit our exposure to increases in the price of corn and manage ethanol price fluctuations. Although we believe that our hedging strategies can reduce the risk of price fluctuations, the financial statement impact of these activities depends upon, among other things, the prices involved and our ability to physically receive or deliver the commodities involved. Our hedging activities could cause net income to be volatile from quarter to quarter due to the timing of the change in value of the derivative instruments relative to the cost and use of the commodity being hedged. As corn and ethanol prices move in reaction to market trends and information, our income statement will be affected depending on the impact such market movements have on the value of our derivative instruments. Hedging arrangements expose us to the risk of financial loss in situations where the counterparty to the hedging contract defaults or, in the case of exchange-traded contracts, where there is a change in the expected differential between the price of the commodity underlying the hedging agreement and the actual prices paid or received by us for the physical commodity bought or sold. There are also situations where the hedging transactions themselves may result in losses, as when a position is purchased We continually monitor and manage our commodity risk exposure and our hedging transactions as part of our overall risk management policy. As a result, we may vary the amount of hedging or other risk mitigation strategies we undertake, and we may choose not to engage in hedging transactions. Our ability to hedge is always subject to our liquidity and available capital. Dependence on One or a Few Major Customers As discussed above, we have marketing and agency agreements with Bunge for the purpose of marketing and distributing our In Fiscal 2021, Bunge constituted 74% of total revenues, compared to almost 83% of revenue in Fiscal 2020. Competition Domestic Ethanol Competitors The ethanol we produce is similar to ethanol produced by other domestic plants. Since ethanol is We may be at a competitive disadvantage compared to our larger competitors and the oil companies who are capable of producing a significantly greater amount of ethanol, have multiple ethanol plants that may help them achieve certain efficiencies and other benefits that we cannot achieve with one ethanol plant or are able to operate at times when it is unprofitable for us to operate. For instance, ethanol producers that own multiple plants may be able to compete in the marketplace more effectively, especially during periods when operating margins are unfavorable, because they have the flexibility to run certain production facilities while reducing production or shutting down production at other facilities. These large producers may also be able to realize economies of scale which we are unable to realize or they may have better negotiating positions with purchasers. Further, new products or methods of ethanol production developed by larger and better-financed competitors could Foreign Ethanol Competitors In recent years, the ethanol industry has experienced increased competition from international suppliers of ethanol and although ethanol imports have decreased during the past few years, if competition from ethanol imports were to increase again, such increased imports could negatively impact demand for domestic ethanol which could adversely impact our financial results. Large international companies with much greater resources than ours have developed, or are developing, increased foreign ethanol production capacities. Many international suppliers produce ethanol primarily from inputs other than corn, such as sugarcane, and have cost structures that may be substantially lower than U.S. based ethanol producers including us. Many of these international suppliers are companies with much greater resources than us with greater production capacities. Brazil is the world’s second largest ethanol producer. Brazil makes ethanol primarily from sugarcane as opposed to corn, and depending on feedstock prices, may be less expensive to produce. Depending on feedstock prices, ethanol imported from foreign countries, including Brazil, may be less expensive than domestically-produced ethanol. However, foreign demand, transportation costs and infrastructure constraints may temper the market impact on the United States. Local Ethanol Production Because we are located on the border of Iowa and Nebraska, and because ethanol producers generally compete primarily with local and regional producers, the ethanol producers located in Iowa and Nebraska presently constitute our primary competition. According to the Competition from Alternative Renewable Fuels Many of the current ethanol production incentives are designed to encourage the production of renewable fuels using raw materials other than corn, including cellulose. Cellulose is the main component of plant cell walls and is the most common organic compound on earth. Cellulose is found in wood chips, corn stalks, rice straw, amongst other common plants. Cellulosic ethanol is ethanol produced from cellulose. Research continues regarding cellulosic ethanol, and various companies are in various stages of developing and constructing some of the first generation cellulosic plants. Several companies have commenced pilot projects to study the feasibility of commercially producing cellulosic ethanol and are producing cellulosic ethanol on a small scale and, at a few companies in the United States have begun producing on a commercial scale. Additional commercial scale cellulosic ethanol plants could be completed in the near future, although these cellulosic ethanol plants have Because our Facility is designed as a single-feedstock 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. Like ethanol, the emerging fuel cell Distillers Grain Competition Ethanol plants in the Midwest produce the majority of distillers grains and primarily compete with other ethanol producers in the production and sales of distillers grains. According to the The primary customers of distillers grains are dairy and beef cattle, according to the RFA The market for distillers grains is generally confined to locations where freight costs allow it to be competitively priced against other feed ingredients. Distillers grains compete with three other feed formulations: corn gluten feed, dry brewers grain and mill feeds. The primary value of these products as animal feed is their protein content. Dry brewers grain and distillers grains have about the same protein content, and corn gluten feed and mill feeds have slightly lower protein contents. Distillers grains contain nutrients, fat content, and fiber that we believe will differentiate our distillers grains products from other feed formulations. However, producers of other forms of animal feed may also have greater experience and resources than we do and their products may have greater acceptance among producers of beef and dairy cattle, poultry and hogs. Principal Supply & Demand Factors Ethanol Ethanol prices Management currently expects ethanol prices will continue to adjust to the supply and demand factors of ethanol and oil and will generally fluctuate with, but not be directly correlated to, the price of corn. Management believes the industry will need to Management also believes it is important that ethanol blending capabilities of the gasoline market be expanded to increase demand for ethanol. Recently, there has been increased awareness of the need to expand retail ethanol distribution and blending infrastructure, which would allow the ethanol industry to supply ethanol to markets in the United States that are not currently selling significant amounts of ethanol. Distillers Grains Distillers grains compete with other protein-based animal feed products. Historically, sales prices for distillers grains have correlated with prices of corn. However, there have been occasions when the price increase for this co-product has not been directly correlated to changes in corn prices. In addition, our distillers grains compete with products made from other feedstocks, the cost of which may not rise when corn prices rise. Consequently, Management expects that distillers grain prices will continue to generally follow the price of corn during Fiscal Competition During crop year Competition for corn supply from other ethanol plants and other corn We compete with other users of corn, including ethanol producers regionally and nationally, producers of food and food ingredients for human consumption (such as high fructose corn syrup, starches, and sweeteners), producers of animal feed and industrial users. According to the USDA, for Federal Ethanol Support and Governmental Regulations RFS and Related Federal Legislation The ethanol industry Annually, the EPA is In November 2021, the EPA announced a proposed Although renewable volume Federal mandates supporting the use of renewable fuels State Initiatives and Mandates In 2006, Iowa passed legislation promoting the use of renewable fuels in Iowa. One of the most significant provisions of the Iowa renewable fuels legislation E85 Demand for ethanol has been affected by moderately increased consumption of E85 fuel, a blend of 85% ethanol and 15% Changes in Corporate Average Fuel Economy (“ E15 E15 is a blend of higher octane In May 2020, the USDA announced The program's predecessor, the Biofuels Infrastructure Partnership ("BIP"), was implemented by the USDA in May 2015 to increase the availability of higher blends and to fund the installation of new ethanol Environmental and Other Regulations and Permits Ethanol production involves the emission of various airborne pollutants, including particulate matters, carbon monoxide, oxides of nitrogen, volatile organic compounds and sulfur dioxide. Ethanol production also requires the use of significant volumes of water, a portion of which is treated and discharged into the environment. We are required to maintain various environmental and operating permits. Even though we have successfully acquired the permits necessary for our operations, any retroactive change in environmental regulations, either at the federal or state level, could require us to obtain additional or new permits or spend considerable resources on complying with such regulations. In addition, if we sought to expand the Facility’s capacity in the future, above our current 140 million gallons, we would likely be required to acquire additional regulatory permits and could also be required to install additional pollution control equipment. Our failure to obtain and maintain any environmental and/or operating permits currently required or which may be required in the future could force us to make material changes to our Facility or to shut down altogether. The U.S. Supreme Court has classified carbon dioxide as an air pollutant under the Clean Air Act in a case seeking to require the EPA to regulate carbon dioxide in vehicle emissions. As stated above, we believe the final RFS2 regulations grandfather our plant at its current operating capacity, though expansion of our plant will need to meet a threshold of a 20% reduction in greenhouse gas (“ Separately, the California Air Resources Board (" Part of our business is regulated by environmental laws and regulations governing the labeling, use, storage, discharge and disposal of hazardous materials. Other examples of government policies that can have an impact on our business include tariffs, duties, subsidies, import and export restrictions and outright embargos. We also employ maintenance and operations personnel at our Facility. In addition to the attention that we place on the health and safety of our employees, the operations at our Facility are governed by the regulations of the Occupational Safety and Health Administration, or OSHA. We have obtained all of the necessary permits to operate the plant. Although we have been successful in obtaining all of the permits currently required, any retroactive change in environmental regulations, either at the federal or state level, could require us to obtain additional or new permits or spend considerable resources in complying with such regulations. Our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act are available free of charge on our website at www.sireethanol.com as soon as reasonably practicable after we file or furnish such information electronically with the SEC. The information found on our website is not incorporated by reference into this report or any other report we file with or furnish to the SEC. The public may read and copy any materials we file with the SEC at the SEC’s Public Reference Room at 100 F Street, NE, Washington, DC. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also maintains an Internet site that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at www.sec.gov. You should carefully read and consider the risks and uncertainties below and the other information contained in this Risks Associated With Our Capital Structure Our units have no public trading market and are subject to significant transfer restrictions which could make it difficult to sell units and could reduce the value of the units. There is not an active trading market for our membership units. To maintain our partnership tax status, our units may not be publicly traded. Within applicable tax regulations, we utilize a qualified matching service (“ Our current indebtedness Under the terms of our Credit Agreement, we have made certain customary representations and we are subject to customary affirmative and negative covenants, including restrictions on our ability to incur additional debt that is not subordinated, create additional liens, transfer or dispose of assets, make distributions, consolidate, dissolve or merge, and customary events of default (including payment defaults, covenant defaults, cross defaults and bankruptcy defaults). The Credit Agreement also contains financial covenants including a minimum working capital amount, minimum local net worth (as defined) and a minimum debt service coverage ratio. A breach of any of these covenants or requirements could result in a default under our Credit Agreement. If we default under our Credit Agreement and we are unable to cure the default or obtain a waiver, we will not be able to access the credit available under our Credit Agreement and there can be no assurance that we would be able to obtain alternative financing. Our Credit Agreement also includes customary default provisions that entitle our lenders to take various actions in the event of a default, including, but not limited to, demanding payment for all amounts outstanding. If this occurs, we may not be able to repay such indebtedness or borrow sufficient funds to refinance. Even if new financing is available, it may not be on terms that are acceptable to us. No assurance can be given that our future operating results will be sufficient to achieve compliance with the covenants and requirements of our Credit Agreement. Risks Associated With Operations The ongoing impacts of the COVID-19 pandemic and its variants may negatively affect our operations, financial condition, and demand for our products. The COVID-19 pandemic and the new variants of the virus are still impacting countries, communities, supply chains and commodities markets, in The impact of adverse economic conditions on gasoline could have a material adverse impact on the price and demand for ethanol and our financial performance. The demand for gasoline correlates closely with general economic growth rates. The occurrence of recessions or other periods of low or negative economic growth will typically have a direct adverse impact on gasoline prices. Other factors that affect general economic conditions in the world or in a major region, such as changes in population growth rates, periods of civil unrest, pandemics (e.g. COVID-19), government austerity programs, or currency exchange rate fluctuations, can also impact the demand for gasoline. Sovereign debt downgrades, defaults, inability to access debt markets due to credit or legal constraints, liquidity crises, the breakup or restructuring of fiscal, monetary, or political systems such as the European Union, and other events or conditions (e.g. pandemics such as COVID-19), that impair the functioning of financial markets and institutions also may adversely impact the demand for gasoline. Reduced demand for gasoline may impair demand for ethanol, harm our operations and negatively impact our financial Decreasing oil and gasoline prices resulting in ethanol trading at a premium to gasoline could negatively impact our ability to operate profitably. Ethanol has historically traded at a discount to gasoline; however, with the recent fluctuations in gasoline prices, at times ethanol may trade at a premium to gasoline, causing a financial disincentive for discretionary blending of ethanol beyond the rates required to comply with the Declines in the price of ethanol or distillers grain would significantly reduce our revenues. The sales prices of ethanol and distillers grains can be volatile as a result of a number of factors such as overall supply and demand, the price of gasoline and corn, levels of government support, and the availability and price of competing products. We are dependent on a favorable spread between the price we receive for our ethanol and One of the most significant factors influencing the price of ethanol has been the substantial increase in ethanol production in recent years. According to the Increased demand for ethanol may require an increase in higher percentage blends for conventional automobiles. Currently, ethanol is blended with conventional gasoline for use in standard (non-flex fuel) vehicles to create a blend which is 10% ethanol and 90% conventional gasoline. In order to expand demand for ethanol, higher percentage blends of ethanol must be utilized in conventional automobiles. Such higher percentage blends of ethanol have become a contentious issue with automobile manufacturers and environmental groups having fought against higher percentage ethanol blends. E15 is a blend which is 15% ethanol and 85% conventional gasoline. Although there have been significant developments towards the availability of E15 in the marketplace, there are still obstacles to meaningful market penetration by E15. As a result, the approval of E15 may not significantly increase demand for Reduced ethanol exports due to Brazil has historically been a top destination for ethanol produced in the United States. However, Our business is not diversified. Our success depends largely on our ability to profitably operate our ethanol plant. We do not have any other lines of business or other sources of revenue if we are unable to operate our ethanol plant and manufacture ethanol, distillers grains, corn oil and carbon dioxide. If economic or political factors adversely affect the market for ethanol, distillers grains, corn oil or carbon dioxide, we have no other line of business to fall back on. Our business would also be significantly harmed if the ethanol plant could not operate at full capacity for any extended period of time. Any site near a major waterway system presents potential for flooding risk. While our site is located in an area designated as above the 100-year flood plain, it does exist within an area at risk of a "500-year flood". Even though our site is protected by levee systems, its existence next to a major river and major creeks present a risk that flooding could occur at some point in the future. During the last half of our fiscal year ended September 30, 2011, the Missouri River experienced significant flooding, as a result of unprecedented amounts of rain and snow in the Missouri River basin. This produced a sustained flood lasting many weeks at a "500-year flood" level (a level which has a 0.2 percent chance of occurring). While there were levee failures elsewhere, the levees held around our facility. We did experience minimal rail disruption due to flooding in the surrounding areas to the north and south of the Facility, but our operations were not significantly impacted. We have procured flood insurance as a means of risk mitigation; however, there is a chance that such insurance will not cover certain costs in excess of our insurance associated with flood damage or loss of income during a flood period. Our current insurance may not be adequate to cover the losses that could be incurred in a flood of a 500-year magnitude. We may experience delays or disruption in the operation of our rail line and loop track, which may lead to decreased We have entered into the Track Agreement to service our track and railroad cars. There may be times when we have to slow production at our ethanol plant due to our inability to ship all of the ethanol and distillers grains we produce, or getting rail cars returned on a timely basis. Due to increased rail traffic nationally because of shipments of crude oil, rail shipment delays have been experienced from time to time, especially during severe winter conditions. If we cannot operate our plant at full capacity, we may experience decreased revenues which may affect the profitability of the Facility. Hedging transactions, which are primarily intended to stabilize our corn costs, may be ineffective and involve risks and costs that could reduce our profitability and have an adverse impact on our liquidity. We are exposed to market risk from changes in commodity prices. Exposure to commodity price risk results principally from our dependence on corn in the ethanol production process. In an attempt to minimize the effects of the volatility of corn costs on our operating profits, we enter into forward corn, ethanol, and distillers grain contracts and engage in other hedging transactions involving over-the-counter and exchange-traded futures and option contracts for corn; provided, we have sufficient working capital to support such hedging transactions. Hedging is an attempt to protect the price at which we buy corn and the price at which we will sell our products in the future and to reduce profitability and operational risks caused by price fluctuation. The effectiveness of our hedging strategies, and the associated financial impact, depends 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 our futures contracts. Our hedging activities may not successfully reduce the risk caused by price fluctuations which may leave us vulnerable to high corn prices. We have experienced hedging losses in the past and we may experience hedging losses again in the future. We may vary the amount of hedging or other price mitigation strategies we undertake, or we may choose not to engage in hedging transactions in the future and our operations and financial conditions may be adversely affected during periods in which corn prices increase. Hedging arrangements also expose us to the risk of financial loss in situations where the other party to the hedging contract defaults on its contract or, in the case of over-the-counter or exchange-traded contracts, where there is a change in the expected differential between the underlying price in the hedging agreement and the actual prices paid or received by us. Our attempts to reduce market risk associated with fluctuations in commodity prices through the use of over-the-counter or exchange-traded futures results in additional costs, such as brokers’ commissions, and may require cash deposits with brokers or margin calls. Utilizing cash for these costs and to cover margin calls has an impact on the cash we have available for our operations which could result in liquidity problems during times when corn prices fall significantly. Depending on our open derivative positions, we may require additional liquidity with little advance notice to meet margin calls. We have had to in the past, and in the future will likely be required to, cover margin calls. While we continuously monitor our exposure to margin calls, we cannot guarantee that we will be able to maintain adequate liquidity to cover margin calls in the future. Ethanol production is energy intensive and interruptions in our supply of energy, or volatility in energy prices, could have a material adverse impact on our business. Ethanol production requires a constant and consistent supply of energy. If our production is halted for any extended period of time, it will have a material adverse effect on our business. If we were to suffer interruptions in our energy supply, our business would be harmed. We have entered into the Steam Contract Our ability to successfully operate depends on the availability of water. To produce ethanol, we need a significant supply of water, and water supply and quality are important requirements to operate an ethanol plant. Our water requirements are supplied by our wells, but there are no assurances that we will continue to have a sufficient supply of water to sustain the Facility in the future, or that we can obtain the necessary permits to obtain water directly from the Missouri River as an alternative to our wells. We have executed an output contract for the purchase of all of the ethanol we produce, which may result in lower revenues because of decreased marketing flexibility and inability to capitalize on temporary or regional price disparities. Bunge is the exclusive purchaser of our ethanol and markets our ethanol in national, regional and local markets. We do not plan to build our own sales force or sales organization to support the sale of ethanol. As a result, we are dependent on Bunge to sell our principal product. When there are temporary or regional disparities in ethanol market prices, it could be more financially advantageous to have the flexibility to sell ethanol ourselves through our own sales force. We have decided not to pursue this route. We are increasingly dependent on information technology and disruptions, failures or security breaches of our information technology infrastructure could have a material adverse effect on our operations. Information technology is critically important to our business operations. We rely on information technology networks and systems, including the Internet, to process, transmit and store electronic and financial information, to manage a variety of In addition, if we are unable to prevent physical and electronic break-ins, cyber-attacks and other information security breaches, we may encounter significant disruptions in our operations including our production and manufacturing processes, which can cause us to suffer financial and reputational damage, be subject to litigation or incur remediation costs or penalties. Any such disruption could materially and adversely impact our reputation, business, financial condition and results of operations. Such breaches may also result in the unauthorized disclosure of confidential information belonging to us or to our partners, customers, suppliers or employees which could further harm our reputation or cause us to suffer financial losses or be subject to litigation or other costs or penalties. The mishandling or inappropriate disclosure of non-public sensitive or protected information could lead to the loss of intellectual property, negatively impact planned corporate transactions or damage our reputation and brand image. Misuse, leakage or falsification of legally protected information could also result in a violation of data privacy laws and regulations and have a negative impact on our reputation, business, financial condition and results of operations. Continued price volatility and fluctuations in the price of corn may adversely impact our operating results and profitability Our operating results and financial condition are significantly affected by the price and supply of corn. Because ethanol competes with non-corn derived fuels, we generally are unable to readily pass along increases in corn costs to our customers. At certain levels, corn prices may make the production of ethanol uneconomical. There is significant price pressure on local corn markets caused by nearby ethanol plants, livestock industries and other corn consuming enterprises. Trade actions by the Biden Administration and foreign governments, particularly those affecting the agriculture sector and related industries, could adversely affect our operations and profitability. In a global economy domestic and foreign government policies and regulations significantly impact domestic agricultural commodity production and trade flows. Governmental policies affecting the agricultural industry, such as taxes, trade tariffs, duties, subsidies, import and export restrictions on commodities and commodity products, can influence industry profitability, the planting of certain crops, the location and size of crop production, whether unprocessed or processed commodity products are traded, and the volume and types of imports and exports. International trade disputes can also adversely affect trade flows by limiting or disrupting trade between countries or regions. Future governmental policies, regulations or actions affecting our industry may adversely affect the supply of, demand for and prices of our products, restrict our ability to do business and cause our financial results to suffer. Declines in the price of ethanol or distillers grain would significantly reduce our The sales prices We compete with larger, better financed entities, which could negatively impact our ability to operate profitably. There is significant competition among ethanol producers with numerous producers and privately-owned ethanol plants planned and operating throughout the Midwest and elsewhere in the United States. Our business faces a competitive challenge from larger plants, from plants that can produce a wider range of products than we can, and from other plants similar to ours. Large ethanol producers such as Archer Daniels Midland, Flint Hills Resources LP, Green Plains Increased ethanol industry penetration by oil companies may adversely impact our margins. The ethanol industry is a highly competitive environment and it is principally comprised of smaller entities that engage exclusively in ethanol production and large integrated grain companies that produce ethanol along with their base grain businesses. We have historically always faced competition with other small independent producers as well as larger, better financed producers for capital, labor, corn and other resources. Until recently, oil companies, petrochemical refiners and gasoline retailers have not Changes and advances in ethanol production technology could require us to incur costs to update our Facility or could otherwise hinder our ability to compete in the ethanol industry or operate profitably. Advances and changes in the technology of ethanol production are expected to occur. Such advances and changes may make the ethanol production technology installed in our plant less desirable or obsolete. These advances could also allow our competitors to produce ethanol at a lower cost than us. If we are unable to adopt or incorporate technological advances, our ethanol production methods and processes could be less efficient than our competitors, which could cause our plant to become uncompetitive or completely obsolete. If our competitors develop, obtain or license technology that is superior to ours or that makes our technology obsolete, we may be required to incur significant costs to enhance or acquire new technology so that our ethanol production remains competitive. Alternatively, we may be required to seek third-party licenses, which could also result in significant expenditures. We cannot guarantee or assure that third-party licenses will be available or, once obtained, will continue to be available on commercially reasonable terms, if at all. These costs could negatively impact our financial performance by increasing our operating costs and reducing our net income. Competition from the advancement of alternative fuels may decrease the demand for ethanol and negatively impact our profitability. Alternative fuels, gasoline oxygenates and ethanol production methods are continually under development. A number of automotive, industrial and power generation manufacturers are developing alternative clean power systems using fuel cells or clean burning gaseous fuels. Like ethanol, the emerging fuel cell The broad commercialization and acceptance of Electric Vehicles (EV) and other Alternative Fuel Source Vehicles may have a negative impact on gasoline and biofuels, including ethanol, which could negatively impact our profitability. 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. Like ethanol, the emerging fuel cell and electric-powered vehicle industries offer technological options to address worldwide energy costs, the long-term availability of petroleum reserves and environmental concerns. Fuel cells have emerged as a potential alternative to certain existing power sources because of their higher efficiency, reduced noise and lower emissions. Fuel cell industry participants are currently targeting the transportation, stationary power and portable power markets in order to decrease fuel costs, lessen dependence on crude oil and reduce harmful emissions. The same can be said of electric-powered vehicles. If the fuel cell industry continues to expand and gain broad acceptance and becomes readily available to consumers for motor vehicle use, we may not be able to compete effectively. Likewise, participants in the emerging electric-powered vehicle industry are currently targeting the transportation market to decrease dependence on crude oil and reduce harmful emissions. If the electric-powered vehicle industry continues to expand and gain broad acceptance, the ethanol and larger gasoline industry may not be able to compete effectively. This additional competition could reduce the demand for ethanol, which would negatively impact our profitability The inability to become a carbon-neutral or carbon-negative fuel source could affect our future ability to compete in the market, which could negatively impact our profitability. RFA members have pledged to achieve a net-zero carbon footprint by 2050 or sooner. To stay competitive with electric vehicles and other Alternative Fuel Source Vehicles in an economy which continues to highly-value carbon neutral or zero-carbon alternatives, it is likely going to be imperative that the ethanol industry and the Company become producers of carbon neutral or carbon-negative fuel sources in the future. In order for the Company to achieve this reduction in carbon impact, the Company anticipates that a solution for carbon capture must be identified and implemented with respect to the Company’s plant. There are various solutions to this issue and the Company must determine which path forward is the most effective while also being a fiscally sound decision. If the Company is unable to maintain its competitive edge in the marketplace, or if the Company were to select an improper technology in its attempts to reduce its carbon impact, it could have a negative effect on the Company’s results of operations and profitability. Corn-based ethanol may compete with cellulose-based ethanol in the future, which could make it more difficult for us to produce ethanol on a cost-effective basis. Most ethanol produced in the U.S. is currently produced from corn and other raw grains, such as milo or sorghum - especially in the Midwest. The current trend in ethanol production research is to develop an efficient method of producing ethanol from cellulose-based biomass, such as agricultural waste, forest residue, municipal solid waste and energy crops. This trend is driven by the fact that cellulose-based biomass is generally cheaper than corn, and producing ethanol from cellulose-based biomass would create opportunities to produce ethanol in areas which are unable to grow corn. The Energy Independence and Security Act of 2007 and the 2008 Farm Bill offer a very strong incentive to develop commercial scale cellulosic ethanol. The statutory volume requirement in the RFS requires that 16 billion gallons per year of advanced bio-fuels be consumed in the United States by 2022. Additionally, state and federal grants have been awarded to several companies who are seeking to develop commercial-scale cellulosic ethanol plants. As a result, at least three companies have reportedly already begun producing on a commercial scale and a handful of other companies have begun construction on commercial scale cellulosic ethanol plants some of which may be completed in the near future. If an efficient method of producing ethanol from cellulose-based biomass is developed, we may not be able to compete effectively. It may not be practical or cost-effective to convert our Facility into a plant which will use cellulose-based biomass to produce ethanol. If we are unable to produce ethanol as cost-effectively as cellulose-based producers, our ability to generate revenue will be negatively impacted. Depending on commodity prices, foreign producers may produce ethanol at a lower cost than we can, which may result in lower ethanol prices which would adversely affect our financial results. We face competition from foreign ethanol producers with Brazil currently the second largest ethanol producer in the world. Brazil’s ethanol production is sugarcane based, as opposed to corn based, and, depending on feedstock prices, may be less expensive to produce. Under Risks Associated With Government Regulation and Subsidization The ethanol industry is highly dependent on government mandates relating to the production and use of ethanol and changes to such mandates and related regulations could adversely affect the market for ethanol and our results of operations The domestic market for ethanol is largely dictated by federal mandates for blending ethanol with gasoline. Future demand for ethanol will be largely dependent upon the economic incentives to blend based upon the relative value of gasoline versus ethanol, taking into consideration the relative octane value of ethanol, environmental requirements and the RFS mandate. The RFS mandate helps support a market for ethanol that might disappear without this incentive. Annually, the EPA is supposed to pass a rule that establishes the number of gallons of different types of renewable fuels that must be used in the United States which is called the renewable volume obligations. In The EPA has recently expanded its use of waivers to small refineries. The effect of these waivers is that the refinery is no longer required to earn or purchase blending credits, known as RINs, negatively affecting ethanol demand and resulting in lower ethanol prices. On October 15, The compliance mechanism for Federal law mandates the use of oxygenated gasoline in the winter in areas that do not meet Clean Air Act standards for carbon monoxide. If these mandates are repealed, the market for domestic ethanol could be significantly reduced. Additionally, flexible-fuel vehicles receive preferential treatment in meeting corporate average fuel economy, or CAFE, standards. However, high blend ethanol fuels such as E85 result in lower fuel efficiencies. Absent the CAFE preferences, it may be unlikely that auto manufacturers would build flexible-fuel vehicles. Any change in these CAFE preferences could reduce the growth of E85 markets and result in lower ethanol prices, which could adversely impact our operating results. To the extent that such federal or state laws or regulations are modified, the demand for ethanol may be reduced, which could negatively and materially affect our ability to operate profitably. We are subject to extensive environmental regulation and operational safety regulations that impact our expenses and could reduce our profitability. Ethanol production involves the emission of various airborne pollutants, including particulate matters, carbon monoxide, oxides of nitrogen, volatile organic compounds and sulfur dioxide. We are subject to regulations on emissions from the EPA and the IDNR (Iowa Department of Natural Resources). The EPA’s and IDNR’s environmental regulations are subject to change and often such changes are not favorable to industry. Consequently, even if we have the proper permits now, we may be required to invest or spend considerable resources to comply with future environmental regulations. Our failure to comply or the need to respond to threatened actions involving environmental laws and regulations may adversely affect our business, operating results or financial condition. We must follow procedures for the proper handling, storage, and transportation of finished products and materials used in the production process and for the disposal of waste products. In addition, state or local requirements also restrict our production and distribution operations. We could incur significant costs to comply with applicable laws and regulations. Changes to current environmental rules for the protection of the environment may require us to incur additional expenditures for equipment or processes. We could be subject to environmental nuisance or related claims by employees, property owners or residents near the Facility arising from air or water discharges. Ethanol production has been known to produce an odor to which surrounding residents could object. We believe our plant design mitigates most odor objections. However, if odors become a problem, we may be subject to fines and could be forced to take costly curative measures. Environmental litigation or increased environmental compliance costs could significantly increase our operating costs. We are subject to federal and state laws regarding operational safety. Risks of substantial compliance costs and liabilities are inherent in ethanol production. Costs and liabilities related to worker safety may be incurred. Possible future developments-including stricter safety laws for workers or others, regulations and enforcement policies and claims for personal or property damages resulting from our operation could result in substantial costs and liabilities that could reduce the amount of cash that we would otherwise have to distribute to members or use to further enhance our business. Carbon dioxide may be regulated by the EPA in the future as an air pollutant, requiring us to obtain additional permits and install additional environmental mitigation equipment, which may adversely affect our financial performance. Our Facility emits carbon dioxide as a by-product of the ethanol production process and we sell a portion of our carbon dioxide by-product to Air Products and Chemicals, The California Low Carbon Fuel Standard may decrease demand for corn based ethanol which could negatively impact our profitability. California passed a Low Carbon Fuels Standard (" We own the Facility site located near Council Bluffs, Iowa, which consists of three parcels totaling nearly 275 acres. This property is encumbered under the mortgage agreement with From time to Not applicable. As of September 30, To date, we have made distributions totaling Item 7.Management’s Discussion and Analysis of Financial Condition and Results of General Overview and Recent Developments The following discussion and analysis provides information which management believes is relevant to an assessment and understanding of our financial condition, The Company is an Iowa limited liability company located in Council Bluffs, Iowa, formed in March, 2005. The Company is permitted to produce 140 million gallons of ethanol. On November 26, 2019, the EPA approved the Company's petition as an "Efficient Producer" to increase the D-6 RINs generated for up to 147 million gallons of ethanol produced annually, provided the non-grandfathered ethanol produced satisfies the 20% lifecycle GHG ("Greenhouse gas" impacts) reduction requirements specified in the Clean Air Act for renewable fuel. The Company must comply with all registration provisions in order to register for the production of non-grandfathered ethanol, and the registration application must be accepted by the EPA before the facility is eligible to generate RIN's for non-grandfathered ethanol produced. The Company anticipates completing the registration process by the end of the second quarter in the fiscal year ending September 30, 2022 ("Fiscal 2022"). Industry Factors Affecting our Results of Operations For the fiscal year ended September 30, 2021 ("Fiscal Corn prices increased 59% during Fiscal Management anticipates that ethanol prices will continue to change in relation to changes in corn and energy prices. If corn, crude oil and gasoline prices remain During Fiscal 2021, the Company faced significant challenges with respect to transportation and logistics. Like many companies, the ongoing impacts of the COVID-19 pandemic on coastal ports and the trucking industry had a material effect on our ability to timely, economically, and consistently ship products both domestically and abroad. Management continues to explore various options to mitigate these challenges, but expects them to be a factor into Fiscal 2022. Management does not know when these logistics challenges will dissipate at this time. The average market price per ton of distillers grains sold in Results of Operations The following table shows our results of operations, stated as a percentage of revenue for Fiscal Fiscal 2021 Fiscal 2020 Amounts in 000's % of Revenues Amounts in 000's % of Revenues Income Statement Data Revenues Cost of Goods Sold Material Costs Variable Production Expense Fixed Production Expense Gross Margin General and Administrative Expenses Other Expenses and Income, net Net Income (Loss) Revenues Our revenue from operations is derived from three primary sources: sales of ethanol, distillers grains, and distillers corn oil. The chart The market experienced lower domestic demand in response to the The During Fiscal Fiscal 2021 Fiscal 2020 Amounts in 000's % of Revenues Amounts in 000's % of Revenues Product Revenue Information Ethanol Distiller's Grains Corn Oil Other Cost of Goods Sold Our cost of goods sold as a percentage of our revenues was Realized and unrealized (gains) or losses related to our derivatives and hedging related to corn resulted in an decrease of Our average General & Administrative Expense Our general and administrative expenses as a percentage of revenues were Other Expense Our other expenses were approximately Key Operating Measures 2.931 Our production increased 10.2% when comparing Fiscal 2020 to Fiscal 2021 due to the effects of the pandemic in 2020 and the reduced ethanol production experienced nationwide. The average ethanol price per gallon increased 58% year over year due to the increased demand and constraints on supply and transportation. The price of corn increased 57.6% on average due to input costs, early projections of drought and transportation constraints. While the overall cost of natural gas went up 25.9%, the Company was able to reduce its BTU's per gallon by 6.7% due to energy efficiency improvements throughout the plant. The cost of chemicals increased 14.5% year over year due to reduced supply, higher natural gas prices (impacting nitrogen based chemicals) and labor shortages. Paycheck Protection Program Loan On April 14, 2020, the Company received $1.1 million under the new Paycheck Protection Program ("PPP Loan") legislation passed in response to the economic downturn triggered by COVID-19. Our PPP Loan may be forgiven based upon various factors, including, without limitation, our payroll cost over an eight-to-twenty-four week period starting upon our receipt of the funds. Expenses for approved payroll costs, lease payments on agreements before February 15, 2020, and utility payments under agreements before February 1, 2020 and certain other On January 28, 2021, the Company received an additional $1.1 million under Phase II of the PPP legislation (the "Second PPP Loan"). As in the original PPP loan, expenses for approved payroll costs, lease payments on agreements and utility payments under agreements and certain other specified costs can be paid with these funds and eligible for payment forgiveness by the federal government. At least 60% of the proceeds must be used for approved payroll costs, and no more than 40% for non-payroll expenses. PPP loan proceeds used by a borrower for the approved expense categories will generally be forgiven by the lender if the borrower satisfies certain employee headcount and compensation requirements. The Company applied for forgiveness of the Second PPP Loan in September of 2021. As of December 18, 20201, we are still awaiting a response on our request. Liquidity and Capital Resources As of September 30, In June 2014, the Company entered into a $66.0 million Senior Credit Agreement (the “ During Fiscal 2021, we entered into Amendments No. 5, 6 and 7 to the Credit Agreement (the “Amendments”). The • The existing term note is replaced by a Second Amended and Restated Term Note with a maximum principal amount of $30.0 million, a maturity date of November 15, 2024, an interest rate of LIBOR + 340 basis points, and required the Company make one principal payment of $3.75 million during Fiscal 2021, which payment was made on March 1, 2021, and thereafter requires the Company to make four equal semi-annual payments of $3.75 million on each March 1 and September 1, through September 1, 2023. All remaining amounts due under the Second Amended and Restated Term Note are due and payable on the maturity date • The Company’s existing First Amended and Restated Revolving Term Note (the “Restated Revolving Term Note”) was amended to provide that the current interest rate of LIBOR + 340 basis points is now subject to change as discussed below • The Company entered into a new Revolving Credit Note (the “New Revolving Credit Note”) with a maximum draw amount of $10,000,000, a maturity date of February 1, 2022 and an interest rate of LIBOR + 340 basis points (which interest rate is subject to change as discussed below). The full amount of this New Revolving Credit Note is available on a revolving basis from time to time through maturity. Primary Working Capital Needs Cash provided by operations for Fiscal We believe that our existing sources of liquidity, including cash on hand, available revolving credit and cash provided by operating activities, will satisfy our projected liquidity requirements, which primarily consists of working capital requirements, for the next twelve months. However, in the event that the market experiences significant price volatility and negative crush margins at or in excess of the levels experienced in previous years, we may be required to explore alternative methods to meet our short-term liquidity needs including temporary shutdowns of operations, temporary reductions in our production levels, or negotiating short-term concessions from our lenders. Commodity Price Risk Our operations are highly dependent on commodity prices, especially prices for corn, ethanol and distillers grains and the spread between them ( the "crush margin"). As a result of price volatility for these commodities, our operating results may fluctuate substantially. The price and availability of corn are subject to significant fluctuations depending upon a number of factors that affect commodity prices in general, including crop conditions, weather, governmental programs and foreign purchases. We may experience increasing costs for corn and natural gas and decreasing prices for ethanol and distillers grains which could significantly impact our operating results. Because the market price of ethanol is not directly related to corn prices, ethanol producers are generally not able to compensate for increases in the cost of corn through adjustments in prices for ethanol. We continue to monitor corn and ethanol prices and manage the "crush margin" to affect our longer-term profitability. We enter into various derivative contracts with the primary objective of managing our exposure to adverse price movements in the commodities used for, and produced in, our business operations and, to the extent we have working capital available and available market conditions are appropriate, we engage in hedging transactions which involve risks that could harm our business. We measure and review our net commodity positions on a daily basis. Our daily net agricultural commodity position consists of inventory, forward purchase and sale contracts, over-the-counter and exchange traded derivative instruments. The effectiveness of our hedging strategies is dependent upon the cost of commodities and our ability to sell sufficient products to use all of the commodities for which we have futures contracts. Although we actively manage our risk and adjust hedging strategies as appropriate, there is no assurance that our hedging activities will successfully reduce the risk caused by market volatility which In addition, as described above, hedging transactions expose us to the risk of counterparty non-performance where the counterparty to the hedging contract defaults on its contract or, in the case of over-the-counter or exchange-traded contracts, where there is a change in the expected differential between the price of the commodity underlying the hedging agreement and the actual prices paid or received by us for the physical commodity bought or sold. We have, from time to time, experienced instances of counterparty non-performance but losses incurred in these situations were not significant. Although we believe our hedge positions accomplish an economic hedge against our future purchases and sales, management has chosen not to use hedge accounting, which would match any gain or loss on our hedge positions to the specific commodity purchase being hedged. We are using fair value accounting for our hedge positions, which means as the current market price of our hedge positions changes, the realized or unrealized gains and losses are immediately recognized in the current period (commonly referred to as the “mark to market” method). The immediate recognition of hedging gains and losses under fair value accounting can cause net income to be volatile from quarter to quarter due to the timing of the change in value of the derivative instruments relative to the cost and use of the commodity being hedged. As corn prices move in reaction to market trends and information, our income statement will be affected depending on the impact such market movements have on the value of our derivative instruments. Depending on market movements, crop prospects and weather, our hedging strategies may cause immediate adverse effects, but are expected to produce long-term positive impact. In the event we do not have sufficient working capital to enter into hedging strategies to manage our commodities price risk, we may be forced to purchase our corn and market our ethanol at spot prices and as a result, we could be further exposed to market volatility and risk. However, during the past year, the spot market has been advantageous. Credit and Counterparty Risks Through our normal business activities, we are subject to significant credit and counterparty risks that arise through normal commercial sales and purchases, including forward commitments to buy and sell, and through various other over-the-counter (OTC) derivative instruments that we utilize to manage risks inherent in our business activities. We define credit and counterparty risk as a potential financial loss due to the failure of a counterparty to honor its obligations. The exposure is measured based upon several factors, including unpaid accounts receivable from counterparties and unrealized gains (losses) from OTC derivative instruments (including forward purchase and sale contracts). We actively monitor credit and counterparty risk through credit analysis (by our marketing agent). Impact of Hedging Transactions on Liquidity Our operations and cash flows are highly impacted by commodity prices, including prices for corn, ethanol, distillers grains and natural gas. We attempt to reduce the market risk associated with fluctuations in commodity prices through the use of derivative instruments, including forward corn contracts and over-the-counter exchange-traded futures and option contracts. Our liquidity position may be positively or negatively affected by changes in the underlying value of our derivative instruments. When the value of our open derivative positions decrease, we may be required to post margin deposits with our brokers to cover a portion of the decrease or we may require significant liquidity with little advanced notice to meet margin calls. Conversely, when the value of our open derivative positions increase, our brokers may be required to deliver margin deposits to us for a portion of the increase. We continuously monitor and manage our derivative instruments portfolio and our exposure to margin calls and while we believe we will continue to maintain adequate liquidity to cover such margin calls from operating results and borrowings, we cannot estimate the actual availability of funds from operations or borrowings for hedging transactions in the future. The effects, positive or negative, on liquidity resulting from our hedging activities tend to be mitigated by offsetting changes in cash prices in our business. For example, in a period of rising corn prices, gains resulting from long grain derivative positions would generally be offset by higher cash prices paid to farmers and other suppliers in local corn markets. These offsetting changes do not always occur, however, in the same amounts or in the same period. We expect that a $1.00 per bushel fluctuation in market prices for corn would impact our cost of goods sold by approximately $48 million, or $0.34 per gallon, assuming our plant operates at 100% of our capacity assuming no increase in the price of ethanol. We expect the annual impact to our results of operations due to a $0.50 decrease in ethanol prices will result in approximately a $70 million decrease in revenue. Summary of Critical Accounting Policies and Estimates Note 2 to our financial statements contains a summary of our significant accounting policies, many of which require the use of estimates and assumptions. Accounting estimates are an integral part of the preparation of financial statements and are based upon management’s current judgment. We used our knowledge and experience about past events and certain future assumptions to make estimates and judgments involving matters that are inherently uncertain and that affect the carrying value of our assets and liabilities. We believe that of our significant accounting policies, the following are noteworthy because changes in these estimates or assumptions could materially affect our financial position and results of operations: • Revenue Recognition The Company recognizes revenue when a customer obtains control of promised goods or services in an amount that reflects the considerations the entity expects to receive in exchange for those goods or services. In addition, the standard requires disclosures of the nature, amount, timing and uncertainty of revenue and cash flows arising from the contracts with customers. The Company applies the five-step method to all contracts with customers. The Company sells ethanol (pursuant to a marketing agreement) and related products The • Accounts Receivable Accounts receivable are recorded at original invoice amounts less an estimate made for doubtful receivables based on a review of all outstanding amounts on a quarterly basis. Management determines the allowance for doubtful accounts by regularly evaluating customer receivables and • Investment in Commodities Contracts, Derivative Instruments and Hedging Activities The Company’s operations and cash flows are subject to fluctuations due to changes in commodity prices. The Company is subject to market risk with respect to the price and availability of corn, the principal raw material used to produce ethanol and ethanol by-products. Exposure to commodity price risk results from its dependence on corn in the ethanol production process. In general, rising corn prices result in lower profit margins and, therefore, represent unfavorable market conditions. This is especially true when market conditions do not allow the Company to pass along increased corn costs to customers. The availability and price of corn is subject to wide fluctuations due to unpredictable factors such as weather conditions, farmer planting decisions, governmental policies with respect to agriculture and international trade and global demand and supply. To minimize the risk and the volatility of commodity prices, primarily related to corn and ethanol, the Company uses various derivative instruments, including forward corn, ethanol and distillers grains purchase and sales contracts, over-the-counter and exchange-trade futures and option contracts. When the Company has sufficient working capital available, it enters into derivative contracts to hedge its exposure to price risk related to forecasted corn needs and forward corn purchase contracts. Management has evaluated the Company’s contracts to determine whether the contracts are derivative instruments. Certain contracts that literally meet the definition of a derivative may be exempted from derivative accounting as normal purchases or normal sales. Normal purchases and normal sales are contracts that provide for the purchase or sale of something other than a financial instrument or derivative instrument that will be delivered in quantities expected to be used or sold over a reasonable period in the normal course of business. Gains and losses on contracts that are designated as normal purchases or normal sales contracts are not recognized until quantities are delivered or utilized in production. The Company applies the normal purchase and sale exemption to forward contracts relating to ethanol and distillers grains and solubles and therefore these forward contracts are not marked to market. As of Corn purchase contracts are treated as derivative financial instruments. Changes in fair value of forward corn contracts, which are marked to market each period, are included in costs of goods sold. As of In addition, the Company enters into short-term cash, options and futures contracts as a means of managing exposure to changes in commodity prices. The Company enters into derivative contracts to hedge the exposure to volatile commodity price fluctuations. The Company maintains a risk management strategy that uses derivative instruments to minimize significant, unanticipated earnings fluctuations caused by market volatility. The Company’s specific goal is to protect itself from large moves in commodity costs. All derivatives are designated as non-hedge derivatives and the contracts will be accounted for at fair • Inventory Inventory is valued at the lower of weighted average cost or net realizable value. In the valuation of inventories and purchase commitments, net realizable value is defined as estimated selling price in the ordinary course of business less reasonable predictable costs of completion, disposal and transportation. Not applicable. Report of Independent Registered Public Accounting Firm To the Members and Board of Directors Opinion on the Financial Statements We have audited the accompanying balance sheets of Southwest Iowa Renewable Energy, LLC (the Company) as of September 30, Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on We conducted our audits in accordance with the standards of the Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence Critical Audit Matters Critical audit matters are matters arising from the current period audit of the financial statements /s/ RSM US LLP We have Served as the Company's auditor since 2008. Des Moines, Iowa December SOUTHWEST IOWA RENEWABLE ENERGY, LLC Balance Sheets (Dollars in thousands) September 30, 2021 September 30, 2020 ASSETS Current Assets Cash and cash equivalents Accounts receivable, net of allowance for doubtful accounts Derivative financial instruments Inventory Prepaid expenses and other Total current assets Property, Plant and Equipment Land Plant, building and equipment Office and other equipment Accumulated depreciation Net property, plant and equipment Right of use asset operating leases, net Total Assets LIABILITIES AND MEMBERS' EQUITY Current Liabilities Accounts payable Accrued expenses Current maturities of notes payable Current portion of operating lease liability Total current liabilities Long Term Liabilities Notes payable, less current maturities Other long-term liabilities Operating lease liability, less current maturities Total long term liabilities Members' Equity Members' capital 8,975 units issued and outstanding as of September 30, 2021 and 2020 Retained earnings Total members' equity Total Liabilities and Members' Equity See Notes to Financial Statements SOUTHWEST IOWA RENEWABLE ENERGY, LLC Statements of Operations (Dollars in thousands, except per unit data) Year Ended Year Ended September 30, 2021 September 30, 2020 Revenues Cost of Goods Sold Cost of goods sold-non hedging Realized & unrealized hedging (gains) losses Gross Margin General and administrative expenses Operating Income Other Expense Interest expense and other income, net Net Income (Loss) Weighted Average Units Outstanding -basic and diluted Income (Loss) per unit -basic and diluted See Notes to Financial Statements SOUTHWEST IOWA RENEWABLE ENERGY, LLC Statements of Members' Equity (Dollars in thousands) Members' Capital Retained Earnings Total Balance, September 30, 2019 Repurchase of Membership Units Net (Loss) Balance, September 30, 2020 Net Income Balance, September 30, 2021 See Notes to Financial Statements SOUTHWEST IOWA RENEWABLE ENERGY, LLC Statements of Cash Flows (Dollars in thousands) Year Ended Year Ended September 30, 2021 September 30, 2020 CASH FLOWS FROM OPERATING ACTIVITIES Net Income (Loss) Adjustments to reconcile net income (loss) to net cash provided by operating activities: Depreciation Amortization Loss on disposal of property and equipment Change in other assets, net Bad debt expense (Increase) decrease in current assets: Accounts receivable Inventory Prepaid expenses and other Derivative financial instruments Increase in other long-term liabilities Increase (decrease) in current liabilities: Accounts payable Derivative financial instruments Accrued expenses Net cash provided by operating activities CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property and equipment Proceeds from sale of property and equipment Net cash (used in) investing activities CASH FLOWS FROM FINANCING ACTIVITIES Payments for financing costs Settlement of put option liability Proceeds from notes payable Payments of notes payable Repurchase of membership units Net cash provided by financing activities Net increase in cash and cash equivalents CASH AND CASH EQUIVALENTS Beginning Ending SUPPLEMENTAL CASH FLOW INFORMATION Cash paid for interest SUPPLEMENTAL DISCLOSURE OF NON-CASH INVESTING AND FINANCING ACTIVITIES Establishment of lease liability and right-of-use asset See Notes to Financial Statements SOUTHWEST IOWA RENEWABLE ENERGY, LLC Notes to Financial Statements September 30, Note 1:Nature of Business Southwest Iowa Renewable Energy, LLC (the “ Note 2:Summary of Significant Accounting Policies Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. Cash and Cash Equivalents The Company considers all highly liquid investments purchased with a maturity of three months or less when purchased to be cash equivalents. Concentration of Credit Risk The Company’s cash balances are maintained in bank deposit accounts which at times may exceed federally-insured limits. The Company has not experienced any losses in such accounts. Revenue Recognition The Company recognizes revenue when a customer obtains control of promised goods or services in an amount that reflects the considerations the entity expects to receive in exchange for those goods or services. In addition, the standard requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from the contracts with customers. The Company applies the five-step method to all contracts with customers. The Company sells ethanol and related products pursuant to marketing agreements. Revenues are recognized when the risk of loss has been transferred to the marketing company and the marketing company has taken title to the product, prices are fixed or determinable and collectability is reasonably assured. The Company’s products are generally shipped Accounts Receivable Accounts receivable are recorded at original invoice amounts less an estimate made for doubtful receivables based on a review of all outstanding amounts on a monthly basis. Management determines the allowance for doubtful accounts by regularly evaluating individual customer receivables and considering customers’ financial condition, credit history and current economic conditions. As of Risks and Uncertainties The Company's operating and financial performance is largely driven by the prices at which ethanol is sold and the net expense of corn. The price of ethanol is influenced by factors such as supply and demand, weather, government policies and Investment in Commodities Contracts, Derivative Instruments and Hedging Activities The Company’s operations and cash flows are subject to fluctuations due to changes in commodity prices. The Company is subject to market risk with respect to the price and availability of corn, the principal raw material used to produce ethanol and ethanol by-products. Exposure to commodity price risk results from its dependence on corn in the ethanol production process. In general, rising corn prices result in lower profit margins and, therefore, represent unfavorable market conditions. This is especially true when market conditions do not allow the Company to pass along increased corn costs to customers. The availability and price of corn is subject to wide fluctuations due to unpredictable factors such as weather conditions, farmer planting decisions, governmental policies with respect to agriculture and international trade and global demand and supply. To minimize the risk and the volatility of commodity prices, primarily related to corn and ethanol, the Company uses various derivative instruments, including forward corn, ethanol and distillers grains purchase and sales contracts, over-the-counter and exchange-trade futures and option contracts. When the Company has sufficient working capital available, it enters into derivative contracts to hedge its exposure to price risk related to forecasted corn needs and forward corn purchase contracts. Management has evaluated the Company’s contracts to determine whether the contracts are derivative instruments. Certain contracts that literally meet the definition of a derivative may be exempted from derivative accounting as normal purchases or normal sales. Normal purchases and normal sales are contracts that provide for the purchase or sale of something other than a financial instrument or derivative instrument that will be delivered in quantities expected to be used or sold over a reasonable period in the normal course of business. Gains and losses on contracts that are designated as normal purchases or normal sales contracts are not recognized until quantities are delivered or utilized in production. The Company applies the normal sale exemption to forward contracts relating to ethanol, distillers grains, and corn oil and therefore these forward contracts are not marked to market. As of September 30, Corn purchase contracts are treated as derivative financial instruments. Changes in fair value of forward corn contracts, which are marked to market each period, are included in costs of goods sold. As of September 30, In addition, the Company enters into short-term cash, options and futures contracts as a means of managing exposure to changes in commodity prices. The Company enters into derivative contracts to hedge the exposure to volatile commodity price fluctuations. The Company maintains a risk management strategy that uses derivative instruments to minimize significant, unanticipated earnings fluctuations caused by market volatility. The Company’s specific goal is to protect itself from large moves in commodity costs. All derivatives are designated as non-hedge derivatives and the contracts will be accounted for at fair value. Although the contracts are considered effective economic hedges of specified risks, they are not designated as or accounted for as hedging instruments. Derivatives not designated as hedging instruments along with cash due to brokers at September 30, Balance Sheet Classification September 30, 2021 September 30, 2020 in 000's in 000's Futures and option contracts In gain position In loss position Cash held by broker Forward contracts, corn Current asset The net realized and unrealized gains and losses on the Company’s derivative contracts for the years ended Statement of Operations Classification September 30, 2021 September 30, 2020 Net realized and unrealized (gains) losses related to: (in 000's) (in 000's) Forward purchase contracts (corn) Cost of Goods Sold Futures and option contracts (corn) Cost of Goods Sold Inventory Inventory is stated at the lower of average cost or net realizable value. In the valuation of inventories and purchase commitments, net realizable value is defined as estimated selling price in the ordinary course of business less reasonable predictable costs of completion, disposal and transportation. Leases In February 2016, Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) 2016-02 "Leases” ("ASU 2016-02"). ASU 2016-02 requires the recognition of lease assets and lease liabilities by lessees for all leases greater than one year in duration and classified as operating leases under previous GAAP. Under the guidance, lessees are required to recognize the following for all leases (with the exception of short-term leases): 1) a lease liability, which is a lessee's obligation to make lease payments arising from a lease, measured on a discounted cash flow basis; and 2) a "right to use" asset, which is an asset that represents the lessee's right to use the specified asset for the lease term. The Company adopted this accounting standard effective October 1, 2019, the start of fiscal year ended September 30, 2020. Upon adoption, the Company elected a practical expedient which allows existing leases to retain their classification as operating leases. The Company has elected to account for lease and related non-lease components as a single lease component. See Note 11 for more detailed information regarding leases. Property and Equipment Property and equipment are stated at cost. Depreciation is computed using the straight-line method over the following estimated useful lives: (in years) Buildings Process Equipment Office Equipment Maintenance and repairs are charged to expense as incurred; major improvements are capitalized. Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset group may not be recoverable. An impairment loss would be recognized when estimated undiscounted future cash flows from operations are less than the carrying value of the asset group. An impairment loss would be measured by the amount by which the carrying value of the asset exceeds the fair value of the asset. Management has determined there were no events or changes in circumstances that required an impairment evaluation during Fiscal Income Taxes The Company has elected to be treated as a partnership for federal and state income tax purposes and generally does not incur income taxes. Instead, the Company’s earnings and losses are included in the income tax returns of the members. Therefore, no provision or liability for federal or state income taxes has been included in these financial statements. Management has evaluated the Company’s tax positions under the Financial Accounting Standards Board issued guidance on accounting for uncertainty in income taxes and concluded that the Company has taken no uncertain tax positions that require adjustment to the financial statements to comply with the provisions of this guidance. Note 3:Inventory Inventory is comprised of the following at: September 30, 2021 September 30, 2020 (in 000's) (in 000's) Raw Materials - corn Supplies and Chemicals Work in Process Finished Goods Total Note FCSA/CoBank The Company The Term Loan provides for semi-annual payments by the Company to FCSA of As of September 30, Financing costs associated with the Credit Agreement Facility are recorded at cost and include expenditures directly related to securing debt financing. The Company amortizes financing costs using the effective interest method over the term of the related debt. Paycheck Protection Program Loan On April 14, 2020, the Company received $1.1 million under the new Paycheck Protection Program ("PPP Loan") legislation passed in response to On January 28, 2021, the Company received an additional $1.1 million under Phase II of the Note Notes payable consists of the following (in 000's): September 30, 2021 September 30, 2020 Term loan bearing interest at LIBOR plus 3.40% (3.64% at September 30, 2021) Note payable, PPP Loan bearing interest at 1.00%, maturing April 28, 2022 Revolving term loan bearing interest at LIBOR plus 3.40% (3.64% at September 30, 2021) Other with interest rates from 3.50% to 4.15% and maturities through 2027 Less Current Maturities Less Financing Costs, net of amortization Total Long Term Debt Approximate aggregate maturities of notes payable as of September 30, 2022 2023 2024 2025 2026 2027 and thereafter Total Note Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In determining fair value, the Company used various methods including market, income and cost approaches. Based on these approaches, the Company often The fair value hierarchy ranks the quality and reliability of the information used to determine fair values. Financial assets and liabilities carried at fair value will be classified and disclosed in one of the following three categories: Level 1 - Valuations for assets and liabilities traded in active markets from readily available pricing sources for market transactions involving identical assets or liabilities. Level 2 - Valuations for assets and liabilities traded in less active dealer or broker markets. Valuations are obtained from third-party pricing services for identical or similar assets or liabilities. Level 3 - Valuations incorporate certain assumptions and projections in determining the fair value assigned to such assets or liabilities. A description of the valuation methodologies used for instruments measured at fair value, including the general classifications of such instruments pursuant to the valuation hierarchy, is set below. Derivative financial statements The following table summarizes financial instruments measured at fair value on a recurring basis as of September 30, September 30, 2021 Level 1 Level 2 Level 3 Assets: Derivative financial instruments Liabilities: Derivative financial instruments September 30, 2020 Level 1 Level 2 Level 3 Assets: Derivative financial instruments Liabilities: Derivative financial instruments Note The Company has an equity incentive plan which provides that the Board of Directors may make awards of equity appreciation units (“ During the Fiscal Note Related Party Transactions On Bunge As part of the Bunge Membership Interest Purchase Agreement (the On June 26, 2009, the Company executed a Railcar Agreement with Bunge for the lease of 325 ethanol cars and 300 hopper cars which are used for the delivery and marketing of ethanol and distillers grains. In November 2016, The Company entered into an agreement effective March 24, 2019 extending the original Railcar Agreement with Bunge for the lease of 323 ethanol cars and 111 hopper cars which will be used for the delivery and marketing of ethanol and distiller grains. This was later amended to 110 hopper cars effective November 2019. Effective August 2020, the ethanol car level was amended to 320, and the lease was assigned to Trinity Leasing company. Under the Railcar Agreement, the original DOT111 tank cars are leased over a four year term from March 24, 2019 to April 30, 2023, with the ability to start returning cars after January 1, 2023 to conform to the requirement for DOT117 tank cars with enhanced safety specifications which is scheduled to be effective in May 2023. The 110 hopper cars are leased over a three year term running from March 24, 2019 to March 31, 2022 which term will continue on a month-to-month basis thereafter. The amendments to the Railcar Agreement lowered the cost for the leases by approximately 20% as compared to the prior lease terms. Pursuant to the terms of a side letter to the Railcar Agreement, we sublease cars back to other companies from time to time when the cars are not in use in our operations. We work with the lessor to determine the most economic use of the available ethanol and hopper cars in light of current market conditions. In February 2019, we entered into a second 36 month lease for an additional 30 tank cars from an unrelated third party leasing company (this was in addition to the 30 non-insulated tank cars leased from that company signed December 2015. This agreement expired in June of 2020, and was converted to a month-to-month basis.). Related party expenses under this agreement were $0 million and $0.8 million for Fiscal 2021 and 2020, respectively, net of subleases and accretion. The Company continues to work with As part of the As part of the Bunge Repurchase Agreement, Bunge agreed to provide transition services until March 31, 2020 for all duties and responsibilities of the original Agency Agreement. The Company is now responsible for all duties and Major Customers In connection with the Note The Company has entered into a steam contract with an unrelated party under which the vendor agreed to provide the steam required by the Company, up to 475,000 pounds per hour. The Company agreed to pay a net energy rate for all steam provided under the contract as well as a monthly demand charge. The net energy rate is set for the firstthree years then adjusted each year beginning on the third anniversary date. The steam contract was renewed effective January 1, 2013, and will remain in effect until November 30, 2024. Expenses under this agreement for the years ended Note 10: Lease Obligations Effective October 1, 2019, the Company adopted ASU 2016-02, Leases (Topic 842). The Company elected the option to apply the transition provisions at the adoption date instead of the earliest comparative period presented in the financial statements. By making this election, the Company has not applied retrospective reporting for the year ended September 30, 2020. The Company elected the short-term lease exception provided for in the standard and therefore only recognized right-of-use assets and lease liabilities for leases with a term greater than one year. The Company elected the package of practical expedients to not re-evaluate existing contracts as containing a lease or the lease classification unless it was not previously assessed against the lease criteria. In addition, the Company did not reassess initial direct costs for any existing leases. A lease exists when a contract conveys to a party the right to control the use of identified property, plant, or equipment for a period of time in exchange for consideration. The Company recognized a lease liability at the lease commencement date, as the present value of future lease payments, using an estimated rate of interest that the Company would pay to borrow equivalent funds on a collateralized basis. A lease asset is recognized based on the lease liability value and adjusted for any prepaid lease payments, initial direct costs, or lease incentive amounts. The lease term at the commencement date includes any renewal options or termination options when it is reasonably certain that the Company will exercise or not exercise those options, respectively. The Company leases The discount rate used in determining the lease liability for each individual lease was the Company's estimated incremental borrowing rate of 3.55% . The right-of-use asset operating lease, is included in the other asset grouping, and operating The Company's aggregate minimum rental commitments under non-cancellable operating leases 2022 2023 2024 Total Undiscounted future payments Discount effect Present value There are no items to report. The Company’s management, including its President and Chief Executive Officer (our principal executive officer), The Company’s management assessed the effectiveness of the Company’s internal control over This annual report does not include an attestation report on internal controls by the company’s registered public accounting firm pursuant to the exemption under Section 989G of the Dodd-Frank Act of 2010. The Information required by this Item is incorporated by reference from the definitive proxy statement for the Company’s Item 11.Executive Compensation. The Information required by this Item is incorporated by reference in the The Information required by this Item is incorporated by reference in the The Information required by this Item is incorporated by reference in the The Information required by this Item is incorporated by reference in the 2 Omitted - Inapplicable. Articles of Organization, as filed with the Iowa Secretary of State on March 28, 2005 (incorporated by reference to Exhibit 3(i) of Registration Statement on Form 10 filed by the Company on January 28, 2008). Fifth Amended and Restated Operating Agreement dated Unit Transfer Policy, including QMS Manual attached thereto as Appendix 1 9 Omitted - Inapplicable. Electric Service Contract dated December 15, 2006 with MidAmerican Energy Company (incorporated by reference to Exhibit 10.6 of Registration Statement on Form 10 filed by the Company on January 28, 2008). License Agreement dated September 25, 2006 between the Company and ICM, Inc. (incorporated by reference to Exhibit 10.10 Steam Service Contract Amended and Restated Railcar Sublease Agreement dated March 25, 2009 with Bunge North America, Inc. (incorporated by reference to Exhibit ICM, Inc. Agreement - Equity Matters, by and between ICM, Inc. and the Company, dated as of June 17, 2010 (incorporated by reference to Exhibit 10.3 of Form 8-K filed by the Company on June 23, 2010). Bunge Agreement - Equity Matters by and between the Company and Bunge N.A. Holdings, Inc. dated effective August 26, 2009. (incorporated by reference to Exhibit 10.72 of Form S-1/A filed by the Company on February 24, 2011) First Amendment to Bunge Agreement - Equity Matters, by and between Bunge N.A. Holdings, Inc. and the Company, dated as of June 17, 2010 (incorporated by reference to Exhibit 10.5 of Form 8-K filed by the Company on June 23, 2010). Southwest Iowa Renewable Energy Equity Incentive Plan (incorporated by reference to Exhibit 10.1 of Form 8-K filed by the Company Joint Defense Agreement between ICM, Inc. and the Company dated July 13, 2010 (incorporated by reference to Exhibit 10.1 of Form 8-K filed by the Company on July 16, 2010). Tricanter Purchase and Installation Agreement by and between ICM, Inc. and the Company dated August 25, 2010 (incorporated by reference to Exhibit 10.1 of Form 8-K/A filed by the Company on January 12, 2011). Portions of the Agreement have been omitted pursuant to a request for confidential treatment. Employment Agreement dated effective January 1, 2012 by and between the Company and Brian T. Cahill. (incorporated by reference to Exhibit 10.2 of Form 8-K filed by the Company on January 5, 2012). First Amendment to Promissory Note dated February 29, 2012 by and between the Company and Bunge N.A. Holdings, Inc. (incorporated by reference to Exhibit 10.2 of Form 8-K filed by the Company on March 6, 2012) Base Contract for Sale and Purchase of Natural Gas between Encore Energy Services, Inc. and the Company effective April 1, 2012. Portions of this Agreement have been omitted pursuant to a request for confidential treatment (incorporated by reference to Exhibit 10.1 of Form 8-K filed by the Company on May 1, 2012). Confirming Order between Encore Energy Services, Inc. and the Company dated April 25, 2012. Portions of the Agreement have been omitted pursuant to a request for confidential treatment. (incorporated by reference to Exhibit 10.2 of Form 8-K filed by the Company on May 1, 2012). Letter Agreement by and between the Company and CFO Systems, LLC dated June 21, 2012. (incorporated by reference to Exhibit 10.2 of Form 8-K filed by the Company on June 22, 2012). Notice of Assignment of Interests from Bunge N.A. Holdings, Inc. to Bunge North America, Inc. dated September 24, 2012. (incorporated by reference of Exhibit 10 of Form 10-K filed by Company on December 19, 2012). Carbon Dioxide Purchase and Sale Agreement by and among the Company and EPCO Carbon Dioxide Products, Inc. named therein dated effective as of April 2, 2013 (incorporated by reference to Exhibit 10.1 Non-Exclusive CO2 Facility Site Lease Agreement by and among the Company and EPCO Carbon Dioxide Products, Inc. named therein dated effective April 2, 2013 (incorporated by reference to Exhibit 10.2 Credit Agreement by and between the Company, Farm Credit Services of America, FLCA, as Lender and CoBank, ACB as cash management provider and agent dated as of June 24, 2014 (incorporated by reference to Exhibit 10.1 Revolving Term Note by and between the Company and Farm Credit Services of America, FLCA dated as of June 24, 2014 (incorporated by reference to Exhibit 10.3 Amendment No. 1 to Ethanol Purchase Agreement by and between the Company, as Producer, Bunge North America, Inc., as Bunge dated August 29, 2014 (incorporated by reference to Exhibit 10.1 Amendment No. 2 to Ethanol Purchase Agreement by and between the Company, as Producer, Bunge North America, Inc., as Bunge dated October 31, 2014 (incorporated by reference to Exhibit 10.1 Amended and Restated Ethanol Purchase Agreement dated effective December 5, 2014 by and between the Company and Bunge North America, Inc. (incorporated by reference to Exhibit 10.1 Second Amended and Restated Ethanol Purchase Agreement effective as of January 1, 2020 by and among the Company and Bunge North America, Inc. (incorporated by reference to Exhibit 10.3 of Form 8-K filed by the Company on January 2, 2020). Amended and Restated Grain Feedstock Agency Agreement dated effective December 5, 2014 by and between the Company and Bunge North America, Inc. (incorporated by reference to Exhibit 10.2 Amended and Restated Distiller’s Grain Purchase Agreement dated effective December 5, 2014 by and between the Company and Bunge North America, Inc. (incorporated by reference to Exhibit 10.3 Services Agreement Regarding Corn Purchases dated effective December 5, 2014 by and between the Company and Bunge North America, Inc. (incorporated by reference to Exhibit 10.4 Letter Agreement dated effective December 5, 2014 by and between the Company and Bunge North America, Inc. (incorporated by reference to Exhibit 10.5 SIRE ICM Unit Agreement by and between the Company and ICM Investments, LLC dated effective as of December 17, 2014 (incorporated by reference to Exhibit 10.1 Employment Agreement between the Company and Amendment No. 4 to Credit Agreement dated November 8, 2019 by and among Southwest Iowa Renewable Energy, LLC, Farm Credit Services of American, FLCA and CoBank, ACB (incorporated by reference to Exhibit 10.1 of Form 8-K filed by the Company on November 14, 2019). Amended and Restated Term Note by and between the Company and Farm Credit Services of America, FLCA dated November 8, 2019 (incorporated by reference to Exhibit 10.2 of Form 8-K filed by the Company on November 14, 2019). Amended and Restated Revolving Term Note by and between the Company and Farm Credit Services of America, FLCA dated November 8, 2019 (incorporated by reference to Exhibit 10.3 of Form 8-K filed by the Company on November 14, 2019). Amended and Restated Ethanol Purchase Agreement dated effective October 23, 2017 by and between the Company and Bunge North America, Inc. (incorporated by reference to Exhibit 10.1 of Form 8-K filed by the Company on October 26, 2017). Portions of the Ethanol Purchase Agreement have been omitted pursuant to a request for confidential treatment. Bunge Membership Interest Purchase Agreement dated December 31, 2019 by and among the Company and Bunge North America, Inc. (incorporated by reference to Exhibit 10.1 of Form 8-K filed by the Company on January 2, 2020. Termination Agreement dated December 31, 2019 by and among the Company and Bunge North America, Inc. (incorporated by reference to Exhibit 10.2 of Form 8-K filed by the Company on January 2, 2020). 11 Omitted - Inapplicable. 12 Omitted - Inapplicable. 13 Omitted - Inapplicable. 14 Omitted - Inapplicable. 15 Omitted - Inapplicable. 16 Omitted - Inapplicable. 17 Omitted - Inapplicable. 18 Omitted - Inapplicable. 19 Omitted - Inapplicable. 20 Omitted - Inapplicable. Rule 13a-14(a)/15d-14(a) Certification (pursuant to Section 302 of the Sarbanes-Oxley Act of 2002) executed by the Principal Executive Officer. (filed herewith) Rule 13a-14(a)/15d-14(a) Certification (pursuant to Section 302 of the Sarbanes-Oxley Act of 2002) executed by the Principal Financial Officer. (filed herewith) Rule 15d-14(b) Certifications (pursuant to Section 906 of the Sarbanes-Oxley Act of 2002) executed by the Principal Executive Officer. (furnished herewith) Rule 15d-14(b) Certifications (pursuant to Section 906 of the Sarbanes-Oxley Act of 2002) executed by the Principal Financial Officer. (furnished herewith) 101.INS Inline XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document 101.SCH Inline XBRL Taxonomy Extension Schema Document 101.CAL Inline XBRL Taxonomy Extension Calculation Linkbase Document 101.DEF Inline XBRL Taxonomy Extension Definition Linkbase Document 101.LAB Inline XBRL Taxonomy 101.PRE Inline XBRL Taxonomy Extension Presentation Linkbase Document 104 Cover Page Interactive Data File (embedded within the Inline XBRL Document and include in Exhibit 101) _________________ * Denotes exhibit that constitutes a management contract, or compensatory plan or arrangement ** This certification is not deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, or otherwise subject to the liability of that section. Such certification will not be deemed to be incorporated by reference into any filing under the Securities Act of 1933 or the Securities Exchange Act of 1934, except to the extent that the Company specifically incorporates it by reference In accordance with the requirements of the Exchange Act, the Registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. SOUTHWEST IOWA RENEWABLE ENERGY, LLC Date: December /s/ Michael D. Jerke, President and Chief Executive Officer Date: December /s/ Ann M. Reis, Chief Financial Officer and Pursuant to the requirements of the Securities Exchange Act of 1934, this Report has been signed below by the following persons on behalf of the Registrant in the capacities and on the dates indicated. Signature Date /s/ Karol D. King December Karol D. King, Chairman of the Board /s/ Theodore V. Bauer Theodore V. Bauer, Director /s/ Michael K. Guttau December 23, 2021 Michael K. Guttau, Director /s/ Jill E. Euken December 23, 2021 Jill E. Euken, Director“will”,“will,” “should,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “future,” “intend,” “could,” “hope,” “predict,” “target,” “potential,” or “continue” or the negative of these terms or other similar expressions. These forward-looking statements are only our predictions based on current information and involve numerous assumptions, risks and uncertainties. Our actual results or actions may differ materially from these forward-looking statements for many reasons, including the reasons described in this report. While it is impossible to identify all such factors, factors that could cause actual results to differ materially from those estimated by us include:Changes in the availability and price of corn, natural gas, and steam;Negative impacts resulting from the reduction in the renewable fuel volume requirements under the Renewable Fuel Standard issued by the Environmental Protection AgencyOur inability to comply with our credit agreements required to continue our operations;Negative impacts that our hedging activities may have on our operations;Decreases in the market prices of ethanol and distillers grains;Ethanol supply exceeding demand; and corresponding ethanol price reductions;Changes in the environmental regulations that apply to our plant operations;Changes in plant production capacity or technical difficulties in operating the plant;Changes in general economic conditions or the occurrence of certain events causing an economic impact in the agriculture, oil or automobile industries;Changes in other federal or state laws and regulations relating to the production and use of ethanol;Changes and advances in ethanol production technology;Competition from larger producers as well as competition from alternative fuel additives;Changes in interest rates and lending conditions of our loan covenants;Volatile commodity and financial markets; andDecreases in export demand due to the imposition of duties and tariffs by foreign governments on ethanol and distillers grains produced in the United States.“Risk"Risk Factors.”" Other risks and uncertainties are disclosed in our prior Securities and Exchange Commission (“SEC”("SEC") filings. These and many other factors could affect our future financial condition and operating results and could cause actual results to differ materially from expectations set forth in the forward-looking statements made in this document or elsewhere by Company or on its behalf. We undertake no obligation to revise or update any forward-looking statements. The forward-looking statements contained in this Form 10-K are included in the safe harbor protection provided by Section 27A of the Securities Act of 1933, as amended (the “1933 Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”).The Company historically was permitted to produce up to 125 million gallons under it's air permit; however, the Iowa Department of Natural Resources (IDNR) approved an increase in the Company's air permit to allow for production of 140 million gallons per rolling 12 months starting in March 2017.I29I-29 and I80,I-80, within a mile of the Missouri River and has access to five major rail carriers. This location is in close proximity to a significant amount of corn and has convenient product market access. The Facility receives corn and chemical deliveries primarily by truck and is able to utilize rail delivery if necessary. Finished products are shipped by rail and truck. The site has access to water from ground wells and from the Missouri River. Additionally, in close proximity to the Facility’sFacility are providers of our primary energy source (steam)sources (natural gas and electricity), there arewith two natural gas providers available, both with infrastructure immediately accessible to the Facility.7-Management’s7-Management’s Discussion and Analysis of Financial Condition and Results of Operations”Operations” for information about our revenue, profit and loss measurements and total assets and liabilities, as they relate to our overall financial condition, results of operations, and material cash requirements, as well as “Item 8 – Financial Statements and Supplementary Data”Data” for our financial statements and supplementary data.six milesix-mile loop railroad track for rail service to our Facility, which accommodates several unit trains. We are party to an Industrial Track Agreement with CBEC Railway, Inc. (the “We are a partyanthe Amended and Restated Railcar Lease Agreement (“ a significant equity holder, for the lease of 323 ethanol cars and 298111 hopper cars which are used for the delivery and marketing of our ethanol and distillers grains. Bunge was a related party until December 31, 2019. Pursuant to the terms of the Membership Interest Purchase Agreement (the "Bunge Repurchase Agreement") effective December 31, 2019, the Company repurchased the 3,334 Series B membership units owned by Bunge.wethe original DOT111 tank cars are leased railcarsover a four-year term from March 24, 2019 to April 30, 2023, with the ability to start returning cars after January 1, 2023 to conform to the requirement for terms lasting 120 monthsDOT117 tank cars with enhanced safety specifications which continuesis scheduled to be effective in May 2023. The 110 hopper cars are leased over a three-year term running from March 24, 2019 to March 31, 2022 which term will continue on a month to monthmonth-to-month basis thereafter. The amendments to the Railcar Agreement will terminate uponlowered the expiration of all railcar leases.cost for the leases by approximately 20% as compared to the prior lease terms. Pursuant to the terms of a side letter to the Railcar Agreement, we sublease cars back to Bunge or third partiesother companies from time to time when the cars are not in useneeded in our operations. We work with Bungethe lessor to determine the most economic use of the available ethanol and hopper cars in light of currentthen-current market conditions. During the fiscal year ended September 30, 2017,In February 2019, we subleased 96 hopper cars to Bunge, and maintained our lease agreement for 92 hopper cars to two separate third parties. In June 2017, we also entered into a second 36 month36-month lease for an additional 30 non-insulated tank cars from Trinity Leasing, which lease runs through January 2022, and in June 2021 we leased an unrelated third party leasing company (this was in addition to the 30 non-insulatedadditional 70 tank cars leased from that company signed December 2015).6162 full time employees, as of September 30, 2017.2021. We are not subject to any collective bargaining agreements and we have not experienced any work stoppages. Our management considers our employee relationships to be favorable.124.1129.8 million and 122.3117.8 million gallons of ethanol for the fiscal years ended September 30, 20172021 ("Fiscal 20172021") and September 30, 20162020 (“Fiscal 20162020”), respectively, and approximately 80.9%75% and 77.4%74.3% of our revenue was derived from the sale of ethanol in Fiscal 20172021 and 2016,Fiscal 2020, respectively.meal..meal. We produce two forms of distillers grains: wet distillers grains with solubles (“2017,2021, we sold 9.2% less3.2% greater tons of distillers grains compared to Fiscal 2016.2020. Approximately 14.0%18.3% and 18.1%20% of our revenue was derived from the sale of distillers grains in Fiscal 20172021 and 2016,Fiscal 2020, respectively.5.2% more6.3% greater tons of corn oil in Fiscal 20172021 than in Fiscal 2016,2020, with approximately 4.6%6.3% and 3.9%5.0% of our revenue generated from corn oil sales, respectively.Facility.facility. In addition, we entered into a Non-Exclusive CO2 Facility Site Lease Agreement under which we granted Air Products a non-exclusive right of entry and license to construct, maintain and operate a carbon dioxide liquefaction plant (the “CO2 Plant”) on a site near our Facility.facility. The term of the CO2 Agreement runs for ten (10) years from the startup of the CO2 Plant (the “Initial Term”) and then renews automatically for two (2) additional five (5) year periods thereafter, unless written notice of termination is submitted within six (6) months prior to the end of the then currentthen-current term.0.4% and 0.3% of our revenue generatedfor Fiscal 2021 and 0.4% in Fiscal 2017 and Fiscal 2016, respectively.distillers grains through Bunge. Restated Distiller’s Grain Purchase Agreement dated December 5, 2014 (the "DG Purchase Agreement"). The DG Purchase Agreement expired December 31, 2019; however, as part of the Bunge Repurchase Agreement, Bunge agreed to provide transition services until March 31, 2020 for all duties and responsibilities under the original DG Purchase Agreement. The Company is now responsible for all duties and responsibilities previously performed by Bunge under the DG Purchase Agreement.and distillers grains, including export markets, andmarkets. We believe that there is some potential for increased international sales of our products. However,products; however, due to high transportation costs, and the fact that we are not located near a major international shipping port, we expect a majority of our products to continue to be marketed and sold domestically.halfnine months of 2017,2021, ethanol exports experienced by the industry increased 29%decreased 10% as compared to the first sixnine months of 2016. Exports2020, and 21% as compared to the first nine months of ethanol have increased with Brazil receiving2019. This puts exports at their lowest point for this period in five years. Canada remains the country importing the largest percentage of ethanol produced in the United States. South Korea has become the second largest export market for ethanol produced in the United States, and Canada andwhile India in second andremains close behind as the third place, respectively. Theselargest destination of U.S. ethanol exports. Exports of the U.S. ethanol to these three countries constitute almost 75%roughly 55% of all U.S. ethanol exports. India, the Philippines, the United Arab Emirates, South KoreaChina and Peru have also been otherrepresent the remaining countries in the top 5 for destinations for U.S. ethanol exports in the first nine months of 2021.2017.However, ethanolFiscal 2021, the resurgence of the Chinese market may signal additional export opportunities in the future as Chinese biofuels and carbon- reduction policies are explored. during 2017 Brazil and China adopted import quotas and/or tariffs on the importation of ethanol which are expected to continue to negatively impact U.S. exports. China, the number three importer of U.S. ethanol in 2016, has imported negligible volumes year-to-date due to a 30% tariff imposed on U.S. and Brazil fuel ethanol, which took effect on January 1, 2017. However, on September 13, 2017, China’s National Development and Reform Commission, the National Energy Board and 15 other state departments issued a joint plan to expand the use and production of biofuels containing up to 10% ethanol by 2020. This joint plan may support increased exports to China; however, there is no guarantee that the joint plan will offset the adverse impacts of the tariff or that there will be any positive impact to domestic exports to China.On September 1, 2017, Brazil’s Chamber of Foreign Trade, or CAMEX, issued an official written resolution, imposing a 20% tariff on U.S. ethanol imports in excess of 150 million liters, or 39.6 million gallons per quarter. The ruling is valid for two years. The export market is beginning to see the impact of the imposition of these tariffs. According to the Renewable Fuels Association, during September 2017, Brazil fell out of the top two customers of U.S. ethanol exports for the first time in 16 monthswhich is most likely the result of the nation's implementation of the 20% tariff on imported ethanol. Exports to Brazil in September 2017 decreased by 20% compared to August 2017 exports and by 70% compared to the peak in May 2017. The Chinese and Brazil tariffs have had, and likely will continue to have, a negative impact on the export market demand and prices for ethanol produced in the United States.exporting hasexports have increased and may continue to increase as worldwide acceptance grows. According to the Energy Information AdministrationRenewable Fuels Association (the “EIA”"RFA"), U.S. distiller’sdistillers grains annual exports through AugustSeptember 30, 20172021 were approximately 4% lower5% higher than distiller’sdistillers grains exports for the same eight-monthnine month period last year withyear. Mexico, Turkey, South Korea, Canada, ThailandVietnam, Indonesia, and Indonesia accounting for 62% of total U.S. distillers export volumesHistorically,Turkey are now the United States ethanol industry exported a significant amount of distillers grains to China; however, exports to China have significantly decreased as a result of the Chinese antidumping and countervailing investigations and the implementation of significant duties on importing into China distillers grains produced in the United States. In January 2017, China announced a final ruling which set the antidumping duties at a range between 42.2% and 53.7% and anti-subsidy duties at a range between 11.2% to 12%. The imposition of these duties resulted in plummeting demand from this top importer requiring United States producers to seek out alternatives markets, most notably in Mexico and Canada. On September 1, 2017, the Minister of Agriculture and Rural Development of Vietnam lifted the suspension which blocked imports of U.S. dried distiller’s grains which had been in place since December 2016. Prior to the implementation of the suspension, Vietnam had historically been a substantial export market for U.S. distiller’s grains representing the third largest export marketdestinations for U.S. distillers grains. The lift of this suspension may resultgrains exports with Canada significantly trimming its imports in increased exports to Vietnam; however, there is no guarantee that the Vietnamese export market will achieve significant growthWe sell carbon dioxide directly to Air Products2020 and we2021. inor middlemen within the domestic market. with Bunge.. Under the Ethanol Agreement, the Company has agreed to sell Bunge all of the ethanol produced by the Company, and Bunge has agreed to purchase the same. The Company payspaid Bunge a percentage fee for ethanol sold by Bunge, subject to a minimum and maximum annual fee. The initial term of the Ethanol Agreement expired on December 31, 2019. As part of the Bunge Membership Interest Purchase Agreement (the "Bunge Repurchase Agreement"), the parties entered into a restated Ethanol Agreement effective January 1, 2020 (the "Restated Ethanol Agreement") which provides that the Company will pay Bunge a flat monthly marketing fee. The term of the Restated Ethanol Agreement expires on December 31, 2019, however it will automatically renew for one five-year term unless Bunge provides the Company with notice of election2026. terminate.We entered into a Distillers Grain Purchase Agreement, as amended (“DG Agreement”) with Bunge, under which Bunge iswas obligated to purchase from us and we arewere obligated to sell to Bunge all distillers grains produced at our Facility.The initial term of the DG Agreement runs until December 31, 2019, and will automatically renew for one additional five year terms unless Bunge provides the Company with notice of election to terminate. Under the DG Agreement, Bunge payspaid us a purchase price equal to the sales price minus the marketing fee and transportation costs. The sales price iswas the price received by Bunge in a contract consistent with the DG Marketing Policy or the spot price agreed to between Bunge and the Company. Bunge receivesreceived a marketing fee consisting of a percentage of the net sales price, subject to a minimum and maximum amount. Net sales price is the sales price less the transportation costs and rail lease charges. The transportation costs arewere all freight charges, fuel surcharges, and other access charges applicable to delivery of distillers grains. The initial term of the DG Agreement expired on December 31, 2019; however, as part of the Bunge Repurchase Agreement, Bunge agreed to provide transition services until March 31, 2020 for all duties and responsibilities of the DG Purchase Agreement. The Company is now responsible for all duties and responsibilities previously performed by Bunge under the DG Purchase Agreement. end usersour buyers within the domestic market.In November 2017,United States Departmentprice of Agriculture (the “USDA”) revised their estimates forethanol and distillers grains out paces rising corn prices. During Fiscal 2021, corn prices were higher compared to Fiscal 2020. Overall corn acres planted in 2021 were up 3% over 2020 and the 2017/2018nationwide yield was 3% higher than in 2020 as well. We benefitted from what we believe to be record yields in our local western Iowa region allowing our Facility to acquire the corn cropwe need to increase its forecastcontinue to 14.6 billion bushels with yields averaging 175.4 bushels per acre. These projections are substantially lower thanrun at full operating level rates throughout the 2016/2017 results for corn yield and production in the United States. The USDA also forecasted the area harvested for corn at 83.1 million acres which is 4% lower than the 86.6 million acres harvested in the USDA report for 2016/2017. Although the revised forecast for production and yield are lower than the prior crop year, if the USDA forecasts are realized, the 2017/2018 corn crop will be the second highest production and yield on record in the United States.continue to remain lowersteady or move slightly higher through the first two quarters of our fiscal year ended September 30, 2018 (“Fiscal 2018”) as a result of2022 due to the high levels of production and yield forecasted by the USDA, as well as carryover levelsbeneficial forecasts for corn demand from the prior year. However, ifUSDA. If corn prices rise again,similar to the record prices seen in 2021, however, it willwould have an adverse impact on our operating margins unless the prices we receive for our ethanol and distillers grains are able to outpace the rising corn prices. Management continually monitors corn prices and the availability of corn near the Facility and also continually attempts to minimize the effects of the volatility of corn costs on profitability through its risk management strategies, including hedging positions taken in the corn market.needswould need approximately 48.3 million bushels of corn annually, to produce 140 million gallons of ethanol, or approximately 132,300 bushels per day. During Fiscal 20172021 we purchased 0.4% less13.1% more corn compared to Fiscal 2016,2020, which was obtained entirely from local markets. The Company and Bunge were also entered intoparties to an Amended and Restated Grain Feedstock Agency Agreement on December 5, 2014 (the “providesprovided that Bunge will procure corn for the Company and the Company will pay Bunge a per bushel fee, subject to a minimum and maximum annual fee. The initial term of the Agency Agreement expiresexpired on December 31, 20192019; however, as part of the Bunge Repurchase Agreement, Bunge agreed to provide transition services until March 31, 2020 for all duties and will automatically renew for one additional five year term unless Bunge provides noticeresponsibilities of election to the Company to terminate.Starting with the 2015 crop year, the Company began exploring using corn containing Syngenta Seeds, Inc.’s proprietary Enogen® technology (“Enogen Corn”) for a portion of its ethanol production needs.Agency Agreement. The Company contracts directly with growers to produce Enogen Cornis now responsible for sale toall duties and responsibilities previously performed by Bunge under the Company. Consistent with our Agency Agreement with Bunge, we also entered into a Services Agreement with Bunge regarding corn purchases (the “ Services Agreement ”). Under this Services Agreement, we originate all Enogen Corn contracts for our Facility and Bunge will assist us with certain administrative matters related to Enogen Corn, including facilitating delivery to our Facility. Fiscal year 2017 was our second full year of accepting Enogen, and deliveries constituted 14.9% of all corn deliveries, an increase from Fiscal 2016's initial level of 8.7%.24,00022,000 MMBTUs of energy are required to produce a gallon of ethanol. It is our goal to operate the plant as safely and profitably as possible, optimizing the amount of energy consumed per gallon of ethanol produced, balanced with the relative values of WDGS as compared to DDGS. SteamUnlike mostproducersproduced, which results in steam savings and carbon emission reductions In April 2020, the Company implemented Bioleap's Dryer Exhaust Energy Recovers ("DEER"). The DEER system reduces the steam load on the boilers, providing immediate energy savings and freeing up capacity on the current boiler system. The change in the United States which usesource blend for steam from approximately 95% natural gas and 5% steam in Fiscal 2020 to 100% natural gas and 0% steam in Fiscal 2021 impacted the energy costs for the Company due to the lower cost of natural gas as their primary energy source, we have accesscompared to steam which benefits were partially offset as a one of our energy sources in addition to natural gas. Historically, we have changed between steam andthe natural gas depending on energy costs and other factors. boilers are less efficient than the steam line.believe our abilityare party to utilize steam makes us more competitive, as under certain energy market conditions our energy costs will be lower than natural gas fired plants. We have entered into a Steam Service Contract (“Contract”Contract”) with MidAmerican Energy Company (“MidAm”MidAm”), under which MidAm provides us the steam required by us,agreed to provide up to 475,000 pounds of steam per hour. Effective in January 2013, we amended theThe Steam Contract to linklinks our net energy rates and charges for steam to certain specified energy indexes, subject to certain minimum and maximum rates, so that our steam costs remain competitive with the general energy market. Effective in August 2015, we amended therates. The Steam Contract to extend the term untilexpires in November 2024. During Fiscal 2017,2021, we purchased approximately 23.2% more steam compared to Fiscal 2016. This increase in Fiscal 2017 was due to a much slower increase in the price of steam relative to natural gas for the Company. The increase in Fiscal 2017 was partially offset by the fact that the amount of availabledid not purchase any steam from MidAm was reducedand steam availability from MidAm continues to be volatile as a result of MidAm’s increased utilization of wind energy, rather than coal, insince Fiscal 2017, which generally reduces the amount of available steam produced.Although steam has traditionally been considered our primary energy source, natural55.0%66.3% of our energy usage (natural gas and electricity) in Fiscal 2017, down from 65%2021, compared to 57.7% in Fiscal 2016. This was influenced by the 30%2020. The increase in theour natural gas cost per MMBTU during Fiscal 2017 combinedusage was due to decreased steam availability and certain minimum payment obligations specified in our contract with greater steam availability.MidAm. We have two natural gas boilers for use when our steam service is temporarily unavailable. Natural gas is also needed for incidental purposes. We entered into a natural gas supply agreement with Encore Energy in April of 2012 to fulfill our natural gas needs at the Gas Daily Midpoint pricing. 20172021 we used approximately 3.5% more4.9% less electricity compared to Fiscal 2016.2020. This was primarily due to higher production levels duringour various energy saving projects that were completed in 2019 and 2020. The Company continues to explore technology improvements that reduce the hot 2017 summer months as compared to 2016.corn to ethanolproduction process. Our primary water source comes from the underground Missouri River aquifer via our three onsite wells. The majority of the water used in an ethanol plant is recycled back into the plant. All our ground water is treated through our onsite water oxidation system. This filtered water is used throughout our process. We do treat (polish) some of this filtered water for boiler and cooling tower make-up with our Reverse Osmosis (RO) system to minimize any elements that will harm the boiler and steam systems.systems as permitted. We send some of our non-process (corn) contact water back to the Missouri River, including our Cooling Tower and Green Sand filtered backwash waters.River. The makeup water requirements for the cooling tower are primarily a result of evaporation and cooling. We also evaporate much of our water through our dryer system for dried corn distillers grains. The rest of our process water is recycled back into the plant, which minimizes any waste of our water supply. principal products. We rely on Bunge for the sale and distribution of the majority of our products.ethanol product. Currently, we do not have the ability to market our ethanol and distillers grains internally should Bunge be unable or refuse to market these productsour ethanol at acceptable prices. However, we anticipate that we would be able to very quickly secure competitive marketers should we need to replace Bunge for any reasonAccording toAt the end of 2020, the Renewable Fuels Association as of October 27, 2017("RFA") estimated that there were 214208 installed ethanol production facilities in the United States capablewith a total capacity of producing 16.117.4 billion gallons based on nameplate capacity and seven16 additional plants under expansion or construction with capacity to produce an additional 463 million gallons. Further, the Renewable Fuels Association estimates that virtually none ofconstruction. In Fiscal 2021 we have seen a rebound in the ethanol production capacitymargin environment that shows a substantial improvement from the decade lows experienced in 2020. As a result, competing plants have come back on line or otherwise resumed operations and expansion has resumed within the industry, primarily in North Dakota. While it is important to note that 2020 was an atypical year as transportation fuel demand was severely reduced because of COVID-19 restrictions and lockdowns, there is renewed optimism in the United Statesmarket as ethanol commodity prices have pushed through the $2.00/ gallon mark, a feat last accomplished in 2014. In recent weeks, margins have hit the highest marks since December 2014, according to data from Iowa State University. idled.a commodity product, competition in the industry is predominately based on price. The top five producers account for approximately 45%almost half of domestic production. We are in direct competition with many of these top five producers as well as other national producers, many of whom have greater resources and experience than we have and each of which is producing significantly more ethanol than we produce. In addition, we believe that the ethanol industry will continue to consolidate leading to a market where a small number of large ethanol producers with substantial production capacities will control an even larger portion of the U.S. ethanol production. In recent years, the ethanol industry has also seen increased competition from oil companies whothat have purchased ethanol production facilities. These oil companies are required to blend a certain amount of ethanol each year.provide themcreate competitive advantages over us.Several large companies produce ethanol in Brazil, including affiliatesBrazilian imports account for less than 1% of Bunge. In 2017, 15.0 billion gallons of corn based biofuels blending was mandated by the Renewable Fuel Standard, or RFS2, when U.S. ethanol production was 15.8 billion gallons.consumed. Many in the ethanol industry are concerned that certain provisions of RFS2the Renewable Fuel Standard (the "RFS") as adopted may disproportionately benefit ethanol produced from sugarcane. This could make sugarcane based ethanol, which is primarily produced in Brazil, more competitive in the United States ethanol market. If this were to occur, it could reduce demand for the ethanol that we produce. In recent years, sugarcane ethanol imported from Brazil has been one of the mostRFS2RFS requirement to blend 4.35 billion gallons of advanced biofuels.Effective March 16, 2015, the Brazilian government increased the required percentage U.S. imports of ethanol in vehicle fuel soldproduced in Brazil to 27% from 25% which, along with more competitively priced ethanol produced from corn,are down significantly reduced U.S. ethanol imports from Brazil as(approximately 52%) through the first nine months of 2021 compared to importsthe same period in 2020, however, no Brazilian ethanol was imported during 2015 and 2016. However, there has been an increase in U.S. ethanol imports from Brazil during calendar year 2017 as compared to calendar 2016. Brazil favored sugar production over ethanol production, as they were encouraged by the higher prices for the sweetener in the international market. Energy Information Administration (“EIA”) data shows ethanol imports from Brazil rose to 1,766 thousand barrels in the first eightfive months of calendar 2017 from 819 thousand barrels2021. Per the RFA, virtually all imports of fuel ethanol in the first eight months of calendar 2016. Based on the current strength of2020 entered the United States Dollar compared to the Brazilian Reis along with very favorable prices for sugarcane based ethanol in the United States, specifically in California, it is possible that ethanol imports from Brazil may continue to increase in Fiscal 2018 which will further impactwhere they can take advantage of the level of ethanol supplies in the United Statesstate's Low Carbon Fuel Standard and may result in ethanol price decreases.Iowa Renewable Fuels Association, as of September, 2017,RFA, Iowa had 43 operating ethanol refineries in production, with a combined nameplate capacity to produce 4.054.6 billion gallons of ethanol. TheFor Nebraska, Energy Officethe RFA reports that as of September 2017, there are currently 2226 existing ethanol plants in production inNebraskain Nebraska, with a combined ethanol nameplate production capacity of approximately 1.942.3 billion gallons.We anticipate increased competition from renewable fuels that do not use corn as feedstock. faced somecontinued to face financial and technological issues,issues. If this technology can be profitably employed on a commercial scale, it could potentially lead to ethanol that is less expensive to produce than corn based ethanol. Cellulosic ethanol may also capture more government subsidies and assistance than corn based ethanol. This could decrease demand for our product or result in competitive disadvantages for our ethanol production process.facilities,facility, we have limited ability to adapt the plant to a different feedstock or process system without additional capital investment and retooling.industry offers aand electric-powered vehicle industries offer technological optionoptions to address worldwide energy costs, the long-term availability of petroleum reserves and environmental concerns. Fuel cells have emerged as a potential alternative to certain existing power sources because of their higher efficiency, reduced noise and lower emissions. Fuel cell industry participants are currently targeting the transportation, stationary power and portable power markets in order to decrease fuel costs, lessen dependence on crude oil and reduce harmful emissions. The same can be said of electric-powered vehicles. If the fuel cell industry continues to expand and gain broad acceptance and becomes readily available to consumers for motor vehicle use, we may not be able to compete effectively. Likewise, participants in the emerging electric-powered vehicle industry are currently targeting the transportation market to decrease dependence on crude oil and reduce harmful emissions. If the electric-powered vehicle industry continues to expand and gain broad acceptance, the ethanol and larger gasoline industry may not be able to compete effectively. This additional competition could reduce the demand for ethanol, which would negatively impact our profitability.Renewable Fuels Association'sRFA 2021 Ethanol Industry Outlook 2017(the “(the "RFA 2017 2021 Outlook”"), ethanol plants produced more than 42almost 33.1 million metric tons of distillers grains and other animal feed .in 2020 and 3.3 billion pounds of distillers corn oil. We compete with other producers of distillers grains products both locally and nationally.2017 Outlook.2021 Outlook, which comprises 78% of distiller grains consumption. In recent years, an increasing amount of distillers grains have been used in the swine, poultry and fish 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 poultry and swine, we expect these markets to expand and create additional demand for distillers grains; however, no assurance can be given that these markets will in fact expand, or if they do, that we will benefit from such expansion.stayed lowincreased dramatically during Fiscal 2017, partially2021 , reaching heights not seen since 2014 as the rebounding demand for blended gasoline and decreased supply following slow-downs in responseproduction during Fiscal 2020 caused prices to lower cornrise. In the first quarter of Fiscal 2021 the average price of a gallon of ethanol sold for $1.30 and oil prices andby the large supplyfourth quarter of Fiscal 2021, the price had increased to $2.15. The same price increases were also experienced with the inputs where the price of corn and oil. The increased productionfrom $4.45 a bushel in the first quarter of ethanol withinFiscal 2021 to $6.78 a bushel in the United States also impacted ethanol prices duringfourth quarter of Fiscal 2017. The increase in ethanol production resulted from the domestic producers responding to the consistently low corn prices during Fiscal 2017.grow bothalign the retail product delivery infrastructure and demand for ethanol in order to increase production margins in the near and long term.The overall demand On June 1, 2019, President Trump initiated rulemaking to expand fuel waivers for transportationE15 to allow year-round sale of fuel also impactsblends containing gasoline up to a 15% blend of ethanol. In June 2021, however, the demandU.S. Court of Appeals for ethanol. The demand for transportation fuel peaked in 2007, dropped dramatically during the recession, stabilized, and in 2016 has returned to 2007 levels. According to EIA data,District of Columbia struck down this rule finding that the EPA exceeded its authority. Although there is a demand for approximately 143 billion gallonshave been significant developments towards the availability of total gasoline demandE15 in the United States in 2016. The fuel efficiency of vehicles and the total number of miles traveledmarketplace, there are still obstacles that could inhibit meaningful market penetration by consumers affects the overall demand for transportation fuel and thus also impacts the demand for ethanol. According to the EIA, in 2016, the increase in gasoline consumption reflects a forecasted 2.5% increase in highway travel (because of employment growth and lower retail prices), that is partially offset by increases in vehicle fleet fuel economy. Market acceptance of E15 and E85, as approved by the Environmental Protection Agency for use in passenger cars from the 2001 model year or later will continue the growth in ethanol sales in the near future. In North America, over 80% of distillers grains are used in ruminant animal diets, and are also fed to poultry and swine. Every bushel of corn used in the dry grind ethanol process yields approximately 17 pounds of dry matter distillers grains, which is an excellent source of energy and protein for livestock and poultry. The price of distillers grains may decrease when the prices of competing feed products decrease. The prices of competing animal feed products are based in part on the prices of the commodities from which these products are derived. Downward pressure on commodity prices, such as soybeans and corn, will generally cause the price of competing animal feed products to decline, resulting in downward pressure on the price of distillers grains.2018.2017,2021/22, according to the USDA November 2021 report, 83.185.1 million acres of corn were planted,harvested, which was down 4.0%up 3% from 2016. Although there were less acres planted, the2020/21. The expected yield is 175.4177.0 bushels per acre, which is slightly above 2016's recordup 5.6% compared to 2020's results. Prices for corn are expected to stay lowfall slightly as a result of the high levels of production, and yields forecastedwhich was slowed by the USDA.consumerscustomers exists around our Facility. According to Iowa Renewable Fuels Association, as of September, 2017,RFA 2021 Ethanol Industry Outlook, there were 43 operational ethanol plants in Iowa. The plants are concentrated, for the most part, in the northern and central regions of the state where a majority of the corn is produced. The existence and development of other ethanol plants, if any, particularly those in close proximity to our Facility, may increase the demand for corn which may result in even higher costs for supplies of corn.2016/2017, 5.52020/2021, 5.0 billion bushels of U.S. corn wereare expected to be used in ethanol production, with 6.97.3 billion bushels being used in food and other industrial uses, and 1.92.5 billion bushels used for export. As of September 2017, the USDA has forecast the amount of corn to beIn 2019/2020, 4.9 billion bushel were used in ethanol production, with 6.3 billion used in food and other industrial uses and 1.8 billion used for ethanol production during the current marketing year at 5.4 billion bushels approximately the same as the prior year.is dependent on several economic incentives to produce ethanol, including ethanol use mandates. One significant federal ethanolreceives support isthrough the Federal Renewable Fuels Standard (the “RFS”"RFS") which has been, and will continuecontinues to be, a driving factor in the growth of ethanol usage. The RFS requires that in each year a certain amount of renewable fuels must be used in the United States. The RFS is a national program that does not require that any renewable fuels be used in any particular area or state, allowingallows refiners to use renewable fuel blends in those areas of the country where it is most cost-effective. The U.S. Environmental Protection Agency (the “EPA”) is responsible for revising and implementing regulations to ensure that transportationtransported fuel sold in the United States contains a minimum volume of renewable fuel. RFS2 requirements increaseRFS statutory volume requirement increases incrementally each year through 2022 when the mandate requires thatuntil the United States is statutorily required to use 36 billion gallons of renewable fuels. Starting in 2009,fuels by calendar year 2022. The EPA has the authority, however, to waive the RFS requiredstatutory volume requirements, in whole or in part, provided that a portionthere is either inadequate domestic renewable fuel supply or the implementation of the RFS 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 userequirement would severely harm the economy or environment of these advanced renewable fuels increases each year as a percentage of the total renewable fuels required to be used instate, region or the United States.supposedrequired by statute to pass a rule that establishes the number of gallons of different types of renewable fuels that must be used in the United States which is called the renewable volume obligations.On Novemberobligation. For 2020, 2021, and 2022 the statutory volume requirements for renewable fuels were 30 2015,billion gallons, 33 billion gallons, and 36 billion gallons, respectively. In 2019 the EPA set the 2020 renewable volume obligation at 20.09 billion gallons of renewable fuels—far below the statutory threshold—and has since failed to establish final renewable volume obligations under the RFS despite its obligation to do so. On December 7, 2021, the EPA issued its final rules fora proposed rule (the “Proposed Rule”) to revise the annual 2014, 2015 and 20162020 renewable volume obligations (the “Final 2014 - 2016 Rules”). On May 18, 2016,(RVOs) and establish renewable volume obligations for 2021 and 2022. The Proposed Rule would retroactively reduce the 2020 renewable volume obligation to 17.13 billion gallons. For 2021, the EPA’s Proposed Rule is proposing to set the renewable volume obligation at 18.52 billion gallons, and 20.77 billion gallons for 2022. EPA will accept public comment on the Proposed Rule through February 4, 2022, following which the EPA releasedwill release a final rule, which may be materially different than the Proposed Rule.rulerulemaking to set 2017extend RFS compliance deadlines for 2019 and 2020. The 2019 extension applies only to small refineries, but the 2020 extension applies to all refineries. This allows oil refineries to delay providing proof that they are in compliance with the RFS’ biofuel blending requirements. This delay continues to cause uncertainty and instability within the renewable fuels marketplace and could impact the price of ethanol during fiscal year 2022. requirements under RFS2 which set the annual volume requirement for renewable fuel at 18.8 billion gallons per year, of which 14.8 billion gallons may be met with corn-based ethanol. The EPA issued the final rule for 2017 and increased the total volume requirements from 18.8 billion gallons to 19.24 billion gallons (the “Final 2017 Rule”). Although the volume requirements set forth in the Final 2017 Rule are a significant increase over the 2016 volume requirements and the 2017 requirements originally proposed in May 2016, the 2017 volume requirements are still below the 2017 statutory mandate of 24 billion gallons per year. However, in connection with the issuance of the Final 2017 Rule, the EPA increasedobligations establish the number of gallons which mayof renewable fuel that must be metblended into the nation’s fuel supply, these obligations do not take into account waivers granted by corn-based ethanol from 14.8 billion gallonsthe EPA to 15 billion gallons. This bringssmall refiners for "hardship." The EPA can, in consultation with the renewable volume obligationsDepartment of Energy, waive the obligation for conventional renewable fuelsindividual smaller refineries that canare suffering “disproportionate economic hardship” due to compliance with the RFS. To qualify, for this “small refinery waiver,” the refineries must be met by corn-based ethanol backunder total throughput of 75,000 barrels per day and state their case for an exemption in an application to the levels called for in the statutory mandate for 2017/On July 5, 2017,EPA each year. In a separate action on December 7, 2021, the EPA releasedproposed denying 65 small refinery waiver petitions in a proposed rulebreak from past practice under the Trump administration. On December 8, 2021, a federal court of appeals granted EPA’s request to setremand to EPA 31 SREs exemptions granted during the 2018 renewable volume requirements which would setTrump administration. Broadly, waivers reduce the annual volume requirementdemand for renewable fuel at 19.24 billion gallonsRINs.per year (the “Proposed 2018 Rule”). On November 30, 2017,like the RFS are a significant driver of ethanol demand in the U.S. Under the RFS, the EPA issued the final rule for 2018 which varied only slightly from the Proposed 2018 Rule with theannual volume requirement for renewable fuel set at 19.29 billion gallons of renewable fuels per year (the "Final 2018 Rule"). Although the volume requirements set forth in the Final 2018 Rule are slightly higher than the 19.28 billion gallons required under the Final 2017 Rule, the volume requirements are still significantly below the 26 billion gallons statutory mandate for 2018 with significant reductions in the volume requirements for advanced biofuels. However, the Final 2018 Rule does maintain the number of gallons which may be met by conventional renewable fuels such as corn-based ethanol at 15.0 billion gallons.The following chart sets forth (in billion gallons) the statutory volumes, the Final 2014-2016 Rule volumes, the Final 2017 Rule volumesassigns individual refiners, blenders, and the Final 2018 Rule volumes. Total Renewable Fuel Volume Requirement Portion of Volume Requirement That Can Be Met By Corn-based Ethanol 2014 Statutory 18.15 14.10 Final 2014-2016 Rules 16.28 13.61 2015 Statutory 20.50 15.00 Final 2014-2016 Rules 16.93 14.05 2016 Statutory 22.25 15.00 Final 2014-2016 Rules 18.11 14.50 Statutory 24.00 15.00 2017 Final 2017 Rule 19.28 15.00 2018 Statutory 26.00 15.00 Final 2018 Rule 19.29 15.00 Under RFS, if mandatory renewable fuel volumes are reduced by at least 20% for two consecutive years, the EPA is required to modify, or reset, statutory volumes through 2022. Since 2018 is the first year the total volume requirements are more than 20% below statutory levels, the EPA Administrator directed his staff to initiate the required technical analysis to perform any future reset consistent with the reset rules. If 2019 volume requirements are also more than 20% below statutory levels, the reset will be triggered under RFS and the EPA will be required to modify statutory volumes through 2022 within one year of the trigger event, based on the same factors used to set the volume requirements post-2022.The volume requirements mandated in the Final 2014-2016 Rules, the 2017 Final Rule and the Final 2018 Rule are still below the volume requirements statutorily mandated by Congress. These reduced volume requirements, combined with the potential elimination of such requirements by the exercise of the EPA waiver authority or by Congress, could decrease the market price and demand for ethanol which will negatively impact our financial performance. However, in connection with the issuance of the Final 2017 Rule and the Final 2018 Rule, the EPA maintained the renewable volume obligations for conventional renewable fuels that can be met by corn-based ethanol back to the levels called for in the statutory mandate. Although this signals a sign of support of the RFS by the EPA and a rejection of arguments by the oil industry relating to the “blend wall,” there is no guarantee that for future years the EPA will adhere to the statutory mandate for conventional renewable fuels.Beginning in January 2016, various ethanol and agricultural industry groups petitioned a federal appeals court to hear a legal challenge to the EPA Final Rule. In addition, various representatives of the oil industry have also filed challenges to the EPA Final Rule. If the EPA's decision to reduce the volume requirements under the RFS is allowed to stand, or if the volume requirements are further reduced, it could have an adverse effect on the market price and demand for ethanol which would negatively impact our financial performance.The U.S. Federal District Court for the D.C. Circuit ruled on July 28, 2017, in favor of the Americans for Clean Energy and its petitioners against the EPA related to its decision to lower the volume requirements as set forth in the Final 2016 Rule. The Court concluded the EPA erred in how it interpreted the “inadequate domestic supply” waiver provision of RFS, which authorizesthe EPA to consider supply-side factors affectingimporters the volume of renewable fuels they are obligated to use based on their percentage of total domestic transportation fuel availablesales. The mechanism that provides accountability in RFS compliance is the Renewable Identification Number (RIN). RIN’s are a tradeable commodity given that if refiners (obligated parties) need additional RIN’s to refiners, blenders, and importersbe compliant, they have to meet the statutory volume requirements. The waiver provision does not allow the EPApurchase them from those that have excess. Thus, there is an economic incentive to consider the volume ofuse renewable fuel available to consumersfuels like ethanol, or the demand-side constraints that affect the consumption of renewable fuel by consumers. As a result, the Court vacated the EPA’s decision to reduce the total renewable fuel volume requirements for 2016 through its waiver authority, which the EPA is expected to address according to Administrator Pruitt's letter. The Company currently believes this decision will benefit the industry overall with the EPA's waiver analysis now limited to supply considerations only.Management anticipates that there will be further legal challenges to the EPA's reduction in the volume requirements, including the Final 2017 Rule. However, if the EPA's decisionalternative, buy RIN’s. Obligated parties use RINs to reduce the volume requirements under the RFS is allowedshow compliance with RFS-mandated volumes. RINs are attached to stand, or if the volume requirements are further reduced, it could have an adverse effect on the market price and demand for ethanol which would negatively impact our financial performance.On October 19, 2017, EPA Administrator Pruitt issued a letter to several U.S. Senators representing states in the Midwest reiterating his commitment to the text and spirit of the RFS. He stated that the EPA will meet the November 30, 2017 deadline for issuing final 2018 volume requirements, that the EPA’s preliminary analysis suggests that final volume requirements should be set at amounts at or greater than those provided in the Proposed 2018 Rule which is consistent with the requirements set forth in the Final 2018. Rule, The letter also stated that the EPA would soon finalize a decision to deny the request to change the point of obligation for renewable identification numbers, or RINs, from refiners and importers to blenders, that the EPA is actively exploring its authority to remove arbitrary barriers to the year-rounds use of E15 and other mid-level ethanol blends so that E15 may be sold throughout the year without disruption and that the EPA will be not pursue regulations to allow ethanol exports to generate RINs. All of these statements represent actions that would likely have a positive impact on the ethanol industry either directly or indirectly.Although the release of the Final 2018 Rule and the maintenance of the 15 billion gallon threshold for volume requirements that may be met with corn-based ethanol together with the letter issued by Administrator Pruitt signals support from the EPA and the Trump administration for domestic ethanol production, the Trump administration could still elect to materially modify, repeal or otherwise invalidate the RFS2 and it is unclear what regulatory framework and renewable volume requirements, if any, will emerge as a result of such reforms; however, any such reform could adversely affect the demand and price for ethanol and the Company's profitability.On February 3, 2010, the EPA implemented new regulations governing the RFS which are referred to as "RFS2". The most controversial part of RFS2 involves what is commonly referred to as the lifecycle analysis of greenhouse gas emissions. Specifically, the EPA adopted rules to determine which renewable fuels provided sufficient reductions in greenhouse gases, compared to conventional gasoline, to qualify under the RFS program. RFS2 establishes a tiered approach, where regular renewable fuels are required to accomplish a 20% greenhouse gas reduction compared to gasoline, advanced biofuelsby ethanol producers and biomass-based biodiesel must accomplish a 50% reduction in greenhouse gases, and cellulosic biofuels must accomplish a 60% reduction in greenhouse gases. Any fuels that fail to meet this standard cannot be used by fuel blenders to satisfy their obligations under the RFS program. Our ethanol plant was grandfathered into the RFS due to the fact that it was constructed prior to the effective date of the lifecycle greenhouse gas requirement and is not required to prove compliance with the lifecycle greenhouse gas reductions.Based on the final regulations, we believe our Facility, at its current operating capacity, was grandfathered into the RFS given it was constructed prior to the effective date of the lifecycle greenhouse gas requirement and therefore is not required to prove compliance with the lifecycle greenhouse gas reductions. However, expansion of our Facility will require us to meet a threshold of a 20% reduction in greenhouse gas, or GHG emissions to produce ethanol eligible for the RFS2 mandate. In order to expand capacity at our Facility, we may be required to obtain additional permits, install advanced technology, or reduce drying of certain amounts of distillers grains. Many in the ethanol industry are concerned that certain provisions of RFS2 as adopted may disproportionately benefit ethanol produced from sugarcane. This could make sugarcane based ethanol, which is primarily produced in Brazil, more competitive in the United States ethanol market. If this were to occur, it could reduce demand for the ethanol that we produce.Due primarily in response to the drought conditions experienced in 2012, claims that blending of ethanol into the motor fuel supply will be constrained by unwillingness of the market to accept greater than 10% ethanol blends, or the blend wall, and other industry factors, new legislation aimed at reducing or eliminating renewable fuel use required by RFS2 has been introduced. The Renewable Fuel Standard Elimination Act, originally introduced in April 2013 and reintroduced as H.R. 703 in February 2015, targeted the repeal ofdetached when the renewable fuel program of the EPA. Also introduced in April 2013, and reintroduced as H.R. 704 in February 2015, was the RFS Reform Bill which tried to prohibit more than ten percent (10%) ethanol in gasoline and reduce the RFS2 mandated volume of renewable fuel. Both of these bills failed to make it out of congressional committee and were not enacted into law.Recently, similar legislation aimed at reducingis blended with transportation fuel or eliminating the renewable fuel use required by the RFS has been introducedtraded in the United States Congress. On January 3, 2017,open market. The market price of detached RINs affects the Leave Ethanol Volumes at Existing Levels (LEVEL) Act (H.R. 119) was introduced in the House of Representatives. The bill would freeze renewable fuel blending requirements under the RFS at 7.5 billion gallons per year, prohibit the sale of gasoline containing more than 10% ethanol, and revoke the EPA’s approval of E15 blends. On January 31, 2017, a bill (H.R. 777) was introduced in the House of Representatives that would require the EPA and National Academies of Sciences to conduct a study on “the implications of the use of mid-level ethanol blends”. A mid-level ethanol blend is an ethanol-gasoline blend containing 10-20% ethanol by volume, including E15 and E20, that is intended to be used in any conventional gasoline-powered motor vehicle or non-road vehicle or engine. Also on January 31, 2017, a bill (H.R. 776) was introduced in the House of Representatives that would limit the volume of cellulosic biofuel required under the RFS to what is commercially available. On March 2, 2017, a bill (H.R. 1315) was introduced in the House of Representatives that would cap the volumeprice of ethanol in gasoline at 10%. Oncertain markets and influences the same day, a new version of the RFS Elimination Act (H.R. 1314), which was originally introduced in April 2013, was introduced and seeks to fully repeal the RFS.All of these bills were assigned to a congressional subcommittee, which will consider them before possibly sending any of them on to the House of Representatives as a whole. The enactment of any of these bills or similar legislation aimed at eliminating or reducing the RFS mandates could have a material adverse impact on the ethanol industry as a whole and our business operations.On April 17, 2015, the U.S. Department of Transportation, or DOT, announced rail safety changes for transportation of ethanol and other liquids. Effective immediately, transportation of Class 3 flammable liquids, such as ethanol, are subject to new safety advisories, notices and an emergency order issuedpurchasing decisions by the DOT, Federal Railroad Administration and Pipeline and Hazardous Materials Safety Administration. The emergency order limits trains to a maximum authorized operating speed limit when passing through highly populated areas and carrying large amounts of ethanol or other Class 3 flammable liquids.On May 1, 2015, the DOT, in coordination with Transport Canada, announced the final rule, “Enhanced Tank Car Standards and Operational Controls for High-Hazard Flammable Trains.” The rule calls for an enhanced tank car standard known as the DOT specification 117 tank car and establishes a schedule that began in May 2017 to retrofit or replace older tank cars carrying crude oil and ethanol. U.S. and Canadian shippers have until May 1, 2023, to phase out or upgrade older DOT111 tank cars servicing ethanol. Shippers have until July 1, 2023, to retrofit or replace non-jacketed CPC-1232 tank cars, and until May 1, 2025, to retrofit or replace jacketed CPC-1232 tank cars, transporting ethanol in the U.S. and Canada. The rule also establishes new braking standards intended to reduce the severity of accidents and “pile-up effect.” New operational protocols are also applicable, which include reduced speed, routing requirements and local government notifications. In addition, companies that transport hazardous materials must develop more accurate classification protocols.iswas a renewable fuels standardtargeted set of tax credits encouraging 10%an escalating percentage of the gasoline sold in Iowa to consist of, be blended with, or be replaced by, renewable fuels. To receive the tax credit, retailers of gasoline are required to reach escalating annual targets of the percentage of their gasoline sales that consist of, are blended with, or are replaced by, renewable fuels. This renewable fuel tax credit originally required 10% of the gasoline that retailers sold to fall within the renewable fuels standard increasesdefinitions to receive the credit and has increased incrementally to 25% as of the gasoline sold in Iowa byJanuary 1, 2020. To reachThis tax credit automatically repealed itself on January 1, 2021 for tax years beginning on or after that goal, the use of date. will have to climb dramatically. Gas stations that embrace E85 will be in line for state tax credits and also incentives. To qualify under the bill, ethanol must be agriculturally-derived. E85gasoline.gasoline, which is available for use in flex fuel vehicles. There are more than 21 million flex fuel vehicles on the road today, or approximately 8% of all vehicles, representing more vehicles than require premium gasoline today. In addition to use as a fuel in flexible fuel vehicles, E85 can be used as an aviation fuel, as reported by the National Corn Growers Association, and as a hydrogen source for fuel cells. According to the Renewable Fuels Association,U.S. Department of Energy, there are currently more than 21 million flexible fuel vehicles capable of operating on E85 in the United States and nearly all of the major automakers have available flexible fuel modesmodels and have indicated plans to produce several million more flexible fuel vehicles per year. The Renewable Fuels AssociationU.S. Department of Energy reports that there are more than 3,7004,000 retail gasoline stations supplying E85 with 1,200 new stations scheduled to open in the next 18 months.or other ethanol flex fuel blends. While the number of retail E85 suppliers has increased each year, this remains a relatively small percentage of the total number of U.S. retail gasoline stations, which is approximately 170,000.well over 100,000. In order for E85 fuel to increase demand for ethanol, it must be available for consumers to purchase it. As public awareness of ethanol and E85 increases along with E85’s increased availability, management anticipates some growth in demand for ethanol associated with increased E85 consumption.Theconsumption. The USDA provides financial assistance to help implement “blender pumps” in the United States in order to increase demand for ethanol and to help offset the cost of introducing mid-level ethanol blends into the United States retail gasoline market. 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/gasolinegasoline and up to 15% ethanol.gasoline. E15 was approved for use in model year 2001 and newer cars, light-duty trucks, medium-duty passenger vehicles (SUVs) and all flex-fuel vehicles by the U.S. Environmental Protection Agency in 2012, This approved group of vehicles includes 80%90% of the cars, trucks and SUVs on the road today According to the Renewable Fuel Association, thisAssociation. This higher octane fuel is available in 2330 states at retail fueling stations. Sheetz, Kum & Go, Murphy USA, MAPCO Express, Protec Fuel, Minnoco, Thornton's, Hy-Vee, Growmark and Hy-VeeCasey's all offer E15 to 2001 and newer vehicles today at several stations. AccordingOne of the historic challenges with the growth of the E15 market is the fact that, the waiver in the Clean Air Act, known as the One-Pound Waiver, which allows E10 to Growth Energy, as of October 5, 2017, there were 1,043 retail stations sellingbe sold year-round, does not apply to E15 which is a substantial increase from the 431 stations selling E15 as of December 31, 2016.2015,2019, the EPA finalized a rule extending the One-Pound Waiver to E15 so its sale could expand beyond flex-fuel vehicles during the June 1 to September 15 summer driving season. In June 2021, however, the U.S. Court of Appeals for the District of Columbia struck down this rule finding that the EPA exceeded its authority. that the agency will make significant investmentsHigher Blends Infrastructure Incentive Program which consists of up to $100 million in a biofuels infrastructure partnershipfunding for grants to doublebe used to increase the numberavailability of renewable fuel blender pumps that can supply consumers with higher blends of ethanol blends, like E15 and E85. The program provides competitive grants, matched by states,biodiesel fuels and to help implementincrease the implementation of “blender pumps” in the United StatesStates. Funds may be awarded to retailers such as fueling stations and convenience stores to assist in order to increase demand for ethanolthe cost of installation or upgrading of fuel pumps and to helpother infrastructure which helps offset the cost of introducing mid-levelhigher level ethanol blends into the United States retail gasoline market. A blender pump is a gasoline pump that can dispense a variety of different ethanol/gasoline blends. Blender pumps typically can dispense E10, E15, 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. As of March 2017,In October 2020, the USDA biofuels infrastructure partnership program had provided $210announced the grant of $22 million of awards to the first round of recipients. To date, the USDA has awarded approximately $66.4 million to eligible projects. infrastructure at more than 1,400infrastructure. The USDA reports that to date, 20 states have received BIP federal funding in an aggregate amount of $100 million covering nearly 1,500 stations in 20 states. Installations began in 2016 and will continue into 2017, which will significantly increase the number of stations selling both E15 and E85.Cellulosic EthanolThe Energy Independence and Security Act provided numerous funding opportunities in support of cellulosic ethanol. In addition, RFS2 mandates an increasing level of production of biofuels which are not derived from corn. These policies suggest an increasing policy preference away from corn ethanol and toward cellulosic ethanol.CARB"CARB") has adopted a Low Carbon Fuel Standard (the "LCFS") requiring a 10% reduction in GHG emissions from transportation fuels by 2020 using a lifecycle GHG emissions calculation. On December 29, 2011, a federal district court in California ruled that the California LCFS was unconstitutional which halted implementation of the California LCFS. 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 the overall market demand for corn-based ethanol and result in decreased ethanol prices.report. report. The risks and uncertainties described below are not the only ones we may face. The following risks, together with additional risks and uncertainties not currently known to us or that we currently deem immaterial, could impair our financial condition and results of operation.FourthFifth Amended and Restated Operating Agreement dated March 21, 2015June 19, 2020 (the “Operating Agreement”) unless the Board of Directors (the “Board” or “Board of Directors”) approves such a transfer. Furthermore, the Boardrequirerequires us to comply with certain restrictive loan covenants which may limit our ability to operate our business.We operatecapital intensive businessesaddition to the global financial markets. This pandemic has resulted in social distancing, travel bans, governmental stay-at-home orders, and relyquarantines, and if any of these measures are reinstituted or prolonged, they may limit access to our facilities, customers, suppliers, management, support staff and professional advisors. At this time it is not possible to fully assess the impact of the COVID-19 pandemic on cash generated fromthe Company’s operations and external financing. Limitations on access to external financing could adversely affectcapital requirements, but the aforementioned factors, among other things, may impact our operating results.Increases in liquidity requirements could occur due to,operations, financial condition and demand for example, increased commodity prices. Our operating cash flow is dependent on our products, as well as our overall ability to profitably operate our businessesreact timely and overall commodity market conditions. In addition, wemitigate the impact of this event. Depending on its severity and longevity, the COVID-19 pandemic may need to raise additional financing to fund growth of our businesses. In this market environment, we may experience limited access to incremental financing. This could cause us to defer or cancel growth projects, reduce our business activity or, if we are unable to meet our debt repayment schedules, causehave a default in our existing debt agreements. These events could have anmaterial adverse effect on our business, customers, and members.position.Risks Associated With OperationsRFS2.RFS. Discretionary blending is an important secondary market which is often determined by the price of ethanol versus the price of gasoline. In periods when discretionary blending is financially unattractive, the demand for ethanol may be reduced. In recent years, the price of ethanol has been less than the price of gasoline which increased demand for ethanol from fuel blenders. However, recently, low oil prices have driven down the price of gasoline which has reduced the spread between the price of gasoline and the price of ethanol which could discourage discretionary blending, dampen the export market and result in a downward market adjustment in the price of ethanol. Any extended period where oil and gasoline prices remain lower than ethanol prices for a significant period of time could have a material adverse effect on our business, results of operation and financial condition which could decrease the value of our units.distiller'distillers grains and the price we pay for corn and natural gas. Any lowering of ethanol and distillers grains prices, especially if it is associated with increases in corn and natural gas prices, may affect our ability to operate profitably. We anticipate the price of ethanol and distillers grains to continue to be volatile in our 2018the next fiscal year as a result of the net effect of changes in the price of gasoline and corn and increased ethanol supply offset by increased ethanol demand.supply. Declines in the prices we receive for our ethanol and distillers grains will lead to decreased revenues and may result in our inability to operate the ethanol plant profitably for an extended period of time which could decrease the value of our units.Renewable Fuels Association,RFA, domestic ethanol production capacity increased from an annualized rate of 1.5 billion gallons per year in 1999 to a record 16.016.9 billion gallons in 2016. In addition, if2019 with additional production capacity still under construction. Given the near record ethanol production margins improve,crush margin at present, owners of ethanol production facilities may increase production levels therebyto pre-pandemic levels or to even greater production levels, resulting in further increases in domestic ethanol inventories. Any increase in the demand forsupply of ethanol may not be commensurate with increases in the supply ofdemand for ethanol, thus leading to lower ethanol prices. Also, demand for ethanol could be impaired due to a number of other factors, including regulatory developments and reduced United States gasoline consumption. Reduced gasoline consumption has occurred in the past and could occur in the future as a result of increased gasoline or oil prices or other factors such as increased automobile fuel efficiency. Any of these outcomes could have a material adverse effect on our results of operations, cash flows and financial condition.ethanolBrazilthe imposition of tariffs on U.S. ethanol could have a negative impact on ethanol prices.earlier this year, Brazil has imposed a tariff on ethanol which is produced in the United States and exported to Brazil. This tariff has resulted in a decline in demand for ethanol from BrazilBrazil. Additionally, China has imposed a tariff on ethanol which is produced in the United States and couldexported to China which has negatively impactimpacted exports of ethanol to China. These tariffs and their associated effects on international demand for ethanol produced in the United States have negatively impacted the market price of ethanol in the United States and could adversely impact our ability to profitably operate the ethanol plant.We are dependent on MidAm for our steam supply and any failure by it may result in a decrease in our profits or our inability to operate.Under the Steam Contract, MidAm provides us with steam to operate our Facility until November 30, 2024. We expect to face periodic interruptions in our steam supply under the Steam Contract. For this reason, we installed boilers at the Facility to provide a backup natural gas energy source. We also have entered into a natural gas supply agreement with Encore Energy for our long term natural gas needs, but this does not assure availability at all times. In addition, our current environmental permits limit the annual amount of natural gas that we may use in operating our gas-fired boiler.As with natural gas and other energy sources, our steam supply can be subject to immediate interruption by weather, strikes, transportation, conversion to wind turbines and production problems that can cause supply interruptions or shortages. While we anticipate utilizing natural gas as a temporary heat source in the event of MidAm’s plant outages, an extended interruption inthe supply of both steam and natural gas backup could cause us to halt or discontinue our production of ethanol, which would damage our ability to generate revenues. We may have conflicting financial interests with Bunge and ICM that could cause them to put their financial interests aheadICM and Bunge appoint three of our directors and have been, and are expected to be, involved in substantially all material aspects of our financing and operations and we have entered into a number of material commercial arrangements with Bunge, as described elsewhere in this report. ICM, Bunge and their respective affiliates may have conflicts of interest because ICM, Bunge and their respective employees or agents are involved as owners, creditors and in other capacities with other ethanol plants in the United States. We cannot require ICM or Bunge to devote their full time or attention to our activities. As a result, ICM and/or Bunge may have, or come to have, a conflict of interest in allocating personnel, materials and other resources to our Facility. Such conflicts of interest may reduce our profitability and the value of the units and could result in reduced distributions to investors.for our primary energy source. Wewith MidAm and we also are able to operate at full capacity using natural gas-fired boilers, which mitigates the risk of disruption in steam supply. However, the amount of natural gas we are permitted to use for this purpose is currently limited and the price of natural gas may be significantly higher than our steam price. In addition, natural gas and electricity prices have historically fluctuated significantly. Increases in the price of steam, natural gas or electricity would harm our business by increasing our energy costs. The prices which we will be required to pay for these energy sources will have a direct impact on our costs of producing ethanol and our financial results.Tank cars used to transport crude oil and ethanol may need to be retrofitted or replaced to meet proposed new rail safety regulations.The U.S. ethanol industry has long relied on railroads to deliver its product to market. We have leased 383 ethanol cars. These leased cars may need to be retrofitted or replaced to comply with final regulations adopted by the U.S. DepartmentRisks Associated With the Ethanol IndustryRecent reductions in the renewable volume obligations for corn-based ethanol under the RFS which are lower than the statutory requirements has had, and will continue to have, a negative impact on the market price or demand for ethanol.In November 2015, the EPA issued its Final 2014-2016 Rules for the 2014, 2015 and 2016 renewable volume obligations which reflected significant reductions in the total renewable fuel volume requirements from the statutory mandates initially set by Congress. In May 2016, the EPA released its proposed rule to set 2017 renewable volume requirements under RFS2 which set the annual volume requirement for renewable fuels at 18.8 billion gallons per year, of which 14.8 billion gallons could be met with corn-based ethanol but in November 2016, the EPA issued the Final 2017 Rule which increased the total volume requirements from 18.8 billion gallons to 19.28 billion gallons. The 2017 volume requirements are still below the 2017 statutory mandate of 24 billion gallons per year. However, in connection with the issuance of the Final 2017 Rule, the EPA increased the number of gallons which may be met by corn-based ethanol from 14.8 billion gallons to 15 billion gallons. This brings the renewable volume obligations for conventional renewable fuels that can be met by corn-based ethanol back to the levels called for in the statutory mandate for 2017.On July 5, 2017, the EPA released the Proposed 2018 Rule which proposed an annual volume requirement for renewable fuel of 19.24 billion gallons of renewable fuels per year. On November 30, 2017, the EPA issued the Final 2018 Rule which varied only slightly from the Proposed 2018 Rule with the annual volume requirement for renewable fuel set at 19.29 billion gallons of renewable fuels per year. Although the volume requirements set forth in the Final 2018 Rule are slightly higher than the 19.28 billion gallons required under the Final 2017 Rule, the final volume requirements are still significantly below the 26 billion gallons statutory mandate for 2018 with significant reductions in the volume requirements for advanced biofuels. However, the Final 2018 Rule does maintain the number of gallons which may be met by conventional renewable fuels such as corn-based ethanol at 15.0 billion gallons.The release of the Final 2018 Rule and the maintenance of the 15 billion gallon threshold for volume requirements that may be met with corn-based ethanol together with the letter issued by Administrator Pruitt may signal a rejection of arguments by the oil industry relating to the “blend wall” and support from the EPA and the Trump administration for domestic ethanol production; however, there is no guarantee that for future years the EPA will adhere to the statutory mandate for conventional renewable fuels. The Trump administration could still elect to materially modify, repeal or otherwise invalidate the RFS and it is unclear what regulatory framework and renewable volume requirements, if any, will emerge as a result of such reforms; however,any such reform could adversely affect the demand and price for ethanol and our profitability. In addition, due to the lower price of gasoline, we do not anticipate that renewable fuel blenders will use more ethanol than is required by the RFS which may result in a significant decrease in ethanol demand.Furthermore, there have also been recent proposals in Congress to reduce or eliminate the RFS. The EPA's reduction of the volume requirements under the RFS set forth in the EPA’s final rules combined with any further reduction to or elimination of the RFS requirements, could materially decrease the market price and demand for ethanol which will negatively impact our financial performance.The volume requirements mandated in the Final 2014 - 2016 Rules, the Final 2017 Rule and the Final 2018 Rule remain below the volume requirements statutorily mandated by Congress. These reduced volume requirements, combined with the potential elimination of such requirements by the exercise of the EPA waiver authority or by Congress, could decrease the market price and demand for ethanol which will negatively impact our financial performance.If exports to Europe are decreased due to the imposition by the European Union of a tariff on U.S. ethanol, ethanol prices may be negatively impacted.The European Union imposed a tariff on ethanol which is produced in the United States and exported to Europe. As a result of such tariff, exports of ethanol to Europe have decreased which has negatively impacted the market price of ethanol in the United States. The European Union tariff is scheduled to expire in 2018 which could result in increased demand for domestic ethanol from the European Union. Additional demand for ethanol from the European Union could help offset decreased demand from China and Brazil and have a positive impact on domestic ethanol prices. However, it will take time for ethanol prices to reflect any positive impact resulting from the expiration of the European Union tariff and there is no guarantee that any positive impact will result.Decreases in exports of distillers grains to China have had, and could continue to have, a negative effect on the price of distillers grains in the U.S. and negatively affect our profitability.Historically, the United States ethanol industry exported a significant amount of distillers grains to China. However, on January 12, 2016, the Chinese government began an antidumping and countervailing duty investigation related to distillers grains imported from the United States which has significantly reduced exports of distillers grains to China. China issued a preliminary ruling on the anti-dumping investigation imposing an immediate duty on distillers grains that are produced in the United States and implemented an anti-subsidy duty on September 30, 2016. In January 2017, China announced a final ruling which set the antidumping duties at a range between 42.2% and 53.7% and established anti-subsidy duties at a range between 11.2% and 12%. The imposition of these duties resulted in plummeting demand from this top importer requiring United States producers to seek out alternatives markets, most notably in Mexico and Canada. The imposition of these duties create significant trade barriers and have significantly decreased demand from China and the prices for distiller’s grains produced in the United States. Continued reduction in demand from China, if alternative markets are not found, combined with lower domestic corn prices could negatively impact our ability to profitably operate its ethanol plant.Decreased
For example, as a result of trade actions announced by the Trump administration and responsive actions announced by our trading partners, including by China, the domestic ethanol market has experienced negative impacts of higher ethanol tariffs and other disruptions to international agricultural trade. Additionally, the imposition of certain duties on exports of distillers grains created significant trade barriers and has significantly decreased demand for such products from China and the prices for ethanoldistiller’s grains produced in the United States. Although the markets have substantially adjusted to these shifts, ongoing changes in domestic and foreign policy could adversely affectnegatively impact our results of operations and the profitability of the Company.ability to operate at a profitOur revenues are dependent on marketforof ethanol and prices for ethanol products can vary significantly over time and decreases in price levels could adversely affect our profitability and viability. Market prices for ethanoldistillers grains can be volatile as a result of a number of factors including, but not limited to,such as overall supply and demand, the price of gasoline and corn, levels of government support, and the availability and price of competing fuels,products. We are dependent on a favorable spread between the overall supply and demandprice we receive for our ethanol and distillers grains and the price we pay for corn and natural gas. Any lowering of ethanol and distillers grains prices, especially if it is associated with increases in corn and natural gas prices, may affect our ability to operate profitably. We anticipate the price of ethanol and distillers grains to continue to be volatile in during our 2021 fiscal year as a result of the net effect of changes in the price of gasoline and corn and the level of government support. The price forincreased ethanol has some relation to the price for oil and gasoline. The price of ethanol tends to increase as the price of gasoline increases,supply offset by increased export demand and the pricecontinuing impact of ethanol tendsthe COVID-19 pandemic. In addition, growing conditions in a particular season’s harvest may cause the corn crop to be of poor quality resulting in corn shortages and a decrease as the price of gasoline decreases, although this may not always be the case. Any lowering of gasoline prices will likely also lead to lower prices for ethanol and adversely affect our operating results. Increased production of ethanol may lead to lowerin distillers grains prices. Any downward changeDeclines in the price of ethanol may decrease our prospects for profitability.Ethanol is marketed as a fuel additive to reduce vehicle emissions from gasoline, as an octane enhancer to improve the octane rating of the gasoline with which it is blended and as a replacement for gasoline. As a result, ethanol prices are influenced by the supply of and demand for gasoline. Our results of operations may be adversely impacted if the demand for, or the price of gasoline decreased dramatically without a similar price reduction in corn. Market prices for ethanol produced in the United States are also influenced by the supply of and demand for imported ethanol. Imported ethanol is not subject to an import tariff and under RFS2 sugarcane ethanol imported from Brazil has been one of the most economical means for obligated parties to meet the advanced biofuel standards.Decreased prices for distillers grains could adversely affect our results of operations and our ability to operate at a profit.Distillers grains compete with other protein-based animal feed products. The price of distillers grains may decrease when the prices of competing feed products decrease. The prices of competing animal feed products are based in part on the prices of the commodities from which these products are derived. Downward pressure on commodity prices, such as soybeans, will generally cause the price of competing animal feed products to decline, resulting in downward pressure on the price of distillers grains.Historically, sales prices for distillers grains have been correlated with prices of corn. However, there have been occasions when the price increase for this co-product has lagged behind increases in corn prices. In addition, our distillers grains co-product competes with products made from other feedstocks, the cost of which may not have risen as corn prices have risen. Consequently, the price we may receive for distillers grains may not rise as corn prices rise, thereby lowering our cost recovery percentage relative to corn.Due to industry increases in U.S. dry mill ethanol production, the production of distillers grains in the United States has increased dramatically, and this trend may continue. This may cause distillers grains prices to fall in the United States, unless demand increases or other market sources are found. To date, demand for distillers grains in the United States has increased roughly in proportion to supply. We believe this is because U.S. farmers use distillers grains as a feedstock, and distillers grains are slightly less expensive than corn,will lead to decreased revenues and may result in our inability to operate the ethanol plant profitably for which it is a substitute. However, if prices for distillers grains in the United States fall, it may have an adverse effect on our business. Renewable Energy, Inc., Valero Renewable Fuels and POET Biorefining, among others, are capable of producing a significantly greater amount of ethanol than we produce. Further, many believe that there will be further consolidation occurring in the ethanol industry in the near future which will likely lead to a few companies who control a significant portion of the ethanol production market. We may not be able to compete with these larger entities. These larger ethanol producers may be able to affect the ethanol market in ways that are not beneficial to us which could affect our financial performance.industry offersand electric-powered vehicle industries offer a technological optionoptions to address increasing worldwide energy costs, the long-term availability of petroleum reserves and environmental concerns. Fuel cells have emerged as a potential alternative to certain existing power sources because of their higher efficiency, reduced noise and lower emissions. Fuel cell industry participants are currently targeting the transportation, stationary power and portable power markets in order to lower fuel costs, decrease dependence on crude oil and reduce harmful emissions. The same can largely be said of electric-powered vehicles. If the fuel cell and hydrogen industries continue to expand and gain broad acceptance, and hydrogen becomes readily available to consumers for motor vehicle use, we may not be able to compete effectively. Likewise, participants in the emerging electric-powered vehicle industry are currently targeting the transportation market to decrease dependence on crude oil and reduce harmful emissions. If the electric-powered vehicle industry continues to expand and gain broad acceptance, the ethanol and larger gasoline industry may not be able to compete effectively. This additional competition could reduce the demand for ethanol, which would negatively impact our profitability.RFS2the RFS, certain parties are obligated to meet an advanced biofuel standard and sugarcane ethanol imported from Brazil has historically been one of the most economical means for obligated parties to meet this standard. OtherNovember 2015,the past, the EPA issued its Final 2014-2016 Rules forhas set the 2014, 2015 and 2016 renewable volume obligations which reflected significant reductions in the total renewable fuel volume requirements frombelow the statutory mandates initially set by Congress. In May 2016,volume requirements. The EPA issued the EPA released its proposedfinal rule to set 2017 renewable volume requirements under RFS2for 2020 which set the annual volume requirementrequirements for renewable fuelsfuel at 18.820.09 billion gallons per year, of which 14.8 billion gallons could be met with corn-based ethanol but in November 2016,renewable fuel. Both the EPA issued the Final 2017 Rule which increased the totalfinal 2019 volume requirements from 18.8 billion gallons to 19.28 billion gallons. The 2017and the final 2020 volume requirements are still below the 2017 statutory mandate of 24 billion gallons per year. However, in connection with the issuance of the Final 2017 Rule, the EPA increasedrequirement maintained the number of gallons which may be met by corn-based ethanol from 14.8 billion gallons to 15 billion gallons. This brings the renewable volume obligations for conventional renewable fuels that can be met by corn-based ethanol back to the levels called for in the statutory mandate for 2017.On July 5, 2017, the EPA released the Proposed 2018 Rule which proposed an annual volume requirement for renewable fuel of 19.24 billion gallons of renewable fuels per year. On November 30, 2017, the EPA issued the Final 2018 Rule which varied only slightly from the Proposed 2018 Rule with the annual volume requirement for renewable fuel set at 19.29 billion gallons of renewable fuels per year. Although the volume requirements set forth in the Final 2018 Rule are slightly higher than the 19.28 billion gallons required under the Final 2017 Rule, the final volume requirements are still significantly below the 26 billion gallons statutory mandate for 2018 with significant reductions in the volume requirements for advanced biofuels. However, the Final 2018 Rule does maintain the number of gallons which may be met by conventional renewable fuels such as corn-basedcorn based ethanol at 15.0 billion gallons.releaseProposed Rule would retroactively reduce the 2020 renewable volume obligation to 17.13 billion gallons. For 2021, the EPA’s Proposed Rule is proposing to set the renewable volume obligation at 18.52 billion gallons, and 20.77 billion gallons for 2022. At this time, there is substantial uncertainty about the future of the Final 2018 RuleRFS and the maintenanceaggregate obligations to be imposed on refiners in the future. Because the RFS is the predominate driver of demand for renewable fuels in the domestic marketplace, additional decreases in the renewable volume obligations, or a decrease in the scope and targets of the RFS could have a material impact on the price of ethanol and our profitability.billion gallon threshold2019, the EPA released a supplemental notice seeking additional comment on a proposed rule on adjustments to the way that annual renewable fuel percentages are calculated. The supplemental notice was issued in response to an announcement by President Trump of a proposed plan to require refiners not exempt from the rules to blend additional gallons of ethanol to make up for volume requirements that may be met with corn-based ethanol together with the letter issued by Administrator Pruitt may signal a rejection of argumentsgallons exempted by the oil industry relatingEPA's expanded use of waivers to small refineries. The proposed plan was expected to calculate the “blend wall” and supportvolume that refiners were required to blend by using a three-year average of exempted gallons. However, the EPA proposed to use a three-year average to account for the reduction in demand resulting from the waivers using the number of gallons of relief recommended by the United States Department of Energy. If the EPA continues to grant waivers to smaller refineries and the Trump administration for domesticAdministration fails to take any action to reallocate ethanol production; however, there is no guarantee that for future years the EPA will adheregallons lost to the statutory mandate for conventional renewable fuels. The Trump administration could still elect to materially modify, repeal or otherwise invalidate the RFS and it is unclear what regulatory framework and renewable volume requirements, if any, will emerge as a result of such reforms; however, any such reform could adversely affect the demand and price for ethanol and our profitability. In addition, due to the lower price of gasoline, we do not anticipate that renewable fuel blenders will use more ethanol than is required by the RFS which may result in a significant decrease in ethanol demand..Furthermore, there have also been recent proposals in Congress to reduce or eliminate the RFS. The EPA's reduction of the volume requirements under the RFS set forth in the EPA's final rules combined with any further reduction to or elimination of the RFS requirements, could materially decreasewaivers, the market price and demand for ethanol would be adversely affected which willwould negatively impact our financial performance. Additionally, under the provisions of the Energy Independent and Security Act, the EPA has the authorityto waive the mandated RFS requirements in whole or in part. Although the EPA has not granted any waiver, we cannot guarantee that if future waiver requests are filed that the EPA will deny such requests. Our operations could be adversely impacted if such a waiver is ever granted and any reversal or waiver in federal policy on the RFS could have a significant impact on the ethanol industry. The volume requirements mandated in the Final 2014 - 2016 Rules, the Final 2017 Rule and the Final 2018 Rule remain below the volume requirements statutorily mandated by Congress. These reduced volume requirements, combined with the potential elimination of such requirements by the exercise of the EPA waiver authority or by Congress, could decrease the market price and demand for ethanol which will negatively impact our financial performance.RFS2RFS is the generation of renewable identification numbers, or RINs, which are generated and attached to renewable fuels such as the ethanol we produce and detached when the renewable fuel is blended into the transportation fuel supply. Detached RINs may be retired by obligated parties to demonstrate compliance with RFS2RFS or may be separately traded in the market. The market price of detached RINs may affect the price of ethanol in certain U.S. markets as obligated parties may factor these costs into their purchasing decisions. Moreover, at certain price levels for various types of RINs, it becomes more economical to import foreign sugarcane ethanol. If changes to RFS2 result in significant changes in the price of various types of RINs, it could negatively affect the price of ethanol, and our operations could be adversely impacted. Inc., formerly known as EPCO Carbon Dioxide Products, Inc. pursuant to a Carbon Dioxide Purchase and Sale Agreement. The United States Supreme Court has classified carbon dioxide as an air pollutant under the Clean Air Act in a case seeking to require the EPA to regulate carbon dioxide in vehicle emissions. Similar lawsuits have been filed seeking to require the EPA to regulate carbon dioxide emissions from stationary sources such as our ethanol plant under the Clean Air Act. While there are currently no regulations applicable to us concerning carbon dioxide, if Iowa or the federal government, or any appropriate agency, decides to regulate carbon dioxide emissions by plants such as ours, we may have to apply for additional permits or we may be required to install carbon dioxide mitigation equipment or take other steps unknown to us at this time in order to comply with such law or regulation. Compliance with future regulation of carbon dioxide, if it occurs, could be costly and may prevent us from operating the Facility profitably.LCFS"LCFS") which requires that renewable fuels used in California must accomplish certain reductions in greenhouse gases which reductions are measured using a lifecycle analysis. Management believes that theThe California LCFS and other state regulations aimed at reducing greenhouse gas emissions could impact the price of corn-based ethanol which could have an adverse impact on the market forpreclude corn-based ethanol produced in the Midwest.Midwest from being used in California. California represents a significant ethanol demand market. Thismarket and therefore, if we are unable to supply corn-based ethanol to California, this could result in a reduction of our revenues and negatively impact our ability to profitably operate the ethanol plant.Our site borders nesting areas used by endangered bird species, which could impact our ability to successfully maintain or renew operating permits. The presenceThe Piping Plover ( Charadrius melodus ) and Least Tern ( Sterna antillarum ) use the fly ash ponds of the existing MidAm power plant for their nesting grounds. The birds are listed on the state and federal threatened and endangered species lists. The IDNR determined that our rail operation, within specified but acceptable limits, does not interfere with the birds’ nesting patterns and behaviors. However, it was necessary for us to modify our construction schedules, plant site design and track maintenance schedule to accommodate the birds’ patterns. We cannot foresee or predict the birds’ future behaviors or status. As such, we cannot say with certainty that endangered species related issues will not arise in the future that could negatively affect the plant’s operations.Lenders.our Lender. We lease a building on the Facility site to an unrelated third party, and lease 45 acres on the south end of the property to an unrelated third party for farming, and grow cornwe custom farm for our own use on ten acres.On August 25, 2010, the Company entered into a Tricanter Purchase and Installation Agreement (the “Tricanter Agreement”) with ICM, pursuantwhich ICM sold the Company a tricanter corn oil separation system (the “Tricanter Equipment”). Under the Tricanter Agreement, ICM has agreed to indemnify the Company from any and all lawsuit and damages with respect to the Company's installation and use of the Tricanter Equipment.On August 5, 2013, GS Cleantech Corporation (“GS Cleantech”) filed a suit in United States District Court for the Southern District of Iowa, Western Division (Case No. 2:13-CV-00021-JAJ-CFB), naming the Company as a defendant (the “Lawsuit”). The Lawsuit alleges infringement of patents assigned to GS Cleantech with respect to the corn oil separation technology used in the Tricanter Equipment. The Lawsuit seeks preliminary and permanent injunctions against the Company to prevent future infringement on the patents owned by GS CleanTech and damages in an unspecified amount adequate to compensate GS CleanTech for the alleged patent infringement, plus attorney's fees.The Lawsuit became part of multidistrict litigation against numerous parties and was transferred to the Federal District Court for the Southern District of Indiana (the “Court”). On October 23, 2014, the patents owned by GS CleanTech in the Lawsuit were found to be invalid by the SD of Indiana District Court. On January 15, 2015, the Company received a partial summary judgment finding in the Lawsuit by the SD of Indiana District Court consistent with the October 23, 2014 ruling. In September 2016, the Court issued an opinion renderingthe CleanTech patents unenforceable due to inequitable conduct.This ruling is in addition to the prior favorable court decisions on non-infringement. GS Cleantech has asked the Court to reconsider its decision regarding inequitable conduct. In addition, GS Cleantech and its attorneys filed a Notice of Appeal appealing the rulings on summary judgment.Under the Tricanter Agreement, ICM is obligated to, and has retained counsel at its expense to defend the Company in this Lawsuit. The Company is not currently able to predict the final outcome of this Lawsuit with any degree of certainty. The Company expects ICM to continue to vigorously defend the Company in further proceedings. However, in the event that damages are awarded as a result of this Lawsuit and, if ICM is unable to fully indemnify the Company for any reason, the Company could be liable for such damages. In addition,time, the Company may needbe subject to cease uselegal proceedings, claims, and litigation arising in the ordinary course of its current oil separation process and seek outbusiness. While the outcome of these matters, if any, are currently not determinable, we do not expect that the ultimate costs to resolve these matters, if any, would have a replacementmaterial adverse effect on the Company consolidated financial position, results of operations, or execute a license with GS CleanTech.Registrant’sRegistrant’s Common Equity, Related Member Matters, and Issuer Purchases of Equity Securities.2017,2021, we had (i) 8,9938,975 Series A Units issued and outstanding held by 846 persons, (ii) 3,334 Series B Units issued and outstanding held by Bunge, and (iii) 1,000 Series C Units issued and outstanding held by ICM.840 persons. We do not have any established trading market for itsour units, nor is one contemplated. However, we do provide access to a Qualified Matching Service for our members, which provides a system for limited transfers of our Units.$22.2$28.9 million to our members, with no distributions made during Fiscal 2017 and2021 or Fiscal 2016 in the amount of $4.5 million and $3.3 million, respectively; however, we2020. We cannot be certain if or when we will be able to make additional distributions. Further, our ability to make distributions is restricted under the terms of the Credit Agreement.Selected Financial Data.The following table presents selected financial and operating data as of the dates and for the periods indicated. The selected balance sheet financial data for the years ended September 30, 2017 and 2016 and the selected income statement data and other financial data for such years have been derived from the audited financial statements included elsewhere in this Form 10-K. You should read the following table in conjunction with "Item 7- [Reserved]Operations” and the financial statements and the accompanying notes included elsewhere in this Form 10-K. Among other things, those financial statements include more detailed information regarding the basis of presentation for the following financial data. September 30, 2017 September 30, 2016 Amounts Amounts in 000's in 000's Balance Sheet Data Cash and cash equivalents $ 1,487 $ 3,139 Total current assets 28,460 27,241 Total assets $ 148,829 $ 151,963 Total current liabilities $ 18,112 $ 17,932 Total long term liabilities 18,726 30,954 Total liabilities 36,838 48,886 Total members' equity 111,991 103,077 Total liabilities and members' equity $ 148,829 $ 151,963 Fiscal 2017 Fiscal 2016 Amounts Amounts in 000's in 000's Income Statement Revenues $ 219,768 $ 223,326 Cost of Goods Sold 200,986 212,163 Gross Margin 18,782 11,163 General and Administrative Expenses 4,787 4,588 Interest expense and other income, net 950 1,022 Change in fair value of put option liability (400 ) 460 Net Income $ 13,445 $ 5,093 Income per Unit: Income per unit -basic $ 1,008.85 $ 382.16 Income per unit -diluted $ 906.28 $ 382.16 Modified EBITDAModified EBITDA is defined as net income plus interest expense net of interest income, plus depreciation and amortization, or EBITDA, then adjusted for unrealized hedging losses, and other non-cash credits and charges to net income. Modified EBITDA is not required by or presented in accordance with generally accepted accounting principles in the United States of America (“GAAP”), and should not be considered as an alternative to net income, operating income or any other performance measure derived in accordance with GAAP, or as an alternative to cash flow from operating activities or as a measure of our liquidity.We present Modified EBITDA because we consider it to be an important supplemental measure of our operating performance and it is considered by our management and Board of Directors as an important operating metric in their assessment of our performance.We believe Modified EBITDA allows us to better compare our current operating results with corresponding historical periods and with the operational performance of other companies in our industry because it does not give effect to potential differences caused by variations in capital structures (affecting relative interest expense, including the impact of write-offs of deferred financing costs when companies refinance their indebtedness), the amortization of intangibles (affecting relative amortization expense), unrealized hedging losses and other items that are unrelated to underlying operating performance. We also present Modified EBITDA because we believe it is frequently used by securities analysts and investors as a measure of performance. There are a number of material limitations to the use of Modified EBITDA as an analytical tool, including the following:Modified EBITDA does not reflect our interest expense or the cash requirements to pay our interest. Because we have borrowed money to finance our operations, interest expense is a necessary element of our costs and our ability to generate profits and cash flows. Therefore, any measure that excludes interest expense may have material limitations.Although depreciation and amortization are non-cash expenses in the period recorded, the assets being depreciated and amortized may have to be replaced in the future, and Modified EBITDA does not reflect the cash requirements for such replacement. Because we use capital assets, depreciation and amortization expense is a necessary element of our costs and ability to generate profits. Therefore, any measure that excludes depreciation and amortization expense may have material limitations.We compensate for these limitations by relying primarily on our GAAP financial measures and by using Modified EBITDA only as supplemental information. We believe that consideration of Modified EBITDA, together with a careful review of our GAAP financial measures, is the most informed method of analyzing our operations. Because Modified EBITDA is not a measurement determined in accordance with GAAP and is susceptible to varying calculations, Modified EBITDA, as presented, may not be comparable to other similarly titled measures of other companies. The following table provides a reconciliation of Modified EBITDA to net income: Fiscal 2017 Fiscal 2016 Amounts Amounts in 000's (except per unit) in 000's (except per unit) Net Income $ 13,445 $ 5,093 Interest Expense, Net 1,118 1,393 Depreciation 12,058 11,785 EBITDA 26,621 18,271 Unrealized Hedging (gain) (363 ) (1,016 ) Change in fair value of put option liability (400 ) 460 Modified EBITDA $ 25,858 $ 17,715 Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation.and results of operations.operations, and material cash requirements. This discussion should be read in conjunction with the financial statements included herewith and notes to the financial statements thereto and the risk factors contained herein.The Company historically was permitted to produce up to 125 million gallons under it's air permit; however, the Iowa Department of Natural Resources (IDNR) approved an increase in the Company's air permit to allow for production of 140 million gallons per rolling 12 months starting in March 2017 We began producing ethanol in February, 2009 and sell our ethanol, distillers grains, and corn oil in the United States, Mexico and the Pacific Rim. 20172021") compared to the fiscal year ended September 30, 2020 ("Fiscal 2016,2020"), the average price per gallon of ethanol sold increased 3.6%. Although there has been an increased supply of ethanol, weby 58% due to reduced stocks, increasing demand and higher corn and energy prices. There have also seenbeen increased prices for crude oil and gasoline in Fiscal 20172021 compared to Fiscal 20162020 due to reduced supply world-wide, and an increase in driving compared to Fiscal 2020 when there were lockdown orders and restrictions on relatively flat consumption.Management currently believes that despite the ethanol price changes, the ethanol outlook for the first quarter oftravel imposed by many authorities.2018 will be relatively flat2021. compared to Fiscal 2020 due to the following factors.The latest estimatesanticipated high demand for corn in China and portions of supply and demand provided by the U.S. Department of Agriculture (the "USDA") estimate the 2017/18 ending corn stocks of 2.49 billion bushels, the highest level in 30 years. The USDA held corn consumption for ethanol and co-products steady at 5.5 billion bushels and increased their forecast for the 2017/18 corn supply to 14.6 billion bushels, suggesting lower corn prices into the first half of Fiscal 2018.Gasoline demand increased slightly in 2017 over 2016 levels. The U.S. Energy Information Administration (the "EIA")released in its Short Term Energy Outlook report of November 7, 2017 that U.S. gasoline demand maintained last years record levels of ~9.3MMbpd in 2017 versus 2016.However, corn prices trended upward during the first half of Fiscal 2017 became more volatile and fluctuated downward during the last quarter of Fiscal 2017.United States experiencing severe droughts. Weather, world supply and demand, current and anticipated stocks, agricultural policy and other factors can contribute to volatility in corn prices. If corn prices, rise, it willand such changes have a negativematerial effect on our operating margins unless the pricecost of ethanol and distillers grains out paces risinggoods sold with corn prices.lowhigh or further decrease,increase, that could have a significant negative impact on the market price of ethanol and our profitabilitynet income, particularly should ethanol stocks remain high. A declinelow.U.S. ethanol exportsFiscal 2021, increased by 26% compared to the average price per ton of distillers grains sold for the same period in Fiscal 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 premiumlower cost alternative during Fiscal 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 as compared to unleaded gasoline, or other factors may contributeplants return to higher ethanol stocks unlessadditional demand can be created from other foreign markets or domestically. In addition, the EPA's reduction of the renewable volume obligations set forth in the RFS may limit demand for ethanol negatively impacting ethanol prices.In addition, market forces may continue toproduction levels as operating conditions improve could also have a negative impacteffect on distiller grain prices including lower export demand as a result of the imposition of an anti-dumping duties and anti-subsidy duties by the Chinese government on the import of distillers grains produced in the U.S in January 2017. These duties have adversely impacted export volume to China and decreased market prices. We cannot forecast how much demand from China will come back into the marketplace and distillers grains prices could remain low unless additional demand can be created from other foreign markets or domestically. Domestic demand for distillers grains could also remain low if corn prices decline and end-users switch to lower priced alternatives.20172021 and 2016. Fiscal 2017 Fiscal 2016 Amounts % of Revenues Amounts % of Revenues in 000's in 000's Income Statement Data Revenues $ 219,768 100.0 % $ 223,326 100.0 % Cost of Goods Sold Material Costs 140,877 64.1 % 154,153 69.0 % Variable Production Expense 31,350 14.3 % 29,805 13.3 % Fixed Production Expense 28,759 13.1 % 28,205 12.6 % Gross Margin 18,782 8.5 % 11,163 5.0 % General and Administrative Expenses 4,787 2.2 % 4,588 2.1 % Other Expenses 550 0.2 % 1,482 0.7 % Net Income $ 13,445 6.1 % $ 5,093 2.3 % $ 302,820 100.0 % $ 198,614 100.0 % 245,478 81.1 % 142,477 71.7 % 28,145 9.3 % 24,367 12.3 % 13,872 4.6 % 26,045 13.1 % 15,325 5.0 % 5,725 2.9 % 5,733 1.9 % 5,169 2.6 % 1,008 0.3 % 998 0.5 % $ 8,584 2.8 % $ (442 ) (0.2 )% at the bottom of this sectionbelow displays statistical information regarding our revenues. The decreaseincrease in revenue from Fiscal 20162021 compared to Fiscal 20172020 is primarily attributable to increased demand for our products driven by the lifting of lockdowns from the pandemic and vaccine distributions resulting in people going back to work and starting to travel again. For our main product ethanol, there was duea 58% increase in the average price per gallon of ethanol in Fiscal 2021 as compared to Fiscal 2020 driven by the tight supply of ethanol coupled with rising demand post-pandemic, and a decrease9.2% increase in the volume of 9.20%ethanol sold during Fiscal 2021 compared to Fiscal 2020. There was also an increase of 3.2% in the volume of distillers grains sold coupled with a decreaseand an increase in the average price per ton of distillers grains of approximately 16.7%. The decrease in26% primarily attributable to the prevailing prices of distillers grain revenue was partially offset by an increase in the average price per gallon of ethanol of approximately 3.6% in Fiscal 2017 asgrains compared to Fiscal 2016 (which was partially offset by a 0.6% decrease in the volume of ethanol sold during Fiscal 2017 over Fiscal 2016). Corncompeting feed products. Distillers corn oil revenue also increased 16.9%94% in Fiscal 20172021 compared to Fiscal 20162020 due to an increase of 11.0%6.3% in tons sold in Fiscal 2021 as compared to Fiscal 2020, along with an increase of 83% in the price of distillers corn oil received as compareddue to biodiesel processors utilizing higher quantities of distillers corn oil, thereby substantially increasing demand.priceCOVID-19 pandemic in 2020 which caused consumer driving to decrease. In addition, the market experienced weak export demand as a result of the impact of the pandemic on the worldwide economy All of these factors resulted in an extremely tight year for the ethanol industry. In Fiscal 2021, we witnessed a recovery in ethanol prices, distillers grains prices and distillers corn oil received during Fiscal 2016.The increaseprices driven by strong demand for each product coupled with lower supply attributable to industry slowdowns in the price of ethanol was due in part to domestic demand as relatively low fuel prices resulted in increased consumers driving and increased export demand. The price of ethanol has also seen positive impact from the rising ethanol blend rates at the pump. In addition, because ethanol2020. Ethanol prices are typically directionally consistent with changes in corn and energy prices, lowerand in Fiscal 2021, we did see the price of ethanol increase 58% over the course of the year with a similar increase in the cost of corn prices were offset by rising crude oil and gasoline prices throughout the fiscal year which had a favorable effect on ethanol prices.16.7% decrease26% increase in the average price of distillers grains which represents almostwas coupled with a 25% drop to3.2% increase in tonnage sold resulting in a 40% increase in this revenue category, resulted principally from lower domestic and export demand during the Fiscal 2017 as compared to Fiscal 2016.2017,2021, corn oil prices increased 11.0%83% and tons sold increased 6.3% compared to Fiscal 2016 primarily2020, due to increased demand from the biodiesel industry and due to the expansionprocessors utilizing higher quantities of the RFS advanced biofuel mandate increasing the demand for biodiesel. However,in light of the EPA's reduction of the volume requirements for advanced biofuels in the Final 2018 Rule as compared to the statutory mandate , this increased demand for corn oil may not continue during the fiscal year ending September 30, 2018.Althoughoil. Although management believes that corn oil prices will remain relatively steady at the increasedcurrent price levels, prices may decrease if there is an oversupply of corn oil production resulting from increased production rates at ethanol plants or if biodiesel producers begin to utilize lower-priced alternatives such as soybean oil unless an alternative demand for corn oil can be found. Fiscal 2017 Fiscal 2016 Amounts in 000's % of Revenues Amounts in 000's % of Revenues Product Revenue Information Ethanol $ 177,840 80.9 % $ 172,767 77.4 % Distiller's Grains 30,692 14.0 % 40,570 18.1 % Corn Oil 10,162 4.6 % 8,696 3.9 % Other 1,074 0.5 % 1,293 0.6 % $ 227,036 75.0 % $ 147,605 74.3 % 55,561 18.3 % 39,781 20.0 % 18,996 6.3 % 9,886 5.0 % 1,227 0.4 % 1,342 0.7 % 91.5%95% and 95.0%97.1% for Fiscal 20172021 and 2016,2020, respectively, and decreased due to the average price per gallon ofincrease in prices for ethanol, increasing by approximately 3.6% in Fiscal 2017 as compared to Fiscal 2016.distillers corn oil and distillers grains. Our two primary costs of producing ethanol and distillers grains are corn and energy, with steamnatural gas and natural gaselectricity as our primary energy sources. Cost of goods sold also includes net (gains) or losses from derivatives and hedging relating to corn. Material costs decreasedincreased as a result of the average price of corn used in ethanol production per bushel decreasing 6.8%increasing by 59% in Fiscal 20172021 from 2016. Corn usedFiscal 2020 on a 10% increase in ethanol production decreased by 1.1% in Fiscal 2017 from 2016 as we continue2021 compared to operate more efficiently and increase our yield of ethanol from corn ground. $(0.4)$4.4 million in our cost of goods sold for Fiscal 2017,2021, compared to an increasea decrease of $0.5$2.6 million in our cost of goods sold for Fiscal 2016.2020. We recognize the gains or losses that result from the changes in the value of our derivative instruments related to corn in cost of goods sold as the changes occur. As corn prices fluctuate, the value of our derivative instruments are impacted, which affects our financial performance. We anticipate continued volatility in our cost of goods sold due to the timing of the changes in value of the derivative instruments relative to the cost and use of the commodity being hedged. steam and natural gas energy cost increased 23.5%26% per MMBTU comparing Fiscal 20172021 to Fiscal 2016.2020 due to the increased cost of natural gas during Fiscal 2021. Variable production expenses showed an increaseincreased when comparing Fiscal 20172021 to Fiscal 20162020 due to the increase inhigher energy costs resulting from the higher average cost per MMBTU of steam and natural gas which was partially offset by the lower cost of chemicals.volume. Fixed production expenses were higherlower when comparing Fiscal 20172021 to Fiscal 20162020 due to higher payrolllower lease expenses due to resigning the railcar agreement and benefit charges, higher railcar lease expenselower repairs and higher depreciation expenses.2.2%1.9% for Fiscal 20172021 and 2.1%2.6% for Fiscal 2016.2020. General and administrative expenses include salaries and benefits of administrative employees, professional fees and other general administrative costs. Our general and administrative expenses for Fiscal 20172021 increased 4.3%10.9% compared to Fiscal 2016.2020. The increase in general and administrative expenses from Fiscal 20162020 to Fiscal 20172021 is due mainly to an increase in salaryhigher legal and bonus expensesprofessional fees and an increase in advertising expenses due to the timing of corporate sponsorships.$0.6 million and $1.5$1.0 million for both Fiscal 20172021 and 2016, respectively,2020, and were approximately 0.3% and 0.7%0.5% of our revenues for Fiscal 20172021 and 2016,2020, respectively. The majority of this decreaseline item consists of consistent patronage dividends that we receive annually. Fiscal 2021 Fiscal 2020 Production (Denatured gallons) 129.8 117.8 Ethanol Yield (den gal/bu) 2.88 Ethanol Price (per gal) 1.76 1.24 Corn Price (per bu) 5.47 3.47 Corn Oil Yield (lbs/bu) 0.942 0.942 BTU's / gallon 22,154 23,740 Steam / Nat Gas Cost per MMBTU 3.302 2.623 kWh/gallon 0.642 0.677 Chemical Cost ($/gal) 0.095 0.083 expenses wasspecified costs can be paid with these funds and eligible for payment forgiveness by the federal government. At least 60% of the proceeds must be used for approved payroll costs, and no more than 40% on non-payroll expenses. PPP loan proceeds used by a result of a credit of $0.4 million in Fiscal 2017 compared to a charge of $0.5 million Fiscal 2016borrower for the ICM put option.2017,2021, we had a cash balance of $1.5$1.9 million, $31.9$5 million available under the term revolver and working capital of $10.3$21.3 million.providesprovided us with a term loan of $30 million, duethat matured in 2019, and a revolving term loan of $36 million, due in 2023. The interest rate on the Credit Agreement iswas LIBOR plus 3.35%. The Credit Agreement resulted in a significantly lower interest rate than under the prior credit facility. The Company’s term loan and revolving term loan requires it to comply with specified financial covenants related to minimum local net worth, minimum current working capital, a minimum debt service coverage ratio and limitation on unit holder distributions.Company was in compliance with these covenants at September 30, 2017.We expectfollowing are the prices of our primary input (corn) and our principal products (ethanol and distillers grains) to remain stable inkey modifications made by the first quarter of Fiscal 2018, given the relative prices of these commodities and the operations of our risk management program in the quarter. We therefore currently believe that our operating margins in the first quarter of Fiscal 2018 will be similar to our operating margins in the fourth quarter of Fiscal 2017. We expect that in the last three quarters of Fiscal 2018 our margins will be steady if ethanol and corn prices maintain their stability.• The provisions of the Second Amended and Restated Term Note, Restated Revolving Term Note, and New Revolving Credit Note (the “Notes”) are amended to provide for the adjustment of the interest rate applicable to each of the foregoing in connection with the phasing out of LIBOR. The Credit Agreement previously calculated the interest rates for the each of the Notes as LIBOR plus a 340 basis point spread. The Fifth Amendment provides that the interest rate for each Note is calculated using LIBOR + 340 basis points until the occurrence of certain events. Upon the earliest occurrence of one of the specified events, the interest rate applicable to the Notes converts to a variant of the secured overnight financing rate (“SOFR”), as established from time to time by the Federal Reserve Bank of New York, plus a corresponding spread 20172021 and 20162020 was $22.4$6.4 million and $12.3$7.1 million, respectively. This change is primarily a resultdue to the high cost of an increase in net incomecorn and improved accounts receivable which was partially offset by an increase to inventories.related inventory during 2021. For Fiscal 20172021 and 2016,2020, net cash (used in) investing activities was ($7.7 million)$(8.3) million and $(4.6)$(8.2) million, respectively, primarily for fixed asset additions, net of proceeds from the property insurance claim.additions. For Fiscal 20172021 and 2016,2020, net cash flows used inprovided by financing activities was $16.3$2.7 million and $7.5$1.1 million, respectively due to increased notes and revolver loan payments, as well as increased distribution payments to members. Revenue Recognitionpursuant to marketing agreements.(direct sales). Revenues are recognized when the risk of loss has been transferred to the marketing company (or direct buyer) and the marketing company or direct buyer has taken title to the product, prices are fixed or determinable and collectability is reasonably assured. Company’sCompany's products are generally shipped FOB loadingFree on Board ("FOB") shipping point and recorded as a sale upon delivery of the applicable bill of lading. The Company’slading and transfer of risk of loss. Subject to a few limited exceptions, all of the Company's ethanol sales are handledhanded through an ethanol purchase agreement (the “Ethanol Agreement”"Ethanol Agreement") with Bunge North America, Inc. (“("Bunge") which was restated effective January 1, 2020, in connection with the Company's repurchase of the Series B Units from Bunge” under the Bunge Membership Interest Purchase Agreement (the "Bunge Repurchase Agreement"). Syrup and distillers grains (co-products) arewere previously sold through a distillers grains agreement (the “DG Agreement”"DG Agreement") with Bunge, based on market prices. As discussed in Note 9, the initial term of this DG Agreement expired December 31, 2019, and as set forth in the Bunge Repurchase Agreement, Bunge provided transition services for all duties and responsibilities of the original DG Agreement through March 31, 2020. Since April 1, 2020, the Company has been responsible for these functions. The Company markets and distributes all of the distillers corn oil it produces directly to end users at market prices. Carbon dioxide is sold through a Carbon Dioxide Purchase and Sale Agreement (the “CO2 Agreement”"CO2 Agreement") with Air Products and Chemicals, Inc., formerly known Shipping and handling costs are booked as EPCO Carbon Dioxide Products, Inc. (”Air Products”).a direct offset to revenue. Marketing fees, agency fees, and commissions due to the marketer are calculated separately from the settlement for the sale of the ethanol products and co-products and are included as a component of cost of goods sold. Shippinghandling costs incurred byconsidering the Company for the salecustomer's financial condition, credit history and current economic conditions. As of ethanolSeptember 30, 2021, and co-productsSeptember 30, 2020, management had determined an allowance of $0.2 million and $0.1 million was necessary. Receivables are included in costwritten off when deemed uncollectible and recoveries of goods sold.Investment in Commodities Contracts, Derivative Instruments and Hedging Activities2017, 2021, the Company was committed to sell 7.0had 10.5 million gallons ofin open contracts for ethanol, 84.745 thousand tons of open contracts on dried distillers grains 92.3, 73 thousand tons of wet distillers grains, and 3.78.5 million pounds of corn oil.2017,2021, the Company was committed to purchasing 2.95.1 million bushels of corn on a forward contract basis resulting in a total commitment of $$10.3$26.6 million. In addition the Company was committed to purchasing 691.1249 thousand bushels of corn using basis contracts.InventoryPut Option liability.The put option liability consists of an agreement between the Company and ICM that contains a conditional obligation to repurchase feature. In accordance with accounting for put options as a liability, the Company calculated the fair value of the put option under Level 3, using a valuation model called the Monte Carlo Simulation. Using this model, the estimated value at September 30, 2017 was $5.7 million.Off-Balance Sheet ArrangementsWe do not have any off balance sheet arrangements.and Members20172021 and 2016, and2020, the related statements of operations, members’ equity and cash flows for each of the years then ended. ended, and the related notes to the financial statements (collectively, the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of September 30, 2021 and 2020, and the results of its operations and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.thesethe Company’s financial statements based on our audits. Public Company Accounting Oversight Board (United States).PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financingfinancial reporting. OurAs part of our audits included considerationwe are required to obtain an understanding of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includessupportingregarding the amounts and disclosures in the financial statements, assessingstatements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statement presentation.statements. We believe that our audits provide a reasonable basis for our opinion.In our opinion,referredthat were communicated or required to above present fairly, in allbe communicated to the audit committee and that: (1) relate to accounts or disclosures that are material respects,to the financial position of Southwest Iowa Renewable Energy, LLC as of September 30, 2017statements and 2016, and the results of its operations and its cash flows for the years then ended in conformity with U.S. generally accepted accounting principles.18, 2017SOUTHWEST IOWA RENEWABLE ENERGY, LLC Balance Sheets (Dollars in thousands) September 30, 2017 September 30, 2016 ASSETS Current Assets Cash and cash equivalents $ 1,487 $ 3,139 Accounts receivable 1,826 470 Accounts receivable, related party 11,469 13,137 Derivative financial instruments 23 88 Inventory 13,214 9,937 Prepaid expenses and other 441 470 Total current assets 28,460 27,241 Property, Plant and Equipment Land 2,064 2,064 Plant, building and equipment 225,651 218,417 Office and other equipment 1,511 1,200 229,226 221,681 Accumulated depreciation (111,000 ) (99,109 ) Net property, plant and equipment 118,226 122,572 Other Assets 2,143 2,150 Total Assets $ 148,829 $ 151,963 LIABILITIES AND MEMBERS' EQUITY Current Liabilities Accounts payable $ 3,387 $ 3,295 Accounts payable, related parties 165 737 Derivative financial instruments 911 1,526 Accrued expenses 6,943 5,217 Accrued expenses, related parties 168 640 Current maturities of notes payable 6,538 6,517 Total current liabilities 18,112 17,932 Long Term Liabilities Notes payable, less current maturities 13,026 24,754 Other long-term liabilities 5,700 6,200 Total long term liabilities 18,726 30,954 Commitments (Notes 9 and 11) Members' Equity Members' capital 13,327 Units issued and outstanding 87,165 87,165 Retained earnings 24,826 15,912 Total members' equity 111,991 103,077 Total Liabilities and Members' Equity $ 148,829 $ 151,963 See Notes to Financial Statements SOUTHWEST IOWA RENEWABLE ENERGY, LLC Statements of Operations (Dollars in thousands, except per unit data) Year Ended Year Ended September 30, 2017 September 30, 2016 Revenues $ 219,768 $ 223,326 Cost of Goods Sold Cost of goods sold-non hedging 201,376 211,703 Realized & unrealized hedging (gains) losses (390 ) 460 200,986 212,163 Gross Margin 18,782 11,163 General and administrative expenses 4,787 4,588 Operating Income 13,995 6,575 Other Expense Interest expense and other income, net 950 1,022 Change in fair value of put option liability (400 ) 460 550 1,482 Net Income $ 13,445 $ 5,093 Weighted Average Units Outstanding -basic 13,327 13,327 Weighted Average Units Outstanding -diluted 14,394 13,327 Income per unit -basic $ 1,008.85 $ 382.16 Income per unit -diluted $ 906.28 $ 382.16 See Notes to Financial Statements SOUTHWEST IOWA RENEWABLE ENERGY, LLC Statements of Members' Equity (Dollars in thousands) Members' Capital Retained Earnings Total Balance, September 30, 2015 $ 87,165 $ 14,151 $ 101,316 Net Income — 5,093 5,093 Distributions — (3,332 ) (3,332 ) Balance, September 30, 2016 $ 87,165 $ 15,912 $ 103,077 Net Income — 13,445 13,445 Distributions — (4,531 ) (4,531 ) Balance, September 30, 2017 $ 87,165 $ 24,826 $ 111,991 See Notes to Financial Statements SOUTHWEST IOWA RENEWABLE ENERGY, LLC Statements of Cash Flows (Dollars in thousands) Year Ended Year Ended September 30, 2017 September 30, 2016 CASH FLOWS FROM OPERATING ACTIVITIES Net Income $ 13,445 $ 5,093 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation 12,058 11,785 Amortization 71 72 Other assets 7 18 Change in fair value of put option liability (400 ) 460 (Increase) decrease in current assets: Accounts receivable 312 (9,843 ) Inventories (3,277 ) 4,361 Prepaid expenses and other 29 (143 ) Derivative financial instruments 65 731 Decrease in other long-term liabilities (100 ) (100 ) Increase (decrease) in current liabilities: Accounts payable (480 ) (619 ) Derivative financial instruments (615 ) 867 Accrued expenses 1,254 (420 ) Net cash provided by operating activities 22,369 12,262 CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property and equipment (7,712 ) (4,937 ) Decrease in restricted cash — 305 Net cash (used in) investing activities (7,712 ) (4,632 ) CASH FLOWS FROM FINANCING ACTIVITIES Distributions paid to members (4,531 ) (3,332 ) Proceeds from notes payable 81,129 163,861 Payments on notes payable (92,907 ) (168,050 ) Net cash (used in) financing activities (16,309 ) (7,521 ) Net increase (decrease) in cash and cash equivalents (1,652 ) 109 CASH AND CASH EQUIVALENTS Beginning 3,139 3,030 Ending $ 1,487 $ 3,139 See Notes to Financial Statements SUPPLEMENTAL CASH FLOW INFORMATION Cash paid for interest $ 1,067 $ 1,346 See Notes to Financial Statements $ 1,945 $ 1,116 12,766 8,488 1,556 705 28,677 13,369 443 424 45,387 24,102 2,064 2,064 255,623 247,462 1,892 1,803 259,579 251,329 (153,546 ) (142,444 ) 106,033 108,885 Other Assets 3,937 6,667 Other Assets 1,069 1,172 $ 156,426 $ 140,826 $ 7,695 $ 3,204 4,556 4,176 10,019 8,191 2,922 3,052 25,192 18,623 51,677 48,529 4,154 4,255 1,015 3,615 56,846 56,399 64,106 64,106 10,282 1,698 74,388 65,804 $ 156,426 $ 140,826 $ 302,820 $ 198,614 291,890 195,488 (4,395) (2,599 ) 287,495 192,889 15,325 5,725 5,733 5,169 9,592 556 1,008 998 $ 8,584 $ (442 ) 8,975 9,899 $ 956.43 $ (44.65 ) $ 87,165 $ 2,140 $ 89,305 (23,059 ) 0 (23,059 ) 0 (442 ) (442 ) $ 64,106 $ 1,698 $ 65,804 0 8,584 8,584 $ 64,106 $ 10,282 $ 74,388 $ 8,584 $ (442 ) 11,114 10,694 78 100 0 85 103 275 79 128 (4,357 ) 700 (15,308 ) 3,798 (19 ) (93 ) (851 ) (627 ) 2,076 383 4,491 (949 ) 0 (597 ) 380 (6,311 ) 6,370 7,144 (8,262 ) (8,342 ) 0 127 (8,262 ) (8,215 ) (33 ) (223 ) 0 (6,037 ) 244,441 223,736 (241,687 ) (193,305 ) 0 (23,059 ) 2,721 1,112 829 41 1,116 1,075 $ 1,945 $ 1,116 $ 2,026 $ 1,927 $ 0 $ 9,684 20172021123.7127.0 million gallons and 124.5115.0 million gallons of ethanol in Fiscal 20172021 and Fiscal 2016,2020, respectively. The Company sells its ethanol, distillers grains, corn syrup, and distillers corn oil in the continental United States, Mexico and the Pacific Rim.FOB loadingFree on Board ("FOB") shipping point, and recorded as a sale upon delivery of the applicable bill of lading.lading and transfer of risk of loss. The Company’s ethanol sales are handled through an ethanol purchase agreement (the “Ethanol Agreement”“Ethanol Agreement”) with Bunge North America, Inc. (“Bunge”) which was restated effective January 1, 2020 in connection with the Company's repurchase of the Series B Units from Bunge” under the Bunge Membership Interest Purchase Agreement (the "Bunge Repurchase Agreement"). Syrup and distillers grains (co-products) arewere sold through a distillers grains agreement (the “DG Agreement”“DG Agreement”) with Bunge, based on market prices. As discussed in Note 9, the initial term of this DG Agreement expired December 31, 2019, and as set forth in the Bunge Repurchase Agreement, Bunge provided transition services for all duties and responsibilities of the original DG Agreement through March 31, 2020. The Company is now responsible for all of these functions. The Company markets and distributes all of the corn oil it produces directly to end users at market prices. Carbon dioxide is sold through a Carbon Dioxide Purchase and Sale Agreement (the “CO2 Agreement” Agreement”) with Air Products and Chemicals, Inc., formerly known Shipping and handling costs are booked as EPCO Carbon Dioxide Products, Inc. ("Air Products”).a direct offset to revenue. Marketing fees, agency fees, and commissions due to the marketer are calculated separately from the settlement for the sale of the ethanol products and co-products and are included as a component of cost of goods sold. Shipping and handling costs incurred by the Company for the sale20172021 and 20162020, management had determined noan allowance isof $206 thousand and $128 thousand, respectively, was necessary. Receivables are written off when deemed uncollectableuncollectible, and recoveries of receivables written off are recorded when received.2017,2021, the Company was committedhad commitments to sell 7.07.7 million gallons of ethanol, 84.786 thousand tons of dried distillers grains, 92.389 thousand tons of wet distillers grains and 3.78.9 million pounds of corn oil.2017,2021, the Company was committed to purchasing 2.95.4 million bushels of corn on a forward contract basis resulting in a total commitment of $10.3$28.7 million. In addition the Company was committed to purchasing 691.113 thousand bushels of corn using basis contracts.20172021 and 20162020 are as follows: Balance Sheet Classification September 30, 2017 September 30, 2016 in 000's in 000's Futures and option contracts In gain position $ 190 $ 361 In loss position (100 ) (20 ) Cash (due to) broker (67 ) (253 ) Current asset 23 88 Forward contracts, corn Current liability 911 1,526 Net futures, options, and forward contracts $ (888 ) $ (1,438 ) $ 196 $ 590 (1,386 ) (592 ) 2,012 304 $ 734 $ 403 Net futures, options, and forward contracts 1,556 705 20172021 and 20162020 consist of the following: $ 4,436 $ 67 (8,831) (2,666 ) Statement of Operations Classification September 30, 2017 September 30, 2016 Net realized and unrealized (gains) losses related to: (in 000's) (in 000's) Forward purchase contracts (corn) Cost of Goods Sold $ 1,590 $ 6,468 Futures and option contracts (corn) Cost of Goods Sold (1,980 ) (6,008 ) Futures and option contracts (ethanol) Revenue — 429 40 Buildings 40 Years 10 - 20 Years 3-7 Years20172021 or Fiscal 2016.Fair value of financial instrumentsThe carrying amounts of cash and cash equivalents, derivative financial instruments, accounts receivable, accounts payable and accrued expenses approximate fair value due to the short term nature of these instruments.The put option liability consists of an agreement between the Company and ICM that contains a conditional obligation to repurchase feature. In accordance with accounting for put options as a liability, the Company calculated the fair value of the put option under Level 3, using a valuation model called the Monte Carlo Simulation. Using this model, the estimated value at September 30, 2017 and 2016 was 5.7 million and $6.1 million, respectively.The carrying amount of the notes payable approximates fair value, as the interest rate is a floating rate. The terms are consistent with those available in the market as of September 30, 2017 and 2016, using level 3 inputs.Income Per UnitBasic income per unit is calculated by dividing net income by the weighted average units outstanding for each period. Diluted income per unit is adjusted for convertible debt, using the treasury stock method and the put option using the reverse treasury stock method. In Fiscal 2016, the put option did not impact diluted income per unit as it was anti-dilutive. Basic earnings and diluted per unit data were computed as follows (in thousands except per unit data): Twelve Months Ended September 30, 2017 September 30, 2016 Numerator: Net income for basic earnings per unit $ 13,445 $ 5,093 Change in fair value of put option liability $ (400 ) $ — Net income for diluted earnings per unit $ 13,045 $ 5,093 Denominator: Weighted average units outstanding - basic 13,327 13,327 Weighted average units outstanding - diluted 14,394 13,327 Income per unit - basic $ 1,008.85 $ 382.16 Income per unit - diluted $ 906.28 $ 382.16 Recently Issued Accounting PronouncementsRevenue RecognitionIn May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes all existing revenue recognition requirements, including most industry-specific guidance. The new standard requires a company to recognize revenue when it transfers goods or services to customers in an amount that reflects the consideration that the company expects to receive for those goods or services. The new standard will be effective for us on October 1, 2018. The Company expects to have enhanced disclosures, but does not expect the new standard to have a material impact on the Company's financial statements.LeasesIn February 2016, FASB issued ASU 2016-02 "Leases” ("ASU 2016-02"). ASU 2016-02 requires the recognition of lease assets and lease liabilities by lessees for all leases greater than one year in duration and classified as operating leases under previous GAAP. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, and for interim periods within thatfiscal year. We will not implement ASU 2016-02 until October 2019, when Fiscal 2020 starts. The Company does not expect the new standard to have a material impact on the Company's financial statements.Interest - Imputation of InterestIn April 2015, the Financial Accounting Standards Board issued ASU 2015-03 that simplifies the presentation of debt issuance costs and requires that debt issuance costs related to a recognized debt liability be presented in the statement of financial position as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. This was adopted for the presentation of 2017 financial documents, and we made reclassifications to the 2016 financial statements to conform with the 2017 presentation. There was no impact on financial position or results of operations. September 30, 2017 September 30, 2016 (in 000's) (in 000's) Raw Materials - corn $ 4,010 $ 2,924 Supplies and Chemicals 4,149 3,293 Work in Process 1,486 1,271 Finished Goods 3,569 2,449 Total $ 13,214 $ 9,937 Note 4: Members’ EquityAt September 30, 2017 and 2016 outstanding member units were: September 30, 2017 September 30, 2016 A Units 8,993 8,993 B Units 3,334 3,334 C Units 1,000 1,000 13,327 13,327 $ 9,275 $ 1,663 5,589 4,906 2,762 1,667 11,051 5,133 $ 28,677 $ 13,369 The Series A, B and C unit holders all vote on certain matters with equal rights. The Series C unit holders as a group have the right to elect one Board member. The Series B unit holders as a group have the right to elect the number of Board members which bears the same proportion to the total number of Directors in relation to Series B outstanding units to total outstanding units. Based on this calculation, the Series B unit holders have the right to elect two Board members. Series A unit holders as a group have the right to elect the four remaining Directors not elected by the Series C and B unit holders.5: 4:Revolving Loan/Credit AgreementsDuring Fiscal 2014, theentered intois a party to a credit agreement with Farm Credit Services of America, FLCA (“FCSA”("FCSA"), Farm Credit Services of America, PCA and CoBank, ACB, as cash management provider and agent (“CoBank”("CoBank") which provides the Company with a term loan in the amount of $30,000,000$30.0 million (the “Term Loan”"Term Loan") and a revolving term loan in the amount of up to $36,000,000$40.0 million (the “Revolving"Revolving Term Loan ", andLoan"), together with the Term Loan, the “FCSA"FCSA Credit Facility”Facility"). On February 26, 2021, the credit agreement was amended to add an additional $10.0 million revolving line of credit with a maturity date of August 1, 2021, with the same rate provisions as the original credit agreement (the "Revolving Credit Loan"). We extended the Revolving Credit Loan's maturity date twice during 2021, once as of June 30, 2021 and once as of October 29, 2021. The current maturity date of the Revolving Credit Loan is February 1, 2022. The balance on the Revolving Credit Loan was $0 at September 30,2021. The FCSA Credit Facility is secured by a security interest on all of the Company’sCompany's assets.quarterly installments of $1,500,000, which began on December 20, 2014$3.75 million with a maturity date of September 20, 2019. November 15, 2024. The RevolvingFebruary 26, 2021 amendment to the credit agreement modified the Term Loan has ato only require the Company to make one principal payment of $3.75 million during 2021, which payment was made on March 1, 2021, and thereafter requires the Company to make four equal semi-annual payments of $3.75 million on each March 1 and September 1, through September 1, 2023 (the "Restated Term Note"). All remaining amounts due under the Restated Term Note are due and payable on the maturity date of June 1, 2023 and requires annual reductions in principal availability of $6,000,000 commencing on June 1, 2020. November 15, 2024. Under the FCSA Credit Facility, the Company has the right to select from the several LIBOR based interest rate options with respect to each of the Term Loan and the Revolving Term Loan.2017,2021, there was $16.1$57.5 million outstanding under the FCSA Credit Facility, with $31.9$5 million available under the Revolving Term Loan. In 2017, we adopted ASU number 2015-03recognize the financingeconomic downturn triggered by COVID-19. Our PPP Loan may be forgiven based upon various factors, including, without limitation, our payroll cost over an eight-to-twenty-four week period starting upon our receipt of the funds. Expenses for approved payroll costs, aslease payments on agreements before February 15, 2020, and utility payments under agreements before February 1, 2020 and certain other specified costs can be paid with these funds and eligible for payment forgiveness by the federal government. At least 60% of the proceeds must be used for approved payroll costs, and no more than 40% on non-payroll expenses. PPP loan proceeds used by a direct deductionborrower for the approved expense categories will generally be fully forgiven by the lender if the borrower satisfies certain employee headcount and compensation requirements. The Company has applied for forgiveness on the PPP loan from the carrying amountSmall Business Administration ("SBA") and as of December 18, 2021, is awaiting a response on our request. debt liability.PPP legislation (the "Second PPP Loan"). As in the original PPP loan, expenses for approved payroll costs, lease payments on agreements and utility payments under agreements and certain other specified costs can be paid with these funds and eligible for payment forgiveness by the federal government. At least 60% of the proceeds must be used for approved payroll costs, and no more than 40% for non-payroll expenses. PPP loan proceeds used by a borrower for the approved expense categories will generally be forgiven by the lender if the borrower satisfies certain employee headcount and compensation requirements. The 2016 statements were revised to reflect this reclassification.Company applied for forgiveness of the Second PPP Loan in September of 2021. As of December 18, 20201, we are still awaiting a response on our request. 6:5: Notes PayableNotes payable consists of the following (in 000's): September 30, 2017 September 30, 2016 Term loan bearing interest at LIBOR plus 3.35% (4.59% at September 30, 2017) $ 12,000 $ 18,000 Revolving term loan bearing interest at LIBOR plus 3.35% (4.59% at September 30 2017) 4,100 9,361 Other with interest rates from 3.50% to 4.15% and maturities through 2022 3,666 4,183 19,766 31,544 Less Current Maturities 6,538 6,517 Less Financing Costs, net of amortization 202 273 Total Long Term Debt 13,026 24,754 $ 22,500 $ 26,250 1,063 1,063 Note payable, PPP Loan bearing interest at 1.00% maturing January 4, 2026 1,114 1,114 34,999 26,828 2,157 2,761 61,833 56,902 10,019 8,191 137 182 51,677 48,529 20172021 are as follows (in 000's)000's): $ 10,019 7,608 7,612 35,115 1,233 246 $ 61,833 2018 $ 6,538 2019 6,560 2020 579 2021 589 2022 1,400 2023 and Thereafter 4,100 Total $ 19,766 7: 6:Fair Value Measurementutilizedutilizes certain assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and/or the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated, or generally unobservable inputs. The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. Based on the observable inputs used in the valuation techniques, the Company is required to provide the following information according to the fair value hierarchy.Level 1 -Valuations for assets and liabilities traded in active markets from readily available pricing sources for market transactions involving identical assets or liabilities.Level 2 -Valuations for assets and liabilities traded in less active dealer or broker markets. Valuations are obtained from third-party pricing services for identical or similar assets or liabilities.Level 3 -Valuations incorporate certain assumptions and projections in determining the fair value assigned to such assets or liabilities.Put Option liability. The put option liability consists of an agreement between the Company and ICM that contains a conditional obligation to repurchase feature. In accordance with accounting for put options as a liability, the Company calculated the fair value of the put option under Level 3, using a valuation model called the Monte Carlo Simulation.third-partythird-party pricing services. Forward purchase contracts are reported at fair value utilizing Level 2 inputs. For these contracts, the Company obtains fair value measurements from local grain terminal values. The fair value measurements consider observable data that may include live trading bids from local elevators and processing plants which are based off the CME market.2017 2021 and 2016,2020, categorized by the level of the valuation inputs within the fair value hierarchy: (dollars in '000s) $ 196 $ 734 $ 0 $ 1,386 0 0 $ 590 $ 403 $ 0 $ 592 0 0 September 30, 2017 Level 1 Level 2 Level 3 Assets: Derivative financial instruments $ 190 $ — $ — Liabilities: Derivative financial instruments 100 911 — Put Option Liability — — 5,700 September 30, 2016 Level 1 Level 2 Level 3 Assets: Derivative financial instruments $ 361 $ — $ — Liabilities: Derivative financial instruments 20 1,526 — Put Option Liability — — 6,100 The following table summarizes the assumptions used in computing the fair valueTable of the put option subject to fair value: September 30, 2017 September 30, 2016 Expected dividend yield — — Risk-free interest rate 1.34 % 0.63 % Expected volatility 26 % 32 % Expected life (years) 1.25 1.25 Exercise price $ 10,897 $ 10,897 Company unit price $ 5,670 $ 5,200 The following table reflects the activity for liabilities measured at fair value using Level 3 inputs as of September 30, 2017: September 30, 2017 September 30, 2016 Beginning Balance $ 6,100 $ 5,640 Change in Value (400 ) 460 Ending Balance $ 5,700 $ 6,100 8: 7:Incentive Compensationno0 EAUs outstanding. The EPUs are valued in accordance with the agreement which is based on the book value per unit of the Company. The Company had 83.368.4 unvested EPUs outstanding under this plan as of September 30, 2017,2021, which will vest three years from the dates of the awards. 20172021 and 2016,2020, the Company recorded compensation expenseexpenses related to this plan of approximately $342,000$189,000 and $191,000,$172,000, respectively. As of September 30, 2017 2021 and 2016,2020, the Company had a liability of approximately $844,000$416,000 and $502,000,$344,000, respectively, recorded within accrued expenses on the balance sheet. The incentive compensation expense to beis recognized in future periods at September 30, 2017 and 2016 was $252,000 and $215,000, respectively.over three years from the date of the awards.9: 8:Related Party Transactions and Major CustomersBungeDecember 5, 2014, November 15, 2019, the Company entered intorepurchased all of the ICM Units, which repurchase had an Amendedeffective date of October 31, 2019. On December 31, 2019, the effective date, the Company repurchased the 3,334 Series B membership units owned by Bunge. Effective as of the date of the respective repurchase of the ICM Units and Restated Ethanolthe Series B Units from Bunge, ICM and Bunge no longer constituted related parties. However, the activities discussed below reflect related party activity during the quarter ended December 31, 2019 up to and through the date of the respective repurchase, and historical expenses incurred in Fiscal 2020 for comparable periods.“Ethanol"Bunge Repurchase Agreement”") with Bunge. Under, the parties entered into a restated Ethanol Agreement effective January 1, 2020 (the Company has agreed to sell Bunge all of"Restated Ethanol Agreement") which provides that the ethanol produced by the Company, and Bunge has agreed to purchase the same. The Company will pay Bunge a percentageflat monthly marketing fee for ethanol sold by Bunge, subject to a minimum and maximum annual fee. The initial term of the Restated Ethanol Agreement expires on December 31, 2019, however it will automatically renew for one five-year term unless Bunge provides the Company with notice of election to terminate. 2026. The Company has incurred related party ethanol marketing expenses of $1.5 million in each year for Fiscal 20172021 and 2016,$1.5 million in Fiscal 2020, under the Ethanol Agreement.wethe Company reduced the number of leased ethanol cars to 323 and in both November 2013 and January 2015 we2015. The Company reduced the number of hopper cars by one for a total of 298 leased hopper cars).cars. Under the Railcar Agreement, the Company leases railcars for terms lasting 120 months and continuing on a month to month basis thereafter. The Railcar Agreement will terminate upon the expiration of all railcar leases. Expenses under this agreement were $4.0 million and $4.4 million for the Fiscal 2017 and 2016, net of subleases and accretion, respectively. In November 2016, the Company entered into a sublease for 96 hoppers with Bunge that is set to expireexpired on March 24, 2019. The Company hashad subleased another 92 hopper cars to unrelated third parties, which expires also expired March 25, 2019. In June 2018, one of the third party customers entered into an assignment agreement for their 52 hopper cars with the Company and Bunge.Bungethe lessors to determine the need for ethanol and hopper cars in light of current market conditions, and the expected conditions in 20172022 and beyond. The Company believes we will be able to fully utilize our fleet of hopper cars in the future, to allow us to cost-effectively ship distillers grains to distant markets, primarily the export markets. On December 5, 2014,CompanyBunge Repurchase Agreement, Bunge agreed to provide transition services until March 31, 2020 for all duties and Bunge entered into an Amended and Restated Distiller’s Grain Purchase Agreement (the “ Agreement ”). Under the DG Purchase Agreement, Bunge will purchaseAgreement. The Company is now responsible for all distiller’s grains producedduties and responsibilities previously performed by the Company, and will receive a marketing fee based on the net sale price of distillers grains, subject to a minimum and maximum annual fee. The initial term of the DG Purchase Agreement expires on December 31, 2019 and will automatically renew for one additional five year term unless Bunge provides notice of election to the Company to terminate.Bunge. The Company has incurred related party distillers grains marketing expenses of $1.1$0 million and $1.3$0.3 million during Fiscal 20172021 and 2016,2020, respectively.Bunge also entered into an Amended and Restated Grain Feedstock Agency Agreement on December 5, 2014 (the “ Agency Agreement ”). The Agency Agreement provides that Bunge will procure corn for the Company, the Company will pay Bunge a per bushel fee, subject to a minimum and maximum annual fee. The initial term of the Agency Agreement expires on December 31, 2019 and will automatically renew for one additional five year term unless Bunge provides notice of election to the Company to terminate. Expensesresponsibilities previously performed by Bunge. Related party expenses for corn procurement by Bunge were $0.7$0 million for each year of the fiscal years ended September 30, 2017 and 2016. The Company has outstanding corn contracts of 181 thousand bushels with a $620 thousand liability as of September 30, 2017,$0.2 million during Fiscal 2021 and 258 thousand bushels with a $900 thousand liability as of September 30, 2016 included in derivative financial instruments liability on the balance sheet.Starting2020, respectively.2015 crop year, the Company is using corn containing Syngenta Seeds, Inc.’s proprietary Enogen® technology (“ Enogen Corn ”) for a portion of its ethanol production needs. The Company contracts directly with growers to produce Enogen Corn for sale to the Company. The Company has contracted for 28,900 acres of Enogen corn for Fiscal 2018. Concurrent with the AgencyBunge Repurchase Agreement, the Company and Bunge entered into a Services Agreement regarding corn purchases (the “ Services Agreement ”). Under this agreement, the Company originates all Enogen Corn contracts for its facility and Bunge assists the Company with certain administrative matters related to Enogen Corn, including facilitating delivery to the facility. The Company pays Bunge a per bushel service fee. The initial term of the Services Agreement expires on December 31, 2019 and will automatically renew for one additional five year term unless Bunge provides notice of election to the Company to terminate. Expenses under the Services Agreement are included as part of the Amended and Restated Grain Feedstock Agency Agreement discussed above.ICMIn connection with the payoff of the ICM subordinated debt, the Company entered into the SIRE ICM Unit Agreement dated December 17, 2014 (the “ Unit Agreement ”). Under the Unit Agreement, the Company granted ICM the right to sell to theCompany its 1,000 Series C and 18 Series A Membership Units (the “ ICM Units ”) commencing anytime during the earliest of several alternative dates and events at the greater of $10,897 per unit or the fair market value (as defined in the agreement) on the date of exercise. The Company recorded a liability of $5.6 million (included in long-term liabilities) in 2015, and recorded an additional expense of $460 thousand in Fiscal 2016, and in Fiscal 2017 reduced expense by $400 thousand in conjunction with this put right under the Unit Agreement (the "Loss from debt extinguishment" and the "Change in fair value of put option liability" ). See Note 7 Fair Value Measurement, for the terms of this agreement.Major CustomersThe Company is party to the Ethanol Agreement effective January 1, 2020 pursuant to which Bunge continues to purchase and the Distillers Grain Purchase Agreement with Bunge for the exclusive marketing, selling, and distributing ofmarket all of the ethanol and distillers grains produced by the Company. The Distillers Grain Purchase Agreement expired on December 31, 2019; however, as part of the Bunge Repurchase Agreement, Bunge agreed to provide transition services until March 31, 2020 for all duties and responsibilities of the Distillers Grain Purchase Agreement. The Company is now responsible for all duties and responsibilities previously performed by Bunge under the Distillers Grain Purchase Agreement. The Company has expensed $2.6$0 million and $2.8$0.7 million in marketing fees under these agreements for Fiscal 20172021 and 2016,2020, respectively. Revenues with this customer were $208.8$223.2 million and $214.5$165.1 million, respectively, for Fiscal 20172021 and 2016.2020. Trade accounts receivable due from Bunge were $11.5$8.7 million and $13.1$4.6 million as of September 30, 2017 2021 and 2016,2020, respectively.10:9: Commitments20172021 and 20162020 were $5.1$0.1 million and $3.7$0.5 million, respectively.certainrail cars and rail moving equipment railcars, vehicles,with original terms up to 3 years for hopper cars and 4 years for tanker cars from Bunge. This lease was assigned to Trinity Leasing effective July 17, 2020. An additional 60 cars are leased from a third party under two separate leases for 3 years for half and 4 years for the second half. The Company is obligated to pay costs of insurance, taxes, repairs and maintenance pursuant to the terms of the leases. These costs are in addition to regular lease payments and are not included in lease expense. The Company subleased 50 tanker cars to two unrelated third parties. The Company subleased 60 hopper cars to an unrelated third party starting in May 2020, and the third party returned 15 hopper cars in September 2020. The lease expired in August 2020, but the remaining 45 hopper cars remain on a month-to-month rent basis. Expense incurred for the operating leases were $2.7 million for the year ended September 30, 2021 and $3.0 million for the year ended September 30, 2020. The lease agreements have maturity dates ranging from January 2022 to May 2023. The average remaining life of the lease term for these leases was 2.93 years as of September 30, 2021.facilitieslease liability, included in current and long term liabilities was $3.9 million as of September 30, 2021.that expire on various dates through 2019. The future minimum lease payments required under these leases (netas of sublease income) are $4.6 million in 2018, and $2.1 million in 2019. Rent expense (net of sublease income) related to operating leases for the years ended September 30, 2017 and 2016 was $4.6 million and $4.7 million, respectively. Non Related party sublease totals were $0.7 million in each year for 2017 and 2016. The majority of the future minimum lease payments2021 are due to Bunge. Future sublease income is due from unrelated third parties.as follows (in 000's): $ 2,819 1,216 6 4,041 4,041 (104 ) $ 3,937 Brian T. Cahill,Michael D. Jerke, along with its Chief Financial Officer (our principal financial officer), Brett L. Frevert,Ann M. Reis, have reviewed and evaluated the effectiveness of the Company’s disclosure controls and procedures (as defined in Rule 13a-15 under the Securities Exchange Act of 1934, as amended, the “Exchange Act”“Exchange Act”), as of September 30, 2017.2021. The Company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and that receipts and expenditures of the Company are being made only in accordance with authorizations of management and directors of the Company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the Company’s assets that could have a material effect on the financial statements. Based upon this review and evaluation, these officers believe that the Company’sCompany's disclosure controls and procedures are presently effective in ensuring that material information related to us is recorded, processed, summarized and reported within the time periods required by the forms and rules of the Securities and Exchange Commission (the “SEC”"SEC").financingfinancial reporting as of September 30, 2017.2021. In making this assessment, the Company’s management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework (the 2013 Framework). Based on this assessment, the Company’s management concluded that, as of September 30, 2017,2021, the Company’s integrated controls over financial reporting were effective.20182022 Annual Meeting of Members (the “2018“2022 Proxy Statement”Statement”) to be filed with the SEC within 120 days after the end of the Company’s fiscal year ended September 30, 2017.201811. Executive Compensation.20182022 Proxy Statement.12. Security Ownership of 13.Certain Beneficial Owners and ManagementRelationships and Related Member Matters.20182022 Proxy Statement.13. Certain Relationships14.Principal Accountant Fees and Related Transactions, and Director Independence.20182022 Proxy Statement.Item 14. Principal Accountant Fees and Services.The Information required by this Item is incorporated by reference in the 2018 Proxy Statement.(a) Documents filed as part of this Report. Balance SheetsStatements of OperationsStatements of Members’ EquityStatements of Cash FlowsNotes to Financial Statements(b)The following exhibits are filed herewith or incorporated by reference as set forth below:2 Omitted - Inapplicable.Balance Sheets Statements of Operations Statements of Members’ Equity Statements of Cash Flows Notes to Financial Statements (b) The following exhibits are filed herewith or incorporated by reference as set forth below: FourthMarch 21, 2014June 19, 2020 (incorporated by reference to Exhibit 3.1 of3.2.1 on Form 8-K filed by the Company on March 26, 2014).June 23, 2020.(incorporated by reference to Exhibit 4(v) of Form S-1/A filed by the Company on October 19, 2011).(filed herewith)4(vi) Description of Our Securities (filed herewith) 9ofon Form S-1/A filed by the Company on February 24, 2011). Portions of the Agreement have been omitted pursuant to a request for confidential treatment.Subordinated Revolving Credit Note made by the Company in favor of Bunge N.A. Holdings, Inc. dated effective August 26, 2009 (incorporated by reference to Exhibit 10.2 of Form 8-K filed by the Company on September 3, 2009). Amendment to by anddated January 22, 2007 between the Company and MidAmerican Energy Company, dated effectiveas amended October 3, 2008.2008, January 1, 2009, January 1, 2009, December 1, 2009, January 1, 2013, and August 20, 2015 (incorporated by reference to Exhibit 10.3 of Form 10-K filed by the Company on December 11, 2020). Portions of the Agreement and amendments thereto have been omitted pursuant to a request for confidential treatment. (incorporated by referenceItem 601(b)(10)(iv) of Regulation S-K (17 CFR § 229.601(b)(10)(iv)) because such information is both not material and would likely cause competitive harm to Exhibit 10.61 of Form S-1/A filed by the Company on February 24, 2011)company if publicly disclosed Second Amendment to Steam Service Contract by and between the Company and MidAmerican Energy Company dated effective January 1, 2009. Portions of the Agreement have been omitted pursuant to a request for confidential treatment. (incorporated by reference to Exhibit 10.62 of Form S-1/A filed by the Company on February 24, 2011)Third Amendment to Steam Service Contract by and between the Company and MidAmerican Energy Company dated effective January 1, 2009. Portions of the Agreement have been omitted pursuant to a request for confidential treatment. (incorporated by reference to Exhibit 10.63 of Form S-1/A filed by the Company on February 24, 2011)Fourth Amendment to Steam Service Contract by and between the Company and MidAmerican Energy Company dated effective December 1, 2009. Portions of the Agreement have been omitted pursuant to a request for confidential treatment. (incorporated by reference to Exhibit 10.64 of Form S-1/A filed by the Company on February 24, 2011)10.110.4 of Form 10-Q10-K filed by the Company on August 14, 2009)December 11, 2020). Portions of the Agreement have been omitted pursuant to a request for confidential treatment.Item 601(b)(10)(iv) of Regulation S-K (17 CFR § 229.601(b)(10)(iv)) because such information is both not material and would likely cause competitive harm to the company if publicly disclosed.Negotiable Subordinated Term Loan Note issued by the Company in favor of ICM, Inc., dated June 17, 2010 (incorporated by reference to Exhibit 10.2 of Form 8-K filed by the Company on June 23, 2010).Subordinated Term Loan Note issued by the Company in favor of Bunge N.A. Holdings, Inc., dated June 17, 2010 (incorporated by reference to Exhibit 10.4 of Form 8-K filed by the Company on June 23, 2010).onof July 6, 2010).Corn Oil Agency Agreement by and between Bunge North America, Inc. and the Company effective as of November 12, 2010 (incorporated by reference to Exhibit 10.1 of Form 8-K filed by the Company on November 30, 2010). Portions of the Agreement have been omitted pursuant to a request for confidential treatment.Fifth Amendment to Steam Service Contract by and among the Company and MidAmerican Energy Company named therein dated effective January 1, 2013 (incorporated by reference to Exhibit 10.1 on Form 8-K filed by the Company on March 19, 2013).onof Form 8-K filed by the Company on April 11, 2013).onof Form 8-K filed by the Company onof April 11, 2013).onof Form 8-K filed by the Company on June 30, 2014).Global Modification Agreement dated February 26, 2021 by and among the Company, Farm Credit Services of America, FLCA, Farm Credit Services of America, PCA and CoBank, ACB (incorporated by reference to Exhibit 10.1 on Form 8-K filed by the Company on March 4, 2021) 10.20 Term Note by and between the Company and Farm Credit Services of America, FLCA dated June 24, 2014 (incorporated by reference to Exhibit 10.2 onof Form 8-K filed by the Company on June 30, 2014).onof Form 8-K filed by the Company on June 30, 2014).Subordination Agreement by and between Bunge North America, Inc., ICM Investments, LLC, and CoBank, ACB dated as of June 24, 2014 (incorporated by reference to Exhibit 10.4 on Form 8-K filed by the Company on June 30, 2014).Subordinated Term Loan Note by and between the Company and Bunge North American, Inc. dated as of June 23, 2014(incorporated by reference to Exhibit 10.5 on Form 8-K filed by the Company on June 30, 2014).Intercreditor Agreement by and between Bunge North America, Inc. and ICM Investments, LLC dated as of June 23, 2014 (incorporated by reference to Exhibit 10.6 on Form 8-K filed by the Company on June 30, 2014).[Negotiable] Subordinated Term Loan Note by and between the Company and ICM Investments, LLC dated as of June 23, 2014 (incorporated by reference to Exhibit 10.7 on Form 8-K filed by the Company on June 30, 2014).onof Form 8-K filed by the Company on September 5, 2014).onof Form 8-K filed by the Company on October 31, 2014).onof Form 8-K filed by the Company on December 11, 2014). Portions of the Ethanol Purchase Agreement have been omitted pursuant to a request for confidential treatment.onof Form 8-K filed by the Company on December 11, 2014). Portions of the Grain Feedstock Agency Agreement have been omitted pursuant to a request for confidential treatment.onof Form 8-K filed by the Company on December 11, 2014). Portions of the Distiller’s Grain Purchase Agreement have been omitted pursuant to a request for confidential treatment. onof Form 8-K filed by the Company on December 11, 2014). Portions of the Services Agreement have been omitted pursuant to a request for confidential treatment. onof Form 8-K filed by the Company on December 11, 2014). Waiver and Forbearance Agreement dated effective December 5, 2104, by and between the Company and ICM Investments, LLC. (incorporated by reference to Exhibit 10.6 on Form 8-K filed by the Company on December 11, 2014).onof Form 8-K filed by the Company on December 23, 2014). Sixth Amendment to Steam Service ContractMidAmerican Energy CompanyMichael D. Jerke effective October 22, 2018 (incorporated by reference to Exhibit 10.1 of Form 8-K filed by the Company on September 28, 2018).10.33 Amendment No. 5 to Credit Agreement dated February 26, 2021 by and among the Company, Farm Credit Services of America, FLCA, Farm Credit Services of America, PCA and CoBank, ACB (incorporated by reference to Exhibit 10.2 on Form 8-K filed by the Company on September 30, 2015).March 4, 2021)11Omitted - Inapplicable. 1210.34Amendment No. 6 to Credit Agreement dated July 30, 2021 by and among the Company, Farm Credit Services of America, FLCA, Farm Credit Services of America, PCA and CoBank, ACB (incorporated by reference to Exhibit 10.1 of Form 8-K filed by the Company on August 12, 2021). Omitted - Inapplicable. 1310.35Amendment No. 7 to Credit Agreement dated October 29, 2021 by and among the Company, Farm Credit Services of America, FLCA, Farm Credit Services of America, PCA and CoBank, ACB (incorporated by reference to Exhibit 10.1 of Form 8-K filed by the Company on November 4, 2021). Omitted - Inapplicable. 1410.36Revolving Credit Note dated February 26, 2021 (incorporated by reference to Exhibit 10.4 on Form 8-K filed by the Company on March 4, 2021) Omitted - Inapplicable. 1610.37First Amended and Restated Revolving Credit Note dated July 30, 2021 (incorporated by reference to Exhibit 10.2 of Form 8-K filed by the Company on August 12, 2021) Omitted - Inapplicable. 1810.38Second Amended and Restated Revolving Credit Note dated October 29, 2021 (incorporated by reference to Exhibit 10.2 of Form 8-K filed by the Company on November 4, 2021). Omitted - Inapplicable. 2110.39Second Amended and Restated Term Note dated February 26, 2021 (incorporated by reference to Exhibit 10.3 on Form 8-K filed by the Company on March 4, 2021) Omitted - Inapplicable. 22Omitted - Inapplicable. 23Omitted - Inapplicable. 24Omitted - Inapplicable. 101.XMLXBRLInstance101.XSDXBRLSchemaExtension Label Linkbase Document101.CALXBRLTaxonomy Calculation Database101.LABXBRLTaxonomy Label Linkbase101.PREXBRLTaxonomy Presentation Linkbase101.DEFXBRLTaxonomy Definition Linkbase________________________*** 15, 201723, 2021Brian T. CahillMichael D. Jerke Brian T. Cahill, 15, 201723, 2021Brett L. FrevertAnn M. Reis Brett L. Frevert, CFOPrincipal FinancialChief Accounting OfficerSignature 15, 201723, 2021 December 15, 201723, 2021 /s/ Hubert M. HouserDecember 15, 2017Hubert M. Houser, /s/ Michael K. GuttauDecember 15, 2017Michael K. Guttau, /s/ Eric J. HeismeyerDecember 15, 2017Eric J. Heismeyer, Director /s/ Matthew K. GibsonKevin J. RossDecember 15, 201723, 2021Matthew K. Gibson,Kevin J. Ross, Director /s/ Andrew J. BullochDecember 15, 2017Andrew J. Bulloch, Director54