UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)



x			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended ~~June 30, 2020~~

March 31, 2021



¨			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

COMMISSION FILE NO. 000-50253



South Dakota Soybean Processors, LLC
(Exact name of registrant as specified in its charter)



South Dakota						46-0462968
(State or Other Jurisdiction of Incorporation or Organization)						(I.R.S. Employer Identification No.)

100 Caspian Avenue; PO Box 500 Volga, South Dakota						57071
(Address of Principal Executive Offices						(Zip Code)



(605) 627-9240
(Registrant's telephone number, including area code)

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

Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). x Yes ¨ No

Indicate by check mark whether the registrant is a large accelerated filer, accelerated filer or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

¨ Large Accelerated Filer

¨ Accelerated Filer

x Non-Accelerated Filer

¨ Smaller Reporting Company

¨ Emerging Growth Company

(do not check if a smaller reporting company)

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for company with an new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

¨ Yes x No

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY

PROCEEDINGS DURING THE PRECEDING FIVE YEARS

Check whether the registrant filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court. Yes ¨ No ¨

APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: On ~~August 7, 2020,~~May 12, 2021, the registrant had 30,419,000 capital units outstanding.

Table of Contents

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

South Dakota Soybean Processors, LLC

Condensed Financial Statements

~~June 30,~~March 31, 2021 and 2020 ~~and 2019~~

South Dakota Soybean Processors, LLC

Condensed Balance Sheets


	June 30, 2020			December 31, 2019				March 31, 2021		December 31, 2020
	(Unaudited)							(Unaudited)
Assets							Assets
Current assets							Current assets
Cash and cash equivalents	$	3,814,872		$	624,681		Cash and cash equivalents	$	3,833,044	$	3,650,950
Trade accounts receivable	21,199,077			24,420,557			Trade accounts receivable	28,219,622		28,990,655
Inventories	58,781,838			44,470,052			Inventories	96,563,212		69,593,473
Commodity derivative instruments							Commodity derivative instruments	33,438,012		28,417,680
Margin deposits	3,492,375			6,772,160			Margin deposits	0		6,018,001
Prepaid expenses	1,596,402			1,884,742			Prepaid expenses	2,081,924		2,093,622
Total current assets	88,884,564			78,172,192			Total current assets	164,135,814		138,764,381

Property and equipment	121,117,799			118,363,393			Property and equipment	123,875,225		122,195,099
Less accumulated depreciation	(56,074,844		)	(53,846,189		)	Less accumulated depreciation	(59,151,319)		(57,963,905)
Total property and equipment, net	65,042,955			64,517,204			Total property and equipment, net	64,723,906		64,231,194

Other assets							Other assets
Investments in related parties	8,331,703			7,873,727			Investments in related parties	9,327,890		9,327,890
Investments in cooperatives	1,539,293			1,562,098			Investments in cooperatives	1,559,800		1,539,293
Right-of-use lease asset, net	8,012,349			5,979,771			Right-of-use lease asset, net	11,285,215		11,960,289
Total other assets	17,883,345			15,415,596			Total other assets	22,172,905		22,827,472

Total assets	$	171,810,864		$	158,104,992		Total assets	$	251,032,625	$	225,823,047

(continued on following page)

South Dakota Soybean Processors, LLC

Condensed Balance Sheets (continued)


	March 31, 2021		December 31, 2020
	(Unaudited)
Liabilities and Members' Equity
Current liabilities
Excess of outstanding checks over bank balance	$	13,487,522	$	8,263,020
Current maturities of long-term debt	4,000,000		0
Note payable - seasonal loan	37,283,162		0
Current operating lease liabilities	5,656,417		5,846,456
Accounts payable	1,645,652		1,506,779

Accrued commodity purchases	30,984,546		44,962,904
Commodity derivative instruments	36,324,870		41,940,744
Margin deposit deficit	3,522,041		0
Accrued expenses	2,634,875		3,083,591
Accrued interest	119,285		40,564
Deferred liabilities - current	2,566,578		1,728,407
Total current liabilities	138,224,948		107,372,465

Long-term liabilities
Long-term debt, net of current maturities and unamortized debt issuance costs	15,987,797		17,499,868
Long-term operating lease liabilities	5,628,798		6,113,834

Total long-term liabilities	21,616,595		23,613,702

Commitments and contingencies (Notes 5, 6, 7, and 12)	0		0

Members' equity
Class A Units, no par value, 30,419,000 units issued and outstanding at March 31, 2021 and December 31, 2020	91,191,082		94,836,880

Total liabilities and members' equity	$	251,032,625	$	225,823,047

June 30, 2020 December 31, 2019
(Unaudited)
Liabilities and Members' Equity

Current liabilities

Excess of outstanding checks over bank balance $ 4,804,508
$ 8,164,752
Current maturities of long-term debt 4,534,595
4,603,342
Note payable - seasonal loan 13,154,794
1,743,029
Current operating lease liabilities 5,569,687
2,663,967
Accounts payable 2,084,334
4,904,963
Accrued commodity purchases 30,204,052
31,346,533
Accrued expenses 2,912,028
2,900,118
Accrued interest 85,664
74,770
Deferred liabilities - current 388,449
448,458
Total current liabilities 63,738,111
56,849,932

Long-term liabilities
Long-term debt, net of current maturities and unamortized debt
issuance costs
20,665,241
11,991,923
Long-term operating lease liabilities 2,442,662
3,315,804
Total long-term liabilities 23,107,903
15,307,727

Commitments and contingencies (Notes 6, 7, 8, and 13)

Members' equity

Class A Units, no par value, 30,419,000 units issued and
outstanding at June 30, 2020 and December 31, 2019
84,964,850
85,947,333

Total liabilities and members' equity $ 171,810,864
$ 158,104,992

The accompanying notes are an integral part of these condensed financial statements.

South Dakota Soybean Processors, LLC

Condensed Statements of Operations (Unaudited)

For the ~~Three and Six-Month~~Three-Month Periods Ended ~~June 30,~~March 31, 2021 and 2020 ~~and~~ ~~2019~~



	2021		2020

Net revenues	$	123,627,541	$	98,723,412

Cost of revenues:
Cost of product sold	99,264,660		80,200,506
Production	7,363,387		7,423,370
Freight and rail	10,198,191		9,211,835
Brokerage fees	172,092		163,238
Total cost of revenues	116,998,330		96,998,949

Gross profit (loss)	6,629,211		1,724,463

Operating expenses:
Administration	1,117,842		1,024,729

Operating income (loss)	5,511,369		699,734

Other income (expense):
Interest expense	(317,152)		(349,987)
Other non-operating income (expense)	224,728		(322,217)
Patronage dividend income	365,147		195,553
Total other income (expense)	272,723		(476,651)

Income (loss) before income taxes	5,784,092		223,083

Income tax benefit (expense)	0		0





Net income (loss)	$	5,784,092	$	223,083




Basic and diluted earnings (loss) per capital unit	$	0.19	$	0.01

Weighted average number of capital units outstanding for calculation of basic and diluted earnings (loss) per capital unit	30,419,000		30,419,000

�� Three Months Ended June 30, Six Months Ended June 30,
2020 2019 2020 2019

Net revenues $ 93,268,093
$ 100,331,589
$ 191,991,505
$ 192,298,396

Cost of revenues:

Cost of product sold 69,602,276
76,330,505
149,802,782
147,679,055
Production 7,406,999
6,821,032
14,830,369
13,694,012
Freight and rail 9,431,150
10,143,954
18,642,985
18,259,881
Brokerage fees 154,818
159,151
318,056
329,087
Total cost of revenues 86,595,243
93,454,642
183,594,192
179,962,035

Gross profit (loss) 6,672,850
6,876,947
8,397,313
12,336,361

Operating expenses:

Administration 898,767
927,314
1,923,496
1,932,515

Operating income (loss) 5,774,083
5,949,633
6,473,817
10,403,846

Other income (expense):

Interest expense (308,354 ) (267,730 ) (658,341 ) (460,289 )
Other non-operating income (expense) 20,885
100,099
(301,332 ) 419,466
Patronage dividend income —
—
195,553
169,456
Total other income (expense) (287,469 ) (167,631 ) (764,120 ) 128,633

Income (loss) before income taxes 5,486,614
5,782,002
5,709,697
10,532,479

Income tax benefit (expense) —
—
—
(600 )

Net income (loss) $ 5,486,614
$ 5,782,002
$ 5,709,697
$ 10,531,879

Basic and diluted earnings (loss) per capital unit $ 0.18
$ 0.19
$ 0.19
$ 0.35

Weighted average number of capital units outstanding for calculation of basic and diluted earnings (loss) per capital unit 30,419,000
30,419,000
30,419,000
30,419,000

The accompanying notes are an integral part of these condensed financial statements.

South Dakota Soybean Processors, LLC

Condensed Statements of Changes in Members' Equity (Unaudited)

For the ~~Six~~Three Months Ended ~~June 30,~~March 31, 2021 and 2020 ~~and 2019~~


						Class A Units
	Class A Units					Units	Amount
	Units	Amount

Balances, December 31, 2018	30,419,000	$	90,177,248
Net income	—	10,531,879
Distribution to members	—	(15,209,500		)
Balances, June 30, 2019	30,419,000	$	85,499,627

Balances, December 31, 2019	30,419,000	$	85,947,333		Balances, December 31, 2019	30,419,000	$	85,947,333
Net income	—	5,709,697			Net income	—	223,083
Distribution to members	—	(6,692,180		)	Distribution to members	—	(6,692,180)
Balances, June 30, 2020	30,419,000	$	84,964,850
Balances, March 31, 2020					Balances, March 31, 2020	30,419,000	$	79,478,236

Balances, December 31, 2020					Balances, December 31, 2020	30,419,000	$	94,836,880
Net income					Net income	—	5,784,092
Distribution to members					Distribution to members	—	(9,429,890)
Balances, March 31, 2021					Balances, March 31, 2021	30,419,000	$	91,191,082

The accompanying notes are an integral part of these condensed financial statements.

South Dakota Soybean Processors, LLC


	2020			2019				2021		2020
Operating activities							Operating activities
Net income (loss)	$	5,709,697		$	10,531,879		Net income (loss)	$	5,784,092	$	223,083

Charges and credits to net income not affecting cash:							Charges and credits to net income not affecting cash:
Depreciation and amortization	2,433,310			2,131,494			Depreciation and amortization	1,270,770		1,188,309
Net (gain) loss recognized on derivative activities	(6,851,092		)	(898,101		)	Net (gain) loss recognized on derivative activities	5,816,260		(5,138,750)
Gain on sales of property and equipment	—			(6,687		)	Gain on sales of property and equipment	1,905		0
Loss on equity method investment	—			99,489

Non-cash patronage dividends	(43,405		)	(42,364		)	Non-cash patronage dividends	(75,411)		(43,405)
Forgiveness of Paycheck Protection Program loan							Forgiveness of Paycheck Protection Program loan	(10,000)		0
Change in current assets and liabilities	(4,725,051		)	(12,731,135		)	Change in current assets and liabilities	(46,470,743)		(10,946,028)

Net cash provided by (used for) operating activities	(3,476,541		)	(915,425		)	Net cash provided by (used for) operating activities	(33,683,127)		(14,716,791)

Investing activities							Investing activities
Purchase of investments	(404,329		)	—			Purchase of investments	0		(404,329)
Retirement of patronage dividends	66,210			32,288			Retirement of patronage dividends	54,904		66,210
Proceeds from sales of property and equipment	—			64,800

Purchase of property and equipment	(2,956,848		)	(3,207,332		)	Purchase of property and equipment	(1,764,167)		(1,864,856)

Net cash provided by (used for) investing activities	(3,294,967		)	(3,110,244		)	Net cash provided by (used for) investing activities	(1,709,263)		(2,202,975)

Financing activities							Financing activities
Change in excess of outstanding checks over bank balances	(3,360,244		)	2,215,874			Change in excess of outstanding checks over bank balances	5,224,502		(2,615,647)
Net proceeds (payments) from seasonal borrowings	11,411,765			—			Net proceeds (payments) from seasonal borrowings	37,283,162		17,972,775
Distributions to members	(6,692,180		)	(15,209,500		)	Distributions to members	(9,429,890)		(6,692,180)
Payments for debt issue costs	(10,000		)	—			Payments for debt issue costs	0		(10,000)
Proceeds from long-term debt	11,215,700			44,091,300			Proceeds from long-term debt	11,839,877		10,000,000
Principal payments on long-term debt	(2,603,342		)	(33,267,415		)	Principal payments on long-term debt	(9,343,167)		(2,000,000)
Net cash provided by (used for) financing activities	9,961,699			(2,169,741		)	Net cash provided by (used for) financing activities	35,574,484		16,654,948

Net change in cash and cash equivalents	3,190,191			(6,195,410		)	Net change in cash and cash equivalents	182,094		(264,818)

Cash and cash equivalents, beginning of period	624,681			7,197,082			Cash and cash equivalents, beginning of period	3,650,950		624,681

Cash and cash equivalents, end of period	$	3,814,872		$	1,001,672		Cash and cash equivalents, end of period	$	3,833,044	$	359,863

Supplemental disclosures of cash flow information							Supplemental disclosures of cash flow information
Cash paid during the period for:							Cash paid during the period for:
Interest	$	647,447		$	419,781		Interest	$	238,431	$	300,888

Income taxes	$	—		$	—		Income taxes	$	0	$	0

Noncash investing activities:
Soybean meal contributed as investment in related party	$	53,647		$	—

South Dakota Soybean Processors, LLC

Notes to Condensed Financial Statements

Note 1 - Principal Activity and Significant Accounting Policies

The unaudited condensed financial statements contained herein have been prepared pursuant to the rules and regulations of the Securities Exchange Commission. Certain information and note disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to those rules and regulations, although South Dakota Soybean Processors, LLC (the “Company”, “LLC”, “we”, “our”, or “us”) believes that the disclosures made are adequate to make the information not misleading.

In the opinion of management, all normal recurring adjustments considered necessary for a fair presentation have been included in the accompanying condensed financial statements. The results of operations and cash flows for interim periods are not necessarily indicative of results for a full year due in part to the seasonal nature of some of the Company’s businesses. The balance sheet data as of December 31, ~~2019~~2020 has been derived from audited financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America.

These statements should be read in conjunction with the financial statements and notes thereto for the year ended December 31, ~~2019,~~2020, included in the Company’s annual report on Form 10-K filed with the Securities and Exchange Commission on March ~~18, 2020.~~31, 2021.

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 at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Revenue

The Company accounts for all of its revenues from contracts with customers under ASC 606, Revenue from Contracts with Customers.

The Company principally generates revenue from merchandising and transporting manufactured agricultural products used as ingredients in food, feed, energy and industrial products. Revenue is measured based on the consideration specified in the contract with a customer, and excludes any amounts collected on behalf of third parties (e.g. - taxes). The Company follows a policy of recognizing revenue at a single point in time when it satisfies its performance obligation by transferring control over a product to a customer. Control transfer typically occurs when goods are shipped from our facilities or at other predetermined control transfer points (for instance, destination terms). Shipping and handling costs related to contracts with customers for sale of goods are accounted for as a fulfillment activity and are included in cost of revenues. Accordingly, amounts billed to customers for such costs are included as a component of revenues.

Payments received in advance to the transfer of goods, or "contract liabilities", are included in "Deferred liabilities - current" on the Company's condensed balance sheets. These customer prepayments totaled ~~$83,768~~$2,566,578 and ~~$313,347~~$1,728,407 as of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, respectively. Of the ~~$313,347~~$1,728,407 balance as of December 31, ~~2019,~~2020, contract liabilities recognized as revenues were ~~$88,692 and $313,347~~$392,984 for the three ~~and six~~ months ended ~~June 30, 2020, respectively.~~March 31, 2021. Of the ~~$15,042~~$313,347 customer prepayments as of December 31, ~~2018,~~2019, the Company recognized ~~$0 and $15,042~~$224,655 of contract liabilities as revenues during the three ~~and six~~ months ended ~~June 30, 2019, respectively.~~

March 31, 2020.

South Dakota Soybean Processors, LLC

Notes to Condensed Financial Statements

The following table presents a disaggregation of revenue from contracts with customers for the three ~~and six~~ month periods ended ~~June 30,~~March 31, 2021 and 2020, ~~and 2019,~~ by product type:


	Three Months Ended June 30,				Six Months Ended June 30,					2021		2020
	2020		2019		2020		2019
Soybean meal and hulls	$	61,332,072	$	64,538,123	$	124,024,952	$	124,200,926	Soybean meal and hulls	$	79,223,026	$	62,692,880
Soybean oil and oil byproducts	31,936,021		35,793,466		67,966,553		68,097,470		Soybean oil and oil byproducts	44,404,515		36,030,532

Totals	$	93,268,093	$	100,331,589	$	191,991,505	$	192,298,396	Totals	$	123,627,541	$	98,723,412

Recent accounting pronouncements

Any recent accounting pronouncements are not expected to have a material impact on our condensed financial statements.

Note 2 - Accounts Receivable

Accounts receivable are considered past due when payments are not received on a timely basis in accordance with the Company’s credit terms, which is generally 30 days from invoice date. Accounts considered uncollectible are written off. The Company’s estimate of the allowance for doubtful accounts is based on historical experience, its evaluation of the current status of receivables, and unusual circumstances, if any.

The following table presents the aging analysis of trade receivables as of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019:~~2020:

In general, cash received is applied to the oldest outstanding invoice first, unless payment is for a specified invoice. The Company, on a case by case basis, may charge a late fee of 1.5% per month on past due receivables.

Note 3 - Inventories

The Company’s inventories consist of the following at ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019:~~2020:

June 30,
2020 December 31,
2019
Finished goods $ 32,212,243
$ 26,559,194
Raw materials 26,201,294
17,641,335
Supplies & miscellaneous 368,301
269,523

Totals $ 58,781,838
$ 44,470,052

~~South Dakota Soybean Processors, LLC~~

~~Notes to Condensed Financial Statements~~


	March 31, 2021		December 31, 2020
Finished goods	$	48,286,682	$	35,502,780
Raw materials	48,025,892		33,824,265
Supplies & miscellaneous	250,638		266,428

Totals	$	96,563,212	$	69,593,473

Finished goods and raw materials are valued at estimated market value, which approximates net realizable value. ~~In addition, futures and option contracts are marked to market through cost of revenues, with unrealized gains and losses recorded in the above inventory amounts.~~ Supplies and other inventories are stated at the lower of cost or net realizable value.

~~Note 4 - Investments in Related Parties~~

South Dakota Soybean Processors, LLC

~~The Company accounts for the investments in Prairie AquaTech, LLC, Prairie AquaTech Investments, LLC and Prairie AquaTech Manufacturing, LLC using the fair value method in ASU No. 2016-01~~. ~~The Company has elected~~Notes to utilize the measurement alternative for equity investments that do not have readily determinable fair values and measure these investments at their cost less any impairment plus or minus any observable price changes in orderly transactions.Condensed Financial Statements

Prior to October 2019, the Company accounted for its investment in Prairie AquaTech, LLC using the equity method due to the Company's ability to exercise significant influence based on its board position. The Company recognized losses of $0 and $3,261 during the three months ended June 30, 2020 and 2019, respectively, and $0 and $99,489 during the six months ended June 30, 2020 and 2019, respectively, which is included in other non-operating income (expense). In October 2019, the Company ceased the accounting for its investment in Prairie AquaTech, LLC under the equity method, and began accounting for the investment at fair value as a result of its decreased ability to exercise significant influence due to an increased quantity of board positions.

On March 27, 2020, the Company invested in Prairie AquaTech Manufacturing, LLC another $404,329 in cash. The Company also agreed to invest into Prairie AquaTech Manufacturing, LLC an additional $500,000 of soybean meal to be used in the entity's operations. During the three and six months ended June 30, 2020, the Company contributed $53,647 of soybean meal under this agreement.

Note 54 - Property and Equipment

The following is a summary of the Company's property and equipment at ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019:~~2020:


	2020							2019			2021						2020
	Cost		Accumulated Depreciation			Net		Net			Cost		Accumulated Depreciation		Net		Net
Land	$	516,326	$	—		$	516,326	$	516,326	Land	$	516,326	$	0	$	516,326	$	516,326
Land improvements	2,353,237		(686,430		)	1,666,807		1,545,088		Land improvements	2,406,915		(797,325)		1,609,590		1,647,052
Buildings and improvements	22,369,519		(9,768,446		)	12,601,073		12,807,844		Buildings and improvements	22,443,026		(10,193,289)		12,249,737		12,391,726
Machinery and equipment	85,386,613		(44,471,445		)	40,915,168		41,480,121		Machinery and equipment	88,433,579		(46,888,448)		41,545,131		41,674,080
Railroad cars	5,777,579		(88,739		)	5,688,840		1,207,545		Railroad cars	5,852,292		(177,270)		5,675,022		5,704,283
Company vehicles	146,754		(118,095		)	28,659		36,032		Company vehicles	151,682		(96,243)		55,439		59,613
Furniture and fixtures	1,363,744		(941,689		)	422,055		459,153		Furniture and fixtures	1,387,880		(998,744)		389,136		408,288
Construction in progress	3,204,027		—			3,204,027		6,465,095		Construction in progress	2,683,525		0		2,683,525		1,829,826

Totals	$	121,117,799	$	(56,074,844	)	$	65,042,955	$	64,517,204	Totals	$	123,875,225	$	(59,151,319)	$	64,723,906	$	64,231,194

Depreciation of property and equipment was ~~$1,243,780~~$1,269,550 and ~~$1,063,365~~$1,187,316 for the three months ended ~~June 30,~~March 31, 2021 and 2020, ~~and 2019, respectively, and $2,431,096 and $2,130,417 for the six months ended June 30, 2020 and 2019,~~ respectively.

Note 65 - Note Payable – Seasonal Loan

~~The~~Prior to the amendments described in Note 13, the Company ~~has~~had entered into a revolving credit agreement with CoBank which expires December 1, ~~2020.~~2021. The purpose of the credit agreement is to finance the operating needs of the Company. Under this agreement, the Company ~~may~~could borrow up to ~~$28~~$45 million, and advances on the revolving credit agreement are secured. Interest accrues at a variable rate ~~(2.38%~~(2.31% at ~~June 30, 2020)~~March 31, 2021). The Company pays a 0.20% annual commitment fee on any funds not borrowed. There were advances outstanding of ~~$13,154,794~~$37,283,162 and ~~$1,743,029~~$0 at ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, respectively. The remaining available funds to borrow under the terms of the revolving credit agreement were ~~$14.8~~$7.7 million as of ~~June 30, 2020.~~March 31, 2021.

~~South Dakota Soybean Processors, LLC~~

~~Notes to Condensed Financial Statements~~

Note 76 - Long-Term Debt

The following is a summary of the Company's long-term debt at ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019:~~2020:

June 30,
2020 December 31,
2019
Revolving term loan from CoBank, interest at variable rates (2.63% and 4.24% at June 30, 2020 and December 31, 2019, respectively), secured by substantially all property and equipment. Loan matures September 20, 2023. $ 24,000,000
$ 16,000,000
Note payable to U.S. Small Business Authority, due in monthly principal and interest installments of $68,428, interest rate at 1.00%, unsecured. Note matures April 20, 2022. 1,215,700
—
Note payable to Brookings Regional Railroad Authority, due in annual principal and interest installments of $75,500, interest rate at 2.00%, secured by railroad track assets. Note matured June 1, 2020. —
603,342
Total debt before debt issuance costs 25,215,700
16,603,342
Less current maturities (4,534,595 ) (4,603,342 )
Less debt issuance costs, net of amortization of $8,136 and $5,923 as of June 30, 2020 and December 31, 2019, respectively (15,864 ) (8,077 )

Total long-term debt $ 20,665,241
$ 11,991,923


	March 31, 2021		December 31, 2020
Revolving term loan from CoBank, interest at variable rates (2.56% and 2.60% at March 31, 2021 and December 31, 2020, respectively), secured by substantially all property and equipment. Loan matures September 20, 2023.	$	20,000,000	$	17,503,291
Note payable to U.S. Small Business Authority, due in monthly principal and interest installments, interest rate at 1.00%, unsecured. Note matures July 20, 2022.	0		10,000
Total debt before debt issuance costs	20,000,000		17,513,291
Less current maturities	(4,000,000)		0
Less debt issuance costs, net of amortization of $11,797 and $10,577 as of March 31, 2021 and December 31, 2020, respectively	(12,203)		(13,423)

Total long-term debt	$	15,987,797	$	17,499,868

The Company entered into an agreement as of January 28, 2020 with CoBank to amend and restate its Credit Agreement, which includes both the revolving term and seasonal loans. Under the terms and conditions of the Credit Agreement, CoBank agreed to make advances to the Company for up to $26,000,000 on the revolving term

South Dakota Soybean Processors, LLC

Notes to Condensed Financial Statements

loan with a variable effective interest rate of ~~2.63%~~2.56%. The amount available for borrowing on the revolving term loan, however, will decrease by $2,000,000 every six months beginning on March 20, 2020, with a scheduled balloon payment for the remaining balance on the loan's maturity date of September 20, 2023. The Company pays a 0.40% annual commitment fee on any funds not borrowed. The debt issuance costs of $24,000 paid by the Company on this amendment will be amortized over the term of loan. The principal balance outstanding on the revolving term loan was ~~$24,000,000~~$20,000,000 and ~~$16,000,000~~$17,503,291 as of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, respectively. There were no0 remaining commitments available to borrow on the revolving term loan as of ~~June 30, 2020.~~March 31, 2021.

Under this agreement, the Company is subject to compliance with standard financial covenants and the maintenance of certain financial ratios. One of those loan covenants restricts the Company's borrowings from entities other than CoBank to $300,000. As of June 30, 2020, the Company had debt from others totaling $1,215,700, or well in excess of the covenant, due to the PPP loan entered into on April 20, 2020 discussed below. The Company obtained CoBank's consent prior to entering into the new loan and subsequently received a waiver that is in effect as of June 30, 2020. The Company was in compliance with all ~~other~~ covenants and conditions with CoBank as of ~~June 30, 2020.~~

~~Effective~~ March 1, 2013, the State of South Dakota Department of Transportation agreed to loan the Brookings County Regional Railway Authority $964,070 for purposes of making improvements to the railway infrastructure near the Company’s soybean processing facility in Volga, South Dakota. In consideration of this secured loan, the Company agreed to provide a guarantee to the State of South Dakota Department of Transportation for the full amount of the loan, plus interest. This guaranty was converted into a direct obligation of the Company’s on October 16, 2013, when the Company received the entire loan proceeds and assumed responsibility for paying the annual principal and interest payments.31, 2021.

On April 20, 2020, the Company entered into an unsecured promissory note for $1,215,700 under the U.S. Small Business Administration's Paycheck Protection Program (“PPP Loan“)~~. The Paycheck Protection Program was established~~, a loan program created under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act“) ~~and is administered by the U.S. Small Business Administration.~~. The PPP Loan is being made through First Bank & Trust, N.A. The PPP Loan iswas scheduled to mature on ~~April~~July 20, 2022 and ~~has~~had a 1% interest rate. ~~No payments are due~~The Company submitted to the SBA a loan forgiveness application on ~~the PPP Loan until~~ November 20, 2020, ~~although interest will continue to accrue during the deferment period. Beginning November 20, 2020, the Company will pay 18 equal monthly installments of principal and interest in~~with the amount ~~necessary to fully amortize the PPP Loan through the maturity date. Under the terms of the CARES Act, all or a portion of the PPP Loan~~which may be ~~forgiven. Such~~forgiven equal to the sum of qualifying expenses such as payroll, rent obligations, and covered utility payments. The forgiveness ~~will be determined,~~

~~South Dakota Soybean Processors, LLC~~

~~Notes to Condensed Financial Statements~~

~~subject to limitations, based~~application was approved by the SB for $1,205,700 on ~~the use of loan proceeds for payroll costs~~November 25, 2020 and ~~mortgage interest, rent or utility costs. No assurance is provided that the Company will obtain forgiveness of the PPP Loan in whole or in part.~~$10,000 on February 19, 2021.

The following are minimum principal payments on long-term debt obligations for the twelve-month periods ended ~~June 30:~~March 31:


2022	$	4,000,000
2023	4,000,000
2024	12,000,000




Total	$	20,000,000

2021 $ 4,534,595
2022 4,681,105
2023 4,000,000
2024 12,000,000

Total $ 25,215,700

Note 87 - Operating Leases

The Company has several operating leases for railcars. These leases have terms ranging from 3-18 years and do not have renewal terms provided. The leases require the Company to maintain the condition of the railcars, restrict the use of the railcars to specified products, such as soybean meal, hulls or oil, limit usage to the continental United States, Canada or Mexico, require approval to sublease to other entities, and require the Company's submission of its financial statements. Lease expense for all railcars was ~~$740,705~~$760,961 and ~~$756,871~~$783,210 for the three months ended ~~June 30,~~March 31, 2021 and 2020, ~~and 2019, respectively, and $1,523,915 and $1,535,990 for the six months ended June 30, 2020 and 2019,~~ respectively.

The following is a schedule of the Company's operating leases for railcars as of ~~June 30, 2020:~~March 31, 2021:

Lessor

Quantity of
Railcars

Commencement
Date

Maturity
Date

Monthly
Payment

American Railcar Leasing

7/1/2015

6/30/2021

30,780

Andersons Railcar Leasing Co.

7/1/2018

6/30/2023

5,000

Andersons Railcar Leasing Co.

7/1/2019

6/30/2026

11,300

Farm Credit Leasing

9/1/2020

8/31/2032

34,929

GATX Corporation

7/1/2020

6/30/2024

4,200

Midwest Railcar Corporation

1/1/2015

12/31/2021

27,200

Trinity Capital

11/1/2020

10/31/2023

17,255

Trinity Capital

11/1/2020

10/31/2023

11,900

Wells Fargo Rail

112

8/1/2017

7/31/2022

52,557

South Dakota Soybean Processors, LLC

Notes to Condensed Financial Statements

Lessor
Quantity of
Railcars

Commencement
Date

Maturity
Date

Monthly
Payment

American Railcar Leasing 30
7/1/2015 6/30/2021 $ 30,780
Andersons Railcar Leasing Co. 10
7/1/2018 6/30/2023 5,000
Andersons Railcar Leasing Co. 20
7/1/2019 6/30/2026 11,300
GATX Corporation 14
7/1/2020 6/30/2024 4,200
Midwest Railcar Corporation 64
1/1/2015 12/31/2021 27,200
Trinity Capital 88
8/1/2002 7/31/2020 33,704
Trinity Capital 29
12/1/2015 11/30/2020 28,536
Trinity Capital 20
10/1/2015 9/30/2020 13,600
Wells Fargo Rail 112
8/1/2017 7/31/2022 52,557
Wells Fargo Rail 107
1/1/2018 12/31/2022 35,845
Wells Fargo Rail 7
1/1/2004 12/31/2021 2,926
Wells Fargo Rail 15
1/1/2004 12/31/2021 5,850
Wells Fargo Rail 8
1/1/2015 12/31/2021 3,600

524
$ 255,098

Lessor

Quantity of
Railcars

Commencement
Date

Maturity
Date

Monthly
Payment

Wells Fargo Rail

107

1/1/2018

12/31/2022

35,845

Wells Fargo Rail

1/1/2004

12/31/2021

2,926

Wells Fargo Rail

1/1/2004

12/31/2021

5,850

Wells Fargo Rail

1/1/2015

12/31/2021

3,600

523

243,342

The Company also has a number of other operating leases for machinery and equipment. These leases have terms ranging from 3-7 years; however, most of these leases have automatic renewal terms. These leases require monthly payments of ~~$3,649.~~$3,779. Rental expense under these other operating leases was ~~$11,394~~$9,741 and ~~$12,719~~$7,681 for the ~~three months ended June 30, 2020 and 2019, respectively, and $19,075 and $20,642 for the six-month~~three-month periods ended ~~June 30,~~March 31, 2021 and 2020, ~~and 2019,~~ respectively.

On March 19, 2020, the Company entered into an agreement with an entity in the western United States to provide storage and handling services for the Company's soybean meal. The Company will pay the entity $3,300,000, which

~~South Dakota Soybean Processors, LLC~~

~~Notes to Condensed Financial Statements~~

is included in current operating lease liabilities on the Company's balance sheet, after the entity's construction of additional storage and handling facilities. The agreement will mature seven years after completion of the construction but includes an additional ~~seven-year~~seven-year renewal period at the sole discretion of the Company.

Operating leases are included in right-to-use lease assets, current operating lease liabilities, and long-term lease liabilities on the condensed balance sheets. These assets and liabilities are recognized at the commencement date based on the present value of remaining lease payments over the lease term using the Company's secured incremental borrowing rates or implicit rates, when readily determinable. Short-term operating leases, which have an initial term of 12 months or less, are not recorded on the condensed balance sheet.

Lease expense for these operating leases is recognized on a straight-line basis over the lease terms. The components of lease costs recognized within our condensed statements of operations for the three-month and ~~six-month~~three-month periods ended ~~June 30,~~March 31, 2021 and 2020 ~~and 2019~~ were as follows:

The following summarizes the supplemental cash flow information for the ~~three and six-month~~three-month periods ended ~~June 30, 2020~~March 31, 2021 and ~~2019:~~2020:



	2021		2020

Cash paid for amounts included in measurement of lease liabilities	$	740,385	$	777,143

Supplemental non-cash information:
Right-of-use assets obtained in exchange for lease liabilities	$	0	$	3,300,000

Three Months Ended June 30, Six Months Ended June 30,
2020 2019 2020 2019

Cash paid for amounts included in measurement of lease liabilities $ 777,143
$ 742,911
$ 1,554,286
$ 1,485,822

Supplemental non-cash information:
Right-of-use assets obtained in exchange for lease liabilities $ 185,750
$ 796,358
$ 3,485,750
$ 796,358

South Dakota Soybean Processors, LLC

Notes to Condensed Financial Statements

The following summarizes the weighted-average remaining lease term and weighted-average discount rate:



	~~June 30, 2020~~March 31, 2021

Weighted-average remaining lease-term - operating leases (in years)	~~7.4~~		9.1

Weighted-average discount rate - operating leases	~~3.7~~3.2	%

~~South Dakota Soybean Processors, LLC~~

~~Notes to Condensed Financial Statements~~


	Railcars		Other		Total
Twelve-month periods ended March 31:
2022	$	2,471,800	$	3,341,488	$	5,813,288
2023	1,600,398		41,907		1,642,305
2024	824,233		30,453		854,686
2025	567,348		17,312		584,660
2026	554,748		2,064		556,812
Thereafter	2,723,432		1,032		2,724,464
Total lease payments	8,741,959		3,434,256		12,176,215
Less amount of lease payments representing interest	(880,321)		(10,679)		(891,000)
Total present value of lease payments	$	7,861,638	$	3,423,577	$	11,285,215

Railcars Other Total
Twelve-month periods ended June 30:
2021 $ 2,315,724
$ 3,341,841
$ 5,657,565
2022 1,544,281
40,284
1,584,565
2023 566,184
39,182
605,366
2024 173,400
24,236
197,636
2025 135,600
9,991
145,591
Thereafter 148,200
—
148,200
Total lease payments 4,883,389
3,455,534
8,338,923
Less amount of lease payments representing interest (311,842 ) (14,732 ) (326,574 )
Total present value of lease payments $ 4,571,547
$ 3,440,802
$ 8,012,349

Note 98 - Member Distribution

On ~~January 21, 2020,~~February 2, 2021, the Company’s Board of Managers approved a cash distribution of approximately ~~$6.7~~$9.4 million, or ~~22.0¢~~31.0¢ per capital unit. The distribution was paid in accordance with the Company’s operating agreement and distribution policy on February ~~6, 2020.~~4, 2021.

Note 109 - Derivative Instruments and Hedging Activities

In the ordinary course of business, the Company enters into contractual arrangements as a means of managing exposure to changes in commodity prices and, occasionally, foreign exchange and interest rates. The Company’s derivative instruments primarily consist of commodity futures, options and forward contracts, and interest rate swaps, caps and floors. Although these contracts may be effective economic hedges of specified risks, they are not designated as, nor accounted for, as hedging instruments. These contracts are recorded on the Company’s condensed balance sheets at fair value as discussed in Note ~~11,~~10, Fair Value.

As of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, the value of the Company’s open futures, options and forward contracts was approximately ~~$4,468,174~~$(2,886,858) and ~~$(5,955,928)~~$(13,523,064), respectively.

As of December 31, 2019
Balance Sheet Classification Asset Derivatives Liability Derivatives
Derivatives not designated as hedging instruments:

Commodity contracts Current Assets $ 3,320,161
$ 8,930,683
Foreign exchange contracts Current Assets 29,696
27,582
Interest rate caps and floors Current Liabilities —
347,520

Totals $ 3,349,857
$ 9,305,785

South Dakota Soybean Processors, LLC

Notes to Condensed Financial Statements


		As of December 31, 2020
	Balance Sheet Classification	Asset Derivatives		Liability Derivatives
Derivatives not designated as hedging instruments:
Commodity contracts	Current Assets	$	28,365,908	$	41,196,628
Foreign exchange contracts	Current Assets	50,979		48,539
Interest rate caps and floors	Current Liabilities	793		695,577

Totals		$	28,417,680	$	41,940,744

During the ~~three and six-month~~three-month periods ended ~~June 30,~~March 31, 2021 and 2020, ~~and 2019,~~ net realized and unrealized gains (losses) on derivative transactions were recognized in the condensed statements of operations as follows:




	2021		2020
Derivatives not designated as hedging instruments:
Commodity contracts	$	(6,042,326)	$	5,626,229
Foreign exchange contracts	19,226		(67,997)
Interest rate swaps, caps and floors	206,840		(419,482)

Totals	$	(5,816,260)	$	5,138,750

Net Gain (Loss) Recognized
on Derivative Activities for the Net Gain (Loss) Recognized
on Derivative Activities for the
Three Months Ended June 30, Six Months Ended June 30,
2020 2019 2020 2019
Derivatives not designated as hedging instruments:

Commodity contracts $ 1,504,942
$ 266,869
$ 7,131,171
$ 1,008,821
Foreign exchange contracts 246,656
8,347
178,659
44,829
Interest rate swaps, caps and floors (39,256 ) (125,483 ) (458,738 ) (155,549 )

Totals $ 1,712,342
$ 149,733
$ 6,851,092
$ 898,101
The Company recorded gains (losses) of $(5,816,260) and $5,138,750 in cost of goods sold related to its commodity derivative instruments for the three-month periods ended March 31, 2021 and 2020, respectively.

Note 1110 - Fair Value

ASC 820, Fair Value Measurements and Disclosures, defines fair value, establishes a comprehensive framework for measuring fair value and expands disclosures which are required about fair value measurements. Specifically, this guidance establishes a hierarchy prioritizing the inputs to valuation techniques, giving the highest priority to quoted prices in active markets for identical assets and liabilities and the lowest priority to unobservable value inputs. The three levels of hierarchy and examples are as follows:

•Level 1 – Quoted prices are available in active markets for identical assets or liabilities as of the reported date. The types of assets and liabilities included in Level 1 are highly liquid and actively traded instruments with quoted prices, such as equities listed on the New York Stock Exchange and commodity derivative contracts listed on the Chicago Board of Trade (“CBOT”).

•Level 2 – Pricing inputs are other than quoted prices in active markets, but are either directly or indirectly observable as of the reported date. The types of assets and liabilities in Level 2 are typically either comparable to actively traded securities or contracts, or priced with models using highly observable inputs, such as commodity prices using forward future prices.

•Level 3 – Significant inputs to pricing that are unobservable as of the reporting date. The types of assets and liabilities included in Level 3 are those with inputs requiring significant management judgment or estimation, such as complex and subjective models and forecasts used to determine the fair value of financial transmission rights.

The following tables set forth financial assets and liabilities measured at fair value in the condensed balance sheets and the respective levels to which fair value measurements are classified within the fair value hierarchy as of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019:~~2020:

Fair Value as of June 30, 2020
Level 1 Level 2 Level 3 Total
Financial assets:

Inventory $ 5,098,359
$ 53,230,827
$ —
$ 58,329,186
Margin deposits (deficits) $ 3,492,375
$ —
$ —
$ 3,492,375

Fair Value as of December 31, 2019
Level 1 Level 2 Level 3 Total
Financial assets:

Inventory $ (5,610,521 ) $ 49,717,733
$ —
$ 44,107,212
Margin deposits $ 6,772,160
$ —
$ —
$ 6,772,160

South Dakota Soybean Processors, LLC

Notes to Condensed Financial Statements


	Fair Value as of March 31, 2021
	Level 1		Level 2		Level 3		Total
Financial assets:
Inventory	$	0	$	96,049,664	$	0	$	96,049,664
Commodity derivative instruments	$	0	$	(2,886,858)	$	0	$	(2,886,858)
Margin deposits (deficits)	$	(3,522,041)	$	0	$	0	$	(3,522,041)


	Fair Value as of December 31, 2020
	Level 1		Level 2		Level 3		Total
Financial assets:
Inventory	$	0	$	69,127,700	$	0	$	69,127,700
Commodity derivative instruments	$	0	$	(13,523,064)	$	0	$	(13,523,064)
Margin deposits	$	6,018,001	$	0	$	0	$	6,018,001

The Company enters into various commodity derivative instruments, including futures, options, swaps and other agreements. The fair value of the Company’s commodity derivatives is determined using unadjusted quoted prices for identical instruments on the CBOT. The Company estimates the fair market value of their finished goods and raw materials inventories using the market price quotations of similar forward future contracts listed on the CBOT and adjusts for the local market adjustments derived from other grain terminals in our area. ~~This market adjustment caused a negative balance in the Level 1 inventory amount as of December 31, 2019.~~

The Company considers the carrying amount of significant classes of financial instruments on the balance sheets, including cash, accounts receivable, and accounts payable, to be reasonable estimates of fair value due to their length or maturity. The fair value of the Company’s long-term debt approximates the carrying value. The interest rates on the long-term debt are similar to rates the Company would be able to obtain currently in the market.

The Company has patronage investments in other cooperatives and common and preferred stock holdings in privately held entities. There is no market for their patronage credits or the entity’s common and preferred holdings, and it is impracticable to estimate the fair value of the Company’s investments. These investments are carried on the balance sheet at original cost plus the amount of patronage earnings allocated to the Company, less any cash distributions received.

Note 1211 - Related Party Transactions

The Company sold soybean products to Prairie AquaTech, LLC and Prairie AquaTech Manufacturing, LLC totaling ~~$56,453~~$1,502,827 and ~~$185,923~~$2,806 during the three months ended ~~June 30,~~March 31, 2021 and 2020, ~~and 2019, respectively, and $59,259 and $293,980 during the six months ended June 30, 2020 and 2019,~~ respectively. As of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, Prairie AquaTech, LLC and Prairie AquaTech Manufacturing, LLC owed the Company ~~$250~~$0 and ~~$104,947,~~$339,967, respectively.

The Company has entered into agreements with Prairie AquaTech Manufacturing, LLC to perform various management services and to serve as the owner's representative during the construction of its new manufacturing facility adjacent to the Company's plant in Volga, South Dakota. The Company received a total of $1.72 million in compensation for those services, which was recorded in deferred liabilities on the Company's condensed balance sheet. ~~As of June 30, 2020 and December 31, 2019, the balance remaining in deferred liabilities was $0 and $101,111, respectively.~~ The Company recognized revenues from management services of ~~$35,278~~$0 and ~~$220,841~~$85,833 during the three months ended ~~June 30,~~March 31, 2021 and 2020, ~~and 2019, respectively, and $121,111 and $565,597 during the six months ended June 30, 2020 and 2019,~~ respectively.

Note 1312 - Commitments and Contingencies

As of March 31, 2021, the Company had unpaid commitments of approximately $2.1 million for construction and acquisition of property and equipment, all of which is expected to be incurred by December 31, 2021.

From time to time in the ordinary course of our business, the Company may be named as a defendant in legal proceedings related to various issues, including without limitation, workers’ compensation claims, tort claims, or contractual dispute. The Company carries insurance that provides protection against general commercial liability claims, claims against our directors, officer and employees, business interruption, automobile liability, and workers'

South Dakota Soybean Processors, LLC

Notes to Condensed Financial Statements

compensation. The Company is not currently involved in any material legal proceedings and are not aware of any potential claims.

Note 1413 - Subsequent Event

The Company evaluated all of its activities and, except for the events listed below, concluded that no subsequent events have occurred that would require recognition in its financial statements or disclosed in the notes to its financial statements.

On April 5, 2021, the Company entered into an amendment of the seasonal loan agreement with CoBank. The maximum amount that the Company may borrow under the seasonal loan is increased from $45.0 million to $60.0 million until the loan matures on December 1, 2021. All other material items and conditions under the seasonal loan agreement remain unchanged following this amendment.

On April 30, 2021, the Company entered into an amendment of the seasonal loan agreement with CoBank. The maximum amount that the Company may borrow under the seasonal loan is increased from $60.0 million to $70.0 million until the loan matures on December 1, 2021. All other material items and conditions under the seasonal loan agreement remain unchanged following this amendment.

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

Forward-Looking Statements

The information in this quarterly report on Form 10-Q for the ~~six-month~~three-month period ended ~~June 30, 2020,~~March 31, 2021, (including reports filed with the Securities and Exchange Commission (the “SEC” or “Commission”), contains “forward-looking statements” that deal with future results, expectations, plans and performance, and should be read in conjunction with the financial statements and Annual Report on Form 10-K for the year ended December 31, ~~2019.~~2020. Forward-looking statements may include statements which use words such as “believe,” “expect,” “anticipate,” “intend,” “plan,” “estimate,” “predict,” “hope,” “will,” “should,” “could,” “may,” “future,” “potential,” or the negatives of these words, and all similar expressions. Forward-looking statements involve numerous assumptions, risks and uncertainties. Actual results or actual business or other conditions may differ materially from those contemplated by any forward-looking statements. Factors that could cause actual results to differ materially from the forward-looking statements are identified in our Form 10-K for the year ended December 31, ~~2019.~~2020.

We are not under any duty to update the forward-looking statements contained in this report, nor do we guarantee future results or performance or what future business conditions will be like. We caution you not to put undue reliance on any forward-looking statements, which speak only as of the date of this report.

Executive Overview and Summary

~~Going into 2020, we knew we would face challenges on several fronts. Yet some~~We recorded a net income of ~~these challenges, as is the case for the U.S. and the world, were impossible~~$5.8 million, compared to ~~foresee.~~

~~One challenge which we were keenly aware of, however, was the adverse impact from a significantly reduced soybean crop in our region in 2019. Instead of an anticipated 250~~$0.2 million bushel soybean harvest in South Dakota, only 146 million bushels were harvested in 2019 due to the highest number of prevent-plant acres in the nation, inclement weather and reduced yields in some areas. With 2019 being the second wettest in our region's history, we experienced processing issues and higher dryer costs as well. The protein levels in soybeans were also in the lower third of all crops that we have received historically, making it difficult for us to meet our protein guarantees on our soybean meal sold to customers.

On a second front, we were aware that two large-scale processing plants would be coming online in the U.S. in 2019, one located approximately 150 miles to the north in Aberdeen, South Dakota. Yet, we did not know the extent of impact on us arising from the increased capacity, particularly from the Aberdeen plant. To date, the Aberdeen facility has not materially impacted our margins, but the addition of capacity going forward is likely to have a negative impact.

Of course, the COVID-19 pandemic has adversely affected our business. Much of our oil is purchased and used by restaurants and other customers in the food industry. When this industry shut down in March and during the second quarter of 2020, it significantly reduced demand for oil. Similarly, our soybean meal is purchased and used by hog producers as feed. When meat processing facilities shut down, hogs backed up on farms leading to a sharp drop in demand for soybean meal.

The positive news is that we were able to endure this unprecedented time while generating a profit of $5.7 million during the first half of 2020. Although our profitability is down approximately $4.8 million from the same period in 2020. The $5.6 million improvement in profit is largely due to improved weather conditions within our soybean procurement area along with increased demand for soybean oil. While adverse weather in the spring of 2019 significantly reduced the quantity and quality of soybeans in our area, conditions during the 2020 crop year vastly improved, in turn yielding a large soybean crop with improved quality. In addition, oil demand surged significantly due to increased demand from the renewable diesel and food retail sectors that continue to recover following the COVID-19 pandemic.

Although the first quarter results were very good, we are ~~proud~~less certain about the remaining quarters of ~~our results given~~2021. Results may be affected by the ~~circumstances,~~uncertainty with soybean supply until this fall's harvest which may be a difficult challenge for us. Due to a strong export demand and increased processing in the U.S., soybean supply is ~~owed~~expected to ~~an exceptional management and operational team.~~

~~Looking forward, our margins will not be as good as hoped, but there is reason for optimism. Demand for our products is slowly returning. Oil demand from both~~decrease dramatically during the ~~food and bioenergy sectors continues to increase as restaurants re-open and commercial traffic picks up on highways. Our recent refinery expansion has allowed~~summer. This shortfall, along with the anticipated higher soybean prices, may force us to ~~take advantage~~slow production in August and September. Although a large fall harvest would provide relief, we are unable to forecast the harvest at this time. To alleviate risk, we have begun construction of ~~strengthening~~additional storage facilities to help us capture a greater number of new crop soybeans when available this fall. In addition, we may receive lower prices for meal as U.S. soybean processors increase production due to a surging demand ~~by turning more of our inventory into products the market is seeking. Hog slaughter rates are picking up, and dairy margins are stronger than they have been~~ for some time which will help improve soybean meal demand. Finally, the 2020 soybean harvest looks promising. Soybeans were planted on time this past spring, and the crop throughout our region looks very good.

oil, resulting in lower margins.

RESULTS OF OPERATIONS

Comparison of the three months ended ~~June 30,~~March 31, 2021 and 2020 ~~and 2019~~


	Three Months Ended March 31, 2021			Three Months Ended March 31, 2020
	$		% of Revenue	$		% of Revenue
Revenue	$	123,627,541	100.0	$	98,723,412	100.0
Cost of revenues	(116,998,330)		(94.6)	(96,998,949)		(98.3)
Gross profit	6,629,211		5.4	1,724,463		1.7
Operating expenses	(1,117,842)		(0.9)	(1,024,729)		(1.0)

Interest expense	(317,152)		(0.3)	(349,987)		(0.4)
Other non-operating income (expense)	589,875		0.5	(126,664)		(0.1)


Net income	$	5,784,092	4.7	$	223,083	0.2

Three Months Ended June 30, 2020 Three Months Ended June 30, 2019
$ % Revenue $ % Revenue
Revenue $ 93,268,093
100.0
$ 100,331,589
100.0
Cost of revenues (86,595,243 ) (92.8 ) (93,454,642 ) (93.1 )
Operating expenses (898,767 ) (1.0 ) (927,314 ) (0.9 )
Interest expense (308,354 ) (0.3 ) (267,730 ) (0.3 )
Other non-operating income (expense) 20,885
—
100,099
0.1
Income tax benefit (expense) —
—
—
—

Net income $ 5,486,614
5.9
$ 5,782,002
5.8

Revenue - – Revenue ~~decreased~~ ~~$7.1~~increased $24.9 million,, or ~~7.0%~~25.2%, for the three-month ~~periods~~period ended ~~June 30, 2020~~,March 31, 2021, compared to the same period in ~~2019~~.2020. The ~~decrease~~increase in revenues is primarily due to ~~a decrease~~increases in the ~~quantity~~average sales prices of ~~soybeans processed, which decreased the volume of our~~all soybean ~~products available for sale~~products. Soybean prices soared due to ~~customers. As restaurants and customers~~a very strong demand in the ~~food industry closed or modified operations due to the COVID-19 pandemic,~~soybean export sector, resulting in increased meal and oil prices. Oil prices were further affected by surging demand for ~~our~~soybean oil ~~products decreased as well. Demand for soybean meal decreased during periods as COVID-19 shut down meat processing facilities which caused a back-up of hogs on producer farms.~~from the renewable diesel sector.

Gross Profit/Loss – Gross profit ~~decreased $204,000, or 3.0%,~~increased $4.9 million for the three months ended ~~June 30, 2020,~~March 31, 2021, compared to the same period in ~~2019.The decrease~~2020. The increase in gross profit is primarily due to ~~adverse weather~~an improvement in the quantity and quality of soybeans grown in the U.S., especially in our ~~soybean~~local procurement ~~area and increased soybean processing in~~area. In addition, demand for oil surged from the U.S. Severe flooding from heavy snow and rainfall in the spring of 2019 caused local farmers to delay or reduce planting, or elect not to plant at all. Consequently, soybean production in South Dakota decreased by nearly 50% from 2018 to 2019, which increased soybean prices and reduced our soybean crush margins. Crush margins were also adversely affected by increased production capacity from soybean processors throughout the U.S. which, after experiencing decent crush margins, increased their production capacity.renewable diesel sector as more plants are opened.

Operating Expenses – Administrative expenses, including all selling, general and administrative expenses, ~~decreased $29,000,~~increased approximately $93,000, or ~~3.1%~~9.1%, ~~for~~during the three-month period ended ~~June 30, 2020,~~March 31, 2021, compared to the same period in ~~2019.~~2020. The ~~decrease in operating expenses~~increase is primarily due to ~~travel restrictions related to the COVID-19 pandemic. Many meetings, conferences and conventions were canceled, postponed or held virtually due to the pandemic.~~an increase in personnel costs.

Interest Expense – Interest expense ~~increased $41,000,~~decreased $33,000, or ~~15.2%~~9.4%, ~~for~~during the three months ended ~~June 30, 2020,~~March 31, 2021, compared to the same period in ~~2019.~~2020. The ~~increase~~decrease in interest expense is due primarily to a decrease in interest rates on our senior debt with CoBank. As of March 31, 2021, the interest rate on our revolving long-term loan was 2.56%, compared to 3.44% as of March 31, 2020. Partially offsetting the decrease in rates is an increase in borrowings from our lines of credit, as we borrowed more due to higher commodity prices and to pay for capital improvements. The average debt level during the three-month period ended ~~June 30, 2020~~March 31, 2021 was approximately ~~$39.2~~$47.8 million, compared to ~~$20.6~~$36.6 million for the same period in 2019. Partially offsetting the increase in borrowings is a decrease in interest rates on our senior debt with CoBank. As of June 30, 2020, the interest rate on our revolving long-term loan was 2.63%, compared to 4.88% as of June 30, 2019.2020.

Other Non-Operating Income – Other non-operating income (expense), including patronage dividend income, ~~decreased $79,000~~improved $717,000 during the ~~three months~~three-month period ended ~~June 30, 2020,~~March 31, 2021, compared to the same period in ~~2019.~~2020. The ~~decrease~~increase in other non-operating income is due to a ~~decrease~~$626,000 improvement in ~~compensation from management services. Compensation from management services decreased from 2019~~gains (losses) on our interest rate hedge instruments. During the three-month period ended March 31, 2021, gains on interest rate hedges totaled $207,000, compared to ~~2020 due to~~losses of $419,000 during the ~~completion of construction services performed for Prairie AquaTech Manufacturing, LLC~~same period in ~~2019.~~2020.

Net Income/Loss – During the three-month period ended ~~June 30, 2020,~~March 31, 2021, we generated a net income of ~~$5.5~~$5.8 million, compared to ~~$5.8~~$0.2 million for the same period in ~~2019.~~2020. The ~~$300,000~~$5.6 million decrease is primarily attributable to ~~decreases~~an increase in gross profit and other non-operating income.

~~Comparison of the six months ended June 30, 2020 and 2019~~

Six Months Ended June 30, 2020 Six Months Ended June 30, 2019
$ % of Revenue $ % of Revenue
Revenue $ 191,991,505
100.0
$ 192,298,396
100.0
Cost of revenues (183,594,192 ) (95.6 ) (179,962,035 ) (93.6 )
Operating expenses (1,923,496 ) (1.0 ) (1,932,515 ) (1.0 )
Interest expense (658,341 ) (0.3 ) (460,289 ) (0.2 )
Other non-operating income (expense) (105,779 ) (0.1 ) 588,922
0.3
Income tax benefit (expense) —
—
(600 ) —

Net income $ 5,709,697
3.0
$ 10,531,879
5.5

~~Revenue~~ – Revenue decreased $0.3 million, or 0.2%, for the six-month period ended June 30, 2020, compared to the same period in 2019. The decrease in revenues is primarily due to a 1.4% decrease in the quantity of soybeans processed, which decreased the volume of our soybean products available for sale to customers. As restaurants and customers in the food industry closed or modified operations due to the COVID-19 pandemic, demand for our products decreased as well. Demand for soybean meal decreased during periods as COVID-19 shut down meat processing facilities which caused a back-up of hogs on producer farms.

~~Gross Profit/Loss~~ – Gross profit decreased $3.9 million for the six months ended June 30, 2020, compared to the same period in 2019. The decrease in gross profit is primarily due to adverse weather in our soybean procurement area and deteriorating conditions related to the COVID-19 pandemic. Severe flooding from heavy snow and rainfall in the spring of 2019 caused local farmers to delay or reduce planting, or elect not to plant at all. Consequently, soybean production in South Dakota decreased by nearly 50% from 2018 to 2019, which increased soybean prices and reduced our soybean crush margins. Crush margins were also adversely affected by the COVID-19 pandemic as restaurants and other retailers were closed or modified their operations.

~~Operating Expenses~~ – Administrative expenses, including all selling, general and administrative expenses, remained relatively constant for the six-month period ended June 30, 2020, compared to the same period in 2019.

~~Interest Expense~~ – Interest expense increased $198,000, or 43.0%, during the six months ended June 30, 2020, compared to the same period in 2019. The increase in interest expense is due primarily to an increase in borrowings from our lines of credit, as we borrowed more to pay for capital improvements. The average debt level during the six-month period ended June 30, 2020 was approximately $37.9 million, compared to $18.0 million for the same period in 2019. Partially offsetting the increase in borrowings is a decrease in interest rates on our senior debt with CoBank. As of June 30, 2020, the interest rate on our revolving long-term loan was 2.63%, compared to 4.88% as of June 30, 2019.

~~Other Non-Operating Income~~ – Other non-operating income (expense), including patronage dividend income, decreased $695,000 during the six-month period ended June 30, 2020, compared to the same period in 2019. The decrease in other non-operating income is due to a $444,000 decrease in compensation from management services and a $303,000 increase in losses on our interest rate hedges. Compensation from management services decreased from 2019 to 2020 due to the completion of construction services performed for Prairie AquaTech Manufacturing, LLC in 2019. During the six-month period ended June 30, 2020, losses on interest rate caps and floors totaled $459,000, compared to $156,000 during the same period in 2019.

~~Net Income/Loss~~ – During the six-month period ended June 30, 2020, we generated a net income of $5.7 million, compared to $10.5 million for the same period in 2019. The $4.8 million decrease is primarily attributable to decreases in gross profit and other non-operating income.

LIQUIDITY AND CAPITAL RESOURCES

Our primary sources of liquidity are cash provided by operations and borrowings under our two lines of credit which are discussed below under “Indebtedness.” On ~~June 30, 2020,~~March 31, 2021, we had working capital, defined as current assets less current liabilities, of approximately ~~$25.1~~$25.9 million, compared to ~~$23.9~~$18.7 million on ~~June 30, 2019.~~March 31, 2020. Working capital increased ~~$1.2~~$7.2 million between periods primarily due to ~~$10.0 million in new borrowings and $6.0 million in~~ net ~~profit. These increase in working capital were partially offset by capital expenditures of $9.8 million and a $6.7 million distribution to members.~~income during that period. Based on our current plans, we believe that we will continue funding our capital and operating needs from cash from operations and revolving lines of credit.

Comparison of the ~~Six~~Three Months Ended ~~June 30,~~March 31, 2021 and 2020 ~~and 2019~~


	2020			2019				2021		2020
Net cash provided by (used for) operating activities	$	(3,476,541	)	$	(915,425	)	Net cash provided by (used for) operating activities	$	(33,683,127)	$	(14,716,791)
Net cash provided by (used for) investing activities	(3,294,967		)	(3,110,244		)	Net cash provided by (used for) investing activities	(1,709,263)		(2,202,975)
Net cash provided by (used for) financing activities	9,961,699			(2,169,741		)	Net cash provided by (used for) financing activities	35,574,484		16,654,948

Cash Flows Used For Operations

The ~~$2.6~~$19.0 million increase in cash flows used for operating activities is due to a ~~$15.2~~$19.8 million increase in inventories ~~in 2020, compared to the same period in 2019. We increased inventories by $14.3 million during the six months ended June 30, 2020, compared to~~and a ~~$0.9~~$12.2 million decrease ~~during the same period~~ in ~~2019. Partially offsetting the increase in inventories was an $11.8 million decrease in the reduction of~~ accrued commodity purchases. During the ~~six-month~~three-month period ended ~~June 30, 2020,~~March 31, 2021, we ~~reduced accrued commodity purchases~~increased inventories by ~~$1.1~~$27.0 million, compared to ~~$12.9~~$7.2 million during the same period in ~~2019.~~2020. Accrued commodity purchases decreased by $14.0 million during the three months ended March 31, 2021, compared to $1.8 million during the same period in 2020. Partially offsetting the changes in inventories and accrued commodity purchases was a $5.8 million net loss on derivative activities in 2021, compared to a $5.1 million net gain during the same period in 2020. The changes in inventories, accrued commodity purchases and net gains (losses) on derivative activities are the result of increased commodity prices in our industry.

Cash Flows Used For Investing Activities

The ~~$0.2~~$0.5 million ~~increase~~decrease in cash flows used for investing activities during the ~~six-month~~three-month period ended ~~June 30, 2020,~~March 31, 2021, compared to the same period in ~~2019,~~2020, is due to ~~an increase~~a decrease in investment purchases. During the ~~six~~three months ended ~~June 30, 2020,~~March 31, 2021, we ~~invested an additional $0.4 million in cash~~made no new investments in Prairie AquaTech Manufacturing, LLC, compared to $0$0.4 million during the same period in ~~2019.~~2020.

Cash Flows Provided By (Used For) Financing Activities

The ~~$12.1~~$18.9 million ~~change~~increase in cash flows provided by ~~(used for)~~ financing activities is principally due to a ~~$9.2~~$21.6 million increase in net proceeds on ~~borrowings and an $8.5 million decrease in cash distributions to members.~~borrowings. During the ~~six~~three months ended ~~June 30, 2020,~~March 31, 2021, net proceeds on borrowings increased ~~$20.0~~$45.0 million, compared to ~~$10.8~~$23.4 million during the same period in ~~2019. Cash~~2020. Partially offsetting the increase in net borrowings was a $2.7 million increase in cash distributions to our members ~~totaled approximately $6.7 million~~ during the ~~six-month~~three-month period ended ~~June 30, 2020,~~March 31, 2021, compared to ~~$15.2 million during~~ the same period in ~~2019.~~2020.

Indebtedness

We have two lines of credit with CoBank, our primary lender, to meet the short and long-term needs of our operations. The first credit line is a revolving long-term loan. Under ~~the terms of~~ this loan, we may borrow funds as needed up to the credit line maximum, or $26.0 million, and then pay down the principal whenever excess cash is available. Repaid amounts may be borrowed up to the available credit line. On March 20, 2020, the available credit line decreased by $2.0 million, and decreases continually by the same amount every six months until the credit line’s maturity on September 20, 2023 at which time ~~there~~we will be required to make a balloon payment for the remaining balance. We pay a 0.40% annual commitment fee on any funds not borrowed. The principal balance outstanding on the revolving term loan is ~~$24.0~~$20.0 million and ~~$16.0~~$17.5 million as of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019.~~2020. Under this loan, there were no additional funds available to ~~be borrowed~~borrow as of ~~June 30, 2020.~~March 31, 2021.

The second credit line is a revolving working capital (seasonal) loan. The primary purpose of this loan is to finance our operating needs. ~~The~~Prior to the amendments described below, the maximum we ~~may~~could borrow under this credit line ~~is $28~~was $45.0 million until the loan's maturity on December 1, ~~2020.~~2021. We pay a 0.20% annual commitment fee on any

funds not borrowed; however, we have the option to reduce the credit line during any given commitment period listed in the credit agreement to avoid the commitment

fee. As of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, there were advances outstanding on the seasonal loan of ~~$13.2~~$37.3 million and ~~$1.7 million,~~$0, respectively. Under this loan, ~~there~~$7.7 million was ~~$14.8 million in~~ available ~~funds~~ to ~~borrow~~be borrowed as of ~~June~~March 31, 2021.

On April 5, 2021 and April 30, ~~2020.~~2021, we amended our seasonal loan with CoBank. Under the amendments, the principal amount that we may borrow is increased from $45.0 million to $60.0 million until the loan's maturity on December 1, 2021. All other material items and conditions under the credit agreement, and subsequent amendments to such agreement, remain the same following this amendment.

Both the revolving and seasonal loans with CoBank are set up with a variable rate option. The variable rate is set by CoBank and changes weekly on the first business day of each week. We also have a fixed rate option on both loans, allowing us to fix rates for any period between one day and the entire commitment period. The annual interest rate on the revolving term loan is ~~2.63%~~2.56% and ~~4.24%~~2.60% as of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, respectively. As of ~~June 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, the interest rate on the seasonal loan is ~~2.38%~~2.31% and ~~3.99%~~2.35%, respectively. Under these loans, we are subject to compliance with standard financial covenants and the maintenance of certain financial ratios. One of those loan covenants restricts the borrowings from entities other than CoBank to $300,000. As of June 30, 2020, we had debt from others totaling $1,215,700, or well in excess of the covenant, due to the new PPP loan entered into on April 20, 2020 discussed immediately below. We obtained CoBank's consent prior to entering into the new loan and subsequently received a waiver that is in effect as of June 30, 2020. We were in compliance with all ~~other~~ covenants and conditions with CoBank as of ~~June 30, 2020.~~March 31, 2021.

On April 20, 2020, we entered into an unsecured promissory note for $1,215,700 under the U.S. Small Business Administration's Paycheck Protection Program (“PPP Loan“)~~. The Paycheck Protection Program was established~~, a loan program created under the Coronavirus Aid, Relief and Economic Security ~~Act~~ (the ~~“CARES Act“~~"CARES Act") ~~and is administered by the U.S. Small Business Administration.~~. The PPP Loan iswas made through First Bank & Trust, N.A., Brookings, South Dakota. The PPP Loan was scheduled to mature on ~~April~~July 20, 2022 and ~~has~~had a 1%1.0% interest rate. ~~No payments are due on the PPP Loan until~~In November ~~20, 2020, although interest will continue to accrue during the deferment period. Beginning November 20,~~ 2020, we ~~are obligated~~submitted to ~~pay 18~~the SBA an application for loan forgiveness equal ~~monthly installments~~to the sum of principal and interest in the amount necessary to fully amortize the PPP Loan through the maturity date, unless all or a portion of the PPP Loan is forgiven under the terms and conditions of the CARES Act. Forgiveness of the PPP Loan is determined, subject to limitations, based on the use of loan proceeds forqualifying expenses such as payroll costs, rent obligations, and ~~mortgage interest, rent or~~covered utility ~~costs. We believe all or a significant portion of~~payments. The forgiveness application was approved by the ~~PPP Loan will be forgiven.~~SBA on November 25, 2020 for $1,205.700 and the remaining $10,000 in February 2021.

We also had a loan with the State of South Dakota Department of Transportation in connection with previous improvements made to the railway infrastructure near our soybean processing facility in Volga, South Dakota. Under this loan, which matured on June 1, 2020, we made annual principal and interest payments of $75,500. The principal balance outstanding on this loan was $0 and $603,342 as of June 30, 2020 and December 31, 2019.

OFF BALANCE SHEET FINANCING ARRANGEMENTS

We do not utilize variable interest entities or other off-balance sheet financial arrangements.

Contractual Obligations

The following table shows our contractual obligations for the periods presented:


	Payment due by period
CONTRACTUAL OBLIGATIONS	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
Long-Term Debt Obligations (1)	$	21,145,000	$	4,495,000	$	16,650,000	$	—	$	—

Operating Lease Obligations	12,176,000		5,813,000		2,497,000		1,141,000		2,725,000

Totals	$	33,321,000	$	10,308,000	$	19,147,000	$	1,141,000	$	2,725,000

Payment due by period
CONTRACTUAL
OBLIGATIONS
Total
Less than
1 year
1-3 years 3-5 years
More than
5 years
Long-Term Debt Obligations (1) $ 26,931,000
$ 5,152,000
$ 9,599,000
$ 12,180,000
$ —

Operating Lease Obligations 8,339,000
5,658,000
2,190,000
343,000
148,000

Totals $ 35,270,000
$ 10,810,000
$ 11,789,000
$ 12,523,000
$ 148,000
(1) Represents principal and interest payments on our notes payable, which are included on our Balance Sheet.


~~(1)~~	~~Represents principal and interest payments on our notes payable, which are included on our Balance Sheet.~~

RECENT ACCOUNTING PRONOUNCEMENTS

See Note 1 of our Financial Statements under Part I, Item 1, for a discussion on the impact, if any, of the recently pronounced accounting standards.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

There have been no material changes to our critical accounting policies and estimates from those set forth in our Annual Report on Form 10-K for the year ended December 31, ~~2019.~~2020.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Commodities Risk & Risk Management. To reduce the price change risks associated with holding fixed price commodity positions, we generally take opposite and offsetting positions by entering into commodity futures contracts (either a straight or options futures contract) on a regulated commodity futures exchange, the Chicago Board of Trade. While hedging activities reduce the risk of loss from changing market prices, such activities also limit the gain potential which otherwise could result from these significant fluctuations in market prices. Our policy is generally to maintain a hedged position within limits, but we can be long or short at any time. Our profitability is primarily derived from margins on soybeans processed, not from hedging transactions. Our management does not anticipate that hedging activities will have a significant impact on future operating results or liquidity. Hedging arrangements do not protect against nonperformance of a cash contract.

At any one time, our inventory and purchase contracts for delivery to our facility may be substantial. We have risk management policies and procedures that include net position limits. They are defined by commodity, and include both trader and management limits. This policy and procedure triggers a review by management when any trader is outside of position limits. The position limits are reviewed at least annually with the board of managers. We monitor current market conditions and may expand or reduce the limits in response to changes in those conditions.

An adverse change in market prices would not materially affect our profitability since we generally take opposite and offsetting positions by entering into commodity futures and forward contracts as economic hedges of price risk.

Foreign Currency Risk. We conduct essentially all of our business in U.S. dollars and have minimal direct risk regarding foreign currency fluctuations. Foreign currency fluctuations do, however, impact the ability of foreign buyers to purchase U.S. agricultural products and the competitiveness of and demand for U.S. agricultural products compared to the same products offered by foreign suppliers.

Interest Rate Risk. We manage exposure to interest rate changes by using variable rate loan agreements with fixed rate options. Long-term loan agreements can utilize the fixed option through maturity; however, the revolving ability to pay down and borrow back would be eliminated once the funds were fixed.

As of ~~June 30, 2020,~~March 31, 2021, we had ~~$1.2 million~~$0 in fixed rate debt outstanding and ~~$52~~$65.0 million of variable rate lines of credit. Interest rate changes impact the amount of our interest payments and, therefore, our future earnings and cash flows. Assuming other variables remain constant, a 1.0% increase in interest rates on our variable rate debt could have an estimated impact on profitability of approximately ~~$520,000~~$650,000 per year.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures. Based on their evaluation as of the end of the period covered by this quarterly report on Form 10-Q, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934) are effective to ensure that information required to be disclosed by us in reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms.

Changes in Internal Control Over Financial Reporting. There were no changes to our internal controls over financial reporting that materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting during the quarter ended ~~June 30, 2020.~~

March 31, 2021.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings.

From time to time in the ordinary course of our business, we may be named as a defendant in legal proceedings related to various issues, including without limitation, workers’ compensation claims, tort claims, or contractual dispute. We carry insurance that provides protection against general commercial liability claims, claims against our

directors, officer and employees, business interruption, automobile liability, and workers' compensation. We are not currently involved in any material legal proceedings and are not aware of any potential claims.

Item 1A. Risk Factors.

During the quarter ended ~~June 30, 2020,~~March 31, 2021, there were no material changes to the Risk Factors disclosed in Item 1A (Part I) of our ~~2019~~2020 Annual Report on Form 10-K.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

None.

Item 5. Other Information.

None.

Item 6. Exhibits.



Exhibit Number						Description
3.1(i)						Articles of Organization (1)
3.1(ii)						Operating Agreement, as amended (2)
3.1(iii)						Articles of Amendment to Articles of Organization (3)
4.1						Form of Class A Unit Certificate (4)
10.1						~~Promissory Note (U.S. Small Business Administration's Paycheck Protection Program)~~Amendment to Credit Agreement with CoBank dated April 5, 2021
~~31.1~~10.2						Amended and Restated Revolving Credit Promissory Note dated April 5, 2021
10.3						Amended and Restated Revolving Credit Promissory Note dated April 30, 2021
31.1						Rule 13a-14(a)/15d-14(a) Certification by Chief Executive Officer
31.2						Rule 13a-14(a)/15d-14(a) Certification by Chief Financial Officer
32.1						Section 1350 Certification by Chief Executive Officer
32.2						Section 1350 Certification by Chief Financial Officer

(1) Incorporated by reference from Appendix B to the information statement/prospectus filed as a part of the issuer’s Registration Statement on Form S-4 (File No. 333-75804).

(2) Incorporated by reference from the same numbered exhibit to the issuer’s Form 8-K filed on June 22, 2017.

(3) Incorporated by reference from the same numbered exhibit to the issuer’s Form 10-Q filed on August 14, 2002.

(4) Incorporated by reference from the same numbered exhibit to the issuer’s Registration Statement on Form S-4 (File No. 333-75804).

SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



	SOUTH DAKOTA SOYBEAN PROCESSORS, LLC

Dated:	~~August 7, 2020~~May 12, 2021	By	/s/ Thomas Kersting
			Thomas Kersting, Chief Executive Officer
			(Principal Executive Officer)

Dated:	~~August 7, 2020~~May 12, 2021	By	/s/ Mark Hyde
			Mark Hyde, Chief Financial Officer
			(Principal Financial Officer)

2524


	June 30, 2020		December 31, 2019			March 31, 2021		December 31, 2020
Past due:					Past due:
Less than 30 days past due	$	3,385,867	$	4,306,064	Less than 30 days past due	$	4,022,668	$	4,827,150
30-60 days past due	282,520		341,956		30-60 days past due	424,009		85,177
60-90 days past due	87,905		10,302		60-90 days past due	0		11,366
Greater than 90 days past due	18,660		14,162		Greater than 90 days past due	20		43,524
Total past due	3,774,952		4,672,484		Total past due	4,446,697		4,967,217
Current	17,424,125		19,748,073		Current	23,772,925		24,023,438

Totals	$	21,199,077	$	24,420,557	Totals	$	28,219,622	$	28,990,655


	Three Months Ended June 30,				Six Months Ended June 30,
	2020		2019		2020		2019			2021		2020
Cost of revenues - Freight and rail	$	740,705	$	756,871	$	1,523,915	$	1,535,990	Cost of revenues - Freight and rail	$	760,961	$	783,210
Cost of revenues - Production	9,009		9,714		13,373		14,633		Cost of revenues - Production	7,608		4,364
Administration expenses	2,385		3,005		5,702		6,009		Administration expenses	2,133		3,317
Total operating lease costs	$	752,099	$	769,590	$	1,542,990	$	1,556,632	Total operating lease costs	$	770,702	$	790,891



			Page

Part I.	FINANCIAL INFORMATION		34

	Item I.	Financial Statements (Unaudited)	34

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1819

	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	2322

	Item 4.	Controls and Procedures	23

Part II.	OTHER INFORMATION		2423

	Item 1.	Legal Proceedings	2423

	Item 1A.	Risk Factors	24

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	24

	Item 3.	Defaults among Senior Securities	24

	Item 4.	Mine Safety Disclosures	24

	Item 5.	Other Information	24

	Item 6.	Exhibits	24

Signatures			25



��	Three Months Ended June 30,						Six Months Ended June 30,
	2020			2019			2020			2019

Net revenues	$	93,268,093		$	100,331,589		$	191,991,505		$	192,298,396

Cost of revenues:
Cost of product sold	69,602,276			76,330,505			149,802,782			147,679,055
Production	7,406,999			6,821,032			14,830,369			13,694,012
Freight and rail	9,431,150			10,143,954			18,642,985			18,259,881
Brokerage fees	154,818			159,151			318,056			329,087
Total cost of revenues	86,595,243			93,454,642			183,594,192			179,962,035

Gross profit (loss)	6,672,850			6,876,947			8,397,313			12,336,361

Operating expenses:
Administration	898,767			927,314			1,923,496			1,932,515

Operating income (loss)	5,774,083			5,949,633			6,473,817			10,403,846

Other income (expense):
Interest expense	(308,354		)	(267,730		)	(658,341		)	(460,289		)
Other non-operating income (expense)	20,885			100,099			(301,332		)	419,466
Patronage dividend income	—			—			195,553			169,456
Total other income (expense)	(287,469		)	(167,631		)	(764,120		)	128,633

Income (loss) before income taxes	5,486,614			5,782,002			5,709,697			10,532,479

Income tax benefit (expense)	—			—			—			(600		)

Net income (loss)	$	5,486,614		$	5,782,002		$	5,709,697		$	10,531,879


Basic and diluted earnings (loss) per capital unit	$	0.18		$	0.19		$	0.19		$	0.35

Weighted average number of capital units outstanding for calculation of basic and diluted earnings (loss) per capital unit	30,419,000			30,419,000			30,419,000			30,419,000



2021	$	4,534,595
2022	4,681,105
2023	4,000,000
2024	12,000,000

Total	$	25,215,700


		As of June 30, 2020						As of March 31, 2021
	Balance Sheet Classification	Asset Derivatives		Liability Derivatives			Balance Sheet Classification	Asset Derivatives		Liability Derivatives
Derivatives not designated as hedging instruments:						Derivatives not designated as hedging instruments:
Commodity contracts	Current Assets	$	8,388,189	$	3,289,830	Commodity contracts	Current Assets	$	33,384,458	$	35,814,167
Foreign exchange contracts	Current Assets	230,943		46,503		Foreign exchange contracts	Current Assets	53,554		22,594
Interest rate caps and floors	Current Liabilities	—		814,625		Interest rate caps and floors	Current Liabilities	0		488,109

Totals		$	8,619,132	$	4,150,958	Totals		$	33,438,012	$	36,324,870



		As of December 31, 2019
	Balance Sheet Classification	Asset Derivatives		Liability Derivatives
Derivatives not designated as hedging instruments:
Commodity contracts	Current Assets	$	3,320,161	$	8,930,683
Foreign exchange contracts	Current Assets	29,696		27,582
Interest rate caps and floors	Current Liabilities	—		347,520

Totals		$	3,349,857	$	9,305,785



	Fair Value as of June 30, 2020
	Level 1		Level 2		Level 3		Total
Financial assets:
Inventory	$	5,098,359	$	53,230,827	$	—	$	58,329,186
Margin deposits (deficits)	$	3,492,375	$	—	$	—	$	3,492,375



	Fair Value as of December 31, 2019
	Level 1			Level 2		Level 3		Total
Financial assets:
Inventory	$	(5,610,521	)	$	49,717,733	$	—	$	44,107,212
Margin deposits	$	6,772,160		$	—	$	—	$	6,772,160



	Three Months Ended June 30, 2020					Three Months Ended June 30, 2019
	$			% Revenue		$			% Revenue
Revenue	$	93,268,093		100.0		$	100,331,589		100.0
Cost of revenues	(86,595,243		)	(92.8	)	(93,454,642		)	(93.1	)
Operating expenses	(898,767		)	(1.0	)	(927,314		)	(0.9	)
Interest expense	(308,354		)	(0.3	)	(267,730		)	(0.3	)
Other non-operating income (expense)	20,885			—		100,099			0.1
Income tax benefit (expense)	—			—		—			—

Net income	$	5,486,614		5.9		$	5,782,002		5.8



	Six Months Ended June 30, 2020					Six Months Ended June 30, 2019
	$			% of Revenue		$			% of Revenue
Revenue	$	191,991,505		100.0		$	192,298,396		100.0
Cost of revenues	(183,594,192		)	(95.6	)	(179,962,035		)	(93.6	)
Operating expenses	(1,923,496		)	(1.0	)	(1,932,515		)	(1.0	)
Interest expense	(658,341		)	(0.3	)	(460,289		)	(0.2	)
Other non-operating income (expense)	(105,779		)	(0.1	)	588,922			0.3
Income tax benefit (expense)	—			—		(600		)	—

Net income	$	5,709,697		3.0		$	10,531,879		5.5