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 ~~September 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 ~~November 10, 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

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

South Dakota Soybean Processors, LLC

Condensed Balance Sheets


		September 30, 2020		December 31, 2019			March 31, 2021		December 31, 2020
		(Unaudited)					(Unaudited)
Assets	Assets					Assets
Current assets	Current assets					Current assets
Cash and cash equivalents	Cash and cash equivalents	$	3,830,935	$	624,681	Cash and cash equivalents	$	3,833,044	$	3,650,950
Trade accounts receivable	Trade accounts receivable	24,791,552		24,420,557		Trade accounts receivable	28,219,622		28,990,655
Inventories	Inventories	69,125,470		44,470,052		Inventories	96,563,212		69,593,473
Commodity derivative instruments						Commodity derivative instruments	33,438,012		28,417,680
Margin deposits	Margin deposits	0		6,772,160		Margin deposits	0		6,018,001
Prepaid expenses	Prepaid expenses	833,034		1,884,742		Prepaid expenses	2,081,924		2,093,622
Total current assets	Total current assets	98,580,991		78,172,192		Total current assets	164,135,814		138,764,381

Property and equipment	Property and equipment	122,161,207		118,363,393		Property and equipment	123,875,225		122,195,099
Less accumulated depreciation	Less accumulated depreciation	(57,152,178)		(53,846,189)		Less accumulated depreciation	(59,151,319)		(57,963,905)
Total property and equipment, net	Total property and equipment, net	65,009,029		64,517,204		Total property and equipment, net	64,723,906		64,231,194

Other assets	Other assets					Other assets
Investments in related parties	Investments in related parties	8,613,180		7,873,727		Investments in related parties	9,327,890		9,327,890
Investments in cooperatives	Investments in cooperatives	1,539,293		1,562,098		Investments in cooperatives	1,559,800		1,539,293
Right-of-use lease asset, net	Right-of-use lease asset, net	12,657,379		5,979,771		Right-of-use lease asset, net	11,285,215		11,960,289
Total other assets	Total other assets	22,809,852		15,415,596		Total other assets	22,172,905		22,827,472

Total assets	Total assets	$	186,399,872	$	158,104,992	Total assets	$	251,032,625	$	225,823,047

(continued on following page)

South Dakota Soybean Processors, LLC

Condensed Balance Sheets (continued)


		September 30, 2020		December 31, 2019			March 31, 2021		December 31, 2020
		(Unaudited)					(Unaudited)
Liabilities and Members' Equity	Liabilities and Members' Equity					Liabilities and Members' Equity
Current liabilities	Current liabilities					Current liabilities
Excess of outstanding checks over bank balance	Excess of outstanding checks over bank balance	$	19,126,253	$	8,164,752	Excess of outstanding checks over bank balance	$	13,487,522	$	8,263,020
Current maturities of long-term debt	Current maturities of long-term debt	4,699,978		4,603,342		Current maturities of long-term debt	4,000,000		0
Note payable - seasonal loan	Note payable - seasonal loan	0		1,743,029		Note payable - seasonal loan	37,283,162		0
Current operating lease liabilities	Current operating lease liabilities	5,944,833		2,663,967		Current operating lease liabilities	5,656,417		5,846,456
Accounts payable	Accounts payable	756,439		4,904,963		Accounts payable	1,645,652		1,506,779

Accrued commodity purchases	Accrued commodity purchases	39,433,158		31,346,533		Accrued commodity purchases	30,984,546		44,962,904
Commodity derivative instruments						Commodity derivative instruments	36,324,870		41,940,744
Margin deposit deficit	Margin deposit deficit	557,593		0		Margin deposit deficit	3,522,041		0
Accrued expenses	Accrued expenses	3,729,033		2,900,118		Accrued expenses	2,634,875		3,083,591
Accrued interest	Accrued interest	63,875		74,770		Accrued interest	119,285		40,564
Deferred liabilities - current	Deferred liabilities - current	555,842		448,458		Deferred liabilities - current	2,566,578		1,728,407
Total current liabilities	Total current liabilities	74,867,004		56,849,932		Total current liabilities	138,224,948		107,372,465

Long-term liabilities	Long-term liabilities					Long-term liabilities
Long-term debt, net of current maturities and unamortized debt issuance costs	Long-term debt, net of current maturities and unamortized debt issuance costs	18,462,743		11,991,923		Long-term debt, net of current maturities and unamortized debt issuance costs	15,987,797		17,499,868
Long-term operating lease liabilities	Long-term operating lease liabilities	6,712,546		3,315,804		Long-term operating lease liabilities	5,628,798		6,113,834

Total long-term liabilities	Total long-term liabilities	25,175,289		15,307,727		Total long-term liabilities	21,616,595		23,613,702

Commitments and contingencies (Notes 6, 7, 8, and 13)
Commitments and contingencies (Notes 5, 6, 7, and 12)						Commitments and contingencies (Notes 5, 6, 7, and 12)	0		0

Members' equity	Members' equity					Members' equity
Class A Units, no par value, 30,419,000 units issued and outstanding at September 30, 2020 and December 31, 2019		86,357,579		85,947,333
Class A Units, no par value, 30,419,000 units issued and outstanding at March 31, 2021 and December 31, 2020						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	Total liabilities and members' equity	$	186,399,872	$	158,104,992	Total liabilities and members' equity	$	251,032,625	$	225,823,047

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 Nine-Month~~Three-Month Periods Ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~


		Three Months Ended September 30,				Nine Months Ended September 30,
		2020		2019		2020		2019			2021		2020

Net revenues	Net revenues	$	104,454,116	$	85,001,379	$	296,445,621	$	277,299,775	Net revenues	$	123,627,541	$	98,723,412

Cost of revenues:	Cost of revenues:									Cost of revenues:
Cost of product sold	Cost of product sold	85,001,018		65,035,124		234,803,800		212,714,179		Cost of product sold	99,264,660		80,200,506
Production	Production	7,286,860		8,889,751		22,117,229		22,583,763		Production	7,363,387		7,423,370
Freight and rail	Freight and rail	9,592,900		8,212,636		28,235,885		26,472,517		Freight and rail	10,198,191		9,211,835
Brokerage fees	Brokerage fees	168,043		146,960		486,099		476,047		Brokerage fees	172,092		163,238
Total cost of revenues	Total cost of revenues	102,048,821		82,284,471		285,643,013		262,246,506		Total cost of revenues	116,998,330		96,998,949

Gross profit (loss)	Gross profit (loss)	2,405,295		2,716,908		10,802,608		15,053,269		Gross profit (loss)	6,629,211		1,724,463

Operating expenses:	Operating expenses:									Operating expenses:
Administration	Administration	857,116		848,890		2,780,612		2,781,405		Administration	1,117,842		1,024,729

Operating income (loss)	Operating income (loss)	1,548,179		1,868,018		8,021,996		12,271,864		Operating income (loss)	5,511,369		699,734

Other income (expense):	Other income (expense):									Other income (expense):
Interest expense	Interest expense	(238,984)		(196,440)		(897,325)		(656,729)		Interest expense	(317,152)		(349,987)
Other non-operating income (expense)	Other non-operating income (expense)	83,534		(17,253)		(217,798)		402,213		Other non-operating income (expense)	224,728		(322,217)
Patronage dividend income	Patronage dividend income	0		0		195,553		169,456		Patronage dividend income	365,147		195,553
Total other income (expense)	Total other income (expense)	(155,450)		(213,693)		(919,570)		(85,060)		Total other income (expense)	272,723		(476,651)

Income (loss) before income taxes	Income (loss) before income taxes	1,392,729		1,654,325		7,102,426		12,186,804		Income (loss) before income taxes	5,784,092		223,083

Income tax benefit (expense)	Income tax benefit (expense)	0		0		0		(600)		Income tax benefit (expense)	0		0

Net income (loss)	Net income (loss)	$	1,392,729	$	1,654,325	$	7,102,426	$	12,186,204	Net income (loss)	$	5,784,092	$	223,083



Basic and diluted earnings (loss) per capital unit	Basic and diluted earnings (loss) per capital unit	$	0.05	$	0.05	$	0.23	$	0.40	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	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		Weighted average number of capital units outstanding for calculation of basic and diluted earnings (loss) per capital unit	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 ~~Nine~~Three Months Ended ~~September 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		—	12,186,204
Distribution to members		—	(15,209,500)
Balances, September 30, 2019		30,419,000	$	87,153,952

Balances, December 31, 2019	Balances, December 31, 2019	30,419,000	$	85,947,333	Balances, December 31, 2019	30,419,000	$	85,947,333
Net income	Net income	—	7,102,426		Net income	—	223,083
Distribution to members	Distribution to members	—	(6,692,180)		Distribution to members	—	(6,692,180)
Balances, September 30, 2020		30,419,000	$	86,357,579
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

Condensed Statements of Cash Flows (Unaudited)

For the ~~Nine~~Three Months Ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~


		2020		2019			2021		2020
Operating activities	Operating activities					Operating activities
Net income (loss)	Net income (loss)	$	7,102,426	$	12,186,204	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:					Charges and credits to net income not affecting cash:
Depreciation and amortization	Depreciation and amortization	3,669,109		3,199,108		Depreciation and amortization	1,270,770		1,188,309
Net (gain) loss recognized on derivative activities	Net (gain) loss recognized on derivative activities	(34,076)		(2,983,943)		Net (gain) loss recognized on derivative activities	5,816,260		(5,138,750)
Gain on sales of property and equipment	Gain on sales of property and equipment	(40,356)		(6,687)		Gain on sales of property and equipment	1,905		0
Loss on equity method investment		0		135,588

Non-cash patronage dividends	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	Change in current assets and liabilities	(12,082,495)		(20,331,307)		Change in current assets and liabilities	(46,470,743)		(10,946,028)

Net cash provided by (used for) operating activities	Net cash provided by (used for) operating activities	(1,428,797)		(7,843,401)		Net cash provided by (used for) operating activities	(33,683,127)		(14,716,791)

Investing activities	Investing activities					Investing activities
Purchase of investments	Purchase of investments	(404,329)		0		Purchase of investments	0		(404,329)
Retirement of patronage dividends	Retirement of patronage dividends	66,210		32,288		Retirement of patronage dividends	54,904		66,210

Proceeds from sales of property and equipment		41,216		64,800

Purchase of property and equipment	Purchase of property and equipment	(4,158,360)		(4,977,738)		Purchase of property and equipment	(1,764,167)		(1,864,856)

Net cash provided by (used for) investing activities	Net cash provided by (used for) investing activities	(4,455,263)		(4,880,650)		Net cash provided by (used for) investing activities	(1,709,263)		(2,202,975)

Financing activities	Financing activities					Financing activities
Change in excess of outstanding checks over bank balances	Change in excess of outstanding checks over bank balances	10,961,501		1,299,234		Change in excess of outstanding checks over bank balances	5,224,502		(2,615,647)
Net proceeds (payments) from seasonal borrowings	Net proceeds (payments) from seasonal borrowings	(1,743,029)		3,738,236		Net proceeds (payments) from seasonal borrowings	37,283,162		17,972,775
Distributions to members	Distributions to members	(6,692,180)		(15,209,500)		Distributions to members	(9,429,890)		(6,692,180)
Payments for debt issue costs	Payments for debt issue costs	(10,000)		0		Payments for debt issue costs	0		(10,000)
Proceeds from long-term debt	Proceeds from long-term debt	17,131,227		71,476,467		Proceeds from long-term debt	11,839,877		10,000,000
Principal payments on long-term debt	Principal payments on long-term debt	(10,557,204)		(55,538,347)		Principal payments on long-term debt	(9,343,167)		(2,000,000)
Net cash provided by (used for) financing activities	Net cash provided by (used for) financing activities	9,090,315		5,766,090		Net cash provided by (used for) financing activities	35,574,484		16,654,948

Net change in cash and cash equivalents	Net change in cash and cash equivalents	3,206,255		(6,957,961)		Net change in cash and cash equivalents	182,094		(264,818)

Cash and cash equivalents, beginning of period	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	Cash and cash equivalents, end of period	$	3,830,936	$	239,121	Cash and cash equivalents, end of period	$	3,833,044	$	359,863

Supplemental disclosures of cash flow information	Supplemental disclosures of cash flow information					Supplemental disclosures of cash flow information
Cash paid during the period for:	Cash paid during the period for:					Cash paid during the period for:
Interest	Interest	$	908,220	$	604,727	Interest	$	238,431	$	300,888

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

Noncash investing activities:
Soybean meal contributed as investment in related party		$	335,124	0

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

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 ~~$24,701~~$2,566,578 and ~~$313,347~~$1,728,407 as of ~~September 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 ~~$0 and $313,347~~$392,984 for the three ~~and nine~~ months ended ~~September 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 nine~~ months ended ~~September 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 nine~~ month periods ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019,~~ by product type:


		Three Months Ended September 30,				Nine Months Ended September 30,
		2020		2019		2020		2019			2021		2020

Soybean meal and hulls	Soybean meal and hulls	$	63,195,149	$	57,332,025	$	187,220,101	$	181,532,951	Soybean meal and hulls	$	79,223,026	$	62,692,880
Soybean oil and oil byproducts	Soybean oil and oil byproducts	41,258,967		27,669,354		109,225,520		95,766,824		Soybean oil and oil byproducts	44,404,515		36,030,532

Totals	Totals	$	104,454,116	$	85,001,379	$	296,445,621	$	277,299,775	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 ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019:~~2020:


		September 30, 2020		December 31, 2019			March 31, 2021		December 31, 2020
Past due:	Past due:					Past due:
Less than 30 days past due	Less than 30 days past due	$	3,076,174	$	4,306,064	Less than 30 days past due	$	4,022,668	$	4,827,150
30-60 days past due	30-60 days past due	211,884		341,956		30-60 days past due	424,009		85,177
60-90 days past due	60-90 days past due	0		10,302		60-90 days past due	0		11,366
Greater than 90 days past due	Greater than 90 days past due	3,617		14,162		Greater than 90 days past due	20		43,524
Total past due	Total past due	3,291,675		4,672,484		Total past due	4,446,697		4,967,217
Current	Current	21,499,877		19,748,073		Current	23,772,925		24,023,438

Totals	Totals	$	24,791,552	$	24,420,557	Totals	$	28,219,622	$	28,990,655

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 ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019:~~2020:


		September 30, 2020		December 31, 2019			March 31, 2021		December 31, 2020
Finished goods	Finished goods	$	9,738,859	$	26,559,194	Finished goods	$	48,286,682	$	35,502,780
Raw materials	Raw materials	59,065,129		17,641,335		Raw materials	48,025,892		33,824,265
Supplies & miscellaneous	Supplies & miscellaneous	321,482		269,523		Supplies & miscellaneous	250,638		266,428

Totals	Totals	$	69,125,470	$	44,470,052	Totals	$	96,563,212	$	69,593,473

Finished goods and raw materials are valued at estimated market value, which approximates net realizable value. Supplies and other inventories are stated at the lower of cost or net realizable value.

South Dakota Soybean Processors, LLC

Notes to Condensed Financial Statements

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~~

~~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 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.

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 September 30, 2020 and 2019, respectively, and $0 and $99,489 during the nine months ended September 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 nine months ended September 30, 2020, the Company contributed $281,477 and $335,124, respectively, of soybean meal under this agreement.

Note 54 - Property and Equipment

The following is a summary of the Company's property and equipment at ~~September 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	Land	$	516,326	$	0	$	516,326	$	516,326	Land	$	516,326	$	0	$	516,326	$	516,326
Land improvements	Land improvements	2,353,237		(722,997)		1,630,240		1,545,088		Land improvements	2,406,915		(797,325)		1,609,590		1,647,052
Buildings and improvements	Buildings and improvements	22,369,519		(9,909,761)		12,459,758		12,807,844		Buildings and improvements	22,443,026		(10,193,289)		12,249,737		12,391,726
Machinery and equipment	Machinery and equipment	85,553,534		(45,352,503)		40,201,031		41,480,121		Machinery and equipment	88,433,579		(46,888,448)		41,545,131		41,674,080
Railroad cars	Railroad cars	5,852,292		(118,747)		5,733,545		1,207,545		Railroad cars	5,852,292		(177,270)		5,675,022		5,704,283
Company vehicles	Company vehicles	151,682		(87,730)		63,952		36,032		Company vehicles	151,682		(96,243)		55,439		59,613
Furniture and fixtures	Furniture and fixtures	1,387,880		(960,440)		427,440		459,153		Furniture and fixtures	1,387,880		(998,744)		389,136		408,288
Construction in progress	Construction in progress	3,976,737		0		3,976,737		6,465,095		Construction in progress	2,683,525		0		2,683,525		1,829,826

Totals	Totals	$	122,161,207	$	(57,152,178)	$	65,009,029	$	64,517,204	Totals	$	123,875,225	$	(59,151,319)	$	64,723,906	$	64,231,194

Depreciation of property and equipment was ~~$1,234,580~~$1,269,550 and ~~$1,067,076~~$1,187,316 for the three months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019, respectively, and $3,665,676 and $3,197,493 for the nine months ended September 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 ~~(2.35%~~(2.31% at ~~September 30, 2020)~~March 31, 2021). The Company pays a 0.20% annual commitment fee on

~~South Dakota Soybean Processors, LLC~~

~~Notes to Condensed Financial Statements~~

any funds not borrowed. There were advances outstanding of $37,283,162 and $0 ~~and $1,743,029~~ at ~~September 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 ~~$28.0~~$7.7 million as of ~~September 30, 2020.~~March 31, 2021.

Note 76 - Long-Term Debt

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

September 30,
2020 December 31,
2019
Revolving term loan from CoBank, interest at variable rates (2.60% and 4.24% at September 30, 2020 and December 31, 2019, respectively), secured by substantially all property and equipment. Loan matures September 20, 2023. $ 21,961,664 $ 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 0
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. 0 603,342
Total debt before debt issuance costs 23,177,364 16,603,342
Less current maturities (4,699,978) (4,603,342)
Less debt issuance costs, net of amortization of $9,357 and $5,923 as of September 30, 2020 and December 31, 2019, respectively (14,643) (8,077)
Total long-term debt $ 18,462,743 $ 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 ~~2.6%~~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 ~~$21,961,664~~$20,000,000 and ~~$16,000,000~~$17,503,291 as of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, respectively. There were ~~approximately $38,000 in~~0 remaining commitments available to borrow on the revolving term loan as of ~~September 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 an amount not to exceed $300,000. As of September 30, 2020, the Company had debt outstanding from others totaling $1,215,700, due to borrowings under a new PPP loan as further 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 September 30, 2020. The Company was in compliance with all ~~other~~ covenants and conditions with CoBank as of ~~September 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“), a loan program created under the

~~South Dakota Soybean Processors, LLC~~

~~Notes to Condensed Financial Statements~~

Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act“). 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, 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 ~~September 30:~~March 31:


2021		$	4,699,978
2022	2022	4,477,386		2022	$	4,000,000
2023	2023	14,000,000		2023	4,000,000
2024				2024	12,000,000


Total	Total	$	23,177,364	Total	$	20,000,000

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 ~~$847,671~~$760,961 and ~~$766,022~~$783,210 for the three months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019, respectively, and $2,371,586 and $2,302,012 for the nine months ended September 30, 2020 and 2019,~~ respectively.

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

Lessor

Quantity of
Railcars

Commencement
Date

Maturity
Date

Monthly
Payment

Lessor

Quantity of
Railcars

Commencement
Date

Maturity
Date

Monthly
Payment

American Railcar Leasing

7/1/2015

6/30/2021

30,780

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.

7/1/2018

6/30/2023

5,000

Andersons Railcar Leasing Co.

7/1/2019

6/30/2026

11,300

Andersons Railcar Leasing Co.

7/1/2019

6/30/2026

11,300

Farm Credit Leasing

9/1/2020

8/31/2032

34,929

Farm Credit Leasing

9/1/2020

8/31/2032

34,929

GATX Corporation

7/1/2020

6/30/2024

4,200

GATX Corporation

7/1/2020

6/30/2024

4,200

Midwest Railcar Corporation

1/1/2015

12/31/2021

27,200

Midwest Railcar Corporation

1/1/2015

12/31/2021

27,200

Trinity Capital

11/1/2015

10/31/2020

28,536

Trinity Capital

11/1/2020

10/31/2023

17,255

Trinity Capital

11/1/2015

10/31/2020

13,600

Trinity Capital

11/1/2020

10/31/2023

11,900

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

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

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

572

285,478

1312

South Dakota Soybean Processors, LLC

Notes to Condensed Financial Statements

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 ~~$11,013~~$9,741 and ~~$21,081~~$7,681 for the ~~three months ended September 30, 2020 and 2019, respectively, and $30,088 and $41,723 for the nine-month~~three-month periods ended ~~September 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 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 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 ~~nine-month~~three-month periods ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~ were as follows:


		Three Months Ended September 30,				Nine Months Ended September 30,
		2020		2019		2020		2019			2021		2020
Cost of revenues - Freight and rail	Cost of revenues - Freight and rail	$	847,671	$	766,022	$	2,371,586	$	2,302,012	Cost of revenues - Freight and rail	$	760,961	$	783,210
Cost of revenues - Production	Cost of revenues - Production	8,631		17,973		22,004		32,606		Cost of revenues - Production	7,608		4,364
Administration expenses	Administration expenses	2,382		3,108		8,084		9,117		Administration expenses	2,133		3,317
Total operating lease costs	Total operating lease costs	$	858,684	$	787,103	$	2,401,674	$	2,343,735	Total operating lease costs	$	770,702	$	790,891

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


		Three Months Ended September 30,				Nine Months Ended September 30,
		2020		2019		2020		2019			2021		2020

Cash paid for amounts included in measurement of lease liabilities	Cash paid for amounts included in measurement of lease liabilities	$	743,763	$	891,632	$	2,298,049	$	2,377,454	Cash paid for amounts included in measurement of lease liabilities	$	740,385	$	777,143

Supplemental non-cash information:	Supplemental non-cash information:									Supplemental non-cash information:
Right-of-use assets obtained in exchange for lease liabilities	Right-of-use assets obtained in exchange for lease liabilities	$	5,337,749	$	5,591	$	8,823,499	$	801,949	Right-of-use assets obtained in exchange for lease liabilities	$	0	$	3,300,000

South Dakota Soybean Processors, LLC

Notes to Condensed Financial Statements

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


	~~September 30, 2020~~March 31, 2021

Weighted-average remaining lease-term - operating leases (in years)	~~8.8~~9.1

Weighted-average discount rate - operating leases	3.2	%

~~South Dakota Soybean Processors, LLC~~

~~Notes to Condensed Financial Statements~~

The following is a maturity analysis of the undiscounted cash flows of the operating lease liabilities as of ~~September 30, 2020:~~March 31, 2021:


		Railcars		Other		Total			Railcars		Other		Total
Twelve-month periods ended September 30:
2021		$	2,788,189	$	3,342,111	$	6,130,300
Twelve-month periods ended March 31:								Twelve-month periods ended March 31:
2022	2022	2,142,004		42,348		2,184,352		2022	$	2,471,800	$	3,341,488	$	5,813,288
2023	2023	1,107,543		39,641		1,147,184		2023	1,600,398		41,907		1,642,305
2024	2024	621,703		22,882		644,585		2024	824,233		30,453		854,686
2025	2025	554,748		7,007		561,755		2025	567,348		17,312		584,660
2026								2026	554,748		2,064		556,812
Thereafter	Thereafter	3,000,806		1,376		3,002,182		Thereafter	2,723,432		1,032		2,724,464
Total lease payments	Total lease payments	10,214,993		3,455,365		13,670,358		Total lease payments	8,741,959		3,434,256		12,176,215
Less amount of lease payments representing interest	Less amount of lease payments representing interest	(999,087)		(13,892)		(1,012,979)		Less amount of lease payments representing interest	(880,321)		(10,679)		(891,000)
Total present value of lease payments	Total present value of lease payments	$	9,215,906	$	3,441,473	$	12,657,379	Total present value of lease payments	$	7,861,638	$	3,423,577	$	11,285,215

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 ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, the value of the Company’s open futures, options and forward contracts was approximately ~~$(4,803,532)~~$(2,886,858) and ~~$(5,955,928)~~$(13,523,064), respectively.

As of September 30, 2020
Balance Sheet Classification Asset Derivatives Liability Derivatives
Derivatives not designated as hedging instruments:
Commodity contracts Current Assets $ 13,024,512 $ 17,058,625
Foreign exchange contracts Current Assets 18,379 11,248
Interest rate caps and floors Current Liabilities 0 776,550
Totals $ 13,042,891 $ 17,846,423


			As of December 31, 2019						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:						Derivatives not designated as hedging instruments:
Commodity contracts	Commodity contracts	Current Assets	$	3,320,161	$	8,930,683	Commodity contracts	Current Assets	$	33,384,458	$	35,814,167
Foreign exchange contracts	Foreign exchange contracts	Current Assets	29,696		27,582		Foreign exchange contracts	Current Assets	53,554		22,594
Interest rate caps and floors	Interest rate caps and floors	Current Liabilities	0		347,520		Interest rate caps and floors	Current Liabilities	0		488,109

Totals	Totals		$	3,349,857	$	9,305,785	Totals		$	33,438,012	$	36,324,870

1514

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 nine-month~~three-month periods ended ~~September 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:


		Net Gain (Loss) Recognized on Derivative Activities for the				Net Gain (Loss) Recognized on Derivative Activities for the
		Three Months Ended September 30,				Nine Months Ended September 30,
		2020		2019		2020		2019			2021		2020
Derivatives not designated as hedging instruments:	Derivatives not designated as hedging instruments:									Derivatives not designated as hedging instruments:
Commodity contracts	Commodity contracts	$	(6,632,699)	$	2,188,931	$	498,472	$	3,197,752	Commodity contracts	$	(6,042,326)	$	5,626,229
Foreign exchange contracts	Foreign exchange contracts	(222,464)		(10,091)		(43,805)		34,738		Foreign exchange contracts	19,226		(67,997)
Interest rate swaps, caps and floors	Interest rate swaps, caps and floors	38,147		(92,998)		(420,591)		(248,547)		Interest rate swaps, caps and floors	206,840		(419,482)

Totals	Totals	$	(6,817,016)	$	2,085,842	$	34,076	$	2,983,943	Totals	$	(5,816,260)	$	5,138,750

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 ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019:~~

Fair Value as of September 30, 2020
Level 1 Level 2 Level 3 Total
Financial assets:
Inventory $ (4,034,113) $ 72,593,947 $ 0 $ 68,559,834
Margin deposits (deficits) $ (557,593) $ 0 $ 0 $ (557,593)

Fair Value as of December 31, 2019
Level 1 Level 2 Level 3 Total
Financial assets:
Inventory $ (5,610,521) $ 49,717,733 $ 0 $ 44,107,212
Margin deposits $ 6,772,160 $ 0 $ 0 $ 6,772,160
2020:

1615

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 September 30, 2020 and 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 ~~$282,877~~$1,502,827 and ~~$648,215~~$2,806 during the three months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019, respectively, and $342,136 and $942,195 during the nine months ended September 30, 2020 and 2019,~~ respectively. As of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, Prairie AquaTech, LLC and Prairie AquaTech Manufacturing, LLC owed the Company $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 September 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 $0 and ~~$100,834~~$85,833 during the three months ended ~~September 30,~~March 31, 2021 and 2020, ~~and 2019, respectively, and $121,111 and $666,431 during the nine months ended September 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 ~~nine-month~~three-month period ended ~~September 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

~~For the nine months ended September 30, 2020, we reported~~We recorded a net income of ~~$7.1~~$5.8 million, compared to ~~$12.2~~$0.2 million during the same period in ~~2019, the result of multiple challenges~~2020. The $5.6 million improvement in ~~2020. First, the~~profit is largely due to improved weather conditions within our soybean procurement area along with increased demand for soybean oil. While adverse weather ~~during~~in the spring of 2019 significantly reduced the quantity and quality of soybeans in our ~~area. During~~area, conditions during the ~~spring of 2019 and subsequent growing season, South Dakota experienced excessive rainfall and ground moisture which resulted~~2020 crop year vastly improved, in ~~many unplanted fields. The unplanted fields, along~~turn yielding a large soybean crop with ~~a corresponding drop in soybean production, forced us to acquire soybeans outside of our typical soybean market, therefore increasing our procurement costs beyond our expectations.~~improved quality. In addition, the soybeans harvested in 2019 were generally higher in moisture and lower in protein content, which resulted in a reduced production yield and corresponding margin. Fortunately, the absence of a significant soybean export program, mostly due reduced soybean sales to China, reduced competition for local soybeans, thereby mitigating the impact of a smaller crop.

~~The COVID-19 pandemic further affected our operations in 2020. After restaurants and bars began closing in early March, soybean~~ oil demand decreased significantly. Similarly, when packing plants closed down and hog producers were unable to deliver pigs to the packing plants, producers placed hogs on maintenance diets. The maintenance diets, which contained very little soybean meal, caused our customers to cancel or delay shipments for meal. Since the return of packing plants to full production, however, meal demand has improved, with a robust export sector playing a part. Oil demand has also surged significantly due to increased demand from the renewable diesel ~~industry.~~and food retail sectors that continue to recover following the COVID-19 pandemic.

Although the first quarter results were very good, we are ~~currently~~less certain about the remaining quarters of 2021. Results may be affected by the 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 ~~process of evaluating~~U.S., soybean supply is expected to decrease dramatically during the ~~size~~summer. This shortfall, along with the anticipated higher soybean prices, may force us to slow production in August and ~~quality of the new soybean crop,~~September. Although a large fall harvest would provide relief, we are ~~optimistic about our prospects~~unable to forecast the harvest at this time. To alleviate risk, we have begun construction of 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 ~~the remainder of 2020 and early 2021. Most~~meal as U.S. soybean processors increase production ~~reports forecast South Dakota's soybean crop around 250 million bushels, compared~~due to ~~146.2 million bushels in 2019. The oil and protein content of this year's crop appears to be higher and moisture content lower compared to last year. This improved crop, when combined with resurgent~~a surging demand for ~~soybean meal and~~ oil, ~~should provide positive results for the remainder of 2020 and a good start for 2021.~~resulting in lower margins.

RESULTS OF OPERATIONS

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


		Three Months Ended September 30, 2020			Three Months Ended September 30, 2019				Three Months Ended March 31, 2021			Three Months Ended March 31, 2020
		$		% Revenue	$		% Revenue		$		% of Revenue	$		% of Revenue
Revenue	Revenue	$	104,454,116	100.0	$	85,001,379	100.0	Revenue	$	123,627,541	100.0	$	98,723,412	100.0
Cost of revenues	Cost of revenues	(102,048,821)		(97.7)	(82,284,471)		(96.8)	Cost of revenues	(116,998,330)		(94.6)	(96,998,949)		(98.3)
Gross profit	Gross profit	2,405,295		2.3	2,716,908		3.2	Gross profit	6,629,211		5.4	1,724,463		1.7
Operating expenses	Operating expenses	(857,116)		(0.8)	(848,890)		(1.0)	Operating expenses	(1,117,842)		(0.9)	(1,024,729)		(1.0)

Interest expense	Interest expense	(238,984)		(0.2)	(196,440)		(0.2)	Interest expense	(317,152)		(0.3)	(349,987)		(0.4)
Other non-operating income (expense)	Other non-operating income (expense)	83,534		0.1	(17,253)		—	Other non-operating income (expense)	589,875		0.5	(126,664)		(0.1)
Income tax benefit (expense)		—		—	—		—

Net income	Net income	$	1,392,729	1.3	$	1,654,325	1.9	Net income	$	5,784,092	4.7	$	223,083	0.2

Revenue -– Revenue increased ~~$19.5~~$24.9 million, or ~~22.9%~~25.2%, for the three-month period ended ~~September 30, 2020,~~March 31, 2021, compared to the same period in ~~2019.~~2020. The increase in revenues is ~~largely~~primarily due to increases in the ~~quantity~~average sales prices of ~~soybeans processed~~all soybean products. Soybean prices soared due to a very strong demand in the soybean export sector, resulting in increased meal and sales of soybean oil. We processed an additional 10.9% in soybeans compared to the same period in 2019, which increased the volume of soybean products available for sale to our customers. In addition, our soybean oil ~~sales increased 49.4% compared to the same period in 2019. The increase in~~prices. Oil prices were further affected by surging demand for soybean oil ~~is primarily due to an increase in production capacity on~~from the renewable diesel ~~industry.~~sector.

Gross Profit/Loss – Gross profit ~~decreased $312,000, or 11.5%,~~increased $4.9 million for the three months ended ~~September 30, 2020,~~March 31, 2021, compared to the same period in ~~2019.~~2020. The ~~decrease~~increase in gross profit is primarily due to ~~the adverse weather conditions~~an improvement in ~~2019 which negatively affected~~ the quantity and quality of ~~soybean crop~~soybeans grown in the U.S., especially in our local procurement area. ~~Severe flooding~~In addition, demand for oil surged from ~~heavy snow and rainfall in~~ the spring of 2019 forced 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 moisture and decreased protein content in the 2019 soybean crop, both of which reduced product yield.renewable diesel sector as more plants are opened.

The decrease in gross profit caused by adverse weather is partially offset by a $1.6 million, or 18.0%, reduction in production costs due to a decrease in maintenance expenses. In August 2019, we had an extended shutdown of our Volga facility, which required us to make extensive repairs and replace certain processing equipment.

Operating Expenses – Administrative expenses, including all selling, general and administrative expenses, ~~remained relatively constant for~~increased approximately $93,000, or 9.1%, during the three-month period ended ~~September 30, 2020,~~March 31, 2021, compared to the same period in ~~2019.~~2020. The increase is primarily due to an increase in personnel costs.

Interest Expense – Interest expense ~~increased $43,000,~~decreased $33,000, or ~~21.7%~~9.4%, ~~for~~during the three months ended ~~September 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 ~~September 30, 2020~~March 31, 2021 was approximately ~~$31.9~~$47.8 million, compared to ~~$16.2~~$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 September 30, 2020, the interest rate on our revolving long-term loan was 2.60%, compared to 4.47% as of September 30, 2019.2020.

Other Non-Operating Income – Other non-operating income (expense), including patronage dividend income, ~~increased $101,000~~improved $717,000 during the ~~three months~~three-month period ended ~~September 30, 2020,~~March 31, 2021, compared to the same period in ~~2019.~~2020. The increase in other non-operating income is due to a ~~$131,000~~$626,000 improvement in gains (losses) on our interest rate ~~hedges.~~hedge instruments. During the ~~quarter~~three-month period ended ~~September 30, 2020, we recognized $38,000 of~~March 31, 2021, gains on interest rate ~~swaps,~~hedges totaled $207,000, compared to ~~a loss~~losses of ~~$93,000~~$419,000 during the same period in ~~2019.~~2020.

Net Income/Loss – During the three-month period ended ~~September 30, 2020,~~March 31, 2021, we generated a net income of ~~$1.4~~$5.8 million, compared to ~~$1.7~~$0.2 million for the same period in ~~2019.~~2020. The ~~$300,000 decrease is primarily attributable to a decrease in gross profit.~~

~~Comparison of the nine months ended September 30, 2020 and 2019~~

Nine Months Ended September 30, 2020 Nine Months Ended September 30, 2019
$ % of Revenue $ % of Revenue
Revenue $ 296,445,621 100.0 $ 277,299,775 100.0
Cost of revenues (285,643,013) (96.4) (262,246,506) (94.6)
Gross profit 10,802,608 3.6 15,053,269 5.4
Operating expenses (2,780,612) (0.9) (2,781,405) (1.0)
Interest expense (897,325) (0.3) (656,729) (0.2)
Other non-operating income (expense) (22,245) — 571,669 0.2
Income tax benefit (expense) — — (600) —
Net income $ 7,102,426 2.4 $ 12,186,204 4.4

~~Revenue~~ – Revenue increased $19.1 million, or 6.9%, for the nine-month period ended September 30, 2020, compared to the same period in 2019. The increase in revenues is primarily due to increases in the quantity of soybeans processed and sales of soybean oil. We processed an additional 2.4% in soybeans, which increased the volume of soybean products available for sale to our customers. In addition, our soybean oil sales increased 11.1% compared to the same period in 2019. The increase in demand for soybean oil is primarily due to an increase in production capacity within the renewable diesel industry.

~~Gross Profit/Loss~~ – Gross profit decreased $4.3 million for the nine months ended September 30, 2020, compared to the same period in 2019. The decrease in gross profit is primarily due to adverse weather conditions and COVID-19. 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 further affected by the COVID-19 pandemic as restaurants and other retailers closed or reduced their operations.

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

~~Interest Expense~~ – Interest expense increased $241,000, or 36.6%, during the nine months ended September 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 nine-month period ended September 30, 2020 was approximately $35.9 million, compared to $17.4 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 September 30, 2020, the interest rate on our revolving long-term loan was 2.60%, compared to 4.47% as of September 30, 2019.

~~Other Non-Operating Income~~ – Other non-operating income (expense), including patronage dividend income, decreased $594,000 during the nine-month period ended September 30, 2020, compared to the same period in 2019. The decrease in other non-operating income is due to a $545,000 decrease in compensation from management services. Compensation from management services decreased from 2019 to 2020 following the completion of construction services performed for Prairie AquaTech Manufacturing, LLC in 2019.

~~Net Income/Loss~~ ~~– During the nine-month period ended September 30, 2020, we generated a net income of $7.1 million, compared to $12.2 million for the same period in 2019. The $5.1~~$5.6 million decrease is primarily attributable to ~~decreases~~an increase in gross profit and other non-operating income.

2019

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 ~~September 30, 2020,~~March 31, 2021, we had working capital, defined as current assets less current liabilities, of approximately ~~$23.7~~$25.9 million, compared to ~~$26.1~~$18.7 million on ~~September 30, 2019.~~March 31, 2020. Working capital ~~decreased $2.4~~increased $7.2 million between periods primarily due to ~~capital expenditures of $9.2 million and a $6.7 million distribution to members.~~net 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 ~~Nine~~Three Months Ended ~~September 30,~~March 31, 2021 and 2020 ~~and 2019~~


		2020		2019			2021		2020
Net cash provided by (used for) operating activities	Net cash provided by (used for) operating activities	$	(1,428,797)	$	(7,843,401)	Net cash provided by (used for) operating activities	$	(33,683,127)	$	(14,716,791)
Net cash provided by (used for) investing activities	Net cash provided by (used for) investing activities	(4,455,263)		(4,880,650)		Net cash provided by (used for) investing activities	(1,709,263)		(2,202,975)
Net cash provided by (used for) financing activities	Net cash provided by (used for) financing activities	9,090,315		5,766,090		Net cash provided by (used for) financing activities	35,574,484		16,654,948

Cash Flows Used For Operations

The ~~$6.4~~$19.0 million ~~decrease~~increase in cash flows used for operating activities is due to a ~~$17.4~~$19.8 million ~~change~~increase in inventories and a $12.2 million decrease in accrued commodity purchases. During the ~~nine-month~~three-month period ended ~~September 30, 2020,~~March 31, 2021, we increased ~~accrued commodity purchases~~inventories by ~~$8.1~~$27.0 million, compared to ~~a reduction of $9.3~~$7.2 million during the same period in ~~2019. Partially offsetting~~2020. Accrued commodity purchases decreased by $14.0 million during the ~~change in accrued commodity purchase was an $8.8~~three months ended March 31, 2021, compared to $1.8 million ~~increase in inventories in 2020, compared to~~during the same period in ~~2019. We increased~~2020. Partially offsetting the changes in inventories ~~by $24.7~~and accrued commodity purchases was a $5.8 million ~~during the nine months ended September 30, 2020,~~net loss on derivative activities in 2021, compared to a ~~$15.9~~$5.1 million ~~decrease~~net gain during the same period in ~~2019. Increases~~2020. The changes in inventories, accrued commodity purchases and ~~inventories were~~net gains (losses) on derivative activities are the result of ~~timing of the annual soybean harvest, which was delayed~~increased commodity prices in ~~2019 due to adverse weather conditions.~~our industry.

Cash Flows Used For Investing Activities

The ~~$0.4~~$0.5 million decrease in cash flows used for investing activities during the ~~nine-month~~three-month period ended ~~September 30, 2020,~~March 31, 2021, compared to the same period in ~~2019,~~2020, is due to a decrease in capital improvements. During the nine months ended September 30, 2020, we spent approximately $4.2 million on capital improvements, compared to $5.0 million during the same period in 2019. Partially offsetting the decrease in capital improvements was an increase in investment purchases. During the ~~nine~~three months ended ~~September 30, 2020,~~March 31, 2021, we ~~invested an additional $0.4 million~~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 ~~$3.3~~$18.9 million increase in cash flows provided by financing activities is principally due to ~~an $8.5~~a $21.6 million decrease in cash distributions to members. Cash distributions to our members totaled approximately $6.7 million during the nine-month period ended September 30, 2020, compared to $15.2 million during the same period in 2019. Partially offsetting the decrease in cash distributions to members was a $5.2 million reductionincrease in net proceeds on borrowings. During the ~~nine~~three months ended ~~September 30, 2020,~~March 31, 2021, net proceeds on borrowings increased ~~$15.8~~$45.0 million, compared to ~~$21.0~~$23.4 million during the same period in ~~2019.~~2020. Partially offsetting the increase in net borrowings was a $2.7 million increase in cash distributions to our members during the three-month period ended March 31, 2021, compared to the same period in 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 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 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 ~~$22.0~~$20.0 million and ~~$16.0~~$17.5 million as of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019.~~2020. Under this loan, there were ~~$38,000 of~~no additional funds available to ~~be borrowed~~borrow as of ~~September 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 ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, there were advances outstanding on the seasonal loan of ~~$0.0~~$37.3 million and ~~$1.7 million,~~$0, respectively. Under this loan, ~~there~~$7.7 million was ~~$28.0 million in~~ available ~~funds~~ to ~~borrow~~be borrowed as of ~~September~~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 ~~2.60%~~2.56% and ~~4.24%~~2.60% as of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, respectively. As of ~~September 30, 2020~~March 31, 2021 and December 31, ~~2019,~~2020, the interest rate on the seasonal loan is ~~2.35%~~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 the loan covenants restricts our ability to borrow from lenders other than CoBank to an amount not exceeding $300,000. As of September 30, 2020, we had debt outstanding from other lenders equal to $1,215,700, due to borrowings under a new PPP loan, as further discussed below. We obtained CoBank's consent prior to entering into the new loan and subsequently received a waiver that is in effect as of September 30, 2020. We were in compliance with all ~~other~~ covenants and conditions with CoBank as of ~~September 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“), a loan program created under the ~~CARES Act.~~Coronavirus Aid, Relief and Economic Security (the "CARES Act"). 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.~~

~~We also had a loan with~~SBA on November 25, 2020 for $1,205.700 and the ~~State of South Dakota Department of Transportation~~remaining $10,000 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 September 30, 2020 and December 31, 2019.February 2021.

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											Payment due by period
CONTRACTUAL OBLIGATIONS	CONTRACTUAL OBLIGATIONS	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years		CONTRACTUAL OBLIGATIONS	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
Long-Term Debt Obligations (1)	Long-Term Debt Obligations (1)	$	24,393,000	$	5,264,000	$	19,129,000	$	—	$	—	Long-Term Debt Obligations (1)	$	21,145,000	$	4,495,000	$	16,650,000	$	—	$	—

Operating Lease Obligations	Operating Lease Obligations	13,670,000		6,130,000		3,331,000		1,207,000		3,002,000		Operating Lease Obligations	12,176,000		5,813,000		2,497,000		1,141,000		2,725,000

Totals	Totals	$	38,063,000	$	11,394,000	$	22,460,000	$	1,207,000	$	3,002,000	Totals	$	33,321,000	$	10,308,000	$	19,147,000	$	1,141,000	$	2,725,000

(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 ~~September 30, 2020,~~March 31, 2021, we had ~~$1.2 million~~$0 in fixed rate debt outstanding and ~~$50~~$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 ~~$500,000~~$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 ~~September 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 ~~September 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						Amendment to Credit Agreement with CoBank dated April 5, 2021
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).

2423

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:	~~November 10, 2020~~May 12, 2021	By	/s/ Thomas Kersting
			Thomas Kersting, Chief Executive Officer
			(Principal Executive Officer)

Dated:	~~November 10, 2020~~May 12, 2021	By	/s/ Mark Hyde
			Mark Hyde, Chief Financial Officer
			(Principal Financial Officer)

2524


			Page

Part I.	FINANCIAL INFORMATION		4

	Item I.	Financial Statements (Unaudited)	4

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	19

	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	2422

	Item 4.	Controls and Procedures	2423

Part II.	OTHER INFORMATION		2523

	Item 1.	Legal Proceedings	2523

	Item 1A.	Risk Factors	2524

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	2524

	Item 3.	Defaults among Senior Securities	2524

	Item 4.	Mine Safety Disclosures	2524

	Item 5.	Other Information	2524

	Item 6.	Exhibits	2524

Signatures			2625


		As of September 30, 2020
	Balance Sheet Classification	Asset Derivatives		Liability Derivatives
Derivatives not designated as hedging instruments:
Commodity contracts	Current Assets	$	13,024,512	$	17,058,625
Foreign exchange contracts	Current Assets	18,379		11,248
Interest rate caps and floors	Current Liabilities	0		776,550

Totals		$	13,042,891	$	17,846,423


	Fair Value as of September 30, 2020
	Level 1		Level 2		Level 3		Total
Financial assets:
Inventory	$	(4,034,113)	$	72,593,947	$	0	$	68,559,834
Margin deposits (deficits)	$	(557,593)	$	0	$	0	$	(557,593)


	Fair Value as of December 31, 2019
	Level 1		Level 2		Level 3		Total
Financial assets:
Inventory	$	(5,610,521)	$	49,717,733	$	0	$	44,107,212
Margin deposits	$	6,772,160	$	0	$	0	$	6,772,160


	Nine Months Ended September 30, 2020			Nine Months Ended September 30, 2019
	$		% of Revenue	$		% of Revenue
Revenue	$	296,445,621	100.0	$	277,299,775	100.0
Cost of revenues	(285,643,013)		(96.4)	(262,246,506)		(94.6)
Gross profit	10,802,608		3.6	15,053,269		5.4
Operating expenses	(2,780,612)		(0.9)	(2,781,405)		(1.0)

Interest expense	(897,325)		(0.3)	(656,729)		(0.2)
Other non-operating income (expense)	(22,245)		—	571,669		0.2
Income tax benefit (expense)	—		—	(600)		—

Net income	$	7,102,426	2.4	$	12,186,204	4.4