Heron Lake BioEnergy (HLBYL) 10-Q 16 Mar 20 2020 Q1 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	3 Months Ended
	Jan. 31, 2020	Mar. 16, 2020
Document Type	10-Q
Document Period End Date	Jan. 31, 2020
Entity Registrant Name	HERON LAKE BIOENERGY, LLC
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Central Index Key	0001286964
Current Fiscal Year End Date	--10-31
Document Fiscal Year Focus	2020
Document Fiscal Period Focus (Q1,Q2,Q3,FY)	Q1
Amendment Flag	false
Class A units
Common stock, shares outstanding		62,932,107
Class B units
Common stock, shares outstanding		15,000,000

Condensed Consolidated Balance

Condensed Consolidated Balance Sheets - USD ($)	Jan. 31, 2020	Oct. 31, 2019
Current Assets
Cash	$ 2,095,986	$ 4,541,295
Restricted cash	42,221	52,516
Accounts receivable	988,463	4,891,249
Inventory	7,751,957	6,276,258
Commodity derivative instruments	144,410	95,823
Prepaid expenses and other current assets	641,557	408,325
Total current assets	11,664,594	16,265,466
Property and Equipment, net	38,175,096	39,408,195
Operating lease right of use assets	10,257,425
Other assets	697,254	922,254
Total Assets	60,794,369	56,595,915
Current Liabilities
Current maturities of long-term debt	333,977	333,977
Checks drawn in excess of bank balances	724,292
Accounts payable	3,124,877	5,386,618
Commodity derivative instruments	12,912
Accrued expenses	380,927	423,266
Operating lease, current liabilities	1,296,140
Total current liabilities	5,873,125	6,143,861
Long-Term Debt, less current portion	370,174	300,203
Operating Lease, long-term liabilities	8,961,285
Other Long-Term Liabilities	562,481	551,000
Commitments and Contingencies
Members' Equity
Members' equity attributable to Heron Lake BioEnergy, LLC consists of 77,932,107 units issued and outstanding at January 31, 2020 and October 31, 2019	45,027,304	47,599,276
Non-controlling interest		2,001,575
Total members' equity	45,027,304	49,600,851
Total Liabilities and Members' Equity	$ 60,794,369	$ 56,595,915

Condensed Consolidated Balanc_2

Condensed Consolidated Balance Sheets (Parenthetical) - shares	Jan. 31, 2020	Oct. 31, 2019
Condensed Consolidated Balance Sheets
Members' Equity, units issued	77,932,107	77,932,107
Members' Equity, units outstanding	77,932,107	77,932,107

Condensed Consolidated Statemen

Condensed Consolidated Statements of Operations - USD ($)	3 Months Ended
	Jan. 31, 2020	Jan. 31, 2019
Condensed Consolidated Statements of Operations
Revenues	$ 26,680,280	$ 25,697,520
Cost of Goods Sold	28,129,771	26,731,320
Gross Loss	(1,449,491)	(1,033,800)
Operating Expenses	(899,445)	(919,527)
Operating Loss	(2,348,936)	(1,953,327)
Other Income (Expense):
Interest income	11,581	28,802
Interest expense	(11,531)	(7,914)
Other income, net	339	205
Total other income, net	389	21,093
Net Loss	(2,348,547)	(1,932,234)
Less: Net Income Attributable to Non-controlling Interest	(67,827)	(91,406)
Net Loss Attributable to Heron Lake BioEnergy, LLC	$ (2,416,374)	$ (2,023,640)
Weighted Average Units Outstanding—Basic and Diluted (Class A and B)	77,932,107	77,932,107
Net Loss Per Unit Attributable to Heron Lake BioEnergy, LLC—Basic and Diluted (Class A and B)	$ (0.03)	$ (0.03)

Condensed Consolidated Statem_2

Condensed Consolidated Statements of Changes in Members' Equity - USD ($)	Class A units	Class B units	Members' Equity attributable to Heron Lake BioEnergy LLC	Noncontrolling Interest	Total
Balance at Oct. 31, 2018			$ 53,054,846	$ 1,723,839	$ 54,778,685
Balance (in units) at Oct. 31, 2018	62,932,107	15,000,000
Increase (Decrease) in Stockholders' Equity
Net income attributable to non-controlling interest				91,406	91,406
Net income (loss) attributable to Heron Lake BioEnergy, LLC			(2,023,640)		(2,023,640)
Balance at Jan. 31, 2019			51,031,206	1,815,245	52,846,451
Balance (in units) at Jan. 31, 2019	62,932,107	15,000,000
Balance at Oct. 31, 2019			47,599,276	2,001,575	$ 49,600,851
Balance (in units) at Oct. 31, 2019	62,932,107	15,000,000			77,932,107
Increase (Decrease) in Stockholders' Equity
Acquisition of non-controlling interest			(155,598)	(2,069,402)	$ (2,225,000)
Net income attributable to non-controlling interest				$ 67,827	67,827
Net income (loss) attributable to Heron Lake BioEnergy, LLC			(2,416,374)		(2,416,374)
Balance at Jan. 31, 2020			$ 45,027,304		$ 45,027,304
Balance (in units) at Jan. 31, 2020	62,932,107	15,000,000			77,932,107

Condensed Consolidated Statem_3

Condensed Consolidated Statements of Cash Flows - USD ($)	3 Months Ended
	Jan. 31, 2020	Jan. 31, 2019
Cash Flow From Operating Activities:
Net loss	$ (2,348,547)	$ (1,932,234)
Adjustments to reconcile net loss to net cash used in operations:
Depreciation and amortization	1,316,198	1,286,722
Change in fair value of commodity derivative instruments	162,620	(94,292)
Change in operating assets and liabilities:
Accounts receivable	3,902,786	2,368,689
Inventory	(1,475,699)	(1,040,419)
Commodity derivative instruments	(198,295)	391,575
Prepaid expenses and other current assets	(233,232)	(291,950)
Accounts payable	(2,136,555)	(3,098,498)
Accrued expenses	(42,339)	(220,187)
Accrued railcar rehabilitation costs	11,481
Net cash used in operating activities	(1,041,582)	(2,630,594)
Cash Flows from Investing Activities:
Capital expenditures	(208,285)	(92,921)
Net cash used in investing activities	(208,285)	(92,921)
Cash Flows from Financing Activities:
Checks drawn in excess of bank balance	724,292
Proceeds from long-term debt	7,039,706
Payments on long-term debt	(6,969,735)	(7,763)
Acquisition of non-controlling interest	(2,000,000)
Net cash used in financing activities	(1,205,737)	(7,763)
Net decrease in Cash and Restricted Cash	(2,455,604)	(2,731,278)
Cash and Restricted Cash—Beginning of Period	4,593,811	5,995,982
Cash and Restricted Cash—End of Period	2,138,207	3,264,704
Supplemental Disclosure of Cash Flow Information
Interest expense	$ 11,531	7,914
Supplemental Disclosure of Non-Cash Investing and Financing Activities
Capital expenditures included in accounts payable		$ 8,148

Condensed Consolidated Statem_4

Condensed Consolidated Statements of Cash Flows (Parenthetical) - USD ($)	Jan. 31, 2020	Oct. 31, 2019	Jan. 31, 2019	Oct. 31, 2018
Reconciliation of Cash and Restricted Cash
Cash - Balance Sheet	$ 2,095,986	$ 4,541,295	$ 3,125,463
Restricted Cash - Balance Sheet	42,221	52,516	139,241
Cash and Restricted Cash	$ 2,138,207	$ 4,593,811	$ 3,264,704	$ 5,995,982

SUMMARY OF SIGNIFICANT ACCOUNTI

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES	3 Months Ended
	Jan. 31, 2020
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES	1. Nature of Business Heron Lake BioEnergy, LLC’s wholly owned subsidiary, HLBE Pipeline Company, LLC (“HLBE Pipeline Company”), is the sole owner of Agrinatural Gas, LLC (“Agrinatural”). Agrinatural is a natural gas pipeline company that was formed to construct, own, and operate the natural gas pipeline that provides natural gas to the Company’s ethanol production facility and other customers through a connection with the natural gas pipeline facilities of Northern Border Pipeline Company in Cottonwood County, Minnesota. Beginning as of December 11, 2019, HLBE holds a 100% interest in Agrinatural. At October 31, 2019, HLBE held a 73% interest in Agrinatural. Basis of Presentation and Principles of Consolidation The condensed consolidated unaudited financial statements as of January 31, 2020 include the accounts of Heron Lake BioEnergy, LLC and its wholly owned subsidiary, HLBE Pipeline Company (collectively, the “Company”). Given the Company’s control over the operations of Agrinatural and its majority voting interest, the Company consolidates the unaudited financial statements of Agrinatural with its consolidated unaudited financial statements, with the equity and earnings attributed to the remaining 27% non-controlling interest identified separately in the accompanying condensed consolidated balance sheets and statements of operations through December 11, 2019, when the remaining non-controlling interest was acquired. All significant intercompany balances and transactions are eliminated in consolidation. The condensed consolidated unaudited financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted as permitted by such rules and regulations. These condensed consolidated unaudited financial statements and related notes should be read in conjunction with the financial statements and notes thereto included in the Company’s audited consolidated financial statements for the year ended October 31, 2019, contained in the Company’s annual report on Form 10-K. In the opinion of management, the condensed consolidated unaudited financial statements reflect all adjustments consisting of normal recurring accruals that we consider necessary to present fairly the Company’s results of operations, financial position, and cash flows. The results reported in these condensed consolidated unaudited financial statements should not be regarded as necessarily indicative of results that may be expected for any other fiscal period or for the fiscal year. Accounting Estimates Management uses estimates and assumptions in preparing these condensed consolidated unaudited financial statements in accordance with generally accepted accounting principles. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. The Company uses estimates and assumptions in accounting for significant matters including, among others, the economic lives of property and equipment, the assumptions used in the analysis of impairment of long-lived assets, valuation of commodity derivative instruments, inventory, inventory purchase and sales commitments, and evaluation of railcar rehabilitation costs. The Company periodically reviews estimates and assumptions, and the effects of revisions are reflected in the period in which the revision is made. Actual results could differ from those estimates. Non-controlling Interest Amounts recorded as non-controlling interest on the October 31, 2019 balance sheet relates to the net investment by an unrelated party in Agrinatural through December 11, 2019 when the remaining non-controlling interest was acquired. Income and losses are allocated to the members of Agrinatural based on their respective percentage of membership units held. Pursuant to the firm natural gas transportation agreement , Agrinatural will provide natural gas to the plant with a specified price per MMBTU for a term ending on October 31, 2021, with one automatic renewal option to extend the term for an additional five years. Revenue Recognition Revenue is recognized upon transfer of control of promised products or services to customers in an amount that reflects the consideration we expect to receive in exchange for those products or services. Our contracts primarily consist of agreements with marketing companies and other customers as described below. Our performance obligations consist of the delivery of ethanol, distillers' grains, and corn oil to our customers. Our customers primarily consist of three distinct marketing companies as discussed below. The consideration we receive for these products is fixed or determinable based on current observable market prices at the Chicago Mercantile Exchange, generally, and adjusted for local market differentials. Our contracts have specific delivery modes, rail or truck, and dates. Revenue is recognized when the Company delivers the products to the mode of transportation specified in the contract, at the transaction price established in the contract, net of commissions, fees, and freight. We sell each of the products via different marketing channels as described below. · Ethanol. The Company sells its ethanol via a marketing agreement with Eco-Energy, Inc. Eco-Energy sells one hundred percent of the Company’s ethanol production based on agreements with end users at prices agreed upon mutually among the end user, Eco-Energy and the Company. Our performance obligations consist of our obligation to deliver ethanol to our customers. Our customer contracts consist of orders received from the customer pursuant to a marketing agreement. The marketing agreement calls for control and title to pass to Eco-Energy once a rail car is released to the railroad or a truck is released from the Company’s scales. Revenue is recognized then at the price in the agreement with the end user, net of commissions, freight, and fees. · Distillers’ grains. The Company engages another third-party marketing company, Gavilon, Inc, to sell one hundred percent of the distillers grains it produces at the plant. Gavilon takes title and control once a rail car is released to the railroad or a truck is released from the Company’s scales. Prices are agreed upon between Gavilon and the Company. Our performance obligations consist of our obligation to deliver distillers grains to our customers. Our customer contracts consist of orders received from the customer pursuant to a marketing agreement. Revenue is recognized net of commissions, freight and fees. · Distillers’ corn oil (corn oil). The Company sells one hundred percent of its corn oil production to RPMG, Inc. The process for selling corn oil is the same as our distillers’ grains. RPMG takes title and control once a rail car is released to the railroad or a truck is released from the Company's scales. Prices are agreed upon between RPMG and the Company. Our performance obligations consist of our obligation to deliver corn oil to our customers. Our customer contracts consist of orders received from the customer pursuant to a marketing agreement. Revenue is recognized net of commissions, freight and fees. · Agrinatural generates revenue from the transportation of natural gas to residential and commercial customers. Revenue is recognized at the point when natural gas is delivered at the transaction price established in the contract. Inventory Inventory is stated at the lower of cost or net realizable value. Cost for all inventories is determined using the first in first out method. Net realizable value is the estimated selling prices in the ordinary course of business less reasonably predictable costs of completion, disposal, and transportation. Inventory consists of raw materials, work in process, finished goods, and supplies. Corn is the primary raw material along with other raw materials. Finished goods consist of ethanol, distillers’ grains, and corn oil. Derivative Instruments From time to time the Company enters into derivative transactions to hedge its exposures to commodity price fluctuations. The Company is required to record these derivatives on the balance sheets at fair value. In order for a derivative to qualify as a hedge, specific criteria must be met and appropriate documentation maintained. Gains and losses from derivatives that do not qualify as hedges, or are undesignated, must be recognized immediately in earnings. If the derivative does qualify as a hedge, depending on the nature of the hedge, changes in the fair value of the derivative will be either offset against the change in fair value of the hedged assets, liabilities, or firm commitments through earnings or recognized in other comprehensive income until the hedged item is recognized in earnings. Changes in the fair value of undesignated derivatives are recorded in earnings. Additionally, the Company is required to evaluate its contracts to determine whether the contracts are derivatives. Certain contracts that literally meet the definition of a derivative may be exempted as “normal purchases or normal sales.” Normal purchases and normal sales are contracts that provide for the purchase or sale of something other than a financial instrument or derivative instrument that will be delivered in quantities expected to be used or sold over a reasonable period in the normal course of business. Contracts that meet the requirements of normal purchases or sales are documented as normal and exempted from accounting and reporting requirements, and therefore, are not marked to market in our condensed consolidated unaudited financial statements. In order to reduce the risks caused by market fluctuations, the Company occasionally hedges its anticipated corn, natural gas, and denaturant purchases and ethanol sales by entering into options and futures contracts. These contracts are used with the intention to fix the purchase price of anticipated requirements for corn in the Company's ethanol production activities and the related sales price of ethanol. The fair value of these contracts is based on quoted prices in active exchange-traded or over-the-counter market conditions. Although the Company believes its commodity derivative positions are economic hedges, none have been formally designated as a hedge for accounting purposes and derivative positions are recorded on the balance sheet at their fair market value, with changes in fair value recognized in current period earnings or losses. The Company does not enter into financial instruments for trading or speculative purposes. The Company has adopted authoritative guidance related to “Derivatives and Hedging,” and has included the required enhanced quantitative and qualitative disclosure about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of gains and losses from derivative instruments, and disclosures about credit-risk-related contingent features in derivative agreements. See further discussion in Note 5. Recently Adopted Accounting Pronouncements In February 2016, the Financial Accounting Standards Board (FASB) issued new guidance on accounting for leases under Accounting Standards Codification 842 (ASC 842). Under the new guidance, lessees are required to recognize the following for all leases (with the exception of short-term leases) at the commencement date: (1) a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted cash flow basis; and (2) a “right of use” asset, which is an asset that represents the lessee’s right to use the specified asset for the lease term. Lease expense under the new guidance is substantially the same as prior to the adoption. See Note 8 for further information. Reportable Operating Segments Accounting Standards Codification (“ASC”) 280, “Segment Reporting”, establishes the standards for reporting information about segments in financial statements. Operating segments are defined as components of an enterprise for which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. Based on the related business nature and expected financial results criteria set forth in ASC 280, the Company has two reportable operating segments for financial reporting purposes. · Ethanol Production . Based on the nature of the products and production process and the expected financial results, the Company’s operations at its ethanol plant, including the production and sale of ethanol and its co-products, are aggregated into one financial reporting segment. · Natural Gas Pipeline . The Company has majority ownership in Agrinatural, through its wholly owned subsidiary, HLBE Pipeline, LLC, and operations of Agrinatural’s natural gas pipeline are aggregated into another financial reporting segment.

RISKS AND UNCERTAINTIES

RISKS AND UNCERTAINTIES	3 Months Ended
	Jan. 31, 2020
RISKS AND UNCERTAINTIES
RISKS AND UNCERTAINTIES	2. The Company has certain risks and uncertainties that it experiences during volatile market conditions. These volatilities can have a severe impact on operations. The Company’s revenues are derived from the sale and distribution of ethanol and distillers’ grains to customers primarily located in the U.S. Corn for the production process is supplied to the plant primarily from local agricultural producers. Ethanol sales average 70% to 90% of total revenues and corn costs average 70% to 90% of cost of goods sold. The Company’s operating and financial performance is largely driven by the prices at which it sells ethanol, distillers’ grains, and corn oil and the related costs of corn. The price of ethanol is influenced by factors such as supply and demand, the weather, government policies and programs, unleaded gasoline prices, and the petroleum markets as a whole. Excess ethanol supply in the market, in particular, puts downward pressure on the price of ethanol. The Company's largest cost of production is corn. The cost of corn is generally impacted by factors such as supply and demand, the weather, government policies and programs, and a risk management program used to protect against the price volatility of these commodities. Market fluctuations in the price of and demand for these commodities may have a significant adverse effect on the Company’s operations, profitability and the availability and adequacy of cash flow to meet the Company’s working capital requirements. The Company's risk management program is used to protect against the price volatility of these commodities. The Company, and the ethanol industry as a whole, experienced significant adverse conditions throughout most of 2019 and into 2020 as a result of industry-wide record low ethanol prices due to reduced demand and high industry inventory levels. These factors resulted in prolonged negative operating margins, significantly lower cash flow from operations and substantial net losses. The Company believes its cash on hand and available debt from its lender will provide sufficient liquidity to meets its anticipated working capital, debt service and other liquidity needs through the next twelve months.

REVENUE

REVENUE	3 Months Ended
	Jan. 31, 2020
REVENUE
REVENUE	3. Revenue by Source All revenues from contracts with customers under ASC Topic 606 are recognized at a point in time. The following table disaggregates revenue by major source for the three months ended January 31, 2020 and 2019: Three Months Ended January 31, 2020 (unaudited) Ethanol Production Natural Gas Pipeline Total Ethanol $ $ — $ Distillers’ Grains — Corn Oil — Other — Natural Gas Total Revenues $ $ $ Three Months Ended January 31, 2019 (unaudited) Ethanol Production Natural Gas Pipeline Total Ethanol $ $ — $ Distillers’ Grains — Corn Oil — Other — Natural Gas — Total Revenues $ $ $ Payment Terms The Company has contractual payment terms with each respective marketer that sells ethanol, distillers’ grains and corn oil. These terms are 10 calendar days after the transfer of control date. The Company has contractual payment terms with the natural gas customers of 20 days. Shipping and Handling Costs 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 goods sold. Accordingly, amounts billed to customers for such costs are included as a component of revenue.

INVENTORY

INVENTORY	3 Months Ended
	Jan. 31, 2020
INVENTORY
INVENTORY	4. Inventory consisted of the following: January 31, 2020 October 31, 2019 (unaudited) Raw materials $ 1,939,236 $ 932,503 Work in process 696,617 732,243 Finished goods 3,673,218 3,157,429 Supplies 1,442,886 1,454,083 Totals $ 7,751,957 $ 6,276,258 The Company performs a lower of cost or net realizable value analysis on inventory to determine if the market values of certain inventories are less than their carrying value, which is attributable primarily to decreases in market prices of corn and ethanol.

DERIVATIVE INSTRUMENTS

DERIVATIVE INSTRUMENTS	3 Months Ended
	Jan. 31, 2020
DERIVATIVE INSTRUMENTS
DERIVATIVE INSTRUMENTS	5. DERIVATIVE INSTRUMENTS As of January 31, 2020, the total notional amount of the Company’s outstanding corn derivative instruments was approximately 5,528,000 bushels, comprised of long corn futures positions on 391,000 bushels that were entered into to hedge forecasted ethanol sales through July 2020 and short corn futures positions on 1,607,000 bushels that were entered into to hedge forecasted corn purchases through December 2021. Additionally, there are corn options positions of 3,530,000 bushels through July 2020. There may be offsetting positions that are not shown on a net basis that could lower the notional amount of positions outstanding. As of January 31, 2020, the Company had approximately $42,000 of cash collateral (restricted cash) related to derivatives held by a broker. The following table provides detail regarding the Company’s derivative instruments at January 31, 2020, none of which are designated as hedging instruments: Consolidated Balance Sheet Location Assets Liabilities Corn contracts Commodity derivative instruments $ 144,410 $ — Ethanol contracts Commodity derivative instruments — 12,912 Totals $ 144,410 $ 12,912 As of October 31, 2019, the total notional amount of the Company’s outstanding corn derivative instruments was approximately 5,398,000 bushels, comprised of long corn futures positions on 2,131,000 bushels that were entered into to hedge forecasted ethanol sales through July 2020, and short corn futures positions on 3,267,000 bushels that were entered into to hedge forecasted corn purchases through December 2021. Additionally, there are corn options positions of 4,000,000 bushels through March 2020. There may be offsetting positions that are not shown on a net basis that could lower the notional amount of positions outstanding. As of October 31, 2019, the Company had a $52,000 in cash collateral (restricted cash) related to derivatives held by a broker. The following table provides detail regarding the Company’s derivative financial instruments at October 31, 2019, none of which were designated as hedging instruments: Consolidated Balance Sheet Location Assets Liabilities Corn contracts Commodity derivative instruments $ 20,060 $ — Ethanol contracts Commodity derivative instruments 75,763 — Totals $ 95,823 $ — The following tables provide detail regarding the gains (losses) from Company’s derivative financial instruments in its condensed consolidated unaudited statements of operations, none of which are designated as hedging instruments: Consolidated Statement of Three Months Ended January 31, Operations Location 2020 2019 Corn contracts Cost of goods sold $ (80,768) $ 94,292 Ethanol contracts Revenues (81,852) — Total gain (loss) $ (162,620) $ 94,292

FAIR VALUE MEASUREMENTS

FAIR VALUE MEASUREMENTS	3 Months Ended
	Jan. 31, 2020
FAIR VALUE MEASUREMENTS
FAIR VALUE MEASUREMENTS	6. The following table sets forth, by level, the Company assets that were accounted for at fair value on a recurring basis at January 31, 2020: Fair Value Measurement Using Carrying Amount in Quoted Prices Significant Other Significant Consolidated Balance Sheet Active Markets Observable Inputs Unobservable inputs Financial Assets: Fair Value (Level 1) (Level 2) (Level 3) Commodity Derivative instruments - Corn $ 144,410 $ 144,410 $ 144,410 $ — $ — Commodity Derivative instruments - Ethanol $ 12,912 $ 12,912 $ 12,912 $ — $ — The following table sets forth, by level, the Company assets and liabilities that were accounted for at fair value on a recurring basis at October 31, 2019: Fair Value Measurement Using Carrying Amount in Quoted Prices in Significant Other Significant Consolidated Active Markets Observable Inputs Unobservable Inputs Financial Assets: Balance Sheet Fair Value (Level 1) (Level 2) (Level 3) Commodity Derivative instruments - Corn $ 20,060 $ 20,060 $ 20,060 $ — $ — Financial Liabilities: Commodity Derivative instruments - Ethanol $ 75,763 $ 75,763 $ 75,763 $ — $ — We determine the fair value of commodity derivative instruments by obtaining fair value measurements from an independent pricing service. The fair value measurements consider observable data that may include dealer quotes and live trading levels from the Chicago Board of Trade market and New York Mercantile Exchange. We determine the fair value of corn Level 2 instruments by model-based techniques in which all significant inputs are observable in the markets noted above.

DEBT FINANCING

DEBT FINANCING	3 Months Ended
	Jan. 31, 2020
DEBT FINANCING
DEBT FACILITIES	7. Long-term debt consists of the following: January 31, 2020 October 31, 2019 (unaudited) Amended revolving term note payable to lending institution, see terms below. $ 69,971 $ — Assessment payable as part of water treatment agreement, due in semi-annual installments of $189,393 with interest at 6.55%, enforceable by statutory lien, with the final payment due in 2021. The Company made deposits for one years' worth of debt service payments of approximately $364,000, which is included with other assets that are held on deposit to be applied with the final payments of the assessment. 634,180 634,180 Totals 704,151 634,180 Less amounts due within one year 333,977 333,977 Net long-term debt $ 370,174 $ 300,203 Revolving Term Note The 2020 Credit Facility includes an amended and restated revolving term loan with an $8,000,000 principal commitment. This loan replaces the amended revolving term note and seasonal revolving loan made under the 2018 Credit Facility. The loan is secured by substantially all of the Company’s assets, including a subsidiary guarantee. The 2020 Credit Facility contains customary covenants, including restrictions on the payment of dividends and loans and advances to Agrinatural, and maintenance of certain financial ratios including minimum working capital, minimum net worth and a debt service coverage ratio as defined by the credit facility. Failure to comply with the protective loan covenants or maintain the required financial ratios may cause acceleration of the outstanding principal balances on the revolving term loan and/or the imposition of fees, charges, or penalties. As part of the 2020 Credit Facility closing, the Company entered into an amended administrative agency agreement with CoBank, ACP (“CoBank”). As a result, CoBank will continue to act as the agent for the lender with respect to the 2020 Credit Facility. The Company agreed to pay CoBank an annual fee of $2,500 for its services as administrative agent. Under the terms of the amended revolving term loan, the Company may borrow, repay, and reborrow up to the aggregate principal commitment amount of $8,000,000. Final payment of amounts borrowed under the amended revolving term loan is due December 1, 2022. Interest on the amended revolving term loan accrues at a variable weekly rate equal to 3.10% above the One-Month London Interbank Offered Rate (“LIBOR”) Index rate, which totaled 4.76% at January 31, 2020 . The Company also agreed to pay an unused commitment fee on the unused available portion of the amended revolving term loan commitment at the rate of 0.500% per annum, payable monthly in arrears. Estimated annual maturities of long-term debt at January 31, 2020 are as follows based on the most recent debt agreements: 2020 $ 333,977 2021 300,203 2022 69,971 Total debt $ 704,151

LEASES

LEASES	3 Months Ended
	Jan. 31, 2020
LEASES
LEASES	8. Adoption of ASC 842 As discussed in Note 1, on November 1, 2019, the Company adopted the provisions of ASC 842 using the modified retrospective approach, which applies the provisions of ASC 842 upon adoption, with no change to prior periods. This adoption resulted in the Company recognizing initial right of use assets and lease liabilities of approximately $10.9 million at November 1, 2019. The adoption did not have a significant impact on the Company’s statement of operations. Upon the initial adoption of ASC 842, the Company elected the following practical expedients allowable under the guidance: not to reassess whether any expired or existing contracts are or contain leases; not to reassess the lease classification for any expired or existing leases; not to reassess initial direct costs for any existing leases. Additionally, the Company elected the short-term lease exemption policy, applying the requirements of ASC 842 to only long-term (greater than one year) leases. The Company leases rail cars for its facility to transport ethanol and dried distillers’ grains to its end customers. Operating lease right of use assets and liabilities are recognized at commencement date based on the present value of lease payments over the lease term. The Company uses its estimated incremental borrowing rate, unless an implicit rate is readily determinable, as the discount rate for each lease in determining the present value of lease payments. For the three months ended January 31, 2020, the Company’s weighted average discount rate was 4.87%. Operating lease expense is recognized on a straight-line basis over the lease term. The Company determines if an arrangement is a lease or contains a lease at inception. The Company’s leases have remaining terms of approximately one to seven years. For the three months ended January 31, 2020, the weighted average remaining lease term was four years. The Company elected to use a portfolio approach for lease classification, which allows for an entity to group together leases with similar characteristics provided that its application does not create a material difference when compared to accounting for the leases at a contract level. For railcar leases, the Company elected to combine the railcars within each rider and account for each rider as an individual lease. The following table summarizes the remaining maturities of the Company’s operating lease liabilities as of January 31, 2020: Twelve Months Ended January 31, 2021 $ 1,767,000 2022 1,767,000 2023 1,767,000 2024 1,757,250 2025 1,650,000 Thereafter 3,400,000 Totals 12,108,250 Less: Amount representing interest 1,850,825 Lease liabilities $ 10,257,425 For the three months ended January 31, 2020, the Company recorded operating lease costs of approximately $575,000 in cost of goods sold in the Company’s statement of operations, which approximates the cash paid for the period.

COMMITMENTS AND CONTINGENCIES

COMMITMENTS AND CONTINGENCIES	3 Months Ended
	Jan. 31, 2020
COMMITMENTS AND CONTINGENCIES.
COMMITMENTS AND CONTINGENCIES	9. Corn Forward Contracts At January 31, 2020, the Company had cash and basis contracts for forward corn purchase commitments for approximately 7,966,000 bushels for deliveries through December 2021. Given the uncertainty of future ethanol and corn prices, the Company could incur a loss on the outstanding corn purchase contracts in future periods. Management has evaluated these forward contracts and its inventories using the lower of cost or net realizable value evaluation, similar to the method used on its inventory, and has determined that no impairment loss existed at January 31, 2020 or October 31, 2019. Ethanol Forward Contracts At January 31, 2020, the Company had fixed and basis contracts to sell approximately $11,566,000 of ethanol for various delivery periods through March 2020, which approximates 85% of its anticipated ethanol sales for that period. Distillers’ Grains Forward Contracts At January 31, 2020, the Company had forward contracts to sell approximately $2,211,000 of distillers’ grains for delivery through March 2020, which approximates 55% of its anticipated distillers’ grains sales during that period. Corn Oil Forward Contracts At January 31, 2020, the Company had forward contracts to sell approximately $289,000 of corn oil for various delivery periods through February 2020, which approximates 75% of its anticipated corn oil sales for that period. Rail Car Rehabilitation Costs The Company leases 50 hopper rail cars under a multi-year agreement which ends in May 2027. Under the agreement, the Company is required to pay to rehabilitate each car for “damage” that is considered to be other than normal wear and tear upon turn in of the car(s) at the termination of the lease. Prior to the year ending October 31, 2019, the Company believed ongoing repairs resulted in an insignificant future rehabilitation expense. During the year ending October 31, 2019, based on new information, we re-evaluated our assumptions and believe that it is probable that we may be assessed for damages incurred. Company management has estimated total costs to rehabilitate the cars at January 31, 2020 to be approximately $562,000. During the quarter ended January 31, 2020, the Company has recorded an expense in cost of goods of approximately $11,000.

MEMBERS' EQUITY

MEMBERS' EQUITY	3 Months Ended
	Jan. 31, 2020
MEMBERS' EQUITY.
MEMBERS' EQUITY	10. Heron Lake BioEnergy, LLC is authorized to issue up to 80,000,000 capital units, of which 65,000,000 have been designated Class A units and 15,000,000 have been designated as Class B units. Members of Heron Lake BioEnergy, LLC are holders of units who have been admitted as members and who hold at least 2,500 units. Any holder of units who is not a member will not have voting rights. Transferees of units must be approved by Heron Lake BioEnergy, LLC’s Board of Governors to become members. Members are entitled to one vote for each unit held. Subject to Heron Lake BioEnergy, LLC’s Member Control Agreement, all units share equally in the profits and losses and distributions of assets on a per unit basis. Heron Lake BioEnergy, LLC has a total of 62,932,107 Class A units and 15,000,000 Class B units issued and outstanding, for an aggregate total of 77,932,107 units issued and outstanding at January 31, 2020 and October 31, 2019. On December 11, 2019, HLBE Pipeline Company acquired the remaining non-controlling interest of Agrinatural for a total price of $2.225 million. A deposit of $225,000 was paid in October 2019 and recorded within other assets at October 31, 2019, and the remaining amount was paid on December 11, 2019. The change of interest is recorded as an equity transaction in accordance with ASC 805.

RELATED PARTY TRANSACTIONS

RELATED PARTY TRANSACTIONS	3 Months Ended
	Jan. 31, 2020
RELATED PARTY TRANSACTIONS
RELATED PARTY TRANSACTIONS	11. Granite Falls Energy, LLC The Company has a management services agreement with Granite Falls Energy, LLC (“GFE”, a related party). Under the terms of the management services agreement, GFE supplies its own personnel to act as part-time officers and managers of the Company for the positions of Chief Executive Officer, Chief Financial Officer, and Commodity Risk Manager and the Company pays GFE 50% of the total salary, bonuses, and other expenses and costs incurred by GFE for the three management positions. The management services agreement automatically renews for successive one-year terms unless and until the Company or GFE gives the other party 90-days written notice of termination prior to expiration of the then current term. The management services agreement may also be terminated by either party for cause under certain circumstances. Total expenses under this agreement were approximately $123,000 and $121,000 for the three months ended January 31, 2020 and 2019, respectively . Corn Purchases - Members The Company purchased corn from board members of approximately $5,065,000 and $1,949,000 for the three months ended January 31, 2020 and 2019, respectively.

BUSINESS SEGMENTS

BUSINESS SEGMENTS	3 Months Ended
	Jan. 31, 2020
BUSINESS SEGMENTS
BUSINESS SEGMENTS	12. The Company groups its operations into the following two business segments: Ethanol Production Ethanol and co-product production and sales Natural gas pipeline Ownership and operations of natural gas pipeline Segment reporting is intended to give financial statement users a better view of how the Company manages and evaluates its businesses. The accounting policies for each segment are the same as those described in the summary of significant accounting policies. Segment income or loss does not include any allocation of shared-service costs. Segment assets are those that are directly used in or identified with segment operations. Inter-segment balances and transactions have been eliminated. The following tables summarize financial information by segment and provide a reconciliation of segment revenue, contribution to operating income (loss), and total assets: Three Months Ended January 31, 2020 January 31, 2019 Revenue: (unaudited) (unaudited) Ethanol production $ 25,991,003 $ 25,112,221 Natural gas pipeline 1,136,217 1,039,625 Eliminations (446,940) (454,326) Total Revenue $ 26,680,280 $ 25,697,520 Three Months Ended January 31, 2020 January 31, 2019 Operating Income (Loss): (unaudited) (unaudited) Ethanol production $ (2,812,778) $ (2,345,303) Natural gas pipeline 646,298 563,273 Eliminations (182,456) (171,297) Operating Loss $ (2,348,936) $ (1,953,327) January 31, 2020 October 31, 2019 Assets: (unaudited) Ethanol production $ 48,171,952 $ 44,097,379 Natural gas pipeline 12,622,417 12,498,536 Total Assets $ 60,794,369 $ 56,595,915

SUMMARY OF SIGNIFICANT ACCOUN_2

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)	3 Months Ended
	Jan. 31, 2020
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Business	Nature of Business Heron Lake BioEnergy, LLC’s wholly owned subsidiary, HLBE Pipeline Company, LLC (“HLBE Pipeline Company”), is the sole owner of Agrinatural Gas, LLC (“Agrinatural”). Agrinatural is a natural gas pipeline company that was formed to construct, own, and operate the natural gas pipeline that provides natural gas to the Company’s ethanol production facility and other customers through a connection with the natural gas pipeline facilities of Northern Border Pipeline Company in Cottonwood County, Minnesota. Beginning as of December 11, 2019, HLBE holds a 100% interest in Agrinatural. At October 31, 2019, HLBE held a 73% interest in Agrinatural.
Basis of Presentation and Principles of Consolidation	Basis of Presentation and Principles of Consolidation The condensed consolidated unaudited financial statements as of January 31, 2020 include the accounts of Heron Lake BioEnergy, LLC and its wholly owned subsidiary, HLBE Pipeline Company (collectively, the “Company”). Given the Company’s control over the operations of Agrinatural and its majority voting interest, the Company consolidates the unaudited financial statements of Agrinatural with its consolidated unaudited financial statements, with the equity and earnings attributed to the remaining 27% non-controlling interest identified separately in the accompanying condensed consolidated balance sheets and statements of operations through December 11, 2019, when the remaining non-controlling interest was acquired. All significant intercompany balances and transactions are eliminated in consolidation. The condensed consolidated unaudited financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted as permitted by such rules and regulations. These condensed consolidated unaudited financial statements and related notes should be read in conjunction with the financial statements and notes thereto included in the Company’s audited consolidated financial statements for the year ended October 31, 2019, contained in the Company’s annual report on Form 10-K. In the opinion of management, the condensed consolidated unaudited financial statements reflect all adjustments consisting of normal recurring accruals that we consider necessary to present fairly the Company’s results of operations, financial position, and cash flows. The results reported in these condensed consolidated unaudited financial statements should not be regarded as necessarily indicative of results that may be expected for any other fiscal period or for the fiscal year.
Accounting Estimates	Accounting Estimates Management uses estimates and assumptions in preparing these condensed consolidated unaudited financial statements in accordance with generally accepted accounting principles. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. The Company uses estimates and assumptions in accounting for significant matters including, among others, the economic lives of property and equipment, the assumptions used in the analysis of impairment of long-lived assets, valuation of commodity derivative instruments, inventory, inventory purchase and sales commitments, and evaluation of railcar rehabilitation costs. The Company periodically reviews estimates and assumptions, and the effects of revisions are reflected in the period in which the revision is made. Actual results could differ from those estimates.
Non-controlling Interest	Non-controlling Interest Amounts recorded as non-controlling interest on the October 31, 2019 balance sheet relates to the net investment by an unrelated party in Agrinatural through December 11, 2019 when the remaining non-controlling interest was acquired. Income and losses are allocated to the members of Agrinatural based on their respective percentage of membership units held. Pursuant to the firm natural gas transportation agreement , Agrinatural will provide natural gas to the plant with a specified price per MMBTU for a term ending on October 31, 2021, with one automatic renewal option to extend the term for an additional five years.
Revenue Recognition	Revenue Recognition Revenue is recognized upon transfer of control of promised products or services to customers in an amount that reflects the consideration we expect to receive in exchange for those products or services. Our contracts primarily consist of agreements with marketing companies and other customers as described below. Our performance obligations consist of the delivery of ethanol, distillers' grains, and corn oil to our customers. Our customers primarily consist of three distinct marketing companies as discussed below. The consideration we receive for these products is fixed or determinable based on current observable market prices at the Chicago Mercantile Exchange, generally, and adjusted for local market differentials. Our contracts have specific delivery modes, rail or truck, and dates. Revenue is recognized when the Company delivers the products to the mode of transportation specified in the contract, at the transaction price established in the contract, net of commissions, fees, and freight. We sell each of the products via different marketing channels as described below. · Ethanol. The Company sells its ethanol via a marketing agreement with Eco-Energy, Inc. Eco-Energy sells one hundred percent of the Company’s ethanol production based on agreements with end users at prices agreed upon mutually among the end user, Eco-Energy and the Company. Our performance obligations consist of our obligation to deliver ethanol to our customers. Our customer contracts consist of orders received from the customer pursuant to a marketing agreement. The marketing agreement calls for control and title to pass to Eco-Energy once a rail car is released to the railroad or a truck is released from the Company’s scales. Revenue is recognized then at the price in the agreement with the end user, net of commissions, freight, and fees. · Distillers’ grains. The Company engages another third-party marketing company, Gavilon, Inc, to sell one hundred percent of the distillers grains it produces at the plant. Gavilon takes title and control once a rail car is released to the railroad or a truck is released from the Company’s scales. Prices are agreed upon between Gavilon and the Company. Our performance obligations consist of our obligation to deliver distillers grains to our customers. Our customer contracts consist of orders received from the customer pursuant to a marketing agreement. Revenue is recognized net of commissions, freight and fees. · Distillers’ corn oil (corn oil). The Company sells one hundred percent of its corn oil production to RPMG, Inc. The process for selling corn oil is the same as our distillers’ grains. RPMG takes title and control once a rail car is released to the railroad or a truck is released from the Company's scales. Prices are agreed upon between RPMG and the Company. Our performance obligations consist of our obligation to deliver corn oil to our customers. Our customer contracts consist of orders received from the customer pursuant to a marketing agreement. Revenue is recognized net of commissions, freight and fees. · Agrinatural generates revenue from the transportation of natural gas to residential and commercial customers. Revenue is recognized at the point when natural gas is delivered at the transaction price established in the contract.
Inventory	Inventory Inventory is stated at the lower of cost or net realizable value. Cost for all inventories is determined using the first in first out method. Net realizable value is the estimated selling prices in the ordinary course of business less reasonably predictable costs of completion, disposal, and transportation. Inventory consists of raw materials, work in process, finished goods, and supplies. Corn is the primary raw material along with other raw materials. Finished goods consist of ethanol, distillers’ grains, and corn oil.
Derivative Instruments	Derivative Instruments From time to time the Company enters into derivative transactions to hedge its exposures to commodity price fluctuations. The Company is required to record these derivatives on the balance sheets at fair value. In order for a derivative to qualify as a hedge, specific criteria must be met and appropriate documentation maintained. Gains and losses from derivatives that do not qualify as hedges, or are undesignated, must be recognized immediately in earnings. If the derivative does qualify as a hedge, depending on the nature of the hedge, changes in the fair value of the derivative will be either offset against the change in fair value of the hedged assets, liabilities, or firm commitments through earnings or recognized in other comprehensive income until the hedged item is recognized in earnings. Changes in the fair value of undesignated derivatives are recorded in earnings. Additionally, the Company is required to evaluate its contracts to determine whether the contracts are derivatives. Certain contracts that literally meet the definition of a derivative may be exempted as “normal purchases or normal sales.” Normal purchases and normal sales are contracts that provide for the purchase or sale of something other than a financial instrument or derivative instrument that will be delivered in quantities expected to be used or sold over a reasonable period in the normal course of business. Contracts that meet the requirements of normal purchases or sales are documented as normal and exempted from accounting and reporting requirements, and therefore, are not marked to market in our condensed consolidated unaudited financial statements. In order to reduce the risks caused by market fluctuations, the Company occasionally hedges its anticipated corn, natural gas, and denaturant purchases and ethanol sales by entering into options and futures contracts. These contracts are used with the intention to fix the purchase price of anticipated requirements for corn in the Company's ethanol production activities and the related sales price of ethanol. The fair value of these contracts is based on quoted prices in active exchange-traded or over-the-counter market conditions. Although the Company believes its commodity derivative positions are economic hedges, none have been formally designated as a hedge for accounting purposes and derivative positions are recorded on the balance sheet at their fair market value, with changes in fair value recognized in current period earnings or losses. The Company does not enter into financial instruments for trading or speculative purposes. The Company has adopted authoritative guidance related to “Derivatives and Hedging,” and has included the required enhanced quantitative and qualitative disclosure about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of gains and losses from derivative instruments, and disclosures about credit-risk-related contingent features in derivative agreements. See further discussion in Note 5.
Reportable Operating Segments	Reportable Operating Segments Accounting Standards Codification (“ASC”) 280, “Segment Reporting”, establishes the standards for reporting information about segments in financial statements. Operating segments are defined as components of an enterprise for which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. Based on the related business nature and expected financial results criteria set forth in ASC 280, the Company has two reportable operating segments for financial reporting purposes. · Ethanol Production . Based on the nature of the products and production process and the expected financial results, the Company’s operations at its ethanol plant, including the production and sale of ethanol and its co-products, are aggregated into one financial reporting segment. · Natural Gas Pipeline . The Company has majority ownership in Agrinatural, through its wholly owned subsidiary, HLBE Pipeline, LLC, and operations of Agrinatural’s natural gas pipeline are aggregated into another financial reporting segment.
Recently Adopted Accounting Pronouncements	Recently Adopted Accounting Pronouncements In February 2016, the Financial Accounting Standards Board (FASB) issued new guidance on accounting for leases under Accounting Standards Codification 842 (ASC 842). Under the new guidance, lessees are required to recognize the following for all leases (with the exception of short-term leases) at the commencement date: (1) a lease liability, which is a lessee’s obligation to make lease payments arising from a lease, measured on a discounted cash flow basis; and (2) a “right of use” asset, which is an asset that represents the lessee’s right to use the specified asset for the lease term. Lease expense under the new guidance is substantially the same as prior to the adoption. See Note 8 for further information.

REVENUE (Tables)

REVENUE (Tables)	3 Months Ended
	Jan. 31, 2020
REVENUE
Schedule of disaggregated revenue by source	Three Months Ended January 31, 2020 (unaudited) Ethanol Production Natural Gas Pipeline Total Ethanol $ $ — $ Distillers’ Grains — Corn Oil — Other — Natural Gas Total Revenues $ $ $ Three Months Ended January 31, 2019 (unaudited) Ethanol Production Natural Gas Pipeline Total Ethanol $ $ — $ Distillers’ Grains — Corn Oil — Other — Natural Gas — Total Revenues $ $ $

INVENTORY (Tables)

INVENTORY (Tables)	3 Months Ended
	Jan. 31, 2020
INVENTORY
Schedule of inventory	January 31, 2020 October 31, 2019 (unaudited) Raw materials $ 1,939,236 $ 932,503 Work in process 696,617 732,243 Finished goods 3,673,218 3,157,429 Supplies 1,442,886 1,454,083 Totals $ 7,751,957 $ 6,276,258

DERIVATIVE INSTRUMENTS (Tables)

DERIVATIVE INSTRUMENTS (Tables)	3 Months Ended
	Jan. 31, 2020
DERIVATIVE INSTRUMENTS
Schedule of derivative instruments	The following table provides detail regarding the Company’s derivative instruments at January 31, 2020, none of which are designated as hedging instruments: Consolidated Balance Sheet Location Assets Liabilities Corn contracts Commodity derivative instruments $ 144,410 $ — Ethanol contracts Commodity derivative instruments — 12,912 Totals $ 144,410 $ 12,912 As of October 31, 2019, the total notional amount of the Company’s outstanding corn derivative instruments was approximately 5,398,000 bushels, comprised of long corn futures positions on 2,131,000 bushels that were entered into to hedge forecasted ethanol sales through July 2020, and short corn futures positions on 3,267,000 bushels that were entered into to hedge forecasted corn purchases through December 2021. Additionally, there are corn options positions of 4,000,000 bushels through March 2020. There may be offsetting positions that are not shown on a net basis that could lower the notional amount of positions outstanding. As of October 31, 2019, the Company had a $52,000 in cash collateral (restricted cash) related to derivatives held by a broker. The following table provides detail regarding the Company’s derivative financial instruments at October 31, 2019, none of which were designated as hedging instruments: Consolidated Balance Sheet Location Assets Liabilities Corn contracts Commodity derivative instruments $ 20,060 $ — Ethanol contracts Commodity derivative instruments 75,763 — Totals $ 95,823 $ —
Schedule of gains (losses) from derivative instruments	Consolidated Statement of Three Months Ended January 31, Operations Location 2020 2019 Corn contracts Cost of goods sold $ (80,768) $ 94,292 Ethanol contracts Revenues (81,852) — Total gain (loss) $ (162,620) $ 94,292

FAIR VALUE MEASUREMENTS (Tables

FAIR VALUE MEASUREMENTS (Tables)	3 Months Ended
	Jan. 31, 2020
FAIR VALUE MEASUREMENTS
Schedule of assets and liabilities accounted for on a recurring basis	The following table sets forth, by level, the Company assets that were accounted for at fair value on a recurring basis at January 31, 2020: Fair Value Measurement Using Carrying Amount in Quoted Prices Significant Other Significant Consolidated Balance Sheet Active Markets Observable Inputs Unobservable inputs Financial Assets: Fair Value (Level 1) (Level 2) (Level 3) Commodity Derivative instruments - Corn $ 144,410 $ 144,410 $ 144,410 $ — $ — Commodity Derivative instruments - Ethanol $ 12,912 $ 12,912 $ 12,912 $ — $ — The following table sets forth, by level, the Company assets and liabilities that were accounted for at fair value on a recurring basis at October 31, 2019: Fair Value Measurement Using Carrying Amount in Quoted Prices in Significant Other Significant Consolidated Active Markets Observable Inputs Unobservable Inputs Financial Assets: Balance Sheet Fair Value (Level 1) (Level 2) (Level 3) Commodity Derivative instruments - Corn $ 20,060 $ 20,060 $ 20,060 $ — $ — Financial Liabilities: Commodity Derivative instruments - Ethanol $ 75,763 $ 75,763 $ 75,763 $ — $ —

DEBT FINANCING (Tables)

DEBT FINANCING (Tables)	3 Months Ended
	Jan. 31, 2020
DEBT FINANCING
Schedule of long-term debt	January 31, 2020 October 31, 2019 (unaudited) Amended revolving term note payable to lending institution, see terms below. $ 69,971 $ — Assessment payable as part of water treatment agreement, due in semi-annual installments of $189,393 with interest at 6.55%, enforceable by statutory lien, with the final payment due in 2021. The Company made deposits for one years' worth of debt service payments of approximately $364,000, which is included with other assets that are held on deposit to be applied with the final payments of the assessment. 634,180 634,180 Totals 704,151 634,180 Less amounts due within one year 333,977 333,977 Net long-term debt $ 370,174 $ 300,203
Schedule of estimated maturities of long-term debt	2020 $ 333,977 2021 300,203 2022 69,971 Total debt $ 704,151

LEASES (Tables)

LEASES (Tables)	3 Months Ended
	Jan. 31, 2020
LEASES
Summary of maturities of operating lease liabilities	Twelve Months Ended January 31, 2021 $ 1,767,000 2022 1,767,000 2023 1,767,000 2024 1,757,250 2025 1,650,000 Thereafter 3,400,000 Totals 12,108,250 Less: Amount representing interest 1,850,825 Lease liabilities $ 10,257,425

BUSINESS SEGMENTS (Tables)

BUSINESS SEGMENTS (Tables)	3 Months Ended
	Jan. 31, 2020
BUSINESS SEGMENTS
Schedule of business segments	Ethanol Production Ethanol and co-product production and sales Natural gas pipeline Ownership and operations of natural gas pipeline
Reconciliation of segment revenue	Three Months Ended January 31, 2020 January 31, 2019 Revenue: (unaudited) (unaudited) Ethanol production $ 25,991,003 $ 25,112,221 Natural gas pipeline 1,136,217 1,039,625 Eliminations (446,940) (454,326) Total Revenue $ 26,680,280 $ 25,697,520
Schedule of operating income (loss) and total assets	Three Months Ended January 31, 2020 January 31, 2019 Operating Income (Loss): (unaudited) (unaudited) Ethanol production $ (2,812,778) $ (2,345,303) Natural gas pipeline 646,298 563,273 Eliminations (182,456) (171,297) Operating Loss $ (2,348,936) $ (1,953,327) January 31, 2020 October 31, 2019 Assets: (unaudited) Ethanol production $ 48,171,952 $ 44,097,379 Natural gas pipeline 12,622,417 12,498,536 Total Assets $ 60,794,369 $ 56,595,915

SUMMARY OF SIGNIFICANT ACCOUN_3

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Nature of Business (Details) gal in Millions	3 Months Ended
	Jan. 31, 2020Optiongal	Dec. 11, 2019	Oct. 31, 2019
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Operating capacity of Ethanol plant owned and operated | gal	72.3
Agrinatural, LLC
Noncontrolling interest
Number of renewal options | Option	1
Term of renewed contract	5 years
Agrinatural, LLC
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Noncontrolling interest, ownership percentage by noncontrolling owners	27.00%
HLBE Pipeline Company, LLC | Agrinatural, LLC
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Ownership percentage		100.00%	73.00%

SUMMARY OF SIGNIFICANT ACCOUN_4

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Revenue Recognition (Details)	3 Months Ended
	Jan. 31, 2020company
CONCENTRATIONS
Number of distinct marketing companies	3
Ethanol | Eco-Energy, Inc. | Revenue from product line
CONCENTRATIONS
Concentration percentage	100.00%
Distillers' Grains | Gavilon, Inc. | Revenue from product line
CONCENTRATIONS
Concentration percentage	100.00%
Corn Oil | RPMG, Inc. | Revenue from product line
CONCENTRATIONS
Concentration percentage	100.00%

SUMMARY OF SIGNIFICANT ACCOUN_5

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Reportable Operating Segments (Details)	3 Months Ended
	Jan. 31, 2020segment
Segment Reporting Information
Number of reportable segments	2
Ethanol production
Segment Reporting Information
Number of reportable segments	1

RISKS AND UNCERTAINTIES (Detail

RISKS AND UNCERTAINTIES (Details)	3 Months Ended
	Jan. 31, 2020
Total revenues | Customer | Ethanol | Minimum
RISKS AND UNCERTAINTIES
Concentration percentage	70.00%
Total revenues | Customer | Ethanol | Maximum
RISKS AND UNCERTAINTIES
Concentration percentage	90.00%
Cost of goods sold | Product | Corn | Minimum
RISKS AND UNCERTAINTIES
Concentration percentage	70.00%
Cost of goods sold | Product | Corn | Maximum
RISKS AND UNCERTAINTIES
Concentration percentage	90.00%

REVENUE - Revenue (Details)

REVENUE - Revenue (Details) - USD ($)	3 Months Ended
	Jan. 31, 2020	Jan. 31, 2019
Revenue Recognition
Total Revenues	$ 26,680,280	$ 25,697,520
Payment terms	10 days
Ethanol production
Revenue Recognition
Total Revenues	$ 25,991,003	25,112,221
Natural gas pipeline
Revenue Recognition
Total Revenues	689,277	585,299
Ethanol
Revenue Recognition
Total Revenues	20,291,884	18,398,152
Ethanol | Ethanol production
Revenue Recognition
Total Revenues	20,291,884	18,398,152
Distillers' Grains
Revenue Recognition
Total Revenues	4,488,804	5,485,355
Distillers' Grains | Ethanol production
Revenue Recognition
Total Revenues	4,488,804	5,485,355
Corn Oil
Revenue Recognition
Total Revenues	914,398	964,411
Corn Oil | Ethanol production
Revenue Recognition
Total Revenues	914,398	964,411
Other
Revenue Recognition
Total Revenues	295,917	264,303
Other | Ethanol production
Revenue Recognition
Total Revenues	295,917	264,303
Natural Gas
Revenue Recognition
Total Revenues	$ 689,277	585,299
Payment terms	20 days
Natural Gas | Ethanol production
Revenue Recognition
Total Revenues	$ 0
Natural Gas | Natural gas pipeline
Revenue Recognition
Total Revenues	$ 689,277	$ 585,299

INVENTORY (Details)

INVENTORY (Details) - USD ($)	3 Months Ended
	Jan. 31, 2020	Jan. 31, 2019	Oct. 31, 2019
Inventory
Raw materials	$ 1,939,236		$ 932,503
Work in process	696,617		732,243
Finished goods	3,673,218		3,157,429
Supplies	1,442,886		1,454,083
Totals	7,751,957		$ 6,276,258
Ethanol
Inventory
Loss on inventory	877,000	$ 981,000
Corn
Inventory
Loss on inventory	$ 126,000	$ 24,000

DERIVATIVE INSTRUMENTS (Details

DERIVATIVE INSTRUMENTS (Details)	3 Months Ended	12 Months Ended
	Jan. 31, 2020USD ($)bu	Oct. 31, 2019USD ($)bu
Derivative instruments
Financial Assets	$ 144,410	$ 95,823
Financial Liabilities	$ 12,912
Corn contracts
Derivative instruments
Notional volume | bu	5,528,000	5,398,000
Corn contracts | Commodity Option [Member]
Derivative instruments
Notional volume | bu	3,530,000	4,000,000
Corn contracts | Long/Purchase
Derivative instruments
Notional volume | bu	391,000	2,131,000
Corn contracts | Short/Sale
Derivative instruments
Notional volume | bu	1,607,000	3,267,000
Derivatives held by a broker
Derivative instruments
Restricted cash	$ 42,000	$ 52,000
Derivatives not designated as hedging instruments
Derivative instruments
Financial Assets	144,410	95,823
Financial Liabilities	12,912
Derivatives not designated as hedging instruments | Corn contracts
Derivative instruments
Financial Assets	144,410	20,060
Derivatives not designated as hedging instruments | Ethanol contracts
Derivative instruments
Financial Assets		$ 75,763
Financial Liabilities	$ 12,912

DERIVATIVE INSTRUMENTS, Gains (

DERIVATIVE INSTRUMENTS, Gains (losses) (Details) - Derivatives not designated as hedging instruments - USD ($)	3 Months Ended
	Jan. 31, 2020	Jan. 31, 2019
Derivative Instruments
Total gain (loss)	$ (162,620)	$ 94,292
Corn contracts | Cost of goods sold
Derivative Instruments
Total gain (loss)	(80,768)	$ 94,292
Ethanol contracts | Revenues.
Derivative Instruments
Total gain (loss)	$ (81,852)

FAIR VALUE MEASUREMENTS (Detail

FAIR VALUE MEASUREMENTS (Details) - USD ($)	Jan. 31, 2020	Oct. 31, 2019
Fair value measurements
Financial Assets	$ 144,410	$ 95,823
Financial Liabilities	12,912
Corn contracts | Carrying Amount
Fair value measurements
Financial Assets	144,410	20,060
Corn contracts | Recurring basis | Fair Value.
Fair value measurements
Financial Assets	144,410	20,060
Corn contracts | Level 1 | Recurring basis | Fair Value.
Fair value measurements
Financial Assets	144,410	20,060
Ethanol contracts | Carrying Amount
Fair value measurements
Financial Assets	12,912
Financial Liabilities		75,763
Ethanol contracts | Recurring basis | Fair Value.
Fair value measurements
Financial Assets	12,912
Financial Liabilities		75,763
Ethanol contracts | Level 1 | Recurring basis | Fair Value.
Fair value measurements
Financial Assets	$ 12,912
Financial Liabilities		$ 75,763

DEBT FINANCING (Details)

DEBT FINANCING (Details) - USD ($)	3 Months Ended	12 Months Ended
	Jan. 31, 2020	Oct. 31, 2019
DEBT FACILITIES
Long-term debt	$ 704,151	$ 634,180
Less amounts due on demand or within one year	333,977	333,977
Net long term debt	370,174	300,203
Amended revolving term note payable to lending institution
DEBT FACILITIES
Long-term debt	69,971
Assessments payable as part of water treatment agreement, with interest at 6.55%, due in 2021
DEBT FACILITIES
Long-term debt	$ 634,180	$ 634,180
Frequency of payment	semi-annual	semi-annual
Payment	$ 189,393	$ 189,393
Interest rate (as a percent)	6.55%	6.55%
Period of worth of debt	1 year	1 year
Deposit on debt service payments	$ 364,000	$ 364,000

DEBT FINANCING - Additional inf

DEBT FINANCING - Additional information (Details) - 2020 Credit Facility	3 Months Ended
	Jan. 31, 2020USD ($)
CoBank
Debt financing
Annual fee	$ 2,500
Amended revolving term note payable to lending institution
Debt financing
Maximum borrowing capacity	$ 8,000,000
Interest rate at end of period (as a percent)	4.76%
Unused commitment fee per annum on the unused portion of debt (as a percent)	0.50%
Amended revolving term note payable to lending institution | One-Month LIBOR
Debt financing
Spread above variable interest rate (as a percent)	3.10%

DEBT FINANCING - Estimated annu

DEBT FINANCING - Estimated annual maturities (Details) - USD ($)	Jan. 31, 2020	Oct. 31, 2019
Estimated maturities of long-term debt
2020	$ 333,977
2021	300,203
2022	69,971
Long-term debt	$ 704,151	$ 634,180

LEASES (Details)

LEASES (Details) - USD ($)	3 Months Ended
	Jan. 31, 2020	Nov. 01, 2019
Leases
Right of use assets	$ 10,257,425
Lease liabilities	$ 10,257,425
Lease, Practical Expedients, Package [true false]	true
Weighted average discount rate	4.87%
Weighted average remaining lease term	4 years
Cost of goods sold
Leases
Operating lease costs	$ 575,000
Minimum
Leases
Remaining term	1 year
Maximum
Leases
Remaining term	7 years
ASU 2016-02 | Restatement
Leases
Right of use assets		$ 10,900,000
Lease liabilities		$ 10,900,000

LEASES - Future minimum lease p

LEASES - Future minimum lease payments (Details)	Jan. 31, 2020USD ($)
Maturities of operating lease liabilities
2021	$ 1,767,000
2022	1,767,000
2023	1,767,000
2024	1,757,250
2025	1,650,000
Thereafter	3,400,000
Totals	12,108,250
Less: Amount representing interest	1,850,825
Lease liabilities	$ 10,257,425

COMMITMENTS AND CONTINGENCIES (

COMMITMENTS AND CONTINGENCIES (Details)	3 Months Ended	12 Months Ended
	Jan. 31, 2020USD ($)itembu	Oct. 31, 2019USD ($)
Commodity Contract
COMMITMENTS AND CONTINGENCIES
Impairment charge	$ 0	$ 0
Corn Forward Contracts | Long/Purchase
COMMITMENTS AND CONTINGENCIES
Notional volume | bu	7,966,000
Ethanol Forward Contracts | Short/Sale
COMMITMENTS AND CONTINGENCIES
Notional value	$ 11,566,000
Anticipated sales (as a percent)	85.00%
Distillers Grains Forward Contracts | Short/Sale
COMMITMENTS AND CONTINGENCIES
Notional value	$ 2,211,000
Anticipated sales (as a percent)	55.00%
Corn Oil Forward Contract | Short/Sale
COMMITMENTS AND CONTINGENCIES
Notional value	$ 289,000
Anticipated sales (as a percent)	75.00%
Rail Car Rehabilitation Agreement
COMMITMENTS AND CONTINGENCIES
Number of hopper rail cars leased | item	50
Estimated total costs to rehabilitate the cars	$ 562,000
Rail Car Rehabilitation Agreement | Cost of goods sold
COMMITMENTS AND CONTINGENCIES
Rehabilitation Cost	$ 11,000

MEMBERS' EQUITY (Details)

MEMBERS' EQUITY (Details)	Dec. 11, 2019USD ($)	Jan. 31, 2020USD ($)Vote / sharesshares	Oct. 31, 2019USD ($)shares
Members' Equity
Common Unit, Issued		77,932,107	77,932,107
Minimum number of units held to be member		2,500
Number of votes per unit | Vote / shares		1
Remaining non-controlling interest | $	$ 2,225,000	$ 2,225,000
Other assets
Members' Equity
Deposit Assets | $			$ 225,000
Maximum
Members' Equity
Common Unit, Authorized		80,000,000
Class A units
Members' Equity
Common Unit, Authorized		65,000,000
Common Unit, Issued		62,932,107	62,932,107
Class B units
Members' Equity
Common Unit, Authorized		15,000,000
Common Unit, Issued		15,000,000	15,000,000

RELATED PARTY TRANSACTIONS - (D

RELATED PARTY TRANSACTIONS - (Details)	3 Months Ended
	Jan. 31, 2020USD ($)item	Jan. 31, 2019USD ($)
Agrinatural, LLC
RELATED PARTY TRANSACTIONS
Noncontrolling interest, ownership percentage by noncontrolling owners	27.00%
Board Members | Corn
RELATED PARTY TRANSACTIONS
Amount purchased from related party	$ 5,065,000	$ 1,949,000
Granite Falls Energy LLC Excluding Heron Lake Bioenergy LLC
RELATED PARTY TRANSACTIONS
Percentage of costs for three management positions incurred by GFE paid by the Company	50.00%
Number of management positions of GFE partially paid for by the Company | item	3
Renewal term	1 year
Period of written notice for termination prior to renewal of agreement	90 days
Amount of related party transaction	$ 123,000	$ 121,000

BUSINESS SEGMENTS (Details)

BUSINESS SEGMENTS (Details)	3 Months Ended
	Jan. 31, 2020USD ($)segment	Jan. 31, 2019USD ($)	Oct. 31, 2019USD ($)
Segment Reporting Information
Number of operating segments | segment	2
Total Revenues	$ 26,680,280	$ 25,697,520
Operating Income (Loss)	(2,348,936)	(1,953,327)
Assets	60,794,369		$ 56,595,915
Ethanol production
Segment Reporting Information
Total Revenues	25,991,003	25,112,221
Assets	48,171,952		44,097,379
Natural gas pipeline
Segment Reporting Information
Total Revenues	689,277	585,299
Assets	12,622,417		$ 12,498,536
Operating Segments | Ethanol production
Segment Reporting Information
Total Revenues	25,991,003	25,112,221
Operating Income (Loss)	(2,812,778)	(2,345,303)
Operating Segments | Natural gas pipeline
Segment Reporting Information
Total Revenues	1,136,217	1,039,625
Operating Income (Loss)	646,298	563,273
Intersegment Eliminations
Segment Reporting Information
Total Revenues	(446,940)	(454,326)
Operating Income (Loss)	$ (182,456)	$ (171,297)