Heron Lake BioEnergy (HLBYL) 10-Q 16 Mar 16 2016 Q1 Quarterly report Financial data

Document and Entity Information

Document and Entity Information - shares	3 Months Ended
	Jan. 31, 2016	Mar. 16, 2016
Entity Registrant Name	Heron Lake BioEnergy, LLC
Entity Central Index Key	1,286,964
Current Fiscal Year End Date	--10-31
Entity Filer Category	Non-accelerated Filer
Document Type	10-Q
Document Period End Date	Jan. 31, 2016
Document Fiscal Year Focus	2,016
Document Fiscal Period Focus (Q1,Q2,Q3,FY)	Q1
Amendment Flag	false
Entity Current Reporting Status	Yes
Class A
Common stock, shares outstanding		62,932,107
Class B
Common stock, shares outstanding		15,000,000

Consolidated Balance Sheets

Consolidated Balance Sheets - USD ($)	Jan. 31, 2016	Oct. 31, 2015
Current Assets
Cash	$ 1,166,542	$ 1,126,283
Restricted cash	363,291
Accounts receivable	4,747,017	5,671,181
Inventory	5,492,522	5,259,346
Derivative Assets, Current	126,238	677,149
Prepaid expenses and other current assets	334,523	158,473
Total current assets	12,230,133	12,892,432
Property, Plant and Equipment, Net	52,342,605	52,984,550
Other Assets
Other intangible assets, net	112,611	122,148
Other assets	697,254	697,254
Total other assets	809,865	819,402
Total Assets	65,382,603	66,696,384
Current Liabilities
Current maturities of long-term debt	584,674	517,957
Bank Overdrafts	5,341,768	1,836,682
Accounts payable	2,056,012	3,913,714
Accrued expenses	254,435	187,750
Total current liabilities	8,236,889	6,456,103
Long-Term Debt, net of current maturities	7,536,806	6,711,975
Members' Equity
Members' Equity Attributable to Heron Lake BioEnergy, LLC: 64,812,107 and 38,622,107 multiple classes of units issued and outstanding at October 31, 2013 and 2012, respectively	48,524,340	52,446,500
Non-controlling interest	1,084,568	1,081,806
Total members' equity	49,608,908	53,528,306
Total Liabilities and Members' Equity	$ 65,382,603	$ 66,696,384

Consolidated Balance Sheets (Pa

Consolidated Balance Sheets (Parenthetical) - shares	Jan. 31, 2016	Oct. 31, 2015
Statement of Financial Position [Abstract]
Members' Equity, units issued	77,932,107	77,932,107
Members' Equity, units outstanding	77,932,107	77,932,107

Consolidated Statements of Oper

Consolidated Statements of Operations - USD ($)	1 Months Ended		3 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Jan. 31, 2016	Jan. 31, 2015
Income Statement [Abstract]
Revenues			$ 26,588,565	$ 27,177,449
Cost of Goods Sold			25,730,984	25,330,399
Gross Profit			857,581	1,847,050
Operating Expenses			(808,634)	(880,382)
Operating Income			48,947	966,668
Other Income (Expense)
Interest income			253
Interest expense			(58,674)	(48,066)
Other income			67,678	24,251
Total other income (expense), net			9,257	(23,815)
Net Income			58,204	942,853
Less: Net Income Attributable to Non-controlling Interest			83,759	63,597
Net Income (Loss) Attributable to Heron Lake BioEnergy, LLC			$ (25,555)	$ 879,256
Weighted Average Units Outstanding?Basic and Diluted (Class A and B)			77,932,107	77,932,107
Net Income (Loss) Per Unit Attributable to Heron Lake BioEnergy, LLC - Basic and Diluted (Class A and B)			$ 0	$ 0.01
Distributions Per Unit (Class A and B)	$ 0.05	$ 0.12	$ 0.05	$ 0.12

Consolidated Statements of Cash

Consolidated Statements of Cash Flows - USD ($)	3 Months Ended
	Jan. 31, 2016	Jan. 31, 2015
Cash Flow From Operating Activities
Net income	$ 58,204	$ 942,853
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	1,184,553	1,133,293
Change in fair value of commodity derivative instruments	(253,684)	(14,038)
Change in operating assets and liabilities:
Restricted cash	(363,291)	95,686
Accounts receivable	924,164	3,224,572
Inventory	(233,176)	(959,204)
Prepaid expenses and other current assets	(176,050)	(147,244)
Accounts payable	(1,672,711)	2,161,114
Accrued expenses	66,685	45,455
Commodity derivative instruments	804,595	93,838
Net cash provided by (used in) operating activities	339,289	6,576,325
Cash Flows from Investing Activities
Capital expenditures	(718,062)	(3,897,444)
Net cash used in investing activities	(718,062)	(3,897,444)
Cash Flows from Financing Activities
Checks drawn in excess of bank balance	(3,505,086)	(3,425,828)
Proceeds from long-term debt	4,613,122	3,354,979
Payments on long-term debt	(3,721,574)	(145,567)
Distributions to members	(3,896,605)	(9,351,850)
Distributions to non-controlling interest	(80,997)
Net cash provided by (used in) financing activities	419,032	(2,716,610)
Net increase (decrease) in cash	40,259	(37,729)
Cash - Beginning of period	1,126,283	662,128
Cash - End of period	1,166,542	624,399
Supplemental Disclosure of Cash Flow Information
Interest expense	58,674	63,531
Supplemental Disclosure of Non-Cash Investing, Operating and Financing Activities
Capital expenditures included in accounts payable	$ 164,491	$ 272,954

SUMMARY OF SIGNIFICANT ACCOUNTI

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES	3 Months Ended
	Jan. 31, 2016
Accounting Policies [Abstract]
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES	1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation and Principles of Consolidation The accompanying condensed consolidated unaudited financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. 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, 2015, 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 quarter or for the fiscal year. Nature of Business The Company owns and operates an ethanol plan near the Heron Lake, Minnesota with a permitted capacity of approximately 72.3 million gallons per year of undenatured ethanol on a twelve month rolling sum basis. In addition, the Company produces and sells distillers’ grains with solubles and corn oil as co-products of ethanol production. Additionally, the Company, through a majority owned subsidiary, operates a natural gas pipeline that provides natural gas to the Company's ethanol production facility and other customers. Principles of Consolidation The condensed consolidated unaudited financial statements as of January 31, 2016 include the accounts of Heron Lake BioEnergy, LLC and its wholly owned subsidiary, HLBE Pipeline Company, LLC, collectively the “Company”. HLBE Pipeline Company, LLC owns 73% of Agrinatural Gas, LLC (“Agrinatural”). 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 (loss) attributed to the remaining 27% noncontrolling interest identified separately in the accompanying condensed consolidated balance sheets and statements of operations. All significant intercompany balances and transactions are eliminated in consolidation. 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 analysis of impairment of long-lived assets and valuation of commodity derivative instruments, inventory, and inventory purchase and sales commitments. 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. Noncontrolling Interest Amounts recorded as noncontrolling interest on the balance sheets relate to the net investment by an unrelated party in Agrinatural. Income and losses are allocated to the members of Agrinatural based on their respective percentage of membership units held. Agrinatural will provide natural gas to the plant with a specified price per MMBTU for an initial term of 5 years expiring October 31, 2016, with two automatic renewal options for five year periods. On July 1, 2015, the Company entered into an amendment of its natural gas transportation agreement dated May 13, 2011 with Agrinatural, in which the Company agreed on an early exercise of one of the two automatic five-year term renewals thereby extending the term of the transportation agreement to October 31, 2021. Revenue Recognition The Company generally sells ethanol and related products pursuant to marketing agreements. Revenues from the production of ethanol and the related products are recorded when the customer has taken title and assumed the risks and rewards of ownership, prices are fixed or determinable and collectability is reasonably assured. Title is generally assumed by the buyer at the Company’s shipping point. In accordance with the Company's agreements for the marketing and sale of ethanol and related products, marketing fees and commissions due to the marketers are deducted from the gross sales price as earned. These fees and commissions are recorded net of revenues as they do not provide an identifiable benefit that is sufficiently separable from the sale of ethanol and related products. Shipping costs incurred by the Company in the sale of ethanol are not specifically identifiable and as a result, are recorded based on the net selling price reported to the Company from the marketer. Shipping costs incurred by the Company in the sale of ethanol related products are included in cost of goods sold . Inventory Inventory is stated at the lower of cost or net realizable value in accordance with the Financial Accounting Standards Board (FASB) Accounting Standards Update (ASU) No. 2015-11 issued in July 2015. Cost for all inventories is determined using the first in first out method (FIFO). 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 spare parts. Corn is the primary raw material along with other raw materials. Finished goods consist of ethanol, distillers' grains, and corn oil. Correction Of An Immaterial Error The Company revised the condensed consolidated unaudited statement of cash flows for the three months ended January 31, 2015, to correct for a non-cash acquisition of property and equipment resulting in an increase in cash provided by operating activities of approximately $ 3,359,225 and a corresponding decrease in net cash provided by investing activities.

RISKS AND UNCERTAINTIES

RISKS AND UNCERTAINTIES	3 Months Ended
	Jan. 31, 2016
Risks and Uncertainties [Abstract]
RISKS AND UNCERTAINTIES	2. RISKS AND UNCERTAINTIES 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 75% - 85% of total revenues and corn costs average 75% - 90% of cost of goods sold. The Company’s operating and financial performance is largely driven by the prices at which it sells ethanol and the net expense 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 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 products 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.

INVENTORY

INVENTORY	3 Months Ended
	Jan. 31, 2016
Inventory Disclosure [Abstract]
INVENTORY	3. INVENTORY Inventory consisted of the following: January 31, 2016 October 31, 2015 (Unaudited) Raw materials $ $ Work in process Finished Goods Supplies Totals $ $ 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. Based on the lower of cost or net realizable value analysis, the Company recorded a loss on ethanol inventories of approximately $261,000 and $0 for the three month periods ended January 31, 2016 and 2015, respectively .

DERIVATIVE INSTRUMENTS

DERIVATIVE INSTRUMENTS	3 Months Ended
	Jan. 31, 2016
Derivative Instruments and Hedging Activities Disclosure [Abstract]
DERIVATIVE INSTRUMENTS	4. DERIVATIVE INSTRUMENTS As of January 31, 2016, the total notional amount of the Company’s outstanding corn derivativ e instruments was approximately; 2,995,000 bushels, comprised of long corn positions on 500,000 bushels, and short corn positions on 2,455,000 bushels, that were entered into to hedge forecasted corn purchases through December 2016. 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, 2016, the total notional amount of the Company’s outstanding ethanol derivative instruments was approximately 840,000 gallons that were entered into to hedge forecasted ethanol sales through March 2016. The following tables provide details regarding the Company’s derivative instruments at January 31, 2016, none of which are designated as hedging instruments: Balance Sheet Location Assets Liabilities Corn contracts Commodity derivative instruments $ $ — Ethanol contracts Commodity derivative instruments — Totals $ $ — As of October 31, 2015, the total notional amount of the Company's outstanding corn derivative instruments was approximately 1,875,000 bushels, comprised of long corn positions on 360,000 bushels, and short corn positions on 1,515,000 bushels, that were hedge forecasted corn purchases through July 2016. The following tables provide details regarding the Company’s derivative instruments at October 31, 2015, none of which are designated as hedging instruments: Balance Sheet Location Assets Liabilities Corn contracts Commodity derivative instruments $ $ — The following tables provide details regarding the gains and (losses) from Company’s derivative instruments in its consolidated statements of operations, none of which are designated as hedging instruments: Statement of Three Months Ended January 31, Operations location 2016 2015 Corn contracts Cost of goods sold $ $ Ethanol contracts Revenues — Natural gas contracts Cost of goods sold — Totals $ $ As of January 31, 2016, the Company had approximately $363,000 of cash collateral (restricted cash) related to corn derivatives held by a broker. At October 31, 2015, the Company had no cash collateral (restricted cash) related to derivatives held by a broker.

FAIR VALUE

FAIR VALUE	3 Months Ended
	Jan. 31, 2016
Fair Value Disclosures [Abstract]
FAIR VALUE MEASUREMENTS	5. FAIR VALUE The following table provides information on those derivative assets measured at fair value on a recurring basis at January 31, 2016: Fair Value Measurement Using Carrying Amount Quoted Prices in Significant Other Unobservable in Balance Sheet Active Markets Observable Inputs inputs Financial Assets January 31, 2016 (Level 1) (Level 2) (Level 3) Commodity Derivative instruments $ $ $ — $ — The following table provides information on those derivative assets measured at fair value on a recurring basis at October 31, 2015: Fair Value Measurement Using Significant Carrying Amount Quoted Prices in Significant Other Unobservable in Balance Sheet Active Markets Observable Inputs inputs Financial Assets October 31, 2015 (Level 1) (Level 2) (Level 3) Commodity Derivative instruments $ $ $ — $ — The Company determines 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.

DEBT FINANCING

DEBT FINANCING	3 Months Ended
	Jan. 31, 2016
Debt Disclosure [Abstract]
DEBT FACILITIES	6. DEBT FINANCING Debt financing consists of the following: January 31, 2016 October 31, 2015 (unaudited) Revolving term loan to lending institution, see terms below $ $ Assessments payable Note payable to electrical company Note payable to noncontrolling interest member of Agrinatural Total Less amounts due within one year Net long-term debt $ $ Revolving Term Loan The Company has a revolving term loan with a lender initially tota ling $28,000,000 . Amounts borrowed by the Company under the revolving term loan and repaid or prepaid may be re-borrowed at any time prior to the March 1, 2022 maturity date. Under the terms of the credit facility, the revolving term loan commitment declines by $3,500,000 annually, starting March 1, 2015 and continues each anniversary thereafter until maturity. Therefore, the amount available on this facility at January 31, 2016 was $24,500,000 and w as reduced again at March 1, 2016 to $21,000,000 . Interest on the revolving term loan accrues at a variable rate equal to 3.25% above the One-Month London Interbank Offered Rate (“ LIBOR ”) Index rate. The Company may elect to enter into a fixed interest rate on this loan at various times throughout the term of the loan as provided in the loan agreements. The Company also agreed to pay an unused commitment fee on the unused portion of the revolving term loan commitment at the rate of 0.50% per annum. The revolving term loan is subject to a prepayment fee for any prepayment on the term loan prior to July 1, 2016 due to refinancing. The credit facility contains customary covenants. The loan is secured by substantially all of the Company assets including a subsidiary guarantee. The outstanding balance on the revolving term loan totaled approximately $5,776,000 and $4,823,000 at January 31, 2016, and October 31, 2015, respectively. The interest rate on the revolving term loan was 3.69% and 3.45% at January 31, 2016, and October 31, 2015, respectively. As part of the credit facility closing, the Company entered into an administrative agency agreement with CoBank, ACP (“CoBank”). CoBank purchased a participation interest in the AgStar loans and was appointed the administrative agent for the purpose of servicing the loans. As a result, CoBank will act as the agent for AgStar with respect to the credit facility. In October 2003, the Company entered into an industrial water supply development and distribution agreement with the City of Heron Lake, Jackson County, and Minnesota Soybean Processors. In consideration of this agreement, the Company and Minnesota Soybean Processors are allocated equally the debt service on $735,000 in water revenue bonds that were issued by the City to support this project that mature in February 2019. The parties have agreed that prior to the scheduled expiration of the agreement, they will negotiate in good faith to replace the agreement with a further agreement regarding the wells and related facilities. In May 2006, the Company entered into an industrial water supply treatment agreement with the City of Heron Lake and Jackson County. Under this agreement, the Company pays monthly installments over 24 months starting January 1, 2007 equal to one years' debt service on approximately $3.6 million in water revenue bonds, which will be returned to the Company if any funds remain after final payment in full on the bonds and assuming we comply with all payment obligations under the agreement. As of January 31, 2016 and October 31, 2015, there was a total of approximately $1,954,000 and $1,963,000 , respectively, in outstanding water revenue bonds. The Company classifies its obligations under these bonds as assessments payable. The interest rates on the bonds range from 0.50% to 8.73% . Estimated annual maturities of debt at January 31, 2016 are as follows based on the most recent debt agreements: 2016 $ 2017 2018 2019 2020 After 2020 Total debt $

COMMITMENTS AND CONTINGENCIES

COMMITMENTS AND CONTINGENCIES	3 Months Ended
	Jan. 31, 2016
Commitments and Contingencies Disclosure [Abstract]
COMMITMENTS AND CONTINGENCIES	7. COMMITMENTS AND CONTINGENCIES Forward Contracts At January 31, 2016, the Company had cash and basis contracts for forward corn purchase commitments for approximately 4,597,000 bushels for deliveries through December 2016. At January 31, 2016, the Company had forward contracts to sell approximately $2,100,000 of ethanol for various delivery periods from February 2016 through March 2016 which approximates 15% of its anticipated ethanol sales during that period. At January 31, 2016, the Company had forward contracts to sell approximately $95,000 of distillers' grains for delivery through February 2016. At January 31, 2016, the Company had forward contracts to sell approximately $391,000 of corn oil for delivery through May 2016. Construction in Progress On July 31, 2015, the Company placed a purchase order with an unrelated party for a new regenerative thermal oxidizer and made a down payment on the equipment of approximately $375,000 to secure the order. The total commitment approximates $1,900,000 and is expected to be completed during the latter part of fiscal year 2016.

MEMBERS' EQUITY

MEMBERS' EQUITY	3 Months Ended
	Jan. 31, 2016
Equity [Abstract]
MEMBERS' EQUITY	8. MEMBERS’ EQUITY The Company is authorized to issue 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 the Company 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 our Board of Governors to become members. Members are entitled to one vote for each unit held. Subject to the Member Control Agreement, all units share equally in the profits and losses and distributions of assets on a per unit basis. The Company 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 both January 31, 2016 and October 31, 2015. In December 2015, the Board of Governors declared a cash distribution of $0.05 per unit, or approximately $3,897,000 . The distribution was paid in January 2016. In December 2014, the Board of Governors declared a cash distribution of $0.12 per unit, or approximately $9,352,000 . The distribution was paid in January 2015.

LEASES

LEASES	3 Months Ended
	Jan. 31, 2016
Leases [Abstract]
LEASES	9. LEASES The Company leases equipment, primarily rail cars, under operating leases through 2017. Rent expense for these leases was approximately $533,000 and $519,000 for the three months ended January 31, 2016 and 2015, respectively.

RELATED PARTY TRANSACTIONS

RELATED PARTY TRANSACTIONS	3 Months Ended
	Jan. 31, 2016
Related Party Transactions [Abstract]
RELATED PARTY TRANSACTIONS	1 0 . RELATED PARTY TRANSACTIONS On March 27, 2015, Agrinatural executed a new management and operating agreement with Swan Engineering, Inc. ("SEI"). SEI, together with an unrelated third party owns Rural Energy Solutions, LLC ("RES"), the 27% minority owner of Agrinatural. Under the new management and operating agreement, SEI will continue to provide Agrinatural with day-to-day management and operation of Agrinatural's pipeline distribution business. In exchange for these services, Agrinatural will pay SEI an aggregate management fee equal to the fixed monthly base fee plus the variable customer management fee based on the number of customers served on the pipeline less the agreed monthly fee reduction of $4,500 . The Company paid approximately $44,000 and $56,000 for the monthly base fee and variable customer management fee, for the three month periods ended January 31, 2016 and 2015, respectively. The new management and operating agreement with SEI expires July 1, 2019, unless earlier terminated for cause as defined in the agreement. On March 27, 2015, Agrinatural also executed a new project management agreement with SEI. Pursuant to the new project management agreement, SEI will continue to supervise all of Agrinatural's pipeline construction projects. These projects are constructed by unrelated third-party pipeline construction companies. Under the new project management agreement, Agrinatural will pay SEI a total of 10% of the actual capital expenditures for construction projects approved by Agrinatural's Board of Directors, excluding capitalized marketing costs. The Company recorded approximately $1,000 and $37,000 for the project management fees for the three month periods ended January 31, 2016 and 2015, respectively. The new project management with SEI expires June 30, 2019, unless earlier terminated for cause as defined in the agreement.

BUSINESS SEGMENTS

BUSINESS SEGMENTS	3 Months Ended
	Jan. 31, 2016
Segment Reporting [Abstract]
BUSINESS SEGMENTS	11. BUSINESS SEGMENTS Based on the growth of the Company’s natural gas pipeline subsidiary during the fourth quarter of fiscal 2014, the Company has determined they have two operating segments. 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, and total assets: Three Months Ended Three Months Ended January 31, 2016 January 31, 2015 Revenue: (Unaudited) (Unaudited) Ethanol production $ $ Natural gas pipeline Eliminations Total Revenue $ $ Operating Income (Loss): Ethanol production $ $ Natural gas pipeline Eliminations Operating Income $ $ January 31, 2016 October 31, 2015 Total Assets: (Unaudited) Ethanol production $ $ Natural gas pipeline Total assets $ $

SUMMARY OF SIGNIFICANT ACCOUN17

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (Policies)	3 Months Ended
	Jan. 31, 2016
Accounting Policies [Abstract]
Basis of Presentation and Principles of Consolidation	Basis of Presentation and Principles of Consolidation The accompanying condensed consolidated unaudited financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. 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, 2015, 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 quarter or for the fiscal year.
Nature of Business	Nature of Business The Company owns and operates an ethanol plan near the Heron Lake, Minnesota with a permitted capacity of approximately 72.3 million gallons per year of undenatured ethanol on a twelve month rolling sum basis. In addition, the Company produces and sells distillers’ grains with solubles and corn oil as co-products of ethanol production. Additionally, the Company, through a majority owned subsidiary, operates a natural gas pipeline that provides natural gas to the Company's ethanol production facility and other customers.
Principles of Consolidation	Principles of Consolidation The condensed consolidated unaudited financial statements as of January 31, 2016 include the accounts of Heron Lake BioEnergy, LLC and its wholly owned subsidiary, HLBE Pipeline Company, LLC, collectively the “Company”. HLBE Pipeline Company, LLC owns 73% of Agrinatural Gas, LLC (“Agrinatural”). 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 (loss) attributed to the remaining 27% noncontrolling interest identified separately in the accompanying condensed consolidated balance sheets and statements of operations. All significant intercompany balances and transactions are eliminated in consolidation.
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 analysis of impairment of long-lived assets and valuation of commodity derivative instruments, inventory, and inventory purchase and sales commitments. 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.
Noncontrolling Interest	Noncontrolling Interest Amounts recorded as noncontrolling interest on the balance sheets relate to the net investment by an unrelated party in Agrinatural. Income and losses are allocated to the members of Agrinatural based on their respective percentage of membership units held. Agrinatural will provide natural gas to the plant with a specified price per MMBTU for an initial term of 5 years expiring October 31, 2016, with two automatic renewal options for five year periods. On July 1, 2015, the Company entered into an amendment of its natural gas transportation agreement dated May 13, 2011 with Agrinatural, in which the Company agreed on an early exercise of one of the two automatic five-year term renewals thereby extending the term of the transportation agreement to October 31, 2021.
Revenue Recognition	Revenue Recognition The Company generally sells ethanol and related products pursuant to marketing agreements. Revenues from the production of ethanol and the related products are recorded when the customer has taken title and assumed the risks and rewards of ownership, prices are fixed or determinable and collectability is reasonably assured. Title is generally assumed by the buyer at the Company’s shipping point. In accordance with the Company's agreements for the marketing and sale of ethanol and related products, marketing fees and commissions due to the marketers are deducted from the gross sales price as earned. These fees and commissions are recorded net of revenues as they do not provide an identifiable benefit that is sufficiently separable from the sale of ethanol and related products. Shipping costs incurred by the Company in the sale of ethanol are not specifically identifiable and as a result, are recorded based on the net selling price reported to the Company from the marketer. Shipping costs incurred by the Company in the sale of ethanol related products are included in cost of goods sold
Inventory	Inventory Inventory is stated at the lower of cost or net realizable value in accordance with the Financial Accounting Standards Board (FASB) Accounting Standards Update (ASU) No. 2015-11 issued in July 2015. Cost for all inventories is determined using the first in first out method (FIFO). 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 spare parts. Corn is the primary raw material along with other raw materials. Finished goods consist of ethanol, distillers' grains, and corn oil.
Correction Of An Immaterial Error	Correction Of An Immaterial Error The Company revised the condensed consolidated unaudited statement of cash flows for the three months ended January 31, 2015, to correct for a non-cash acquisition of property and equipment resulting in an increase in cash provided by operating activities of approximately $ 3,359,225 and a corresponding decrease in net cash provided by investing activities.

INVENTORY (Tables)

INVENTORY (Tables)	3 Months Ended
	Jan. 31, 2016
Inventory Disclosure [Abstract]
Schedule of inventory	January 31, 2016 October 31, 2015 (Unaudited) Raw materials $ $ Work in process Finished Goods Supplies Totals $ $

DERIVATIVE INSTRUMENTS (Tables)

DERIVATIVE INSTRUMENTS (Tables)	3 Months Ended
	Jan. 31, 2016
Derivative Instruments and Hedging Activities Disclosure [Abstract]
Schedule of Derivative Instruments [Table Text Block]	The following tables provide details regarding the Company’s derivative instruments at January 31, 2016, none of which are designated as hedging instruments: Balance Sheet Location Assets Liabilities Corn contracts Commodity derivative instruments $ $ — Ethanol contracts Commodity derivative instruments — Totals $ $ — As of October 31, 2015, the total notional amount of the Company's outstanding corn derivative instruments was approximately 1,875,000 bushels, comprised of long corn positions on 360,000 bushels, and short corn positions on 1,515,000 bushels, that were hedge forecasted corn purchases through July 2016. The following tables provide details regarding the Company’s derivative instruments at October 31, 2015, none of which are designated as hedging instruments: Balance Sheet Location Assets Liabilities Corn contracts Commodity derivative instruments $ $ —
Schedule of gains (losses) from derivative instruments included in the Condensed Consolidated Statements of Operations	The following tables provide details regarding the gains and (losses) from Company’s derivative instruments in its consolidated statements of operations, none of which are designated as hedging instruments: Statement of Three Months Ended January 31, Operations location 2016 2015 Corn contracts Cost of goods sold $ $ Ethanol contracts Revenues — Natural gas contracts Cost of goods sold — Totals $ $

FAIR VALUE (Tables)

FAIR VALUE (Tables)	3 Months Ended
	Jan. 31, 2016
Fair Value Disclosures [Abstract]
Schedule of fair value of assets measured on a non-recurring basis	The following table provides information on those derivative assets measured at fair value on a recurring basis at January 31, 2016: Fair Value Measurement Using Carrying Amount Quoted Prices in Significant Other Unobservable in Balance Sheet Active Markets Observable Inputs inputs Financial Assets January 31, 2016 (Level 1) (Level 2) (Level 3) Commodity Derivative instruments $ $ $ — $ — The following table provides information on those derivative assets measured at fair value on a recurring basis at October 31, 2015: Fair Value Measurement Using Significant Carrying Amount Quoted Prices in Significant Other Unobservable in Balance Sheet Active Markets Observable Inputs inputs Financial Assets October 31, 2015 (Level 1) (Level 2) (Level 3) Commodity Derivative instruments $ $ $ — $ —

DEBT FINANCING (Tables)

DEBT FINANCING (Tables)	3 Months Ended
	Jan. 31, 2016
Debt Disclosure [Abstract]
Schedule of Long-term debt	Debt financing consists of the following: January 31, 2016 October 31, 2015 (unaudited) Revolving term loan to lending institution, see terms below $ $ Assessments payable Note payable to electrical company Note payable to noncontrolling interest member of Agrinatural Total Less amounts due within one year Net long-term debt $ $
Schedule of estimated maturities of long-term debt	Estimated annual maturities of debt at January 31, 2016 are as follows based on the most recent debt agreements: 2016 $ 2017 2018 2019 2020 After 2020 Total debt $

BUSINESS SEGMENTS (Tables)

BUSINESS SEGMENTS (Tables)	3 Months Ended
	Jan. 31, 2016
Segment Reporting [Abstract]
Schedule of Primary Business Segments [Table Text Block]	Ethanol Production Ethanol and co-product production and sales Natural gas pipeline Ownership and operations of natural gas pipeline
Schedule of Segment Reporting Information, by Segment [Table Text Block]	The following tables summarize financial information by segment and provide a reconciliation of segment revenue, contribution to operating income, and total assets: Three Months Ended Three Months Ended January 31, 2016 January 31, 2015 Revenue: (Unaudited) (Unaudited) Ethanol production $ $ Natural gas pipeline Eliminations Total Revenue $ $ Operating Income (Loss): Ethanol production $ $ Natural gas pipeline Eliminations Operating Income $ $ January 31, 2016 October 31, 2015 Total Assets: (Unaudited) Ethanol production $ $ Natural gas pipeline Total assets $ $

SUMMARY OF SIGNIFICANT ACCOUN23

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (Details) gal in Millions	3 Months Ended
	Jan. 31, 2016USD ($)Optiongal
Accounting Policies [Abstract]
Operating capacity of Ethanol plant owned and operated | gal	72.3
Summary of significant accounting policies
Initial term of providing natural gas to the plant	5 years
Number of renewal options | Option	2
Term of renewed contract	5 years
Prior Period Reclassification Adjustment | $	$ 3,359,225
HLBE Pipeline Company, LLC
Summary of significant accounting policies
Percentage of Agrinatural Gas, LLC owned by HLBE Pipeline Company, LLC	73.00%
Agrinatural Gas
Summary of significant accounting policies
Remaining percentage in Agrinatural Gas, LLC included as noncontrolling interest (as a percent)	27.00%

RISKS AND UNCERTAINTIES (Detail

RISKS AND UNCERTAINTIES (Details)	3 Months Ended
	Jan. 31, 2016
Total revenues | Ethanol | Minimum
RISKS AND UNCERTAINTIES
Average percentage of total sales or cost of goods sold	75.00%
Total revenues | Ethanol | Maximum
RISKS AND UNCERTAINTIES
Average percentage of total sales or cost of goods sold	85.00%
Cost of goods sold | Corn | Minimum
RISKS AND UNCERTAINTIES
Average percentage of total sales or cost of goods sold	75.00%
Cost of goods sold | Corn | Maximum
RISKS AND UNCERTAINTIES
Average percentage of total sales or cost of goods sold	90.00%

INVENTORY (Details)

INVENTORY (Details) - USD ($)	3 Months Ended
	Jan. 31, 2016	Jan. 31, 2015	Oct. 31, 2015
Inventory Disclosure [Abstract]
Raw materials	$ 1,279,422		$ 1,800,320
Work in process	695,199		693,844
Finished Goods	2,652,533		1,829,311
Supplies	865,368		935,871
Totals	5,492,522		$ 5,259,346
Loss on inventory	$ 261,000	$ 0

DERIVATIVE INSTRUMENTS (Details

DERIVATIVE INSTRUMENTS (Details)	3 Months Ended
	Jan. 31, 2016USD ($)item	Jan. 31, 2015USD ($)	Oct. 31, 2015USD ($)item
Derivative Instruments
Derivative Asset, Current	$ 126,238		$ 677,149
Restricted Cash and Investments, Current	363,000		$ 0
Corn contracts
Derivative Instruments
Derivative Asset, Current	$ 111,363
Derivative, Nonmonetary Notional Amount | item	2,995,000		1,875,000
Ethanol contracts
Derivative Instruments
Derivative Asset, Current	$ 14,875
Derivative, Nonmonetary Notional Amount | item	840,000
Derivatives not designated as hedging instruments
Derivative Instruments
Gains and (losses) from derivative instruments	$ 253,684	$ 14,038
Derivatives not designated as hedging instruments | Cost of goods sold
Derivative Instruments
Gains and (losses) from derivative instruments	187,387	$ 14,038
Derivatives not designated as hedging instruments | Revenues
Derivative Instruments
Gains and (losses) from derivative instruments	44,747
Derivatives not designated as hedging instruments | Natural gas contracts | Cost of goods sold
Derivative Instruments
Gains and (losses) from derivative instruments	$ 21,550
Long position | Corn contracts
Derivative Instruments
Derivative, Nonmonetary Notional Amount | item	500,000		360,000
Short position | Corn contracts
Derivative Instruments
Derivative, Nonmonetary Notional Amount | item	2,455,000		1,515,000

FAIR VALUE MEASUREMENTS (Detail

FAIR VALUE MEASUREMENTS (Details) - USD ($)	Jan. 31, 2016	Oct. 31, 2015
Fair value measurements
Derivative Assets, Current	$ 126,238	$ 677,149
Level 1
Fair value measurements
Derivative Asset, Fair Value, Gross Asset	$ 126,238	$ 677,149

DEBT FINANCING - (Details)

DEBT FINANCING - (Details) - USD ($)	3 Months Ended
	Jan. 31, 2016	Jan. 31, 2015	Mar. 01, 2016	Oct. 31, 2015
Debt financing
Long-term Debt	$ 8,121,480			$ 7,229,932
Less amounts due on demand or within one year	584,674			517,957
Net long term debt	$ 7,536,806			6,711,975
Initial Term of Transportation Agreement	5 years
Proceeds from long-term debt	$ 4,613,122	$ 3,354,979
Estimated maturities of long-term debt
2,016	584,674
2,017	462,086
2,018	333,015
2,019	307,709
2,020	326,798
After 2,020	6,107,198
Revolving term note payable to lending institution
Debt financing
Debt Instrument, Original Amount	28,000,000
Long-term Debt	5,776,421			4,822,777
Initial amount of debt	24,500,000		$ 21,000,000
Debt Instrument, Outstanding Amount	$ 5,776,000			$ 4,823,000
Interest rate (as a percent)	3.69%			3.45%
Variable rate basis	LIBOR
Spread over interest rate (as a percent)	3.25%
Unused commitment fee per annum on the unused portion of debt (as a percent)	0.50%
Annual decline in loan availability after a specified date	$ 3,500,000
Assessments payable
Debt financing
Long-term Debt	1,954,059			$ 1,963,405
Initial amount of debt	$ 3,600,000
Debt Instrument, Periodic Worth of Debt	1 year
Debt Instrument, Interest Rate, Effective Percentage Rate Range, Minimum	0.50%
Debt Instrument, Interest Rate, Effective Percentage Rate Range, Maximum	8.73%
Notes payable to electrical company
Debt financing
Long-term Debt	$ 125,000			143,750
Note Payable Noncontrolling Entity
Debt financing
Long-term Debt	266,000			$ 300,000
Water Revenue bonds [Member]
Debt financing
Initial amount of debt	$ 735,000

COMMITMENTS AND CONTINGENCIES -

COMMITMENTS AND CONTINGENCIES - (Details) bu in Millions	1 Months Ended	3 Months Ended
	Jul. 31, 2015USD ($)	Jan. 31, 2016USD ($)bu
COMMITMENTS AND CONTINGENCIES
Purchase Obligation, Down Payment	$ 375,000
Purchase Obligation	$ 1,900,000
Ethanol
COMMITMENTS AND CONTINGENCIES
Forward Contracts		$ 2,100,000
Estimated Percent of Product Produced		15.00%
Distiller's Grains
COMMITMENTS AND CONTINGENCIES
Forward Contracts		$ 95,000
Corn
COMMITMENTS AND CONTINGENCIES
Forward Contracts, Bushels | bu		4,597,000
Forward Contracts		$ 391,000

MEMBERS' EQUITY (Details)

MEMBERS' EQUITY (Details)	1 Months Ended		3 Months Ended
	Dec. 31, 2015USD ($)	Dec. 31, 2014USD ($)	Jan. 31, 2016USD ($)Vote / sharesshares	Jan. 31, 2015USD ($)	Oct. 31, 2015shares
Class of Stock [Line Items]
Common Unit, Authorized			80,000,000
Common Unit, Issued			77,932,107		77,932,107
Common Unit, Outstanding			77,932,107		77,932,107
Minimum number of units held by members of the company (in shares)			2,500
Number of votes per unit | Vote / shares			1
Distribution Made to Limited Liability Company (LLC) Member, Cash Distributions Paid | $	$ 3,897,000	$ 9,352,000	$ 3,896,605	$ 9,351,850
Class A units
Class of Stock [Line Items]
Common Unit, Authorized			65,000,000
Common Unit, Issued			62,932,107		62,932,107
Common Unit, Outstanding			62,932,107		62,932,107
Class B units
Class of Stock [Line Items]
Common Unit, Authorized			15,000,000
Common Unit, Issued			15,000,000		15,000,000
Common Unit, Outstanding			15,000,000		15,000,000

LEASES - (Details)

LEASES - (Details) - USD ($)	3 Months Ended
	Jan. 31, 2016	Jan. 31, 2015
Leases [Abstract]
Operating Leases, Rent Expense, Net	$ 533,000	$ 519,000

RELATED PARTY TRANSACTIONS - (D

RELATED PARTY TRANSACTIONS - (Details) - USD ($)	Mar. 27, 2015	Jan. 31, 2016	Jan. 31, 2015
RELATED PARTY TRANSACTIONS
Capital Expenditure Reimbursement	10.00%
Agrinatural, LLC
RELATED PARTY TRANSACTIONS
Noncontrolling Interest, Ownership Percentage by Noncontrolling Owners	27.00%
Management Fee Reduction		$ 4,500
Monthly Base Fee		44,000	$ 44,000
Monthly Variable Fee		56,000	56,000
Project Management Fees		$ 1,000	$ 37,000

BUSINESS SEGMENTS (Details)

BUSINESS SEGMENTS (Details) - USD ($)	3 Months Ended
	Jan. 31, 2016	Jan. 31, 2015	Oct. 31, 2015
Segment Reporting Information [Line Items]
Revenues	$ 26,588,565	$ 27,177,449
Operating Income (Loss)	48,947	966,668
Assets	65,382,603	66,696,384	$ 66,696,384
Ethanol
Segment Reporting Information [Line Items]
Revenues	26,248,829	26,813,093
Operating Income (Loss)	(332,118)	678,513
Assets	52,691,207	53,663,064
Natural Gas
Segment Reporting Information [Line Items]
Revenues	788,959	816,562
Operating Income (Loss)	496,692	404,550
Assets	12,691,396	13,033,320
Intersegment Eliminations
Segment Reporting Information [Line Items]
Revenues	(449,223)	(452,206)
Operating Income (Loss)	$ (115,627)	$ (116,395)