Highwater Ethanol (HEOL) 10-Q 8 Jun 17 2017 Q2 Quarterly report Financial data

Document and Entity Information

Document and Entity Information Document - shares	6 Months Ended
	Apr. 30, 2017	Jun. 08, 2017
Entity Information [Line Items]
Entity Registrant Name	HIGHWATER ETHANOL LLC
Entity Central Index Key	1,371,451
Current Fiscal Year End Date	--10-31
Entity Filer Category	Non-accelerated Filer
Document Type	10-Q
Document Period End Date	Apr. 30, 2017
Document Fiscal Year Focus	2,017
Document Fiscal Period Focus	Q2
Amendment Flag	false
Entity Common Stock, Shares Outstanding		4,814

Condensed Balance Sheets

Condensed Balance Sheets - USD ($)	Apr. 30, 2017	Oct. 31, 2016
Current Assets
Cash and cash equivalents	$ 1,840,301	$ 2,129,800
Derivative instruments	399,604	540,286
Accounts receivable	2,164,325	4,139,687
Inventories	7,675,114	6,958,903
Prepaids and other	133,502	57,981
Total current assets	12,212,846	13,826,657
Property and Equipment
Land and land improvements	12,647,512	12,647,512
Buildings	38,576,751	38,564,729
Office equipment	819,644	774,776
Equipment	70,831,798	69,869,289
Vehicles	74,094	74,094
Construction in Progress	756,046	407,989
Gross property and equipment	123,705,845	122,338,389
Less accumulated depreciation	(51,137,514)	(47,196,051)
Net property and equipment	72,568,331	75,142,338
Other Assets
Investments	2,560,777	2,693,844
Deposits	191,457	191,457
Total other assets	2,752,234	2,885,301
Total Assets	87,533,411	91,854,296
Current Liabilities
Accounts payable	2,634,001	2,882,943
Accrued expenses	1,005,883	1,014,137
Current maturities of long-term debt	2,849,016	3,297,327
Total current liabilities	6,488,900	7,194,407
Long-Term Debt	9,447,962	13,807,492
Commitments and Contingencies
Members' Equity
Members' equity, 4,892 units outstanding	71,596,549	70,852,397
Total Liabilities and Members’ Equity	$ 87,533,411	$ 91,854,296

Condensed Balance Sheets Parent

Condensed Balance Sheets Parenthetical - shares	Apr. 30, 2017	Oct. 31, 2016
Members' equity, units outstanding	4,814	4,892

Condensed Statements of Operati

Condensed Statements of Operations - USD ($)	3 Months Ended		6 Months Ended
	Apr. 30, 2017	Apr. 30, 2016	Apr. 30, 2017	Apr. 30, 2016
Revenues	$ 23,718,623	$ 23,074,068	$ 50,777,236	$ 47,273,892
Cost of Goods Sold	23,127,166	23,190,188	45,993,969	47,955,401
Gross Profit (Loss)	591,457	(116,120)	4,783,267	(681,509)
Operating Expenses	754,042	785,987	1,478,062	1,479,889
Operating Profit (Loss)	(162,585)	(902,107)	3,305,205	(2,161,398)
Other Income (Expense)
Interest income	274	596	776	2,251
Other income	1,256	136,957	3,549	142,893
Interest expense	(165,314)	(209,728)	(366,800)	(344,271)
Income from equity method investments	18,086	57,067	39,162	119,117
Total other income (expense), net	(145,698)	(15,108)	(323,313)	(80,010)
Net Income (Loss)	$ (308,283)	$ (917,215)	$ 2,981,892	$ (2,241,408)
Weighted Average Units Oustanding	4,814	4,936	4,854	4,936
Net Income (Loss) Per Unit	$ (64.04)	$ (185.82)	$ 614.32	$ (454.09)
Distributions Per Unit	$ 0	$ 0	$ 345	$ 400

Condensed Statements of Cash Fl

Condensed Statements of Cash Flows - USD ($)	6 Months Ended
	Apr. 30, 2017	Apr. 30, 2016
Cash Flows from Operating Activities
Net Income (loss)	$ 2,981,892	$ (2,241,408)
Adjustments to reconcile net income (loss) to net cash provided by operating activities
Depreciation and amortization	3,966,282	3,604,371
Income from equity method investments	(39,162)	(119,117)
Gain on sale of asset	(9,093)	0
Non-cash patronage income	(81,854)	(56,049)
Change in assets and liabilities
Accounts receivable	1,975,362	(204,013)
Inventories	(716,211)	(55,411)
Derivative instruments	140,682	176,025
Prepaids and other	(75,521)	(4,236)
Customer deposits	0	201,228
Accounts payable	(315,434)	259,377
Accrued expenses	(8,254)	(84,521)
Net cash provided by operating activities	7,818,689	1,476,246
Cash Flows from Investing Activities
Capital expenditures	(1,320,649)	(3,717,482)
Proceeds from sale of asset	(28,777)	0
Distribution from equity method investment	254,084	398,418
Net cash used in investing activities	(1,037,788)	(3,319,064)
Cash Flows from Financing Activities
Payments on long-term debt	(4,832,660)	(3,107,388)
Member unit repurchase, 78.5 units	(550,000)	0
Member distributions	(1,687,740)	(1,974,400)
Net cash used in financing activities	(7,070,400)	(5,081,788)
Net Decrease in Cash and Cash Equivalents	(289,499)	(6,924,606)
Cash and cash equivalents – Beginning of Period	2,129,800	9,205,643
Cash and cash equivalents – End of Period	1,840,301	2,281,037
Supplemental Cash Flow Information
Cash paid for interest	284,037	392,041
Supplemental Disclosure of Noncash Financing and Investing Activities
Capital expenditures included in accounts payable	$ 131,062	$ 699,618

Summary of Significant Accounti

Summary of Significant Accounting Policies	6 Months Ended
	Apr. 30, 2017
Summary of Significant Accounting Policies [Abstract]
Summary of Significant Accounting Policies	SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accompanying unaudited condensed interim financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote 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. The accompanying balance sheet and related notes as of October 31, 2016 are derived from the audited financial statements as of that date. These condensed financial statements and related notes should be read in conjunction with the financial statements and notes thereto included in the Company’s audited financial statements for the year ended October 31, 2016 , contained in the Company’s Form 10-K. In the opinion of management, the interim condensed financial statements reflect all adjustments, consisting of only normal recurring adjustments, considered necessary for fair presentation of the Company's financial position as of April 30, 2017 and the results of operations and cash flows for all periods presented. Nature of Business Highwater Ethanol, LLC, (a Minnesota Limited Liability Company) operates a 50 million gallon per year ethanol plant in Lamberton, Minnesota. The Company produces and sells, primarily through third-party professional marketers, fuel ethanol and co-products of the fuel ethanol production process in the continental United States, Mexico and Canada. Accounting Estimates Management uses estimates and assumptions in preparing these 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, among others, the carrying value of property and equipment and related impairment testing, inventory valuation, and derivative instruments. Actual results could differ from those estimates and such differences may be material to the financial statements. The Company periodically reviews estimates and assumptions and the effects of revisions are reflected in the period in which the revision is made. Revenue Recognition The Company generally sells ethanol and related products pursuant to marketing agreements. The Company’s products are shipped FOB shipping point. Revenues are recognized when the customer has taken title and has assumed the risks and rewards of ownership, prices are fixed or determinable and collectability is reasonably assured. For ethanol sales, title transfers when loaded into the rail car and for distiller’s grains when the loaded rail cars leave the plant facility. In accordance with the Company’s agreements for the marketing and sale of ethanol and related products, marketing fees and freight due to the marketers are deducted from the gross sales price at the time incurred. Revenue is recorded net of these marketing fees and freight as they do not provide an identifiable benefit that is sufficiently separable from the sale of ethanol and related products. Derivative Instruments Derivatives are recognized in the balance sheet and the measurement of these instruments is 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 recognized currently in earnings. Contracts are evaluated 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 as derivatives, therefore, are not marked to market in our financial statements. The Company enters into corn and ethanol commodity-based and natural gas derivatives in order to protect cash flows from fluctuations caused by volatility in prices. These derivatives are not designated as effective hedges for accounting purposes. For derivative instruments that are not accounted for as hedges, or for the ineffective portions of qualifying hedges, the change in fair value is recorded through earnings in the period of change. Changes in fair market value of ethanol derivatives are included in revenues. Changes in fair market value of corn and natural gas derivatives are included in costs of goods sold. Fair Value of Financial Instruments The carrying value of cash and cash equivalents, accounts receivable, accounts payable, and other working capital items approximate fair value at April 30, 2017 due to the short maturity nature of these instruments. The Company believes the carrying value of the derivative instruments approximates fair value based on quoted market prices or widely accepted valuation techniques including discounted cash flow analysis which includes observable market-based inputs. The Company believes the carrying amount of the long-term debt approximates the fair value due to a significant portion of total indebtedness containing variable interest rates and that this rate is a market interest rate for these borrowings. Equity Method Investments The Company has a 6% investment interest in an unlisted company, Renewable Products Marketing Group, LLC (RPMG), who markets the Company’s ethanol. The Company also has a 7% ownership interest in Lawrenceville Tank, LLC (LT), which owns and operates a trans load/tank facility near Atlanta, Georgia. These investments are flow-through entities and are being accounted for by the equity method of accounting under which the Company’s share of net income is recognized as income in the Company’s statements of operations and added to the investment account. Distributions or dividends received from the investment are treated as a reduction of the investment account. The Company consistently follows the practice of recognizing the net income from equity method investments based on the most recent reliable data. Therefore, the net income which is reported in the Company's statement of operations for the quarter ended April 30, 2017 is based on the investee’s results of operations for the three month period ended March 31, 2017. Railcar Damages Accrual In accordance with the Company's railcar lease agreements, the Company is required to pay for damages considered to be in excess of normal wear and tear at the termination of the lease. The Company accrues the estimated cost for railcar damages over the term of the lease. Recent Accounting Pronouncements In May 2014, the FASB issued ASU No. 2014-09 (ASU 2014-09), Revenue from Contracts with Customers, which supersedes nearly all existing revenue recognition guidance under U.S. GAAP. The new standard requires a company to recognize revenue when it transfers goods or services to customers in an amount that reflects the consideration that the company expects to receive for those goods or services. Additionally, the guidance requires improved disclosures to help users of financial statements better understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. ASU 2014-09 is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period, which is the Company’s first quarter of fiscal year 2019. Early application is permitted one year earlier. The new standard allows for the amendment to be applied either retrospectively to each prior reporting period presented or retrospectively as a cumulative-effect adjustment as of the date of adoption. The Company is evaluating the effect that ASU 2014-09 will have on its financial statements and related disclosures, including which transition method it will adopt. In April 2015, the FASB issued ASU No. 2015-03 (ASU 2015-03), Interest-Imputation of Interest, which simplifies the presentation of debt issuance costs. The new standard debt issuance costs will be reclassified as a deduction to the carrying amount of the related debt balance, therefore, decreasing both assets and liabilities. ASU 2015-03 was effective for fiscal years, and interim periods within those years, beginning after December 31, 2015. The Company implemented ASU 2015-03 effective November 1, 2016. The effect was offsetting current and long term debt by $91,236 at April 30, 2017 and retroactively offsetting long term debt by $130,347 at October 31, 2016. In January 2016, the FASB issued ASU No. 2016-01 (ASU2016-01), Financial Instruments-Overall (Subtopic 825-10), which is intended to make financial statement information on recognition, measurement, presentation, and disclosure of financial instrument more useful. ASU 2016-01 is effective for fiscal periods beginning after December 15, 2017. The Company is currently in the process of evaluating the impact that this new guidance will have on the Financial Statements. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). This ASU requires lessees to recognize a lease liability and a right-to-use asset for all leases, including operating leases, with a term greater than twelve months on its balance sheet. This ASU is effective in annual and interim periods in fiscal years beginning after December 15, 2018, with early adoption permitted, and requires a modified retrospective transition method. The Company is currently in the process of evaluating the impact that this new guidance will have on the Financial Statements. In August 2016, the FASB issued ASU No. 2016-15 (ASU 2016-15), Statement of Cash Flows (Topic 230), which clarifies and provides guidance for specific cash flow issues. ASU 2016-15 is effective for fiscal periods beginning after December 15, 2017. The Company is currently in the process of evaluating the impact that this new guidance will have on the Financial Statements.

Uncertainties

Uncertainties	6 Months Ended
	Apr. 30, 2017
Risks and Uncertainties [Abstract]
Uncertainties	UNCERTAINTIES The Company derives substantially all of its revenues from the sale of ethanol and distillers grains. These products are commodities and the market prices for these products display substantial volatility and are subject to a number of factors which are beyond the control of the Company. The Company’s most significant manufacturing inputs are corn and natural gas. The price of these commodities is also subject to substantial volatility and uncontrollable market factors. In addition, these input costs do not necessarily fluctuate with the market prices for ethanol and distillers grains. As a result, the Company is subject to significant risk that its operating margins can be reduced or eliminated due to the relative movements in the market prices of its products and major manufacturing inputs. As a result, market fluctuations in the price of or demand for these commodities can have a significant adverse effect on the Company’s operations, profitability, and availability of cash flows to make loan payments and maintain compliance with the loan agreement.

Fair Value Measurements

Fair Value Measurements	6 Months Ended
	Apr. 30, 2017
Fair Value Measurements [Abstract]
Fair Value Measurements	FAIR VALUE MEASUREMENTS The following table provides information on those assets (liabilities) measured at fair value on a recurring basis. Fair Value as of Fair Value Measurement Using April 30, 2017 Level 1 Level 2 Level 3 Derivative instruments - commodities $ (1,097,718 ) $ (1,097,718 ) $ — $ — Fair Value as of Fair Value Measurement Using October 31, 2016 Level 1 Level 2 Level 3 Derivative instruments - commodities $ (706,473 ) $ (706,473 ) $ — $ — The Company determines the fair values of commodities by obtaining the fair value measurements from an independent pricing service based on dealer quotes and live trading levels from the Chicago Board of Trade.

Inventories

Inventories	6 Months Ended
	Apr. 30, 2017
Inventories [Abstract]
Inventories	INVENTORIES Inventories consisted of the following at: April 30, 2017 October 31, 2016 Raw materials $ 1,678,123 $ 3,243,617 Spare parts and supplies 3,290,664 2,327,674 Work in process 684,678 611,347 Finished goods 2,021,649 776,265 Total $ 7,675,114 $ 6,958,903

Derivative Instruments

Derivative Instruments	6 Months Ended
	Apr. 30, 2017
Derivative Instruments [Abstract]
Derivative Instruments	DERIVATIVE INSTRUMENTS As of April 30, 2017 , the Company had entered into corn and ethanol derivative instruments, which are required to be recorded as either assets or liabilities at fair value in the balance sheet. The Company uses these instruments to manage risks from changes in market rates and prices. They are not used for speculative purposes. Derivatives qualify for treatment as hedges when there is a high correlation between the change in fair value of the derivative instrument and the related change in value of the underlying hedged item. The Company may designate the hedging instruments based upon the exposure being hedged as a fair value hedge, a cash flow hedge or a hedge against foreign currency exposure. The derivative instruments outstanding at April 30, 2017 are not designated as effective hedges for accounting purposes. Commodity Contracts As of April 30, 2017 , the Company has open positions for 600,000 bushels of corn and 1,260,000 gallons of ethanol. Management expects all open positions outstanding as of April 30, 2017 to be realized within the next twelve months. The following tables provide details regarding the Company's derivative instruments at April 30, 2017 and October 31, 2016 : Instrument Balance Sheet location April 30, 2017 October 31, 2016 Corn, natural gas and ethanol contracts In gain position $ 167,838 $ 523,218 In loss position (1,265,556 ) (1,229,691 ) Deposits with broker 1,497,322 1,246,759 Current assets $ 399,604 $ 540,286 The following tables provide details regarding the gains (losses) from the Company's derivative instruments in the statements of operations, none of which are designated as hedging instruments: Statement of Three Months Ended April 30, Operations location 2017 2016 Ethanol contracts Revenues $ 196,478 $ 5,645 Corn contracts Cost of goods sold 300,480 (47,252 ) Natural gas contracts Cost of goods sold 14,887 15,954 Statement of Six Months Ended April 30, Operations location 2017 2016 Ethanol contracts Revenues $ 422,210 $ 35,147 Corn contracts Cost of goods sold 850,816 110,918 Natural gas contracts Cost of goods sold 11,747 (96,700 )

Debt Financing

Debt Financing	6 Months Ended
	Apr. 30, 2017
Debt Financing [Abstract]
Debt Financing	DEBT FINANCING Long-term debt consists of the following at: April 30, 2017 October 31, 2016 Variable Rate Term Loan $ 11,250,000 $ 12,750,000 Term Revolving Loan 1,000,000 3,937,839 Capital lease 138,214 547,327 Less debt issuance costs (91,236 ) (130,347 ) Total 12,296,978 17,104,819 Less amounts due within one year 2,849,016 3,297,327 Net long-term debt $ 9,447,962 $ 13,807,492 Bank Financing On January 22, 2016, the Company entered into a Second Amended and Restated Credit Agreement with AgStar Financial Services, PCA, as administrative agent for several financial institutions ("AgStar") which amended the Amended and Restated Credit Agreement dated September 22, 2014. The Second Amended and Restated Credit Agreement decreased the Term Loan to $15,000,000 , increased the Term Revolving Loan to $15,000,000 and eliminated the Revolving Line of Credit. Term Loan The Term Loan is for $15,000,000 with a variable interest rate that is equal to the 30-day LIBOR rate plus 325 basis points with no minimum interest rate. The applicable interest rate at April 30, 2017 was 4.13% . Monthly principal payments are due on the Term Loan of approximately $250,000 plus accrued interest. Payments are based upon a five year amortization and the Term Loan is fully amortized. The outstanding balance on this note was $11,250,000 at April 30, 2017 . The Company may convert the Term Loan to a fixed rate loan, subject to certain conditions as described in the Second Amended and Restated Credit Agreement and with the consent of AgStar. Term Revolving Loan The Term Revolving Loan is for up to $15,000,000 with a variable interest rate that is the 30-day LIBOR rate plus 325 basis points with no minimum interest rate. The applicable interest rate at April 30, 2017 was 4.13% . The availability under the Term Revolving Loan increases to $20,000,000 after the Term Loan is paid down to $10,000,000 so long as at least one or more of the participating banks agrees to raise its commitment. The Term Revolving Loan may be advanced, repaid and re-borrowed during the term. Monthly interest payments are due on the Term Revolving Loan. Payment of all amounts outstanding are due on January 22, 2023. The outstanding balance on this note was $1,000,000 at April 30, 2017 . The Company also has $1,000,000 in letters of credit outstanding at April 30, 2017 which reduce the amount available under the Term Revolving Loan. The Company pays interest at a rate of 1.50% on amounts outstanding for the letters of credit. The Company is also required to pay unused commitment fees for the Term Revolving Loan as defined in the Second Amended and Restated Credit Agreement. Covenants and other Miscellaneous Terms The loan facility with AgStar is secured by substantially all business assets. The Company executed a mortgage creating a first lien on its real estate and plant and a security interest in all personal property located on the premises and assigned all rents and leases to property, marketing contracts, risk management services contract, and natural gas, electricity, water service and grain procurement agreements. The Company is also subject to various financial and non-financial covenants that limit distributions and debt and require minimum debt service coverage, tangible net worth, and working capital requirements. The debt service coverage ratio is no less than 1.25:1.00 measured annually by comparing adjusted EBITDA to scheduled payments of principal and interest. The minimum working capital is $8,250,000 , which is calculated as current assets plus the amount available for drawing under the Term Revolving Loan and undrawn amounts on outstanding letters of credit, less current liabilities, and is measured quarterly. The Company is limited to annual capital expenditures of $5,000,000 without prior approval, incurring additional debt over certain amounts without prior approval, and making additional investments as described in the Amended and Restated Credit Agreement without prior approval of AgStar. The Company is allowed to make cash distributions to members as frequently as monthly in an amount equal to 75% of net income if working capital is greater than or equal to $8,250,000 , or 100% of net income if working capital is greater than or equal to $11,000,000 , or an unlimited amount if working capital is greater than or equal to $11,000,000 and the outstanding balance on the Term Loan is $0 . Capital Lease The Company entered into a series of related definitive agreements, dated September 26, 2013, with Butamax which include an Easement for Construction and Process Demonstration Agreement, an Equipment Lease Agreement, a Technology License Agreement, a Technology Demonstration Risk Reduction Agreement and a Security Agreement (collectively, the "Agreements") pursuant to which Butamax has agreed to construct, install and lease its corn oil separation system and license to the Company its proprietary, patent-protected corn oil separation technology. Pursuant to the Agreements, the Company agreed to give Butamax access to the plant in order to construct, install, operate, test and commercially validate a corn oil separation system. Butamax retains ownership of the corn oil separation system and technology but agrees to lease it to the Company for a term of 120 months subject to Butamax's right to remove the system if the Company is in breach of the Agreements. The term of the lease may also be extended or terminated pursuant to the terms of the Agreements. The Company is responsible for repairs and maintenance of the system and bear the risk of loss. In return, the Company agrees to payment of certain license fees which are subject to being reduced under the terms of the Agreements if the corn oil separation system does not meet certain performance goals. The Agreements provide that the corn oil separation system shall be conveyed to the Company at the end of the term so long as the Company is not in breach of the Agreements. The Company granted a security interest to Butamax in the corn oil separation system to secure its obligations under the Agreements. Pursuant to the Agreements, the Company agreed, subject to certain obligations of confidentiality, to provide Butamax with Company information on a monthly basis including business and financial information and have granted Butamax the option to have a representative present in board and committee meetings as an observer. The Company also agreed to give Butamax notice in the event of an issuance or sale of membership interests or convertible debt instruments. The Company recorded this as a capital lease in April 2014, and the balance as of April 30, 2017 was $138,214 . The estimated maturities of the long-term debt at April 30, 2017 are as follows: Principal Debt Issuance Costs Total April 2018 $ 2,888,214 $ (39,198 ) $ 2,849,016 April 2019 3,000,000 (28,385 ) 2,971,615 April 2020 3,000,000 (17,571 ) 2,982,429 April 2021 2,500,000 (6,082 ) 2,493,918 April 2022 — — — April 2023 and thereafter 1,000,000 — 1,000,000 Long-term debt $ 12,388,214 $ (91,236 ) $ 12,296,978

Commitments and Contingencies

Commitments and Contingencies	6 Months Ended
	Apr. 30, 2017
Commitments and Contingencies Disclosure [Abstract]
Commitments and Contingencies	COMMITMENTS AND CONTINGENCIES Regulatory Agencies The Company is subject to oversight from regulatory agencies regarding environmental concerns which arise in the ordinary course of its business. Forward Contracts At April 30, 2017 , the Company had approximately 11,095,000 bushels of forward fixed basis corn contracts and 1,881,000 bushels of forward fixed price corn contracts valued at approximately $6,094,000 . These purchase contracts are for various delivery periods through March 2018. At April 30, 2017 , the Company had approximately 1,207,000 MMBTUs of forward fixed price natural gas purchase contracts valued at approximately $3,402,000 for various delivery periods through March 2019. In addition, at April 30, 2017 , the Company had approximately 220,000 gallons of forward fixed price denaturant purchase contracts valued at $276,000 for various delivery periods through June 2017. At April 30, 2017 , the Company had approximately 9,975 tons of forward fixed price dried distillers grains sales contracts valued at $1,012,000 for various delivery periods through September 2017. In addition, at April 30, 2017 , the Company had approximately 7,400 tons of forward fixed price modified distillers grains sales contracts valued at approximately $414,000 for delivery periods through October 2017. In addition, at April 30, 2017 , the Company had approximately 145,000 pounds of forward fixed price corn oil sales contracts valued at approximately $41,000 for delivery periods through May 2017. Construction The Company has begun construction on an additional grain storage bin which is expected to add 600,000 bushels of storage and cost approximately $1,600,000 . The project is expected to be completed during the fourth quarter of the Company's 2017 fiscal year. Unit Repurchases During the second quarter of our fiscal year ended October 31, 2017, the Company repurchased 78 of its membership units at a price of $7,000 per unit for a total purchase price of $546,000 and .5 of its membership units at a price of $8,000 per unit for a total purchase price of $4,000 .

Accounting Policies

Accounting Policies	6 Months Ended
	Apr. 30, 2017
Summary of Significant Accounting Policies [Abstract]
Accounting Estimates	Accounting Estimates Management uses estimates and assumptions in preparing these 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, among others, the carrying value of property and equipment and related impairment testing, inventory valuation, and derivative instruments. Actual results could differ from those estimates and such differences may be material to the financial statements. The Company periodically reviews estimates and assumptions and the effects of revisions are reflected in the period in which the revision is made.
Revenue Recognition	Revenue Recognition The Company generally sells ethanol and related products pursuant to marketing agreements. The Company’s products are shipped FOB shipping point. Revenues are recognized when the customer has taken title and has assumed the risks and rewards of ownership, prices are fixed or determinable and collectability is reasonably assured. For ethanol sales, title transfers when loaded into the rail car and for distiller’s grains when the loaded rail cars leave the plant facility. In accordance with the Company’s agreements for the marketing and sale of ethanol and related products, marketing fees and freight due to the marketers are deducted from the gross sales price at the time incurred. Revenue is recorded net of these marketing fees and freight as they do not provide an identifiable benefit that is sufficiently separable from the sale of ethanol and related products.
Derivative Instruments	Derivative Instruments Derivatives are recognized in the balance sheet and the measurement of these instruments is 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 recognized currently in earnings. Contracts are evaluated 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 as derivatives, therefore, are not marked to market in our financial statements. The Company enters into corn and ethanol commodity-based and natural gas derivatives in order to protect cash flows from fluctuations caused by volatility in prices. These derivatives are not designated as effective hedges for accounting purposes. For derivative instruments that are not accounted for as hedges, or for the ineffective portions of qualifying hedges, the change in fair value is recorded through earnings in the period of change. Changes in fair market value of ethanol derivatives are included in revenues. Changes in fair market value of corn and natural gas derivatives are included in costs of goods sold.
Fair Value of Financial Instruments	Fair Value of Financial Instruments The carrying value of cash and cash equivalents, accounts receivable, accounts payable, and other working capital items approximate fair value at April 30, 2017 due to the short maturity nature of these instruments. The Company believes the carrying value of the derivative instruments approximates fair value based on quoted market prices or widely accepted valuation techniques including discounted cash flow analysis which includes observable market-based inputs. The Company believes the carrying amount of the long-term debt approximates the fair value due to a significant portion of total indebtedness containing variable interest rates and that this rate is a market interest rate for these borrowings.
Investments	Equity Method Investments The Company has a 6% investment interest in an unlisted company, Renewable Products Marketing Group, LLC (RPMG), who markets the Company’s ethanol. The Company also has a 7% ownership interest in Lawrenceville Tank, LLC (LT), which owns and operates a trans load/tank facility near Atlanta, Georgia. These investments are flow-through entities and are being accounted for by the equity method of accounting under which the Company’s share of net income is recognized as income in the Company’s statements of operations and added to the investment account. Distributions or dividends received from the investment are treated as a reduction of the investment account. The Company consistently follows the practice of recognizing the net income from equity method investments based on the most recent reliable data. Therefore, the net income which is reported in the Company's statement of operations for the quarter ended April 30, 2017 is based on the investee’s results of operations for the three month period ended March 31, 2017.
Railcar Damages Accrual	Railcar Damages Accrual In accordance with the Company's railcar lease agreements, the Company is required to pay for damages considered to be in excess of normal wear and tear at the termination of the lease. The Company accrues the estimated cost for railcar damages over the term of the lease.
Recent Accounting Pronouncements	Recent Accounting Pronouncements In May 2014, the FASB issued ASU No. 2014-09 (ASU 2014-09), Revenue from Contracts with Customers, which supersedes nearly all existing revenue recognition guidance under U.S. GAAP. The new standard requires a company to recognize revenue when it transfers goods or services to customers in an amount that reflects the consideration that the company expects to receive for those goods or services. Additionally, the guidance requires improved disclosures to help users of financial statements better understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. ASU 2014-09 is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period, which is the Company’s first quarter of fiscal year 2019. Early application is permitted one year earlier. The new standard allows for the amendment to be applied either retrospectively to each prior reporting period presented or retrospectively as a cumulative-effect adjustment as of the date of adoption. The Company is evaluating the effect that ASU 2014-09 will have on its financial statements and related disclosures, including which transition method it will adopt. In April 2015, the FASB issued ASU No. 2015-03 (ASU 2015-03), Interest-Imputation of Interest, which simplifies the presentation of debt issuance costs. The new standard debt issuance costs will be reclassified as a deduction to the carrying amount of the related debt balance, therefore, decreasing both assets and liabilities. ASU 2015-03 was effective for fiscal years, and interim periods within those years, beginning after December 31, 2015. The Company implemented ASU 2015-03 effective November 1, 2016. The effect was offsetting current and long term debt by $91,236 at April 30, 2017 and retroactively offsetting long term debt by $130,347 at October 31, 2016. In January 2016, the FASB issued ASU No. 2016-01 (ASU2016-01), Financial Instruments-Overall (Subtopic 825-10), which is intended to make financial statement information on recognition, measurement, presentation, and disclosure of financial instrument more useful. ASU 2016-01 is effective for fiscal periods beginning after December 15, 2017. The Company is currently in the process of evaluating the impact that this new guidance will have on the Financial Statements. In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). This ASU requires lessees to recognize a lease liability and a right-to-use asset for all leases, including operating leases, with a term greater than twelve months on its balance sheet. This ASU is effective in annual and interim periods in fiscal years beginning after December 15, 2018, with early adoption permitted, and requires a modified retrospective transition method. The Company is currently in the process of evaluating the impact that this new guidance will have on the Financial Statements. In August 2016, the FASB issued ASU No. 2016-15 (ASU 2016-15), Statement of Cash Flows (Topic 230), which clarifies and provides guidance for specific cash flow issues. ASU 2016-15 is effective for fiscal periods beginning after December 15, 2017. The Company is currently in the process of evaluating the impact that this new guidance will have on the Financial Statements.

Fair Value Measurements (Tables

Fair Value Measurements (Tables)	6 Months Ended
	Apr. 30, 2017
Fair Value Measurements [Abstract]
Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis	The following table provides information on those assets (liabilities) measured at fair value on a recurring basis. Fair Value as of Fair Value Measurement Using April 30, 2017 Level 1 Level 2 Level 3 Derivative instruments - commodities $ (1,097,718 ) $ (1,097,718 ) $ — $ — Fair Value as of Fair Value Measurement Using October 31, 2016 Level 1 Level 2 Level 3 Derivative instruments - commodities $ (706,473 ) $ (706,473 ) $ — $ —

Inventories (Tables)

Inventories (Tables)	6 Months Ended
	Apr. 30, 2017
Inventories [Abstract]
Schedule of Inventory	April 30, 2017 October 31, 2016 Raw materials $ 1,678,123 $ 3,243,617 Spare parts and supplies 3,290,664 2,327,674 Work in process 684,678 611,347 Finished goods 2,021,649 776,265 Total $ 7,675,114 $ 6,958,903

Derivative Instruments (Tables)

Derivative Instruments (Tables)	6 Months Ended
	Apr. 30, 2017
Derivative Instruments [Abstract]
Schedule of Derivatives Instruments Statements of Financial Performance and Financial Position	Instrument Balance Sheet location April 30, 2017 October 31, 2016 Corn, natural gas and ethanol contracts In gain position $ 167,838 $ 523,218 In loss position (1,265,556 ) (1,229,691 ) Deposits with broker 1,497,322 1,246,759 Current assets $ 399,604 $ 540,286
Schedule of Other Derivatives Not Designated as Hedging Instruments, Statements of Financial Performance and Financial Position	Statement of Three Months Ended April 30, Operations location 2017 2016 Ethanol contracts Revenues $ 196,478 $ 5,645 Corn contracts Cost of goods sold 300,480 (47,252 ) Natural gas contracts Cost of goods sold 14,887 15,954 Statement of Six Months Ended April 30, Operations location 2017 2016 Ethanol contracts Revenues $ 422,210 $ 35,147 Corn contracts Cost of goods sold 850,816 110,918 Natural gas contracts Cost of goods sold 11,747 (96,700 )

Debt Financing (Tables)

Debt Financing (Tables)	6 Months Ended
	Apr. 30, 2017
Debt Financing [Abstract]
Schedule of Long-term Debt	April 30, 2017 October 31, 2016 Variable Rate Term Loan $ 11,250,000 $ 12,750,000 Term Revolving Loan 1,000,000 3,937,839 Capital lease 138,214 547,327 Less debt issuance costs (91,236 ) (130,347 ) Total 12,296,978 17,104,819 Less amounts due within one year 2,849,016 3,297,327 Net long-term debt $ 9,447,962 $ 13,807,492
Schedule of Maturities of Long-term Debt	Principal Debt Issuance Costs Total April 2018 $ 2,888,214 $ (39,198 ) $ 2,849,016 April 2019 3,000,000 (28,385 ) 2,971,615 April 2020 3,000,000 (17,571 ) 2,982,429 April 2021 2,500,000 (6,082 ) 2,493,918 April 2022 — — — April 2023 and thereafter 1,000,000 — 1,000,000 Long-term debt $ 12,388,214 $ (91,236 ) $ 12,296,978

Summary of Significant Accoun18

Summary of Significant Accounting Policies (Details) gal in Millions	6 Months Ended
	Apr. 30, 2017gal
Ethanol [Member]
Product Information [Line Items]
Annual Production Capacity	50

Summary of Significant Accoun19

Summary of Significant Accounting Policies Investment (Details)	Apr. 30, 2017
Renewable Fuels Marketing Group (RPMG) [Member]
Schedule of Equity Method Investments [Line Items]
Equity Method Investment, Ownership Percentage	6.00%
Lawrenceville Tank, LLC [Member]
Schedule of Equity Method Investments [Line Items]
Equity Method Investment, Ownership Percentage	7.00%

Summary of Significant Accoun20

Summary of Significant Accounting Policies Recent Accounting Pronouncements (Details) - USD ($)	6 Months Ended	12 Months Ended
	Apr. 30, 2017	Oct. 31, 2016
Accounting Policies [Abstract]
New Accounting Pronouncement or Change in Accounting Principle, Effect of Adoption, Quantification	$ 91,236	$ 130,347

Fair Value Measurements (Detail

Fair Value Measurements (Details) - Commodity [Member] - Fair Value, Measurements, Recurring [Member] - USD ($)	Apr. 30, 2017	Oct. 31, 2016
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative Instruments - commodities	$ (1,097,718)	$ (706,473)
Fair Value, Inputs, Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative Instruments - commodities	(1,097,718)	(706,473)
Fair Value, Inputs, Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative Instruments - commodities	0	0
Fair Value, Inputs, Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative Instruments - commodities	$ 0	$ 0

Inventories (Details)

Inventories (Details) - USD ($)	Apr. 30, 2017	Oct. 31, 2016
Inventories [Abstract]
Raw Materials	$ 1,678,123	$ 3,243,617
Spare parts and supplies	3,290,664	2,327,674
Work in Process	684,678	611,347
Finished Goods	2,021,649	776,265
Total	$ 7,675,114	$ 6,958,903

Derivative Instruments Balance

Derivative Instruments Balance Sheet (Details)	6 Months Ended
	Apr. 30, 2017USD ($)bugal	Oct. 31, 2016USD ($)
Derivatives, Fair Value [Line Items]
Deposits with broker	$ 1,497,322	$ 1,246,759
Derivative instruments	399,604	540,286
Commodity [Member]
Derivatives, Fair Value [Line Items]
In gain position	167,838	523,218
In loss position	$ (1,265,556)	$ (1,229,691)
Ethanol [Member] | Commodity Contract [Member]
Derivatives, Fair Value [Line Items]
Derivative, Nonmonetary Notional Amount, Mass | gal	1,260,000
Corn [Member] | Commodity Contract [Member]
Derivatives, Fair Value [Line Items]
Derivative, Nonmonetary Notional Amount, Mass | bu	600,000

Derivative Instruments Income S

Derivative Instruments Income Statement (Details) - Not Designated as Hedging Instrument [Member] - USD ($)	3 Months Ended		6 Months Ended
	Apr. 30, 2017	Apr. 30, 2016	Apr. 30, 2017	Apr. 30, 2016
Ethanol [Member] | Sales [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Derivative Instruments, Gain (Loss) Recognized in Income, Net	$ 196,478	$ 5,645	$ 422,210	$ 35,147
Corn [Member] | Cost of Sales [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Derivative Instruments, Gain (Loss) Recognized in Income, Net	300,480	(47,252)	850,816	110,918
Natural Gas [Member] | Cost of Sales [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Derivative Instruments, Gain (Loss) Recognized in Income, Net	$ 14,887	$ 15,954	$ 11,747	$ (96,700)

Debt Financing (Details)

Debt Financing (Details)	6 Months Ended
	Apr. 30, 2017USD ($)	Oct. 31, 2016USD ($)	Jan. 22, 2016USD ($)
Debt Instrument [Line Items]
Capital Lease Obligations	$ 138,214	$ 547,327
Debt Issuance Costs, Net	(91,236)	(130,347)
Long-term Debt and Capital Lease Obligations	12,296,978	17,104,819
Current maturities of long-term debt	2,849,016	3,297,327
Long-Term Debt	$ 9,447,962	13,807,492
Lease term	120
Ratio of Indebtedness to Net Capital	1.25
Capital Lease Obligations, Current	$ 138,214
AgStar Financial Services, PCA [Member] | Letter of Credit [Member]
Debt Instrument [Line Items]
Debt Instrument, Basis Spread on Variable Rate	3.25%
Letters of Credit Outstanding, Amount	$ 1,000,000
Letter of Credit, Interest Rate at Period End	1.50%
AgStar Financial Services, PCA [Member] | Revolving Credit Facility [Member]
Debt Instrument [Line Items]
Debt Instrument, Basis Spread on Variable Rate	3.25%
Notes Payable to Banks [Member] | AgStar Financial Services, PCA [Member]
Debt Instrument [Line Items]
Debt Instrument, Basis Spread on Variable Rate	3.25%
Notes Payable to Banks [Member] | AgStar Financial Services, PCA [Member] | Term Loan [Member]
Debt Instrument [Line Items]
Long-term Debt	$ 11,250,000	12,750,000
Debt Instrument, Face Amount			$ 15,000,000
Debt Instrument Conditional balance	10,000,000
Debt Instrument, Periodic Payment, Principal	250,000
Notes Payable to Banks [Member] | AgStar Financial Services, PCA [Member] | Revolving Credit Facility [Member]
Debt Instrument [Line Items]
Long-term Debt	1,000,000	$ 3,937,839
Debt Instrument, Face Amount	$ 15,000,000
Line of Credit Facility, Interest Rate at Period End	4.13%
Debt Instrument, conditional credit line availability	$ 20,000,000
Line of Credit Facility, Maximum Borrowing Capacity			$ 15,000,000
Working Capital Requirement	8,250,000
Debt Instrument, Annual Capital Expenditure Limit	5,000,000
Long-term Line of Credit, Noncurrent	1,000,000
Minimum [Member] | Notes Payable to Banks [Member] | AgStar Financial Services, PCA [Member] | Revolving Credit Facility [Member]
Debt Instrument [Line Items]
Working Capital Requirement	$ 8,250,000
Debt Instrument, Restrictive Covenants	0.75
Maximum [Member] | Notes Payable to Banks [Member] | AgStar Financial Services, PCA [Member] | Revolving Credit Facility [Member]
Debt Instrument [Line Items]
Working Capital Requirement	$ 11,000,000
Debt Instrument, Restrictive Covenants	1

Debt Financing Short Term Debt

Debt Financing Short Term Debt (Details) - AgStar Financial Services, PCA [Member] - USD ($)	6 Months Ended
	Apr. 30, 2017	Jan. 22, 2016
Letter of Credit [Member]
Line of Credit Facility [Line Items]
Debt Instrument, Basis Spread on Variable Rate	3.25%
Revolving Credit Facility [Member]
Line of Credit Facility [Line Items]
Debt Instrument, Basis Spread on Variable Rate	3.25%
Notes Payable to Banks [Member]
Line of Credit Facility [Line Items]
Debt Instrument, Basis Spread on Variable Rate	3.25%
Notes Payable to Banks [Member] | Revolving Credit Facility [Member]
Line of Credit Facility [Line Items]
Working Capital Requirement	$ 8,250,000
Line of Credit Facility, Maximum Borrowing Capacity		$ 15,000,000
Line of Credit Facility, Interest Rate at Period End	4.13%
Line of Credit Facility, Current Borrowing Capacity	$ 0

Debt Financing Schedule of Matu

Debt Financing Schedule of Maturities of Long-Term Debt (Details) - USD ($)	Apr. 30, 2017	Oct. 31, 2016
Debt Financing [Abstract]
Long-term Debt, Gross, Maturities, Repayments of Principal in Next Rolling Twelve Months	$ 2,888,214
Debt Issuance Costs, Accumulated Amortization in Next Rolling Twelve Months	39,198
Long-term Debt, Maturities, Repayments of Principal in Next Rolling Twelve Months	2,849,016
Long-term Debt, Gross, Maturities, Repayments of Principal in Rolling Year Two	3,000,000
Debt Issuance Costs, Accumulated Amortization in Rolling Year Two	28,385
Long-term Debt, Maturities, Repayments of Principal in Rolling Year Two	2,971,615
Long-term Debt, Gross, Maturities, Repayments of Principal in Rolling Year Three	3,000,000
Debt Issuance Costs, Accumulated Amortization in Rolling Year Three	17,571
Long-term Debt, Maturities, Repayments of Principal in Rolling Year Three	2,982,429
Long-term Debt, Gross, Maturities, Repayments of Principal in Rolling Year Four	2,500,000
Debt Issuance Costs, Accumulated Amortization in Rolling Year Four	6,082
Long-term Debt, Maturities, Repayments of Principal in Rolling Year Four	2,493,918
Long-term Debt, Gross, Maturities, Repayments of Principal in Rolling Year Five	0
Debt Issuance Costs, Accumulated Amortization in Rolling Year Five	0
Long-term Debt, Maturities, Repayments of Principal in Rolling Year Five	0
Long-term Debt, Gross, Maturities, Repayments of Principal in Rolling after Year Five	1,000,000
Debt Issuance Costs, Accumulated Amortization in Rolling After Year Five	0
Long-term Debt, Maturities, Repayments of Principal in Rolling after Year Five	1,000,000
Long-term Debt, Gross	12,388,214
Long-term Debt and Capital Lease Obligations	12,296,978	$ 17,104,819
Debt Issuance Costs, Net	$ (91,236)	$ (130,347)

Commitments and Contingencies (

Commitments and Contingencies (Details)	Apr. 30, 2017USD ($)MMBTUbugal
Supply Commitment [Line Items]
Purchase Commitment, Remaining Minimum Amount Committed, Volume | gal	220,000
Corn [Member]
Supply Commitment [Line Items]
Purchase Commitment, Remaining Minimum Amount Committed, Volume | bu	1,881,000
Financial Instruments, Owned, Physical Commodities, at Fair Value	$ 6,094,000
Natural Gas [Member]
Supply Commitment [Line Items]
Purchase Commitment, Remaining Minimum Amount Committed, Energy | MMBTU	1,207,000
Financial Instruments, Owned, Physical Commodities, at Fair Value	$ 3,402,000
Denaturant [Member]
Supply Commitment [Line Items]
Financial Instruments, Owned, Physical Commodities, at Fair Value	$ 276,000
Basis [Member] | Corn [Member]
Supply Commitment [Line Items]
Purchase Commitment, Remaining Minimum Amount Committed, Volume | bu	11,095,000

Commitments and Contingencies O

Commitments and Contingencies Other Commitments (Details) - Grain Bin [Member]	6 Months Ended
	Apr. 30, 2017USD ($)bu
Other Commitments [Line Items]
Additional Storage Capacity | bu	600,000
Other Construction Costs | $	$ 1,600,000

Commitments and Contingencies S

Commitments and Contingencies Sales Commitments (Details)	6 Months Ended
	Apr. 30, 2017USD ($)Tlb
Distillers Grain [Member]
Derivative [Line Items]
Derivative, Nonmonetary Notional Amount, Mass | T	9,975
Commodity Contract Asset, Current	$ 1,012,000
Modified Distillers Grain [Member]
Derivative [Line Items]
Derivative, Nonmonetary Notional Amount, Mass | T	7,400
Commodity Contract Asset, Current	$ 414,000
Corn Oil [Member]
Derivative [Line Items]
Derivative, Nonmonetary Notional Amount, Mass | lb	145,000
Commodity Contract Asset, Current	$ 41,000

Commitments and Contingencies M

Commitments and Contingencies Membership Unit Repurchase (Details) - USD ($)	1 Months Ended
	Apr. 30, 2017	Feb. 28, 2017
Equity, Class of Treasury Stock [Line Items]
Stock Repurchased During Period, Shares	0.5	78
Share Price	$ 8,000	$ 7,000
Payments for Repurchase of Common Stock	$ 4,000	$ 546,000