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CAUTIONARY STATEMENT REGARDING
FORWARD-LOOKING INFORMATION

This Annual Report on Form 10-K and other reports issued by Northern Growers, LLC (including reports filed with the Securities and Exchange Commission (the “SEC” or “Commission”), contain “forward-looking statements” that deal with future results, expectations, plans and performance.  Forward-looking statements may include statements which use words such as “believe,” “expect,” “anticipate,” “intend,” “plan,” “estimate,” “predict,” “hope,” “will,” “should,” “could,” “may,” “future,” “potential,” or the negatives of these words, and all similar expressions. These forward-looking statements are made based on our expectations and beliefs concerning future events affecting us and are subject to uncertainties and factors relating to our operations and business environment, all of which are difficult to predict and many of which are beyond our control, that could cause our actual results to differ materially from those matters expressed in or implied by these forward-looking statements. We do not undertake any responsibility to release publicly any revisions to these forward-looking statements to take into account events or circumstances that occur after the date of this prospectus.report. Additionally, we do not undertake any responsibility to update you on the occurrence of any unanticipated events which may cause actual results to differ from those expressed or implied by the forward-looking statements contained in this Annual Report.report.  Important factors that could cause actual results to differ materially from our expectations are disclosed under “Risk Factors” and elsewhere in this report.  As stated elsewhere in this report such factors include, among others:

·                                          Changes in ethanol supply and demand;

·                                          Changes in the weather or general economic conditions impacting the availability and price of commodities, particularly corn and natural gas;

·                                          The availability and cost of raw materials for the production process, particularly for corn, naural gas, steam, and water;

•                                        The resultsTable of risk management or hedging strategies;Contents

•                                        Competition from alternative fuels and alternative fuel additives;

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

PART I

Item 1.  Business.

Overview

Northern Growers, LLC (“Northern Growers”) is a South Dakota limited liability company, thatconsisting of 960 members who principally reside in South Dakota and the upper Midwest. Northern Growers owns and manages a 77.16% interest in its subsidiary, Northern Lights Ethanol, LLCPOET® Biorefining - - Big Stone (“Northern Lights”Big Stone”).  Broin Investments I, LLC owns, an ethanol and distillers grains plant (the “plant” or “our plant”) located near the remaining minority interest in Northern Lights.city of Big Stone City, South Dakota. (Northern Growers and Northern LightsBig Stone are also referred to collectively in this report as “we,” “our,” or “us”).

Our revenues are derived from the sale and distribution of ethanol and distillers grains to customers primarily located in the U.S.  Corn for our plant’s production process is supplied primarily from local agricultural producers and from purchases on the open market. After processing the corn into ethanol, ethanol is sold to POET® Ethanol Products, LLC, which subsequently markets and sells the ethanol to gasoline blenders and refineries located throughout the continental U.S.  All of our distillers grains are sold through our marketing agent, POET® Nutrition, Inc., which markets and sells the product to livestock feeders primarily located in the continental U.S. The day-to-day operations of our plant are managed by POET® Plant Management, LLC, of Sioux Falls, South Dakota.

Our operating results are largely driven by the prices at which we sell ethanol and distillers grains and the costs related to their production.  Historically, the price of ethanol tends to fluctuate in the same direction as the price of unleaded gasoline and other petroleum products.  The greatest effect on the price of ethanol is the supply and demand for ethanol in the U.S. markets. Our two largest costs of production are corn and natural gas, although our use of natural gas is offset by the use of steam supplied directly from the adjacent energy power plant called Big Stone Plant. The price of distillers grains is generally influenced by supply and demand, the price of substitute livestock feed, such as corn and soybean meal, and other animal feed proteins.

General Developments of Business

Northern Growers is owned by 859 members who principally residewas originally organized in 2000 as a South Dakota Minnesota, and immediately surrounding states.  Northern Growers’ business primarily consistscooperative for the purpose of owning and managing its interest in Big Stone and providing a major source of corn supply to the plant. Northern Lights,Growers was subsequently reorganized in 2003 as a South Dakota limited liability company at which owns and operates an ethanol plant near Big Stone City, South Dakota (the “plant”).

Reorganization

Northern Growers was originally formed as a South Dakota cooperative on April 14, 2000.  The purpose of the cooperative was to own and manage a 77.16% interest in Northern Lights and to supply corntime it became subject to the plant.  As a cooperative, Northern Growers was entitled to single-level, pass-through tax treatment on income generated through members’ patronage. This allowed Northern Growers to pass income onto its members in the form of distributions without first paying taxes at the company level, similar to the taxation of a partnership. As the cooperative’s board of directors became aware of certain disadvantages in remaining as a cooperative, the board of directors approved a plan to reorganize into a South Dakota limited liability company.

The reorganization from a cooperative to a limited liability company became effective on April 1, 2003 following approval of the reorganization by Northern Growers’ members. The transaction was an exchange of interests whereby the assets and liabilities of the cooperative were transferred for capital units of the newly formed limited liability company, Whetstone Ethanol, LLC. The capital units were distributed to Northern Growers’ members upon dissolution of the cooperative at a rate of one capital unit of the limited liability company for each share of equity stock owned in the cooperative. The distribution of capital units to the members was registeredreporting requirements under the Securities Act of 1933. Upon completion1933 and Securities Exchange Act of the reorganization, the name, Whetstone Ethanol, LLC, was changed to1934.  Northern Growers LLC.  As a limited liability company, Northern Growers elected to beis taxed as a partnership in orderfor federal income tax purposes, meaning that all of its income is subject to retain its historic single-level, incomepass through tax treatment at the member level rather than at the company level.

The Plant

The plant is a dry-mill processing facility, located immediately adjacent to Big Stone Plant near the cityConstruction of Big Stone City in Grant County, South Dakota.  Theour plant was designedcompleted and builtoperations commenced in July 2002 by Broin and Associates, Inc. of Sioux Falls, South Dakota, a division of the Broin Companies, LLC, specializing in the design and construction of ethanol plants.  The2002.  Our plant was originally built with aan annual name-plate production capacity of 40 million gallons of ethanol, annually.but since that time we have made significant capital improvements.  In JuneMarch 2006, we completed a rail expansion project, which provided our plant with additional capacity to store rail cars for the shipment of products.  In October 2006, we completed construction for the incorporation of BPX™ technology into the production process. In addition to reducing energy costs, BPX™ releases additional starch content, increases the protein content and quality of by-products and decreases plant emissions.  In May 2007, Broinour plant expansion was completed, increasing its annual name-plate capacity from 40 million to 75 million

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gallons of ethanol.  In October 2007, we increased our grain storage capacity by adding two grain bins.  The design and Associates expects to complete the construction of the BPX™, grain storage and expansion projects was completed by POET® Design and Construction, Inc., of Sioux Falls, South Dakota.

Since 2008, the ethanol industry has experienced significant change. In 2008, the industry was marked by volatility and unprofitability. An increase in production capacity caused by new and expanding plants drove ethanol prices lower and corn prices higher. Corn prices were significantly higher than in prior years which adversely affected costs of production. Similarly, ethanol prices were significantly lower than in prior years which adversely impacted revenues.  In addition, U.S. financial markets experienced a major expansionsevere downturn in the latter part of 2008 and all of 2009. Businesses across many sectors experienced a lack of access to credit causing a series of liquidity crises.

In 2009, the ethanol industry began to stabilize and profitability returned to much of the plant, increasingindustry. The decrease in ethanol prices in 2008 caused many plants in the name-plate capacityU.S. to 75 million gallons annually.slow production or shut down which consequently decreased supply nationwide. The plant’s day-to-day operations are managed by Broin Management, LLC,decrease in supply contributed to an increase in ethanol prices and revenues. At the same time, corn prices decreased due to a divisionlarge carryout from 2008 and a favorable harvest forecast in 2009.  Energy prices, especially natural gas and steam prices, also decreased.  Whether the current trend continues into 2010 is uncertain due to the lasting effects of the Broin Companies, LLC, specializingfinancial crisis, potential excess capacity in the managementethanol industry and operationlack of demand growth, and volatility historically associated with corn and ethanol plants.prices.

The plant is essentially a fermentation plant.  The corn supplied to the plant is ground and then mixed with water to form a mash.  The mash is heated and enzymes added to convert the starch into fermentable sugars.  Fermentation occurs when yeast is added to convert the sugars into alcohol and carbon dioxide.  Fermentation produces a mixture called “beer,” which contains about 10% alcohol and 90% water.  The “beer” is then boiled in a distillation column to separate the water, resulting in ethyl alcohol that is 90% to 95% pure.  The mixture then goes through a dehydration process, which increases the alcohol content to 99% or greater.  This product is then mixed with a certified denaturant to make the product unfit for human consumption and commercially saleable.

Principal Products

The principal products produced at our plant are fuel grade ethanol and distillers grains.

Ethanol

Ethanol is ethyl alcohol.  Ethanol is produced from starch or sugar-based feed products such as corn, potatoes, wheat, and sorghum, as well as from agricultural waste products including sugar, rice straw, cheese whey, beverage wastes and forestry and paper wastes. Historically, corn has been the primary source of producing ethanol because of its relatively low cost, wide availability and ability to produce large quantities of carbohydrates that convert into glucose more easily than other products.  Today, approximately 90% of the ethanol produced in the United StatesU.S. is produced from corn.

Ethanol is used for three primary purposes: 1) as an oxygenated fuel additive; 2) as an octane enhancer in fuels; and 3) as a non-petroleum based gas substitute. Approximately 95% of all ethanol is used for blending with unleaded gasoline and other fuel products. Ethanol has been utilized as a fuel additive since the late 1970s when its value as a product extender for gasoline was discovered during the OPEC oil embargo crisis.  In the 1980s, ethanol began to see widespread use as an octane enhancer, replacing other environmentally harmful components in gasoline such as lead and benzene.  Ethanol’s use as an oxygenate continued to increase with the passage of the Clean Air Act Amendments of 1990, which required the addition of oxygenates to gasoline in the nation’s most polluted areas.  Because ethanol contains approximately 35% oxygen, its combination with gasoline increases the percentage of oxygen in gasoline.  As a result, the gasoline burns cleaner and releases less carbon monoxide and other exhaust emissions into the atmosphere.

Distillers Grains

A principal co-productby-product of the ethanol production process is distillers grains.  Distillers grains are a high protein, high energy feed supplement marketed primarily to the dairy, beef, sheep, swine, and poultry industries. It is a popular animal feed supplement, with millions of tons produced in North America annually.  Most of the distillers grains produced in the United StatesU.S. are sold for use in animal feeds within the continental United States, andU.S., although a smallgrowing percentage is exported primarily to countries such as Canada and Mexico and countries in Asia and Europe.

Dry mill ethanol processing produces, generally, three forms of distillers grains, all of which differ in moisture content and shelf life: 1) dried distillers grains with solubles, (DDGS);otherwise known as DDGS; 2) distillers wet grains or “wet cake”; and 3) modified distillers grains.  Distillers wet grains are processed corn mash that does not go through a drying process and contains approximately 70% moisture content.  Distillers wet grains have a short shelf life of approximately three days and can be sold only to livestock producers within the immediate vicinity of thea plant.  Modified distillers grains

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are distillers wet grains that have beenare dried to a 50% moisture content.  Modified distillers grains have a slightly

longer shelf life and are often sold to nearby livestock producers. DDGS is distillers wet grains that are dried to an 8-10% moisture content. DDGS have an almost indefinite shelf life and may be sold and shipped to any market regardless of its vicinity to thea plant.

Marketing and Distribution

Ethanol

All of the

The ethanol produced at theour plant is sold to POET® Ethanol Products, LLC, a divisionthe terms of Broin Enterprises, Inc., underwhich are governed by an ethanol marketing agreement. After purchasing the ethanol from us, POET® Ethanol Products in turn, markets and sells the ethanol to major, multi-national oil companies with blending and refinery facilities located throughout the continental United States.U.S. The price receivedthat we receive from the sale to POET® Ethanol Products is based upon various types of contracts between the plantPOET® Ethanol Products and Ethanol Productsits customers, and is fixed upon the transfer of title to POET® Ethanol Products.

The ethanol produced at theour plant is shipped by POET® Ethanol Products using rail cars operated by POET® Ethanol Products or trucks supplied by companies with which POET® Ethanol Products contracts.  Transfer of title and risk of loss is madeshifts to POET® Ethanol Products upon the loading of ethanol onto the railcars and trucks at the plant.  TheOur plant is served by rail facilities and connections to the Burlington Northern Santa Fe railroad system, which facilitatefacilitates the transportation of ethanol to the customers’ terminals.  The plant is also servedterminals, and by multiple South Dakota state highways and Interstate Highway 29, which provide transportation links in all directions.

The marketing agreement with POET®Ethanol Products is in effect until July 2007,2012, renewing automatically for five-year terms unless either party provides at least ninety days written notice of termination prior to the end of the term.  POET® Ethanol Products charges us a marketing and service fee based upon each gallon of ethanol sold. POET® Ethanol Products also charges us a fee for each gallon of ethanol to which renewable identification numbers, or RINS, are assigned, which is necessary for complying with the federal renewable fuels standard and the U.S. Environmental Protection Agency’s enforcement of such standard.   Shipping costs in transportingrelating to the transportation of ethanol are borne by the plantus and are included in our gross revenues and cost of revenues.  In the event that the contractual relationship with POET®Ethanol Products is interrupted for any reason, we believe that another entity or entities to purchase or market the ethanol could be located.  Any interruption, however, could temporarily disrupt the sale of ethanol and adversely affect our business and operations.

Distillers Grains

All of the

The distillers grains produced at theour plant are sold to customers through Dakota Gold Marketing,POET® Nutrition, Inc., a divisionthe terms of Broin Enterprises, Inc., underwhich are governed by a distillers grains marketing agreement. As the plant’sour exclusive marketing agent, Dakota GoldPOET® Nutrition markets and sells the distillers grains produced at the plant to customers primarily located throughout the continental United States.customers. By marketing through POET™ Nutrition, we are not dependent upon one or a limited number of customers. The price received from the sale of distillers grain is the price received from the customers with which Dakota Gold MarketingPOET® Nutrition has negotiated and entered into a contract for sale.

There are

We produce three variations of distillers grains produced at the plant andwhich are marketed by Dakota Gold Marketing:through POET® Nutrition: 1) DDGS; 2) Dakota Gold™; and 3) distillers wet grains. Dakota Gold™Gold® is DDGS that is certified by Dakota Gold Marketing indicating DDGS meetswhich POET® Nutrition certifies to as meeting certain quality standards and specifications. In 2006, approximately 78% of our revenues from the sale of

POET® Nutrition markets distillers grains were attributable to sales of Dakota Gold™.

Dakota Gold Marketing markets Dakota Gold™, DDGS and distillers wet grains to local, regional, national and nationalinternational markets.  The plant ships theWe sell and ship a substantial majority of Dakota Gold™ and DDGSour distillers grains to national markets, which are primarily locatedcustomers in the southwestern United States, and western parts of the restU.S., the remainder of which is shipped to localother areas of the U.S. and regional markets.to Mexico. Shipments to national and international markets are primarily donecompleted by the use of rail because ofdue to a longer shelf life, andwhereas shipments to local or regional markets are primarily donecompleted by truck.  We also contract with Dakota Gold MarketingPOET® Nutrition for the use of railcars in the shipping of DDGS and Dakota Gold™Gold®, paying Dakota Gold MarketingPOET® Nutrition a flat fee per railcar in connection with each shipment. Through the marketing of Dakota Gold, we are not dependent upon one or a limited number of customers.

The marketing agreement with Dakota Gold MarketingPOET®Nutrition is in effect until March 2012, renewing automatically for additional five-year terms unless discontinued by either party upon at least three months prior written notice.  Dakota Gold MarketingPOET®

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Dependence Upon a Single or Few Customers

We, as discussed above, are substantially dependent upon POET® Ethanol Products for the purchase, marketing and distribution of ethanol. POET® Ethanol Products purchases 100% of the ethanol produced at theour plant, all of which is marketed and distributed to its customers.

Sources and Availability of Raw Materials

Corn. TheOur major raw material needed to produce ethanol and distillers grains atfor the plantproduction process is corn.  To operate our plant at afull name-plate capacity, of 75 million gallons of ethanol annually, the plant requireswe require the supply of approximately 26.527 million bushels of corn annually.  AllWe purchase a majority of the plant’sour corn requirements are purchased on the open market from local producers and storage elevators.  The plant’s location in Grant County,northeastern South Dakota is expectedand western Minnesota. We believe that corn producers in proximity to our plant will continue to provide a sufficient supply of corn to meetfor the bushel requirement through 2007.  In 2006, approximately 6.4 million bushels of corn were produced in Grant County and 32.6 million bushels of corn were produced in the nearby South Dakota counties of Codington, Day, Deuel, Hamlin, and Roberts.  Another 37.1 million bushels were produced in the nearby Minnesota counties of Big Stone and Lac Qui Parle.foreseeable future.

Steam. The Our production process at the plant requires a constant supply of steam.  Steam is used for the cooking, evaporation, and distillation processes.  While the production of steam forin the ethanol production process is generally received from an ethanol plant’s on-site boilers, theour plant receives a substantial portion of its steam directly from Big Stone Plant, a coal fired, electrical generating facility located immediately adjacent to the plant, andour plant. Big Stone Plant is co-owned by three utilities, namely, Otter Tail Corporation, Montana-Dakota Utilities and NorthWestern Corporation. In the event that additionalThe benefit of a steam is necessary or the supply of steam from Big Stone Plant is unexpectedly diminished or interrupted, the plant uses two on-site boilers to produce steam. The energy source to power the two on-site boilers and other machinery is natural gas. However,the use of steam from Big Stone Plantthat it reduces the plant’sour dependence on natural gas for operations.  In 2006,2009, for example, 48%37% of the plant’sour natural gas requirements for operations were replaced directly with steam from Big Stone Plant, compared to 40%41% of the plant’sour requirements in 2005.2008.

Big Stone Plant generally provides us with a consistent supply of steam to meet our requirements except during its semi-annual maintenance shutdowns. When Big Stone Plant shuts down for any prolonged period of time, or if the transfer of steam is unexpectedly diminished or interrupted, we use two on-site boilers powered by natural gas to generate steam. However, as discussed below under “Natural Gas,” when we are required to rely on our on-site boilers to generate steam, our natural gas supply can prevent us from generating a sufficient volume of steam to operate at full name-plate production capacity.

The purchase of steam is governed by a steam sale agreement withbetween us and Big Stone Plant provides steam to the plant up toPlant.  The rate is set at a maximum of 140 thousand pounds of steam per hour.fixed rate based on specified volume used, above which it is set at a market rate as determined by Big Stone Plant. The agreement’s ten year term ends on June 1, 2012, but automatically renews for two additional five-year terms unless terminated by either party by providing 12 months advance notice. Big Stone Plant has generally provided the plant with a consistent supply of steam to meet its requirements except during routine, semi-annual maintenance shutdowns.

Natural Gas. The Our production process at the plant requires a constant supply of natural gas.  Natural gas is the primary energy source for the drying of distillers grains. It is primarily responsible for powering the two on-site boilers for the productiongeneration of steam in the event that additional steam is necessary or the supply of steam from Big Stone Plant is unexpectedly diminished or interrupted. The plant contractsWe contract with NorthWestern CorporationCenterPoint Energy Services, Inc., of Sioux Falls, South Dakota,Houston, Texas, for the supply and distribution of natural gas to

the plant.  The agreement with NorthWestern is for a termCenterPoint terminates in 2012.

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a commercial scale; however, due to these new government incentives, we anticipate that commercially viable cellulosic ethanol technology will be developed in the near future. Several companies and researchers have commenced pilot projects to study the feasibility of commercially producing cellulosic ethanol. If this technology can be profitably employed on a commercial scale, it could potentially lead to ethanol that is less expensive to produce than corn based ethanol, especially if corn prices are high. Cellulosic ethanol may also capture more government subsidies and assistance than corn based ethanol. This could decrease demand for our product or result in competitive disadvantages for our ethanol production process.

At the end of 2008, VeraSun Energy filed for Chapter 11 bankruptcy following significant losses. VeraSun’s ethanol plants were auctioned during the bankruptcy process and a significant number of these plants were purchased by Valero Energy Corporation, a major gasoline refining company. The purchase by Valero Energy represents the first major oil company that has taken a stake in ethanol production infrastructure. In addition, Valero Energy controls its own supply of ethanol that can be used to blend at its gasoline refineries. If other oil companies become involved in the ethanol industry, it may be increasingly difficult for us to compete.

According to the Renewable Fuels Association, as of March 2, 2010, the ethanol industry has grown to 113201 production facilities in the United States as of February 2007, compared to 96 production facilities in the United States as of March 2006. The largest ethanol producers include Abengoa Bioenergy Corp, Archer Daniels Midland, Aventine Renewable Energy, Cargill, US Bioenergy and VeraSun Energy Corporation, all of which are capable of producing more ethanol than the plant.U.S. There are numerousten new plants currently under construction along with four plant expansions. The Renewable Fuels Association currently estimates that the U.S. ethanol plants

industry has capacity to produce more than 13.5 billion gallons of a similar size to the plant located in the Midwest region. In addition, at least 77ethanol per year. The new ethanol plants and 7 expanding plants,under construction along with a combined annualthe plant expansions under construction could push U.S. production capacity of over 3fuel ethanol in the near future to more than 14.5 billion gallons annually, are set to come into production in the next 12 months, which will increase the ethanol production capacity of competitors.per year. In South Dakota, excluding theour plant, there are currently 1214 plants in full production, three of which are in an expansion phase, and four new plants undergoing construction, all of which have a combined production capacity of approximately 900960 million gallons.  Despite this concentration and growth, we believe that we will continue to compete favorably with otherThe largest ethanol and distillers grains’ producers because of the plant’s existing efficiencies, the use of new technology from Broin Research, and the marketing arrangements with the companies owned and affiliated with Broin Companies.

The following table identifies most of the producers in the United States along with their production capacities.

* locally-owned

February 12, 2007U.S. include Archer Daniels Midland, Green Plains Renewable Energy, Hawkeye Renewable and Valero Renewable Fuels, Associationeach of which is capable of producing more ethanol than we produce at our plant.

Ethanol production is also expanding internationally. Brazil has long beenEthanol produced or processed in certain countries in Central America and the world’s largest producer and exporter of ethanol, though since 2005, ethanol production inCaribbean region is eligible for tariff reduction or elimination on importation to the United States slightly exceeded Brazilian production.under a program known as the Caribbean Basin Initiative. Some ethanol producers, including Cargill, have started taking advantage of this situation by building dehydration plants in participating Caribbean Basin countries, which convert ethanol into fuel-grade ethanol for shipment to the U.S. Ethanol is produced more cheaply in Brazil than in the United States because of the use of sugarcane,imported from Caribbean Basin countries may be a less expensive raw material alternative to corn.  Because of various tariffs ondomestically produced ethanol and may affect our ability to sell our ethanol profitably. In addition, despite the importation of ethanol into the United States, the pricefact that there is a significant amount of ethanol produced in the United States is currently more competitive than ethanol imported from Brazil.  In the event that these tariffs are reduced or eliminated, which are scheduled to expire in December 2008, the price ofU.S., ethanol produced in the United Statesabroad and shipped by sea may become less competitive, which could adversely impact the abilitybe a more favorable alternative to sellsupply coastal cities that are located on international shipping ports.

Our plant also competes with producers of other gasoline additives having similar octane and oxygenate values as ethanol.

The Caribbean Basin Initiative allows for ethanol produced in participating Caribbean Basin countries to be imported into the United States duty free. Large ethanol producers, like Cargill, have expressed an interest in building ethanol plants in these countries, such as El Salvador. While the Caribbean Basin Initiative caps the amount of duty free ethanol imported into the United States at 7% of the total United States’ production from the previous year, as total production in the United States grows, the amount of ethanol produced from the Caribbean area and sold in the United States will grow accordingly, which could impact the ability to sell ethanol.

Finally, alternative Alternative fuels, gasoline oxygenates and alternative ethanol production methods are also continually under development. The current trend in ethanol production research ismajor oil companies have significantly greater resources than we have to market other additives, to develop an efficient methodalternative products, and to influence legislation and public perception of producingethanol. These companies also have sufficient resources to begin production of ethanol from cellulose-based biomass, suchshould they choose to do so.

A number of automotive, industrial and power generation manufacturers are developing alternative clean power systems using fuel cells, plug-in hybrids or clean burning gaseous fuels. Like ethanol, the emerging fuel cell industry offers a technological option to address worldwide energy costs, the long-term availability of petroleum reserves and environmental concerns. Fuel cells have emerged as agricultural waste, forest residue, municipal solid waste,a potential alternative to certain existing power sources because of their higher efficiency, reduced noise and energy crops.lower emissions. Fuel cell industry participants are currently targeting the transportation, stationary power and portable power markets in order to decrease fuel costs, lessen dependence on crude oil and reduce harmful emissions. If the fuel cell industry continues to expand and gain broad acceptance and becomes readily available to consumers for motor vehicle use, we may not be able to compete effectively. This trendadditional competition could reduce the demand for ethanol, which would negatively impact our profitability.

Demand for ethanol may increase as a result of increased consumption of E85 fuel. E85 fuel is driven by the fact that cellulose-based biomass is generally cheaper than corn,a blend of 85% ethanol and producing ethanol from cellulose-based biomass would create opportunities15% gasoline. According to produce ethanol in areas which are unable to grow corn. Additionally, the enzymes used to produce cellulose-based ethanol have recently become less expensive.   Furthermore, theU.S. Department of Energy has recently announced support forestimates, there are currently nearly 8 million flexible fuel vehicles capable of operating on E85 in the development of cellulose-based ethanol, including a $160 millionU.S. Further, the U.S. Department of Energy programreports that there are currently more than 1,900 retail gasoline stations supplying E85. The number of retail E85 suppliers increases

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significantly each year, however, this remains a relatively small percentage of the total number of U.S. retail gasoline stations, which is approximately 170,000. In order for pilotE85 fuel to increase demand for ethanol, it must be available for consumers to purchase it. As public awareness of ethanol and E85 increases along with E85’s increased availability, we anticipate some growth in demand for ethanol associated with increased E85 consumption.

Distillers Grains Competition

Ethanol plants producing cellulose-based ethanol.  Several large companies, including Iogen Corporation, Abengoa, Royal Dutch Shell Group, Goldman Sachs Group, Dupontin the Midwest produce the majority of distillers grains and Archer Daniels Midland,primarily compete with other ethanol producers in the production and sales of distillers grains. According to the Renewable Fuels Association’s Ethanol Industry Outlook 2010, ethanol plants produced 30.5 million metric tons of distillers grains in 2008/2009 and estimates 33 million metric tons in 2009/2010. The amount of distillers grains produced is expected to increase significantly as the number of ethanol plants increase.

The primary consumers of distillers grains are dairy and beef cattle, according to the Renewable Fuels Association’s Ethanol Industry Outlook 2010. In recent years, an increasing amount of distillers grains have all indicatedbeen used in the swine and poultry markets. Numerous feeding trials show advantages in milk production, growth, rumen health, and palatability over other dairy cattle feeds. With the advancement of research into the feeding rations of poultry and swine, we expect these markets to expand and create additional demand for distillers grains; however, no assurance can be given that these markets will in fact expand, or if they are interested in researchdo, that we will benefit from it. The market for distillers grains is generally confined to locations where freight costs allow it to be competitively priced against other feed ingredients. Distillers grains generally compete with corn, soybean meal and development in this area.  In addition, Xethanol Corporation, of Blairstown, Iowa, and Voyager Ethanol of Emmetsburg, Iowa, have stated plans to convert or expand their plants to a cellulose-based ethanol facility after 2007.other feed formulations.

Federal and State Government Supports

Various federal and state laws, regulations, and programs have led to an increasing use of ethanol in fuel, including subsidies, tax credits, policies and other forms of financial incentives.  Some of these laws provide economic incentives to produce and blend ethanol and others mandate the use of ethanol.

The Renewable Fuels Standard

The most recent ethanol supports are containedEnergy Policy Act enacted in 2005 established the first ever Renewable Fuel Standard, or RFS, in federal law which mandated certain levels of usage of biofuels in the domestic fuel supply beginning in 2006 and continuing through 2012.  In December 2007, the Energy Independence and Security Act of 2007 was enacted.  This legislation further increased the amount of mandated biofuel usage to a maximum of 36 billion gallons a year by 2022.  Pursuant to the Energy Policy Act of 2005. This law became effective on August 8, 2005 and is expected to impact favorably the ethanol industry by enhancing both the production and use of ethanol. The provision of the Energy PolicyIndependence and Security Act, of 2005 likely to have the greatest impact on the ethanol industry is the creation of a Renewable Fuels Standard, known as the RFS. The RFS is a national program that imposes requirements with respect to the amount of renewable fuel produced and used. RFS applies toU.S. Environmental Protection Agency has promulgated rules requiring refineries, blenders, distributors and importers allowing these entities to introduce or sell volumes of biofuels, including corn-based ethanol and biodiesel fuel, into commerce in accordance with the annual RFS. The following table describes minimum biofuel use renewable fuel blends in those areas where itmandated for years 2010 through 2015:

Under the RFS as modified by Energy Independence and Security Act, the mandate for corn-based ethanol is most cost effective. The RFS requires that 4.7capped at 15 billion gallons in 2015 and continues at that level through 2022.  The remaining amount of biofuel required by the RFS must be sold or dispensedderived from non-corn-based ethanol such as biodiesel.

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The EPA is currently reviewing a request to allow for blending of up to 15% ethanol into gasoline for normal use.  A decision is expected in 2007, increasing to 7.5 billion gallons by 2012.mid 2010. If granted, this waiver could have a positive impact upon demand as E15 may replace E10 as the base blend of ethanol in the nation’s fuel supply.

The Clean Air Act and Oxygenated Gasoline Program

Ethanol sales have been favorably affected by the Clean Air Act amendments of 1990, particularly the Oxygenated Gasoline Program, which became effective November 1, 1992. The Oxygenated Gasoline Program requires the sale of oxygenated motor fuels during the winter months in certain major metropolitan areas to reduce carbon monoxide pollution. Ethanol use has also increased as the result of a second Clean Air Act program, the Reformulated Gasoline Program. This program became effective January 1, 1995 and requires the sale of reformulated gasoline in numerous areas to reduce pollutants, specifically those that contribute to ground level ozone, better known as smog. Reformulated gasoline that meets the performance criteria set by the Clean Air Act can be reformulated in a number of ways, including the addition of oxygenates to the gasoline. The two major oxygenates added to reformulated gasoline pursuant to these programs are MTBE and ethanol. MTBE has been linked to groundwater contamination and has been banned from use in many states. Although the Energy Policy Act of 2005 did not impose a national ban of MTBE, its failure to include liability protection for manufacturers of MTBE is expected to result in refiners and blenders using ethanol rather than MTBE. Prior to the passage of the Energy Policy Act, the reformulated gasoline program included a requirement that reformulated gasoline contain 2% oxygenate. The Energy Policy Act repealed that requirement.

The Volumetric Ethanol Excise Tax Credit

The use of ethanol as an alternative fuel source has been aided by federal tax policy.policy, which directly benefits gasoline refiners and blenders, and increases demand for ethanol. In October 2004, the president signed a law that contained the Volumetric Ethanol Excise Tax Credit known as VEETC, and(“VEETC”) was signed into law which amended the federal excise tax structure effective as of January 1, 2005. Prior to VEETC, ethanol-blended fuel was taxed at a lower rate than regularThis law amended the federal gasoline (13.2 cents on a 10% blend). Under VEETC, the ethanol excise tax exemption has been eliminated, thereby allowingstructure effective January 1, 2005.  As amended, the full federal excise tax of 18.4 cents per gallon of gasoline to be collected on all gasoline and allocated to the highway trust fund. In place of the exemption, the bill createslaw created a new volumetric ethanol excise tax credit of 51 cents$0.51 per gallon of ethanol blended at 10% ($0.45 per gallon as of January 1, 2009).  Based on volume,The use of ethanol as a fuel additive is enhanced by the VEETC is expected to allow greater refinery flexibility in blending ethanol since it makesavailability of a credit from the taxfederal gasoline excise tax. The credit available on all ethanol blended with all gasoline, diesel and ethyl tertiary

butyl ether, known as ETBE, including ethanol in E85 (an 85% ethanol fuel blend) and E20 (a 20% ethanol fuel blend) in Minnesota. The VEETC is scheduled to expire on December 31, 2010.

Small Ethanol Producer Tax Credit

The Energy Policy Act of 2005 expanded who qualifies for the small ethanol producer tax credit. Historically, small ethanol producers were allowed a 10-cents-per-gallon production income tax credit on up to 15 million gallons of production annually. The size of the plant eligible for the tax credit was limited to 30 million gallons. Under the Energy Policy Act, the size limitation on the production capacity for small ethanol producers increased from 30 million to 60 million gallons. The credit can be taken on the first 15 million gallons of production. The tax credit is capped at $1.5 million per year per producer. Upon completionWe are no longer eligible for this credit because of the plant’s expansion, the plant’s  annual production will exceedour plant produces in excess of 60 million gallons per year which will make us ineligible for the credit.annually.

Clean-Fuel Vehicle Refueling Equipment Tax Credit

In addition, the Energy Policy Act creates a new tax credit that permits taxpayers to claim a 30% credit (up to $30,000) for the cost of installing clean-fuel vehicle refueling equipment, such as an E85 fuel pump, to be used in a trade or business of the taxpayer or installed at the principal residence of the taxpayer. Under the provision, clean fuels are any fuel at least 85% of the volume of which consists of ethanol, natural gas, compressed natural gas, liquefied natural gas, liquefied petroleum gas and hydrogen and any mixture of diesel fuel and biodiesel containing at least 20% biodiesel. The provision is effective for equipment placed in service until January 1, 2010. While it is unclear how this credit will affect the demand for ethanol in the short term, it is expected to help raise consumer awareness of alternative sources of fuel and could positively impact future demand for ethanol.

Imported Ethanol Tariffs and Quotas

Currently, there is a $0.54 per gallon tariff on imported ethanol, which is scheduled to expire in 2008.  Ethanol2011.  In addition, ethanol imports from 2419 countries in Central America and the Caribbean region are exempted from thethis tariff under the Caribbean Basin Initiative or CBI, which provides that specified nations may export annually to the U.S. an aggregate of 7.0% of United StatesU.S. ethanol production, per year into the United States, with additional exemptions from ethanol produced from feedstock in the Caribbean region over the 7.0% limit.  Large ethanol producers, such as Cargill, have expressed interest in building dehydration plants in participating Caribbean basin countries, such as El Salvador, which would convert ethanol into fuel-grade ethanol for shipment to the United States. Ethanol imported from Caribbean basin countries may be a less expensive alternative to domestically produced ethanol.

State Legislation Banning or Limiting MTBE Use

As of February 2007,2010, 25 states including California and New York, have banned or significantly limited the use of MTBE due to environmental and public health

concerns. Ethanol has served as a replacement for much of the discontinued volumes of MTBE and is expected to continue to replace future volumes of MTBE that are removed from the fuel supply.

South Dakota

In

The state of South Dakota the state provides an incentive production payment to ethanol producers operating in South Dakota. The production incentive consists of a direct payment to South Dakota ethanol producers of up to $0.20 per gallon, which is divided among producers of fuel ethanol within South Dakota up to a maximum of $1 million per year per plant (a maximum of $83,333 per month in 2006) and a maximum of $10 million over the life of a plant.  The program caps the payments that can be distributed to all plants based in South Dakota in a program year to no more than $7 million in payments in 2007each year (program year endingends on June 30, 2007), and every year thereafter.30). The payments are distributed to each plant in proportion to the total number of gallons of ethanol produced and marketed annually by all the plants in South Dakota.  As moreIf additional plants commence production, or existing plants increase production, each plant will receivereceives a lower proportionate share of the maximum payment under the program. Due to an increase in claims made for payment from new andConversely, if existing plants duringterminate operations, or decrease production, each plant receives a higher proportionate share of the 2006 program year, the funds were depleted in full midway through the 2006 program year.  Based on the number of new plants and currently expanding plants, we believe the fundsmaximum payment under the program will be again depleted before the end of the 2007 program year.program.

The ethanol industry and our business depend upon continuation of the federal and state ethanol supports discussed above. These government incentives have supported a market for ethanol that might disappear without the incentives. Alternatively, the government incentives may be continued at lower levels than those at which they currently exist. The elimination or reduction of such federal ethanol supports would make it more costly for us to sell ethanol.

Environmental Regulation and Costs

We are subject to extensive environmental regulation at the federal and state levels.  The federal environmental regulations with which theour plant must comply wereare promulgated by the U.S. Environmental Protection Agency (EPA) pursuant to

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Item 2.  Properties.

The

Our plant is located immediately adjacent to Big Stone Plant nearin the city of Big Stone City, in Grant County, South Dakota.  The land on which theour plant is located is leased from Big Stone-Grant Industrial Development and Transportation, LLC, which is owned by Otter Tail Power Company, Montana-Dakota Utilities, and NorthWestern Corporation.  The term of the lease is for 99 years.  The rent is $2,520.00$2,520 per year until December 31, 2010, after which the rent is increased by 5.0% from the immediately preceding five-year period..  In addition, our plant has transportation facilities including a rail track, rail spur and paved access roads.

Our plant consists of the plant site is served by multiple state highways, is near Interstate Highway 29,following main buildings or properties:

·An administrative building, which contains office equipment, computer systems, and has rail facilitiesfurniture and connections to the Burlington-Northern-Santa Fe Railroad system to transport the ethanolfixtures.

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(1)  Before January 1, 2006, ourThe qualified matching service was operated ondoes not permit firm bids per the rules established under the federal tax code. As a trimester basis, after which it was moved to a quarter based system. Transfer of ownership of all capital units occurs onresult, the first dayprices reflect actual sale prices of the quarter immediately following the quarter(s) in which the trade occurs between the buyer and seller or the next following quarter, depending upon the date of the trade during the quarter. Quarters begin on January 1, April 1, July 1 and October 1.

(2) All unit prices and number of units traded are adjusted to reflect a four-for-one capital unit split made effective on September 1, 2005 and a two-for-one split made effective on July 1, 2006.units.

There were no issuer purchases of equity securities during the fourth quarter ended December 31, 2006.2009.

As a limited liability company being taxed as a partnership, Northern Growers is required to restrict the transferstransfer of its capital units in order to preserve its preferential single-level tax status. Its capital units may not be traded on any national securities exchange orSuch restrictions are set forth in any over-the-counter market. Northern Growers’ Operating Agreement and Capital UnitUnits Transfer System. Under the Capital Units Transfer System, prohibits any transfer that would result in the losstransfers are limited to those through a qualified matching service, transfers made to qualified family members, or transfers by gift, block, upon death, and like transfers, all of its partnership tax status.which are subject to final board of managers’ approval.

Pursuant to Northern Growers’the Operating Agreement, a minimum of 2,500 capital units is required to become and remain a member. In addition to the transfer restrictions described above, under certain limited circumstances, the board of managers retains the right to redeem the capital units at $0.20 per capital unit. The board’s right to redeem is availableunit in the event a member breaches the Operating Agreement or upon a member’s failure to fulfill the membership requirements and with respect to other matters. Under the qualified matching service, the number of capital units traded annually cannot exceed 10% of Northern Growers’ total issued and outstanding capital units.

Distributions

Under the terms of Northern Growers’ Amended and Restated Operating Agreement dated January 1, 2006,July 31, 2009, the board of managers is required to make annual (or more frequent) distributions to its members and may not retain more than $200,000 of net cash from operations, unless (i) a super majoritysuper-majority of the board of managers (75%) decides otherwise, (ii) it would violate or cause a default under the terms of any debt financing or

other credit facilities, or (iii) it is otherwise prohibited by law.  For further details of the restrictions under our debt facilities, please see “Item 7, Management’s Discussion and Analysis of Financial Conditions and Results of Operations—Indebtedness.” Distributions are required to be issued to members of record as of the last day of the quarter immediately prior to the quarter in which the distribution was approved by the board of managers.

In 2005, Northern Lights2008, Big Stone made no cash distributions to Northern Growers.  However, Northern Growers paid cash distributions to its members of approximately $12.5$1.52 million, or $0.030 per capital unit, from a previously made distribution by Big Stone in 2007. In 2009, neither Big Stone nor Northern Growers made any cash distributions to its members.

In February 2010, Big Stone made a cash distribution of $3.47 million to Northern Growers and $3.7$1.03 million to the minority member of Northern Lights.noncontrolling interest member. Northern Growers, in turn, distributedmade a cash distributions to its members of approximately $12.22$2.53 million, or $0.241$0.05 per capital unit.

In 2006, Northern Lights made cash distributions to Northern Growers of approximately $22.95 million and $6.79 million to the minority member of Northern Lights.  Northern Growers, in turn, distributed to its members approximately $22.67 million, or $0.448 per capital unit.

Thus far in 2007, Northern Lights made cash distributions to Northern Growers of approximately $8.49 million and $2.51 to the minority member of Northern Lights.  Northern Growers, in turn, distributed to its members approximately $6.78 million, or $0.134 per capital unit.  Approximately $1.69 million of the $8.49 million, has been retained by Northern Growers in anticipation of a potential redemption of capital units from a member with the largest holding of units in Northern Growers, though it is uncertain whether any redemption will actually occur.

It is uncertain whether similar distributions will be made in 2007. TheOur ability to issue similar distributions is substantially dependent upon our profitability, the discretion of our board of managers subject to the provisions of the Operating Agreement, the restrictions under our loan agreement and the approval from our lender.lender, U.S. Bank. In 2010, the issuances of any distribution to members will be substantially dependent upon the state of the ethanol market and continued profitability.

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Item 6.  Selected Financial Data.

The following table sets forth our selected financial data for the periods indicated. The audited financial statements included in Item 8 of this report have been audited by our independent auditors, Eide Bailly LLP.