UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

                    

FORM 10-K

                    

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer," "smaller reporting company," and "emerging growth company" in Rule 12b-2 of the Exchange Act.

As of June 30, 2020,2021, the aggregate market value of the membership units held by non-affiliates (computed by reference to the most recent offering price of membership units) was $56,803,000.$56,890,000.

As of March 11, 2021,10, 2022, there were 64,560 membership units outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

The registrant has incorporated by reference into Part III of this Annual Report on Form 10-K portions of its definitive proxy statement to be filed with the Securities and Exchange Commission within 120 days after the close of the fiscal year covered by this Annual Report.

    This annual report contains historical information, as well as forward-looking statements that involve known and unknown risks and relate to future events, our future financial performance, or our expected future operations and actions. In some cases, you can identify forward-looking statements by terminology such as "may," "will," "should," "expect," "plan," "anticipate," "believe," "estimate," "future," "intend," "could," "hope," "predict," "target," "potential," or "continue" or the negative of these terms or other similar expressions. These forward-looking statements are only our predictions based on current information and involve numerous assumptions, risks and uncertainties. Our actual results or actions may differ materially from these forward-looking statements for many reasons, including the reasons described in this report. While it is impossible to identify all such factors, factors that could cause actual results to differ materially from those estimated by us include:

The cautionary statements referred to in this section also should be considered in connection with any subsequent written or oral forward-looking statements that may be issued by us or any persons acting on our behalf. We undertake no duty to update these forward-looking statements, even though our situation may change in the future. Furthermore, we cannot guarantee future results, events, levels of activity, performance, or achievements. We caution you not to put undue reliance on any forward-looking statements, which speak only as of the date of this report. You should read this report and the documents that we reference in this report and have filed as exhibits, completely and with the understanding that our actual future results may be materially different from what we currently expect. We qualify all of our forward-looking statements by these cautionary statements.

Business Development

Homeland Energy Solutions, LLC (referred to herein as "we," "us," the "Company," "Homeland" or "Homeland Energy Solutions") is an Iowa limited liability company. We were formed on December 7, 2005 to build and operate a 100 million gallon per year ethanol plant located near Lawler, Iowa. The primary products produced at the plant are ethanol, distiller grains and corn oil. We commenced production on April 4, 2009. The ethanol plant is currently operating at a rate in excess of its nameplate production capacity of 100 million gallons of ethanol per year.

    On June 13, 2013, we entered into an agreement with Steve Retterath, our largest member, to repurchase and retire all of the units owned by Mr. Retterath. We agreed to repurchase and retire 25,860 membership units owned by Mr. Retterath in exchange for $30 million, to be paid in two equal installments, payable at closing and on July 1, 2014. We completed the repurchase of Mr. Retterath's units in April 2020.

The ethanol industry experienced industry-wide record low ethanol prices throughout most of 2018 and 2019 due to reduced demand and high industry inventory levels. This continued into 2020 and the situation was compounded by the crisis associated with the 2019 novel coronavirus disease (“COVID-19”("COVID-19"). In response to these unfavorable operating conditions and a slowdown in global and regional economic activity and a disruption in transportation fuel demand resulting from the COVID-19 pandemic, we reduced our ethanol production rate early in 2020 which impacted our total ethanol production for our 2020 fiscal year. We operated at capacity during our 2021 fiscal year.

Financial Information

    The principal products that we produce are ethanol, distiller grains and corn oil. The table below shows the approximate percentage of our total revenue which is attributed to each of our primary products for each of our last three fiscal years.

Ethanol is ethyl alcohol, a fuel component made primarily from corn and various other grains. Ethanol is primarily used as: (i) an octane enhancer in fuels; (ii) an oxygenated fuel additive for the purpose of reducing ozone and carbon monoxide vehicle emissions; and (iii) a non-petroleum-based gasoline substitute. Ethanol produced in the United States is primarily used for blending with unleaded gasoline and other fuel products. Ethanol blended fuel is typically designated in the marketplace according to the percentage of the fuel that is ethanol, with the most common fuel blend being E10, which includes 10% ethanol. The United States Environmental Protection Agency ("EPA") has approved the use of gasoline blends that contain 15% ethanol, or E15, for use in all vehicles manufactured in model year 2001 and later. In addition, flexible fuel vehicles can use gasoline blends that contain up to 85% ethanol called E85.

Our ethanol plant uses corn as the feedstock in the ethanol production process. A corn-based ethanol plant is essentially a fermentation plant. Ground corn and water are mixed with enzymes and yeast to produce a substance called "beer," which contains approximately 15% alcohol, 11% solids and 74% water. The beer is boiled to separate the water, resulting in ethyl alcohol, which is then dehydrated to increase the alcohol content. This product is then mixed with a certified denaturant, such as gasoline, to make the product unfit for human consumption which allows it to be sold commercially.

Starting inDuring our 2021 fiscal year, we anticipate sellingbegan producing industrial grade alcohol. We first sold industrial grade alcohol after the end of our 2021 fiscal year.

The principal co-product of the ethanol production process is distiller grains, a high protein, high-energy animal feed supplement primarily marketed to the dairy and beef industry. We produce two forms of distiller grains: Modified/Wet Distiller Grains ("MWDG") and Distiller Dried Grains with Solubles ("DDGS"). MWDG is processed corn mash that has been dried to approximately 50% moisture. MWDG has a shelf life of approximately seven days and is often sold to markets near our ethanol plant. DDGS is processed corn mash that has been dried to approximately 10% moisture. It has a longer shelf life and may be sold and shipped to any market, regardless of its vicinity to our ethanol plant. We market nearly all of our distiller grains as DDGS.

    In October 2011, we commenced operating our corn oil extraction equipment. The corn oil extraction equipment we installed allows us to remove some of the corn oil contained in our distiller grains and sell the corn oil separately. The corn oil that we are capable of producing is not food grade corn-oil and it cannot be used for human consumption. The primary uses of the corn oil that we produce are for animal feed, industrial uses and biodiesel production.

Principal Product Markets

    The primary market for our ethanol is the domestic fuel blending market. Other than in 2019 and 2020, over recent years the United States has experienced increased ethanol exports. This increase in ethanol exports followed a conscious effort by the United States ethanol industry to expand ethanol exports along with lower ethanol prices which encourage exports. During our 2020 fiscal year, exports of ethanol decreased, but withAccording to the top export destinations being Brazil,U.S. Energy Information Administration, Canada, India, Columbia, Switzerland, Philippines, Peru and Mexico.the European Union were top destinations for ethanol exports during our 2021 fiscal year. Tariffs implemented by Brazil and China on ethanol imported from the United States reduced export demand from these markets. Trade barriers with key markets may continue to take a toll on ethanol export demand negatively effecting domestic ethanol prices. Ethanol export demand is more unpredictable than domestic demand and tends to fluctuate throughout the year as it is subject to monetary and political forces in other nations. An example of this, the imposition of a tarifftax on imported ethanol by Brazil and increased tariffs implemented by China havehas created uncertainty as to the viability of these marketsthat market for ethanol

    Ethanol is generally blended with gasoline before it is sold to the end consumer. Therefore, the primary purchasers of ethanol are fuel blending companies who mix the ethanol we produce with gasoline. As discussed below in the section entitled "Distribution of Principal Products," we have a third party marketer that sells all of our ethanol. Our ethanol marketer makes substantially all decisions regarding where our ethanol is sold.

    Distiller grains are primarily used as animal feed. Distiller grains are typically fed to animals instead of other traditional animal feeds such as corn and soybean meal. Distiller grains exports have increased in recent years as distiller grains have become a more accepted animal feed. During our 20202021 fiscal year, the largest importers of United States distiller grains were Vietnam, the European Union, South Korea, Mexico China, Canada, Japan, Colombia and South Korea.Turkey. Distiller grains demand has continued to be impacted by Chinese tariffs on distiller grains. Historically, China was the largest export market for United States distiller grains. However, due to continuing trade tensions between the United States and China, management does not believe China will significantly increase its demand for distiller grains in the near term which could impact profitability in the ethanol industry during 2021.2022.

    The primary markets for corn oil are the industrial chemicals market, animal feeding market and the biodiesel production market. Corn oil demand was relatively stablehigher during our 20202021 fiscal year.year as corn oil customers in the renewable diesel market started purchasing corn oil. However, additional corn oil supply has continued to enter the market as the production capacity of the United States ethanol industry has expanded which has adversely impacted corn oil prices. The market for corn oil is expected to continue to shift as changes in supply and demand of corn oil interact. Our corn oil is primarily marketed in the United States and we do not expect that significant exports of corn oil will occur in the near future.

Distribution of Principal Products

    We have hired third party marketers which are responsible for the distribution of all of the products we produce. Below is a description of the arrangements we have with our ethanol, distiller grains and corn oil marketers.

    We have an ethanol marketing agreement with Renewable Products Marketing Group, Inc. ("RPMG"), a professional third party marketer, which is the sole marketer of our ethanol. RPMG also markets all of our corn oil. We are an equity owner of RPMG, LLC ("RPMG, LLC"), the parent company of RPMG, which allows us to realize favorable marketing fees and transparency in the sale of our ethanol and corn oil. Our ethanol marketing agreement provides we can sell our ethanol either through an index arrangement or at a fixed price agreed to between RPMG and the Company. The term of the ethanol marketing agreement is perpetual, until it is terminated. The primary reasons the ethanol marketing agreement would terminate are if we cease to be an owner of RPMG, LLC, if there is a breach of the ethanol marketing agreement which is not cured, or if we give advance notice to RPMG that we wish to terminate the ethanol marketing agreement. Notwithstanding our right to terminate the ethanol marketing agreement, we may be obligated to continue to market our ethanol through RPMG for a period of time after termination. Further, following termination, we would accept an assignment of certain railcar leases which RPMG has secured to service our ethanol sales. If our ethanol marketing agreement is terminated, it would trigger a redemption by RPMG, LLC of our ownership interest in RPMG, LLC.

We have a Distiller Grains Marketing Agreement with CHS, Inc. ("CHS"), pursuant to which CHS agreed to purchase all of the distiller grains produced at our plant. The initial term of the distiller grains marketing agreement was one year, beginning with the start-up of operations and production at the plant. After the initial one-year term, the agreement automatically renews for successive one year terms unless either party gives 90 days written notice of termination before the current term expires.

CHS agreed to pay us 98% of the actual sale price received by CHS from its customers for DDGS sold and 96% of the actual sale price received by CHS for MWDG sold, subject to certain minimum and maximum fees per ton. CHS deducts the customary freight costs incurred by CHS in delivering the distiller grains to its customers from our portion of the distiller grains sale price.

    In July 2011, we entered into a Corn Oil Marketing Agreement with RPMG. We have an exclusive marketing arrangement with RPMG where it will market all of the corn oil that we produce. We agreed to pay RPMG a commission based on each pound of corn oil that RPMG sells on our behalf. We also agreed to pay certain costs associated with RPMG marketing our corn oil. The initial term of the corn oil marketing agreement is for one year and the agreement automatically renews for additional one yearone-year terms unless written notice is given, either by us or RPMG, at least ninety days prior to the expiration of the current term of the agreement.

New Products and Services

    We did not introduce any new products or services duringDuring our 2020 fiscal year. Following the end of the 20202021 fiscal year, we commenced production and salesales of industrial grade alcohol. We have a marketing agreement with Renewable Products Marketing Group, Inc. ("RPMG"), a professional third party marketer, which is the sole marketer of our industrial grade alcohol. The term of the industrial grade alcohol marketing agreement is perpetual, until it is terminated.

Competition

We are in direct competition with numerous ethanol producers in the sale of our products and with respect to raw material purchases related to those products. Many of the ethanol producers with which we compete have greater resources than we do. While management believes we are a lower cost producer of ethanol, larger ethanol producers may be able to take advantage of economies of scale due to their larger size and increased bargaining power with both ethanol, distiller grains and corn oil customers as well as raw material suppliers. As of December 31, 2020,2021, the Renewable Fuels Association estimates that there are 210 ethanol production facilities in the United States with capacity to produce approximately 17.6 billion gallons of ethanol per year. The largest ethanol producers include Archer Daniels Midland, Flint Hills Resources, Green Plains Renewable Energy, POET Biorefining, and Valero Renewable Fuels, each of which are capable of producing significantly more ethanol than we produce.

    Updated: December 31, 20202021

The products that we produce are commodities. Since our products are commodities, there are typically no significant differences between the products we produce and the products of our competitors that would allow us to distinguish our products in the market. As a result, competition in the ethanol industry is primarily based on price and consistent quality.

    A number of automotive, industrial and power generation manufacturers are developing alternative clean power systems using fuel cells, plug-in hybrids, electric cars or clean burning gaseous fuels. Electric car technology has grown in popularity, especially in urban areas. While there are currently a limited number of vehicle recharging stations, making electric cars not feasible for all consumers, there has been increased focus on developing these recharging stations to make electric car technology more widely available. These efforts have resulted in increased market share enjoyed by electric cars. Additional competition from these other sources of alternative energy, particularly in the automobile market, could reduce the demand for ethanol, which would negatively impact our profitability.

    Competition among ethanol producers may continue to increase as gasoline demand decreases due to more fuel efficient vehicles being produced. If the concentration of ethanol used in most gasoline does not increase and gasoline demand is lower due to increased fuel efficiency by the vehicles operated in the United States, competition may increase among ethanol producers to supply the ethanol market.

Distiller Grains Competition

    Our ethanol plant competes with other ethanol producers in the production and sales of distiller grains. Distiller grains are primarily used as an animal feed supplement which replaces corn and soybean meal. As a result, we believe that distiller grains prices are positively impacted by increases in corn and soybean prices. In addition, in recent years the United States ethanol industry has increased exports of distiller grains which management believes has positively impacted demand and prices for distillers grains in the United States. In the event these distiller grains exports decrease, including as a result of the Chinese tariffs which have significantly reduced export demand for distiller grains, it could lead to an oversupply of distiller grains in the United States. An oversupply of distiller grains could result in increased competition among ethanol producers for sales of distiller grains which could negatively impact market distiller grains prices in the United States.

Corn Oil Competition

    We compete with many ethanol producers for the sale of corn oil. Many ethanol producers have installed the equipment necessary to separate corn oil from the distiller grains they produce which has increased competition for corn oil sales. Many ethanol producers have increased corn oil production due to the relatively low value of distiller grains which has increased corn oil competition.

Sources and Availability of Raw Materials

The major raw material required to produce ethanol, distiller grains and corn oil at our plant is corn. The ethanol plant is currently operating at a rate in excess of its nameplate capacity. We anticipate that we will require approximately 65 million bushels of corn per year to produce approximately 195 million gallons of ethanol per year. We buy as much corn as possible

from local grain elevators and farmers. Our commodities manager is responsible for purchasing corn for our operations, scheduling corn deliveries and establishing hedging positions to protect the price we pay for corn.

    Corn prices were lowerhigher during our 20202021 fiscal year compared to previous years primarily due to decreasedincreased corn demand for ethanol production related to the COVID-19 pandemic. However, later in our 2020 fiscal year, cornand higher commodity prices were increasing due to unfavorable weather conditions which impacted the size of the corn crop harvested in the fall 2020 in our local corn draw area. In addition, corn demand from the ethanol industry was increasing.generally. We have not had difficulty securing the corn we need to operate the ethanol plant, however, our cost to purchase the corn we require has been higher. This may require us to purchase corn which is grown farther away from our plant which may increase our corn costs during our 20212022 fiscal year. Since corn is the primary raw material we use to produce our products, the availability and cost of corn can have a significant impact on the profitability of our operations.

In an attempt to minimize the effects of the volatility of corn costs on our profitability, we have two commodities trading accounts with ADM Investor Services, Inc. ("ADMIS") and an account with R.J. O'Brien & Associates, LLC ("RJO"). In addition, we have a commodities manager who manages our corn procurement activities. ADMIS and RJO serve as our brokerbrokers for the purchase and sale of commodity futures contracts for corn, and entersenter into transactions and exercises commodity

The effectiveness of our risk management strategy is dependent on the cost of corn and our ability to sell sufficient ethanol to use all of the corn for which we have futures contracts. Our risk management activities may not be successful in reducing the risk caused by price fluctuation, which may leave us vulnerable to high corn prices.

We entered into an agreement with Northern Natural Gas in April 2008 for connection to its interstate pipeline and for transportation services for our natural gas supply. To access sufficient supplies of natural gas to operate the plant, a dedicated lateral pipeline from Northern Natural Gas's interstate pipeline has been constructed to service our plant. Construction of the natural gas lateral pipeline was completed prior to the commencement of our operations at the ethanol plant. We purchase our natural gas through various suppliers.

We entered into an Energy Management Services Agreement with U.S. Energy dated July 10, 2009. U.S. Energy is now known as World Kinect. Pursuant to the agreement, World Kinect assists us with electric energy and natural gas management and procurement. World Kinect's responsibilities include administration of our gas supply contracts, nomination, scheduling and other logistical issues such as storage and transportation, negotiation and delivery. We work with World Kinect to provide estimated usage volumes on a monthly basis. In exchange for these management services, we pay a monthly service fee, as well as pre-approved expenses in connection with the services. The agreement for these services continues on a month-to-month basis.

On March 6, 2009, we entered into an Electrical Services Agreement with Hawkeye Tri-County Electric Cooperative (Hawkeye),which is now known as MiEnergy Cooperative, to supply all of the electricity necessary to operate the ethanol plant. Pursuant to the agreement, Hawkeye hasMiEnergy Cooperative installed the electrical facilities necessary to deliver all of the electric power and energy required to operate our ethanol plant. The agreement with Hawkeye remained in effect for ten years from the date we began processing ethanol at the plant (April 2009), and terminated on the tenth anniversary of that date (April 2019). We may continueUnder the agreement, we continued to receive the service following expiration of the ten-year term for a minimum of two years. We continue to receive services from MiEnergy Cooperative. Either party will then havehas the right to terminate the agreement upon six months' written notice. Hawkeye recently completed a merger and is now called MiEnergy Cooperative.

During our 2016 fiscal year we installed a steam turbine which allows us to use excess steam produced by the ethanol plant to generate electricity that we use in our production process. Management believes that this project allows us to decrease our total utility costs and allows us to operate the ethanol plant more profitably.

Seasonality of Sales

    We experience some seasonality of demand for our ethanol, distiller grains and corn oil. Since ethanol is predominantly blended with gasoline for use in automobiles, ethanol demand tends to shift in relation to gasoline demand. As a result, we experience some seasonality of demand for ethanol in the summer months related to increased driving and, as a result, increased gasoline demand. In addition, we experience some increased ethanol demand during holiday seasons related to

increased gasoline demand. We also experience decreased distiller grains demand during the summer months due to natural depletion in the size of herds at cattle feed lots and when the animals are turned out to pasture or are slaughtered. Further, we expect some seasonality of demand for our corn oil since a major corn oil user is the biodiesel industry which typically reduces production during the winter months.

Working Capital

    We primarily use our working capital for purchases of raw materials necessary to operate the ethanol plant, for payments on our credit facilities, for distributions to our members and for capital expenditures to maintain and upgrade the ethanol plant. Our primary sources of working capital are income from our operations as well as our revolving line of credit with our primary lender, Home Federal Savings Bank ("Home Federal"). Management believes that our current sources of working capital are sufficient to sustain our operations for our 20212022 fiscal year and beyond.

Dependence on One or a Few Major Customers

    As discussed previously, we have exclusive marketing agreements with RPMG for sales of our ethanol and corn oil and with CHS for sales of our distiller grains. As a result, we rely on RPMG and CHS for the sale and distribution of all of our products. Any loss of RPMG or CHS as the marketing agent for our products could have a significant negative impact on our

Patents, Trademarks, Licenses, Franchises and Concessions

    We do not currently hold any patents, trademarks, franchises or concessions. We were granted a perpetual and royalty free license by ICM, Inc. ("ICM") to use certain ethanol production technology necessary to operate our ethanol plant. The cost of the license granted by ICM was included in the amount we paid to Fagen, Inc. to design and build our ethanol plant.

Federal Ethanol Supports and Governmental Regulation

    The ethanol industry is dependent on the Federal Renewable Fuels Standard (the "RFS"). The RFS requires that in each year, a certain amount of renewable fuels must be used in the United States. The RFS is a national program that does not require that any renewable fuels be used in any particular area or state, allowing refiners to use renewable fuel blends in those areas where it is most cost-effective. The RFS statutory volume requirement increases incrementally each year until the United States is required to use 36 billion gallons of renewable fuels by 2022, including both corn-based and advanced ethanol. Starting in 2009, the RFS required that a portion of the RFS must be met by certain "advanced" renewable fuels. These advanced renewable fuels include ethanol that is not made from corn, such as cellulosic ethanol and biomass based biodiesel. The use of these advanced renewable fuels increases each year as a percentage of the total renewable fuels required to be used in the United States.

    The United States Environmental Protection Agency (the "EPA") has the authority to waive the RFS statutory volume requirement, in whole or in part, provided one of the following two conditions have been met: (1) there is inadequate domestic renewable fuel supply; or (2) implementation of the requirement would severely harm the economy or environment of a state, region or the United States. Annually, the EPA is supposed to pass a rule that establishes the number of gallons of different types of renewable fuels that must be used in the United States which is called the renewable volume obligations. Recently, the EPA has been granting small refinery exemptions from the RFS while not using its authority to waive the RFS statutory volume requirements. These small refinery exemptions created unallocated gallons reducing the corn-based conventional biofuel RFS requirements by 2.25 billion gallons in 2018 and 2 billion gallons in 2019. These small refinery exemptions have had a significant negative impact on domestic demand for ethanol and have resulted in negative operating margins in the ethanol industry. In January 2020, the Tenth Circuit Court of Appeals ruled that small refinery exemptions may only be granted to refineries that had secured them continuously each year since 2010. Consistent with this ruling, in September 2020, the EPA denied certain small refinery exemption petitions filed by oil refineries in 2020 seeking retroactive relief from their ethanol use requirements for prior years. Recently, the EPA announcedThis ruling was recently partially reversed to provide that it will be supporting the Tenth Circuit Court of Appeals decision from January 2020.smaller refiners who have allowed their exemption to lapse can reapply.

In recent years,On November 30, 2018, the final Renewable Volume Obligations (RVO) for 2019 was set at 19.29 billion gallons and the corn-based ethanol RVO was set at 15 billion gallons. However, the EPA has reduceddid not address small refinery exemptions in its 2019 RVO release. In addition, the volume obligationsEPA did not address the reallocation of 500 million gallons from the 2016 RVO which was

ordered by a federal court in a recent lawsuit. In June 2019, the EPA proposed an RVO of 20.04 billion gallons and the corn-based ethanol RVO was set at 15 billion gallons. On December 19, 2019, the final RVO for advanced renewable fuels under2020 was set at 20.09 billion gallons and the RFS which has negatively impacted demandcorn-based ethanol RVO was set at 15 billion gallons. On December 7, 2021, the EPA proposed RVOs for 2021 and 2022 along with a proposed reduction to the 2020 RVO. For 2022, the EPA proposed a 15 billion gallon RVO for corn-based ethanol. The RFSEPA proposes a 13.3 billion gallon for corn-based ethanol in 2021, a reduction from the statutory Renewable Volume Obligation (RVO)corn-based ethanol RVO of 15 billion gallons. Finally, the EPA is proposing reducing the RVO for 2020 by 2.5 billion gallons. The ethanol industry has been pushing the EPA to reverse the effects of these small refinery waivers which we believe contributed to the poor operating margins during 2018 and the EPA's RVO (in billion gallons) are as follows:

    Most ethanol that is used in the United States is sold in a blend called E10. E10 is a blend of 10% ethanol and 90% gasoline. E10 is approved for use in all standard vehicles. Estimates indicate that gasoline demand in the United States is

    Many in the ethanol industry believe that it will be impossible to meet the RFS requirement in future years without an increase in the percentage of ethanol that can be blended with gasoline for use in standard (non-flex fuel) vehicles. The EPA has approved the use of E15, gasoline which is blended at a rate of 15% ethanol and 85% gasoline, in vehicles manufactured in the model year 2001 and later. However, there are still hurdles that need to be addressed in some states before E15 will become more widely available. Many states still have regulatory issues that prevent the sale of E15. Sales of E15 may be limited because it is not approved for use in all vehicles, the EPA requires a label that management believes may discourage consumers from using E15, and retailers may choose not to sell E15 due to concerns regarding liability. As a result, the approval of E15 by the EPA has not had an immediate impact on ethanol demand in the United States. In June 2019, the Trump Administration approved the use of E15 year-round at the federal level which has somewhat expanded the use of E15.

In May 2020, the United States Department of Agriculture ("USDA") announced the Higher Blends Infrastructure Incentive Program which consists of up to $100 million in funding for grants to be used to increase the availability of higher blends of ethanol and biodiesel fuels. Funds may be awarded to retailers such as fueling stations and convenience stores to assist in the cost of installation or upgrading of fuel pumps and other infrastructure. In October 2020, the USDA announced the first round of awards to recipients of $22 million worth of grants. Recently aA second round of funding of approximately $30grants was awarded equal to $18.4 million. In August 2021, the USDA announced an additional $26 million in infrastructure grants, was announced.bringing the total grants under the program to a total of $66.4 million.

In August 2017, Brazil instituted an import quota for ethanol produced in the United States and exported to Brazil, along with a 20% tariff on ethanol imports in excess of the quota. In September 2019, the Brazilians increased the tariff free import quota from 600 million liters to 750 million liters. The quota expired in December 2020 so all U.S. ethanol exports to Brazil are now subject to the tariff. This tariff has reduced exports of ethanol to Brazil and may continue to negatively impact ethanol exports from the United States. Any reduction in ethanol exports could negatively impact market ethanol prices in the United States. In addition, the Chinese government increased the tariff on United States ethanol imports into China from 30% to 45% and ultimately to 70%. ManagementDue to other recent tariff activity between the United States and China, management does not expect these Chinese tariffs to be removed in the near term. Both China and Brazil have been major sources of import demand for United States ethanol and distillers grains. These trade actions may result in negative operating margins for United States ethanol producers.

Costs and Effects of Compliance with Environmental Laws

    We are subject to extensive air, water and other environmental regulations and we require a number of environmental permits to operate the plant. We have obtained all permits that are currently required for operation of the plant. In the fiscal year ended December 31, 2020,2021, we incurred costs and expenses of approximately $234,000$175,000 complying with environmental

laws, including the cost of obtaining permits. Although we have been successful in obtaining all of the permits currently required, any retroactive change in environmental regulations, either at the federal or state level, could require us to obtain additional or new permits or spend considerable resources in complying with such regulations. We anticipate incurring costs and expenses of approximately $200,000$175,000 for compliance with environmental laws for our fiscal year ended December 31, 2021.2022.

Employees

As of December 31, 2020,2021, we had 6062 full-time employees. We do not anticipate a significant change in the number of full-time employees we have in the next 12 months.

ITEM 1A. RISK FACTORS.

Risks Relating to Our Business

subsidy duty. These trade actions have negatively impacted distiller grains demand and prices which could continue to his potential negatively impact our ability to profitably operate the ethanol plant.

Risks Related to Regulation and Governmental Action

affected by government policies and regulations. Governmental policies affecting the agricultural industry, such as taxes, trade tariffs, duties, subsidies, import and export restrictions on commodities and commodity products, can influence industry profitability, the planting of certain crops, the location and size of crop production, whether unprocessed or processed commodity products are traded, and the volume and types of imports and exports.  In addition, international trade disputes can adversely affect trade flows by limiting or disrupting trade between countries or regions. Future governmental policies, regulations or actions affecting our industry may adversely affect the supply of, demand for and prices of our products, restrict our ability to do business and cause our financial results to suffer.  We may experience negative impacts of higher ethanol tariffs and other disruptions to international agricultural trade. Increased ethanol tariffs would likely reduce overall U.S. ethanol export demand, which could have a negative effect on U.S. domestic ethanol prices.

ITEM 2. PROPERTIES.

    Our plant is located on an approximately 350 acre site in Chickasaw County, Iowa. The plant's address is 2779 Highway 24, Lawler, Iowa 52154. Construction of our plant was completed in April 2009. All of our operations are located at this site.

We selected our plant site because of its close proximity to rail service and access to natural gas supplies capable of meeting plant consumption needs. The plant is located on Iowa Highway 24, which runs east/west, and is about 10 miles east of Iowa Highway 63, which runs north/south, and about 40 miles north of Iowa Highway 20, which runs east/west. Our proximity to these highways provides us with easy access to Interstate 35 and Interstate 80. In addition, the plant is located on the Canadian Pacific railroad line which provides us access to many markets for our products.

ITEM 3. LEGAL PROCEEDINGS.

ITEM 4. MINE SAFETY DISCLOSURES

    None.

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

Outstanding Equity

    As of March 11, 2021,10, 2022, we had 64,560 units outstanding and approximately 1,2401,267 total members.

Unit Trading

    There is no established public trading market for our units. However, on February 5, 2008, we established the Unit Trading Bulletin Board, which is a private online matching service, in order to facilitate trading among our members. The Unit Trading Bulletin Board consists of an electronic bulletin board on our website that provides a list of interested buyers and a list of interested sellers, along with their non-firm price quotes. The Unit Trading Bulletin Board does not automatically effect matches between potential sellers and buyers and it is the sole responsibility of sellers and buyers to contact each other to negotiate an agreement to transfer units. We do not become involved in any purchase or sale negotiations arising from our Unit Trading Bulletin Board and have no role in effecting transactions beyond approval, as required under our operating agreement, and the issuance of new certificates. We do not give advice regarding the merits or shortcomings of any particular transaction. We do not receive, transfer or hold funds or securities as an incident of operating the Unit Trading Bulletin Board. We do not receive any compensation for creating or maintaining the Unit Trading Bulletin Board. In advertising our Unit Trading Bulletin Board, we do not characterize Homeland Energy Solutions as being a broker or dealer or an exchange. We do not use the Unit

There are detailed time lines that must be followed under the Unit Trading Bulletin Board rules and procedures with respect to offers and sales of membership units, with which all transactions must comply. In addition, all transactions must comply with our operating agreement, and are subject to approval by our board of directors.

The following table contains historical information by quarter for the past two years regarding the actual unit transactions that were completed by our unit-holders during the periods specified. Some of these transfers were made without consideration and as such no price information is included. We believe this most accurately represents the current trading value of our units. The information was compiled by reviewing the completed unit transfers that occurred on the Unit Trading Bulletin Board or through private transfers during the quarters indicated.

The following tables contain the bid and asked prices that were posted on the Unit Trading Bulletin Board and includes some transactions that were not completed. We believe the table above more accurately describes the trading value of our units as the bid and asked prices below include some offers that never resulted in completed transactions. The information was compiled by reviewing postings that were made on the Unit Trading Bulletin Board.

As a limited liability company, we are required to restrict the transfers of our membership units in order to preserve our partnership tax status. Our membership units may not be traded on any established securities market or readily traded on a secondary market (or the substantial equivalent thereof). All transfers are subject to a determination that the transfer will not cause us to be deemed a publicly traded partnership.

Distributions

Performance Graph

    The following graph shows a comparison of cumulative total member return since December 31, 2015,2016, calculated on a dividend reinvested basis, for the Company, the NASDAQ Composite Index (the "NASDAQ Market Index") and an index of other companies that have the same SIC code as the Company (the "SIC Code Index"). The graph assumes $100 was invested in each of our units, the NASDAQ Market Index, and the SIC Code Index on December 31, 2015.2016. Data points on the graph are quarterly. Note that historic unit price performance is not necessarily indicative of future unit price performance. The data for this performance graph was compiled for us by Zacks Investment Research, Inc.

    Pursuant to the rules and regulations of the Securities and Exchange Commission, the performance graph and the information set forth therein shall not be deemed to be filed for purposes of Section 18 of the Securities Exchange Act of 1934, and shall not be deemed to be incorporated by reference in any filing under the Securities Act of 1933, as amended, or the Exchange Act, except as shall be expressly set forth by specific reference in such a filing.

ITEM 6. SELECTED FINANCIAL DATA

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

Results of Operations

    Our total revenue for our 2020 fiscal year was approximately 15% less than our total revenue for our 2019 fiscal year. Management attributes this decrease in revenue primarily with decreased total production at the ethanol plant which resulted in decreased sales during our 2020 fiscal year along with lower average ethanol prices, partially offset by increased average distiller grains prices during our 2020 fiscal year. Our revenue is presented in our financial statements net of the shipping costs that are incurred in transporting our products to the end customer. These shipping charges are deducted by our marketers from the amounts realized on the sale of our ethanol, distiller grains and corn oil.

    For our 2020 fiscal year, our total ethanol revenue decreased by approximately 18% compared to our 2019 fiscal year due to decreased production which was a result of poor market conditions, partially attributable to the COVID-19 pandemic along with a decrease in the average price we received for the ethanol we sold during our 2020 fiscal year. The gallons of ethanol we sold during our 2020 fiscal year decreased by approximately 9% compared to our 2019 fiscal year. This decrease in ethanol sales resulted from decreased ethanol production at the ethanol plant. The average price we received for our ethanol during our 2020 fiscal year was approximately 9% less than during our 2019 fiscal year. Management attributes this decrease in ethanol prices to decreased gasoline prices and demand during our 2020 fiscal year. During much of our 2020 fiscal year, gasoline demand was lower due to the COVID-19 pandemic. Many states instituted travel restrictions and other social distancing measures which resulted in significantly lower gasoline demand. COVID-19 impacted travel throughout the world

which also impacted ethanol exports during our 2020 fiscal year. Since ethanol is primarily blended with gasoline, when gasoline demand is lower it has a corresponding impact on ethanol demand. While gasoline demand rebounded during the summer of 2020, gasoline demand has remained lower for our entire 2020 fiscal year. Management expects that gasoline demand will remain lower during the first two quarters of our 2021 fiscal year due to the continuing impact of the COVID-19

    Our total distiller grains revenue was approximately 5% less during our 2020 fiscal year compared to the same period of 2019 primarily due to decreased distiller grains production during our 2020 fiscal year, partially offset by increased distiller grains average prices during our 2020 fiscal year. We sold approximately 10% less tons of distiller grains during our 2020 fiscal year compared to the same period of 2019 due to our decreased overall production. The average prices we received for our distiller grains were greater during our 2020 fiscal year compared to the same period of 2019 due primarily to increased distiller grains demand and decreased market supply of distiller grains. We primarily sell our distiller grains in the dried form based on market conditions which favor this product, however we still sell a small portion of our distillers grains in the modified form. The average price we received per ton of dried distiller grains sold increased by approximately 4% during our 2020 fiscal year compared to the same period of 2019. The average price we received per ton of modified distiller grains sold increased by approximately 61% during our 2020 fiscal year compared to the same period of 2019. Since distiller grains are primarily used as an animal feed substitute for corn and soybean meal, the price of distiller grains is impacted by these competing products. Management anticipates relatively stable distiller grains prices during our 2021 fiscal year unless corn and soybean production is lower or export demand for these products increases, especially if export issues between China and the United States are resolved. If China reenters the market for United States agricultural products, it could quickly result in higher corn, soybean and distiller grains prices.

    Our revenue from corn oil sales was approximately 8% greater during our 2020 fiscal year compared to the same period of 2019, due to increased corn oil production and prices for the corn oil we sold during our 2020 fiscal year. The average price we received for our corn oil during our 2020 fiscal year was approximately 2% greater than the average price we received during the same period of 2019. Management attributes this increase in corn oil prices with decreased corn oil supply during 2020. Recently the biodiesel blenders' tax credit was renewed for prior years and until December 31, 2022. Management expects that added certainty in the biodiesel blenders' credit will support current corn oil prices.

    We sold approximately 6% more pounds of corn oil during our 2020 fiscal year compared to the same period of 2019. Management attributes this increase in corn oil sales to increased corn oil produced per bushel of corn used and increased operating time for our corn oil extraction equipment. Management expects corn oil production to be comparable during our 2021 fiscal year compared to our 2020 fiscal year.

    Our two primary costs of producing ethanol, distiller grains and corn oil are corn costs and natural gas costs. Our total cost of goods sold was lower during our 2020 fiscal year compared to our 2019 fiscal year due to decreased consumption of corn and natural gas, along with lower average corn costs per bushel during our 2020 fiscal year compared to our 2019 fiscal year.

    The average price we paid per bushel of corn was approximately 8% less during our 2020 fiscal year compared to our 2019 fiscal year. Management attributes this decrease in the average price we paid per bushel of corn with lower corn demand during our 2020 fiscal year due to reduced ethanol production which is a major source of corn demand. Towards the end of our 2020 fiscal year, our average corn costs per bushel were higher due to increased ethanol production along with localized decreased corn production in our local market. Management anticipates that corn prices will remain at current levels during our 2021 fiscal year, unless Chinese export demand increases significantly which could result in higher corn prices and demand. During our 2020 fiscal year we had combined realized and unrealized losses on our corn and natural gas risk management positions of approximately $5.5 million, which increased our cost of goods sold during our 2020 fiscal year. During our 2019 fiscal year, we experienced a combined realized and unrealized gain on our risk management positions of approximately $4.5 million which reduced our cost of goods sold during our 2019 fiscal year.

    We purchased approximately 6% fewer bushels of corn during our 2020 fiscal year compared to our 2019 fiscal year. Management attributes this decrease in corn consumption with decreased production during our 2020 fiscal year due to reduced run rates in the ethanol plant during early in the 2020 fiscal year. Management anticipates that our corn consumption will be higher during our 2021 fiscal year compared to our 2020 fiscal year because we currently anticipate increased production during our 2021 fiscal year.

    During our 2020 fiscal year, the average price we paid per MMBtu of natural gas was approximately 1% less compared to our 2019 fiscal year. Management attributes this decrease in natural gas prices to lower market energy prices and demand which impacted natural gas prices. In addition, we entered into natural gas price lock agreements for most of 2020

Our selling, general and administrative expenses were less during our 2020 fiscal year compared to our 2019 fiscal year due primarily to decreased dues and subscriptions, and decreased employee related expenses, partially offset by increased legal expense, insurance costs and property taxes.

We had less interest expense during our 2020 fiscal year compared to our 2019 fiscal year due to decreasing principal amounts outstanding on our loans as scheduled principal payments are paid and the pay off of the term debt in 2020. We had more interest income during our 2020 fiscal year compared to the same period of 2019 due to having more cash on hand for portions of the 2020 period. We had more other income during our 2020 fiscal year compared to the same period of 2019 primarily due to Small Business Administration Payroll Protection Program funds as well as Iowa Economic relief funds.

    We had lessmore cash on hand at December 31, 20202021 compared to December 31, 20192020 due to cash usedfrom 2021 operating activities, offset by purchases of equipment and distributions made to pay off term debt in 2020. We had no marketable trading securities at December 31, 2020 compared to approximately $42.5 million at December 31, 2019. A portion of our marketable trading securities during the 2019 period were being held to complete the Retterath unit repurchase, which was completed in April 2020.members. The value of our accounts receivable was lessmore at December 31, 20202021 compared to December 31, 20192020 due to the timing of our product shipments compared to the end of our fiscal year as we were awaiting payment for lessmore of our finished products at the end of our 20202021 fiscal year compared to the end of our 20192020 fiscal year. The value of our inventory was higher at December 31, 20202021 compared to December 31, 20192020 due primarily to increased corn inventory and finished goods inventory at December 31, 20202021 compared to December 31, 2019.2020. We had more prepaid and other assets at December 31, 20202021 compared to December 31, 20192020 due primarily to increases in prepaid insurance.

    The value of our plant equipment and buildings was moreless at December 31, 20202021 compared to December 31, 20192020 primarily due to regular depreciation of our assets, partially offset by capital projects which were completed or in progress during our 20202021 fiscal year, partially offset by regular depreciation of our assets.year. We had approximately $621,000$3.5 million in construction in progress at December 31, 2020.2021.

Our other assets were lower because of the reduction of our right of use asset related to our leases as the lease terms expire. This decrease was partially offset by an increase in undistributed income from our investment in RPMG, LLC, an affiliate of our ethanol and corn oil marketer. In addition, we continue to amortize certain utility rights associated with construction of the ethanol plant.

Current liabilities decreasedincreased due to a decreasean increase in amounts due to a former memberaccounts payable at December 31, 20202021 compared to December 31, 2019. We had a $30 million liability as of 2019 related to the membership unit repurchase agreement that was paid out in 2020. Our accrued expenses, primarily related to year-end bonus accruals, were comparablemore at December 31, 20202021 and December 31, 2019.2020.

We had less long-term liabilities at December 31, 20202021 compared to December 31, 20192020 primarily due to payments we made onreduction of the term debt we incurred related to our expansion project.long-term portion of operating lease liability, partially offset by an increase in other long-term liabilities.

Liquidity and Capital Resources

$18.3 million in cash. Based on financial forecasts performed by our management, we anticipate that we will have sufficient cash from our revolving loans and cash from our operations to continue to operate the ethanol plant at capacity for the next 12 months and beyond. We do not anticipate seeking additional equity or debt financing in the next 12 months to continue our operations. However, should we experience unfavorable operating conditions in the future, we may have to secure additional debt or equity financing for working capital or other purposes.

Application of Critical Accounting Policies

Management uses estimates and assumptions in preparing our financial statements in accordance with generally accepted accounting principles.  These estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses.  Of the significant accounting policies described in the notes to our financial statements, we believe that the following are the most critical:

    In the first quarter of 2018, the Company adopted Accounting Standards Update (ASU) 2014-9, Revenue from Contracts with Customers (Topic 606). Under the ASU, revenue from the sale of the Company's products is recognized at the time control transfers to the customers. This generally occurs upon shipment, loading of the goods or when the customer picks up the goods. The Company believes for its contracts with customers, control is transferred at a point in time, typically upon delivery to the customers. When the Company performs shipping and handling activities after the transfer of control to the customers (e.g. when control transfers prior to delivery), they are considered as fulfillment activities, and accordingly, the costs are accrued for when the related revenue is recognized. Interest income is recognized as earned. Shipping costs incurred by the Company in the sale of ethanol, distiller grains and corn oil are not specifically identifiable and as a result, revenue from the sale of ethanol, distiller grains and corn oil is recorded based on the net selling price reported to the Company from the marketer.

The Company evaluates its contracts to determine whether the contracts are derivative instruments. Certain contracts that literally meet the definition of a derivative may be exempted from derivative accounting 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 the accounting and reporting requirements of derivative accounting.

The Company enters into short-term cash, option and futures contracts as a means of securing purchases of corn, natural gas and sales of ethanol for the plant and managing exposure to changes in commodity and energy prices. All of the Company's derivatives are designated as non-hedge derivatives for accounting purposes, with changes in fair value recognized in net income. Although the contracts are economic hedges of specified risks, they are not designated as and accounted for as hedging instruments.

As part of its trading activity, the Company uses futures and option contracts through regulated commodity exchanges to manage its risk related to pricing of inventories. To reduce that risk, the Company generally takes positions using cash and futures contracts and options.

Realized and unrealized gains and losses related to derivative contracts related to corn and natural gas are included as a component of cost of goods sold and derivative contracts related to ethanol are included as a component of revenues in the accompanying financial statements. The fair values of contracts entered through commodity exchanges are presented on the accompanying balance sheet as derivative instruments.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

    We are exposed to the impact of market fluctuations associated with commodity prices as discussed below. We have no exposure to foreign currency risk as all of our business is conducted in U.S. Dollars and we had no amounts outstanding on variable interest debt as of December 31, 2020.2021. We use derivative financial instruments as part of an overall strategy to manage market risk. We use cash, futures and option contracts to hedge changes to the commodity prices of corn, natural gas and ethanol. We do not enter into these derivative financial instruments for trading or speculative purposes, nor do we designate these contracts as hedges for accounting purposes.

Commodity Price Risk

    We seek to minimize the risks from fluctuations in the prices of raw material inputs, such as corn and natural gas, and finished products, such as ethanol and distiller grains, through the use of hedging instruments. In practice, as markets move, we actively manage our risk and adjust hedging strategies as appropriate. Although we believe our hedge positions accomplish an economic hedge against our future purchases and sales, management has chosen not to use hedge accounting, which would match the gain or loss on our hedge positions to the specific commodity purchase being hedged. We are using fair value accounting for our hedge positions, which means as the current market price of our hedge positions changes, the realized or unrealized gains and losses are immediately recognized in our cost of goods sold or as an offset to revenues. The immediate recognition of hedging gains and losses under fair value accounting can cause net income to be volatile from quarter to quarter due to the timing of the change in value of the derivative instruments relative to the cost and use of the commodity being hedged.

    As of December 31, 2020,2021, we had price protection in place for approximately 12%18% of our anticipated corn needs, 10%28% of our natural gas needs and none of our ethanol sales for the next 12 months. A sensitivity analysis has been prepared to estimate our exposure to ethanol, corn and natural gas price risk. Market risk related to these factors is estimated as the potential change in income resulting from a hypothetical 10% adverse change in the average cost of our corn and natural gas prices and average ethanol price as of December 31, 2020,2021, net of the forward and future contracts used to hedge our market risk for corn and natural gas usage requirements. The volumes are based on our expected use and sale of these commodities for a one year period from December 31, 2020.2021. The results of this analysis, which may differ from actual results, are as follows:

    For comparison purposes, our sensitivity analysis for our 20192020 fiscal year is set forth below.

Liability Risk

    We participate, along with other plants in the industry, in a group captive insurance company (Captive)("Captive"). The Captive insures losses related to workman's compensation, commercial property and general liability. The Captive reinsures catastrophic losses for all participants, including the Company, in excess of predetermined amounts. Our premiums are accrued

ITEM 8. FINANCIAL STATEMENTS

To the Members and the Board of Directors of Homeland Energy Solutions, LLCLLC:

Opinion on the Financial Statements

We have audited the accompanying balance sheets of Homeland Energy Solutions, LLC (the Company) as of December 31, 20202021 and 2019,2020, the related statements of operations, members’ equity and cash flows for each of the three years in the period ended December 31, 2020,2021, and the related notes to the financial statements (collectively, the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 20202021 and 2019,2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2020,2021, in conformity with accounting principles generally accepted in the United States of America.

Basis for Opinion

These financial statements are the responsibility of the Company’sCompany's management. Our responsibility is to express an opinion on the Company’sCompany's financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

Critical Audit Matters

Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. We determined that there are no critical audit matters.

We have served as the Company's auditor since 2010.

Des Moines, Iowa

March 11, 202110, 2022

See Notes to Financial Statements.

See Notes to Financial Statements.