This report contains forward-looking statements that involve future events, our future financial performance and 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, including, but not limited to those listed below and those business risks and factors described elsewhere in this report and our other Securities and Exchange Commission filings.

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.

On September 26, 2013, we entered into a series of related definitive agreements with Butamax Advanced Biofuels, LLC ("Butamax") pursuant to which Butamax installed and leased its corn oil separation system and licensed to the Company  corn oil separation technology.  On December 3, 2020, we executed a Termination and Asset Purchase Agreement (the "Purchase Agreement"). Pursuant to the Purchase Agreement, Butamax agreed to (i) sell the corn oil separation system to the Company; and (ii) provide a license to the Company for its corn oil separation technology to remain in effect until expiration of the patents unless earlier terminated in accordance with the terms of the Technology License Agreement. In exchange for the purchase of the corn oil separation system and the license, the Company pre-paid a lump sum fee to Butamax. The Purchase Agreement also provided for the termination of the remaining agreements with Butamax as of December 3, 2020.   

The principal products we currently produce at the ethanol plant are fuel-grade ethanol and distillers grains. In addition, we are extracting corn oil for sale. The table below shows the approximate percentage of our total revenue which is attributed to each of our products for each of our last three fiscal years.

Our primary product is ethanol. Ethanol is ethyl alcohol, a fuel component made primarily from corn and various other grains. The ethanol we produce is manufactured from corn. Although the ethanol industry continues to explore production technologies employing various feedstocks, such as biomass, corn-based production technologies remain the most practical and provide the lowest operating risks. Corn produces large quantities of carbohydrates, which convert into glucose more easily than most other kinds of biomass.

An 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 about 10% alcohol and 90% 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 to make the product unfit for human consumption and commercially saleable.

Ethanol can be used as: (i) an octane enhancer in fuels; (ii) an oxygenated fuel additive for the purpose of reducing ozone and carbon monoxide emissions; and (iii) a non-petroleum-based gasoline substitute. Approximately 95% of all ethanol is used in its primary form for blending with unleaded gasoline and other fuel products. Used as a fuel oxygenate, ethanol provides a means to control carbon monoxide emissions in large metropolitan areas. The principal purchasers of ethanol are generally the wholesale gasoline marketer or blender.

The principal co-product of the ethanol production process is distillers grains, a high protein, high-energy animal feed supplement primarily marketed to the dairy, poultry, swine and beef industries. Dry mill ethanol processing creates three forms of distiller grains: Distillers Wet Grains with Solubles (“DWS”), Distillers Modified Wet Grains with Solubles (“DMWS”) and Distillers Dried Grains with Solubles (“DDGS”). DWS is processed corn mash that contains approximately 70% moisture. DWS has a shelf life of approximately three days and can be sold only to farms within the immediate vicinity of an ethanol plant. DMWS is DWS that has been dried to approximately 50% moisture. DMWS has a slightly longer shelf life of approximately ten days and is often sold to nearby markets. DDGS is DWS that has been dried to between 10% and 12% moisture. DDGS has an almost indefinite shelf life and may be sold and shipped to any market regardless of its vicinity to an ethanol plant.

Our ethanol and distillers grains are primarily sold in the domestic market, however, as domestic production of ethanol and distillers grains continue to expand, we anticipate increased international sales of ethanol and distillers grains. However, due to high transportation costs, and the fact that we are not located near a major international shipping port, we expect a majority of our products to continue to be marketed and sold domestically.

Over the past fiscal year, Brazil, Canada, India and IndiaSouth Korea were top destinations for ethanol exports. However, overall exports of ethanol for this period decreased duehave been lower. Ethanol export demand is more unpredictable than domestic demand and tends to escalatingfluctuate over time as it is subject to monetary and political forces in other nations. In addition, trade barriers and the impacts of COVID-19.with key markets can negatively affect export demand. Tariffs implemented by Brazil and China on ethanol imported from the United States reduced export demand from those markets. Trade restrictions mayhave had and continue to have a negative effect on ethanol export demand and domestic ethanol prices. Export demand hasfrom those markets. The COVID-19 pandemic also decreased duecontinues to the disruption in global fuel demand resulting from restrictions in responsecreate uncertainty as to the COVID-19 pandemic. Restricted travel, new lockdown measures and slow economic growth continue to have a negative effect on global fuel consumption and it is unknown when such demand will recover as reopening efforts continue to evolve.future export demand.

We have an exclusive marketing agreement with RPMG for the purposes of marketing and distributing our corn oil. We pay RPMG a marketing fee. We may immediately terminate our agreement with RPMG upon written notice if: (1) RPMG fails on three separate occasions within a 12-month period to purchase corn oil or market corn oil, as not otherwise excused under the Agreement; or (2) upon RPMG's insolvency. RPMG may immediately terminate the agreement upon written notice if: (A) during any consecutive three (3) months the actual production or inventory of any corn oil product at the plant varies by twenty (20%) or more from the monthly production and inventory estimates provided to RPMG (other than for reasons permitted under the RPMG Agreement); or (B) upon our insolvency.

We expect to start producing and selling hydrousbegan limited production of USP grade ethanolhigh purity alcohol for use in the hand sanitizer, sanitizer and sanitizer marketother markets during our 2021 fiscal year and expect to start selling our high purity alcohol for use in the hand sanitizer, sanitizer and other markets during our 2022 fiscal year.

The major raw material required for our ethanol plant to produce ethanol and distillers grains is corn. To produce 70.2 million gallons of ethanol per year, our ethanol plant needs approximately 23.5 million bushels of corn, or approximately 65,000 bushels of corn per day, as the feedstock for its dry milling process.

Corn prices were higher during the fiscal year ended October 31, 20202021 compared to the same period in 2019,2020, primarily due to concerns resulting from estimates for decreased production and increased exports.demand which outpaced supply. On November 10, 2020,9, 2021, the United States Department of Agriculture ("USDA") released a report estimating the 20202021 national corn crop at approximately 14.515.1 billion bushels, up 7% from last year's production, with yields averaging 175.8177 bushels per acre. The USDA also reported area harvested for grain at 82.585.1 million acres, up 1%3% from 2019. The corn crop2020. However, yields in our local area hashave been plentiful. However, corn prices could rise in the near termlower due to strong export and domestic demand.dry weather which could have a negative affect on the price we pay for our corn. Weather conditions, world supply and demand, current and anticipated corn stocks, agricultural policy and other factors can all contribute to volatility in corn prices.

We do not anticipate any problems securing the natural gas we need to operate our ethanol plant during our 20212022 fiscal year.

On June 28, 2007, we entered into an agreement for electric service with Redwood Electric Cooperative, Inc., (the "Cooperative") for the purchase and delivery of electric power and energy necessary to operate our ethanol plant. Upon execution of the agreement, we became a member of the Cooperative and are bound by its articles of incorporation and bylaws. This agreement remained in effect until September 19, 2017, when our new agreement with the Cooperative to purchase all of the electric power that we require for our ethanol plant became effective. The new agreement remains in effect until January 1, 2023. The agreement automatically renews for additional five year periods unless we give at least one year's written notice of termination prior to the expiration of the then current term or if the agreement is otherwise terminated in accordance with its terms. For the electric power provided, in addition to certain penalties and adjustments, we will pay the following rates: (i) a facility charge based on the then current net plant value; (ii) a per KWh energy charge at the then current wholesale rate including distribution losses and margin requirements; (iii) an additional demand charge for the entire monthly demand (kW) that is coincident to the peak demand; and (iv) an additional delivery charge for the entire monthly demand (kW) that is coincident to the peak demand. The rates are updated annually. The rates set forth in the agreement terminate in the event that our firm non-coincident peak demand is less that 2,000 kW for twelve consecutive months or our rolling twelve month non-coincident load factor is less than 60% for twelve consecutive months. Upon termination of the agreement by either party for any reason, we remain responsible for payment of the facility charge for what would have been the remaining portion of the term.

We do not anticipate any problems securing the electricity we need to operate our ethanol plant during our 20212022 fiscal year.

The ethanol industry is dependent on economic incentives to produce ethanol. One significant federal ethanol support is 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. 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.

Small refineries can petition the EPA annually for an exemption from their ethanol use requirements for the prior compliance year. The EPA granted significantly more small refinery waivers in 2018 and 2019 than in past years and did not reallocate the waived gallons to other refiners. These actions resulted in decreased ethanol demand which led to reduced market ethanol prices and 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.

In February 2010, the EPA issued additional regulations governing the RFS. These additional regulations have been called RFS2. The most controversial part of RFS2 involves what is commonly referred to as the lifecycle analysis of greenhouse gas emissions. Specifically, the EPA adopted rules to determine which renewable fuels provided sufficient reductions in greenhouse gases, compared to conventional gasoline, to qualify under the RFS program. RFS2 establishes a tiered approach, where regular renewable fuels are required to accomplish a 20% greenhouse gas reduction compared to gasoline, advanced biofuels and biomass-based biodiesel must accomplish a 50% reduction in greenhouse gases, and cellulosic biofuels must accomplish a 60% reduction in greenhouse gases. Any fuels that fail to meet this standard cannot be used by fuel blenders to satisfy their obligations under the RFS program. However, RFS2 as adopted by the EPA provides that corn-based ethanol from modern ethanol production processes does meet the definition of a renewable fuel under the RFS program. Our ethanol plant was grandfathered into the RFS due to the fact that it was constructed prior to the effective date of the lifecycle greenhouse gas requirement and is not required to prove compliance with the lifecycle greenhouse gas reductions. Certain provisions of RFS2 as adopted may disproportionately benefit ethanol produced from sugarcane. This could make sugarcane based ethanol, which is primarily produced in Brazil, more competitive in the United States ethanol market.

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. In recent years, the gasoline demand in the United States has been estimated at approximately 143 billion gallons. Assuming that this estimate is correct and that all gasoline in the United States is blended at a rate of 10% ethanol and 90% gasoline, the maximum demand for ethanol domestically would be approximately 14.3 billion gallons per year. This is commonly referred to as the “blending wall,” which represents a theoretical limit where more ethanol cannot be blended into the national gasoline pool. This is a theoretical limit because it is not possible to blend ethanol into every gallon of gasoline that is being used in the United States and it discounts the possibility of additional ethanol used in higher percentage blends such as E85 used in flex fuel vehicles. In addition, gasoline demand in 2020 was lower due to COVID-19.

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. To date, the USDA has awarded approximately $66.4 million to eligible projects.

The government's regulation of the environment changes constantly. We are subject to extensive air, water and other environmental regulations and we have been required to obtain a number of environmental permits to construct and operate the plant. It is possible that more stringent federal or state environmental rules or regulations could be adopted, which could could require us to obtain additional or new permits or spend considerable resources in complying with such regulations and increase our operating costs and expenses. It also is possible that federal or state environmental rules or regulations could be adopted

Plant operations are governed by the Occupational Safety and Health Administration. We are also subject to regulation by several other federal and state agencies including the Alcohol and Tobacco Tax and Trade Bureau, the Federal Railroad Administration, (“OSHA”). OSHAthe Minnesota Department of Agriculture and the U.S. Department of Agriculture. Federal and state regulations may change such that the costs of operating the plant may increase. Any of these regulatory factors may result in higher costs or other adverse conditions effecting our operations, cash flows and financial performance.

We are in direct competition with numerous ethanol producers, many of whom have greater resources than we do. Following the significant growth during 2005 and 2006, the ethanol industry has grown at a much slower pace. The Renewable Fuels Association estimates that there are approximately 210 ethanol production facilities in the U.S. with capacity to produce approximately 17.617.5 billion gallons of ethanol. However, many ethanol plants significantly reduced ethanol production or even ceased operations altogether in the spring of 2020 in response to the disruption in demand from the COVID-19 pandemic. Some of these plants have gradually increased production as fuel demand partially recovered but some have not returned to historic levels or restarted operations. It is unknown how much production in the United States is currently idled or when demand will fully return.

Since ethanol is a commodity product, competition in the industry is predominantly based on price. We have also experienced increased competition from oil companies who have purchased ethanol production facilities. These oil companies are required to blend a certain amount of ethanol each year. Therefore, the oil companies may be able to operate their ethanol production facilities at times when it is unprofitable for us to operate. Larger ethanol producers may be able to realize economies of scale that we are unable to realize. This could put us at a competitive disadvantage to other ethanol producers. The ethanol industry is continuing to consolidate where a few larger ethanol producers are increasing their production capacities and are controlling a larger portion of the United States ethanol production. Further, some ethanol producers own multiple ethanol plants which may allow them to compete more effectively by providing them flexibility to run certain production facilities while they have other facilities shut down. This added flexibility may allow these ethanol producers to compete more effectively, especially during periods when operation margins are unfavorable in the ethanol industry.

TheFollowing the acquisition of several plants by POET Biorefining from Flint Hill Resources earlier this year, the largest ethanol producers now include Archer Daniels Midland, Flint Hill Resources, Green Plains Renewable Energy, POET Biorefining and Valero Renewable Fuels, each of which are capable of producing significantly more ethanol than we produce. The following table identifies the majority of the largest ethanol producers in the United States along with their approximate production capacities.

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 in the past there were 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 which have made electric car technology more widely available. This additional competition from alternate sources could reduce the demand for ethanol, which would negatively impact our profitability.

We are subjectdepend on our employees to extensive air, wateroperate our plant. While we face competition to attract and other environmental regulationsretain personnel with the necessary skills, we believe that we compete favorably on the basis of wages and we were requiredbenefits and our commitment to obtain a numbertraining and development. In addition, the safety of environmental permits to constructour employees is our highest priority. We have developed and operate the plant. 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. Additionally, any changes that are made to the ethanol plant or its operations must be reviewed to determine if amended permits need to be obtainedenforce workplace safety policies and programs in order to implement these changes.

The prices for and availability of natural gas are subject to volatile market conditions.  These market conditions often are affected by factors beyond our control such as higher prices as a result of colder than average weather conditions or natural disasters, overall economic conditions and foreign and domestic governmental regulations and relations.  Significant disruptions in the supply of natural gas could impair our ability to manufacture ethanol and more significantly, distillers grains for our customers.  Furthermore, increases in natural gas prices or changes in our natural gas costs relative to natural gas costs paid by competitors may adversely affect our results of operations and financial condition.

 

Our plant site is made up of two adjacent parcels which together total approximately 125 acres in southwest Minnesota near Lamberton. The plant's address is 24500 U.S. Highway 14, Lamberton, Minnesota 56152. We produce all of our ethanol, distillers grains and corn oil at this site. Our plant is in excellent condition and is capable of functioning at over 100% of its 50 million gallons per year nameplate production capacity.

None.

As of January 21, 2021,19, 2022, we have 4,7924,770 membership units outstanding and 1,401 unit holders of record. There is no public trading market for our membership units.

We have, however, established a Unit Trading Bulletin Board, a private online matching service, through Farmers National Company Agstock, LLC in order to facilitate trading among our members. The Unit Trading Bulletin Board has been designed to comply with federal tax laws and Internal Revenue Service ("IRS") regulations establishing a “qualified matching service,” as well as state and federal securities laws. Our Unit Trading Bulletin Board consists of an electronic bulletin board that provides a list of interested buyers with a list of interested sellers, along with their non-firm price quotes. The Unit Trading Bulletin Board does not automatically affect matches between potential sellers and buyers and it is the sole responsibility of sellers and buyers to contact each other to make a determination as to whether an agreement to transfer units may be reached. We do not become involved in any purchase or sale negotiations arising from our Unit Trading Bulletin Board and have no role in effecting the transactions beyond approval, as required under our member control 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 the Company as a broker or dealer or an exchange. We do not use the Unit Trading Bulletin Board to offer to buy or sell securities other than in compliance with the securities laws, including any applicable registration requirements.

There are detailed timelines that must be followed under the Unit Trading Bulletin Board Rules and Procedures with respect to offers and sales of membership units. All transactions must comply with the Unit Trading Bulletin Board Rules, our member control agreement, and are subject to approval by our board of governors.

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 the Company to be deemed a publicly traded partnership.

The following table contains historical information by fiscal quarter for the fiscal years ended October 31, 20202021 and 20192020 regarding the actual unit transactions that were completed by our unit-holders during the periods specified. We believe this most accurately represents the current trading value of the Company's units. The information was compiled by reviewing the completed unit transfers that occurred on our Unit Trading Bulletin Board during the quarters indicated.

The following table contains the asked prices that were posted on the Company's Unit Trading Bulletin Board and includes some transactions that were not completed. The Company believes the table above more accurately describes the trading value of its units as the asked prices below include some offers that never resulted in completed transactions. The information was compiled by reviewing postings that were made on the Company's Unit Trading Bulletin Board.

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 filing.

The following table shows the results of our operations and the percentage of revenues, cost of goods sold, gross loss, operating expenses, operating loss and other items to total revenues in our statements of operations for the fiscal years ended October 31, 2020 and 2019:

The following table shows the sources of our revenues for the fiscal years ended October 31, 2020 and 2019.

The increase in ethanol gallons sold for the fiscal year ended October 31, 2020, as compared to the number of gallons of ethanol we sold for the fiscal year ended October 31, 2019, resulted primarily from increased ethanol production rates due to our receipt of our updated air permit in October 2019. This was partially offset by reduced ethanol production levels by up to 25% during the months of March, April, May and June 2020 due to unfavorable operating conditions in the ethanol industry and the COVID-19 pandemic. Our ethanol production levels are currently at an annual rate of approximately 64 million gallons. Management anticipates that the amount of ethanol produced will remain relatively consistent in the future unless economic conditions worsen and we reduce ethanol production levels.

For the fiscal year ended October 31, 2020, the average price per ton that we received for our dried distillers grains was approximately 1.3% higher than the average price we received during the fiscal year ended October 31, 2019, due primarily to a decrease in supply during our second fiscal quarter resulting from some ethanol plants reducing or shutting down production and an increase in corn and soybean prices in the latter part of the period. For the fiscal year ended October 31, 2020, the average price per ton that we received for our modified distillers grains was approximately 7.0% higher than during the fiscal year ended October 31, 2019 due to increased demand and reduced production in our local area.

Revenue from corn oil sales increased by approximately 21.5% for the fiscal year ended October 31, 2020, as compared to the fiscal year ended October 31, 2019 primarily due to an increase in pounds of corn oil sold during the fiscal year ended October 31, 2020, compared to the fiscal year ended October 31, 2019. The pounds of corn oil we sold during the fiscal year ended October 31, 2020 increased by approximately 22.3% as compared to the pounds of corn oil we sold for the fiscal year ended October 31, 2019 due to improved efficiencies leading to increased production for the period.

For the fiscal year ended October 31, 2020, we purchased approximately 1.1% less natural gas as compared to the same period of 2019. This decrease in natural gas usage is primarily due to the decrease in dried distillers grains production.

Our average price per MMBTU of natural gas was approximately 2.1% higher for the fiscal year ended October 31, 2020 compared to the fiscal year ended October 31, 2019. Natural gas prices were higher due to new interim tariff rates levied by Northern Natural Gas effective January 1, 2020. Management anticipates that natural gas prices will continue at current levels unless the natural gas industry experiences production problems or if there are large increases in natural gas demand.

For the fiscal years ended October 31, 2020 and 2019, we recorded gains due to the change in fair value of our outstanding natural gas derivative positions of approximately $11,000 and $22,000, respectively.

The ethanol industry experienced adverse conditions throughout most of 2018 and 2019 as a result of industry-wide record low ethanol prices due to reduced demand and high industry inventory levels. These adverse conditions continued into 2020 and were compounded by the COVID-19 pandemic. As a result of these factors, we have experiencedpandemic resulting in negative operating margins, lower cash flow from operations and net operating losses. In response,losses for those periods. Ethanol demand rebounded in 2021 due to the lifting of COVID-19 restrictions in many areas having a positive effect on ethanol prices resulting in positive operating margins, higher cash flow

We experienced a decrease in our cash provided by (used in) operating activities for the fiscal year ended October 31, 2020, as compared to the fiscal year ended October 31, 2019. This decrease was primarily due to changes in accounts receivables, inventories and accrued expense during the fiscal year ended October 31, 2020.

We used more cash for investing activities during the fiscal year ended October 31, 2020, as compared to the fiscal year ended October 31, 2019. This change was primarily due to an increase in capital expenditures during the fiscal year ended October 31, 2020.

We experienced an increase in our cash for financing activities during the fiscal year ended October 31, 2020, as compared to the fiscal year ended October 31, 2019. This increase was primarily a result of increased net borrowings on long-term debt during the fiscal year ended October 31, 2020, as compared to the fiscal year ended October 31, 2019.

Our loan facility with Compeer is secured by substantially all business assets and also subjects the Company to various financial and non-financial covenants. Subsequent to our fiscal year end, on November 25, 2020, Compeer waived our violation at October 31, 2020, of the minimum debt service coverage ratio in our loan documents.

The Term Revolving Loan is for up to $20,000,000 with a variable interest rate that is based on the 30-day LIBOR rate plus 325 basis points with no minimum interest rate. The applicable interest rate at October 31, 20202021 was 3.40%3.33%. The Term Revolving Loan may be advanced, repaid and re-borrowed during the term. Monthly interest payments are due on the Term Revolving Loan with payment of all amounts outstanding due on January 22, 2023. The outstanding balance on this note was $5,999,000$499,000 at October 31, 2020.2021. We pay interest at a rate of 1.50% on amounts outstanding for letters of credit which also reduce the amount available under the Term Revolving Loan. We had no letters of credit outstanding at October 31, 2020.2021. We are also required to pay unused commitment fees for the Term Revolving Loan as defined in the loan documents.

The 2020 Term Loan is for up to $6,000,000 with a variable interest rate based on the Wall Street Journal's Prime Rate plus 45 basis points with no minimum interest rate. The applicable interest rate at October 31, 20202021 was 3.70%. Beginning January 1, 2021, monthlyMonthly principal payments will beare due on the 2020 Term Loan of approximately $250,000 plus accrued interest with payments of all amounts outstanding due on September 14, 2022. The outstanding balance on this note was $6,000,000$3,000,000 at October 31, 2020.2021. Subsequent to our fiscal year end, the loan balance was paid off.

The loan facility with Compeer is secured by substantially all business assets. We executed a mortgage in favor of Compeer creating a first lien on our real estate and plant and a security interest in all personal property located on the premises and assigned in favor of Compeer, all rents and leases to our property, our marketing contracts, our risk management services contract, and our natural gas, electricity, water service and grain procurement agreements.

We are also subject to various financial and non-financial covenants that limit distributions and debt and require minimum debt service coverage and working capital requirements. Our debt service coverage ratio is to be no less than 1.25:1.00 measured annually by comparing our adjusted EBITDA to our scheduled payments of principal and interest. Our minimum working capital is $8,250,000, which is calculated as current assets plus the amount available for drawing under our Term Revolving Loan and undrawn amounts on outstanding letters of credit, less current liabilities, and is measured quarterly.

We value our inventory at lower of cost or net realizable value. Our estimates are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable. These valuations require the use of management's assumptions which do not reflect unanticipated events and circumstances that may occur. In our analysis, we consider corn costs and ethanol prices, break-even points for our plant and our risk management strategies in place through our derivative instruments. Given the significant assumptions required and the possibility that actual conditions will differ, we consider the valuation of the lower of cost or net realizable value on inventory to be a critical accounting estimate.

We are exposed to market risks from changes in interest rates, corn, natural gas, and ethanol prices. We may seek to minimize these commodity price fluctuation risks through the use of derivative instruments. In the event we utilize derivative instruments, we will attempt to link these instruments to financing plans, sales plans, market developments, and pricing activities. Such instruments in and of themselves can result in additional costs due to unexpected directional price movements.

We have entered into ethanol, corn and natural gas derivatives in order to protect cash flows from fluctuations caused by volatility in commodity prices. In practice, as markets move, we actively attempt to manage our risk and adjust hedging strategies as appropriate. We do not use hedge accounting which would match the gain or loss on our hedge positions to the specific commodity contracts being hedged. Instead, we use fair value accounting for our hedge positions, which means that as the current market price of our hedge position changes, the gains and losses are immediately recognized in our statement of operations. The immediate recognition of hedging gains and losses under fair value accounting can cause net income (loss) 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.

We are exposed to market risk from changes in interest rates. Exposure to interest rate risk results primarily from our our Term Revolving Loan, and our 2020 Term Loan and Revolving Line of Credit Loan, each bearing a variable interest rate.  As of October 31, 2020,2021, we had $5,999,000$499,000 outstanding on the Term Revolving Loan, and $6,000,000$3,000,000 outstanding on the 2020 Term Loan and $0 outstanding on the Revolving Line of Credit Loan. Interest will accrue at the 30-day LIBOR rate plus 325 basis points for the Term Revolving Loan. The applicable interest rate on this loanthe Term Revolving Loan at October 31, 20202021 was 3.40%3.33%. The 2020 Term Loan is subject to a variable interest rate based on the Wall Street Journal's Prime Rate plus 45 basis points. The applicable interest rate on this loanthe 2020 Term Loan at October 31, 20202021 was 3.70%. Interest will accrue at 30-day LIBOR rate plus

We expect to be exposed to market risk from changes in commodity prices.  Exposure to commodity price risk results from our dependence on corn and natural gas in the ethanol production process and the sale of ethanol, distillers grains and corn oil. We may seek to minimize the risks from fluctuations in the prices of raw material inputs through the use of corn commodity-based and natural gas derivatives. These derivatives are not designated as effective hedges for accounting purposes. For derivative instruments that are not accounted for as hedges, or for the ineffective portions of qualifying hedges, the change in fair value is recorded through earnings in the period of change. Corn and natural gas derivative changes in fair market value are included in costs of goods sold.

In the ordinary course of business, we enter into forward contracts for our commodity purchases. At October 31, 2020,2021, we have approximately 881,0001,824,000 bushels of forward fixed basis corn contracts and 1,399,0001,188,000 bushels of forward fixed price corn contracts valued at approximately $5,254,000.$6,100,000. These purchase contracts are for various delivery periods through December 2021.January 2023. At October 31, 2020,2021, we have approximately 2,702,0003,349,000 MMBTUs of forward natural gas fixed price purchase contracts valued at approximately $6,706,000$9,631,000 for delivery periods through March 2023.October 2024. In addition, at October 31, 2020,2021, we have approximately 736,000110,000 gallons of forward fixed price denaturant purchase contracts valued at approximately $839,000$228,000 for delivery periods through JuneNovember 2021.

A sensitivity analysis has been prepared to estimate our exposure to ethanol, distillers grains, 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 and distillers grains prices as of October 31, 20202021 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 October 31, 2020. 2021.