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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

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FORM 10-K

☒Annual report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

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For the fiscal year ended October 31,, 2021

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OR

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☐Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

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For the transition period from               to               .

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COMMISSION FILE NUMBER 000-51277

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GRANITE FALLS ENERGY, LLC

(Exact name of registrant as specified in its charter)

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15045 Highway 23 SE, Granite Falls, MN 56241-0216

(Address of principal executive offices)

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(320) 564-3100

(Registrant’s telephone number, including area code)

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Securities registered pursuant to Section 12(b) of the Act: None

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Securities registered pursuant to Section 12(g) of the Act: Membership Units

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Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. ◻ Yes ⌧x No

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Indicated by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. ◻ Yes ⌧x No

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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.   ⌧x  Yes    ◻  No

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Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).   ⌧x  Yes    ◻  No

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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,” “emerging growth company” in Rule 12b-2 of the Exchange Act:

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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ◻

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Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  ☐  Yes    ⌧x  No

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The aggregate market value of the 20,059 membership units held by non-affiliates of the registrant (computed by reference to the most recent sale price of $1,350 per unit of membership units) was $27,079,650 as of April 30, 2021. The membership units are not listed on an exchange or otherwise publicly traded. Additionally, the membership units are subject to significant restrictions on transfer under the registrant’s operating and member control agreement. The value of the membership units for this purpose has been based solely upon the initial offering price of the membership units. In determining this value, the registrant has assumed that all of its governors, chief executive officer, chief financial officer and beneficial owners of 5% or more of its outstanding membership units are affiliates, but this assumption shall not apply to or be conclusive for any other purpose.

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As of January 31,February 28, 2022, there were 30,606 membership units outstanding.

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DOCUMENTS INCORPORATED BY REFERENCEEXPLANATORY NOTE

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The registrant has incorporated by reference into Part III of thisOn January 31, 2022, Granite Falls Energy, LLC (“Company,” “we,” “us,” “our” and “GFE”) filed its Annual Report on Form 10-K portions of its definitive proxy statement to be filedfor the year ended October 31, 2022 (the “Original Filing”), with the Securities and Exchange Commission within 120 days after(the “SEC”). The Company indicated that it would incorporate Part III of Form 10-K in the closeOriginal Filing by reference to the Company’s definitive proxy statement for its 2022 annual meeting of stockholders. Because the Company does not anticipate filing its definitive proxy statement by February 28, 2022, the Company is filing this Amendment No. 1 (this “Amendment”) on Form 10-K/A, which amends and restates items identified below with respect to the Original Filing and provides the disclosure required by Part III of Form 10-K.

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This Form 10-K/A only amends information in Part III, Item 10 (Directors, Executive Officers and Corporate Governance), Item 11 (Executive Compensation), Item 12 (Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters), Item 13 (Certain Relationships and Related Transactions, and Director Independence), and Item 14 (Principal Accounting Fees and Services). All other items as presented in the Original Filing are unchanged. Except for the foregoing amended and restated information, this Amendment does not amend, update or change any other information presented in the Original Filing.

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In addition, as required by Rule 12b-15 of the fiscal year coveredSecurities Exchange Act of 1934, this Form 10-K/A contains new certifications by this Annual Report (October 31, 2021). This proxy statement is referred to in this reportour principal executive officer and our principal financial and accounting officer, filed as the 2022 Proxy Statement.exhibits hereto.

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CAUTION REGARDING FORWARD LOOKING STATEMENTSThe chart below lists the governors.  The address for all governors is 15045 Highway 23 S.E., Granite Falls, Minnesota, 56241-0216.  

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This annual report contains historical information, as well as forward-looking statements regarding our business, financial condition, results of operations, performance and prospects. All statements that are not historical or current facts are forward-looking statements and are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements 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, including, but not limited to the following:

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Our actual results or actions may differ materially from these forward-looking statementsBiographical Information for many reasons,Governors

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Set forth below is certain information with respect to our governors, including the reasons listed above.  We undertake no dutybusiness experience and the experiences, qualifications, attributes or skills, our Board believes qualifies these individuals to update these forward-looking statements, even thoughserve as governors.

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Leslie Bergquist - Governor.Mr. Bergquist served as a governor of the Company from 2013 to 2019. Since January 2012, Mr. Bergquist has owned and served as president of Bergquist Consulting Corporation, which provides commercial and agricultural loan reviews and appraisal reviews. Mr. Bergquist also serves as a farm manager for Fagen Farms, LLP and Fagen Farms II, LLP, both of which are affiliates of Fagen Holdings, Inc., and as a bus driver for Bennett & Bennett Transportation, Inc. Mr. Bergquist previously served as a senior credit analyst for Forstrom Bancorporation, Inc. from May 2007 through December 2011, and held the positions of president, vice president, and director during his tenure with Yellow Medicine County Bank, which spanned from August 2002 through May 2007. During his prior tenure as a governor of the Company, Mr. Bergquist also served as a one of our situation may changeappointed governors to the board of governors of Heron Lake BioEnergy, LLC, the Company’s wholly owned subsidiary (“HLBE”), and as a member of the audit committee of HLBE. He also served as an appointed director of Agrinatural from September 2013 until March 2018, representing HLBE’s investment interest in Agrinatural. Mr. Bergquist’s experience as an executive, his knowledge of the agricultural industry, and his financial acumen and audit committee experience make him a valuable member of the Board.

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Dean Buesing - Governor, Secretary.  Mr. Buesing has served as a governor of the Company since 2009. Mr. Buesing and his brother have been farming near Granite Falls since 1973, raising corn and soybeans. Since 1980, he has served as president of Buesing Farms, Inc. He is also president of Buesing-Buesing, LLC, which is a farming operation formed in 2006. In 2007, Buesing Ag Partnership was formed, in which he is a partner with his brother and nephew. Mr. Buesing was a director of Minnesota Corn Processors, LLC, an ethanol production facility located near Marshall, Minnesota from 1998 until 2002 when it was bought by Archer Daniels Midland. While a director of Minnesota Corn Processors, LLC, he also served on the long-range planning and development committee. From 2007 to 2011, Mr. Buesing served as a director and secretary of SW Energy, LLC, a development stage ethanol production facility located near McCook, Nebraska. From 1992 to 2000, he was also a director and treasurer of Yellow Medicine Soybean Growers. He is also currently a member of the Minnesota Soybean and Corn Growers Associations. Mr. Buesing previously served as a governor of HLBE Mr. Buesing is a member of the Company’s executive board.

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Paul Enstad - Governor, Chairman of the Board of Governors. Mr. Enstad has served on the board of governors of the Company since its inception in 2000. Mr. Enstad has been farming corn and soybeans near Granite Falls, Minnesota since 1978. He served on the board of directors of Farmers Cooperative Elevator Company, a member of the Company, from 1996 to 2011. Mr. Enstad previously served as a one of the Company's appointed governors of HLBE, representing GFE’s interest in that company, as well as the chairman of the HLBE board. Mr. Enstad also previously as an appointed director of Agrinatural, representing HLBE's investment interest in Agrinatural. The board believes Mr. Enstad's business experience, experience in board and leadership roles, and his knowledge of the ethanol industry, provides the board with valuable perspective.

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David Forkrud - Governor. Mr. Forkrud was elected as an at-large governor of the Company in 2021. Mr. Forkrud previously managed farmer-owned cooperatives for 42 years, retiring in 2016.  Mr. Forkrud continues to work part-time for Farmer’s Co-op Oil Co. of Echo, Minnesota, selling grain handling equipment. He was elected County Commissioner in the future.  We cannot guarantee future results, levelsfall of activity, performance or achievements.  We caution you not to put undue reliance on any forward-looking statements, which speak only as2016 for Redwood County.  Mr. Forkrud was and is a promoter 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 with these cautionary statements. Unless otherwise stated, references in this report to particular years or quarters refer to our fiscal years ended October 31 and the associated quarters of those fiscal years.ethanol.  

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Kenton Johnson - Governor.Mr. Johnson began his tenure with the Board in 2013 as Fagen, Inc.’s appointed governor and continued as a governor upon his election to the Board in 2014. Since 2007, Mr. Johnson has raised corn and soybeans in his farming operation located south of Granite Falls, Minnesota. In August 2009, Mr. Johnson became chief executive officer and shareholder of Prairie View Farms, Inc., a family owned and operated farming business. Since January 2013, Mr. Johnson has served as a director on the boards of Platinum Ethanol, LLC, a 125 million gallon per year ethanol plant located in Arthur, Iowa, and of Platinum Grain, LLC, a commercial grain elevator in Anthon, Iowa. Since October 2013, he has served on the board of Bushmills Ethanol, Inc., an 85 million gallon per year ethanol facility located in Atwater, Minnesota, as an appointee of our general contractor Fagen, Inc. Since June 2015, Mr. Johnson has served as a director for Ringneck Energy, LLC, an 80 million gallon per year ethanol facility in Onida, South Dakota, which commenced operations in 2019. Mr. Johnson previously served as one of the Company’s appointed governors to the board of governors of HLBE. Mr. Johnson received a Bachelor of Science degree in agriculture business management from Southwest Minnesota State University in 2011. Mr. Johnson’s leadership and agriculture experience and industry insight resulting from his board service for similar companies in the ethanol industry make him a valuable member of the Board.

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Sherry Jean Larson - Governor. Ms. Larson has been a governor of the Company since March 2016. She is a certified public accountant and employed as the Senior Vice President, Controller for Independent Community Bankers of America (ICBA). Her responsibilities include the oversight for the preparation, organization, and ongoing analysis of all financial information pertinent to ICBA and its subsidiaries.  She was the Chief Financial Officer of Quam Construction in Willmar, Minnesota from December 2016 to March 2018. For the 15 years preceding, Ms. Larson was employed as a manager at Christianson & Associates, PLLP (“Christianson”), a public accounting firm located in Wilmar, Minnesota. In her role as a manager at Christianson, she assisted a wide variety of clients in the agriculture and manufacturing industries, including numerous ethanol and other alternative renewable fuel clients, with her primary focus on controller services, financial forecasting, business development, and preparation of business plans. Additionally, from October 2014 to April 2016, as part of her duties with Christianson, Ms. Larson served as the interim part-time chief financial officer for a private ethanol production facility pursuant to a financial and consulting services agreement between Christianson and the ethanol production facility. Prior to her employment with Christianson & Associates, Ms. Larson was employed as a senior accountant at Schlenner Wenner & Co. in St. Cloud, Minnesota from November 1997 to July 2001. She graduated from the University of Evansville with a bachelor’s degree in accounting and from St. Cloud State University with a master’s degree in business administration.

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Bruce LaVigne - Governor.  Mr. LaVigne has served as a governor of the Company since 2014. Mr. LaVigne is currently employed as the managing director of Red Lake Resources Ltd, an Ontario private equity mineral exploration company, since April 2010 and as chief executive officer of Secluded Properties Limited, an Ontario company that develops commercial timber and mining, since February 1989. In addition, Mr. LaVigne is also former chief executive officer of Lac Seul Airways, Ltd. (having held the position of chief executive officer from 1998 to 2011); the chief executive officer of 972974 Ontario Limited, a private equity mining and real estate company; the chairman of 1009167 Ontario Limited, a private investment holding company; and a vice president of Boundary Waters Land and Timber, a private equity Minnesota real estate development and timber production company that manages 2,800 acres of commercial timber production land in northern Minnesota. Mr. LaVigne previously served as one of the Company’s alternate appointed governors to the board of governors of HLBE, representing our investment interest in HLBE. Mr. LaVigne’s leadership skills and strategic and operational business acumen make him a valuable member of the Board.

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Martin Seifert - Alternate Governor. Mr. Seifert was first appointed by the Board as an alternate governor in May 2011. Since December 2014, Mr. Seifert has been employed as a lobbyist with the firm of Flaherty and Hood, P.A. in St. Paul, Minnesota.  Previously, he was the executive director of the Avera Marshall Foundation from 2010 to 2013, which provides financial support for the Marshall Regional Medical Center hospital and long term care facility. Mr. Seifert has also been a realtor with Real Estate Retrievers from 2010 to 2014. Mr. Seifert was a member of the Minnesota House of Representatives from 1996 to 2011. He also served as minority leader in the Minnesota House of Representatives from 2006 to 2009. Mr. Seifert graduated from Southwest Minnesota State University in 1995 with a Bachelor of Arts in political science.Mr. Seifert previously served as an alternate appointed governor of HLBE and serves on the board of directors of Catholic United Financial. Mr. Seifert provides significant assistance to our Board in the Company’s interaction with all levels of local and state government and also provides an independent, long-term view of the further development of Company’s site and business.

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Robin Spaude - Governor.  Mr. Spaude was elected as an at-large governor in 2019.  Mr. Spaude served as a full-time employee of the Company beginning in July 2005, serving as the Maintenance Manager from July 2005 to September 2006. From September 2006 to March 2019, Mr. Spaude served as the Company’s Plant Manager.  As Plant Manager, Mr. Spaude was responsible for daily operations management, as well as execution of numerous project budgets and their implementation, which expanded the plant’s operations. Other major projects included cook, liquefaction, mill, dehydration and boiler capacity expansions; rail loop construction; office building expansion; and budget proposal, bid solicitation, and construction coordination for a storage bin addition. Since the plant’s construction, Mr. Spaude’s duties included capital equipment and operating budget forecasts. From March 2001 to July 2005, Mr. Spaude served as an independent contractor providing project and construction

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coordination services and assisting the Company with permitting, infrastructure, and construction management activities. Mr. Spaude also served as an appointed governor of HLBE, from March 2020 to September 2021. From May 2008 to September 2009, Mr. Spaude also served as an independent contractor to Highwater Ethanol, LLC, providing project and construction coordinator services. Prior to Mr. Spaude’s work in the ethanol industry, he was employed for 31 years by the Plews Manufacturing Company (a division of the Parker-Hannifin Corp. until its sale of Plews to the Stant Corp.), an automobile aftermarket company, serving as a Director of Manufacturing and Engineering. In this role, Mr. Spaude had multiple plant manufacturing and engineering responsibilities in the U.S. and Mexico. During his time with the Plews Division, Mr. Spaude’s work played a role in the sales and manufacturing growth from $24 million to $85 million over the course of seven years, via competitor acquisition, consolidation, and lean manufacturing strategies. Mr. Spaude is a retired Army Reserve officer of 20 years’ continuous service in ordinance and logistics. He also served as the Airport Commission chairman from 1988 to 2007 for the Granite Falls Airport, which involved site selection, construction, and public operations. Mr. Spaude graduated from Minnesota West Community and Technical College in Granite Falls, with a degree in Industrial Drafting and Design Technology. He has also completed numerous continuing education courses in engineering and business management over the course of his career. Mr. Spaude was selected as a board member based on his business experience in the ethanol industry and prior involvement with and knowledge of the Company.

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Rodney Wilkison - Governor, Vice Chairman of the Board of Governors. Mr. Wilkison was initially appointed to an at-large board seat in December 2006 and elected as an at-large governor in 2007. Since 1985, Mr. Wilkison has been the owner and chief executive officer of Wilkison Consulting Service, which provides financial consulting, tax preparation, and monthly accounting services for farmers and small businesses. Prior to starting his consulting business, Mr. Wilkison worked for two different banks for over eleven years. Mr. Wilkison graduated from Pipestone Area Vocational Technical Institute with a degree in agricultural banking and is certified by the Minnesota Department of Agriculture as a Farm Business Management Instructor. Mr. Wilkison previously served as a one of GFE’s appointed governors to the board of governors of HLBE, representing the GFE’s interest in that company, as well as the vice-chairman and chair of the audit committee of HLBE. Mr. Wilkison has served as a member and chairman of the Company’s Audit Committee since his election as an at-large governor in 2007. The board believes Mr. Wilkison provides the board with critical financial and accounting acumen and because he qualifies as an audit committee financial expert.

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INDUSTRY AND MARKET DATASECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

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MuchSection 16(a) of the informationSecurities and Exchange Act of 1934, as amended (the “Exchange Act”), requires our officers and governors, and persons who own more than 10% of a registered class of our equity securities, to file reports of ownership and changes in ownership with the Securities and Exchange Commission (the “SEC”).  Officers, governors and greater than 10% beneficial owners are required by SEC regulations to furnish us with copies of all Section 16(a) forms they file.  The Company is required to disclose in this report regarding the ethanol industry, including government regulation relevantAmendment any failure to file or late filings of such reports with respect to the industry,most recent fiscal year.

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Based solely upon a review of copies of forms furnished to the marketCompany or written representations from certain reporting persons that no Form 5s were required for our products and competition is from information published by the Renewable Fuels Association (“RFA”), a national trade association for the U.S. ethanol industry, as well as other publicly available information from governmental agencies or publications. Althoughsuch covered persons, we believe these sources are reliable, we have not independently verifiedthat all Section 16(a) filing requirements applicable to each covered person were satisfied during the information.2021 fiscal year.

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AVAILABLE INFORMATIONCode of Ethics

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Our principalThe Board has adopted a code of ethics that sets forth standards regarding matters such as honest and ethical conduct, compliance with the law, and full, fair, accurate, and timely disclosure in reports and documents that we file with the SEC and in other public communications.  The code of ethics applies to all of our employees, officers, and governors, including our chief executive offices are located at 15045 Highway 23 SE, Granite Falls, Minnesota 56241,officer and our telephone numberchief financial officer.  The code of ethics is 320-564-3100. We make available free of charge on or through our Internet website, www.granitefallsenergy.com, all of our reports and all amendments to those reports as soon as reasonably practicable after such material is electronically filed with, or furnished to, the Securities and Exchange Commission (SEC).  The Securities and Exchange Commission also maintains an Internet site (http://www.sec.gov) through which the public can access our reports.  We will provide electronic or paper copies of these documents free of charge upon request.

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PART I

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When we use the terms “Granite Falls Energy” or “GFE” or similar words in this Annual Report on Form 10-K, unless the context otherwise requires, we are referringwritten request to Granite Falls Energy, LLC, and our operations at our ethanol production facility located in15045 Highway 23 S.E., Granite Falls, Minnesota.  When we use the terms “Heron Lake BioEnergy”, “Heron Lake”, or “HLBE” or similar words, unless the context otherwise requires, we are referring to Heron Lake BioEnergy, LLC and its wholly owned subsidiary, HLBE Pipeline Company, LLC, through which, HLBE holds a 100% interest in Agrinatural Gas, LLC. When we use the terms the “Company,” “we,” “us,” “our” or similar words in this Annual Report on Form 10-K, unless the context otherwise requires, we are referring to Granite Falls Energy, LLC and our consolidated wholly- and majority-owned subsidiaries.  Minnesota, 56241-0216.

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ITEM 1.BUSINESSAudit Committee

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OverviewThe audit committee of the Board operates under a charter adopted by the Board in fall 2005.  Our audit committee charter is available on our website at www.granitefallsenergy.com. Under the charter, the audit committee must have at least three members.  The audit committee consists of Mr. Wilkison, Mr. Bergquist, and Ms. Larson.

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Granite Falls Energy, LLCThe audit committee is exempt from the independence listing standards because the Company’s securities are not listed on a Minnesota limited liability company formed on December 29, 2000national securities exchange or listed in an automated inter-dealer quotation system of a national securities association or to issuers of such securities.  However, our audit committee charter requires a majority of our committee members to be independent.  All of the members of our audit committee are independent under the definition provided in our audit committee charter and the definition of independence provided by NASDAQ rules 5605(a)(2) and 5605(c)(2).

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Mr. Wilkison serves as our audit committee financial expert. Mr. Wilkison’s experience as the owner and chief executive officer of Wilkison Consulting Service, which provides financial consulting, tax preparation, and monthly accounting services for farmers and small businesses, qualifies him to be the purpose of constructing, owning and operating a fuel-grade ethanol plant located in Granite Falls, Minnesota.  audit committee’s financial expert.

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Our business consists primarilyaudit committee held four meetings during fiscal year 2021. Each of our audit committee members attended all of the production and sale of ethanol and its co-products (wet, modified wet and dried distillers’ grains, corn oil and corn syrup) locally, and throughout the continental U.S. However, as markets allow, our products can be, and have been, sold in the export markets.  Our revenues from operations come from three primary sources: sales of fuel ethanol, sales of distillers’ grains and sales of corn oil at GFE’s ethanol plant and HLBE’s ethanol plant.  audit committee meetings.

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Heron Lake BioEnergy, LLC (“Heron Lake BioEnergy” or “HLBE”), which owns an ethanol plant located near Heron Lake, Minnesota, is a wholly owned subsidiary of GFE. In July 2013, we acquired controlling interest in HLBE through our wholly owned subsidiary Project Viking, L.L.C (“Project Viking”). Prior to September 29, 2021, GFE held a 50.7% ownership interest in HLBE. On September 29, 2021, we completed a merger in which we acquired the remaining non-controlling interest of HLBE for $14,000,000. As a result of the merger, GFEExecutive Officers and Project Viking own 100% of HLBE’s issued and outstanding membership units. The merger is further described in the section captioned “Merger with HLBE.”Significant Employees

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AppointmentThe table below lists all of Jeffrey Oestmannour executive officers and two significant employees, our risk manager and plant manager, whom we expect to make a significant contribution to the Company’s business.  The address for all of the individuals identified below is 15045 Highway 23 S.E., Granite Falls, Minnesota, 56241-0216.  There are no arrangements or understandings between any of the Company’s executive officers and any other persons pursuant to which he or she was selected as CEOan executive officer.

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Biographical Information for Executive Officers and Significant Employees

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We appointed Jeffrey Oestmann, to serveChief Executive Officer and General Manager.  Mr. Oestmann joined the Company in May 2021 as CEO, effective May 26, 2021.chief executive officer and general manager. Mr. Oestmann has worked in the agriculture and bio-fuel sectors for approximately 27 years, most recently serving28 years. From 2013 to 2017, Mr. Oestmann served as headPresident and CEO of bio-fuel operationsEast Kansas Agri-Energy, LLC, which operates an ethanol and renewable Diesel plant in Garnett, Kansas. From 2017 to 2019, Oestmann worked for Syngenta, an agricultural science and technology company.company, as Head of Bio-Fuel Operations. From 2012 to 2013, Mr. Oestmann replaced Steve Christensen, who resignedserved as president and CEO of Soy Energy. From 1994 to 2012, Mr. Oestmann worked in various roles for Cargill around the Company effective May 26, 2021, pursuant toworld, including operations, Risk management, Trading, marketing, a separation agreement dated February 17, 2021.business development manager and product development leader. Mr. Oestmann received a business degree from the University of Nebraska at Omaha. Mr. Oestmann also serves as the CEOChief Executive Officer of both GFE and itsHLBE, GFE’s wholly owned subsidiary, HLBE. Additional information regarding Oestmann’s

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HLBE is also the sole owner Agrinatural Gas, LLC (“Agrinatural”), through its wholly owned subsidiary, HLBE Pipeline Company, LLC.  Agrinatural owns approximately 190 miles of natural gas pipelineItem 11. EXECUTIVE COMPENSATION

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Compensation Discussion and provides natural gas to HLBE’s ethanol plant and other commercial, agricultural and residential customers through a connection with the natural gas pipeline facilities of Northern Border Pipeline Company. Agrinatural’s revenues are generated through natural gas distribution fees and sales. HLBE is its largest customer by volume and revenue.Analysis

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Operating SegmentsOverview

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Accounting Standards Codification (“ASC”) 280, “Segment Reporting,” establishesThroughout this Amendment, the standards for reporting information about segments inindividuals who serve as our chief executive officer and chief financial statements. Operating segmentsofficer are definedreferred to as components of an enterprise for which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. Therefore, in applying the criteria set forth in ASC 280, the Company determined that based on the nature of the products and production process and the expected financial results, the Company’s operations at GFE’s ethanol plant and HLBE’s plant, including the production and sale of ethanol and its co-products, are aggregated into one reporting segment.“executive officers.”

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Additionally, we also realize relatively immaterial revenue from natural gas pipeline operations at Agrinatural, HLBE’s wholly owned subsidiary.  Before and after accounting for intercompany eliminations, these revenues from Agrinatural represent less than 1% of our consolidated gross revenues and have little to no impact on the overall performance of the Company.  Therefore, our management does not separately review Agrinatural’s revenues, cost of sales or other operating performance information.  Rather, management reviews Agrinatural’s natural gas pipeline financial data on a consolidated basis with our ethanol production operating segment. Additionally, management believes that the presentation of separate operating performance information for Agrinatural’s natural gas pipeline operations would not provide meaningful information to a reader of the Company’s financial statements and would not achieve the basic principles and objectives of ASC 280.Compensation Committee

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We currently do not have or anticipate we will have any other lines of business or other significant sources of revenue other thanOur three-member executive board served as the sale of ethanol and its co-products, which include distillers’ grains and non-edible corn oil.

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Financial Information

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Please refer to “ITEM 7 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS”Company’s compensation committee for information about our revenue, profit and loss measurements, and total assets and liabilities and “ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA” for our consolidated financial statements and supplementary data.

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Principal Products

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The principal products from ethanol production at GFE’s plant and HLBE’s plant, and from which we derive nearly all our revenue, are fuel-grade ethanol, distillers’ grains, and non-edible corn oil.  In addition, HLBE’s plant also has miscellaneous other revenue generated by sales of corn syrup, a by-product of the ethanol production process, and revenues from Agrinatural’s natural gas pipeline operations.  We did not introduce any new products or services as part of our ethanol production segment during our fiscal year ended October 31, 2021. The executive board has responsibility for establishing, implementing and regularly monitoring adherence to the Company’s compensation philosophy and objectives. The executive board ensures that the total compensation paid to the executive officers is fair, reasonable and competitive.  

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Executive Board and Compensation Committee:

Paul Enstad, Chair

Rodney Wilkison

Dean Buesing

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The table below shows the approximate percentage of our total revenue which is attributable to each of our principal products for each of the last two fiscal years.executive board:

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All of the executive board’s actions are reported to the Board and, where appropriate, submitted to the Board for ratification. In determining the chief executive officer’s compensation, the executive board considers evaluations prepared by the governors. From time to time, the executive board may delegate to the chief executive officer the authority to implement certain decisions of the committee, to set compensation for other executive officers and to fulfill administrative duties.

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Compensation Philosophy and Objectives

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Our compensation programs are designed to achieve the following objectives:

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Compensation Committee Procedures

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The executive board is responsible for determining the nature and amount of compensation for the Company’s executive officers.  The executive board receives input from the chief executive officer on the personal performance achievements of the executive officers and management employees who report to him.  This individual performance assessment determines a portion of the annual compensation for each such executive officer and manager.  In addition, the chief executive officer provides input on salary increases, incentive compensation opportunities, and long-term incentive grants for the executive officers and management employees who report to him, which the committee considers when making executive compensation decisions.

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EthanolThe executive board does its own performance review of the chief executive officer. The executive board annually evaluates the performance of our chief executive officer in light of the Company’s goals and objectives and determines and approves the chief executive officer’s compensation level based on this evaluation. In determining the long-term incentive component of the chief executive officer’s compensation, the executive board will consider all relevant factors, including the Company’s performance, the value of similar awards to chief executive officers of comparable companies, and the awards given to the chief executive officer of the Company in past years. The chief executive officer is a typenot present at executive board level deliberations concerning his compensation.

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Compensation Elements

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Generally the types of alcohol producedcompensation and benefits provided to the executive officers are similar in form to the U.S. principally from corn.  Ethanol is ethyl alcohol, a fuel component made primarily from corn incompensation and benefits provided to our other employees.  For fiscal year 2021, the U.S. but can also be produced from various other grains. Ethanol is primarily used as:principal components of our compensation for executive officers included:

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Ethanol producedWe expect that the principal components of compensation for any executive officer who may be hired in 2022 will be comprised of the same principal components. We have entered into employment agreements with Mr. Oestmann (our chief executive officer) and Ms. Schuler (our chief financial officer), as well as a separation agreement with Steve Christensen, our former chief executive officer who retired in 2021. These components have been included in the U.S. is primarily used for blendingemployment agreements with unleaded gasoline and other fuel productsour executive officers, as an octane enhancer or fuel additive.  Ethanol is most commonly soldwell as E10 (10% ethanol and 90% gasoline), which is the blend of ethanol approved by the U.S. Environmental Protection Agency (“EPA”) for use in all American automobiles. Increasingly, ethanol is also available as E85, a higher percentage ethanol blend (85% ethanol and 15% gasoline) approved by the EPA for use in flexible fuel vehicles. Additionally, ethanol is available as E15 (15% ethanol and 85% gasoline), which is approved by the EPA for use in model year 2001 and newer cars, light-duty trucks, medium-duty passenger vehicles, and all flex-fuel vehicles.Company policies.

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Distillers’ GrainsBase Salary

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The principal co-productBase salaries for our executive officers are established based on the scope of the ethanol production process is distillers’ grains, a high proteintheir roles, responsibilities, experience levels and high-energy animal feed ingredient primarily marketed to the dairyperformance, and beef industries.  Dry mill ethanol processing creates three primary forms of distillers’ grains: wet distillers’ grains, modified wet distillers’ grains, and dried distillers’ grains with solubles.  Most of the distillers’ grains that we selltaking into account competitive market compensation paid by comparable companies for similar positions.  Base salaries are in the form of dried distillers’ grains and modified/wet distillers’ grains.  Modified/wet distillers’ grains are processed corn mash that has been dried toreviewed approximately 50% moisture. Modified/wet distillers’ grains are often sold to nearby markets.  Dried distillers’ grains with solubles are corn mash that has been dried to approximately 10% to 12% moisture.  It has an almost indefinite shelf lifeannually, and may be soldadjusted from time to time to realign salaries with market levels after taking into account individual performance and shipped to any market and fed to almost all types of livestock.experience.

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Corn OilBonus

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We also extract non-edible crude corn oil duringOn June 22, 2017, the thin stillage evaporation process immediately prior to production of distillers’ grains.board adopted an Annual Chief Executive Officer Cash Bonus Plan (the “CEO Bonus Plan”). The corn oil that we produce is not food grade corn oilCompany’s previous chief executive officer and therefore cannot be used for human consumption. Corn oil is used primarily as a biodiesel feedstock and as a supplement for animal feed.general manager, Mr. Christensen, was the sole participant in the CEO Bonus Plan.  

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Principal Product MarketsPursuant to the CEO Bonus Plan, the Company paid Christensen an annual bonus equal to one quarter of one percent (0.25%) of the annual consolidated net income of the Company, as reported in the Company’s annual audited consolidated financial statements. The bonus was to be assessed each year as of the end of the then current fiscal year (October 31), once the Company’s auditors have completed their annual audit of the Company’s consolidated financial statements.  Under the Plan, the bonus payments were paid in a cash lump sum payment within ninety (90) days following the end of the fiscal year (October 31), provided that Christensen was actively employed with the Company on the last day of the fiscal year. For our 2021 fiscal year, Mr. Christensen was awarded a bonus of $57,800 pursuant the CEO Bonus Plan.

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As described below in “DistributionMr. Oestmann’s employment agreement provides that Mr. Oestmann is entitled to an annual bonus equal to one-half of Principal Products”, we market and distribute allone percent (0.5%) of GFE’s and HLBE’s ethanol, distillers’ grains, and corn oil through professional third party marketers. Our marketers make all decisions, in consultation with management, with regardthe Company’s audited net income exceeding $5 million (the “New CEO Bonus Plan”).  For our fiscal year 2021, Mr. Oestmann was awarded a bonus of $78,736 pursuant to where our products are marketed.the New CEO Bonus Plan.

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Our ethanol, distillers’ grains and corn oil are primarily sold in the domestic market; however, as markets allow, our products can be, and have been, sold in the export markets. We expect our ethanol and distillers’ grains marketers to explore all markets for our products, including export markets. We believe that there is some potential for increased international sales of our products. Nevertheless, 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.

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Ethanol Markets

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The success of our sales efforts in the ethanol markets will depend primarily upon the efforts of Eco-Energy, Inc. (“Eco-Energy”), which buys and markets our ethanol. There are local, regional, national, and international markets for ethanol.  The principal markets for our ethanol are petroleum terminals in the continental U.S.  The principal purchasers of ethanol are generally wholesale gasoline distributors or blenders.

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We believe that local markets will be limited and must typically be evaluated on a case-by-case basis.  Although local markets may be the easiest to service, they may be oversold because of the number of ethanol producers near our plants, which may depress the price of ethanol in those markets.

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During our 2021 fiscal year, our Board awarded a bonus of Contents$40,049 to our chief financial officer. The foregoing bonus was awarded by the Board to our chief financial officer as part of an employee incentive program adopted by our board.

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distillers’ grains to ChinaAccounting and Vietnam. However, during 2016, China began an anti-dumping and countervailing duty investigation related to distillers’ grains imported from the U.S. which contributed to a decline in distillers’ grains shipped to China. In January 2017, the Chinese issued final tariffs on U.S. distillers’ grains. The Chinese distillers’ grains anti-dumping tariffs range from 42.2% to 53.7% and the anti-subsidy tariffs range from 11.2% to 12%. The impositionTax Treatment of these duties has resulted in a significant decline in demand from this top importer requiring U.S. producers to seek out alternative markets. There is no guarantee that distillers’ grains exports to China will return to pre-tariff levels.Awards

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On January 15, 2020, then President Trump signedNone of our executive officers, governors, or employees receives compensation in excess of $1,000,000, and therefore the entire amount of their compensation is deductible by the Company as a “phase one” trade agreement with China. The agreement includes a commitmentbusiness expense. Certain large executive compensation awards are not tax deductible by Chinacompanies making such awards. None of our compensation arrangements are likely to purchase agricultural products over two years, including distillers’ grains. The agreement will also provide U.S. manufacturers of DDGS with a streamlined process for registration and licensingreach this cap in order to facilitate U.S. exports to China. While this agreement appears positive for the industry, there is no guarantee that the agreement will be fully implemented, nor is there a guarantee that exports to China return to pre-tariff levels.

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We also sell modified wet distillers’ grains, which has a much smaller, more local market and makes the timing of its sale critical. Further, because of its moisture content, the modified wet distillers’ grains are heavier and more difficult to handle. The customer must be close enough to justify the additional handling and shipping costs. As a result, modified wet distillers’ grains are principally sold only to local feedlots and livestock operations.

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Various factors affect the price of distillers’ grain, including, among others, the price of corn, soybean meal and other alternative feed products, the performance or value of distillers’ grains in a particular feed market, and the supply and demand within the market.  Like other commodities, the price of distillers’ grains can fluctuate significantly.foreseeable future.

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Corn Oil MarketsCompensation Committee Report

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Our corn oil is primarily soldThe following report of the compensation committee shall not be deemed to diesel manufacturersbe “filed” with the Securities and Exchange Commission, nor shall such information be incorporated by reference into any future filing under the Securities Act of 1933, as amended, or the 1934 Securities Exchange Act, as amended, except to a lesserthe extent feed lotthat we specifically incorporate it by reference in such filing.

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The executive board has reviewed and poultry markets. We generally transport our corn oil by truck to users located primarilydiscussed the foregoing Compensation Discussion and Analysis with management.  Based upon this review and discussion, the Board determined that the Compensation Discussion and Analysis should be included in the upper Midwest.this Amendment.

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Distribution of Principal ProductsSummary Compensation Table

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GFE’s ethanol plant is located near Granite Falls, Minnesota, in Chippewa County.  It is servedThe following table sets forth all compensation paid or payable by the TC&W Railway which provides connectionCompany to our executive officers during the Canadian Pacificfiscal years ended October 31, 2021, 2020, and Burlington Northern Santa Fe Railroads. The completion2019, respectively.  As of February 28, 2021, none of our rail loop during our 2012 fiscal year enables usofficers had any options, warrants, or other similar rights to load unit trains.  Our site is in close proximity to major highways that connect to major population centers such as Minneapolis, Minnesota; Chicago, Illinois; and Detroit, Michigan.purchase securities of the Company.

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HLBE’s ethanol plant is located near Heron Lake, Minnesota. It is served by the Union Pacific Railroad. HLBE’s site is also in close proximity to major highways that connect to major population centers such as Minneapolis, Minnesota; Chicago, Illinois; and Detroit, Michigan.

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Ethanol Distribution

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Eco-Energy is the ethanol marketer for both the GFE plant and HLBE plant. Pursuant to our marketing agreements, Eco-Energy purchases and markets the entire ethanol output of GFE’s and HLBE’s ethanol plants.  Under GFE’s ethanol marketing agreement, GFE is responsible for securing all of the rail cars necessary for the transport of ethanol by rail except for 59 rail cars leased to GFE by Eco-Energy. Under HLBE’s ethanol marketing agreement, Eco-Energy arranges for the transportation of HLBE’s ethanol. GFE and HLBE pay Eco-Energy a marketing fee per gallon of ethanol sold, as well as a fixed lease fee for rail cars leased from Eco-Energy. The marketing fee and timing of payments by Eco-Energy were negotiated based on prevailing market-rate conditions for comparable ethanol marketing services. Our marketing contracts were amended for an effective date of January 1, 2022, and an expiration date of December 31, 2023. The contracts will automatically renew for an additional two years unless either party gives written 90-day notice.

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Distillers’ Grains Distribution

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RPMG, Inc. (“RPMG”) is the distillers’ grains marketer for our Granite Falls plant.  Pursuant to GFE’s distillers’ grains marketing agreement, RPMG markets all the distillers’ grains produced at the Granite Falls plant. The contract commenced on February 1, 2011, with an initial term of one year, and will continue in effect until terminated by either party at its unqualified option, by providing written notice of not less than 90 days to the other party.​

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Gavilon Ingredients, LLC (“Gavilon”) is the distillers’ grains marketer for HLBE. Under HLBE’s distillers’ grains marketing agreement, Gavilon purchases all of the distillers’ grains produced at our Heron Lake ethanol plant in exchange for a service fee. The contract commenced on November 1, 2013 with an initial term of six months, and will continue to remain in effect until terminated by either party at its unqualified option, by providing written notice of not less than 60 days to the other party.​

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GOVERNOR COMPENSATION

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Corn Oil DistributionWe do not provide our governors with any equity or equity option awards, nor any non-equity incentive payments or deferred compensation.  Similarly, we do not provide our governors with any other perquisites, “gross-ups,” defined contribution plans, consulting fees, life insurance premium payments or otherwise.

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RPMG isOur governor compensation policy was approved by our Board in October 2021. The current governor compensation policy provides that each governor receives a monthly stipend of $1,750 per Board meeting attended in-person plus an additional $300 per Board meeting for meeting participation whether attended in person or by conference call.  The following amounts are also paid to governors for specified services: (i) the corn oil marketerChairman and Secretary of the Board are paid $600 per month, and (ii) members of the audit committee are paid $1,250 per quarter (with no additional per-meeting compensation). Additionally, we also pay $300 for both the GFE plantcommittee meetings or other additional meetings (excluding audit committee meetings) of greater than four hours in length; and the HLBE plant.  Currently, RPMG markets our corn oil, which is used primarily as a biodiesel feedstock and as a supplement$150 for animal feed.  We pay RPMG a commission based on each pound of corn oil sold by RPMG under these marketing agreements. The contract for GFE commenced on April 29, 2010, and the contract for HLBE commenced on November 1, 2013. Both contracts have an initial term of one year, and will continue in effect until terminated by either party at its unqualified option, by providing written notice of notattending committee meetings or other additional meetings (excluding audit committee meetings) less than 90 days to the other party.

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Dependence on One or a Few Major Customers

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As discussed above, we have exclusive ethanol marketing agreements with Eco-Energy. Additionally, we have agreements with RPMG and Gavilon to market all of the distillers’ grains produced at GFE’s plant and HLBE’s plant, respectively, and with RPMG to market all of the corn oil produced at our plants. We rely on Eco-Energy, RPMG and Gavilon for the sale and distribution of all of our products; therefore, we are highly dependent on Eco-Energy, RPMG and Gavilon for the successful marketing of our products. Any loss of these companies as our marketing agents for our ethanol, distillers’ grains, or corn oil could have a negative impact on our revenues.

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Seasonality of Ethanol Sales

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We experience some seasonality of demand for our ethanol. Since ethanol is predominantly blended with conventional gasoline for usefour hours 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.  In addition, we experience some increased ethanol demand during holiday seasons related to increased gasoline demand.

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Pricing of Corn and Ethanol

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We expect that ethanol sales will represent our primary revenue source and corn will represent our primary component of cost of goods sold.  Therefore, changes in the price at which we can sell the ethanol we produce and the price at which we buy corn for our ethanol plants present significant operational risks inherent in our business. Trends in ethanol prices and corn prices are subject to a number of factors and are difficult to predict.length.

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The price and availabilityfollowing table sets forth all compensation paid or payable by the Company to our governors during the fiscal year ended October 31, 2021. As of corn is subjectFebruary 28, 2022, none of our officers had any options, warrants, or other similar rights to significant fluctuations depending upon a number of factors that affect commodity prices in general, including crop conditions, yields, domestic and global stocks, weather, federal policy and foreign trade. With the volatilitypurchase securities of the weather and commodity markets, we cannot predict the future price of corn. Historically, ethanol prices have tended to correlate with corn prices, wholesale gasoline prices, with demand for and the price of ethanol increasing as supplies of petroleum decreased or appeared to be threatened, crude oil prices increased and wholesale gasoline prices increased. However, the prices of both ethanol and corn do not always follow historical trends.  Company.

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If a period of high corn prices were to be sustained for some time, such pricing may reduce our ability to operate profitably because of the higher cost of operating our plants.  Corn prices increased significantly during the 12 months ended October 31, 2021, due in part to the improved domestic economy, increased demand from China, and drought in South America’s corn-growing regions. Because the market price of ethanol is not directly related to corn prices, we, like most ethanol producers, are not able to compensate for increases in the cost of corn through adjustments in our prices for our ethanol although we do tend to see increases in the prices of our distillers’ grains during times of higher corn prices. Given that ethanol sales comprise a majority of our revenues, our inability to adjust our ethanol prices can result in a negative impact on our profitability during periods of high corn prices.

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Ethanol prices were higher during fiscal year 2021 compared to fiscal year 2020.  The increase in ethanol prices was due primarily to the rebound in demand for transportation fuel as the effects of the COVID-19 pandemic subsided. Management expects demand and prices for ethanol to be volatile in 2022, with factors including, but not limited​

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Committees of Contents

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of our production of ethanol. The risk management committee consists of Jeffrey Oestmann, our chief executive officer, and Eric Baukol, our risk manager.

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Board and Committee Meetings and Governor Attendance

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The Board generally meets once per month.  The Board held twelve regularly scheduled meetings during the fiscal year ended October 31, 2021.  In addition, the audit committee held four meetings, the compensation committee held two meetings, the risk management committee held twelve meetings, and the nominating committee held two meetings.  Each incumbent governor attended 75% or more of the meetings of the Board and Board committees on which such governor served during fiscal year 2021.  

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Natural Gas

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Natural gasAs provided in the current Operating and Member Control Agreement, the alternate governor attends meetings of the Board, and if any elected governor is not available for, or during any part of, a significant inputmeeting of the Board or to take action in writing in lieu of such a meeting, the alternate governor is entitled to act in the stead of such elected governor at such meeting, or during such part, or to take such action in writing (but only on behalf of one elected governor, if more than one is unavailable).  Mr. Seifert, our manufacturing process. The costalternate governor, attended all Board meetings, and due to the absence of natural gas represented approximately 4.5% and 5.2%various elected governors, participated in two meetings of our costthe board of goods sold forgovernors during the yearsfiscal year ended October 31, 2021, and 2020, respectively.as a voting member of the board.

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The Board does not have a policy with regard to governors’ attendance at annual meetings. Last year, all of our governors attended the Company’s annual meeting. Due to this high attendance record, it is the view of the Board that such a policy is unnecessary.

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We do not anticipate any problems securing the natural gas we require to continue to operate our plants at capacity during our 2021 fiscal year or beyond.  At GFE’s plant, we pay Center Point Energy/Minnegasco a per unit fee to move the natural gas through the pipeline, and we have guaranteed to move a minimum of 1,500,000 MMBTU annually through December 31, 2025, which is the ending date of the agreement.  GFE also has an agreement with Kinetic Energy Group.  On our behalf, Kinetic Energy Group procures contracts with various natural gas vendors to supply the natural gas necessary to operate the GFE plant.  We determined that sourcing our natural gas from a variety of vendors is more cost-efficient than using an exclusive supplier.Board’s Role In Risk Oversight

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HLBE has a facilities agreement with Northern Border PipelineAlthough management is responsible for the day-to-day management of risks to the Company, which allows HLBE to access an existing interstate natural gas pipeline located approximately 16 miles north from its plant.  HLBE has entered into a firm natural gas transportation agreement with its indirectly wholly owned subsidiary, Agrinatural.  Under the termsour full Board is actively involved in providing broad oversight of the firm natural gas transportation agreement, AgrinaturalCompany’s risk management programs. In this oversight role, our Board is responsible for satisfying itself that the risk management processes designed and implemented by the Company’s management are functioning and that the systems and processes in place will provide natural gasbring to its attention the HLBE plant with a specified price per MMBTU for a term ending on October 31, 2021, with an automatic renewal option for an additional five year period.  HLBE also has a base agreement formaterial risks facing the sale and purchaseCompany to permit the Board to effectively oversee the management of natural gas with Constellation NewEnergy—Gas Division, LLC (“Constellation”). HLBE buys all of its natural gas from Constellation and this agreement runs through March 31, 2022.these risks.

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A fundamental part of risk management is not only understanding the risks a company faces and what steps management is taking to manage those risks, but also understanding what level of risk is appropriate for the Company.  The prices for and availabilityinvolvement 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 disruptionsfull Board in the supplyrisk oversight process allows our Board to assess management’s appetite for risk and also determine what constitutes an appropriate level of natural gas could impair our abilityrisk for the Company.  Our Board regularly includes agenda items at its meetings relating to manufacture ethanolits risk oversight role and more significantly, dried 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 resultsmeets with various members of management on a range of topics, including corporate governance and regulatory obligations, operations and financial condition.significant transactions, business continuity planning, succession planning, risk management, insurance, pending and threatened litigation and significant commercial disputes.

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Electricity

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Our plants require a continuous supplyWhile our Board provides broad oversight of electricity.  We have agreementsthe Company’s risk management processes, various committees of the Board oversee risk management in place to supply electricitytheir respective areas and regularly report on their activities to our plants.full Board.  Principally, the risk management committee assists our Board in identifying and quantifying methods of mitigating or eliminating risk, principally those relating to commodity prices. Our GFE plant obtains electricity from Minnesota Valley Lightaudit committee focuses on assessing and Power Cooperative,mitigating financial risk, including internal controls over financial reporting. Our three-member executive board, functioning as our compensation committee, oversees risks and our HLBE plant obtains electricity from Federated Rural Electric. We do not anticipate any problems securingrelevant risk controls related to the electricity that we requireCompany’s compensation policies, programs and procedures, including the incentives they create, to continue to operate our plants at capacity during our 2022 fiscal year or beyond.

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Waterencourage a level of risk-taking behavior consistent with the Company’s business strategy.

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We do not anticipate any problems securingbelieve the waterdivision of risk management responsibilities described above is an effective approach for addressing the risks facing the Company and that we require to continue to operate our plants at capacity during our 2022 fiscal year or beyond. GFE obtains the water necessary to operate its plant from the Minnesota River with an adjustable gravity-flow intake system.

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HLBE obtains its water pursuant to an industrial water supply agreement with the City of Heron LakeBoard leadership structure provides appropriate checks and Jackson County, Minnesota.balances against undue risk taking.

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Risk Management and HedgingMember Communications with Our Directors

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The profitabilityBoard does not have a formalized process for holders of membership units to send communications to the Board.  The Board feels this is reasonable given the accessibility of our operations is highly dependentgovernors. Members desiring to communicate with the Board are free to do so by contacting a governor via our website, fax, phone or in writing to the Company’s principal office at 15045 Highway 23 S.E., Granite Falls, Minnesota, 56241-0216.  The Company will provide a copy of each such writing to the directed governor or to all governors if directed to the Board generally.  The names of our governors are set forth above and are listed on the impact of market fluctuations associated with commodity prices.  We use various derivative instruments as part of an overall strategy to manage market risk and to reduce the risk that our ethanol production will become unprofitable when market prices among our principal commodities and products do not correlate.  Company’s website at www.granitefallsenergy.com.

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In order to mitigate our commodity and product price risks, we enter into hedging transactions, including forward corn, ethanol, distillers’ grains and natural gas contracts, in an attempt to partially offset the effects of price volatility for

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Hedging arrangements expose us to the risk of financial loss in situations where the counterparty to the hedging contract defaults or, in the case of exchange-traded contracts, where there is a change in the expected differential between the price of the commodity underlying the hedging agreement and the actual prices paid or received by us for the physical commodity bought or sold.  There are also situations where the hedging transactions themselves may result in losses, as when a position is purchased in a declining market or a position is sold in a rising market. Hedging losses may be offset by a decreased cash price for corn and natural gas and an increased cash price for ethanol and distillers’ grains.

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We have established a risk management committee which assists the board and our risk manager to, among other things, establish appropriate policies and strategies for hedging and enterprise risk. We continually monitor and manage our commodity risk exposure and our hedging transactions as part of our overall risk management policy.  As a result, we may vary the amount of hedging or other risk mitigation strategies we undertake, and we may choose not to engage in hedging transactions.  Our ability to hedge is always subject to our liquidity and available capital.

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Process Improvement

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We are continually working to develop new methods of operating the ethanol plants more efficiently.  We continue to conduct process improvement activities in order to realize these efficiency improvements.

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Patents, Trademarks, Licenses, Franchises and Concessions

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

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CompetitionSECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

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Ethanol CompetitionThe following table provides certain information as of February 28, 2022, with respect to the unit ownership of: (i) those persons or groups (as that term is used in Section 13(d)(3) of the Securities Exchange Act of 1934, as amended ) who beneficially own more than beneficial owners owning or holding 5% or more of our outstanding units; (ii) each governor of the Company, (iii) each named executive officer of the Company (as defined in the “Summary Compensation Table” below); and (iv) all officers and governors as a group.  Except as noted below, the persons listed below possess sole voting and investment power over their respective units. No family relationships exist among our governors and executive officers. The Company is not aware of any arrangements, including any pledge by any person of the Company’s units, the operation of which would result in a change in control of the Company. The Company does not have any equity compensation plans.

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Domestic Competition

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We sell our ethanol in a highly competitive market.  Ethanol is a commodity product where competition in the industry is predominantly based on price. On a national scale, we are in direct competition with numerous other ethanol producers.  According to the Renewable Fuels Association (“RFA”), there are approximately 210 biorefineries with a total nameplate capacity of approximately 17.4 billion gallons of ethanol per year, with two additional plants under expansion or construction with capacity to produce an additional 26 million gallons.  

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The following table identifies the top five largest ethanol producers in the U.S. along with their production capacities.

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Source: Renewable Fuels Association

(1)

The address for all governors and named executive officers is the Company’s principal executive offices located at 15045 Highway 23 SE, Granite Falls, Minnesota.

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Each of the large ethanol producers above are capable of producing significantly more ethanol than we produce. These producers and other large producers are, among other things, capable of producing a significantly greater amount of ethanol or have multiple ethanol plants that may help them achieve certain benefits that we could not achieve with one ethanol plant. This could put us at a competitive disadvantage to other ethanol producers.

(2)

In accordance with Rule 13d-3 under the Securities Exchange Act of 1934, a person is deemed to be the beneficial owner for purposes of this table, of any units if he has shared voting or investment power with respect to such security, or has a right to acquire beneficial ownership at any time within 60 days from the date as of which beneficial ownership is being determined.  As used herein, “voting power” is the power to vote or direct the voting of units and “investment power” is the power to dispose or direct the disposition of units, and includes all units held directly as well as by spouses and minor children, in trust and other indirect ownership, over which units the named individuals effectively exercise sole or shared voting or investment power.

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Larger ethanol producers may have an advantage over us from economies of scale and stronger negotiating positions with purchasers.  Many large producers own multiple ethanol plants and may have flexibility to run certain facilities while shutting or slowing down production at their other facilities. This added flexibility may allow these producers to compete more effectively, especially during periods when operating margins are unfavorable in the ethanol industry. Some large producers own ethanol plants in geographically diverse areas of the U.S. and as result, may be able to more effectively spread the risk they encounter related to feedstock prices. Some of our competitors are owned by subsidiaries of larger oil companies, such as Valero Renewable Fuels and POET Biorefining. Because their parent oil companies are required to blend a certain amount of ethanol each year, these competitors may be able to operate their ethanol production facilities at times when it is unprofitable for us to operate our ethanol plant. Further, new products or methods of ethanol production developed by larger and better-financed competitors could provide them competitive advantages over us and harm our business.

(3)

The percentages in the table are based on 30,606 Units issued and outstanding as of February 28, 2022.

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Local Competition

(4)

Includes 287 units owned directly through Dean J. Buesing Revocable Living Trust and 348 units owned indirectly through Barbara J. Buesing Revocable Living Trust with his wife.  550 of these units are pledged as security.

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A majority of the U.S. ethanol plants, and therefore, the greatest number of gallons of ethanol production capacity, are concentrated in the corn-producing states of Iowa, Nebraska, Illinois, Indiana, Minnesota, South Dakota, Ohio, Wisconsin, Kansas, and North Dakota.  According to the RFA, Minnesota is one of the top producers of ethanol in the U.S. with 19 ethanol plants producing an aggregate of approximately 1.4 billion gallons of ethanol per year.Therefore, we face increased regional and local competition because of the location of our ethanol plant.  

(5)

Includes 20 units owned by the Enstad Brothers Partnership and 5 units owned by the Enstad Family Partnership. Mr. Enstad is a partner of both entities.

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Eco-Energy markets our ethanol primarily on a regional and national basis. We compete with other ethanol producers both for markets in Minnesota and markets in other states. We believe that we are able to reach the best available markets through the use of our experienced marketer and by the rail delivery methods we use. We believe that we can compete favorably with other ethanol producers due to our proximity to ample grain, natural gas, electricity and water supplies at favorable prices.

(6)

Includes 10 units owned jointly with Mr. Forkrud’s spouse.

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International Competition

(7)

Includes 5 units owned jointly with Ms. Schuler’s spouse.

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In addition to intense competition with domestic producers of ethanol, we have faced increased competition from ethanol produced in foreign countries. Depending on feedstock prices, ethanol imported from foreign countries may be less expensive than domestically-produced ethanol.  However, foreign demand, transportation costs and infrastructure constraints may temper the market impact on the United States. Ethanol imports have been lower in recent years and ethanol exports have been higher. However, if demand for imported ethanol were to increase again, demand for domestic ethanol may be reduced, which could lead to lower domestic prices and lower operating margins. Large international companies with much greater resources than ours have developed, or are developing, increased foreign ethanol production capacities. Many international suppliers produce ethanol primarily from inputs other than corn, such as sugar cane, and have cost structures that may be substantially lower than U.S. based ethanol producers including us. Many of these international suppliers are companies with much greater resources than us with greater production capacities.

(8)

Includes 100 units owned jointly with Mr. Wilkison’s spouse.

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Alternative Fuels and Other Fuel Additives Competition

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Alternative fuels and alternative ethanol production methods are continually under development. New ethanol products or methods of ethanol production developed by larger and better-financed competitors could provide them competitive advantages over us and harm our business.

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We anticipate increased competition from renewable fuels that do not use corn as the feedstock. Many of the current ethanol production incentives are designed to encourage the production of renewable fuels using raw materials other than corn. One type of ethanol production feedstock that is being explored is cellulose. Cellulose is found in wood chips, corn stalks and rice straw, amongst other common plants. Several companies and researchers have commenced pilot projects to study the feasibility of commercially producing cellulosic ethanol.

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October 31, 2021, due primarily to the fact that the effects of the COVID-19 pandemic subsided in the fiscal year 2021, resulting in increased demand for transportation fuel, including the ethanol we produce. While demand for transportation fuel has increased, it is possible that new coronavirus variants, additional government lockdowns, or other factors could reduce demand for transportation fuel and thereby decrease the price of the ethanol we produce. Additionally, the continued issuance hardship exemptions from the RVOs may further decrease domestic demand for ethanol. Management believes that the ethanol outlook will remain volatile in the fiscal year 2022.  Governor Independence Standards

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Exports of ethanol decreased slightlyOur securities are not listed on a national securities exchange or in our fiscal year 2021, after increasing slightly eachan inter-dealer quotation system that requires that a majority of the previous two fiscal years. Board be independent. However, we use the independence standards set forth by the SEC and NASDAQExport demand for ethanol is less consistent compared to domestic demand which can lead to ethanol price volatility. The decrease in ethanol exports is due to various factors, including a decrease in trading with Brazil, which had been oneevaluate the independence of the top two largest importers of U.S. ethanol, due to the expiration of a Brazilian import quota. The USDA projects that U.S. ethanol exports will increase slightly in 2022 due to both volume and price gains due, in part, to increased renewable fuel blending requirements in the United Kingdom, India, and other nations.our Board. 

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On September 1, 2017, Brazil’s ChamberIn determining independence, the Board reviews whether governors have any material relationship with the Company taking into consideration the following factors: (i) the business relationships of Foreign Trade imposedour directors; (ii) positions our directors hold with other companies; (iii) family relationships between our directors and other individuals involved with the Company; (iv) transactions between our directors and the Company; and (v) compensation arrangements between our directors and the Company. An independent governor must not have any material relationship with the Company, directly or indirectly as a 20% tariff on U.S. ethanol importspartner, shareholder, or officer of an organization that has a relationship with the Company, or any relationship that would interfere with the exercise of independent judgment in excesscarrying out the responsibilities of 150 million liters, or 39.6 million gallons, per quarter. The tariff was renewed in September 2019, but the import quota was raised to 187.5 million liters, or 49.5 million gallons, per quarter. In December 2020, the import quota expired, thereby subjecting all Brazilian imports of U.S. ethanol to a 20% tariff. These tariffs have had and will likely continue to have a negative impact on the export market demand and prices for ethanol produced in the United States. Any decrease in U.S. ethanol exports could adversely impact the market price of ethanol unless domestic demand increases or additional foreign markets are developed.governor.

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U.S. ethanol exportsThe Board undertook a review of governor independence in February 2022 as to China increased duringall of the 2021 fiscal year, followinggovernors then serving. As a result of its review, the executionboard of governors affirmatively determined that each of Ms. Larson and Messrs. Bergquist, Wilkison, Forkrud, LaVigne, Seifert, and Spaude are independent according to the “independence” definition of the NASDAQ Listing Rules. The Board made the determination that each of Messrs. Buesing, Enstad, and Johnson are not “independent” because they sold a “phase one” trade agreement with China. The agreement, signed by former President Donald Trump on January 15, 2020, includes a commitment by Chinasignificant amount of grain to purchase agricultural products, including ethanol, over the course of two years.  There is, however, no guarantee that exports of ethanol to China will continue or increase.  Additionally, the imposition of tariffs and duties on ethanol imported from the U.S., as well as increased production of ethanol and similar fuels in other countries, can also negatively impact domestic export demand.

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Corn prices increased significantlyus in fiscal year 2021, due in part toas discussed above under the improved domestic economy as well as increased demand from Chinasection titled “Certain Relationships and drought in South America’s corn-growing regions. Corn prices remained above $5 per bushel for most of the year and peaked above $7 per bushel in May 2021.