UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q



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

	For the quarterly period ended June 30, ~~2016~~2017

	OR

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

	For the transition period from to .

	COMMISSION FILE NUMBER 000-52033

RED TRAIL ENERGY, LLC

(Exact name of registrant as specified in its charter)



North Dakota				76-0742311
(State or other jurisdiction of incorporation or organization)				(I.R.S. Employer Identification No.)

3682 Highway 8 South, P.O. Box 11, Richardton, ND 58652
(Address of principal executive offices)

(701) 974-3308
(Registrant's telephone number, including area code)

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 o No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files).

x Yes o No

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



Large Accelerated Filer o	Accelerated Filer o
Non-Accelerated Filer x	Smaller Reporting Company o
	Emerging Growth Company o
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. o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

o Yes x No

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date:

As of August ~~11, 2016~~14, 2017, there were ~~40,148,160~~41,466,340 Class A Membership Units outstanding.

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INDEX

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PART I FINANCIAL INFORMATION

Item 1. Financial Statements

RED TRAIL ENERGY, LLC

Condensed Balance Sheets


ASSETS	June 30, 2016		September 30, 2015		June 30, 2017		September 30, 2016
	(Unaudited)				(Unaudited)
Current Assets
Cash and equivalents	$	3,100	$	5,090,662	$	15,889,129	$	10,274,166
Restricted cash - margin account	6,607,996		2,179,011		3,935,804		2,661,331
Accounts receivable, primarily related party	2,834,560		2,228,150		4,219,682		3,639,317
Other receivables	—		1,790,770		—		64,872
Commodities derivative instruments, at fair value	618,871		—
Inventory	11,103,162		11,692,322		15,933,705		7,983,906
Prepaid expenses	83,265		70,481		70,982		57,812
Total current assets	21,250,954		23,051,396		40,049,302		24,681,404

Property, Plant and Equipment
Land	836,428		836,428		1,342,381		836,428
Land improvements	4,127,372		4,127,372		4,266,953		4,266,953
Buildings	7,823,859		7,807,148		8,036,031		7,836,031
Plant and equipment	82,541,010		82,500,249		86,087,586		83,243,945
Construction in progress	501,221		89,453		720,612		4,800
	95,829,890		95,360,650		100,453,563		96,188,157
Less accumulated depreciation	47,818,550		44,420,567		52,470,254		48,963,454
Net property, plant and equipment	48,011,340		50,940,083		47,983,309		47,224,703

Other Assets
Debt issuance costs, net of amortization	14,316		27,879
Investment in RPMG	605,000		605,000		605,000		605,000
Patronage equity	2,911,114		2,902,908		3,042,895		3,040,304
Deposits	40,000		40,000		40,000		40,000
Total other assets	3,570,430		3,575,787		3,687,895		3,685,304

Total Assets	$	72,832,724	$	77,567,266	$	91,720,506	$	75,591,411

Notes to Unaudited Condensed Financial Statements are an integral part of this Statement.

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RED TRAIL ENERGY, LLC

Condensed Balance Sheets


LIABILITIES AND MEMBERS' EQUITY	June 30, 2016		September 30, 2015		June 30, 2017		September 30, 2016
	(Unaudited)				(Unaudited)
Current Liabilities
Disbursements in excess of bank balances	$	259,126	$	—
Accounts payable	1,248,227		2,676,888		$	21,086,907	$	2,187,886
Accrued expenses	4,700,605		2,946,772		976,934		5,452,506
Commodities derivative instruments, at fair value (see note 2)	—		279,362		126,650		215,700
Accrued loss on firm purchase commitments (see note 7)	50,000		61,000		—		74,000
Current maturities of long-term debt	2,592		3,976,681
Current maturities of notes payable					2,612		2,597
Total current liabilities	6,260,550		9,940,703		22,193,103		7,932,689

Long-Term Liabilities
Notes payable	6,189		1,862,246		3,577		5,538
Total long-term liabilities	6,189		1,862,246

Members’ Equity (40,148,160 Class A Membership Units issued and outstanding)	66,565,985		65,764,317
Members’ Equity (41,466,340 and 40,148,160 as of June 30, 2017 and September 30, 2016, respectively, of Class A Membership Units issued and outstanding)					69,523,826		67,653,184

Total Liabilities and Members’ Equity	$	72,832,724	$	77,567,266	$	91,720,506	$	75,591,411

Notes to Unaudited Condensed Financial Statements are an integral part of this Statement.

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RED TRAIL ENERGY, LLC

Condensed Statements of Operations (Unaudited)


	Three Months Ended		Three Months Ended			Nine Months Ended			Nine Months Ended
	June 30, 2016		June 30, 2015			June 30, 2016			June 30, 2015			Three Months Ended			Three Months Ended		Nine Months Ended			Nine Months Ended
	(Unaudited)		(Unaudited)			(Unaudited)			(Unaudited)			June 30, 2017			June 30, 2016		June 30, 2017			June 30, 2016
Revenues, primarily related party	$	26,789,485	$	28,571,787		$	78,245,021		$	75,175,964		$	28,536,654		$	26,789,485	$	85,616,060		$	78,245,021

Cost of Goods Sold
Cost of goods sold	22,792,677		28,297,296			71,453,566			71,175,753			26,132,798			22,792,677		80,146,245			71,453,566
Lower of cost or market inventory adjustment	—		—			583,392			304,439			—			—		—			583,392
Loss on firm purchase commitments	50,000		—			50,000			46,000			—			50,000		—			50,000
Total Cost of Goods Sold	22,842,677		28,297,296			72,086,958			71,526,192			26,132,798			22,842,677		80,146,245			72,086,958

Gross Profit	3,946,808		274,491			6,158,063			3,649,772			2,403,856			3,946,808		5,469,815			6,158,063

General and Administrative Expenses	654,063		471,269			1,904,987			1,604,322			565,397			654,063		2,004,142			1,904,987

Operating Income (Loss)	3,292,745		(196,778		)	4,253,076			2,045,450
Operating Income												1,838,459			3,292,745		3,465,673			4,253,076

Other Income (Expense)
Interest income	17,696		6,139			38,844			3,390			37,297			17,696		80,275			38,844
Other income	15,473		281,269			636,357			1,563,917			25,277			15,473		664,009			636,357
Interest expense	—		(78,643		)	(114,567		)	(279,036		)	(12		)	—		(41		)	(114,567		)
Total other income (expense), net	33,169		208,765			560,634			1,288,271			62,562			33,169		744,243			560,634

Net Income	$	3,325,914	$	11,987		$	4,813,710		$	3,333,721		$	1,901,021		$	3,325,914	$	4,209,916		$	4,813,710

Weighted Average Units Outstanding
Basic	40,148,160		40,148,160			40,148,160			40,148,160			41,466,340			40,148,160		41,451,005			40,148,160

Diluted	40,148,160		40,148,160			40,148,160			40,148,160			41,466,340			40,148,160		41,451,005			40,148,160

Net Income Per Unit
Basic	$	0.08	$	—		$	0.12		$	0.08		$	0.05		$	0.08	$	0.10		$	0.12

Diluted	$	0.08	$	—		$	0.12		$	0.08		$	0.05		$	0.08	$	0.10		$	0.12

Notes to Unaudited Condensed Financial Statements are an integral part of this Statement.

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RED TRAIL ENERGY, LLC

Condensed Statements of Cash Flows(Unaudited)


	Nine Months Ended			Nine Months Ended			Nine Months Ended			Nine Months Ended
	June 30, 2016			June 30, 2015			June 30, 2017			June 30, 2016
Cash Flows from Operating Activities	(Unaudited)			(Unaudited)
Net income	$	4,813,710		$	3,333,721		$	4,209,916		$	4,813,710
Adjustments to reconcile net income to net cash provided by (used in) operating activities:
Depreciation and amortization	3,411,547			3,253,323			3,506,800			3,411,547
Change in fair value of derivative instruments	(898,234		)	6,925,183			(89,050		)	(898,234		)
Lower of cost or market inventory adjustment	(583,392		)	(304,439		)	—			(583,392		)
Loss on firm purchase commitments	50,000			497,000			—			50,000
Noncash patronage equity	(8,207		)	(149,074		)	(2,591		)	(8,207		)
Change in operating assets and liabilities:
Restricted cash	(4,428,984		)	(2,807,371		)	(1,274,474		)	(4,428,984		)
Accounts receivable	(606,410		)	(3,523,554		)	(580,365		)	(606,410		)
Other receivables	1,790,770			555,621			64,872			1,790,770
Inventory	1,122,552			(2,499,856		)	(7,949,799		)	1,122,552
Prepaid expenses	(12,784		)	(17,327		)	(13,170		)	(12,784		)
Accounts payable	(1,169,535		)	(1,573,186		)	18,899,021			(1,169,535		)
Accrued expenses	1,753,833			(626,731		)	(4,475,572		)	1,753,833
Accrued purchase commitment losses	(11,000		)	(2,773,000		)	(74,000		)	(11,000		)
Net cash provided by operating activities	5,223,866			290,310			12,221,588			5,223,866

Cash Flows from Investing Activities
Capital expenditures	(469,240		)	(3,577,678		)	(945,406		)	(469,240		)
Net cash (used in) investing activities	(469,240		)	(3,577,678		)	(945,406		)	(469,240		)

Cash Flows from Financing Activities
Dividends paid	(4,012,042		)	(8,034,723		)	(4,977,453		)	(4,012,042		)
Unit repurchase							(681,820		)	—
Debt repayments	(5,830,146		)	(8,801,311		)	(1,946		)	(5,830,146		)
Net cash (used in) financing activities	(9,842,188		)	(16,836,034		)	(5,661,219		)	(9,842,188		)

Net (Decrease) in Cash and Equivalents	(5,087,562		)	(20,123,402		)
Net Increase (Decrease) in Cash and Equivalents							5,614,963			(5,087,562		)
Cash and Equivalents - Beginning of Period	5,090,662			21,952,259			10,274,166			5,090,662
Cash and Equivalents - End of Period	$	3,100		$	1,828,857		$	15,889,129		$	3,100

Supplemental Disclosure of Cash Flow Information
Interest paid	$	138,570		$	299,240		$	41		$	138,570
Units issued in exchange for property							$	3,320,000		$	—

Notes to Unaudited Condensed Financial Statements are an integral part of this Statement.

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RED TRAIL ENERGY, LLC

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED JUNE 30, ~~2016~~2017

The accompanying condensed unaudited financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted as permitted by such rules and regulations. These financial statements and related notes should be read in conjunction with the financial statements and notes thereto included in the Company's audited financial statements for the fiscal year ended September 30, ~~2015,~~2016, contained in the Company's Annual Report on Form 10-K.

In the opinion of management, the interim condensed unaudited financial statements reflect all adjustments considered necessary for fair presentation. The adjustments made to these statements consist only of normal recurring adjustments. Operating results for the periods presented are not necessarily indicative of the results that may be expected for the fiscal year ending September 30, ~~2016.~~2017.

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Business

Red Trail Energy, LLC, a North Dakota limited liability company (the “Company”), owns and operates a 50 million gallon annual name-plate production ethanol plant near Richardton, North Dakota (the “Plant”).

Accounting Estimates

Management uses estimates and assumptions in preparing these financial statements in accordance with generally accepted accounting principles. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities and the reported revenues and expenses. Significant items subject to such estimates and assumptions include the useful lives of property, plant and equipment, inventory and allowance for doubtful accounts. Actual results could differ from those estimates.

Net Income Per Unit

Net income per unit is calculated on a basic and fully diluted basis using the weighted average units outstanding during the period.

Recently Issued Accounting Pronouncements

Revenue from Contracts with Customers

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers” which supersedes the guidance in “Revenue Recognition (Topic 605)” and requires entities to recognize revenue in a way that depicts the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled to in exchange for those goods or services. ASU 2014-09 is effective for annual reporting periods beginning after December 15, 2017, including interim periods within that reporting period and is to be applied retrospectively, with early application not permitted. ~~We are evaluating~~The Company has evaluated the new standard ~~but do~~and anticipates a change in the reporting of revenue as enhanced disclosures will be required. The Company does not ~~at this time expect this standard to have~~anticipate a ~~material~~significant impact on our ~~consolidated~~ financial ~~statements.~~statements due to the nature of our revenue streams and our revenue recognition policy.

Simplifying the Measurement of Inventory

In July 2015, the FASB issued ASU No. 2015-11, "Simplifying the Measurements of Inventory" regarding inventory that is measured using the first-in, first-out or average cost method. The guidance does not apply to inventory measured using the last-in, first-out or the retail inventory method. The guidance requires inventory within its scope to be measured at the lower of cost or net realizable value, which is the estimated selling price in the normal course of business less reasonable predictable costs of completion, disposal and transportation. These amendments more closely align GAAP with International Financial Reporting Standards (IFRS). ASU 2015-11 is effective for ~~fiscal years~~annual reporting periods beginning after December 15, 2016, including interim periods within ~~those fiscal years,~~that reporting period, and should be applied prospectively with early adoption permitted as of the beginning of an interim or annual reporting period. ~~We are evaluating~~The Company has evaluated the new standard ~~but do not at this time expect this standard~~and anticipates no significant impact to ~~have a material impact on~~ our ~~consolidated~~ financial ~~statements.~~

statements due to the current inventory measurement policy.

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RED TRAIL ENERGY, LLC

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED JUNE 30, ~~2016~~2017

Lease Accounting Standards

In February 2016, the FASB issued ASU No. 2016-02, "Leases (topic 842)" which requires a lessee to recognize a right to use asset and a lease liability on its balance sheet for all leases with terms of twelve months or greater. This guidance is effective for fiscal years beginning after December 15, 2018, included interim periods within those years with early adoption permitted. The Company has evaluated the new standard and expects it will have a material impact on the financial statements as we will have to begin capitalizing leases on the balance sheet when the new standard is implemented. See note 6 for current operating lease commitments.

Statement of Cash Flows; Restricted Cash

In November 2016, the FASB issued ASU No. 2016-18, "Statement of Cash Flows (Topic 230): Restricted Cash" which requires that a statement of cash flows explain the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. Therefore, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. ASU No. 2016-18 is effective for annal periods beginning after December 15, 2017, and interim periods within those annual periods. The Company has evaluated the new standard and anticipates a change in the presentation of restricted cash on the cash flow statement once the standard is adopted.

2. DERIVATIVE INSTRUMENTS

Commodity Contracts

As part of its hedging strategy, the Company may enter into ethanol, soybean, soybean oil, natural gas and corn commodity-based derivatives in order to protect cash flows from fluctuations caused by volatility in commodity prices in order to protect gross profit margins from potentially adverse effects of market and price volatility on ethanol sales, corn oil sales, and corn purchase commitments where the prices are set at a future date. 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. Ethanol derivative fair market value gains or losses are included in the results of operations and are classified as revenue and corn derivative changes in fair market value are included in cost of goods sold.


As of:	June 30, 2016 (unaudited)					September 30, 2015						June 30, 2017 (unaudited)						September 30, 2016
Contract Type	# of Contracts	Notional Amount (Qty)		Fair Value		# of Contracts	Notional Amount (Qty)		Fair Value			# of Contracts	Notional Amount (Qty)		Fair Value			# of Contracts	Notional Amount (Qty)		Fair Value
Corn futures	394	1,970,000	bushels	$	605,875	638	3,190,000	bushels	$	(67,787	)	603	3,015,000	bushels	$	(126,650	)	252	1,260,000	bushels	$	(104,450	)
Corn options	—	—	bushels	$	—	500	2,500,000	bushels	$	(196,875	)	—	—	bushels	$	—		2,000	10,000,000	bushels	$	(111,250	)
Soybean oil futures	21	12,600	gal	$	12,996	10	420,000	gal	$	(14,700	)
Total fair value				$	618,871				$	(279,362	)				$	(126,650	)				$	(215,700	)
Amounts are combined on the balance sheet - negative numbers represent liabilities

~~The following tables provide details regarding the Company's derivative financial instruments at June 30, 2016 and September 30, 2015:~~

Derivatives not designated as hedging instruments:

Balance Sheet - as of June 30, 2016 (unaudited) Asset Liability
Commodity derivative instruments, at fair value $ 618,871
$ —
Total derivatives not designated as hedging instruments for accounting purposes $ 618,871
$ —

Balance Sheet - as of September 30, 2015 Asset Liability
Commodity derivative instruments, at fair value $ —
$ 279,362
Total derivatives not designated as hedging instruments for accounting purposes $ —
$ 279,362

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RED TRAIL ENERGY, LLC

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED JUNE 30, ~~2016~~2017

The following tables provide details regarding the Company's derivative financial instruments at June 30, 2017 and September 30, 2016:

Statement of Operations Income/(Expense) Location of gain (loss) in fair value recognized in income Amount of gain(loss) recognized in income during the three months ended June 30, 2016 (unaudited) Amount of gain (loss) recognized in income during the three months ended June 30, 2015 (unaudited) Amount of gain(loss) recognized in income during the nine months ended June 30, 2016 (unaudited) Amount of gain (loss) recognized in income during the nine months ended June 30, 2015 (unaudited)
Corn derivative instruments Cost of Goods Sold $ 4,491,692
$ (1,654,828 ) $ 4,841,356
$ (2,740,031 )
Ethanol derivative instruments Revenue (156,030 ) (54,138 ) (145,404 ) (540,708 )
Soybean oil derivative instruments Revenue 93,240
(17,674 ) 12,966
(931,113 )
Natural gas derivative instruments Cost of Goods Sold —
—
184,540
—
Total $ 4,428,902
$ (1,726,640 ) $ 4,893,458
$ (4,211,852 )



Derivatives not designated as hedging instruments:

Balance Sheet - as of June 30, 2017 (unaudited)	Asset		Liability
Commodity derivative instruments, at fair value	$	—	$	126,650
Total derivatives not designated as hedging instruments for accounting purposes	$	—	$	126,650

Balance Sheet - as of September 30, 2016	Asset		Liability
Commodity derivative instruments, at fair value	$	—	$	215,700
Total derivatives not designated as hedging instruments for accounting purposes	$	—	$	215,700



Statement of Operations Income/(Expense)	Location of gain (loss) in fair value recognized in income	Amount of gain(loss) recognized in income during the three months ended June 30, 2017 (unaudited)			Amount of gain (loss) recognized in income during the three months ended June 30, 2016 (unaudited)			Amount of gain(loss) recognized in income during the nine months ended June 30, 2017 (unaudited)		Amount of gain (loss) recognized in income during the nine months ended June 30, 2016 (unaudited)
Corn derivative instruments	Cost of Goods Sold	$	182,791		$	4,491,692		$	947,046	$	4,841,356
Ethanol derivative instruments	Revenue	—			(156,030		)	306,180		(145,404		)
Soybean oil derivative instruments	Revenue	(4,164		)	93,240			70,518		12,966
Natural gas derivative instruments	Cost of Goods Sold	—			—			10,780		184,540
Total		$	178,627		$	4,428,902		$	1,334,524	$	4,893,458

3. INVENTORY

Inventory is valued at the lower of cost or market. Inventory values as of June 30, ~~2016~~2017 and September 30, ~~2015~~2016 were as follows:


As of	June 30, 2016 (unaudited)		September 30, 2015		June 30, 2017 (unaudited)		September 30, 2016
Raw materials, including corn, chemicals and supplies	$	7,352,289	$	8,237,494	$	12,245,561	$	3,295,435
Work in process	901,951		862,327		1,035,836		754,096
Finished goods, including ethanol and distillers grains	888,852		649,524		530,421		1,881,560
Spare parts	1,960,070		1,942,977		2,121,887		2,052,815
Total inventory	$	11,103,162	$	11,692,322	$	15,933,705	$	7,983,906

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RED TRAIL ENERGY, LLC

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED JUNE 30, 2017

Lower of cost or market adjustments for the three and nine months ended June 30, ~~2016~~2017 and ~~2015~~2016 were as follows:


	For the three months ended June 30, 2016 (unaudited)		For the three months ended June 30, 2015 (unaudited)		For the nine months ended June 30, 2016 (unaudited)		For the nine months ended June 30, 2015 (unaudited)		For the three months ended June 30, 2017 (unaudited)		For the three months ended June 30, 2016 (unaudited)		For the nine months ended June 30, 2017 (unaudited)		For the nine months ended June 30, 2016 (unaudited)
Loss on firm purchase commitments	$	50,000	$	—	$	50,000	$	46,000	$	—	$	50,000	$	—	$	50,000
Loss on lower of cost or market adjustment for inventory on hand	—		—		583,392		304,439		$	—	$	—	$	—	$	583,392
Total loss on lower of cost or market adjustments	$	50,000	$	—	$	633,392	$	350,439	$	—	$	50,000	$	—	$	633,392

The Company has entered into forward corn purchase contracts under which it is required to take delivery at the contract price. At the time the contracts were created, the price of the contract approximated market price. Subsequent changes in market conditions could cause the contract prices to become higher or lower than market prices. As of June 30, ~~2016,~~2017, the average price of corn purchased under certain fixed price contracts, that had not yet been delivered, ~~was greater than~~ approximated market price. Based on this information, the Company has anno estimated loss on firm purchase commitments ~~of $50,000 and $46,000~~ for the three and nine months ended June 30, ~~2016~~2017 and ~~2015, respectively.~~an estimated loss of $50,000 for the three and nine months ended June, 30 2016. The loss iswould have been recorded in “Loss on firm purchase commitments” on the ~~statements~~statement of operations. The amount of the potential loss was determined by applying a methodology similar to that used in the impairment valuation with respect to inventory. Given the uncertainty of future ethanol prices, ~~this loss may or may not be recovered, and~~ further losses on the outstanding purchase commitments could be recorded in future periods.

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~~RED TRAIL ENERGY, LLC~~

~~NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS~~

~~FOR THE PERIOD ENDED JUNE 30, 2016~~

4. BANK FINANCING


As of	June 30, 2016 (unaudited)		September 30, 2015		June 30, 2017 (unaudited)		September 30, 2016
Long-term notes payable under loan agreement to bank	$	—	$	5,807,253
Capital lease obligations (Note 6)	8,781		31,674		$	6,189	$	8,135
Total Long-Term Debt	8,781		5,838,927		6,189		8,135
Less amounts due within one year	2,592		3,976,681		2,612		2,597
Total Long-Term Debt Less Amounts Due Within One Year	$	6,189	$	1,862,246	$	3,577	$	5,538

The ~~Company's notes payable consisted~~Company had a $10 million operating line-of-credit with First National Bank of Omaha that matured on March 20, 2017.

On March 20, 2017, we entered into a ~~term~~new $10 million revolving loan ~~which was repaid~~(the "Revolving Loan") with U.S. Bank National Association ("U.S. Bank"). The Revolving Loan replaced the revolving loan we had with First National Bank of Omaha. The maturity date of the Revolving Loan is May 31, 2018. Our ability to draw funds on the Revolving Loan is subject to a borrowing base calculation as set forth in ~~full in March 2016. As~~the Credit Agreement. At June 30, 2017, we had $0 available on the Revolving Loan, taking into account the borrowing base calculation. Due to having no availability, we had $0 drawn on the Revolving Loan as of June 30, ~~2016, the fixed interest rate on the term loan had been 4.96%.~~

~~The Company also has a~~ ~~$10,000,000~~ ~~operating line-of-credit that matures on March 20,~~ 2017. ~~At June 30, 2016, the Company had~~ $0 ~~drawn on this line-of-credit leaving a balance of~~ ~~$10,000,000~~ ~~available.~~ The variable interest rate on June 30, 2017 was ~~2.71% for amounts drawn on the operating line of credit.~~3.02%. Of the ~~$10,000,000~~$10 million revolving line-of-credit, the Company iswas not allowed to draw ~~$999,500~~$687,597 which is reserved as a source of funds to support a guaranteed payment the Company agreed to related to its natural gas pipeline. While the Company does not expect that it will be required to make a direct payment for the natural gas pipeline, the Company's agreement requires it to have funds available in the event the Company is required to make the guaranteed payment. See note 6 for the Company's additional future minimum lease commitments.

The Company's loans are secured by a lien on substantially all of the assets of the Company.

Scheduled debt maturities for the twelve months ending June 30 Totals

2016 $ 2,592
2017 2,612
2018 2,632
2019 945
Total $ 8,781

As of June 30, ~~2016,~~2017, the Company was in compliance with all of its debt covenants.

5. FAIR VALUE MEASUREMENTS

The following table provides information on those assets and liabilities that are measured at fair value on a recurring basis as of June 30, ~~2016~~2017 and September 30, ~~2015,~~2016, respectively.

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RED TRAIL ENERGY, LLC

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED JUNE 30, ~~2016~~2017


					Fair Value Measurement Using										Fair Value Measurement Using
	Carrying Amount as of June 30, 2016 (unaudited)		Fair Value as of June 30, 2016 (unaudited)		Level 1		Level 2		Level 3		Carrying Amount as of June 30, 2017 (unaudited)		Fair Value as of June 30, 2017 (unaudited)		Level 1		Level 2		Level 3
Assets
Liabilities
Commodities derivative instruments	$	618,871	$	618,871	$	618,871	$	—	$	—	$	126,650	$	126,650	$	126,650	$	—	$	—
Total	$	618,871	$	618,871	$	618,871	$	—	$	—	$	126,650	$	126,650	$	126,650	$	—	$	—

					Fair Value Measurement Using										Fair Value Measurement Using
	Carrying Amount as of September 30, 2015		Fair Value as of September 30, 2015		Level 1		Level 2		Level 3		Carrying Amount as of September 30, 2016		Fair Value as of September 30, 2016		Level 1		Level 2		Level 3
Liabilities
Commodities derivative instruments	$	279,362	$	279,362	$	279,362	$	—	$	—	$	215,700	$	215,700	$	215,700	$	—	$	—
Total	$	279,362	$	279,362	$	279,362	$	—	$	—	$	215,700	$	215,700	$	215,700	$	—	$	—

The fair value of the corn, ethanol, soybean oil and natural gas derivative instruments is based on quoted market prices in an active market.

~~Financial Instruments Not Measured at Fair Value~~

~~The estimated fair value of the Company's long-term debt, including the short-term portion, at June 30, 2016 and September 30, 2015 approximated the carrying value of approximately $0.0 million and~~ ~~$5.8 million~~, respectively. Fair value was estimated using estimated variable market interest rates as of June 30, 2016. The fair values and carrying values consider the terms of the related debt and exclude the impacts of debt discounts and derivative/hedging activity.

6. LEASES

The Company leases equipment under operating and capital leases through January 2023. The Company is generally responsible for maintenance, taxes, and utilities for leased equipment. Equipment under operating lease includes a locomotive and rail cars. Rent expense for operating leases was approximately $~~139,000~~136,000 and ~~$123,000~~$139,000 for the three months ended June 30, 2017 and 2016, respectively and ~~2015,~~$395,000 and $396,000 for the nine months ended June 30, 2017 and 2016, respectively. Equipment under capital leases consists of office equipment and plant equipment.

Equipment under capital leases is as follows at:

As of
June 30, 2016
(unaudited)
September 30, 2015
Equipment $ 483,488
$ 564,648
Less accumulated amortization (93,206 ) (111,604 )
Net equipment under capital lease $ 390,282
$ 453,044

~~Table of Contents~~

~~RED TRAIL ENERGY, LLC~~

~~NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS~~

~~FOR THE PERIOD ENDED JUNE 30, 2016~~



As of	June 30, 2017 (unaudited)			September 30, 2016
Equipment	$	483,488		$	483,488
Less accumulated amortization	(114,665		)	(98,570		)
Net equipment under capital lease	$	368,823		$	384,918

At June 30, ~~2016,~~2017, the Company had the following minimum commitments, which at inception had non-cancelable terms of more than one year. Amounts shown below are for the 12 months period ending June 30:

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RED TRAIL ENERGY, LLC

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED JUNE 30, 2017


	Operating Leases		Capital Leases		Operating Leases		Capital Leases
2016	$	405,640	$	2,592
2017	344,840		2,612		$	456,643	$	2,612
2018	272,496		2,632		350,793		2,632
2019	191,400		945		260,423		945
2020	132,600		—		201,623		—
2021					132,600		—
Thereafter	209,950		—		77,350		—
Total minimum lease commitments	$	1,556,926	8,781		$	1,479,432	6,189
Less amount representing interest			—				—
Present value of minimum lease commitments included in current maturities of long-term debt on the balance sheet			$	8,781			$	6,189

7. COMMITMENTS AND CONTINGENCIES

Firm Purchase Commitments for Corn

To ensure an adequate supply of corn to operate the Plant, the Company enters into contracts to purchase corn from local farmers and elevators. At June 30, ~~2016,~~2017, the Company had various fixed price contracts for the purchase of approximately ~~2.49~~1.2 million bushels of corn. Using the stated contract price for the fixed price contracts, the Company had commitments of approximately ~~$9.5~~$4.0 million related to the ~~2.49~~1.2 million bushels under contract. The Company also has various unpriced basis contracts for the purchase of approximately ~~41,800~~38,000 bushels of corn that have been delivered to the ~~plant.~~Plant. The purchase price of these bushels will be set at the time of pricing the contracts at the ~~July~~September 2017 index price less basis. The estimated accrued payable for these bushels is ~~$145,500.~~$130,000. The deadline for pricing these ~~41,800~~38,000 bushels is August 31, 2017.

Profit and Cost Sharing Agreement

The Company has entered into a Profit and Cost Sharing Agreement with Bismarck Land Company, LLC which became effective on November 1, 2016. The Profit and Cost Sharing Agreement provides that the Company will share 70% of the net revenue generated by the Company from business activities which are brought to the Company by Bismarck Land Company, LLC and conducted on the real estate purchased from the Bismarck Land Company, LLC. The real estate was ~~June 30, 2016.~~initially purchased in exchange for 2 million membership units at $1.66 per unit. This obligation will terminate ten years after the real estate closing date of October 11, 2016 or after Bismarck Land Company, LLC receives $10 million in proceeds from the agreement. In addition, the Company will pay Bismarck Land Company, LLC 70% of any net proceeds received by the Company from the sale of the subject real estate if a sale were to occur in the future, subject to the $10 million cap and the 10 year termination of this obligation. No payments have been made to the Bismarck Land Company, LLC at this time.

8. ~~RELATED-PARTY~~RELATED PARTY TRANSACTIONS

The Company has balances and transactions in the normal course of business with various related parties for the purchase of corn, sale of distillers grains and sale of ethanol. The related parties include unit holders, members of the board of governors of the Company, and RPMG, Inc. (“RPMG”). During the Company's ~~second~~first quarter of ~~2016,~~2017, the Company received a capital account refund from RPMG which is included in other income (expense) in the Company's Statement of Operations. Significant related party activity affecting the financial statements is as follows:


	June 30, 2016 (unaudited)		September 30, 2015		June 30, 2017 (unaudited)		September 30, 2016
Balance Sheet
Accounts receivable	$	2,598,728	$	2,783,821	$	4,028,830	$	3,472,359
Accounts Payable	782,174		448		12,921,307		—
Accrued Expenses	—		402,284		23,781		1,672,349

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RED TRAIL ENERGY, LLC

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED JUNE 30, ~~2016~~2017


	For the three months ended June 30, 2016 (unaudited)		For the three months ended June 30, 2015 (unaudited)		For the nine months ended June 30, 2016 (unaudited)		For the nine months ended June 30, 2015 (unaudited)		For the three months ended June 30, 2017 (unaudited)		For the three months ended June 30, 2016 (unaudited)		For the nine months ended June 30, 2017 (unaudited)		For the nine months ended June 30, 2016 (unaudited)
Statement of Operations
Revenues	$	25,750,633	$	27,980,965	$	79,679,795	$	73,556,604	$	27,795,610	$	25,750,633	$	82,706,618	$	79,679,795
Realized gain on corn hedge	—		—		—		925,400
Cost of goods sold	112,172		27,333		139,815		89,935		7,674		112,172		37,625		139,815
General and administrative	21,929		21,727		61,270		55,418		17,990		21,929		51,038		61,270
Other income/expense	583,739		—		1,167,478		1,190,501		—		583,739		247,307		1,167,478
Inventory Purchases	$	6,639,058	$	5,218,891	$	16,163,517	$	10,879,246	$	15,395,091	$	6,639,058	$	35,060,321	$	16,163,517

9. UNCERTAINTIES IMPACTING THE ETHANOL INDUSTRY AND OUR FUTURE OPERATIONS

The Company has certain risks and uncertainties that it experiences during volatile market conditions, which can have a severe impact on operations. The Company's revenues are derived from the sale and distribution of ethanol and distillers grains to customers primarily located in the United States. Corn for the production process is supplied to the ~~plant~~Plant primarily from local agricultural producers and from purchases on the open market. The Company's operating and financial performance is largely driven by prices at which the Company sells ethanol and distillers grains and by the cost at which it is able to purchase corn for operations. The price of ethanol is influenced by factors such as prices, supply and demand, weather, government policies and programs, and unleaded gasoline and the petroleum markets, although since 2005 the prices of ethanol and gasoline began a divergence with ethanol selling for less than gasoline at the wholesale level. Excess ethanol supply in the market, in particular, puts downward pressure on the price of ethanol. The Company's largest cost of production is corn. The cost of corn is generally impacted by factors such as supply and demand, weather, government policies and programs. The Company's risk management program is used to protect against the price volatility of these commodities.

The Company's financial performance is highly dependent on the Federal Renewable Fuels Standard ("RFS") which requires that a certain amount of renewable fuels must be used each year in the United States. Corn based ethanol, such as the ethanol the Company produces, can be used to meet a portion of the RFS requirement. In November 2013, the EPA issued a proposed rule which would reduce the RFS for 2014, including the RFS requirement related to corn based ethanol. The EPA proposed rule was subject to a comment period which expired in January 2014. On November 30, 2015, the EPA released its final ethanol use requirements for 2014, 2015 and 2016 which ~~are~~were lower than the statutory requirements in the RFS. In addition, on May 31, 2016, the EPA issued a proposed renewable volume obligation for 2017 of 14.8 billion gallons of conventional biofuels, still lower than the statutory requirement in the RFS. These reductions in the renewable volume obligations could have a significant negative impact on the Company's financial performance.

The Company anticipates that the results of operations during the remainder of fiscal ~~2016~~year 2017 will continue to be affected by volatility in the commodity markets. The volatility is due to various factors, including uncertainty with respect to the availability and supply of corn, increased demand for grain from global and national markets, speculation in the commodity markets and demand for corn from the ethanol industry.

10. MEMBER'S EQUITY

Unregistered Units Sales by the Company.

On October 10, 2016, the Company issued two million of the Company's membership units to Bismarck Land Company, LLC as part of the consideration for the acquisition of 338 acres of land adjacent to the ethanol plant that the Company will use to expand its rail yard. The membership units were issued pursuant to the exemption from registration set forth in Regulation D, Rule 506(b), as Bismarck Land Company, LLC is an accredited investor.

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RED TRAIL ENERGY, LLC

NOTES TO UNAUDITED CONDENSED FINANCIAL STATEMENTS

FOR THE PERIOD ENDED JUNE 30, 2017

Unit Purchases By the Company.



	(a)	(b)	(c)	(d)
Period	Total Number of Units Purchased	Average Price Paid per Unit	Total Number of Units Purchased as Part of Publicly Announced Plans or Programs	Maximum Number (or Approximate Dollar Value) of the Units that May Yet Be Purchased Under the Plans or Programs
October 2016	None	None	None	None
November 2016	None	None	None	None
December 2016	564,963	$1.00	None	None
January 2017	116,857	$1.00	None	None
February 2017	None	None	None	None
March 2017	None	None	None	None
April 2017	None	None	None	None
May 2017	None	None	None	None
June 2017	None	None	None	None
Total	681,820	$1.00	None	None

*681,820 Units were purchased other than through a publicly announced plan or program, pursuant to a Membership Unit Repurchase Agreement, a private transaction between the Company and a Member.

11. SUBSEQUENT EVENT

Management evaluated all other activity of the Company and concluded that no subsequent events have occurred that would require recognition in the condensed ~~consolidated~~ financial statements or disclosure in the notes to the condensed ~~consolidated~~ financial statements.

Table of Contents

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

We prepared the following discussion and analysis to help you better understand our financial condition, changes in our financial condition, and results of operations for the three and nine month periods ended June 30, ~~2016~~2017, compared to the same periods of the prior fiscal year. This discussion should be read in conjunction with the condensed financial statements, notes and information contained in the Company's Annual Report on Form 10-K for the fiscal year ended September 30, ~~2015~~2016. Unless otherwise stated, references in this report to particular years, quarters, months, or periods refer to our fiscal years ended in September and the associated quarters, months, or periods of those fiscal years.

Forward Looking Statements

This report contains forward-looking statements that involve future events, our future performance and our future operations and actions. In some cases you can identify forward-looking statements by the use of words such as "may," "should," "anticipate," "believe," "expect," "plan," "future," "intend," "could," "estimate," "predict," "hope," "potential," "continue," or the negative of these terms or other similar expressions. These forward-looking statements are only our predictions and involve numerous assumptions, risks and uncertainties. Our actual results or actions may differ materially from these forward-looking statements for many reasons, including the following factors:

Reductions in the corn-based ethanol use requirement in the Federal Renewable Fuels Standard;

Lower oil prices which result in lower ethanol prices;

Negative operating margins which result from lower ethanol prices;

Lower distillers grains prices which result from the Chinese ~~antidumping investigation;~~anti-dumping and countervailing duty tariffs;

Lower ethanol prices due to the Chinese ethanol tariff and the potential Brazilian ethanol tariff;

Logistics difficulties preventing us from delivering our products to our customers;

Fluctuations in the price and market for ethanol, distillers grains and corn oil;

Availability and costs of products and raw materials, particularly corn and natural gas;

Changes in the environmental regulations that apply to our plant operations and our ability to comply with such regulations;

Ethanol supply exceeding demand and corresponding ethanol price reductions impacting our ability to operate profitably and maintain a positive spread between the selling price of our products and our raw material costs;

Our ability to generate and maintain sufficient liquidity to fund our operations, meet debt service requirements and necessary capital expenditures;

Our ability to continue to meet our loan covenants;

Limitations and restrictions contained in the instruments and agreements governing our indebtedness;

Results of our hedging transactions and other risk management strategies;

Changes and advances in ethanol production technology; and

Competition from alternative fuels and alternative fuel additives.

Overview

Red Trail Energy, LLC, a North Dakota limited liability company (the "Company," "Red Trail," or "we," "our," or "us"), owns and operates a 50 million gallon annual name-plate production ethanol plant near Richardton, North Dakota. Our revenues are derived from the sale and distribution of our ethanol, distillers grains and corn oil primarily in the continental United States. Corn is our largest cost component and our profitability is highly dependent on the spread between the price of corn and the price of ethanol.

During the second quarter of our 2015 fiscal year we completed a capital project to convert the fuel source for the ethanol plant from coal to natural gas. We financed the natural gas conversion project from cash we had on hand as well as funds we had available to borrow on our line of credit. As a result, we are now dependent on the price and availability of natural gas in order to operate the ethanol plant instead of coal.

The ethanol industry is dependent on several economic incentives to produce ethanol, the most significant of which 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 statutory volume requirement increases incrementally each year until the United States is required to use 36 billion gallons of renewable fuels by 2022.

The United States Environmental Protection Agency (the "EPA") has the authority to waive the RFS statutory volume requirement, in whole or in part, provided one of the following two conditions have been met: (1) there is inadequate domestic renewable fuel supply; or (2) implementation of the requirement would severely harm the economy or environment of a state, region or the United States. Annually, the EPA is supposed to pass a rule that establishes the number of gallons of different types of renewable fuels that must be used in the United States which is called the renewable volume obligations. While the EPA's final renewable volume obligations for corn-based ethanol for 2017 and the proposed renewable volume obligations 2018 equal the statutory standard for corn-based ethanol, it is possible that the EPA could reduce this requirement in the future. Any reduction in the renewable volume obligations for corn-based ethanol could negatively impact ethanol prices and demand, and could result in reduced operating margins in the future.

1415

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~~On November 30, 2015,~~In recent years, the ~~EPA released its final renewable volume obligations for corn-based~~ ethanol ~~under the RFS for 2014, 2015 and 2016. The renewable volume obligations for conventional biofuels, including the corn-based ethanol we produce, is significantly lower than the statutory standard set~~industry in the ~~RFS. The RFS required the use~~United States has increased exports of ~~14.40 billion gallons of conventional biofuels~~ethanol and distillers grains. However, in 2014 and 15 billion gallons in 2015 and 2016. Pursuant to the EPA regulation, the requirement for conventional biofuels in 2014 was 13.61 billion gallons, 14.05 billion gallons in 2015 and 14.5 billion gallons in 2016. On May 31, 2016, the EPA issued a proposed renewable volume obligation for 2017 of 14.8 billion gallons of conventional biofuels, still lower than the statutory requirement in the RFS. The renewable volume obligations represent significant reductions in each of these years compared to the requirements in the RFS. Further, due to the lower price of gasoline, we do not anticipate that renewable fuels blenders will use more ethanol than is required by the RFS which may result in a significant decrease in ethanol demand. This departure by the EPA from the statutory requirements in the RFS is expected to have a negative impactChina instituted tariffs on ethanol ~~prices~~ and ~~demand, and is expected to result in reduced operating margins in the future.~~

~~China is the world's largest importer of~~ distillers grains produced in the United States. OnIn addition, the Brazilian sugar industry is pushing the Brazilian government to institute a tariff on imported ethanol. Both China and Brazil have been major sources of import demand for United States ethanol and distillers grains. These trade actions may result in negative operating margins for U.S. ethanol producers.

In January ~~12, 2016,~~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%. In addition, the Chinese government ~~announced that it is conducting an antidumping~~increased its ethanol import tariff from 5% to 30% as of January 1, 2017. These tariffs have had a negative impact on market ethanol and ~~countervailing duty investigation related to~~ distillers grains imported from the United States. This investigation was commenced in November 2015 by Chinese distillers grain producers. This investigation will likely lead to a decrease in distillers grains exports to China in the short-term and may result in the imposition of tariffs by the Chinese in the long-term. This antidumping and countervailing duty investigation could significantly decrease demand and prices ~~for distillers grains produced~~ in the United States. ~~This potential reduction~~

In Brazil, UNICA, the Brazilian sugarcane industry, is lobbying the Brazilian government to institute a 16% tariff on imported ethanol. Ethanol producers in Brazil are seeking a 20% tariff. To date, this tariff has not been implemented. However, Brazil is a major source of ethanol demand, ~~along with lower domestic corn~~and a tariff could negatively impact market ethanol prices ~~could result in excess distillers grains supplies~~ in the United ~~States~~States.

On March 20, 2017, we entered into a new $10 million revolving loan (the "Revolving Loan") with U.S. Bank National Association ("U.S. Bank"). As part of this transaction, we signed a Credit Agreement dated March 17, 2017 (the "Credit Agreement"). The Revolving Loan replaces our credit facilities with First National Bank of Omaha. Interest accrues on any outstanding balance on the Revolving Loan at a rate of 1.77% in excess of the one-month London Interbank Offered Rate ("LIBOR"). The maturity date of the Revolving Loan is May 31, 2018. Our ability to draw funds on the Revolving Loan is subject to a borrowing base calculation as set forth in the Credit Agreement. The Revolving Loan is subject to certain financial covenants as set forth in the Credit Agreement. The most significant financial covenants require us to maintain a fixed charge coverage ratio of no less than 1.25:1.00 and ~~could negatively impact~~a current ratio of no less than 1.50:1.00. Our fixed charge coverage ratio measures our ability to ~~profitably operate the ethanol plant.~~pay our fixed expenses. Our current ratio measures our liquidity and ability to pay short-term and long-term obligations.

Results of Operations for the Three Months Ended June 30, ~~2016~~2017 and ~~2015~~2016

The following table shows the results of our operations and the percentages of revenues, cost of goods sold, general and administrative expenses and other items to total revenues in our unaudited statements of operations for the three months ended June 30, ~~2016~~2017 and ~~2015~~2016:


	Three Months Ended June 30, 2016 (Unaudited)			Three Months Ended June 30, 2015 (Unaudited)					Three Months Ended June 30, 2017 (Unaudited)			Three Months Ended June 30, 2016 (Unaudited)
Statement of Operations Data	Amount		%	Amount			%		Amount		%	Amount		%
Revenues	$	26,789,485	100.00	$	28,571,787		100.00		$	28,536,654	100.00	$	26,789,485	100.00
Cost of Goods Sold	22,842,677		85.27	28,297,296			99.04		26,132,798		91.58	22,842,677		85.27
Gross Profit	3,946,808		14.73	274,491			0.96		2,403,856		8.42	3,946,808		14.73
General and Administrative Expenses	654,063		2.44	471,269			1.65		565,397		1.98	654,063		2.44
Operating Income (Loss)	3,292,745		12.29	(196,778		)	(0.69	)
Other Income	33,169		0.12	208,765			0.73
Operating Income									1,838,459		6.44	3,292,745		12.29
Other Income (Expense)									62,562		0.22	33,169		0.12
Net Income	$	3,325,914	12.41	$	11,987		0.04		$	1,901,021	6.66	$	3,325,914	12.41

Table of Contents

The following table shows additional data regarding production and price levels for our primary inputs and products for the three months ended June 30, ~~2016~~2017 and ~~2015~~2016.

~~Table of Contents~~


	Three Months ended June 30, 2016 (unaudited)		Three Months ended June 30, 2015 (unaudited)		Three Months ended June 30, 2017 (unaudited)		Three Months ended June 30, 2016 (unaudited)
Production:
Ethanol sold (gallons)	14,667,096		15,241,065		16,344,034		14,667,096
Dried distillers grains sold (tons)	30,047		31,089		33,858		30,047
Modified distillers grains sold (tons)	16,307		19,699		19,864		16,307
Corn oil sold (pounds)	3,540,560		2,489,000		4,308,180		3,540,560
Revenues:
Ethanol average price per gallon (net of hedging)	$	1.45	$	1.47	$	1.42	$	1.45
Dried distillers grains average price per ton	117.95		141.49		92.76		117.95
Modified distillers grains average price per ton	57.13		54.56		49.87		57.13
Corn oil average price per pound	0.26		0.24		0.25		0.26
Primary Inputs:
Corn ground (bushels)	5,156,648		5,472,975		5,719,865		5,156,648
Natural gas (MMBtu)	533,092		418,848		418,783		533,092
Costs of Primary Inputs:
Corn average price per bushel (net of hedging)	$	3.95	$	3.64	$	3.31	$	3.95
Natural gas average price per MMBtu (net of hedging)					2.78		1.73
Other Costs (per gallon of ethanol sold):
Chemical and additive costs	$	0.080	$	0.096	$	0.088	$	0.080
Denaturant cost	0.028		0.034		0.037		0.028
Electricity cost	0.045		0.030		0.048		0.045
Direct labor cost	0.062		0.052		0.052		0.062

Revenue

Our revenue was ~~slightly lower~~higher for the third quarter of our ~~2016~~2017 fiscal year compared to the same period of our ~~2015~~2016 fiscal year due to a decrease in the quantity of ethanol and distillers grains we sold along with lower average ethanol and dried distillers grains prices during the 2016 period. These changes were partially offset by increased sales of corn oil along with an increase in the volume of ethanol, distillers grains and corn oil we sold partially offset by lower average ~~price we received~~sales prices for our products during the 2017 period. During the third quarter of our 2017 fiscal year, approximately 81.2% of our total revenue was derived from ethanol sales, approximately 14.5% was from distillers grains sales and approximately 3.8% was from corn oil ~~and modified distillers grains.~~sales. During the third quarter of our 2016 fiscal year, approximately 79.5% of our total revenue was derived from ethanol sales, approximately 16.7% was from distillers grains sales and approximately 3.4% was from corn oil sales. During the third quarter of our 2015 fiscal year, approximately 78.4% of our total revenue was derived from ethanol sales, approximately 19.2% was from distillers grains sales and approximately 2.1% was from corn oil sales.

Ethanol

The average price we received for our ethanol was approximately ~~1.4%~~2.1% less during the third quarter of our ~~2016~~2017 fiscal year compared to the third quarter of our ~~2015~~2016 fiscal year. Management attributes this decrease in the price we received for our ethanol during the third quarter of our ~~2016~~2017 fiscal year to lower ~~gasoline and~~market corn prices ~~both of which can impact~~and increased ethanol supply in the market. Management anticipates that ethanol prices will continue at their current levels provided that market ethanol ~~prices,~~supplies do not increase significantly. Many ethanol producers are expanding their production capacity, which, along with ~~increased~~the Chinese ethanol tariff, could negatively impact the supply and demand balance for ethanol. If the supply of ethanol exceeds demand, it could result in lower market ethanol supply during the 2016 period. As a result of the lower gasoline prices, gasoline demand has increased which has increased demand for ethanol. This increase in ethanol demand has been met by increased production of ethanol in the United States. Management anticipates continued lower oil prices which management believes will continue to negatively impact ethanol prices. These lower ethanol prices may negatively impact our ability to profitably operate the ethanol plant. However, management believes that the lower ethanol prices may result in increased exports of ethanol which could positively impact ethanol demand. The United States ethanol industry is continuing to work to open export markets for ethanol which may positively impact domestic ethanol prices. ~~However, these export~~Export markets are not as reliable as the domestic ethanol ~~market.~~market which can lead to ethanol price volatility.

We sold ~~fewer~~more gallons of ethanol during the third quarter of our ~~2016~~2017 fiscal year compared to the third quarter of our ~~2015~~2016 fiscal year due to ~~lower~~increased production ~~because we moved~~from our ~~scheduled annual maintenance shutdown to~~increased operating capacity at the ~~third quarter of our 2016 fiscal year versus~~plant and improved operating efficiency in the ~~fourth quarter of our 2015 fiscal year.~~2017 period. Management anticipates that our ethanol production and sales will continue to be higher ~~going forward~~during our 2017 fiscal year compared to our 2016 fiscal year due to the plant improvements we ~~have~~ made which ~~have~~ increased our total production capacity. In addition, the amount of ethanol we produced per bushel of corn we ground increased for the third quarter of our 2017 fiscal year

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~~In addition, while we produced and sold fewer gallons of ethanol during~~compared to the third quarter of our 2016 fiscal year, ~~we increased the number of gallons of ethanol we produced per bushel of corn~~ which positively impacted our profitability. We continue to work to maximize the additional production capacity of our ethanol plant and improve our ethanol production efficiency.

From time to time we enter into forward sales contracts for our products. At June 30, ~~2016,~~2017, we had no ~~open~~ ethanol futures ~~contracts.~~contracts and we had no realized loss or gain on ethanol futures contracts during the third quarter of our 2017 fiscal year. Ethanol futures contracts ~~resulted in a loss of approximately $156,000 during~~for the third quarter of our 2016 fiscal year ~~which decreased our revenue. By comparison, our ethanol futures contracts~~ resulted in a loss of approximately ~~$54,000 for the third quarter of our 2015 fiscal year which decreased our revenue.~~$156,000.

Distillers Grains

~~We sell the~~Previously, we sold a majority of our distillers grains in the dried form due to market conditions which ~~is typically shipped outside~~favored that product. However, due to the Chinese anti-dumping and countervailing duty tariffs which have decreased export demand for distillers grains, we increased the amount of modified distillers grains we produced and sold. Modified distillers grains are used in our local ~~market.~~market and are less impacted by world distillers grains markets. The average ~~price~~prices we received for both our dried and modified distillers grains ~~was~~were lower during the third quarter of our ~~2016~~2017 fiscal year compared to the third quarter of our ~~2015~~2016 fiscal year. Management attributes ~~this decrease in dried distillers grains prices with~~these decreases to lower export demand for distillers grains ~~due to the Chinese antidumping and countervailing duty investigation,~~ along with ~~decreased~~increased corn ~~prices~~supply which typically ~~have~~has an impact on the market price of distillers grains. The average price we received for our modified distillers grains was slightly higher during the third quarter of our 2016 fiscal year as compared to the third quarter of our 2015 fiscal year. Management attributes this increase in our modified distillers grains prices with increased local demand for distillers grains, partially offset by lower market corn prices. Management anticipates distillers grains prices will beremain lower during the remaining quarter of our ~~2016~~2017 fiscal year and into our ~~2017~~2018 fiscal year as a result of the Chinese ~~antidumping and countervailing duty investigation~~tariffs along with increased corn availability. Weather conditions have been favorable which many believe will lead to a large corn crop in the fall of 2016. If corn prices are lower during our 2017 fiscal year, we anticipate it will negatively impact the price we receive for our distillers grains.

We produced and sold ~~fewer~~more total tons of distillers grains during the third quarter of our ~~2016~~2017 fiscal year compared to the third quarter of our ~~2015~~2016 fiscal year due to ~~decreased~~increased overall production at the ethanol plant ~~and increased corn oil production~~ during the third quarter of our ~~2016~~2017 fiscal year. ~~Distillers~~However, the increase in distillers grains ~~are a co-product of the ethanol~~ production ~~process, so if~~was impacted by increased corn oil production. As we ~~produce~~extract more corn oil from our distillers grains, it results in less ~~ethanol we anticipate producing fewer tons~~volume of distillers ~~grains.~~grains we have for sale. In addition, we ~~increased the number of~~produced more gallons of ethanol ~~we produced~~ per bushel of corn which also results in ~~fewer tons of~~decreased distillers grains ~~being produced. Finally, as we increase the amount of corn oil we remove from our distillers grains, the total tons of distillers grains we have to sell is reduced.~~production. Management anticipates relatively stable distillers grains production going forward due to anticipated increases in our ethanol conversion efficiency and increased production of corn oil, partially offset by anticipated increased ethanol production due to our plant improvement projects.

Corn Oil

The total pounds of corn oil we sold was higher during the third quarter of our ~~2016~~2017 fiscal year compared to the third quarter of our ~~2015~~2016 fiscal year due to increased efficiency in extracting corn oil during the ~~2016~~2017 period ~~partially offset by decreased~~along with increased total production at the ethanol plant during the ~~2016~~2017 period. Management anticipates that our corn oil production will continue to be higher during our ~~2016~~2017 fiscal year compared to our ~~2015~~2016 fiscal year due to increased corn oil extraction ~~efficiency. Corn~~efficiency and anticipated higher total production at the ethanol plant. The average price we received for our corn oil ~~prices were higher~~was slightly lower during the third quarter of our ~~2016~~2017 fiscal year compared to the third quarter of our ~~2015~~2016 fiscal year due primarily to ~~increased~~decreased corn oil demand from the biodiesel industry. The biodiesel blenders' tax credit was reinstated for 2016 which management believes has increased biodiesel production and resulted in increased corn oil demand. However, the tax credit is expected to expire again at the end of 2016 which could negatively impact corn oil prices in the future. For the remaining quarter of our 2016 fiscal year and the first quarter of our 2017 fiscal year, management expects higher corn oil prices and demand.

Cost of Goods Sold

Our cost of goods sold is primarily made up of corn and ~~energy expenses. Since we converted the ethanol plant from a coal fired plant to a~~ natural gas ~~based ethanol plant, our profitability will in part depend on natural gas prices instead of coal prices.~~expenses. Our cost of goods sold was ~~lower~~higher for the third quarter of our ~~2016~~2017 fiscal year as compared to the third quarter of our ~~2015~~2016 fiscal year due primarily to ~~reduced corn consumption and increased conversion efficiency due to~~a significant derivative instrument gain we experienced during our 2016 fiscal year which decreased ~~total production at the ethanol plant.~~our cost of goods sold. The ~~decrease~~increase in our cost of goods sold was greater than the ~~decrease~~increase in ~~revenue we experienced due to~~ our ~~reduced production, which led to favorable operating margins and profitability~~revenue during the third quarter of our 2017 fiscal year as compared to the third quarter of our 2016 ~~period.~~fiscal year, which decreased our profitability.

Corn Costs

Our cost of goods sold related to corn was less for the third quarter of our ~~2016~~2017 fiscal year compared to the third quarter of our ~~2015~~2016 fiscal year due to ~~decreased~~the net effect of increased corn consumption ~~partially~~ offset by ~~increased~~decreased average corn costs per bushel, before taking into

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account our hedge positions. For the ~~the~~ third quarter of our ~~2016~~2017 fiscal year, we used approximately ~~5.8% fewer~~10.9% more bushels of corn compared to the third quarter of our ~~2015~~2016 fiscal year. The average price we paid per bushel of corn, without taking into account our derivative instruments, was approximately ~~8.0% greater~~15.3% less for the third quarter of our ~~2016~~2017 fiscal year compared to the third quarter of our ~~2015~~2016 fiscal year. In addition, during the third quarter of our 2017 fiscal year, we had a realized gain of approximately $182,000 for our corn derivative instruments which only slightly decreased our cost of goods sold. For the third quarter of our 2016 fiscal year, we had a realized gain of approximately ~~$4.49 million~~$4,491,000 for our corn derivative instruments which greatly decreased ~~our cost of goods sold. By comparison, for the third quarter of our 2015 fiscal year, we had a realized loss of approximately $1.7 million for our corn derivative instruments which increased~~ our cost of goods sold. Management anticipates that we will consume more corn in the future due to our natural gas conversion project which allows us to produce more of our products. Management anticipates that corn prices will remain relatively stable during our ~~2016 fiscal year and into our~~ 2017 fiscal year due to ample corn supplies and relatively stable corn demand. ~~Weather conditions have been favorable~~Management anticipates that corn prices will increase during the ~~summer~~beginning of ~~2016 which management believes will lead~~our 2018 fiscal year due to ~~a large corn crop for 2016. The anticipated large corn crop will likely result~~drought conditions in ~~increased corn supplies which management believes will keep corn prices low.~~our geographical area.

From time to time we enter into forward purchase and option contracts for our commodity purchases and sales. At June 30, 2016, we had forward corn purchase contracts and corn options for various delivery periods through December 2016 for a total commitment

Table of ~~approximately $9.5 million.~~Contents

Energy Costs

During the second quarter of our 2015 fiscal year, our natural gas conversion project came online. As a result, during both the third quarter of our 2016 fiscal year and the third quarter of our 2015 fiscal year we were relying on natural gas as the fuel source for our ethanol plant. Management believes the switch to natural gas allows us to be more competitive in the ethanol industry and allows us to increase our total production capacity. Management anticipates that due to our location near a major sourceWe consumed approximately 21.4% less MMBtu of natural gas production, we will be able to purchase natural gas at very favorable prices and will have sufficient natural gas supplies to meet our plant's operational needs. We have all of the natural gas supply and distribution agreements we need in place to continue to operate the ethanol plant. Management anticipates that our natural gas costs will be higher during the winter months and relatively lower during the summer months due to seasonal supply and demand shifts. Our total energy costs were less during the third quarter of our ~~2016~~2017 fiscal year compared to the third quarter of our ~~2015~~2016 fiscal year, despite our increased production, due to ~~decreased~~efficiency improvements we experienced at the ethanol plant along with producing more modified distillers grains compared to dried distillers grains. Our average cost per MMBtu of natural gas ~~costs per mmBtu, partially offset by increased natural gas consumption~~was approximately 60.7% greater during the ~~2016 period. Our natural gas derivative positions resulted in no gain or loss during~~third quarter of our 2017 fiscal year compared to the third quarter of our 2016 fiscal ~~year. We had no gain or loss on our~~year due to increased market natural gas ~~derivative instruments during the third quarter of our 2015 fiscal year.~~prices.

General and Administrative Expenses

Our general and administrative expenses were ~~higher~~lower for the third quarter of our ~~2016~~2017 fiscal year compared to the third quarter of our ~~2015~~2016 fiscal year due to ~~an increase~~a decrease in ~~property taxes and consulting services.~~our accounts receivable bad debts expense.

Other Income/Expense

We had more interest income during the third quarter of our ~~2016~~2017 fiscal year compared to the third quarter of our ~~2015~~2016 fiscal year due to having ~~more customers with higher outstanding accounts receivable~~greater cash balances during our ~~2016~~2017 fiscal year. We had ~~less~~more other income during the third quarter of our ~~2016~~2017 fiscal year compared to the third quarter of our ~~2015~~2016 fiscal year due to ~~a lower~~an increased capital account refund we received from ~~RPMG,~~ our ~~marketer. In addition, we had less interest expense~~marketer during the ~~third quarter of our 2016~~2017 fiscal ~~year compared to the third quarter of our 2015 fiscal year because we had less borrowings on our credit facilities.~~year.

Results of Operations for the Nine Months Ended June 30, ~~2016~~2017 and ~~2015~~2016

The following table shows the results of our operations and the percentages of revenues, cost of goods sold, general and administrative expenses and other items to total revenues in our unaudited statements of operations for the nine months ended June 30, ~~2016~~2017 and ~~2015:~~2016:



	Nine Months Ended June 30, 2017 (Unaudited)			Nine Months Ended June 30, 2016 (Unaudited)
Statement of Operations Data	Amount		%	Amount		%
Revenues	$	85,616,060	100.00	$	78,245,021	100.00
Cost of Goods Sold	80,146,245		93.61	72,086,958		92.13
Gross Profit	5,469,815		6.39	6,158,063		7.87
General and Administrative Expenses	2,004,142		2.34	1,904,987		2.43
Operating Income	3,465,673		4.05	4,253,076		5.44
Other Income (Expense)	744,243		0.87	560,634		0.72
Net Income	$	4,209,916	4.92	$	4,813,710	6.15

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Nine Months Ended
June 30, 2016 (Unaudited)

Nine Months Ended
June 30, 2015 (Unaudited)
Statement of Operations Data Amount % Amount %
Revenues $ 78,245,021
100.00 $ 75,175,964
100.00
Cost of Goods Sold 72,086,958
92.13 71,526,192
95.15
Gross Profit 6,158,063
7.87 3,649,772
4.85
General and Administrative Expenses 1,904,987
2.43 1,604,322
2.13
Operating Income 4,253,076
5.44 2,045,450
2.72
Other Income 560,634
0.72 1,288,271
1.71
Net Income $ 4,813,710
6.15 $ 3,333,721
4.43

The following table shows additional data regarding production and price levels for our primary inputs and products for the nine months ended June 30, ~~2016~~2017 and ~~2015.~~2016.


	Nine Months ended June 30, 2016 (unaudited)		Nine Months ended June 30, 2015 (unaudited)		Nine Months ended June 30, 2017 (unaudited)		Nine Months ended June 30, 2016 (unaudited)
Production:
Ethanol sold (gallons)	45,108,167		39,499,740		49,036,181		45,108,167
Dried distillers grains sold (tons)	88,260		74,286		83,480		88,260
Modified distillers grains sold (tons)	66,208		59,458		81,927		66,208
Corn oil sold (pounds)	10,540,483		6,085,530		12,924,780		10,540,483
Revenues:
Ethanol average price per gallon (net of hedging)	$	1.34	$	1.56	$	1.42	$	1.34
Dried distillers grains average price per ton	121.14		122.80		99.67		121.14
Modified distillers grains average price per ton	60.40		48.33		46.44		60.40
Corn oil average price per pound	0.24		0.22		0.26		0.24
Primary Inputs:
Corn ground (bushels)	16,138,519		14,225,883		17,103,310		16,138,519
Natural gas (MMBtu)	1,230,882		653,280		1,225,419		1,230,882
Costs of Primary Inputs:
Corn average price per bushel (net of hedging)	$	3.57	$	3.42	$	3.47	$	3.57
Natural gas average price per MMBtu (net of hedging)					2.86		2.40
Other Costs (per gallon of ethanol sold):
Chemical and additive costs	$	0.091	$	0.107	$	0.084	$	0.091
Denaturant cost	0.029		0.038		0.033		0.029
Electricity cost	0.044		0.052		0.045		0.044
Direct labor cost	0.060		0.064		0.059		0.060

Revenue

Our revenue was greater for the nine months ended June 30, ~~2016~~2017 compared to the same period of our ~~2015~~2016 fiscal year ~~primarily~~ due to ~~increased~~an increase in our total production atalong with higher average ethanol and corn oil prices during the ~~ethanol plant,~~2017 period. These changes were partially offset by ~~lower~~decreased average prices we received for our distillers grains. During the nine months ended June 30, 2017, approximately 81.6% of our total revenue was derived from ethanol ~~prices during the 2016 period.~~sales, approximately 14.2% was from distillers grains sales and approximately 3.9% was from corn oil sales. During the nine months ended June 30, 2016, approximately 77.5% of our total revenue was derived from ethanol sales, approximately 18.8% was from distillers grains sales and approximately 3.2% was from corn oil sales. During the nine months ended June 30, 2015, approximately 81.8% of our total revenue was derived from ethanol sales, approximately 16.0% was from distillers grains sales and approximately 1.8% was from corn oil sales.

Ethanol

The average price we received for our ethanol was approximately ~~14.1% less~~5.97% greater during the nine months ended June 30, ~~2016~~2017 compared to the ~~same period of our 2015 fiscal year.~~nine months ended June 30, 2016. Management attributes this ~~decrease~~increase in the price we received for our

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ethanol during the nine months ended June 30, ~~2016~~2017 to ~~lower~~increased market gasoline prices ~~and an increase in industry output.~~which can impact market ethanol prices. We sold more gallons of ethanol during the nine months ended June 30, ~~2016~~2017 compared to ~~the same period of our 2015 fiscal year due to additional production capacity at the plant and less downtime during the 2016 period. During~~ the nine months ended June 30, 2016 due to increased production. In addition, the amount of ethanol we ~~had a realized loss on our ethanol derivative instruments~~produced per bushel of ~~approximately $145,000~~ ~~which decreased our revenue. During~~corn we ground increased for the nine months ended June 30, ~~2015,~~2017 compared to the nine months ended June 30, 2016, which positively impacted our profitability. We continue to work to maximize the additional production capacity of our ethanol plant and improve our ethanol production efficiency.

From time to time we enter into forward sales contracts for our products. Ethanol futures contracts resulted in a gain of approximately $306,000 during the nine months ended June 30, 2017 which increased our revenue. We had a realized loss of approximately $145,000 on our ethanol ~~derivative instruments of approximately $541,000~~futures contracts for the nine months ended June 30, 2016 which decreased our revenue.

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Distillers Grains

The average price we received for our dried distillers grains was ~~less~~approximately 17.72% lower during the nine months ended June 30, ~~2016~~2017 compared to the ~~same period of our 2015 fiscal year due to decreased~~nine months ended June 30, 2016. Management attributes this decrease in dried distillers grains prices with lower export demand for distillers ~~grains.~~grains due to the Chinese anti-dumping and countervailing duty tariffs, along with increased corn supply. The average price we received for our modified distillers grains was ~~greater~~approximately 23.11% lower during the nine months ended June 30, ~~2016~~2017 as compared to the same period of our 2015 fiscal year due to increased local demand for distillers grains which are primarily sold as modified distillers grains. In addition, local higher corn prices positively impacted the price we received for our modified distillers grains. nine months ended June 30, 2016.

We produced and sold more total tons of distillers grains during the nine months ended June 30, ~~2016~~2017 compared to the ~~same period of our 2015 fiscal year~~nine months ended June 30, 2016 due to increased ~~total~~overall production at the ethanol plant during the ~~2016 period.~~nine months ended June 30, 2017. However, the increase in distillers grains production was less than the increase in our ethanol production because we produced more pounds of corn oil which reduces the total tons of distillers grains we produce. In addition, we produced more gallons of ethanol per bushel of corn which also results in decreased distillers grains production.

Corn Oil

The total pounds of corn oil we sold was ~~higher~~approximately 22.62% greater during the nine months ended June 30, ~~2016~~2017 compared to the ~~same period of our 2015 fiscal year~~nine months ended June 30, 2016 due to ~~increased total production by the ethanol plant and~~ increased efficiency in extracting corn oil during the ~~2016~~2017 period along with increased total production at the ethanol plant during the 2017 period. ~~Market~~The average price we received for our corn oil ~~prices were higher~~was approximately 8.33% greater during the nine months ended June 30, ~~2016~~2017 compared to the ~~same period of our 2015 fiscal year due primarily to increased biodiesel production which has increased corn oil demand.~~nine months ended June 30, 2016.

Cost of Goods Sold

Our cost of goods sold was greater for the nine months ended June 30, ~~2016~~2017 as compared to the ~~same period of our 2015 fiscal year~~nine months ended June 30, 2016 due primarily ~~due~~ to ~~increased corn costs per bushel and increased corn consumption along with~~ a ~~lower of cost or market corn inventory adjustment. Partially offsetting this shift was a significant realized~~larger gain on our corn derivative instruments ~~for~~during the 2016 compared to the 2017 period. The increase in our cost of goods was more than the increase in our revenue during the nine months ended June 30, 2017 as compared to the nine months ended June 30, 2016 which decreased our ~~cost of goods sold.~~profitability.

Corn Costs

Our cost of goods sold related to corn was greater for the nine months ended June 30, ~~2016~~2017 compared to ~~the same period of our 2015 fiscal year due to increased corn consumption and higher market corn prices. We consumed approximately 13.4% more bushels of corn during~~ the nine months ended June 30, 2016 due to increased corn consumption along with a decrease in our average corn costs per bushel, before taking into account our hedge positions. For the nine months ended June 30, 2017, we used approximately 5.98% more bushels of corn compared to the ~~same period of our 2015 fiscal year due to our increased production. In addition, the~~nine months ended June 30, 2016. The average price we paid per bushel of corn, without taking into account our derivative ~~instrument gains or losses, increased by~~instruments, was approximately ~~4.4%~~2.80% less for the nine months ended June 30, 2017 compared to the nine months ended June 30, 2016. In addition, during the nine months ended June 30, ~~2016 compared to the same period of our 2015 fiscal year due to changing market prices for corn.~~

~~Our corn derivative positions resulted in~~2017, we had a realized gain of approximately ~~$4.8 million during the nine months ended June 30, 2016~~$947,000 for our corn derivative instruments which decreased our cost of goods sold. By comparison, ~~our corn derivative positions resulted in a loss of approximately $2.7 million during~~for the nine months ended June 30, ~~2015~~2016, we had a realized gain of approximately $4,841,000 for our corn derivative instruments which ~~increased~~decreased our cost of goods sold.

Energy Costs

~~Our total~~We consumed approximately 0.44% less MMBtu of natural gas during the nine months ended June 30, 2017 compared to the nine months ended June 30, 2016, due to our energy ~~expense~~efficiency projects and increased production of modified distillers grains. In addition, our average cost per MMBtu of natural gas was approximately 19.17% greater during the nine months ended June 30, 2017 compared to the nine months ended June 30, 2016. During the nine months ended June 30, 2017, we had a realized gain of approximately $11,000 for our natural gas derivative instruments which decreased our cost of goods sold. By comparison, for the nine months ended June 30, 2016, ~~compared to the same period~~we had a realized gain of our 2015 fiscal year due to our increased production during the 2016 period. We have all of the natural gas supply and distribution agreements we need in place to continue to operate the ethanol plant. Management anticipates thatapproximately $185,000 for our natural gas ~~costs will be higher during the winter months and relatively lower during the summer months due to seasonal supply and demand shifts. Our natural gas~~ derivative ~~positions resulted in a loss of approximately $185,000 during the nine months ended June 30, 2016~~instruments which ~~increased~~decreased our cost of goods sold. ~~We had no gain or loss on natural gas derivative instruments during the nine months ended June 30, 2015.~~

General and Administrative Expenses

Our general and administrative expenses were ~~higher~~greater for the nine months ended June 30, ~~2016~~2017 compared to the ~~same period of our 2015 fiscal year~~nine months ended June 30, 2016 due to an increase in legal fees and consulting and professional services ~~required and our allowance for doubtful accounts.~~

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fees.

Other Income/Expense

We had more interest income during the nine months ended June 30, ~~2016~~2017 compared to the ~~same period of our 2015 fiscal year~~nine months ended June 30, 2016 due to having more cash on hand during the ~~2016~~2017 period. We had ~~less~~more other income during the nine months ended June 30, ~~2016~~

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2017 compared to the ~~same period of our 2015 fiscal year~~nine months ended June 30, 2016 due to a ~~lower~~greater capital account refund from RPMG, our marketer. In addition, we had less interest expense during the nine months ended June 30, ~~2016~~2017 compared to the ~~same period of our 2015 fiscal year~~nine months ended June 30, 2016 because we had less borrowings on our credit facilities.

Changes in Financial Condition for the Nine Months Ended June 30, ~~2016~~2017

Current Assets. We had ~~less~~more cash and equivalents at June 30, ~~2016~~2017 compared to September 30, ~~2015~~2016 primarily due to ~~cash we used for~~an increase in our ~~debt~~accounts payable due to deferred corn payments ~~along with a distribution we paid~~owed to our ~~members during~~corn suppliers in our ~~2016~~2017 fiscal year. We had more restricted cash at June 30, ~~2016~~2017 compared to September 30, ~~2015~~2016 related to cash we deposit in our margin account for our hedging transactions. Our derivative instruments were valued at approximately $619,000 at June 30, 2016 due to unrealized gains on our derivative positions. Our derivative instruments were valued at a loss as of September 30, 2015 and were included as a current liability at that time. Due to the timing of payments from our marketers, we had more accounts receivable at June 30, ~~2016~~2017 compared to September 30, ~~2015.~~2016. We had ~~less other receivables at June 30, 2016 compared to September 30, 2015 due to the receipt of payment for the insurance claim that was outstanding at September 30, 2015. We had less~~more inventory on hand at June 30, ~~2016~~2017 compared to September 30, ~~2015~~2016 due primarily to having ~~less~~more corn inventory at June 30, ~~2016.~~2017.

Property, Plant and Equipment. The value of our property, plant and equipment was ~~lower~~higher at June 30, ~~2016~~2017 compared to September 30, ~~2015~~2016 primarily due to ~~our regular depreciation~~the purchase of ~~our assets. We did not have any material capital projects that we placed into service during our 2016 fiscal year.~~land adjacent to the plant site along with the purchase of a new truck and trailer for corn oil loading.

Current Liabilities. Our accounts payable was ~~lower~~significantly higher at June 30, ~~2016~~2017 compared to September 30, ~~2015~~2016 due to having ~~less~~more corn payables at June 30, ~~2016.~~2017. Our accrued expenses were ~~significantly higher~~lower at June 30, ~~2016~~2017 compared to September 30, ~~2015~~2016 because we had ~~more~~fewer deferred corn payments owed to our corn suppliers at June 30, ~~2016~~2017 compared to September 30, ~~2015~~2016. ~~We had significantly less current maturities of long-term debt at June 30, 2016 because we repaid the balance of our loans with FNBO in March 2016.~~

Long-term Liabilities. Our long-term liabilities were ~~lower~~less at June 30, ~~2016~~2017 compared to September 30, ~~2015~~2016 because of capital lease payments we ~~repaid~~made during our ~~loans with FNBO in March 2016.~~2017 fiscal year.

Liquidity and Capital Resources

Based on financial forecasts performed by our management, we anticipate that we will have sufficient cash from our current credit facilities and cash from our operations to continue to operate the ethanol plant for the next 12 months. Should we experience unfavorable operating conditions in the future, we may have to secure additional debt or equity sources for working capital or other purposes.

The following table shows cash flows for the nine months ended June 30, ~~2016~~2017 and ~~2015~~2016:


	2016 (unaudited)			2015 (unaudited)			2017 (unaudited)			2016 (unaudited)
Net cash provided by operating activities	$	5,223,866		$	290,310		$	12,221,588		$	5,223,866
Net cash (used in) investing activities	(469,240		)	(3,577,678		)	(945,406		)	(469,240		)
Net cash (used in) financing activities	(9,842,188		)	(16,836,034		)	(5,661,219		)	(9,842,188		)
Net (decrease) in cash	$	(5,087,562	)	$	(20,123,402	)
Net increase (decrease) in cash							$	5,614,963		$	(5,087,562	)
Cash and cash equivalents, end of period	$	3,100		$	1,828,857		$	15,889,129		$	3,100

Cash Flow from Operations

Our operations provided more cash during the nine months ended June 30, ~~2016~~2017 compared to the same period of our ~~2015~~2016 fiscal year due primarily to ~~increased net income and~~ an increase in our ~~accrued expenses~~accounts payable related to our corn purchases ~~along with less cash used for our inventory and less accrued purchase commitment losses~~ during the ~~2016~~2017 period.

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Cash Flow From Investing Activities

We used ~~less~~more cash for capital expenditures during the nine months ended June 30, ~~2016~~2017 compared to the same period of our ~~2015~~2016 fiscal year ~~because~~due to the completion of ~~fewer capital projects during the 2016 period. During the first nine months of our 2015 fiscal year we were completing our natural gas conversion project which was a major capital project.~~railroad track improvements. During the 2016 period, our primary capital project was a project to widen the road leading to the plant.

Cash Flow from Financing Activities

We used less cash for financing activities during the ~~first~~ nine months ~~of our 2016 fiscal year~~ended June 30, 2017 compared to the same period of our ~~2015~~2016 fiscal year due to ~~less~~fewer debt payments during the 2017 period, partially offset by cash ~~being~~we used for ~~distributions and debt repayments~~unit repurchases during the ~~2016 period.~~2017 period and more cash we used for distributions.

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Our liquidity, results of operations and financial performance will be impacted by many variables, including the market price for commodities such as, but not limited to, corn, ethanol and other energy commodities, as well as the market price for any co-products generated by the facility and the cost of labor and other operating costs. Assuming future relative price levels for corn, ethanol and distillers grains remain consistent, we expect operations to generate adequate cash flows to maintain operations.

Capital Expenditures

WeThe Company had approximately ~~$501,000~~$721,000 in construction in progress as of June 30, ~~2016 related~~2017 primarily relating to ~~costs incurred for~~ projects to ~~widen the road into the plant, replace the RTO fan, and~~ upgrade the ~~beer mash exchangers.~~cooling towers. During the nine months ended June 30, ~~2016~~,2017, we placed in service approximately ~~$57,000~~$3.5 million in capital projects with the majority of these costs related to the purchase of ~~new equipment for our maintenance department.~~land adjacent to the plant site.

Capital Resources

~~Short-Term Debt Sources~~Revolving Loan

On March 20, 2017, we entered into a new $10 million revolving loan (the "Revolving Loan") with U.S. Bank National Association ("U.S. Bank"). The ~~Company has~~Revolving Loan replaced a similar revolving ~~line-of-credit~~loan we had with First National Bank of ~~$10,000,000 with~~Omaha. Interest accrues on any outstanding balance on the Revolving Loan at a rate of 1.77% in excess of the one-month London Interbank Offered Rate ("LIBOR"). The maturity date of the Revolving Loan is May 31, 2018. Our ability to draw funds on the Revolving Loan is subject to a borrowing base calculation as set forth in the Credit Agreement. At June 30, 2017, we had $0 available on the Revolving Loan, taking into account the borrowing base calculation. Due to having no availability, we had $0 drawn on ~~this line-of-credit~~the Revolving Loan as of June 30, ~~2016. This revolving line-of-credit matures~~2017. Interest accrued on ~~March 20, 2017. The variable interest rate on this line-of-credit is 2.25% over~~ the ~~one-month LIBOR with a rate of 2.71%~~Revolving Loan as of June 30, ~~2016. Of the $10 million revolving line-of-credit, we are not allowed to draw $999,500 which we are reserving as~~2017 at a source of funds to support a guaranteed payment we agreed to related to our natural gas pipeline. While we do not expect that we will be required to make a direct payment for the natural gas pipeline, our agreement requires us to have funds available in the event we are required to make the guaranteed payment.

~~Long-Term Debt Sources~~

~~In March of 2015, we refinanced our outstanding debt with our senior lender. As of~~ ~~June 30, 2016, our long-term debt consisted of a term loan which we repaid in full in March 2016. The following table summarizes our long-term debt instrument with our senior lender.~~

Outstanding Balance (Millions) Interest Rate Estimated
Term Note June 30, 2016 (Unaudited) September 30, 2015 June 30, 2016 (Unaudited) September 30, 2015
Quarterly
Principal and Interest
Payment Amounts
Notes
Term Note $ —
$ 5.8
4.96 % 4.96 % $ 345,243
1, 2

~~Notes~~

~~1 - Maturity date extended to March 2020 from April 2017.~~

~~2 - Variable interest~~ rate of ~~3.5% over the three-month LIBOR was replaced by a fixed per annum interest rate equal to 4.96%~~3.02%.

~~Table of Contents~~Restrictive Covenants

~~Restrictive Covenants~~

~~We are~~The Revolving Loan is subject to ~~a number of covenants and restrictions in connection with our credit facilities, including:~~

~~Providing FNBO with current and accurate financial statements;~~

~~Maintaining~~ certain financial ~~ratios including minimum working capital~~covenants as set forth in the Credit Agreement. The most significant financial covenants require us to maintain a fixed charge coverage ratio of no less than 1.25:1.00 and ~~debt service~~a current ratio of no less than 1.50:1.00. Our fixed charge coverage ~~ratio;~~

~~Maintaining adequate insurance;~~

~~Making, or allowing to be made, any significant change in our business or tax structure;~~

~~Limiting~~ratio measures our ability to ~~make distributions~~pay our fixed expenses. Our current ratio measures our liquidity and ability to ~~members;~~pay short-term and long-term obligations.

~~Maintaining a threshold of capital expenditures.~~

As of June 30, ~~2016,~~2017, we were in compliance with our loan covenants.

Significant Accounting Policies and Estimates

We describe our significant accounting policies in Note 1, Summary of Significant Accounting Policies, of the Notes to ~~Consolidated~~ Financial Statements included in our Annual Report on Form 10-K for the fiscal year ended September 30, ~~2015.~~2016. We discuss our critical accounting estimates in Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations, in our Annual Report on Form 10-K for the fiscal year ended September 30, ~~2015.~~2016. There has been no significant change in our significant accounting policies or critical accounting estimates since the end of our ~~2015~~2016 fiscal year.

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

We are exposed to the impact of market fluctuations associated with commodity prices as discussed below. We use derivative financial instruments as part of an overall strategy to manage market risk. We use cash, futures and option contracts to hedge changes to the commodity prices of corn and ethanol. We do not enter into these derivative financial instruments for trading or speculative purposes, nor do we designate these contracts as hedges for accounting purposes pursuant to the requirements of Generally Accepted Accounting Principles ("GAAP").

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Commodity Price Risk

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.

We enter into fixed price contracts for corn purchases on a regular basis. It is our intent that, as we enter into these contracts, we will use various hedging instruments (puts, calls and futures) to maintain a near even market position. For example, if we have 1 million bushels of corn under fixed price contracts we would generally expect to enter into a short hedge position to offset our price risk relative to those bushels we have under fixed price contracts. Because our ethanol marketing company (RPMG) is selling substantially all of the gallons it markets on a spot basis we also include the corn bushel equivalent of the ethanol we have produced that is inventory but not yet priced as bushels that need to be hedged.

Although we believe our hedge positions will accomplish an economic hedge against our future purchases, they are not designated as hedges for accounting purposes, which would match the gain or loss on our hedge positions to the specific commodity purchase being hedged. We use fair value accounting for our hedge positions, which means as the current market price of our hedge positions changes, the gains and losses are immediately recognized in our cost of sales. The immediate recognition of hedging gains and losses under fair value accounting can cause net income to be volatile from quarter to quarter and year to year due to the timing of the change in value of derivative instruments relative to the cost of the commodity being hedged. However, it is likely that commodity cash prices will have the greatest impact on the derivatives instruments with delivery dates nearest the current cash price.

As of June 30, ~~2016~~2017, we had no fixed corn purchase contracts and we had corn futures and option contracts for approximately ~~1.97~~3.02 million bushels of corn. As of June 30, ~~2016~~2017 we had an unrealized ~~gain~~loss of approximately ~~$606,000~~$127,000 related to our corn futures and option contracts.

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It is the current position of our ethanol marketing company, RPMG, that under current market conditions selling ethanol in the spot market will yield the best price for our ethanol. RPMG will, from time to time, contract a portion of the gallons they market with fixed price contracts.

We estimate that our expected corn usage will be between 18 million and 22 million bushels per calendar year for the production of approximately 50 million to 5961 million gallons of ethanol. As corn prices move in reaction to market trends and information, our income statement will be affected depending on the impact such market movements have on the value of our derivative instruments.

A sensitivity analysis has been prepared to estimate our exposure to corn, natural gas and ethanol price risk. Market risk related to our corn, natural gas and ethanol prices 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, and our average ethanol sales price as of June 30, ~~2016,~~2017, net of the forward and future contracts used to hedge our market risk for corn, natural gas and ethanol. The volumes are based on our expected use and sale of these commodities for a one year period from June 30, ~~2016.~~2017. The results of this analysis, which may differ from actual results, are as follows:


	Estimated Volume Requirements for the next 12 months (net of forward and futures contracts)	Unit of Measure	Hypothetical Adverse Change in Price		Approximate Adverse Change to Income			Estimated Volume Requirements for the next 12 months (net of forward and futures contracts)	Unit of Measure	Hypothetical Adverse Change in Price		Approximate Adverse Change to Income
Ethanol	58,575,000	Gallons	10	%	$	(8,786,250	)	60,350,000	Gallons	10	%	$	(8,449,000	)
Corn	21,300,000	Bushels	10	%	$	(6,062,000	)	17,350,000	Bushels	10	%	$	(6,072,000	)
Natural gas	1,664,000	MMBtu	10	%	$	(316,000	)	1,664,000	MMBtu	10	%	$	(483,000	)

Item 4. Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports that we file or submit pursuant to the Securities Exchange Act of 1934 (the "Exchange Act") is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow for timely decisions regarding required disclosures.

Our management, including our President and Chief Executive Officer (the principal executive officer), Gerald Bachmeier, along with our Chief Financial Officer, (the principal financial officer), Jodi Johnson, have reviewed and evaluated the effectiveness

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of our disclosure controls and procedures as of June 30, ~~2016~~2017. Based on this review and evaluation, these officers believe that our disclosure controls and procedures are effective in ensuring that material information related to us is recorded, processed, summarized and reported within the time periods required by the forms and rules of the Securities and Exchange Commission.

For the fiscal quarter ended June 30, ~~2016~~2017, there has been no change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

From time to time in the ordinary course of business, we may be named as a defendant in legal proceedings related to various issues, including without limitation, workers' compensation claims, tort claims, or contractual disputes. We are not currently involved in any material legal proceedings.

Item 1A. Risk Factors

The following risk factors are provided due to material changes from the risk factors previously disclosed in our annual report on Form 10-K. The risk factors set forth below should be read in conjunction with the risk factors section and the Management's Discussion and Analysis section for the fiscal year ended September 30, ~~2015~~,2016, included in our annual report on Form 10-K.

Distillers grains demand and prices may be negatively impacted by the Chinese ~~antidumping~~anti-dumping and ~~countervailing duty investigation~~anti-subsidy duties. China iswas historically the world's largest importer of distillers grains produced in the United States. On January 12, 2016, the Chinese government announced that it ~~will~~would commence an ~~antidumping~~anti-dumping and countervailing duty investigation related to distillers

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grains imported from the United States. ~~During~~In January 2017, the Chinese finalized the anti-dumping and anti-subsidy duties. The anti-dumping duties range from 42.2% to 53.7%. The final anti-subsidy tariffs range from 11.2% to 12%. Both during the investigation ~~it is likely that~~and after the announcement of the duties, distillers grains exports to China will be reduced, regardless of whether China ends up instituting a tariff on distillers grains produced in the United States and exported to China. Further, if China introduces a tariff on distillers grains produced in the United States and exported to China, it could remove the largest source of export demand for distillers grains. This antidumping and countervailing duty investigation could significantly decrease demand and prices ~~for~~have been negatively impacted. While we expect China to continue to import some distillers grains, ~~produced in~~we do not anticipate that the ~~United States.~~imports will be at the same level as previous years which could continue to negatively impact market distillers grains demand and prices. This potential reduction in demand along with lower domestic corn prices could negatively impact our ability to profitably operate the ethanol plant.

~~Additional Iranian oil may enter the market and~~If Brazil implements a tariff on U.S. produced ethanol, it could negatively impact ~~gasoline and~~market ethanol prices. ~~Recently,~~Brazil is currently the largest importer of ethanol produced in the United States. However, recently the Brazilian government has discussed implementing a tariff on ethanol produced in the United States ~~lifted sanctions~~and exported to Brazil. Due to current ethanol production levels in the United States, the market price of ethanol has been supported by exports of ethanol. Further, additional ethanol capacity is being constructed which may further increase the domestic supply of ethanol. If Brazil implements a tariff on ~~Iran~~U.S. ethanol, it could lead to an oversupply of ethanol in the United States which ~~previously prevented Iranian oil from being imported into~~could negatively impact domestic ethanol prices. Ethanol prices may decrease to a level which does not allow us to operate the ethanol plant profitably.

Many ethanol producers are expanding their production capacity which could lead to an oversupply of ethanol in the United States. Recently, many ethanol producers have commenced projects to expand their ethanol production capacities. These expansions could result in a significant increase in the supply of ethanol in the United States. ~~Further,~~Currently, ethanol prices are supported by ethanol exports which may not continue at their current levels. While many ~~other nations had similar bans on Iranian oil which prevented Iran from exporting a significant~~in the ethanol industry are working to increase the amount of ~~oil into~~ethanol that is used domestically, specifically in the ~~world market. However,~~form of E15, which contains 15% ethanol as ~~a result~~compared to the 10% ethanol which is used in most current blends, adoption of E15 has not been as rapid as most ethanol producers would like. Also, the ~~lifting~~additional ethanol capacity which is being constructed may exceed current domestic and export demand. If an oversupply of ~~sanctions, additional Iranian oil may be introduced into the world market which~~ethanol were to occur, it could result in lower oil prices. These Iranian oil exports come at a time when oil prices are very low and world supplies of oil are high. The lower priced oil has resulted in lower priced gasoline, which has negatively ~~impacted~~impact domestic ethanol prices ~~and demand. If these lower gasoline prices continue, it~~which could negatively impact our ability to profitably operate the ethanol plant.

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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures.

None.

Item 5. Other Information

None.

Item 6. Exhibits.


(a)	The following exhibits are filed as part of this report.



Exhibit No.			Exhibits
31.1			Certificate Pursuant to 17 CFR 240.13a-14(a)*
31.2			Certificate Pursuant to 17 CFR 240.13a-14(a)*
32.1			Certificate Pursuant to 18 U.S.C. Section 1350*
32.2			Certificate Pursuant to 18 U.S.C. Section 1350*
101			The following financial information from Red Trail Energy, LLC's Quarterly Report on Form 10-Q for the quarter ended June 30, ~~2016,~~2017, formatted in XBRL (eXtensible Business Reporting Language): (i) Condensed Balance Sheets as of June 30, ~~2016~~2017 and September 30, ~~2015,~~2016, (ii) Statements of Operations for the three and nine months ended June 30, ~~2016~~2017 and ~~2015,~~2016, (iii) Statements of Cash Flows for the nine months ended June 30, ~~2016~~2017 and ~~2015,~~2016, and (iv) the Notes to Unaudited Condensed Financial Statements.**

(*) Filed herewith.

(**) Furnished herewith.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



		RED TRAIL ENERGY, LLC

Date:	August ~~11, 2016~~14, 2017	/s/ Gerald Bachmeier
		Gerald Bachmeier
		President and Chief Executive Officer
		(Principal Executive Officer)

Date:	August ~~11, 2016~~14, 2017	/s/ Jodi Johnson
		Jodi Johnson
		Chief Financial Officer
		(Principal Financial and Accounting Officer)

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	Page Number
PART I. FINANCIAL INFORMATION	3
Item 1. Financial Statements	3
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations	1415
Item 3. Quantitative and Qualitative Disclosures about Market Risk	23
Item 4. Controls and Procedures	24
PART II. OTHER INFORMATION	2425
Item 1. Legal Proceedings	2425
Item 1A. Risk Factors	2425
Item 2. Unregistered Sales of Equity Securities	2526
Item 3. Defaults Upon Senior Securities	2526
Item 4. Mine Safety Disclosures	2526
Item 5. Other Information	2526
Item 6. Exhibits	2526
SIGNATURES	2627



Derivatives not designated as hedging instruments:

Balance Sheet - as of June 30, 2016 (unaudited)	Asset		Liability
Commodity derivative instruments, at fair value	$	618,871	$	—
Total derivatives not designated as hedging instruments for accounting purposes	$	618,871	$	—

Balance Sheet - as of September 30, 2015	Asset		Liability
Commodity derivative instruments, at fair value	$	—	$	279,362
Total derivatives not designated as hedging instruments for accounting purposes	$	—	$	279,362



Scheduled debt maturities for the twelve months ending June 30	Totals

2016	$	2,592
2017	2,612
2018	2,632
2019	945
Total	$	8,781



	Nine Months Ended June 30, 2016 (Unaudited)			Nine Months Ended June 30, 2015 (Unaudited)
Statement of Operations Data	Amount		%	Amount		%
Revenues	$	78,245,021	100.00	$	75,175,964	100.00
Cost of Goods Sold	72,086,958		92.13	71,526,192		95.15
Gross Profit	6,158,063		7.87	3,649,772		4.85
General and Administrative Expenses	1,904,987		2.43	1,604,322		2.13
Operating Income	4,253,076		5.44	2,045,450		2.72
Other Income	560,634		0.72	1,288,271		1.71
Net Income	$	4,813,710	6.15	$	3,333,721	4.43



	Outstanding Balance (Millions)				Interest Rate				Estimated
Term Note	June 30, 2016 (Unaudited)		September 30, 2015		June 30, 2016 (Unaudited)		September 30, 2015		Quarterly Principal and Interest Payment Amounts		Notes
Term Note	$	—	$	5.8	4.96	%	4.96	%	$	345,243	1, 2