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

As of November 13, 2020,May 14, 2021, we had 64,560 membership units outstanding. Following the end of our first fiscal quarter of 2020, we closed on the unit repurchase transaction with Steve Retterath and the membership units previously held by Mr. Retterath have been retired.

The accompanying unaudited condensed financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. 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 year ended December 31, 2019,2020, contained in the Company's annual report on Form 10-K for 2019.2020.

In the opinion of management, the interim condensed financial statements reflect all adjustments considered necessary for fair presentation. The adjustments made to these statements consist only of normal recurring adjustments.

Homeland Energy Solutions, LLC (an Iowa Limited Liability Company) is located near Lawler, Iowa and was organized to pool investors for a 100 million gallon ethanol plant with distribution primarily throughout the United States. The Company has capacity to produce in excess of 190 million gallons annually and sells distillers dried grains and corn oil as byproducts of ethanol production.

Homeland Energy Solutions, LLC is organized as an Iowa limited liability company. The members' liability is limited as specified in Homeland Energy Solutions' operating agreement and pursuant to the Iowa Revised Uniform Limited Liability Company Act.

Management uses estimates and assumptions in preparing these financial statements in accordance with United States 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. Actual results could differ from those estimates.

The Company maintains its accounts primarily at one financial institution. At various times, the Company's cash balances may exceed amounts insured by the Federal Deposit Insurance Corporation. The Company has not experienced losses in such accounts. Also included in cash and cash equivalents are highly liquid investments that are readily convertible into known amounts of cash, which are subject to an insignificant risk of change in value due to interest rate, quoted price or penalty on withdrawal and have aan original maturity of three months or less.

Investments bought and held principally for the purpose of selling them in the near term are classified as trading securities. Trading securities are measured at fair value using prices obtained from pricing services. Any interest, dividends, and unrealized or realized gains and losses on the trading securities are recorded as part of other income.

At September 30, 2020, trading securities consisted of short term bond mutual funds with an approximate cost of $10,404,000March 31, 2021 and fair value of $10,446,000. At December 31, 2019, trading securities consisted of corporate bonds and short term bond mutual funds with an approximate cost of $42,370,000 and fair value of $42,508,000. For the three and nine months ended September 30, 2020, the Company recorded interest, dividend and net realized and unrealized gains from these investments of approximately $37,000 and $218,000, respectively, included in other income on the statement of operations.held no trading securities. During the same time period of 2019,three months ended March 31, 2021 and 2020, the Company recorded interest, dividends and net unrealized gains from these investmentstrading securities of none and approximately $397,000 and $1,670,000, respectively.$319,000.

The Board of Directors voted to set aside up to $30 million in trading securities to be used by the Company for the repurchase of 25,860 membership units per the terms of an agreement with Mr. Retterath entered into on June 13, 2013 with the Company. These trading securities were used in April 2020 to repurchase the 25,860 membership units from Mr. Retterath.

Credit sales are made primarily to two customers and no collateral is required. The Company carries these accounts receivable at original invoice amount with no allowance for doubtful accounts due to the historical collection rates on these accounts.

On June 29, 2017, the Company amended and restated the Master Loan Agreement with Home Federal Savings Bank ("Home Federal"), amending the term revolving loan to provide funding to operate the plant and establishing a term loan to help fund the Company's $42 million expansion project. In return, the Company entered into agreements providing Home Federal a security interest in substantially all personal property located on Company property. The Company currently has 1 loan with Home Federal, a term revolving loan.

Under the terms of the Second Amended and Restated Second Supplement to the Master Loan Agreement, dated June 29, 2017,November 6, 2020, the Company has a $30$50 million term revolving loan which has a maturity date of December 31, 2022.November 6, 2025. Interest on the term revolving loan is due monthly and accrues at a rate equal to Prime Rate less 60 basis points, 2.65% on September 30, 2020.March 31, 2021. There was $9approximately $12 million outstanding on the term revolving loan and $21approximately $38 million available to be drawn as of September 30, 2020March 31, 2021 and 0 balance outstanding and $30$50 million available as of December 31, 2019.

During the term of the loans, the Company is subject to certain financial covenants at various times calculated monthly, quarterly or annually, including restriction of the payment of dividends and capital expenditures and maintenance of certain financial ratios including the minimum working capital and a fixed charge ratio as defined by the Master Loan Agreement. Failure to comply with the protective loan covenants or maintain the required financial ratios may cause acceleration of the outstanding principal balances on the loans and/or the imposition of fees, charges or penalties. The Company is in compliance with all financial covenants as of September 30, 2020.March 31, 2021.

The Company has purchased corn and materials from members of its Board of Directors who own or manage elevators or are local producers of corn. Purchases during the three and nine months ended September 30, 2020March 31, 2021 totaled approximately $644,000 and $1,815,000, respectively,$2,036,000 and during the three and nine months ended September 30, 2019March 31, 2020 totaled approximately $1,016,000 and $2,995,000, respectively. There is 0 amounts$662,000. Amounts due to these members were $127,841 and $28,078 at September 30, 2020March 31, 2021 and December 31, 2019,2020, respectively.

The Company has entered into a marketing agreement with RPMG to sell all denatured fuel ethanol produced at the plant at a mutually agreed on price, less commission and transportation charges. As of September 30, 2020,March 31, 2021, the Company had no commitments to sell approximately 3 million gallons of ethanol at fixed prices and 3945 million of its produced gallons of ethanol at basis price levels indexed against exchanges for delivery through December 31, 2020.June 30, 2021.

The Company has entered into a marketing agreement with RPMG to sell all corn oil produced at the plant at a mutually agreed on price, less marketing fees and transportation charges. As of September 30, 2020,March 31, 2021, the Company had commitments to sell

The Company also has an investment in RPMG, included in other assets, totaling approximately $2,522,000$2,567,000 and $2,422,000$2,527,000 as of September 30, 2020March 31, 2021 and December 31, 2019,2020, respectively.

Sales and marketing fees related to the agreements in place for the three and nine months ended September 30,March 31, 2021 and 2020 and 2019 were approximately as follows:

At September 30, 2020,March 31, 2021, the Company had approximately $8,429,000$28,744,000 in outstanding priced corn purchase commitments for bushels at various prices and approximately 3,023,0006,705,000 bushels of basis contracts through SeptemberOctober 2022 accounted for under the normal purchase exclusion.

The Company has commitments for minimum purchases of various utilities such as natural gas and electricity over the next 12 months totaling approximately $3,527,000$496,000 accounted for under the normal purchase exclusion.

As of September 30, 2020,March 31, 2021, the Company had 0 natural gas locked in placeat fixed prices. As of March 31, 2020, approximately 966,0002,887,500 decatherms of natural gas was locked into place at fixed prices through December 31, 2020 accounted for under the normal purchase exclusion. As of September 30, 2019, approximately 5,069,500 decatherms of natural gas was locked into place at fixed prices through December 31, 2020.

A lease exists when a contract conveys to a party the right to control the use of identified property, plant, or equipment for a period of time in exchange for consideration. The Company recognized a lease liability at the lease commencement date, as the present value of future lease payments, using an estimated rate of interest that the Company would pay to borrow equivalent funds on a collateralized basis. A lease asset is recognized based on the lease liability value and adjusted for any prepaid lease payments, initial direct costs, or lease incentive amounts. The lease term at the commencement date includes any renewal options or termination options when it is reasonably certain that the Company will exercise or not exercise those options, respectively.

The Company leases rail cars and rail moving equipment with original terms up to 7 years. The Company is obligated to pay costs of insurance, taxes, repairs and maintenance pursuant to the terms of the leases. These costs are in addition to regular lease payments and are not included in lease expense. Rent expense incurred for the operating leases during the three and nine months ended September 30, 2020March 31, 2021 was approximately $442,000 and $1,330,000, respectively,$461,000 and for the same period in 20192020 was approximately $460,000 and $1,314,000, respectively.$444,000. The lease agreements have maturity dates ranging from March 2022 to October 2025. The weighted average remaining life of the lease term for these leases was 2.141.64 years as of September 30, 2020.March 31, 2021.

The discount rate used in determining the lease liability for each individual lease was the Company's estimated incremental borrowing rate of 4.79%. The right-of-use asset operating lease, included in other assets, and operating lease liability, included in current and long term liabilities was $3,514,323 and $4,678,365$2,714,783 as of September 30, 2020 and DecemberMarch 31, 2019, respectively.2021.

At September 30, 2020,March 31, 2021, the Company had the following approximate minimum rental commitments under non-cancelable operating leases for the twelve month period ended September 30:March 31:

The Company's activities expose it to a variety of market risks, including the effects of changes in commodity prices. These financial exposures are monitored and managed by the Company as an integral part of its overall risk-management program. The Company's risk management program focuses on the unpredictability of financial and commodities markets and seeks to reduce the potentially adverse effects that the volatility of these markets may have on its operating results.

To reduce price risk caused by market fluctuations, the Company generally follows a policy of using exchange traded futures and options contracts to reduce its net position of merchandisable agricultural commodity inventories and forward cash purchase and sales contracts and uses exchange traded futures and options contracts to reduce price risk. Exchange-traded

The Company uses futures or options contracts to fix the purchase price of anticipated volumes of corn to be purchased and processed in a future month. The Company's plant will grind approximately 65 million bushels of corn per year.  Over the next twelve months, the Company has hedged and anticipates hedging between 5% and 25% of its anticipated annual grind.  At September 30, 2020,March 31, 2021, the Company has hedged portions of its anticipated monthly purchases for corn averaging approximately 10%20% of its anticipated monthly grind over the next twelve months.

The following table represents the approximate amount of realized/unrealized gains (losses) and changes in fair value recognized in earnings on commodity contracts for the three and nine months ending September 30,March 31, 2021 and 2020 and 2019 and the fair value of derivatives as of September 30, 2020March 31, 2021 and December 31, 2019:2020:

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In determining fair value, the Company uses various methods including market, income and cost approaches. Based on these approaches, the Company often utilizes certain assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and/or the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market-corroborated, or generally unobservable inputs. The Company utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. Based on the observability of the inputs used in the valuation techniques, the Company is required to provide the following

Level 1: Valuations for assets and liabilities traded in active markets from readily available pricing sources for market transactions involving identical assets or liabilities.

Level 2: Valuations for assets and liabilities traded in less active dealer or broker markets. Valuations are obtained from third-party pricing services for identical or similar assets or liabilities.

Level 3: Valuations incorporate certain assumptions and projections in determining the fair value assigned to such assets or liabilities.

A description of the valuation methodologies used for instruments measured at fair value, including the general classification of such instruments pursuant to the valuation hierarchy, is set forth below:

The following table summarizes financial assets and financial liabilities measured at fair value on a recurring basis as of September 30, 2020March 31, 2021 and December 31, 2019,2020, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value:

The Company's financial assets and liabilities not recorded at fair value, for which carrying value approximates fair value, consists of cash and cash equivalents, accounts receivable, accounts payable, accrued expenses, and term revolver debt. As of December 31, 2019, carrying value of long term debt carried at book value of $18,000,000 at December 31, 2019, had an estimated fair value of approximately $17,965,000.

In relation to the repurchase agreement discussed in Note 4, on August 1, 2013 Mr. Retterath filed a lawsuit against the Company along with several directors, the Company's former CEO, former CFO, COO, a former director and the Company's outside legal counsel in Florida state court. In August 2016, this lawsuit was voluntarily dismissed without prejudice by the Retteraths. On August 14, 2013, the Company filed a lawsuit in Iowa state court to enforce the repurchase agreement the Company entered into with Mr. Retterath. No distributions have been paid to Mr. Retterath since the time of the original expected closing date of August 1, 2013. On June 15, 2017, the Iowa Court ruled in favor of Homeland that the repurchase agreement was valid and directed Mr. Retterath to perform his obligations under the repurchase agreement by August 1, 2017. Mr. Retterath subsequently filed various motions with the Iowa Court and was granted a stay regarding his obligation to perform the repurchase agreement while the court considered his post trial motions. On May 7, 2018, the Iowa Court denied Mr. Retterath's motions for a new trial and to reconsider the Iowa Court's prior ruling. In February 2020, the Iowa Supreme Court ruled in favor of the Company that the repurchase agreement was valid. In April 2020, the Company closed the repurchase of the membership units held by Mr. Retterath.

    This report contains forward-looking statements that involve future events, our future performance and our expected future operations and actions. In some cases you can identify forward-looking statements by the use of words such as "may," "will," "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 reasons described in this report or in our Annual Report on Form 10-K for the fiscal year ended December 31, 2019.2020. We are not under any duty to update the forward-looking statements contained in this report. We cannot guarantee future results, levels of activity, performance or achievements. We caution you not to put undue reliance on any forward-looking statements, which speak only as of the date of this report. You should read this report and the documents that we reference in this report and have filed as exhibits, completely and with the understanding that our actual future results may be materially different from what we currently expect. We qualify all of our forward-looking statements by these cautionary statements.

    Homeland Energy Solutions, LLC (referred to herein as "we," "us," the "Company," or "Homeland") is an Iowa limited liability company. Homeland was formed on December 7, 2005 for the purpose of pooling investors for the development, construction and operation of a 100 million gallon per year ethanol plant located near Lawler, Iowa. We began producing ethanol and distiller grains at the plant in April 2009. We completed installation of corn oil extraction equipment and commenced selling corn oil during our fourth quarter of 2011. During our fourth quarter of 2017, we completed a plant expansion project. The ethanol plant is now capable of operating at a rate in excess of 190 million gallons of ethanol per year.

    The following table shows the results of our operations and the percentage of revenues, cost of goods sold, operating expenses and other items to total revenues in our statement of operations for the three months ended September 30, 2020March 31, 2021 and 2019:2020:

    Our total revenue for our thirdfirst quarter of 20202021 was approximately 5% less48% more than our total revenue for our thirdfirst quarter of 20192020 due primarily to decreasedincreased average prices for our products.

    For our thirdfirst quarter of 2020,2021, our total ethanol revenue was approximately 3% less50% more than our thirdfirst quarter of 20192020 due to lower average prices we received for our ethanol during the 2020 period, partially offset by moreas well as slightly fewer gallons sold in 2020.

    The average price per gallon we received for our ethanol during our thirdfirst quarter of 20202021 was approximately 6% less45% more than the average price we received for our ethanol during our thirdfirst quarter of 2019.2020. Management attributes this decreaseincrease in the average price we received for our ethanol with lower market corn prices and lowerhigher market gasoline prices, both of which impactimpacts ethanol prices, during our thirdfirst quarter of 20202021 compared to the same period of 2019.2020. Management believes that the COVID-19 pandemic impacted gasoline demand during the 2020 period during the summer driving season.period. Management anticipates that the impact of the COVID-19 pandemic willmay continue for the rest of our 2020 fiscal year and potentially beyond, especially if additional travel restrictions are implemented later in our 20202021 fiscal year.

    We sold approximately 3% more gallons of ethanol during our thirdfirst quarter of 20202021 compared to the same period of 2019 despite market conditions which have impacted demand for ethanol. During times when ethanol prices2020. Management attributes this increase to increased travel as people begin to travel more as restrictions on travel due to the COVID-19 pandemic are low, we are focusing on operating the ethanol plant as efficiently as possible in order to maximize the amount of ethanol we can produce per bushel of corn ground.relaxing.

    

    Our total distiller grains revenue was approximately 12% less39% more during our thirdfirst quarter of 20202021 compared to the same period of 2019,2020, primarily due to decreasedan increased average price of distiller grains sold, as well as lower averagepartially offset by fewer dried distiller grains prices.produced. We sold approximately 10%2% fewer tons of distiller grains during our thirdfirst quarter of 20202021 compared to the same period of 20192020 due to reduced production at the ethanol plant, overall, along with increased production of corn oil. When we produce more pounds of corn oil, it reduces the volume of distiller grains we have available to sell. We primarily sell our distillers grains in the dried form. The average price we received for our dried distiller grains was approximately 3% lower42% higher during our thirdfirst quarter of 20202021 compared to the same period of 2019.2020. Management anticipates that distiller grains prices will remain steady during the rest of our 20202021 fiscal year due to anticipated stable distiller grains demand.

    Our total corn oil revenue was approximately 5% lower64% higher for our thirdfirst quarter of 20202021 compared to the same period of 20192020 due to decreasedan increased average selling price per pound of corn oil during the 2020 period, partially offset by a slight increase in corn oil pounds sold.2021 period. We sold approximately 1% more pounds of corn oil during our thirdfirst quarter of 20202021 compared to the same period of 20192020 primarily because of increased corn oil extraction efficiency during the 20202021 period. The average price we received for our corn oil was approximately 6% lower63% higher during our thirdfirst quarter of 20202021 compared to the same period of 20192020 due to decreasedincreased demand in the corn oil market. Management anticipates that corn oil prices will decreaseincrease slightly for the rest of our 20202021 fiscal year since biodiesel production is typically lowerhigher during the wintersummer months and corn oil is frequently used as the feedstock to produce biodiesel.

    Our total cost of goods sold was approximately 10% less29% more for our thirdfirst quarter of 20202021 compared to the same period of 2019.2020. Our cost of goods sold related to corn, without taking into account derivative instruments, was approximately 21% lessmore during our thirdfirst quarter of 2021 compared to our first quarter of 2020 compared to our third quarter of 2019 due to using less bushels of corn as well as lowerhigher average corn costs per bushel.bushel, partially offset by fewer bushels of corn ground. We used approximately 5% fewer bushels of corn during our thirdfirst quarter of 20202021 compared to the same period of 20192020 due to reduced overall production at the ethanol plant. Our average cost per bushel of corn was approximately 17% lower27% higher during our thirdfirst quarter of 2021 compared to our first quarter of 2020 compared to our third quarter of 2019 due primarily to ample corn supplies in our market along with decreasedincreased corn demand. Management anticipates that corn costs will remain lowerhigher unless current market conditions persistchange and corn demand is higherlower due to increased ethanol production.corn supply from new crop corn.

    We experienced decreasedincreased natural gas costs during our thirdfirst quarter of 20202021 compared to the same period of 20192020 primarily due to decreased usage during the 2020 period, as well as slightly lowerhigher average costs per MMBtu of natural gas used.used, partially offset by decreased usage during the 2021 period. During our thirdfirst quarter of 2020,2021, our average delivered cost per MMBtu of natural gas was approximately 6% lower

    We engage in risk management activities that are intended to fix the purchase price of the corn and natural gas we require to produce ethanol, distiller grains and corn oil. During our thirdfirst quarter of 2020,2021, we experienced combined realized and unrealized losses of approximately $741,000$1.35 million related to our corn and natural gas derivative instruments which increased our cost of goods sold. During our thirdfirst quarter of 2019,2020, we had combined realized and unrealized gains of approximately $4.53$2.60 million which decreased our cost of goods sold related to our corn and natural gas derivative instruments. We recognize the

gains or losses that result from changes in the value of our corn and natural gas derivative instruments in cost of goods sold as the changes occur.

    We had less interest expense during our thirdfirst quarter of 20202021 compared to the same period of 20192020 due to having less outstanding debt. We had lessmore other income during our thirdfirst quarter of 20202021 compared to the same period of 20192020 due to lessmore gains on our equity method investments in the 20202021 period which are also involved in the ethanol industry and experienced decreasedincreased profitability in 2020.

    Our accounts payable was less at September 30, 2020March 31, 2021 compared to December 31, 20192020 due primarily to having less deferred corn payments at September 30, 2020 and lower average corn costs per bushel. As of September 30, 2020, we no longer had $30 million owed to Mr. Retterath related to the unit repurchase which was closed in April 2020.March 31, 2021. Our accrued expenses were less at September 30, 2020March 31, 2021 compared to December 31, 20192020 due to decreased employee bonuses pursuant to employee compensation plans accrued at December 31, 2019. The current portion of our long-term debt was less at September 30, 2020 compared to December 31, 2019 due to payments we made on our long-term debt during our second and third quarters of 2020.

months and beyond. However, should we experience unfavorable operating conditions in the future, we may have to secure additional debt or equity financing for working capital or other purposes.

    Our operations provided lessused more cash during our first ninethree months of 20202021 compared to the same period of 20192020 due primarily to less net income and decreased cash flow from changes in accounts receivable, inventory, and accounts payable during the 2020 period.2021 period, partially offset by net income.

    Our investing activities providedused more cash during the 20202021 period because we redeemed $32 million in trading securities during that time, offset by moreof increased payments for construction in progress during the 20202021 period compared to the 20192020 period.

    Our financing activities usedprovided more cash during the 20202021 period because we completed the Retterath unit repurchase during the 2020 period. We also made $9 million in loan payments during the 2020 period. During the first nine months of 2019 we paid approximately $4.8 million in distributions.proceeds from long-term borrowings.

    On June 29, 2017, we entered into a new $30 million term loan (the "Term Loan") and increased and extended our existing revolving loan (the "Revolving Loan") with Home Federal Savings Bank ("Home Federal"). Each loanThe Revolving Loan is described below. On November 6, 2020, we entered into an amendment of our credit facilities.

    We have a $30$50 million term revolving loan which has a maturity date of December 31, 2022.November 6, 2025. Interest on the Revolving Loan accrues at Prime Rate less 60 basis points. We are required to make monthly payments of interest until the maturity date on December 31, 2022,November 6, 2025, on which date the unpaid principal balance of the Revolving Loan becomes due. We agreed to pay a fee of 30 basis points on a per annum basis on the unused portion of the Revolving Loan payable on a quarterly basis. As of September 30, 2020,March 31, 2021, we had $9$12 million outstanding on the Revolving Loan and $21$38 million available to be drawn. Interest accrued on the Revolving Loan as of September 30, 2020March 31, 2021 at a rate of 2.65% per year.

    In connection with the Master Loan Agreement, we are required to comply with certain debt covenants and financial ratios. We agreed to a debt service coverage ratio of 1:15 to 1:00 and a minimum working capital covenant of $30 million.  We are permitted to pay distributions to our members up to 100% of our net income for the year in which the distributions are paid provided that immediately prior to the distribution and after giving effect to the distribution, no default exists and we are in

    As of September 30, 2020,March 31, 2021, we were in compliance with all of our debt covenants and financial ratios. Management anticipates that we will be in compliance with all of our debt covenants and financial ratios for at least the next 12 months.

    Failure to comply with the loan covenants or to maintain the required financial ratios may cause acceleration of any future outstanding principal balances on the loans and/or the imposition of fees, charges or penalties. Any acceleration of the debt financing or imposition of the fees, charges or penalties may restrict or limit our access to the capital resources necessary to continue plant operations.

    Should we default on any of our obligations pursuant to the Home Federal loans, Home Federal may terminate its commitment to provide us funds and declare any future unpaid principal balance of the loans, plus accrued interest, immediately due and payable. Events of default include the failure to make payments when due, our insolvency, any material adverse change in our financial condition or the breach of any of the covenants, representations or warranties we have made in the loan agreements.

    The Company evaluates its contracts to determine whether the contracts are derivative instruments. Certain contracts that literally meet the definition of a derivative may be exempted from derivative accounting as normal purchases or normal sales. Normal purchases and normal sales are contracts that provide for the purchase or sale of something other than a financial instrument or derivative instrument that will be delivered in quantities expected to be used or sold over a reasonable period in the normal course of business. Contracts that meet the requirements of normal purchases or sales are documented as normal and exempted from the accounting and reporting requirements of derivative accounting.

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

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

    Realized and unrealized gains and losses related to derivative contracts related to corn and natural gas are included as a component of cost of goods sold and derivative contracts related to ethanol are included as a component of revenues in the accompanying financial statements. The fair values of all contracts with the same counter-party are presented net on the accompanying balance sheet as derivative instruments net of cash due from/to broker.

    Revenue from the sale of the Company's products is recognized at the time control transfer to the customers. This generally occurs upon shipment, loading of the goods or when the customer picks up the goods. Interest income is recognized as earned. Shipping costs incurred by the Company in the sale of ethanol and distiller grains are not specifically identifiable and as a result, revenue from the sale of ethanol and distiller grains is recorded based on the net selling price reported to the Company from the marketer.

    We are exposed to the impact of market fluctuations associated with commodity prices as discussed below. We have no exposure to foreign currency risk as all of our business is conducted in U.S. Dollars. We use derivative financial instruments as part of an overall strategy to manage market risk. We use cash, futures and option contracts to hedge changes to the

commodity prices of corn, natural gas and ethanol. We do not enter into these derivative financial instruments for trading or speculative purposes, nor do we designate these contracts as hedges for accounting purposes.

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

    As of September 30, 2020,March 31, 2021, we had price protection in place for approximately 10%20% of our anticipated corn needs, 19%none of our natural gas needs and none1% of our ethanol sales for the next 12 months. A sensitivity analysis has been prepared to estimate our exposure to ethanol, corn and natural gas price risk. Market risk related to these factors is estimated as the potential change in income resulting from a hypothetical 10% adverse change in the average cost of our corn and natural gas prices and average ethanol price as of September 30, 2020,March 31, 2021, net of the forward and future contracts used to hedge our market risk for corn and natural gas usage requirements. The volumes are based on our expected use and sale of these commodities for a one year period from September 30, 2020.March 31, 2021. The results of this analysis, which may differ from actual results, are as follows: