10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended July 31, 2016

OR

☐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 000-51277

GRANITE FALLS ENERGY, LLC

(Exact name of registrant as specified in its charter)

Minnesota	41-1997390
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
15045 Highway 23 SE, Granite Falls, MN 56241-0216
(Address of principal executive offices)
(320) 564-3100
(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.

☒Yes    ☐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).

☒Yes    ☐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 ☐	Accelerated Filer  ☐
Non-Accelerated Filer ☒	Smaller Reporting Company ☐

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

☐Yes    ☒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 September 14, 2016 there were 30,606 membership units outstanding.

INDEX

	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	14
Item 3. Quantitative and Qualitative Disclosures about Market Risk	33
Item 4. Controls and Procedures	34
PART II. OTHER INFORMATION	35
Item 1. Legal Proceedings	35
Item 1A. Risk Factors	35
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	35
Item 3. Defaults Upon Senior Securities	35
Item 4. Mine Safety Disclosures	35
Item 5. Other Information	35
Item 6. Exhibits	36
SIGNATURES	37

2

PART IFINANCIAL INFORMATION

Item 1.  Financial Statements

GRANITE FALLS ENERGY, LLC AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

	July 31, 2016		October 31, 2015
ASSETS	(unaudited)
Current Assets
Cash	$	11,349,489	$	12,696,536
Restricted cash		1,800,483		—
Accounts receivable		6,919,840		9,667,472
Inventory		10,763,010		12,212,025
Commodity derivative instruments		890,998		677,149
Prepaid expenses and other current assets		451,578		259,862
Total current assets		32,175,398		35,513,044
Property and Equipment, net		81,092,100		84,304,162
Goodwill		1,372,473		1,372,473
Other Assets		790,791		821,402
Total Assets	$	115,430,762	$	122,011,081
LIABILITIES AND MEMBERS' EQUITY
Current Liabilities
Checks drawn in excess of bank balance	$	1,489,447	$	1,836,682
Current maturities of long-term debt		504,125		517,957
Accounts payable		3,105,820		4,643,130
Corn payable to FCE		1,125,003		1,486,247
Commodity derivative instruments		1,753,665		1,114
Accrued expenses		645,720		654,550
Total current liabilities		8,623,780		9,139,680
Long-Term Debt, less current portion		6,685,798		6,711,975
Commitments and Contingencies
Members' Equity
Members' equity attributable to Granite Falls Energy, LLC consists of 30,606 units authorized,  issued, and outstanding		79,165,586		84,602,607
Non-controlling interest		20,955,598		21,556,819
Total members' equity		100,121,184		106,159,426
Total Liabilities and Members' Equity	$	115,430,762	$	122,011,081

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

3

GRANITE FALLS ENERGY, LLC AND SUBSIDIARIES

Condensed Consolidated Statements of Operations

	Three Months Ended		Three Months Ended		Nine Months Ended		Nine Months Ended
	July 31, 2016		July 31, 2015		July 31, 2016		July 31, 2015
	(unaudited)		(unaudited)		(unaudited)		(unaudited)
Revenues	$	58,018,553	$	58,671,723	$	159,994,605	$	176,431,334
Cost of Goods Sold		51,716,678		49,875,833		149,986,152		156,462,251
Gross Profit		6,301,875		8,795,890		10,008,453		19,969,083
Operating Expenses		1,284,016		1,301,446		4,174,358		4,096,079
Operating Income		5,017,859		7,494,444		5,834,095		15,873,004
Other Income (Expense):
Other income (expense), net		2,962		(2,472)		101,769		39,740
Interest income		1,848		2,336		6,384		6,929
Interest expense		(152,403)		(182,107)		(333,045)		(361,602)
Total other expense, net		(147,593)		(182,243)		(224,892)		(314,933)
Net Income	$	4,870,266	$	7,312,201	$	5,609,203	$	15,558,071
Less: Net Income Attributable to Non-controlling Interest		(1,377,444)		(1,871,438)		(1,405,337)		(3,170,575)
Net Income Attributable to Granite Falls Energy, LLC	$	3,492,822	$	5,440,763	$	4,203,866	$	12,387,496
Weighted Average Units Outstanding - Basic and Diluted		30,606		30,606		30,606		30,606
Amounts attributable to Granite Falls Energy, LLC:
Net Income Per Unit - Basic and Diluted	$	114.12	$	177.77	$	137.35	$	404.74
Distributions Per Unit - Basic and Diluted	$	—	$	—	$	315.00	$	1,050.00

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

4

GRANITE FALLS ENERGY, LLC AND SUBSIDIARIES

Condensed Consolidated Statements of Cash Flows

	Nine Months Ended		Nine Months Ended
	July 31, 2016		July 31, 2015
	(unaudited)		(unaudited)
Cash Flows from Operating Activities:
Net income	$	5,609,203	$	15,558,071
Adjustments to reconcile net income to net cash provided by operations:
Depreciation and amortization		7,212,835		7,178,621
Change in fair value of commodity derivative instruments		716		(257,490)
Changes in operating assets and liabilities:
Restricted cash		(1,800,483)		186,125
Accounts receivable		2,747,632		4,408,427
Inventory		1,449,015		(1,952,512)
Prepaid expenses and other current assets		(191,716)		(67,200)
Accounts payable		(1,630,272)		(2,169,564)
Accrued expenses		(8,830)		(8,960)
Commodity derivative instruments		1,537,986		405,829
Net Cash Provided by Operating Activities		14,926,086		23,281,347
Cash Flows from Investing Activities:
Payments for capital expenditures		(4,238,444)		(7,987,229)
Net Cash Used in Investing Activities		(4,238,444)		(7,987,229)
Cash Flows from Financing Activities:
Proceeds from checks drawn in excess of bank balance		(347,235)		2,642,126
Proceeds from long-term debt		9,820,223		11,545,837
Payments on long-term debt		(9,860,232)		(7,555,388)
Distributions to non-controlling interests		(2,006,558)		(4,621,340)
Member distributions paid		(9,640,887)		(32,136,300)
Net Cash Used in Financing Activities		(12,034,689)		(30,125,065)
Net Decrease in Cash		(1,347,047)		(14,830,947)
Cash - Beginning of Period		12,696,536		27,209,010
Cash - End of Period	$	11,349,489	$	12,378,063
Supplemental Cash Flow Information
Cash paid during the period for:
Interest expense	$	333,045	$	361,602
Supplemental Disclosure of Noncash Investing and Financing Activities
Capital expenditures and construction in process included in accounts payable	$	154,169	$	109,922

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

5

Granite Falls Energy, LLC and Subsidiaries

Notes to Condensed Consolidated Unaudited Financial Statements

July 31, 2016

1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Principles of Consolidation

The accompanying condensed consolidated unaudited financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and 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 consolidated financial statements for the year ended October 31, 2015, contained in the Company’s annual report on Form 10-K.

In the opinion of management, the condensed consolidated unaudited financial statements reflect all adjustments consisting of normal recurring accruals that we consider necessary to present fairly the Company’s results of operations, financial position and cash flows. The results reported in these condensed consolidated unaudited financial statements should not be regarded as necessarily indicative of results that may be expected for any other fiscal period or for the fiscal year.

Nature of Business

Granite Falls Energy, LLC (“GFE” or the “Company”) is a Minnesota limited liability company currently producing fuel-grade ethanol, distillers' grains, and crude corn oil near Granite Falls, Minnesota and sells these products, pursuant to marketing agreements, throughout the continental United States and on the international market. GFE's plant has an approximate annual production capacity of 60 million gallons, but is currently permitted to produce up to 70 million gallons of undenatured ethanol on a twelve month rolling sum basis.

Heron Lake BioEnergy, LLC (“HLBE”) is a Minnesota limited liability company currently producing fuel-grade ethanol, distillers' grains, and crude corn oil near Heron Lake, Minnesota and sells these products, pursuant to marketing agreements, throughout the continental United States. HLBE's plant has an approximate annual production capacity of 60 million gallons, but is permitted to produce approximately 72.3 million gallons of undenatured ethanol on a twelve month rolling sum basis. Additionally, HLBE, through a majority owned subsidiary, operates a natural gas pipeline that provides natural gas to HLBE's ethanol production facility and other customers.

Principles of Consolidation

The accompanying condensed consolidated unaudited financial statements consolidate the operating results and financial position of GFE, and its 50.6% owned subsidiary, HLBE (through GFE's 100% ownership of Project Viking, LLC). Given the Company’s control over the operations of HLBE and its majority voting interest, the Company consolidates the condensed consolidated unaudited financial statements of HLBE with GFE's condensed consolidated unaudited financial statements. The remaining 49.4% ownership of HLBE is included in the condensed consolidated unaudited financial statements as a non-controlling interest. HLBE, through its wholly owned subsidiary, HLBE Pipeline Company, LLC, owns 73% of Agrinatural Gas, LLC (“Agrinatural”). Given HLBE’s control over the operations of Agrinatural and its majority voting interest, HLBE consolidates the financial statements of Agrinatural with its consolidated unaudited financial statements, with the equity and earnings attributed to the remaining 27% noncontrolling interest. All intercompany balances and transactions are eliminated in consolidation.

Segment Reporting

Operating segments are defined as components of an enterprise for which separate financial information is available that is evaluated regularly by the chief operating decision maker or decision making group in deciding how to allocate resources and in assessing performance. The Company has determined that it has one reportable business segment, the manufacture and marketing of fuel-grade ethanol and the co-products of the ethanol production process. Although the Company also realizes relatively immaterial revenue from natural gas pipeline operations at Agrinatural, the Company's chief operating decision maker reviews financial information of the Company as a whole for purposes of assessing financial performance and making operating decisions and does not separately review Agrinatural's operating performance information. Accordingly, the Company considers itself to be operating in a single industry segment.

6

Granite Falls Energy, LLC and Subsidiaries

Notes to Condensed Consolidated Unaudited Financial Statements

July 31, 2016

Accounting Estimates

Management uses estimates and assumptions in preparing these condensed consolidated unaudited financial statements in accordance with generally accepted accounting principles in the United States of America. 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. The Company uses estimates and assumptions in accounting for the following significant matters, among others: economic lives of property, plant, and equipment, valuation of commodity derivatives, inventory, and inventory purchase and sale commitments, and the assumptions used in the impairment analysis of long-lived assets and goodwill. Actual results may differ from previously estimated amounts, and such differences may be material to our condensed consolidated unaudited financial statements. The Company periodically reviews estimates and assumptions, and the effects of revisions are reflected in the period in which the revision is made.

Revenue Recognition

The Company generally sells ethanol and related products pursuant to marketing agreements. Revenues from the production of ethanol and the related products are recorded when the customer has taken title and assumed the risks and rewards of ownership, prices are fixed or determinable and collectability is reasonably assured. Ethanol and related products are generally shipped free on board (FOB) shipping point. The Company believes there are no ethanol sales, during any given month, which should be considered contingent and recorded as deferred revenue.

In accordance with the Company's agreements for the marketing and sale of ethanol and related products, marketing fees and commissions due to the marketers are deducted from the gross sales price as earned. These fees and commissions are recorded net of revenues, as they do not provide an identifiable benefit that is sufficiently separable from the sale of ethanol and related products. Shipping costs paid by the Company to the marketer in the sale of ethanol are not specifically identifiable and, as a result, are recorded based on the net selling price reported to the Company from the marketer. Shipping costs incurred by the Company in the sale of distillers' grains and corn oil are included in cost of goods sold.

Inventory

Inventory is stated at the lower of cost or net realizable value in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) No. 2015-11 issued in July 2015. Cost for all inventories is determined using the first in first out method (“FIFO”).  Net realizable value is the estimated selling prices in the ordinary course of business less reasonably predictable costs of completion, disposal, and transportation.  Inventory consists of raw materials, work in process, finished goods, and spare parts.  Corn is the primary raw material along with other raw materials.  Finished goods consist of ethanol, distillers' grains, and corn oil.

Derivative Instruments

From time to time the Company enters into derivative transactions to hedge its exposures to commodity price fluctuations. The Company is required to record these derivatives on the balance sheets at fair value.

In order for a derivative to qualify as a hedge, specific criteria must be met and appropriate documentation maintained. Gains and losses from derivatives that do not qualify as hedges, or are undesignated, must be recognized immediately in earnings. If the derivative does qualify as a hedge, depending on the nature of the hedge, changes in the fair value of the derivative will be either offset against the change in fair value of the hedged assets, liabilities, or firm commitments through earnings or recognized in other comprehensive income until the hedged item is recognized in earnings. Changes in the fair value of undesignated derivatives are recorded in earnings.

Additionally, the Company is required to evaluate its contracts to determine whether the contracts are derivatives. Certain contracts that literally meet the definition of a derivative may be exempted 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 accounting and reporting requirements, and therefore, are not marked to market in our condensed consolidated unaudited financial statements.

7

Granite Falls Energy, LLC and Subsidiaries

Notes to Condensed Consolidated Unaudited Financial Statements

July 31, 2016

In order to reduce the risks caused by market fluctuations, the Company occasionally hedges its anticipated corn, natural gas, and denaturant purchases and ethanol sales by entering into options and futures contracts. These contracts are used with the intention to fix the purchase price of anticipated requirements for corn in the Company's ethanol production activities and the related sales price of ethanol. The fair value of these contracts is based on quoted prices in active exchange-traded or over-the-counter market conditions. Although the Company believes its commodity derivative positions are economic hedges, none have been formally designated as a hedge for accounting purposes and derivative positions are recorded on the balance sheet at their fair market value, with changes in fair value recognized in current period earnings or losses. The Company does not enter into financial instruments for trading or speculative purposes.

The Company has adopted authoritative guidance related to “Derivatives and Hedging,” and has included the required enhanced quantitative and qualitative disclosure about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of gains and losses from derivative instruments, and disclosures about credit-risk-related contingent features in derivative agreements. See further discussion in Note 4.

Correction Of An Immaterial Error

The Company revised the condensed consolidated unaudited statement of cash flows for the nine months ended July 31, 2015, to correct for a non-cash acquisition of property and equipment resulting in an increase in cash provided by operating activities of $3,359,225 and a corresponding decrease in net cash provided by investing activities.

2.   RISKS AND UNCERTAINTIES

The Company has certain risks and uncertainties that it experiences during volatile market conditions. These volatilities can have a severe impact on operations.  The Company's revenues are derived from the sale and distribution of ethanol, distillers' grains, corn oil, and natural gas to customers primarily located in the United States. Corn for the production process is supplied to our plant primarily from local agricultural producers and from purchases on the open market.  Ethanol sales typically average 75 - 85% of total revenues and corn costs typically average 65 - 85% of cost of goods sold.

The Company's operating and financial performance is largely driven by the prices at which they sell ethanol and the net expense of corn. The price of ethanol is influenced by factors such as supply and demand, the weather, government policies and programs, and unleaded gasoline prices and the petroleum markets as a whole. Excess ethanol supply in the market, in particular, puts downward pressure on the price of ethanol. Our largest cost of production is corn.  The cost of corn is generally impacted by factors such as supply and demand, the weather, government policies and programs, and our risk management program used to protect against the price volatility of these commodities.

3.   INVENTORY

Inventories consist of the following:

	July 31, 2016		October 31, 2015
	(unaudited)
Raw materials	$	2,284,305	$	4,504,388
Supplies		2,624,123		2,631,452
Work in process		1,500,729		1,445,084
Finished goods		4,353,853		3,631,101
Totals	$	10,763,010	$	12,212,025

The Company performs a lower of cost or net realizable value analysis on inventory to determine if the market values of certain inventories are less than their carrying value, which is attributable primarily to decreases in market prices of corn and ethanol. Based on the lower of cost or net realizable value analysis, the Company recorded a loss on ethanol inventories, as a component of cost of goods sold, of approximately $108,000 and $0 for the nine month periods ended July 31, 2016 and 2015, respectively.

8

Granite Falls Energy, LLC and Subsidiaries

Notes to Condensed Consolidated Unaudited Financial Statements

July 31, 2016

4.   DERIVATIVE INSTRUMENTS

As of July 31, 2016, the total notional amount of the Company's outstanding corn derivative instruments was approximately 6,525,000 bushels, comprised of 2,650,000 and 3,875,000 bushel equivalent positions held by GFE and HLBE, respectively, that were entered into to hedge forecasted corn purchases through July 2017. There may be offsetting positions that are not shown on a net basis that could lower the notional amount of positions outstanding as disclosed above. 

As of July 31, 2016, the total notional amount of the Company’s outstanding ethanol derivative instruments was approximately 840,000 gallons, comprised of approximately 420,000 gallons of equivalent positions held by each of GFE and HLBE that were entered into to hedge forecasted ethanol sales through September 2016.

The following tables provide details regarding the Company's derivative instruments at July 31, 2016, none of which were designated as hedging instruments:

	Balance Sheet location	Assets		Liabilities
Corn contracts - GFE	Commodity derivative instruments	$	—	$	227,000
Corn contracts - HLBE	Commodity derivative instruments		—		750,150
Ethanol contracts - GFE	Commodity derivative instruments		—		776,515
Ethanol contracts - HLBE	Commodity derivative instruments		890,998		—
Totals		$	890,998	$	1,753,665

In addition, at July 31, 2016, the Company maintained approximately $1,801,000 of restricted cash, comprised of approximately $1,738,000 held by GFE and approximately $63,000 held by HLBE related to margin requirements for the Company’s commodity derivative instrument positions.

The following tables provide details regarding the Company's derivative instruments at October 31, 2015, none of which were designated as hedging instruments:

	Balance Sheet location	Assets		Liabilities
Corn contracts - GFE	Commodity derivative instruments	$	—	$	1,114
Corn contracts - HLBE	Commodity derivative instruments		677,149		—
Totals		$	677,149	$	1,114

At October 31, 2015, the Company did not have any cash collateral (restricted cash) related to commodity derivatives held by a broker.

The following tables provide details regarding the gains and losses from Company's derivative instruments in statements of operations, none of which are designated as hedging instruments:

	Statement of	Three Months Ended July 31,
	Operations Location	2016		2015
Corn contracts	Cost of Goods Sold	$	1,261,468	$	869,850
Ethanol contracts	Revenues		(1,375,892)		—
Natural gas contracts	Cost of Goods Sold		—		—
Total gain (loss)		$	(114,424)	$	869,850

	Statement of	Nine Months Ended  July 31,
	Operations Location	2016		2015
Corn contracts	Cost of Goods Sold	$	1,238,098	$	257,490
Ethanol contracts	Revenues		(1,271,172)		—
Natural gas contracts	Cost of Goods Sold		32,358		—
Total gain (loss)		$	(716)	$	257,490

9

Granite Falls Energy, LLC and Subsidiaries

Notes to Condensed Consolidated Unaudited Financial Statements

July 31, 2016

5.   FAIR VALUE

The following table provides information on those derivative instruments measured at fair value on a recurring basis at July 31, 2016:

			Fair Value Measurement Using
			Quoted Prices		Significant Other		Significant
	Carrying Amount		in Active Markets		Observable Inputs		Unobservable Inputs
Financial Asset:	in Balance Sheet		(Level 1)		(Level 2)		(Level 3)
Commodity Derivative Instruments - Ethanol	$	890,998	$	890,998	$	—	$	—
Financial Liabilities:
Commodity Derivative Instruments - Ethanol	$	776,515	$	776,515	$	—	$	—
Commodity Derivative Instruments - Corn	$	977,150	$	977,150	$	—	$	—

The following table provides information on those derivative instruments measured at fair value on a recurring basis at October 31, 2015:

			Fair Value Measurement Using
			Quoted Prices		Significant Other		Significant
	Carrying Amount		in Active Markets		Observable Inputs		Unobservable Inputs
Financial Asset:	in Balance Sheet		(Level 1)		(Level 2)		(Level 3)
Commodity Derivative Instruments - Corn	$	677,149	$	677,149	$	—	$	—
Financial Liabilities:
Commodity Derivative Instruments - Corn	$	1,114	$	1,114	$	—	$	—

The Company determines the fair value of commodity derivative instruments by obtaining fair value measurements from an independent pricing service. The fair value measurements consider observable data that may include dealer quotes and live trading levels from the Chicago Board of Trade market and New York Mercantile Exchange.

6.   DEBT FACILITIES

Debt financing consists of the following:

	July 31, 2016		October 31, 2015
HERON LAKE BIOENERGY:		(unaudited)
Revolving term loan to lending institution, see terms below	$	5,122,574	$	4,822,777
Assessments payable		1,779,849		1,963,405
Note payable to electrical company		87,500		143,750
Note payable to noncontrolling interest member of Agrinatural		200,000		300,000
Totals		7,189,923		7,229,932
Less amounts due within one year		504,125		517,957
Net long-term debt	$	6,685,798	$	6,711,975

Granite Falls Energy:

GFE has a revolving term loan facility, under which GFE could initially borrow, repay, and re-borrow in an amount up to $18,000,000.   Under the terms of this revolving term loan facility, the revolving term loan principal commitment for borrowing under this facility reduces by $2,000,000 semi-annually, beginning September 1, 2014, with

10

Granite Falls Energy, LLC and Subsidiaries

Notes to Condensed Consolidated Unaudited Financial Statements

July 31, 2016

final payment due March 1, 2018. GFE had no outstanding balance on the revolving term loan at July 31, 2016, and October 31, 2015. Therefore, the aggregate principal amount available for borrowing under this revolving term loan facility at July 31, 2016 and at October 31, 2015 was $10,000,000 and $12,000,000, respectively. The interest rate is based on the bank's "One Month LIBOR Index Rate," plus 3.05%.

The credit facility also requires GFE to comply with certain financial covenants at various times calculated monthly, quarterly or annually, including restriction of the payment of dividends and maintenance of certain financial ratios including minimum working capital, minimum net worth and a debt service coverage ratio as defined by the credit facility. Failure to comply with the protective loan covenants or maintain the required financial ratios may cause acceleration of the outstanding principal balances on the revolving term loan and/or the imposition of fees, charges or penalties. As of July 31, 2016 and October 31, 2015, GFE was in compliance with these financial covenants and expects to be in compliance throughout fiscal 2016. 

The credit facility is secured by substantially all assets of the Company. There are no savings account balance collateral requirements as part of this credit facility.

Heron Lake BioEnergy:

HLBE has a revolving term loan with a lender initially totaling $28,000,000.  Amounts borrowed by HLBE under the revolving term loan and repaid or prepaid may be re-borrowed at any time prior to the March 1, 2022 maturity date. Under the terms of the credit facility, the revolving term loan principal commitment is scheduled to decline by $3,500,000 annually, starting March 1, 2015 and continues each anniversary thereafter until maturity.  Therefore, the aggregate  principal commitment under this facility at July 31, 2016 was $21,000,000. After accounting for amounts outstanding under this facility at July 31, 2016, the aggregate principal amount available to HLBE for borrowing was approximately $15,877,000.  The outstanding balance on the revolving term loan totaled approximately $5,123,000 and $4,823,000 at July 31, 2016, and October 31, 2015, respectively.

Interest on the revolving term loan accrues at a variable rate equal to 3.25% above the One-Month London Interbank Offered Rate ("LIBOR") Index rate. HLBE may elect to enter into a fixed interest rate on this loan at various times throughout the term of the loan as provided in the loan agreements. The interest rate on the revolving term loan was 3.75% and 3.45% at July 31, 2016, and October 31, 2015, respectively.

HLBE also agreed to pay an unused commitment fee on the unused portion of the revolving term loan commitment at the rate of 0.50% per annum. The revolving term loan is subject to a prepayment fee for any prepayment on the term loan prior to July 1, 2016 due to refinancing. The loan is secured by substantially all of HLBE's assets including a subsidiary guarantee. 

During the term of the revolving term loan, HLBE is subject to certain financial covenants at various times calculated monthly, quarterly or annually, including restriction of the payment of dividends and loans and advances to Agrinatural and maintenance of certain financial ratios including minimum working capital, minimum net worth and a debt service coverage ratio as defined by the credit facility. Failure to comply with the protective loan covenants or maintain the required financial ratios may cause acceleration of the outstanding principal balances on the revolving term loan and/or the imposition of fees, charges or penalties. As of July 31, 2016 and October 31, 2015, HLBE was in compliance with these financial covenants and expects to be in compliance throughout fiscal 2016.

As part of the credit facility closing, HLBE entered into an Administrative Agency Agreement with CoBank, ACP (“CoBank”).  CoBank purchased a participation interest in the AgStar loans and was appointed the administrative agent for the purpose of servicing the loans.  As a result, CoBank will act as the agent for AgStar with respect to the credit facility.

In October 2003, HLBE entered into an industrial water supply development and distribution agreement with the City of Heron Lake, Jackson County, and Minnesota Soybean Processors. In consideration of this agreement, HLBE and Minnesota Soybean Processors are allocated equally the debt service on $735,000 in water revenue bonds that were issued by the City to support this project that mature in February 2019. The parties have agreed that, prior to the scheduled expiration of the agreement, they will negotiate in good faith to replace the agreement with a further agreement regarding the wells and related facilities.

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Granite Falls Energy, LLC and Subsidiaries

Notes to Condensed Consolidated Unaudited Financial Statements

July 31, 2016

In May 2006, HLBE entered into an industrial water supply treatment agreement with the City of Heron Lake and Jackson County. Under this agreement, HLBE pays monthly installments over 24 months starting January 1, 2007 equal to one years' debt service on approximately $3.6 million in water revenue bonds, which will be returned to HLBE if any funds remain after final payment in full on the bonds and assuming HLBE complies with all payment obligations under the agreement.

As of July 31, 2016 and October 31, 2015, there were a total of approximately $1,780,000 and $1,963,000, respectively, in outstanding water revenue bonds. HLBE classifies its obligations under these bonds as assessments payable. The interest rates on the bonds range from 0.50% to 8.73%.

Estimated annual maturities of debt at July 31, 2016, are as follows based on the most recent debt agreements:

2016	$	504,125
2017		436,341
2018		322,570
2019		318,253
2020		339,097
After 2020		5,269,537
Total debt	$	7,189,923

7.   LEASES

GFE leases equipment, primarily rail cars, under operating leases through 2025. Rent expense for these leases was approximately $804,000 and $596,000 for the three months ended ended July 31, 2016 and 2015, respectively, and approximately $2,510,000 and $1,800,000 for the nine months ended July 31, 2016, and 2015, respectively.

HLBE leases equipment, primarily rail cars, under operating leases through 2017.  Rent expense for these leases was approximately $686,000 and $525,000 for the three months ended July 31, 2016 and 2015, respectively,  and approximately $1,931,000 and $1,572,000 for the nine months ended July 31, 2016 and 2015, respectively.

8.   MEMBERS' EQUITY

GFE has one class of membership units.   The units have no par value and have identical rights, obligations and privileges.  Income and losses are allocated to all members based upon their respective percentage of units held. As of July 31, 2016 and October 31, 2015, GFE had 30,606 membership units authorized, issued, and outstanding.

In December 2014, the Board of Governors of GFE declared a cash distribution of $1,050 per unit or approximately $32,136,000, for unit holders of record as of December 18, 2014.  The distribution was paid in January 2015.

In December 2015, the Board of Governors of GFE declared a cash distribution of $315 per unit, or approximately $9,641,000,  for unit holders of record as of December 17, 2015. The distribution was paid in January 2016.

In December 2014, the Board of Governors of HLBE declared a cash distribution of $0.12 per unit or approximately $9,352,000 for unit holders of record as of December 18, 2014, of which approximately $4,621,000 was made to the non-controlling interest members of HLBE.  The distribution was paid in January 2015.

In December 2015, the Board of Governors of HLBE declared a cash distribution of $0.05 per unit, or approximately $3,897,000,  for unit holders of record as of December 17, 2015, of which approximately $2,007,000 was made to the noncontrolling interest members of HLBE. The distribution was paid in January 2016.

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Granite Falls Energy, LLC and Subsidiaries

Notes to Condensed Consolidated Unaudited Financial Statements

July 31, 2016

9.   COMMITMENTS AND CONTINGENCIES

Corn Contracts

At July 31, 2016, GFE had no forward corn contracts.

At July 31, 2016, HBLE had cash and basis contracts for forward corn purchase commitments for approximately 3,826,000 bushels for deliveries through July 2017, which approximates 18% of its anticipated corn needs during this period.

Ethanol Contracts

At July 31, 2016, GFE had forward contracts (both fixed and basis) to sell approximately $16,030,000 of ethanol for various delivery periods through December 2016 which approximates 41% of its anticipated ethanol sales during this period.

During the third fiscal quarter, GFE amended its ethanol marketing agreement with Eco-Energy. As amended, the term of the marketing agreement shall continue through December 31, 2019. Additionally, the amended agreement also provides for certain negotiated changes to the marketing fees payable to Eco-Energy and payment terms based on prevailing market-rate conditions for comparable ethanol marketed services.

At July 31, 2016, HLBE had forward contracts (both fixed and basis) to sell approximately $17,100,000 of ethanol for various delivery periods through December 2016, which approximates 44% of its anticipated ethanol sales during this period.

During the third fiscal quarter, HLBE amended its ethanol marketing agreement with Eco-Energy. As amended, the term of the marketing agreement shall continue through December 31, 2019. Additionally, the amended agreement also provides for certain negotiated changes to the marketing fees payable to Eco-Energy and payment terms based on prevailing market-rate conditions for comparable ethanol marketed services.

Distillers' Grain Contracts

At July 31, 2016, GFE had forward contracts to sell approximately $333,000 of distillers' grain for deliveries through September 2016, which approximates 11% of its anticipated distillers’ grains sales during this period.

At July 31, 2016, HLBE had forward contracts to sell approximately $1,393,000 of distillers' grains for delivery through December 2016, which approximates 16% of its anticipated distillers’ grains sales during this period.

Corn Oil

At July 31, 2016, GFE had forward contracts to sell approximately $582,000 of corn oil for delivery through December 2016, which approximates 28% of its anticipated corn oil sales during this period.

At July 31, 2016, HLBE had forward contracts to sell approximately $621,000 of corn oil for delivery through December 2016, which approximates 30% of its anticipated distillers’ grains sales during this period.

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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 months ended July 31, 2016, compared to the same periods of the prior fiscal year. This discussion should be read in conjunction with the condensed consolidated unaudited financial statements and related notes in Item 1 of this report and the information contained in the Company's annual report on Form 10-K for the fiscal year ended October 31, 2015.

Disclosure Regarding Forward-Looking Statements

The SEC encourages companies to disclose forward-looking information so investors can better understand future prospects and make informed investment decisions. As such, we have historical information, as well as forward-looking statements regarding our business, financial condition, results of operations, performance and prospects in this report.  All statements that are not historical or current facts are forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “anticipates”, “believes”, “could”, “estimates”, “expects”, “intends”, “may”, “plans”, “potential”, “predicts”, “projects”, “should”, “will”, “would”, and similar expressions. 

Forward-looking statements are subject to a number of known and unknown risks, uncertainties and other factors, many of which may be beyond our control, and may cause actual results, performance or achievements to differ materially from those projected in, expressed or implied by forward-looking statements. While it is impossible to identify all such factors, factors that could cause actual results to differ materially from those estimated by us are described more particularly in the “Risk Factors” section of our annual report on Form 10-K for the year ended October 31, 2015 and of this report on Form 10-Q. These risks and uncertainties include, but are not limited to, the following:

· Reductions or eliminations in the federal Renewable Fuels Standard (“RFS”), especially the corn-based ethanol use requirement;

· The Chinese antidumping investigation could result in reduced export demand for distillers’ grains, which in turn could have adverse impact on domestic distillers’ grains prices;

· Ethanol may trade at a premium to gasoline at times, causing a disincentive for discretionary blending of ethanol beyond the rates required to comply with the RFS.  Consequently, there may be a negative impact on ethanol pricing and demand;

· Fluctuations in the price of crude oil and gasoline;

· Changes in the availability and price of corn and natural gas;

· Our operating margins have fluctuated in the past and could become negative due to spread between the selling price of our products and our raw material costs;

· Our plant may experience technical difficulties and not produce the gallons of ethanol expected;

· Negative impacts that our hedging activities may have on our operations;

· Ethanol and distillers’ grains supply exceeding demand and corresponding price reductions;

· Our ability to generate free cash flow to fund our operations, invest in our business and service our debt;

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

· Changes in our business strategy, capital improvements or development plans;

· Changes in general economic conditions or the occurrence of certain events causing an economic impact in the agriculture, oil or automobile industries;

· Lack of transport, storage and blending infrastructure preventing our products from reaching high demand markets;

· Changes in federal and/or state laws, including changes in legislation benefiting renewable fuels;

· Competition from alternative fuels and alternative fuel additives;

· Changes in interest rates or the lack of credit availability; and

· Changes and advances in ethanol production technology.

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We believe our expectations regarding future events are based on reasonable assumptions; however, these assumptions may not be accurate or account for all risks and uncertainties. Consequently, forward-looking statements are not guaranteed. Actual results may vary materially from those expressed or implied in our forward-looking statements. In addition, we are not obligated and do not intend to update our forward-looking statements as a result of new information unless it is required by applicable securities laws. We caution investors not to place undue reliance on forward-looking statements, which represent management’s views as of the date of this report. We qualify all of our forward-looking statements by these cautionary statements.

Available Information

Our website address is www.granitefallsenergy.com.  Our annual report on Form 10-K, periodic reports on Form 10-Q, current reports on Form 8-K, and amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Securities Exchange Act of 1934, are available, free of charge, on our website under the link “SEC Compliance”, as soon as reasonably practicable after we electronically file such materials with, or furnish such materials to, the Securities and Exchange Commission. The contents of our website are not incorporated by reference in this report on Form 10-Q.

Industry and Market Data

Much of the information in this report regarding the ethanol industry, including government regulation relevant to the industry is from information published by the Renewable Fuels Association (“RFA”), a national trade association for the United States (“U.S.”) ethanol industry, and information about the market for our products and competition is derived from publicly available information from governmental agencies or publications and other published independent sources.  Although we believe our third-party sources are reliable, we have not independently verified the information.

Overview

Granite Falls Energy, LLC is a Minnesota limited liability company.  References to “we”,  “us”,  “our”,  “Granite Falls Energy”,  “GFE”, and the “Company” refer to Granite Falls Energy, LLC. Our business consists primarily of the production and sale of ethanol and its co-products (wet, modified wet and dried distillers’ grains, corn oil and corn syrup) locally, and throughout the continental U.S.    

Our production operations are carried out at our ethanol plant located in Granite Falls, Minnesota and at the ethanol plant operated by our majority owned subsidiary, Heron Lake BioEnergy, LLC (“Heron Lake BioEnergy” or “HLBE”), near Heron Lake, Minnesota.  As of July 31, 2016, we control approximately 50.6% of HLBE's outstanding membership units through our wholly owned subsidiary, Project Viking, L.L.C.  

The GFE ethanol plant has an approximate annual production capacity of 60 million gallons of denatured ethanol, but is currently permitted to produce up to 70 million gallons of undenatured ethanol on a twelve month rolling sum basis. The HLBE plant has an approximate annual production capacity of 60 million gallons of denatured ethanol, but is currently permitted to produce up to 72 million gallons of undenatured ethanol on a twelve month rolling sum basis.  We intend to continue working toward increasing production at both the GFE and HLBE plants to take advantage of the additional production allowed pursuant to our permits so long as we believe it is profitable to do so.

We market and sell the products produced at the GFE and HLBE plants primarily using third party marketers. The markets in which our products are sold may be local, regional, national, and international and depend primarily upon the efforts of third party marketers. We have contracted with Eco-Energy, LLC to market all of the ethanol produced at our ethanol plants.  We also independently market a small portion of the ethanol production at the GFE plant as E-85 to local retailers.  We have contracted with Renewable Products Marketing Group, LLC (“RPMG”) to market the distillers’ grains produced at the GFE plant and with Gavilon Ingredients, LLC to market distillers’ grains produced at the HLBE plant. We have contracted with RPMG to market all of corn oil produced at our ethanol plants. HLBE also occasionally independently markets and sells excess corn syrup from the distillation process at the Heron Lake plant to local livestock feeders.

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On July 22, 2016, we executed Amendment No. 4 (the “Fourth Amendment”) to our ethanol marketing agreement dated December 24, 2008, as previously amended by Amendments 1 trhough 3 (the “GFE Marketing Agreement”), with Eco-Energy, LLC (“Eco-Energy”). Additionally, on July 22, 2016, HLBE executed Amendment No. 1 (the “First Amendment”) to its ethanol marketing agreement dated September 17, 2013 (the “HLBE Marketing Agreement”) with Eco-Energy. Under the terms of the Marketing Agreements with Eco-Energy, Eco-Energy purchases the entire ethanol output of the GFE ethanol plant and HLBE plant and each of HLBE and GFE pay Eco-Energy marketing fee in consideration of Eco-Energy's services.  These Marketing Agreements were set to expire on December 31, 2016.  However, both the Fourth Amendment to the GFE Marketing Agreement and the First Amendment to the HLBE Marketing Agreement provide for an extension of the term of the Marketing Agreements through December 31, 2019, with automatic renewals for additional consecutive terms of three years unless either party provides written notice to the other at least 90 days prior to the end of the term or the renewal term. Additionally, the Amendments provide for certain negotiated changes to the marketing fees payable to Eco-Energy and  the timing of payments by Eco-Energy to each of HLBE and GFE for the ethanol Eco-Energy purchases from our plants. The Amendments are effective as of January 1, 2017.

Our cost of goods sold consists primarily of costs relating to the corn and natural gas supplies necessary to produce ethanol and distillers' grains for sale at our ethanol plants. Farmers Cooperative Elevator (“FCE”) is the exclusive supplier of corn to the GFE plant.  HLBE generally does not have long-term, fixed price contracts for the purchase of corn. Typically, HLBE purchases its corn directly from grain elevators, farmers, and local dealers within approximately 80 miles of Heron Lake, Minnesota.

At the GFE plant, we pay Center Point Energy/Minnegasco a per unit fee to move the natural gas through the pipeline, and we have guaranteed to move a minimum of 1,500,000 MMBTUs annually through December 31, 2025, which is the ending date of the agreement.  We also have an agreement with U.S. Energy Services, Inc. to procure contracts with various natural gas vendors on our behalf to supply the natural gas necessary to operate the Granite Falls plant.

HLBE has a facilities agreement with Northern Border Pipeline Company, which allows HLBE to access an existing interstate natural gas pipeline located approximately 16 miles north of its plant.  HLBE has entered into a firm natural gas transportation agreement with its majority owned subsidiary, Agrinatural.  HLBE also has an agreement with Constellation NewEnergy—Gas Division, LLC to supply the natural gas necessary to operate the Heron Lake plant.

We have entered into a management services agreement with HLBE pursuant to which our chief executive officer, chief financial officer, and commodity risk manager also hold those same offices with HLBE.  The initial term of the management services agreement expired in July 2016.  However, the management services agreement automatically renewed for an one-year term and will continue to automatically renew for successive one-year terms unless either HLBE or GFE gives the other party written notice of termination prior to expiration of the then current term. The management services agreement may also be terminated by either party for cause under certain circumstances.

HLBE also owns a controlling 73% interest in Agrinatural Gas, LLC (“Agrinatural”), which is a natural gas distribution and sales company located in Heron Lake, Minnesota that owns approximately 187 miles of natural gas pipeline and provides natural gas to HLBE’s ethanol plant and other commercial, agricultural and residential customers through a connection with the natural gas pipeline facilities of Northern Border Pipeline Company.  Agrinatural's revenues are generated through natural gas distribution fees and sales.

Reportable Operating Segments

Operating segments are defined as components of an enterprise for which separate financial information is available that is evaluated regularly by the chief operating decision maker in deciding how to allocate resources and in assessing performance. Our revenues from operations come from three primary sources: sales of fuel ethanol, sales of distillers' grains and sales of corn oil at GFE's ethanol plant and HLBE's ethanol plant.  Therefore, we have determined that based on the nature of the products and production process and the expected financial results, the Company’s operations at its ethanol plant and HLBE's plant, including the production and sale of ethanol and its co-products, are aggregated into one reporting segment.

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Additionally, we also realize relatively immaterial revenue from natural gas pipeline operations at Agrinatural, HLBE's majority owned subsidiary.  The intercompany transactions between HLBE and Agrinatural resulting from the firm natural gas transportation agreement between the two companies are eliminated in consolidation. After intercompany eliminations, revenues from Agrinatural represent less than less than 1% of our consolidated revenues and have little to no impact on the overall performance of the Company.  Therefore, our management does not separately review Agrinatural's operating performance information.  Rather, management reviews Agrinatural's natural gas pipeline financial data on a consolidated basis with our ethanol production operations segment. Additionally, management believes that the presentation of separate operating performance information for Agrinatural's natural gas pipeline operations would not provide meaningful information to a reader of the Company’s condensed consolidated unaudited financial statements.

We currently do not have or anticipate that we will have any other lines of business or other significant sources of revenue other than the sale of ethanol and its co-products, which include distillers' grains and non-edible corn oil.

Plan of Operations for the Next Twelve Months

Over the next twelve months, we will continue our focus on operational improvements at our ethanol plant. These operational improvements include exploring methods to improve ethanol yield per bushel and increasing production output at our plant to take full advantage of our permitted production capacity, reducing our operating costs, and optimizing our margin opportunities through prudent risk-management policies.

We expect to have sufficient cash generated by continuing operations and availability on current credit facilities to fund our operations.  However, should we experience unfavorable operating conditions in the ethanol industry that prevent us from profitably operating the ethanol plants, we may need to seek additional funding.

At the GFE plant, we constructed an additional grain bin, which expands the GFE plant’s grain storage by approximately 750,000 bushels. The grain storage expansion project was commended in August 2015 and was completed during the three months ended July 31, 2016. 

Several upscaling projects will be required to increase the HLBE plant's current production capacity and take full advantage of the additional production allowed under its amended air permit. One such project includes replacing HLBE's existing regenerative thermal oxidizer (“RTO”). During the three months ended July 31, 2016, we completed installation of the RTO and completed emissions testing. With installation complete, management expects the new RTO will improve emissions control and allow us to continue to maintain regulatory compliance under our amended air permit.

GFE’s corn storage expansion project and HLBE’s RTO replacement project were funded from current earnings from operations.  In addition, we anticipate continuing to conduct routine maintenance and repair activities at the GFE and HLBE ethanol plants. We anticipate using cash we generate from our operations and, as needed, our credit facilities to finance these plant upgrade projects.

Trends and Uncertainties Impacting Our Operations

The principal factors affecting our results of operations and financial conditions are the market prices for corn, ethanol, distillers’ grains and natural gas, as well as governmental programs designed to create incentives for the use of corn-based ethanol.  Other factors that may affect our future results of operation include those risks discussed below and in “PART II - Item 1A. Risk Factors” of this report and “PART I - Item 1. Business” and “PART I - Item 1A. Risk Factors” of our annual report on Form 10-K for the fiscal year ended October 31, 2015.

Our operations are highly dependent on commodity prices, especially prices for corn, ethanol, distillers’ grains and natural gas. As a result, our operating results can fluctuate substantially due to volatility in these commodity markets. The price and availability of corn is subject to significant fluctuations depending upon a number of factors that affect commodity prices in general, including crop conditions, yields, domestic and global stocks, weather, federal policy and foreign trade.

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Natural gas prices are influenced by severe weather in the summer and winter and hurricanes in the spring, summer and fall. Other factors include North American exploration and production, and the amount of natural gas in underground storage during injection and withdrawal seasons.

Ethanol prices are sensitive to world crude oil supply and demand, domestic gasoline supply and demand, the price of crude oil, gasoline and corn, the price of substitute fuels and octane enhancers, refining capacity and utilization, government regulation and incentives and consumer demand for alternative fuels. Distillers’ grains prices are impacted by livestock numbers on feed, prices for feed alternatives and supply, which is associated with ethanol plant production.

We expect our ethanol plants to produce approximately 2.8 gallons of denatured ethanol for each bushel of grain processed in the production cycle. Because the market price of ethanol is not always directly related to corn, at times ethanol prices may lag price movements in corn prices and corn-ethanol price spread (the difference between the price per gallon of ethanol and the price per bushel of grain divided by 2.8) may be tightly compressed or negative. If the corn-ethanol price spread is compressed or negative for sustained period, it is possible that our operating margins will decline or become negative and our ethanol plants may not generate adequate cash flow for operations. In such cases, we may reduce or cease production at our ethanol plants in order to minimize our variable costs and optimize cash flow. Any such determinations to reduce or cease production will be made independently for each plant.

Our operating margins for the three months ended July 31, 2016, were impacted by volatility in the commodity markets. As a result of the lower gasoline prices and the traditional summer driving season, gasoline demand increased for the three months ended July 31 2016, which in turn increased the demand for ethanol.  The increased ethanol demand was countered by increased domestic ethanol production, which resulted in slight increases in ethanol prices through June 2016.  However, in July 2016, favorable weather conditions during the growing season led to higher than expected production projections for the current year corn crop, which resulted in declining corn prices. Following corn prices, ethanol prices also decreased. Despite commodity market volatility, ethanol traded at a premium to wholesale gasoline for much of the three months ended July 31, 2016.

Management believes distillers’ grains has also been negatively impacted by the Chinese government initiating an anti-dumping and countervailing duty investigation in January 2016. On July 8, 2016, China’s Ministry of Commerce issued an official notice concerning the hearing in the anti-dumping and countervailing investigations against distillers grains originating in the U.S. The hearing was held August 2, 2016, in Beijing. China is not expected to make a decision on whether to impose antidumping duties on U.S. dried distillers’ grain imports until after the scheduled visit of President Barack Obama to China in early September. If China were to impose a high tariff on distillers’ grains exports from the U.S., it could negatively impact the market price of distillers’ grains in the U.S. which could negatively impact our financial performance.

The Renewable Fuels Standard

The RFS has been, and we expect will continue to be, a significant factor impacting ethanol usage. In the Environmental Protection Agency’s (“EPA”) November 2015 final rule, the RFS required blending volume obligations (“RVOs”) for corn-based ethanol for 2014, 2015 and 2016 were reduced from the statutorily mandated levels. As set in the November 2015 rule, the required blending volume for corn-based ethanol blending for 2016 is 14.5 billion gallons, compared to 15 billion gallons as originally set by statute. Additionally, on May 18, 2016, the EPA released its preliminary rulemaking for 2017, setting the RVO for corn-based ethanol at 14.8 billion gallons, an increase over the 2016 requirement but still below the statutory mandate of 15 billion gallons. The proposal modestly increases the minimum volume requirements of ethanol to 14.8 billion gallons for the coming year. This proposal is expected to be finalized by November of 2016.

The EPA’s departure from the RFS statutory requirements in both the final rule and proposed 2017 volumes are expected to limit demand for ethanol and may have a negative impact on ethanol prices and demand unless additional demand is created by discretionary blending. Beyond the federal mandates, there are limited markets for ethanol. Further, due to the lower price of gasoline, management does 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. A reduction in ethanol demand could have a material adverse effect on our results of operations, cash flows and financial condition, unless additional demand from exports or discretionary or E85 blending develops.

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Environmental and Other Regulations

Our business subjects us to various federal, state, and local environmental laws and regulations.  These laws and regulations require us to obtain and comply with numerous permits to construct and operate our ethanol plant, including water, air and other environmental permits. Although we have been successful in obtaining all of the permits currently required, any retroactive change in environmental regulations, either at the federal or state level, could require us to obtain additional or new permits or spend considerable resources in complying with such regulations. Additionally, any changes that are made to the ethanol plant or its operations must be reviewed to determine if amended permits need to be obtained in order to implement these changes.

In connection with HLBE’s RTO replacement project, HLBE has filed an application for a major amendment of its air emissions permit with the Minnesota Pollution Control Agency (“MPCA”) to allow for the replacement under its current permit. However, due to backlog in the permit approval process, on April 27, 2016, HLBE entered into a compliance agreement with the MPCA. Under the compliance agreement, the MPCA will allow HLBE to proceed with replacement of its RTO prior to receiving approval of its major amendment application provided HLBE operates the new RTO in compliance with its existing air emissions permit and completes certain green initiatives at its facility, including constructing a butterfly and bee garden, installing LED lighting throughout the facility, and installing variable frequency drives on its evaporator pumps. As of July 31, 2016, HLBE had completed construction of the butterfly and bee garden and installation of LED lighting throughout the facility. Installation of the variable frequency drives is expected to be completed this fall during HLBE’s regular semi-annual maintenance shutdown.  Although HLBE expects to comply with all of the requirements of the compliance agreement, its failure to do so could result in penalties and fines as well as additional compliance and/or remediation obligations.

Results of Operations for the Three Months Ended July 31, 2016 and 2015

The following table shows summary information from the results of our operations and the approximate percentage of revenues, costs of goods sold, operating expenses and other items to total revenues in our unaudited condensed consolidated statements of operations for the three months ended July 31, 2016 and 2015 (amounts in thousands).  

	Three Months Ended July 31,
		2016				2015
		(unaudited)				(unaudited)
Income Statement Data		Amount		%		Amount		%
Revenue		$	58,019	100.0	%	$	58,672	100.0	%
Cost of Goods Sold			51,717	89.1	%		49,876	85.0	%
Gross Profit			6,302	10.9	%		8,796	15.0	%
Operating Expenses			1,284	2.2	%		1,301	2.2	%
Operating Income			5,018	8.6	%		7,494	12.8	%
Other Expense, net			(148)	(0.3)	%		(182)	(0.3)	%
Net Income			4,870	8.4	%		7,312	12.5	%
Less: Net Income Attributable to Non-controlling Interest			(1,377)	(2.4)	%		(1,871)	(3.2)	%
Net Income Attributable to Granite Falls Energy, LLC		$	3,493	6.0	%	$	5,441	9.3	%

Revenues

Our consolidated revenue is derived principally from sales of our three primary products: ethanol, distillers’ grains and corn oil. Revenues from these products represented approximately 99.6%  and 99.7% of our total revenues for the three months ended July 31, 2016 and 2015, respectively.  The remaining approximately 0.4% and 0.3% attributable to miscellaneous other revenue for the three months ended July 31, 2016 and 2015 is made up of incidental sales of corn syrup at HLBE's plant and revenues from natural gas pipeline operations at Agrinatural, net of intercompany eliminations for distribution fees paid by HLBE to Agrinatural for natural gas transportation services.  

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The following table shows the sources of our consolidated revenue and the approximate percentage of revenues from those sources to total revenues in our unaudited condensed consolidated statements of operations for the three months ended July 31, 2016:

	Three Months Ended July 31, 2016
	Sales Revenue		% of Total Revenues
Revenue Sources	(in thousands)
Ethanol sales	$	45,038	77.6	%
Distillers grains sales		10,124	17.4	%
Corn oil sales		2,606	4.6	%
Miscellaneous other		251	0.4	%
Total Revenues	$	58,019	100.0	%

The following table shows the sources of our consolidated revenue and the approximate percentage of revenues from those sources to total revenues in our condensed consolidated unaudited statements of operations for the three months ended July 31, 2015:

	Three Months Ended July 31, 2015
	Sales Revenue		% of Total Revenues
Revenue Sources	(in thousands)
Ethanol sales	$	44,402	75.7	%
Distillers grains sales		12,465	21.2	%
Corn oil sales		1,629	2.8	%
Miscellaneous other		175	0.3	%
Total Revenues	$	58,671	100.0	%

Our total consolidated revenues decreased by approximately 1.1% for the three months ended July 31, 2016, as compared to the three months ended July  31, 2015 due primarily to decreases in the average price received for our ethanol.  The following table reflects quantities of our three primary products sold and the average net prices received for the three months ended July 31, 2016 and 2015: 

	Three Months Ended July 31, 2016			Three Months Ended July 31, 2015
	Quantity Sold	Avg. Net Price		Quantity Sold	Avg. Net Price
Product	(in thousands)			(in thousands)
Ethanol (gallons)	32,283	$	1.40	31,256	$	1.42
Distillers' grains (tons)	79	$	128.57	80	$	154.94
Corn oil (pounds)	9,091	$	0.29	6,097	$	0.27

Ethanol

Total revenues from sales of ethanol increased by approximately 1.4% for the three months ended July 31, 2016 compared to the three months ended July 31, 2015 due to an increase of approximately 3.3% in the volumes sold, offset by an approximately 1.8%  decrease in the average price per gallon we received for our ethanol. This increase in the number of gallons sold during the 2016 period is attributable to an approximately 5.6% increase in the number of gallons sold at the HLBE plant during the three months ended July 31, 2016 as compared to the three months ended July 31, 2015.  The number of gallons of ethanol sold at the GFE plant was only marginally higher, increasing by approximately 0.9% from period to period.   The increase in the number of gallons sold during three months ended July 31, 2016 as compared to the same period of 2015, was largely due to the timing of ethanol shipments and an increase in ethanol production at the HLBE plant.    Ethanol production at the HLBE plant was higher compared to prior year due to capital improvements HLBE is making to increase ethanol production under its amended higher permited capacity.

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Ethanol prices were bouyed somewhat during June and early July 2016, due to an increase in domestic demand for ethanol due to lower gasoline prices and normal seasonal increase in driving during the summer months. Additionally, we experienced strong export demand during the three months ended July 31, 2016, particularly from Asia, which management attributes to lower domestic ethanol prices and increased worldwide ethanol demand. However, domestic ethanol production increased during the three months ended July 31, 2016, which increased domestic stocks of ethanol putting downward pressure on domestic ethanol prices. Additionally, declining corn prices in late July, due to the large projected 2016 crop, put further downward pressure on ethanol prices. The net effect of these factors was a decrease in the average price realized for our ethanol for three months ended July 31, 2016 as compared to the same period in 2015.

Management anticipates that ethanol prices will continue to change in relation to changes in corn and energy prices. Continued low prices or further declines in the crude oil and wholesale gasoline markets could have a negative impact on the market price of ethanol and our profitability particularly if domestic ethanol stocks remain high. Ethanol exports have provided support for ethanol prices, especially as domestic ethanol stocks have grown. However, a decrease in U.S. ethanol exports due to the premium on the price of ethanol as compared to unleaded gasoline, the strength of the U.S. dollar and/or other factors could contribute to higher ethanol stocks. If domestic ethanol stocks grow, further decreases in domestic ethanol prices may result unless additional demand from domestic discretionary blending or other foreign markets develop. In addition, the EPA’s reduction of the renewable volume obligations set forth in the RFS may limit demand for ethanol negatively impacting ethanol prices.

From time to time, we engage in hedging activities with respect to our ethanol sales. At July 31, 2016, we had approximately 840,000 gallons of ethanol derivative instruments, comprised of approximately 420,000 gallons of positions held by each of GFE and HLBE. These ethanol derivative instruments resulted in a loss of approximately $1.4 million during the three months ended July 31, 2016, which decreased our revenue.  We had no gain or loss on ethanol derivative instruments during the three months ended July 31, 2015.

Distillers' Grains

Total revenues from sales of distillers’ grains decreased by approximately 18.8% for the three months ended July 31, 2016 compared to the three months ended July 31, 2015, due to both an approximately 17.0% decline in the average price per ton we received for our distillers’ grains and an approximately 2.1% decrease in the volumes sold from period to period.  Management believes the decline in the selling price results primarily from the increased grain supplies for corn and soybeans, resulting in lower market grain prices during the three months ended July 31, 2016, as well as weaker export demand for dried distillers’ grains by China, a significant buyer of domestic distillers’ grains. In January 2016, China opened anti-dumping and countervailing duty investigations into distillers’ grains produced in the U.S. which has had a negative impact on export demand. If China were to impose anti-dumping tariffs on U.S. imports, or if demand in the export market remains low, distillers’ grains prices could continue to weaken unless additional demand can be created from other foreign markets or domestically.

The aggregate decrease in tons sold across both plants is primary due to an approximately 1.2% decrease in the volume of distillers' grains sold at the HLBE plant coupled with an approximately 3.1% decrease in distillers’ grains sales at the GFE plant. The decrease in tons of distillers’ grains sold at both the HLBE and GFE plants during the three months ended July 31, 2016 was primarily attributable to increased production of modified wet distillers’ grains, which resulted in fewer tons dried distillers’ grains produced and sold. 

Since distillers’ grain are primarily used as an animal feed substitute for corn and soybean meal, the price of distillers’ grain is impacted by these competing products. During the three months ended July 31, 2016, distillers’ grains traded at discount compared to a comparable amount of corn. Management anticipates distillers grains will continue to trade at a significant discount compared to the price of corn due to anticipated strong corn supplies and relatively stable demand. However, domestic prices for distillers’ grains could decrease if end-users switch to lower priced alternatives reducing the domestic demand for distillers’ grains.

Corn Oil

Total revenues from sales of corn oil increased by approximately 60.0% for the three months ended July 31, 2016 compared to the three months ended July 31, 2015 due to an approximately 49.1% increase in pounds sold, which coupled with an approximately 7.3% higher average price per pound received for our corn oil from period to period.  

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The increase in pounds sold from period to period was attributable to an approximately 67.1% and 33.5%  increase in the volumes sold at the HLBE and GFE plants, respectively for the three months ended July 31, 2016 compared to the same period of 2015.  The significant increase in pounds sold from period to period at the HLBE plant was due primarily to capital improvements to HLBE’s corn oil extraction equipment during the latter part of fiscal year 2015, which allowed HLBE to increase the amount of corn oil it can produce, as well as corn oil extraction efficiencies. Management anticipates that the corn oil production our ethanol plants will continue to be higher during our 2016 fiscal year compared to our 2015 fiscal year.

Management attributes the increase in the corn oil prices we experienced in the three months ended July 31, 2016 due to increased biodiesel production brought on by the passage of the biodiesel blenders' tax credit for 2016 (and retroactively for 2015). Management anticipates relatively stable corn oil prices going forward. However, corn oil demand due to biodiesel production may decrease if the biodiesel blenders' tax credit is not extended beyond December 2016, its scheduled expiration.

Cost of Goods Sold

Our cost of goods sold increased by approximately 3.7% for the three months ended July 31, 2016, as compared to the three months ended July 31, 2015.  As a percentage of revenues, our cost of goods sold also increased to approximately 89.1% for the three months ended July 31, 2016, as compared to approximately 85.0% for the same period in 2015 due to the narrowing of the margin between the price of ethanol and the price of corn.  The cost of goods sold per gallon of ethanol produced for the three months ended July 31, 2016 was approximately $1.45 per gallon of ethanol sold compared to approximately $1.39 per gallon of ethanol produced for the three months ended July 31, 2015.

The following table shows the costs of corn and natural gas (our two largest single components of costs of goods sold), as well as all other components of cost of goods sold, which includes processing ingredients, electricity, and wages, salaries and benefits of production personnel, and the approximate percentage of costs of those components to total costs of goods sold in our unaudited condensed consolidated statements of operations for the three months ended July 31, 2016:

	Three Months Ended July 31, 2016
	Cost		% of Cost of Goods Sold
	(in thousands)
Corn costs	$	38,179	73.8	%
Natural gas costs		2,440	4.7	%
All other components of costs of goods sold		11,098	21.5	%
Total Cost of Goods Sold	$	51,717	100.0	%

The following table shows the costs of corn, natural gas and all other components of cost of goods sold and the approximate percentage of costs of those components to total costs of goods sold in our unaudited condensed consolidated statements of operations for the three months ended July 31, 2015:

	Three Months Ended July 31, 2015
	Cost		% of Cost of Goods Sold
	(in thousands)
Corn costs	$	38,166	76.5	%
Natural gas costs		3,532	7.1	%
All other components of costs of goods sold		8,178	16.4	%
Total Cost of Goods Sold	$	49,876	100.0	%

Corn

Our cost of goods sold related to corn was approximately 0.1%  higher for the three months ended July 31, 2016 compared to the same period of 2015, due to an approximately 1.5% increase in the average price per bushel paid for corn as the number of bushels of corn processed from period to period decreased by approximately 1.5%.  The corn-ethanol price spread (the difference between the price per gallon of ethanol and the price per bushel of grain divided by 2.8) for the three months ended July 31, 2016 was approximately $0.01 narrower than the corn-ethanol price spread we experienced for same period of 2015.

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The increase in the average consolidated price paid for corn was due to an approximately 5.1% increase in the average price paid for corn at the GFE plant which was partially offset by an approximately 1.8% decrease in the average price paid for corn at the HLBE plant.    The corn prices were volatile during the three months ended July 31, 2016, with corn prices experiencing a rally during June 2016 due to early concerns about weather conditions.  However, as the growing season progressed, weather conditions remained favorable, which led to increased estimates for the 2016 corn crop harvest in the USDA’s July 2016 crop projections, which resulted in downward pressure on corn prices during the end of July 2016. If the 2016 corn crop is as large as is predicted, management anticipates that further reductions in corn market prices may occur.

From time to time we enter into forward purchase contracts for our commodity purchases and sales. At July 31, 2016,  HLBE had cash and basis contracts for forward corn purchase commitments for approximately 6.5 million bushels for various delivery periods through July 2017.  Our corn derivative positions resulted in gains of approximately $1.3 million for the three months ended July 31, 2016, which decreased cost of goods sold, compared to gains of approximately $870,000 related to corn derivative instruments for the same period of 2015.  We recognize the gains or losses that result from the changes in the value of our derivative instruments from corn in cost of goods sold as the changes occur. As corn prices fluctuate, the value of our derivative instruments are impacted, which affects our financial performance. We anticipate continued volatility in our cost of goods sold due to the timing of the changes in value of the derivative instruments relative to the cost and use of the commodity being hedged.

Natural Gas

Our cost of goods sold related to natural gas costs decreased approximately 30.9% for the three months ended July 31, 2016, as compared to the three months ended July 31, 2015.  The decrease in natural gas costs is primarily a result of decreased average price for natural gas due to plentiful supply for the three months ended July 31, 2016 as compared to the same period of 2015. Management anticipates that natural gas prices will continue to hold steady, unless there are major supply disruptions due to production problems or catastrophic weather events, as natural gas production has replenished stock shortages from last year and is currently exceeding demand.

We had no gain or loss on natural gas derivative instruments during the three months ended July 31, 2016 or 2015.

Operating Expenses

Operating expenses include wages, salaries and benefits of administrative employees at the plant, insurance, professional fees and similar costs. Our operating expenses decreased by 1.3% for the three months ended July 31, 2016 compared to the same period ended 2015. Our efforts to optimize efficiencies and maximize production may result in a decrease in our operating expenses on a per gallon basis. However, because these expenses generally do not vary with the level of production at the plant, we expect our operating expenses to remain relatively steady throughout the remainder of the 2016 fiscal year.

Operating Income

We had income from operations of approximately $5.0 million for the three months ended July 31, 2016, compared to income from operations of approximately $7.5 million for the three months ended July 31, 2015. This approximately 33.0%  decrease in our operating income is primarily due to decreased operating margins due to lower average prices received for our products and the narrowing of our net operating margins at our plants.

Other Expense, Net

Our net other expense for the three months ended July 31, 2016 was approximately $148,000, compared to a net expense of approximately $182,000 for the three months ended July 31, 2015.  Net other expense consists primarily of interest expense on our credit facilities. Interest expense for the three months ended July 31, 2016 was approximately $152,000 compared to approximately $182,000 for the same period of 2015, reflecting the decrease in borrowings on HLBE's credit facilities for the three months ended July 31, 2016.

Results of Operations for the Nine months Ended July 31, 2016 and 2015

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The following table shows summary information from the results of our operations and the approximate percentage of revenues, costs of goods sold, operating expenses and other items to total revenues in our unaudited condensed consolidated statements of operations for the nine months ended July 31, 2016 and 2015 (amounts in thousands).

	Nine Months Ended July 31,
		2016				2015
		(unaudited)				(unaudited)
Income Statement Data		Amount		%		Amount		%
Revenue		$	159,995	100.0	%	$	176,431	100.0	%
Cost of Goods Sold			149,986	93.7	%		156,462	88.7	%
Gross Profit			10,008	6.3	%		19,969	11.3	%
Operating Expenses			4,174	2.6	%		4,096	2.3	%
Operating Income			5,834	3.6	%		15,873	9.0	%
Other Expense, net			(225)	(0.1)	%		(315)	(0.2)	%
Net Income			5,609	3.5	%		15,558	8.8	%
Less: Net Income Attributable to Non-controlling Interest			(1,405)	(0.9)	%		(3,171)	(1.8)	%
Net Income Attributable to Granite Falls Energy, LLC		$	4,204	2.6	%	$	12,388	7.0	%

Revenues

Revenues from our three primary products: ethanol, distillers’ grains and corn oil, represented approximately 99.4% and 99.2% of our total consolidated revenues for the nine months ended July 31, 2016 and 2015, respectively. Miscellaneous other revenues attributable to incidental sales of corn syrup and Agrinatural revenues (net of eliminations) represented 0.7% and 0.6% of our consolidated revenues for the nine months ended July 31, 2016 and 2015, respectively.

The following table shows the sources of our consolidated revenue and the approximate percentage of revenues from those sources to total revenues in our unaudited condensed consolidated statements of operations for the nine months ended July 31, 2016:

	Nine Months Ended  July 31, 2016
	Sales Revenue		% of Total Revenues
Revenue Sources	(in thousands)
Ethanol sales	$	125,746	78.6	%
Distillers grains sales		26,613	16.6	%
Corn oil sales		6,479	4.0	%
Miscellaneous other		1,157	0.7	%
Total Revenues	$	159,995	100.0	%

The following table shows the sources of our consolidated revenue and the approximate percentage of revenues from those sources to total revenues in our unaudited condensed consolidated statements of operations for the nine months ended July 31, 2015:

	Nine Months Ended  July 31, 2015
	Sales Revenue		% of Total Revenues
Revenue Sources	(in thousands)
Ethanol sales	$	137,555	78.0	%
Distillers grains sales		33,387	18.9	%
Corn oil sales		4,412	2.5	%
Miscellaneous other		903	0.7	%
Total Revenues	$	176,257	100.0	%

Our total consolidated revenues decreased by approximately 9.3% for the nine months ended July 31, 2016, as compared to the nine months ended July 31, 2015 due primarily to decreases in the average prices received for our ethanol, distillers' grains and corn oil, offset by increases in the total volumes of ethanol and corn oil sold.  The following table reflects quantities of our three primary products sold and the average net prices received for the nine months ended July 31, 2016 and 2015.  

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	Nine Months Ended  July 31, 2016			Nine Months Ended  July 31, 2015
	Quantity Sold	Avg. Net Price		Quantity Sold	Avg. Net Price
Product	(in thousands)			(in thousands)
Ethanol (gallons)	94,070	$	1.34	92,029	$	1.49
Distillers' grains (tons)	228	$	116.82	237	$	141.15
Corn oil (pounds)	25,151	$	0.26	16,358	$	0.27

Ethanol

Total consolidated revenues from ethanol sales decreased by approximately 8.6% for the nine months ended July 31, 2016 as compared to the same period in 2015, due primarily to an  approximately 10.6% decrease in the average price received from period to period, which was offset by an approximately 2.2% increase in total volume of ethanol sold for the same periods. This increase in the number of gallons sold during the 2016 period is attributable to an approximately 6.2% increase in the number of gallons sold at the HLBE plant during the nine months ended July 31, 2016 as compared to the nine months ended July 31, 2015. Comparatively, the number of gallons of ethanol sold at the GFE plant decreased by approximately 1.6% from period to period, largely due to the timing of ethanol shipments.  Ethanol production at the HLBE plant was higher compared to same period of prior year due to capital improvements HLBE is making to increase ethanol production under its amended higher permited capacity and from the system pressure fluctuations that the HLBE plant experienced during the three months ended January 31, 2015 which reduced HLBE's overall production and sales for the nine months ended July 31, 2015.  Although these system pressure issues were addressed and we resumed normal plant operations during the three months ended January 31, 2015, the production issues during that period impacted the aggregate volume of ethanol sold for the nine months ended July 31, 2015.

Our ethanol derivative instruments resulted in a loss of approximately $1.3 million during the nine months ended July 31, 2016, which decreased our revenue. We had no gain or loss on ethanol derivative instruments during the nine months ended July 31, 2015.

Distillers' Grains

Total revenue from the sales of distillers' grains decreased by approximately 20.3% during the nine months ended July 31, 2016 compared to the same period of 2015.  The decline in distillers' grains revenues is primarily attributable to an approximately 17.2% decrease from period to period in the average price received for distillers' grains, which was compounded by an approximately 3.7% decrease in aggregate tons sold. This decrease in tons sold from period to period was due to increased production and sales of modified wet distillers’ grains at the HLBE and GFE plants during the nine months ended July 31, 2016, which decreased the amount of dried distillers’ grains produced and sold, which in turn decreased the aggregate volumes of distillers’ grains produced and sold from period to period.  Management attributes lower distillers' grains prices for the nine months ended July 31, 2016 to lower corn prices, sufficient corn supplies and continued uncertainty regarding Chinese demand for distillers’ grains due to China’s ongoing anti-dumping and countervailing duty investigations. 

Corn Oil

Total corn oil sales increased by approximately 46.8% for the nine months ended July 31, 2016 compared to the same period of 2015.  This increase was due to an approximately 53.8% increase in pounds of corn oil sold from period to period, partially offset by an approximately 4.5% decrease in the price per pound received by the plants for corn oil from period to period. The increase in volume sold for the nine months ended July 31, 2016 compared to the same period of 2015 is attributable to increased production due capital improvements to HLBE’s corn oil extraction equipment in late fiscal 2015 which increased amount of corn oil HLBE can produce, as well as improved oil yield at both the HLBE and GFE plants during the nine months ended July 31, 2016.

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Cost of Goods Sold

Our cost of goods sold decreased by approximately 4.1% for the nine months ended July 31, 2016, as compared to the nine months ended July 31, 2015. However, as a percentage of revenues, our cost of goods sold increased to approximately 93.7% for the nine months ended July 31, 2016, as compared to approximately 88.7% for the same period in 2015 due to the narrowing of the margin between the price of ethanol and the price of corn. The cost of goods sold per gallon of ethanol produced for the nine months ended July 31, 2016 was approximately $1.43 per gallon of ethanol sold compared to approximately $1.50 per gallon of ethanol produced for the nine months ended July 31, 2015.

The following table shows the costs of corn and natural gas (our two largest single components of costs of goods sold), as well as all other components of cost of goods sold, which includes processing ingredients, electricity, and wages, salaries and benefits of production personnel, and the approximate percentage of costs of those components to total costs of goods sold in our unaudited condensed consolidated statements of operations for the nine months ended July 31, 2016:

	Nine Months Ended  July 31, 2016
	Cost		% of Cost of Goods Sold
	(in thousands)
Corn costs	$	111,724	74.5	%
Natural gas costs		7,356	4.9	%
All other components of costs of goods sold		30,906	20.6	%
Total Cost of Goods Sold	$	149,986	100.0	%

The following table shows the costs of corn, natural gas, and all other components of cost of goods sold and the approximate percentage of costs of those components to total costs of goods sold in our unaudited condensed consolidated statements of operations for the nine months ended July 31, 2015:

	Nine Months Ended  July 31, 2015
	Cost		% of Cost of Goods Sold
	(in thousands)
Corn costs	$	117,370	75.0	%
Natural gas costs		11,334	7.3	%
All other components of costs of goods sold		27,758	17.7	%
Total Cost of Goods Sold	$	156,462	100.0	%

Corn

Our cost of goods sold related to corn was approximately 4.8% less for the nine months ended July 31, 2016 compared to the same period of 2015, due primarily to an approximately 4.5% decrease in the average price per bushel paid for corn, coupled with a 0.3% decrease in the number of bushels of corn processed from period to period.  For the nine months ended July 31, 2016 and 2015, our plants processed approximately 32.5 million and 32.6 million bushels of corn, respectively. The corn-ethanol price spread (the difference between the price per gallon of ethanol and the price per bushel of grain divided by 2.8) for the nine months ended July 31, 2016, was approximately $0.01 less than the corn-ethanol price spread we experienced for same period of 2015. The decrease in corn prices was primarily driven by the strong corn harvest in the fall of 2015, resulting in a sufficient local supply of corn to the market and the large projected corn crop anticipated for crop year 2016.

We had gains related to corn derivative instruments of approximately $1.2 million for the nine months ended July 31, 2016, which increased our cost of goods sold, and a gain of $258,000 for the nine months ended July 31, 2015, which decreased our cost of goods sold. We anticipate continued volatility in our cost of goods sold due to the timing of the changes in value of the derivative instruments relative to the cost and use of the commodity being hedged.

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Natural Gas

For the nine month period ended July 31, 2016, we experienced a decrease of approximately 35.1% in our overall natural gas costs compared to the same period of 2015.  Additionally, natural gas costs comprised a slightly smaller portion of our cost of goods sold from period to period decreasing to approximately 4.9% from approximately 7.2% for the nine months ended July 31, 2016 and 2015, respectively. The decrease in natural gas costs was primarily due lower natural gas prices for the nine months ended July 31, 2016 as compared the same period of 2015.  

Our natural gas derivative positions resulted in a gain of approximately $32,000 during the nine months ended July 31, 2016, which increased our cost of goods sold. In comparison, we had no gain or loss on natural gas derivative instruments during the nine months ended July 31, 2015.

Operating Expenses

Our operating expenses increased by approximately 1.9% for the nine months ended July 31, 2016 compared to the same period ended 2015. 

Operating Income

We had income from operations of approximately $5.8 million for the nine months ended July 31, 2016, compared to income from operations of approximately $15.9 million for the nine months ended July 31, 2015. This approximately 63.2%  decrease in our operating income is primarily due to decreased operating margins due to lower average prices received for our products.

Other Expense, Net

Our net other expense for the nine months ended July 31, 2016 was approximately $225,000, compared to an expense of approximately $315,000 for the nine months ended July 31, 2015.  This decrease was largely due to increased other miscellaneous income during the nine months ended July 31, 2016 compared to the same period of 2015.

Changes in Financial Condition at July 31, 2016 

The following table highlights our financial condition at July 31, 2016 and October 31, 2015 (amounts in thousands):

	July 31, 2016		October 31, 2015
	(unaudited)
Current Assets	$	32,175	$	35,513
Total Assets	$	115,431	$	122,011
Current Liabilities	$	8,624	$	9,140
Long-Term Debt	$	6,686	$	6,712
Members' Equity attributable to Granite Falls Energy, LLC	$	79,166	$	84,603
Non-controlling Interest	$	20,956	$	21,557

Total assets were approximately $115.4 million at July 31, 2016, an approximately 5.4% decrease from our total assets at October 31, 2015. The decrease in our total assets is primarily due to an approximately 9.4% decrease in total current assets at July 31, 2016 compared to October 31, 2015. The change in our current assets is due to an approximately 28.4% decrease in accounts recievable, an approximately 11.9% decrease in inventory, and an approximately decrease in 10.4%  cash on hand during the nine months ended July 31, 2016. Our cash on hand at July 31, 2016 was less than cash on hand at October 31, 2015, due to decreased profitability during the period and payment of distributions to members in January 2016. Our trade accounts receivable decreased primarily due to the timing of shipments. Offsetting these decreases was an increase of approximately $1.8 million in restricted cash related to cash held in our margin account for our hedging transactions at July 31, 2016 compared to October 31, 2015. Also contributing to the decrease in total assets was a decrease of approximately $3.2 million in property and equipment due to fewer capital expenditures for construction in progress during the 2016 period.

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Total current liabilities decreased by approximately 5.6% at July 31, 2016 compared to October 31, 2015.  This decrease was mainly due to a decrease of approximately $347,000 in checks drawn in excess of bank balance, a decrease of approximately $361,000 in corn payable to FCE, and a decrease of approximately  $1.5 million in accounts payable at July 31, 2016compared to October 31, 2015. The decrease in our accounts payable is due primarily to a decrease in accounts payable at HLBE which was due to lower corn prices during the three months ended July 31, 2016 which reduced the amount of HLBE’s corn payable at July 31, 2016.  Our outstanding checks drawn in excess of our bank balance represents any checks that HLBE has issued which have not yet been cashed which exceed the cash HLBE has in its bank account. Checks that HLBE issues are paid from its revolving term loans and any cash that it generate is used to pay down its line of credit with AgStar. Offsetting the decrease in checks drawn in excess of bank balance, accounts payable and corn payable was an increase in commodity derivative instruments of $1.7 million approximately at July 31, 2016 as compared to October 31, 2015.

Our long-term debt decreased approximately $26,000 at July 31, 2016 compared to October 31, 2015. The decrease is mostly due to scheduled principal repayment, partially offset by draws on HLBE’s revolving line of credit.

Members’ equity attributable to Granite Falls Energy, LLC at July 31, 2016 compared to October 31, 2015 decreased by $5.4 million. The approximately 6.4%  decrease was related to the distribution to our members of approximately $9.6 million during January 2016, offset by our approximately $4.2 million of net income during the nine months ended July 31, 2016. 

Noncontrolling interest totaled approximately $21.0 million at July 31, 2016.  This is directly related to recognition of the 49.4% noncontrolling interest in HLBE at July 31, 2016.

LIQUIDITY AND CAPITAL RESOURCES

Our principal sources of liquidity consist of cash provided by operations, cash and equivalents on hand, and available borrowings under our credit facilities. Our principal uses of cash are to pay operating expenses of the plants, to make debt service payments on long-term debt, and to make distribution payments to our members.  We expect to have sufficient cash generated by continuing operations and current lines of credit to fund our operations for the next twelve months.

We do not currently anticipate any significant purchases of property and equipment that would require us to secure additional capital in the next twelve months. However, management continues to evaluate conditions in the ethanol industry and explore opportunities to improve the efficiency and profitability of our operations which may require additional capital to supplement cash generated from operations and our current credit facilities.

Cash Flows

The following table shows our cash flows for the nine months ended July 31, 2016 and 2015 (amounts in thousands): 

	2016		2015
	(unaudited)		(unaudited)
Net cash provided by operating activities	$	14,926	$	23,281
Net cash used in investing activities	$	(4,238)	$	(7,987)
Net cash used in financing activities	$	(12,035)	$	(30,125)
Net decrease in cash	$	(1,347)	$	(14,831)

Operating Cash Flows

Our cash flows from operations were approximately $8.3 million less for the nine months ended July 31, 2016 compared to the nine months ended July 31, 2015. This decrease from period to period was due primarily to an approximately  $9.9 million decrease in net income, offset by a net increase of approximately $1.9 million of various working capital items.

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Investing Cash Flows

Cash used in investing activities was approximately $3.7 million less for the nine months ended July 31, 2016, compared to the nine months ended July 31, 2015. This decrease was due primarily to reduced payments for capital expenditures for the nine months ended July 31, 2016 for construction in progress. During the nine months ended July 31, 2016, we used cash at the GFE plant for our grain bin storage expansion and at HLBE plant for our RTO replacement project. During the nine months ended July 31, 2016, we used cash at the HLBE plant to purchase a condenser and sieve beads to remediate the system pressure fluctuations and upgrade corn oil separation equipment. 

Financing Cash Flows

Cash used in financing activities was approximately $18.1 million less for the nine months ended July 31, 2016 compared to the same period of 2015. For the nine months ended July 31, 2016, we made payments of approximately $9.6 million in distributions to our unit holders, approximately $2.0 million to non-controlling interests, and approximately $9.9 million on HLBE’s long-term debt, and  $347,000 checks drawn in excess of bank balance, which were offset by approximately $9.8 million in proceeds from HLBE’s long-term debt.  In comparison, for the same period in 2015, we had proceeds of approximately $11.5 million in proceeds from HLBE’s long-term debt and $2.6 million provided by checks drawn in excess of bank balance and made payments of approximately $7.6 million on HLBE’s long-term debt, approximately $32.1 million in distributions to our unit holders, and $4.6 million to non-controlling interests.

Indebtedness

Granite Falls Energy

We have a credit facility with United FCS consisting of a long-term revolving term loan. Our credit facility with United FCS is secured by substantially all our assets. There are no savings account balance collateral requirements as part of this credit facility.  CoBank serves as administrative agent for this credit facility.

Under the Company's long-term revolving term loan, we could initially borrow, repay, and re-borrow up to $18.0 million. However, the aggregate principal commitment available for borrowing under this facility reduces by $2.0 million every nine months, beginning September 1, 2014, with the final reduction on March 1, 2018.  The outstanding balance on the revolving term loan totaled approximately $0 at July 31, 2016 and October 31, 2015. Therefore, the aggregate principal amount available for borrowing under this revolving term loan facility at July 31, 2016 and October 31, 2015 was $10.0 million and $12.0 million, respectively.  

The Company's credit facility with United FCS is subject to numerous financial and non-financial covenants that limit distributions and debt and require minimum working capital, minimum local net worth, and debt service coverage ratio, including the following:

· GFE must maintain working capital of at least $10.0 million. Working capital is calculated as GFE’s current assets plus the amount available under GFE’s long-term revolving term loan, less GFE’s current liabilities.

· GFE must maintain local net worth of at least $34.0 million.  Local net worth is defined as total assets, minus total liabilities, minus investments by GFE in other entities.

· GFE must maintain a debt service coverage ratio of at least 1.5 to 1.0.  The debt service coverage ratio is calculated as GFE’s net income (after taxes), plus depreciation and amortization, minus extraordinary gains (plus losses), minus gain (plus loss) on asset sales and divided by $4.0 million.

· GFE may make member distributions of up to 75% of GFE’s net income without the consent of United FCS provided GFE remains in compliance with its loan covenants following the distribution.  Any member distributions in excess of 75% of GFE’s net income must be pre-approved by United FCS. 

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As of July 31, 2016, GFE was in compliance with these financial covenants. Management’s current financial projections indicate that we will be in compliance with our financial covenants for the next 12 months and we expect to remain in compliance thereafter. Management does not believe that it is reasonably likely that we will fall out of compliance with our material loan covenants in the next 12 months.  However, if market conditions deteriorate in the future, circumstances may develop which could result in us violating the financial covenants or other terms of GFE’s credit facility. If we fail to comply with the terms of our credit agreement with United FCS, and United FCS refuses to waive the non-compliance, FNBO could terminate the credit facility and any commitment to loan funds to GFE.

Heron Lake BioEnergy

AgStar Revolving Term Note

HLBE has a comprehensive credit credit facility with AgStar Financial Services, FCLA (“AgStar”) which consists of a revolving term loan with a maturity date of March 1, 2022.  As part of the credit facility closing, HLBE entered into an administrative agency agreement with CoBank, ACP (“CoBank”). CoBank purchased a participation interest in the AgStar loans and was appointed the administrative agent for the purpose of servicing the loans.  As a result, CoBank acts as the agent for AgStar with respect to the credit facility. 

Under the AgStar revolving term note, HLBE may borrow, repay, and re-borrow up to the aggregate principal commitment.  The revolving term loan principal commitment, initially $28.0 million, declines by $3.5 million annually, effective March 1, 2015 and continuing each anniversary thereafter until maturity. Therefore, the aggregate principal commitment under this facility at July 31, 2016 was $21.0 million. After accounting for amounts outstanding under this facility at July 31, 2016, the aggregate principal amount available to HLBE for additionaly borrowing was approximately $15.9 million. The outstanding balance on the HLBE revolving term loan totaled approximately $5.1 million and approximately $4.8 million at July 31, 2016, and October 31, 2015, respectively.

Interest on the revolving term loan accrues at a variable rate equal to 3.25% above the One-Month London Interbank Offered Rate ("LIBOR") Index rate. HLBE may elect to enter into a fixed interest rate on this loan at various times throughout the term of the loan as provided in the loan agreements. The interest rate on the revolving term loan was 3.75% and 3.45% at July 31, 2016, and October 31, 2015, respectively.

HLBE also agreed to pay an unused commitment fee on the unused portion of the revolving term loan commitment at the rate of 0.50% per annum. The revolving term loan is subject to a prepayment fee for any prepayment on the term loan prior to July 1, 2016 due to refinancing. The loan is secured by substantially all of HLBE's assets including a subsidiary guarantee.

HLBE's credit facility with AgStar is subject to numerous financial and non-financial covenants that limit HLBE’s distributions and debt and require minimum working capital, minimum local net worth, and debt service coverage ratio, including the following:

· HLBE may not make loans or advances to Agrinatural, HLBE’s subsidiary, which exceed an aggregate principal amount of approximately $3.1 million without the consent of AgStar.  As of July 31, 2016, HLBE has outstanding loans to Agrinatural in an aggregate principal amount of approximately $5.5 million. These loans were consented to by AgStar.

· HLBE must maintain working capital of at least $8.0 million. Working capital is calculated as HLBE’s unconsolidated current assets plus the amount available under HLBE’s revolving term loan, less HLBE’s unconsolidated current liabilities.

· HLBE must maintain net worth of at least $32.0 million. Local net worth is defined as HLBE’s unconsolidated total assets, minus unconsolidated total liabilities plus the approximately $3.9 million of HLBE subordinated convertible debt converted into units on July 1, 2014.

· HLBE must maintain a debt service coverage ratio of at least 1.5 to 1.0.  The debt service coverage ratio is, calculated on an unconsolidated basis, HLBE’s net income (after taxes), plus depreciation and amortization, minus non-cash dividends/income received, minus extraordinary gains (plus losses), minus gain (plus loss) on asset sales and divided by $4.0 million.

· HLBE may make member distributions of up to 65% of HLBE’s net income without the consent of AgStar provided HLBE remains in compliance with its loan covenants following the distribution. Any member distributions in excess of 65% of HLBE’s net income must be pre-approved by AgStar.

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As of July 31, 2016, HLBE was in compliance with these loan covenants. Management’s current financial projections indicate that HLBE will be in compliance with its financial covenants for the next 12 months and we expect it to remain in compliance thereafter. However, if market conditions deteriorate in the future, circumstances may develop which could result in HLBE violating the financial covenants or other terms of its AgStar credit facility. Should unfavorable market conditions result in HLBE’s violation of the terms or covenants of the AgStar credit facility and HLBE fails to obtain a waiver of any such term or covenant, AgStar could deem HLBE in default, impose fees, charges and penalties, terminate any commitment to loan funds to HLBE and require HLBE to immediately repay a significant portion or possibly the entire outstanding balance of the revolving term loan. In the event of a default, AgStar could also elect to proceed with a foreclosure action on HLBE’s plant.

Other HLBE Credit Arrangements

In addition to HLBE's primary credit arrangement with AgStar, HLBE has other material credit arrangements and debt obligations.

In October 2003, HLBE entered into an industrial water supply development and distribution agreement with the City of Heron Lake, Jackson County, and Minnesota Soybean Processors. In consideration of this agreement, HLBE and Minnesota Soybean Processors are allocated equally the debt service on $735,000 in water revenue bonds that were issued by the City to support this project that mature in February 2019. The parties have agreed that, prior to the scheduled expiration of the agreement, they will negotiate in good faith to replace the agreement with a further agreement regarding the wells and related facilities.

In May 2006, HLBE entered into an industrial water supply treatment agreement with the City of Heron Lake and Jackson County. Under this agreement, HLBE pays monthly installments over 24 months starting January 1, 2007 equal to one years' debt service on approximately $3.6 million in water revenue bonds, which will be returned to HLBE if any funds remain after final payment in full on the bonds and assuming HLBE complies with all payment obligations under the agreement.

There was a total of approximately $1.8 million and $2.0 million in outstanding water revenue bonds at July 31, 2016 and October 31, 2015, respectively. HLBE classifies its obligations under these bonds as assessments payable. The interest rates on the bonds range from 0.50% to 8.73%.

To fund the purchase of the distribution system and substation for the plant, HLBE entered into a loan agreement with Federated Rural Electric Association pursuant to which HLBE borrowed $600,000 by a secured promissory note. Under the note HLBE is required to make monthly payments to Federated Rural Electric Association of $6,250 consisting of principal and an annual fee of 1% beginning on October 10, 2009. In exchange for this loan, Federated Rural Electric Association was granted a security interest in the distribution system and substation for the plant. The balance of this loan was approximately $88,000 and $144,000 at July 31, 2016, and October 31, 2015, respectively.

HLBE also has a note payable to the noncontrolling owner of Agrinatural in the amount of in the amount of $200,000 and $300,000 at July 31, 2016 and October 31, 2015, respectively. Interest on the note is the One-Month LIBOR rate plus 4.0% and the note is due on demand.

Agrinatural

Original Agrinatural Credit Facility

On July 29, 2014, HLBE has entered into an intercompany loan agreement, promissory note and related loan documents with Agrinatural, its majority owned subsidiary (collectively, the “Original Agrinatural Credit Facility”). Under the Original Agrinatural Credit Facility, the Company agreed to make a five-year term loan in the principal amount of $3.05 million to Agrinatural for use by Agrinatural to repay approximately $1.4 million of its outstanding debt and provide approximately $1.6 million of working capital to Agrinatural. The Original Agrinatural Credit Facility contains customary financial and non-financial affirmative covenants and negative covenants for loans of this type and size.

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On March 30, 2015, HLBE entered into an allonge (the “Allonge”) to the July 29, 2014 note with Agrinatural. Under the terms of the Allonge, HLBE and Agrinatural agreed to increase the principal amount of the Original Agrinatural Credit Facility to approximately $3.06 million, defer commencement of repayment of principal until May 1, 2015, decrease the monthly principal payment to $36,000 per month and shorten maturity of the Original Agrinatural Credit Facility to May 1, 2019.

Interest on the Original Agrinatural Credit Facility was not amended and continues to accrue at a variable rate equal to the One-Month LIBOR rate plus 4.0%, with the interest rate capped and not to exceed 6.0% per annum.  Accrued interest is due and payable on a monthly basis. Except as otherwise provided in the Allonge, all of the terms and conditions contained in the Original Agrinatural Credit Facility remain in full force and effect.

In exchange for the loan agreement, Agrinatural executed a security agreement granting HLBE a first lien security interest in all of Agrinatural's equipment and assets and a collateral assignment assigning HLBE all of Agrinatural's interests in its contracts, leases, easements and other agreements. In addition, Rural Energy Solutions, LLC, the noncontrolling owner of Agrinatural (“RES”), executed a guarantee under which RES guaranteed full payment and performance of 27% of Agrinatural's obligations to HLBE.

The balance of this loan was approximately $2.6 million at July 31, 2016 and $2.8 million at October 31, 2015.

Additional Agrinatural Credit Facility

On March 30, 2015, HLBE entered into a second intercompany loan agreement, promissory note and related loan documents (collectively, the “Additional Agrinatural Credit Facility”) with Agrinatural. Under the Additional Agrinatural Credit Facility, HLBE agreed to make a four-year term loan in the principal amount of $3.5 million to Agrinatural for use by Agrinatural to repay its outstanding trade debt and provide working capital. The Additional Agrinatural Credit Facility contains customary financial and non-financial affirmative covenants and negative covenants for loans of this type and size, including a covenant restricting capital expenditures by Agrinatural.

Interest on the additional term loan accrues at a variable rate equal to the One-Month LIBOR rate plus 4.0%, with the interest rate capped and not to exceed 6.0% per annum.  Prior to May 1, 2015, Agrinatural is required to pay only monthly interest on the term loan.  Commencing May 1, 2015, Agrinatural is required to make monthly installments of principal plus accrued interest. The entire principal balance and accrued and unpaid interest on the term loan is due and payable in full on May 1, 2019.

On May 19, 2016, HLBE and Agrinatural amended the Additional Agrinatural Credit Facility, entering into amendment to the loan agreement dated March 30, 2015 (the “Amendment”) and an allonge to the negotiable promissory note dated March 30, 2015 issued by Agrinatural to HLBE (the “Additional Allonge”) to increase the amount of the capital expenditures allowed by Agrinatural during the term of the facilty and defer a portion of the principal payments required for 2016.

As provided in the Amendment, for calendar year 2016, Agrinatural may, without consent of HLBE, proceed with and pay for capital expenditures in an amount up to $300,000 plus the amount of contributions in aid of construction received by Agrinatural from customers for capital improvements (“CIAC”), less a reserve for distribution to the Agrinatural members to cover the income or other taxes imposed as a result of receipt of CIAC in an amount equal to 40% of CIAC. For calendar years, 2017, 2018 and 2019, the Amendment provides that Agrinatural may, without consent of HLBE, proceed with and pay for capital expenditures in an amount up to $100,000 plus the amount of CIAC, less a reserve for distribution to the Agrinatural members to cover the income or other taxes imposed as a result of receipt of CIAC in an amount equal to 40% of CIAC. Prior to the Amendment, Agrinatural’s capital expenditures were restricted to $100,000 per year.

Under the terms of the Additional Allonge, HLBE and Agrinatural agreed to decrease monthly principal payments required for the remainder of calendar 2016 (May to December) from approximately $42,000 per month to approximately $9,000 per month with the portion of principal payments deferred in calendar year 2016 to continue to accrue interest at the rate set forth in the Note and becoming a part of the balloon payment due at maturity.

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In exchange for the Additional Agrinatural Credit Facility, Agrinatural executed a security agreement granting HLBE a first lien security interest in all of Agrinatural's equipment and assets and a collateral assignment assigning HLBE all of Agrinatural's interests in its contracts, leases, easements and other agreements. In addition, RES executed a guarantee under which RES guaranteed full payment and performance of 27% of Agrinatural's obligations to HLBE under the Additional Agrinatural Credit Facility.

The balance of this loan was approximately $2.9 million at July 31, 2016 and $3.2 million at October 31, 2015.

Critical Accounting Policies and Estimates

Management uses estimates and assumptions in preparing our financial statements in accordance with generally accepted accounting principles. These estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses.  We believe that of our significant accounting policies summarized in Note 1 to our condensed consolidated unaudited financial statements included with this Form 10-Q.  At July 31, 2016, our critical accounting estimates continue to include those described in our annual report on Form 10-K for the fiscal year ended October 31, 2015. Management has not changed the method of calculating and using estimates and assumptions in preparing our condensed consolidated unaudited financial statements in accordance with generally accepted accounting principles in the U.S.  

Off-Balance Sheet Arrangements

We currently have no off-balance sheet arrangements.

Item 3.   Quantitative and Qualitative Disclosures About Market Risk

We are exposed to the impact of market fluctuations associated with interest rates and 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, ethanol and natural gas. 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 U.S. Generally Accepted Accounting Principles (“GAAP”).

Interest Rate Risk

We are exposed to market risk from changes in interest rates. Exposure to interest rate risk results primarily from our credit facilities with United FCS, PCA  , HLBE's credit facilities with AgStar Financial Services, PCA and HLBE’s note payable to the minority owner of Agrinatural. The specifics of these credit facilities are discussed in greater detail in “Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations - Indebtedness.”

As of July 31, 2016, GFE had no exposure to interest rate risk as we had no amounts outstanding on our credit facility with United FCS, PCA. As of July 31, 2016, HLBE’s exposure to interest rate risk results primarily from its credit facilities with AgStar, as well as its note payable to the noncontrolling owner of Agrinatural.  Below is a sensitivity analysis we prepared regarding HLBE's income exposure to changes in interest rates for its credit facility with AgStar. The sensitivity analysis below shows the anticipated effect on our income from a 10% adverse change in interest rates for a one-year period.

Outstanding Variable
Rate Debt at		Interest Rate at		Interest Rate Following 10%		Approximate Adverse
July 31, 2016		July 31, 2016		Adverse Change		Change to Income
$	5,323,000	3.78	%	4.16	%	$	20,000

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Commodity Price Risk

We seek to minimize the risks from fluctuations in the prices of raw material inputs, such as corn and natural gas, and finished products, such as ethanol and distillers' 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 period to period 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 July 31, 2016, GFE had price protection in place for approximately 21% of its ethanol sales for the next 12 months. As of July 31, 2016, HBLE had price protection in place for approximately 18% of its anticipated corn needs and approximately 18% of its ethanol sales for the next 12 months. Through these contracts we hope to minimize risk from future market price fluctuations and basis fluctuations. As input 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. Depending on market movements, crop prospects and weather, these price protection positions may cause immediate adverse effects, but are expected to produce long-term positive growth for us.

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 fair value of our corn and natural gas prices and average ethanol price as of July 31, 2016, 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 both of the GFE and HLBE plants for a one year period from July 31, 2016.  

The results of this sensitivity analysis, which may differ from actual results, are as follows:

	Estimated Volume Requirements for the next	Hypothetical Adverse Change in
	12 months (net of forward and futures	Price as of		Approximate Adverse Change to
	contracts)	July 31, 2016		Income
Ethanol	102,960,000	10	%	$	13,411,000
Corn	35,475,000	10	%	$	10,873,000
Natural Gas	3,240,000	10	%	$	1,104,000

Participation in Captive Reinsurance Company

We participate in a captive reinsurance company (“Captive”). The Captive reinsures losses related to workman's compensation, commercial property and general liability. Premiums are accrued by a charge to income for the period to which the premium relates and is remitted by our insurer to the captive reinsurer. The Captive reinsures losses in excess of a predetermined amount. The Captive insurer has estimated and collected a premium amount in excess of expected losses but less than the aggregate loss limits reinsured by the Captive. We have contributed limited capital surplus to the Captive that is available to fund losses should the actual losses sustained exceed premium funding. So long as the Captive is fully-funded through premiums and capital contributions to the aggregate loss limits reinsured, and the fronting insurers are financially strong, we cannot be assessed over the amount of our current contributions.

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.

34

Effectiveness of Disclosure Controls and Procedures

Our management, including our Chief Executive Officer and General Manager (the principal executive officer), Steve Christensen, along with our Chief Financial Officer (the principal financial officer), Stacie Schuler, have reviewed and evaluated the effectiveness of our disclosure controls and procedures as of July 31, 2016. Based upon this review and evaluation, these officers have concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods required by the forms and rules of the Securities and Exchange Commission; and to ensure that the information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There were no changes in our internal controls over financial reporting during our most recently completed reporting period  that have materially affected or are 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, Granite Falls Energy, LLC and Heron Lake BioEnergy, LLC may be named as a defendant in legal proceedings related to various issues, including workers' compensation claims, tort claims, or contractual disputes. We are not currently involved in any material legal proceedings.

Item 1A.   Risk Factors

There are no material changes from risk factors previously discussed in Item 1A of our Form 10-K for the fiscal year ended October 31, 2015, as supplemented by the risk factors disclosed in Item 1A of our Form 10-Q for the three months ended ended January 31, 2016. However, additional risks and uncertainties, including risks and uncertainties not presently known to us, or that we currently deem immaterial, could also have an adverse effect on our business, financial condition and/or results of operations.

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.

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Item 6.   Exhibits.

(a) The following exhibits are included in this report.

Exhibit No.	Exhibit
31.1	Certification of Chief Executive Officer pursuant to 17 CFR 240.13a-14(a)*
31.2	Certification of Chief Financial Officer pursuant to 17 CFR 240.13a-14(a)*
32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350*
32.2	Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350*
10.1	Amendment No. 1 dated July  22, 2016 to the Ethanol Marketing Agreement dated September 17, 2013 by and among Heron Lake BioEnergy, LLC and Eco-Energy, LLC, incorporated by reference to Exhibit 10.1 to HLBE's Form 10-Q for the quarter ended July 31, 2016 (File No. 000-51825).+
10.2	Amendment No. 4 dated July 22, 2016 to the Ethanol Marketing Agreement dated December 24, 2008 by and among Eco-Energy, LLC and Granite Falls Energy, LLC.*+
101	The following financial information from Granite Falls Ethanol, LLC's Quarterly Report on Form 10-Q for the three and nine months ended July 31, 2016, formatted in XBRL (eXtensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets at July 31, 2016 and October 31, 2015; (ii) the Condensed Consolidated Statements of Operations for the three and nine months ended July 31, 2016 and July 31, 2015; (iii) the Condensed Consolidated Statements of Cash Flows for the nine months ended July 31, 2016 and 2015; and (iv) Notes to Condensed Consolidated Unaudited Financial Statements.*

*   Filed herewith.

+  Confidential Treatment Requested

36

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.

	GRANITE FALLS ENERGY, LLC
Date:   September 14,  2016	/s/ Steve Christensen
	Steve Christensen
	Chief Executive Officer
	/s/ Stacie Schuler
Date:   September 14,  2016	Stacie Schuler
	Chief Financial Officer

37

EX-10.2

CERTAIN INFORMATION INDICATED BY [***] HAS BEEN DELETED FROM THIS EXHIBIT AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT UNDER RULE 24N-2.

AMENDMENT NO. 4

ETHANOL MARKETING AGREEMENT

THIS Amendment No. 4 (“Amendment 4”), dated July 22, 2016, is entered into by and between Eco-Energy, LLC, a Tennessee Limited Liability Corporation with its registered office at 6100 Tower Circle, Suite 500, Franklin, Tennessee 37067 (“Eco”), and Granite Falls Energy, LLC (“GFE”), a Minnesota Limited Liability Corporation with its main office at 15045 Highway 23 SE, Granite Falls, Minnesota 56241.  Eco and GFE are hereinafter also referred to collectively as the “Parties.”

RECITALS

A.The Parties previously entered an Ethanol Marketing Agreement (“Agreement”), executed December 24, 2008, where the Parties established certain terms and conditions relating to Eco’s rights and obligations regarding the purchase of GFE’s entire ethanol output.  The Agreement established a term which commenced on the first day of ethanol shipment and expired one (1) year thereafter.  A copy of the Agreement—including Exhibit A, Exhibit B and Exhibit C of the Agreement—is attached hereto as Appendix 1.

B.On October 22, 2009, the Parties entered into Amendment No. 1 to the Agreement (attached hereto as Appendix 2), which modified the Agreement as follows: (i) added a “flex fee” adjustment intended to minimize the costs effects of disadvantageous production price fluctuations for GFE and (ii) extended the expiration date of the Agreement until December 31, 2011.

C.On August 30, 2011, the Parties entered into Amendment No. 2 to the Agreement (attached hereto as Appendix 3), which modified the Agreement as follows:  (i) terminated the “flex fee” adjustment specified in Amendment No. 1 to the Agreement, ii) extended the expiration date of the Agreement until December 31, 2013, and adjusted the Payment and Fees section of the Agreement by changing the fee that GFE pays Eco for Marketing Fees from [***] to [***].

D.On September 17, 2013, the Parties entered into Amendment No. 3 to the Agreement (attached hereto as Appendix 4), which modified the Agreement as follows:  (i) allowed GFE to obtain product sales quotes from third parties for Eco to facilitate potential transactions, (ii) extended the expiration date of the Agreement until December 31, 2016, (iii) adjusted the Payment and Fees section of the Agreement by changing the fee that GFE pays Eco for Marketing Fees to [***], establishing payment terms of [***], (iv) required Eco to provide continuous undenatured export offers, (v) [***], and (vi) deleted and replaced Exhibit B (i.e., Eco Transportation Services) to the Agreement.

E.The Parties now desire to again alter the Agreement in order to memorialize the modifications recently agreed upon by the Parties as well as incorporate such modifications into the Agreement.

NOW, THEREFORE, the written signatures of the Parties integrate this Amendment No. 4 into the Agreement making it a binding, and legally enforceable, portion of such.  For good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, Eco and GFE agree as follows:

I.EFFECTIVE DATE:  The modifications specified in Paragraph II of this Amendment No. 4 shall become effective on January 1, 2017.

II.MODIFICATIONS:

1)Section 4 of the Agreement—as amended by Amendment No. 1, Amendment No. 2, and Amendment No. 3—is hereby deleted in its entirety and replaced with the following:

CERTAIN INFORMATION INDICATED BY [***] HAS BEEN DELETED FROM THIS EXHIBIT AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT UNDER RULE 24N-2.

4.Payment and Fees.

(a)[***].

(b)[***].

2)Section 11(a) and Section 11(b) of the Agreement, as previously modified by Amendment No. 1, Amendment No. 2 and Amendment No. 3, is hereby amended as follows:

11.Terms and Termination.

(a)The term of this Agreement shall expire on December 31, 2019.

(b)This Agreement will automatically renew for additional consecutive terms of one (1) year each unless either party hereto gives written notice to the other at least three (3) months prior to the end of the term or the then current renewal term, in which case this Agreement shall terminate at the end of the term or such then current renewal term.

III.EFFECT OF AMENDMENT No. 4:  Except as expressly modified in Section II of this Amendment No. 4 the Agreement—including Amendment No. 1, Amendment No. 2 and Amendment No. 3—remains unchanged and in full force and effect.

IV.ENTIRETIES:  This Amendment No. 4 represents the final agreement between the parties regarding the subject matter hereof and may not be contradicted by evidence or prior, contemporaneous, or subsequent oral agreements of the parties.  There are no unwritten oral agreements between the parties.

CERTAIN INFORMATION INDICATED BY [***] HAS BEEN DELETED FROM THIS EXHIBIT AND FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION PURSUANT TO A REQUEST FOR CONFIDENTIAL TREATMENT UNDER RULE 24N-2.

{Signature page follows}

ECO ENERGY, LLC.	GRANITE FALLS ENERGY, LLC.
By: /s/ Josh Bailey	By: Eric M Baukol
Name: Josh Bailey	Name: Eric M Baukol
Title: CEO	Title: Risk Manager
Date: 7/22/16	Date: 7/22/16

EX-31.1

EXHIBIT 31.1

CERTIFICATION PURSUANT TO 17 CFR 240.15d-14(a)

(SECTION 302 CERTIFICATION)

I, Steve Christensen, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Granite Falls Energy, LLC;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant, as of, and for, the periods presented in this report;

4.The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:	September 14, 2016	/s/ Steve Christensen
		Steve Christensen, Chief Executive Officer
		(Principal Executive Officer)

EX-31.2

EXHIBIT 31.2

CERTIFICATION PURSUANT TO 17 CFR 240.15d-14(a)

(SECTION 302 CERTIFICATION)

I, Stacie Schuler, certify that:

1.I have reviewed this quarterly report on Form 10-Q of Granite Falls Energy, LLC;

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant, as of, and for, the periods presented in this report;

4.The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

5.The registrant's other certifying officers and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

a)All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize and report financial information; and

b)Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

Date:	September 14, 2016	/s/ Stacie Schuler
		Stacie Schuler, Chief Financial Officer
		(Principal Financial Officer)

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report on Form 10-Q of Granite Falls Energy, LLC (the “Company”) for the quarter ended July 31, 2016, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Steve Christensen, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:	September 14, 2016	/s/ Steve Christensen
		Steve Christensen, Chief Executive Officer
		(Principal Executive Officer)

EX-32.2

EXHIBIT 32.2

CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the quarterly report on Form 10-Q of Granite Falls Energy, LLC (the “Company”) for the quarter ended July 31, 2016, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Stacie Schuler, Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date:	September 14, 2016	/s/ Stacie Schuler
		Stacie Schuler, Chief Financial Officer
		(Principal Financial Officer)

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Document and Entity Information Document - shares	9 Months Ended
	Jul. 31, 2016	Sep. 14, 2016
Document and Entity Information [Abstract]
Entity Registrant Name	Granite Falls Energy, LLC
Entity Central Index Key	0001181749
Current Fiscal Year End Date	--10-31
Entity Filer Category	Non-accelerated Filer
Document Type	10-Q
Document Period End Date	Jul. 31, 2016
Document Fiscal Year Focus	2016
Document Fiscal Period Focus	Q3
Amendment Flag	false
Entity Common Stock, Shares Outstanding		30,606
Entity Current Reporting Status	Yes

XML

Balance Sheets - USD ($)	Jul. 31, 2016	Oct. 31, 2015
Current Assets
Cash	$ 11,349,489	$ 12,696,536
Restricted cash	1,800,483
Accounts receivable	6,919,840	9,667,472
Inventory	10,763,010	12,212,025
Commodity derivative instruments	890,998	677,149
Prepaid expenses and other current assets	451,578	259,862
Total current assets	32,175,398	35,513,044
Property, Plant and Equipment
Property and Equipment, net	81,092,100	84,304,162
Goodwill	1,372,473	1,372,473
Other Assets	790,791	821,402
Total Assets	115,430,762	122,011,081
Current Liabilities
Checks drawn in excess of bank balance	1,489,447	1,836,682
Current maturities of long-term debt	504,125	517,957
Accounts payable	3,105,820	4,643,130
Corn payable to FCE	1,125,003	1,486,247
Commodity derivative instruments	1,753,665	1,114
Accrued expenses	645,720	654,550
Total current liabilities	8,623,780	9,139,680
Long-term Debt, less current portion	6,685,798	6,711,975
Commitments and Contingencies
Members' equity attributable to Granite Falls Energy, LLC consists of 30,606 units authorized, issued, and outstanding	79,165,586	84,602,607
Non-controlling interest	20,955,598	21,556,819
Total members' equity	100,121,184	106,159,426
Total Liabilities and Members’ Equity	$ 115,430,762	$ 122,011,081

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Balance Sheets (Parenthetical) - shares	Jul. 31, 2016	Oct. 31, 2015
Condensed Balance Sheets [Abstract]
Common Stock, Shares Authorized	30,606	30,606
Common Stock, Shares, Issued	30,606	30,606
Common stock, shares outstanding	30,606	30,606

XML

Statements of Operations - USD ($)	3 Months Ended		9 Months Ended
	Apr. 30, 2016	Apr. 30, 2015	Jul. 31, 2016	Jul. 31, 2015
Condensed Statements of Operations [Abstract]
Revenues	$ 58,018,553	$ 58,671,723	$ 159,994,605	$ 176,431,334
Cost of Goods Sold	51,716,678	49,875,833	149,986,152	156,462,251
Gross Profit	6,301,875	8,795,890	10,008,453	19,969,083
Operating Expenses	1,284,016	1,301,446	4,174,358	4,096,079
Operating Income	5,017,859	7,494,444	5,834,095	15,873,004
Other Income (Expense)
Other income (expense), net	2,962	(2,472)	101,769	39,740
Interest income	1,848	2,336	6,384	6,929
Interest expense	(152,403)	(182,107)	(333,045)	(361,602)
Total other expense, net	(147,593)	(182,243)	(224,892)	(314,933)
Net Income	4,870,266	7,312,201	5,609,203	15,558,071
Less: Net Income Attributable to Non-controlling Interest	(1,377,444)	(1,871,438)	(1,405,337)	(3,170,575)
Net Income Attributable to Granite Falls Energy, LLC	$ 3,492,822	$ 5,440,763	$ 4,203,866	$ 12,387,496
Weighted Average Units Outstanding - Basic and Diluted	30,606	30,606	30,606	30,606
Net Income Per Unit - Basic and Diluted	$ 114.12	$ 177.77	$ 137.35	$ 404.74
Distributions Per Unit - Basic and Diluted			$ 315.00	$ 1,050.00

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Statements of Cash Flows - USD ($)	9 Months Ended
	Jul. 31, 2016	Jul. 31, 2015
Cash Flows from Operating Activities
Net income	$ 5,609,203	$ 15,558,071
Adjustments to reconcile net income to net cash provided by operations:
Depreciation and amortization	7,212,835	7,178,621
Change in fair value of commodity derivative instruments	716	(257,490)
Change in operating assets and liabilities
Restricted cash	(1,800,483)	186,125
Commodity derivative instruments	2,747,632	4,408,427
Accounts receivable	1,449,015	(1,952,512)
Inventory	(191,716)	(67,200)
Prepaid expenses and other current assets	(1,630,272)	(2,169,564)
Accounts payable	(8,830)	(8,960)
Accrued expenses	1,537,986	405,829
Net Cash Provided by Operating Activities	14,926,086	23,281,347
Cash Flows from Investing Activities
Payments for capital expenditures	(4,238,444)	(7,987,229)
Net Cash Used in Investing Activities	(4,238,444)	(7,987,229)
Cash Flows from Financing Activities
Proceeds from checks drawn in excess of bank balance	(347,235)	2,642,126
Proceeds from long-term debt	9,820,223	11,545,837
Payments on long-term debt	(9,860,232)	(7,555,388)
Distributions to non-controlling interests	(2,006,558)	(4,621,340)
Member distributions paid	(9,640,887)	(32,136,300)
Net Cash Used in Financing Activities, Continuing Operations, Total	(12,034,689)	(30,125,065)
Net Decrease in Cash	(1,347,047)	(14,830,947)
Cash - Beginning of Period	12,696,536	27,209,010
Cash - End of Period	11,349,489	12,378,063
Cash paid during the period for:
Interest Expense	333,045	361,602
Supplemental Disclosure of Noncash Investing, Operating and Financing Activities
Capital expenditures and construction in process included in accounts payable	$ 154,169	$ 109,922

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Summary of Significant Accounting Policies

9 Months Ended

Jul. 31, 2016

Accounting Policies [Abstract]

Summary of Significant Account Policies

1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation and Principles of Consolidation

The accompanying condensed consolidated unaudited financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and 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 consolidated financial statements for the year ended October 31, 2015, contained in the Company’s annual report on Form 10-K.

In the opinion of management, the condensed consolidated unaudited financial statements reflect all adjustments consisting of normal recurring accruals that we consider necessary to present fairly the Company’s results of operations, financial position and cash flows. The results reported in these condensed consolidated unaudited financial statements should not be regarded as necessarily indicative of results that may be expected for any other fiscal period or for the fiscal year.

Nature of Business

Granite Falls Energy, LLC (“GFE” or the “Company”) is a Minnesota limited liability company currently producing fuel-grade ethanol, distillers' grains, and crude corn oil near Granite Falls, Minnesota and sells these products, pursuant to marketing agreements, throughout the continental United States and on the international market. GFE's plant has an approximate annual production capacity of 60 million gallons, but is currently permitted to produce up to 70 million gallons of undenatured ethanol on a twelve month rolling sum basis.

Heron Lake BioEnergy, LLC (“HLBE”) is a Minnesota limited liability company currently producing fuel-grade ethanol, distillers' grains, and crude corn oil near Heron Lake, Minnesota and sells these products, pursuant to marketing agreements, throughout the continental United States. HLBE's plant has an approximate annual production capacity of 60 million gallons, but is permitted to produce approximately 72.3 million gallons of undenatured ethanol on a twelve month rolling sum basis. Additionally, HLBE, through a majority owned subsidiary, operates a natural gas pipeline that provides natural gas to HLBE's ethanol production facility and other customers. 

Principles of Consolidation

The accompanying condensed consolidated unaudited financial statements consolidate the operating results and financial position of GFE, and its 50.6% owned subsidiary, HLBE (through GFE's 100% ownership of Project Viking, LLC). Given the Company’s control over the operations of HLBE and its majority voting interest, the Company consolidates the condensed consolidated unaudited financial statements of HLBE with GFE's condensed consolidated unaudited financial statements. The remaining 49.4% ownership of HLBE is included in the condensed consolidated unaudited financial statements as a non-controlling interest. HLBE, through its wholly owned subsidiary, HLBE Pipeline Company, LLC, owns 73% of Agrinatural Gas, LLC (“Agrinatural”). Given HLBE’s control over the operations of Agrinatural and its majority voting interest, HLBE consolidates the financial statements of Agrinatural with its consolidated unaudited financial statements, with the equity and earnings attributed to the remaining 27% noncontrolling interest. All intercompany balances and transactions are eliminated in consolidation.

Segment Reporting

Operating segments are defined as components of an enterprise for which separate financial information is available that is evaluated regularly by the chief operating decision maker or decision making group in deciding how to allocate resources and in assessing performance. The Company has determined that it has one reportable business segment, the manufacture and marketing of fuel-grade ethanol and the co-products of the ethanol production process. Although the Company also realizes relatively immaterial revenue from natural gas pipeline operations at Agrinatural, the Company's chief operating decision maker reviews financial information of the Company as a whole for purposes of assessing financial performance and making operating decisions and does not separately review Agrinatural's operating performance information. Accordingly, the Company considers itself to be operating in a single industry segment.

Accounting Estimates

Management uses estimates and assumptions in preparing these condensed consolidated unaudited financial statements in accordance with generally accepted accounting principles in the United States of America. 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. The Company uses estimates and assumptions in accounting for the following significant matters, among others: economic lives of property, plant, and equipment, valuation of commodity derivatives, inventory, and inventory purchase and sale commitments, and the assumptions used in the impairment analysis of long-lived assets and goodwill. Actual results may differ from previously estimated amounts, and such differences may be material to our condensed consolidated unaudited financial statements. The Company periodically reviews estimates and assumptions, and the effects of revisions are reflected in the period in which the revision is made.

Revenue Recognition

The Company generally sells ethanol and related products pursuant to marketing agreements. Revenues from the production of ethanol and the related products are recorded when the customer has taken title and assumed the risks and rewards of ownership, prices are fixed or determinable and collectability is reasonably assured. Ethanol and related products are generally shipped free on board (FOB) shipping point. The Company believes there are no ethanol sales, during any given month, which should be considered contingent and recorded as deferred revenue.

In accordance with the Company's agreements for the marketing and sale of ethanol and related products, marketing fees and commissions due to the marketers are deducted from the gross sales price as earned. These fees and commissions are recorded net of revenues, as they do not provide an identifiable benefit that is sufficiently separable from the sale of ethanol and related products. Shipping costs paid by the Company to the marketer in the sale of ethanol are not specifically identifiable and, as a result, are recorded based on the net selling price reported to the Company from the marketer. Shipping costs incurred by the Company in the sale of distillers' grains and corn oil are included in cost of goods sold.

Inventory

Inventory is stated at the lower of cost or net realizable value in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) No. 2015-11 issued in July 2015. Cost for all inventories is determined using the first in first out method (“FIFO”).  Net realizable value is the estimated selling prices in the ordinary course of business less reasonably predictable costs of completion, disposal, and transportation.  Inventory consists of raw materials, work in process, finished goods, and spare parts.  Corn is the primary raw material along with other raw materials.  Finished goods consist of ethanol, distillers' grains, and corn oil.

Derivative Instruments

From time to time the Company enters into derivative transactions to hedge its exposures to commodity price fluctuations. The Company is required to record these derivatives on the balance sheets at fair value.

In order for a derivative to qualify as a hedge, specific criteria must be met and appropriate documentation maintained. Gains and losses from derivatives that do not qualify as hedges, or are undesignated, must be recognized immediately in earnings. If the derivative does qualify as a hedge, depending on the nature of the hedge, changes in the fair value of the derivative will be either offset against the change in fair value of the hedged assets, liabilities, or firm commitments through earnings or recognized in other comprehensive income until the hedged item is recognized in earnings. Changes in the fair value of undesignated derivatives are recorded in earnings.

Additionally, the Company is required to evaluate its contracts to determine whether the contracts are derivatives. Certain contracts that literally meet the definition of a derivative may be exempted 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 accounting and reporting requirements, and therefore, are not marked to market in our condensed consolidated unaudited financial statements.

In order to reduce the risks caused by market fluctuations, the Company occasionally hedges its anticipated corn, natural gas, and denaturant purchases and ethanol sales by entering into options and futures contracts. These contracts are used with the intention to fix the purchase price of anticipated requirements for corn in the Company's ethanol production activities and the related sales price of ethanol. The fair value of these contracts is based on quoted prices in active exchange-traded or over-the-counter market conditions. Although the Company believes its commodity derivative positions are economic hedges, none have been formally designated as a hedge for accounting purposes and derivative positions are recorded on the balance sheet at their fair market value, with changes in fair value recognized in current period earnings or losses. The Company does not enter into financial instruments for trading or speculative purposes.

The Company has adopted authoritative guidance related to “Derivatives and Hedging,” and has included the required enhanced quantitative and qualitative disclosure about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of gains and losses from derivative instruments, and disclosures about credit-risk-related contingent features in derivative agreements. See further discussion in Note 4.

Correction Of An Immaterial Error

The Company revised the condensed consolidated unaudited statement of cash flows for the nine months ended July 31, 2015, to correct for a non-cash acquisition of property and equipment resulting in an increase in cash provided by operating activities of $3,359,225 and a corresponding decrease in net cash provided by investing activities.

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Risks and Uncertainties

9 Months Ended

Jul. 31, 2016

Item 2 Risks and Uncertainties [Abstract]

Risks and Uncertainties

2.   RISKS AND UNCERTAINTIES

The Company has certain risks and uncertainties that it experiences during volatile market conditions. These volatilities can have a severe impact on operations.  The Company's revenues are derived from the sale and distribution of ethanol, distillers' grains, corn oil, and natural gas to customers primarily located in the United States. Corn for the production process is supplied to our plant primarily from local agricultural producers and from purchases on the open market.  Ethanol sales typically average 75 - 85% of total revenues and corn costs typically average 65 - 85% of cost of goods sold.

The Company's operating and financial performance is largely driven by the prices at which they sell ethanol and the net expense of corn. The price of ethanol is influenced by factors such as supply and demand, the weather, government policies and programs, and unleaded gasoline prices and the petroleum markets as a whole. Excess ethanol supply in the market, in particular, puts downward pressure on the price of ethanol. Our largest cost of production is corn.  The cost of corn is generally impacted by factors such as supply and demand, the weather, government policies and programs, and our risk management program used to protect against the price volatility of these commodities.

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Inventory

9 Months Ended

Jul. 31, 2016

Inventory [Abstract]

Inventory

3.   INVENTORY

Inventories consist of the following:

	July 31, 2016		October 31, 2015
	(unaudited)
Raw materials	$	2,284,305	$	4,504,388
Supplies		2,624,123		2,631,452
Work in process		1,500,729		1,445,084
Finished goods		4,353,853		3,631,101
Totals	$	10,763,010	$	12,212,025

The Company performs a lower of cost or net realizable value analysis on inventory to determine if the market values of certain inventories are less than their carrying value, which is attributable primarily to decreases in market prices of corn and ethanol. Based on the lower of cost or net realizable value analysis, the Company recorded a loss on ethanol inventories, as a component of cost of goods sold, of approximately $108,000 and $0 for the nine month periods ended July 31, 2016 and 2015, respectively.

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Derivative Instruments

9 Months Ended

Jul. 31, 2016

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments and Hedging Activities Disclosure [Text Block]

4.   DERIVATIVE INSTRUMENTS

As of July 31, 2016, the total notional amount of the Company's outstanding corn derivative instruments was approximately 6,525,000 bushels, comprised of 2,650,000 and 3,875,000 bushel equivalent positions held by GFE and HLBE, respectively, that were entered into to hedge forecasted corn purchases through July 2017. There may be offsetting positions that are not shown on a net basis that could lower the notional amount of positions outstanding as disclosed above.

As of July 31, 2016, the total notional amount of the Company’s outstanding ethanol derivative instruments was approximately 840,000 gallons, comprised of approximately 420,000 gallons of equivalent positions held by each of GFE and HLBE that were entered into to hedge forecasted ethanol sales through September 2016.

The following tables provide details regarding the Company's derivative instruments at July 31, 2016, none of which were designated as hedging instruments:

	Balance Sheet location	Assets		Liabilities
Corn contracts - GFE	Commodity derivative instruments	$	—	$	227,000
Corn contracts - HLBE	Commodity derivative instruments		—		750,150
Ethanol contracts - GFE	Commodity derivative instruments		—		776,515
Ethanol contracts - HLBE	Commodity derivative instruments		890,998		—
Totals		$	890,998	$	1,753,665

In addition, at July 31, 2016, the Company maintained approximately $1,801,000 of restricted cash, comprised of approximately $1,738,000 held by GFE and approximately $63,000 held by HLBE related to margin requirements for the Company’s commodity derivative instrument positions.

The following tables provide details regarding the Company's derivative instruments at October 31, 2015, none of which were designated as hedging instruments:

	Balance Sheet location	Assets		Liabilities
Corn contracts - GFE	Commodity derivative instruments	$	—	$	1,114
Corn contracts - HLBE	Commodity derivative instruments		677,149		—
Totals		$	677,149	$	1,114

At October 31, 2015, the Company did not have any cash collateral (restricted cash) related to commodity derivatives held by a broker.

The following tables provide details regarding the gains and losses from Company's derivative instruments in statements of operations, none of which are designated as hedging instruments:

	Statement of	Three Months Ended July 31,
	Operations Location	2016		2015
Corn contracts	Cost of Goods Sold	$	1,261,468	$	869,850
Ethanol contracts	Revenues		(1,375,892)		—
Natural gas contracts	Cost of Goods Sold		—		—
Total gain (loss)		$	(114,424)	$	869,850

	Statement of	Nine Months Ended  July 31,
	Operations Location	2016		2015
Corn contracts	Cost of Goods Sold	$	1,238,098	$	257,490
Ethanol contracts	Revenues		(1,271,172)		—
Natural gas contracts	Cost of Goods Sold		32,358		—
Total gain (loss)		$	(716)	$	257,490

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Fair Value

9 Months Ended

Jul. 31, 2016

Fair Value [Abstract]

Fair Value

5.   FAIR VALUE

The following table provides information on those derivative instruments measured at fair value on a recurring basis at July 31, 2016:

			Fair Value Measurement Using
			Quoted Prices		Significant Other		Significant
	Carrying Amount		in Active Markets		Observable Inputs		Unobservable Inputs
Financial Asset:	in Balance Sheet		(Level 1)		(Level 2)		(Level 3)
Commodity Derivative Instruments - Ethanol	$	890,998	$	890,998	$	—	$	—
Financial Liabilities:
Commodity Derivative Instruments - Ethanol	$	776,515	$	776,515	$	—	$	—
Commodity Derivative Instruments - Corn	$	977,150	$	977,150	$	—	$	—

The following table provides information on those derivative instruments measured at fair value on a recurring basis at October 31, 2015:

			Fair Value Measurement Using
			Quoted Prices		Significant Other		Significant
	Carrying Amount		in Active Markets		Observable Inputs		Unobservable Inputs
Financial Asset:	in Balance Sheet		(Level 1)		(Level 2)		(Level 3)
Commodity Derivative Instruments - Corn	$	677,149	$	677,149	$	—	$	—
Financial Liabilities:
Commodity Derivative Instruments - Corn	$	1,114	$	1,114	$	—	$	—

The Company determines the fair value of commodity derivative instruments by obtaining fair value measurements from an independent pricing service. The fair value measurements consider observable data that may include dealer quotes and live trading levels from the Chicago Board of Trade market and New York Mercantile Exchange.

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Debt Facilities

9 Months Ended

Jul. 31, 2016

Debt Disclosure [Abstract]

Debt Disclosure [Text Block]

6.   DEBT FACILITIES

Debt financing consists of the following:

	July 31, 2016		October 31, 2015
HERON LAKE BIOENERGY:		(unaudited)
Revolving term loan to lending institution, see terms below	$	5,122,574	$	4,822,777
Assessments payable		1,779,849		1,963,405
Note payable to electrical company		87,500		143,750
Note payable to noncontrolling interest member of Agrinatural		200,000		300,000
Totals		7,189,923		7,229,932
Less amounts due within one year		504,125		517,957
Net long-term debt	$	6,685,798	$	6,711,975

Granite Falls Energy:

GFE has a revolving term loan facility, under which GFE could initially borrow, repay, and re-borrow in an amount up to $18,000,000.  Under the terms of this revolving term loan facility, the revolving term loan principal commitment for borrowing under this facility reduces by $2,000,000 semi-annually, beginning September 1, 2014, with final payment due March 1, 2018. GFE had no outstanding balance on the revolving term loan at July 31, 2016, and October 31, 2015. Therefore, the aggregate principal amount available for borrowing under this revolving term loan facility at July 31, 2016 and at October 31, 2015 was $10,000,000 and $12,000,000, respectively. The interest rate is based on the bank's "One Month LIBOR Index Rate," plus 3.05%.

The credit facility also requires GFE to comply with certain financial covenants at various times calculated monthly, quarterly or annually, including restriction of the payment of dividends and maintenance of certain financial ratios including minimum working capital, minimum net worth and a debt service coverage ratio as defined by the credit facility. Failure to comply with the protective loan covenants or maintain the required financial ratios may cause acceleration of the outstanding principal balances on the revolving term loan and/or the imposition of fees, charges or penalties. As of July 31, 2016 and October 31, 2015, GFE was in compliance with these financial covenants and expects to be in compliance throughout fiscal 2016. 

The credit facility is secured by substantially all assets of the Company. There are no savings account balance collateral requirements as part of this credit facility.

Heron Lake BioEnergy:

HLBE has a revolving term loan with a lender initially totaling $28,000,000.  Amounts borrowed by HLBE under the revolving term loan and repaid or prepaid may be re-borrowed at any time prior to the March 1, 2022 maturity date. Under the terms of the credit facility, the revolving term loan principal commitment is scheduled to decline by $3,500,000 annually, starting March 1, 2015 and continues each anniversary thereafter until maturity.  Therefore, the aggregate  principal commitment under this facility at July 31, 2016 was $21,000,000. After accounting for amounts outstanding under this facility at July 31, 2016, the aggregate principal amount available to HLBE for borrowing was approximately $15,877,000. The outstanding balance on the revolving term loan totaled approximately $5,123,000 and $4,823,000 at July 31, 2016, and October 31, 2015, respectively.

Interest on the revolving term loan accrues at a variable rate equal to 3.25% above the One-Month London Interbank Offered Rate ("LIBOR") Index rate. HLBE may elect to enter into a fixed interest rate on this loan at various times throughout the term of the loan as provided in the loan agreements. The interest rate on the revolving term loan was 3.75% and 3.45% at July 31, 2016, and October 31, 2015, respectively.

HLBE also agreed to pay an unused commitment fee on the unused portion of the revolving term loan commitment at the rate of 0.50% per annum. The revolving term loan is subject to a prepayment fee for any prepayment on the term loan prior to July 1, 2016 due to refinancing. The loan is secured by substantially all of HLBE's assets including a subsidiary guarantee. 

During the term of the revolving term loan, HLBE is subject to certain financial covenants at various times calculated monthly, quarterly or annually, including restriction of the payment of dividends and loans and advances to Agrinatural and maintenance of certain financial ratios including minimum working capital, minimum net worth and a debt service coverage ratio as defined by the credit facility. Failure to comply with the protective loan covenants or maintain the required financial ratios may cause acceleration of the outstanding principal balances on the revolving term loan and/or the imposition of fees, charges or penalties. As of July 31, 2016 and October 31, 2015, HLBE was in compliance with these financial covenants and expects to be in compliance throughout fiscal 2016.

As part of the credit facility closing, HLBE entered into an Administrative Agency Agreement with CoBank, ACP (“CoBank”).  CoBank purchased a participation interest in the AgStar loans and was appointed the administrative agent for the purpose of servicing the loans.  As a result, CoBank will act as the agent for AgStar with respect to the credit facility.

In October 2003, HLBE entered into an industrial water supply development and distribution agreement with the City of Heron Lake, Jackson County, and Minnesota Soybean Processors. In consideration of this agreement, HLBE and Minnesota Soybean Processors are allocated equally the debt service on $735,000 in water revenue bonds that were issued by the City to support this project that mature in February 2019. The parties have agreed that, prior to the scheduled expiration of the agreement, they will negotiate in good faith to replace the agreement with a further agreement regarding the wells and related facilities.

In May 2006, HLBE entered into an industrial water supply treatment agreement with the City of Heron Lake and Jackson County. Under this agreement, HLBE pays monthly installments over 24 months starting January 1, 2007 equal to one years' debt service on approximately $3.6 million in water revenue bonds, which will be returned to HLBE if any funds remain after final payment in full on the bonds and assuming HLBE complies with all payment obligations under the agreement.

As of July 31, 2016 and October 31, 2015, there were a total of approximately $1,780,000 and $1,963,000, respectively, in outstanding water revenue bonds. HLBE classifies its obligations under these bonds as assessments payable. The interest rates on the bonds range from 0.50% to 8.73%.

Estimated annual maturities of debt at July 31, 2016, are as follows based on the most recent debt agreements:

2016	$	504,125
2017		436,341
2018		322,570
2019		318,253
2020		339,097
After 2020		5,269,537
Total debt	$	7,189,923

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Leases

9 Months Ended

Jul. 31, 2016

Leases [Abstract]

Leases

7.   LEASES

GFE leases equipment, primarily rail cars, under operating leases through 2025. Rent expense for these leases was approximately $804,000 and $596,000 for the three months ended ended July 31, 2016 and 2015, respectively, and approximately $2,510,000 and $1,800,000 for the nine months ended July 31, 2016, and 2015, respectively.

HLBE leases equipment, primarily rail cars, under operating leases through 2017.  Rent expense for these leases was approximately $686,000 and $525,000 for the three months ended July 31, 2016 and 2015, respectively, and approximately $1,931,000 and $1,572,000 for the nine months ended July 31, 2016 and 2015, respectively.

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Members' Equity

9 Months Ended

Jul. 31, 2016

Members' Equity [Abstract]

Members' Equity

8.   MEMBERS' EQUITY

GFE has one class of membership units.   The units have no par value and have identical rights, obligations and privileges.  Income and losses are allocated to all members based upon their respective percentage of units held. As of July 31, 2016 and October 31, 2015, GFE had 30,606 membership units authorized, issued, and outstanding.

In December 2014, the Board of Governors of GFE declared a cash distribution of $1,050 per unit or approximately $32,136,000, for unit holders of record as of December 18, 2014.  The distribution was paid in January 2015.

In December 2015, the Board of Governors of GFE declared a cash distribution of $315 per unit, or approximately $9,641,000,  for unit holders of record as of December 17, 2015. The distribution was paid in January 2016.

In December 2014, the Board of Governors of HLBE declared a cash distribution of $0.12 per unit or approximately $9,352,000 for unit holders of record as of December 18, 2014, of which approximately $4,621,000 was made to the non-controlling interest members of HLBE.  The distribution was paid in January 2015.

In December 2015, the Board of Governors of HLBE declared a cash distribution of $0.05 per unit, or approximately $3,897,000,  for unit holders of record as of December 17, 2015, of which approximately $2,007,000 was made to the noncontrolling interest members of HLBE. The distribution was paid in January 2016.

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Commitments and Contingencies

9 Months Ended

Jul. 31, 2016

Commitments and Contingencies [Abstract]

Commitments and Contingencies

9.   COMMITMENTS AND CONTINGENCIES

Corn Contracts

At July 31, 2016, GFE had no forward corn contracts.

At July 31, 2016, HBLE had cash and basis contracts for forward corn purchase commitments for approximately 3,826,000 bushels for deliveries through July 2017, which approximates 18% of its anticipated corn needs during this period.

Ethanol Contracts

At July 31, 2016, GFE had forward contracts (both fixed and basis) to sell approximately $16,030,000 of ethanol for various delivery periods through December 2016 which approximates 41% of its anticipated ethanol sales during this period.

During the third fiscal quarter, GFE amended its ethanol marketing agreement with Eco-Energy. As amended, the term of the marketing agreement shall continue through December 31, 2019. Additionally, the amended agreement also provides for certain negotiated changes to the marketing fees payable to Eco-Energy and payment terms based on prevailing market-rate conditions for comparable ethanol marketed services.

At July 31, 2016, HLBE had forward contracts (both fixed and basis) to sell approximately $17,100,000 of ethanol for various delivery periods through December 2016, which approximates 44% of its anticipated ethanol sales during this period.

During the third fiscal quarter, HLBE amended its ethanol marketing agreement with Eco-Energy. As amended, the term of the marketing agreement shall continue through December 31, 2019. Additionally, the amended agreement also provides for certain negotiated changes to the marketing fees payable to Eco-Energy and payment terms based on prevailing market-rate conditions for comparable ethanol marketed services.

Distillers' Grain Contracts

At July 31, 2016, GFE had forward contracts to sell approximately $333,000 of distillers' grain for deliveries through September 2016, which approximates 11% of its anticipated distillers’ grains sales during this period.

At July 31, 2016, HLBE had forward contracts to sell approximately $1,393,000 of distillers' grains for delivery through December 2016, which approximates 16% of its anticipated distillers’ grains sales during this period.

Corn Oil

At July 31, 2016, GFE had forward contracts to sell approximately $582,000 of corn oil for delivery through December 2016, which approximates 28% of its anticipated corn oil sales during this period.

At July 31, 2016, HLBE had forward contracts to sell approximately $621,000 of corn oil for delivery through December 2016, which approximates 30% of its anticipated distillers’ grains sales during this period.

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Summary of Significant Accounting Policies - (Policies)

9 Months Ended

Jul. 31, 2016

Accounting Policies [Abstract]

Basis of Presentation and Significant Accounting Policies [Text Block]

Basis of Presentation and Principles of Consolidation

The accompanying condensed consolidated unaudited financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and 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 consolidated financial statements for the year ended October 31, 2015, contained in the Company’s annual report on Form 10-K.

In the opinion of management, the condensed consolidated unaudited financial statements reflect all adjustments consisting of normal recurring accruals that we consider necessary to present fairly the Company’s results of operations, financial position and cash flows. The results reported in these condensed consolidated unaudited financial statements should not be regarded as necessarily indicative of results that may be expected for any other fiscal period or for the fiscal year.

Nature of Business [Policy Text Block]

Nature of Business

Granite Falls Energy, LLC (“GFE” or the “Company”) is a Minnesota limited liability company currently producing fuel-grade ethanol, distillers' grains, and crude corn oil near Granite Falls, Minnesota and sells these products, pursuant to marketing agreements, throughout the continental United States and on the international market. GFE's plant has an approximate annual production capacity of 60 million gallons, but is currently permitted to produce up to 70 million gallons of undenatured ethanol on a twelve month rolling sum basis.

Heron Lake BioEnergy, LLC (“HLBE”) is a Minnesota limited liability company currently producing fuel-grade ethanol, distillers' grains, and crude corn oil near Heron Lake, Minnesota and sells these products, pursuant to marketing agreements, throughout the continental United States. HLBE's plant has an approximate annual production capacity of 60 million gallons, but is permitted to produce approximately 72.3 million gallons of undenatured ethanol on a twelve month rolling sum basis. Additionally, HLBE, through a majority owned subsidiary, operates a natural gas pipeline that provides natural gas to HLBE's ethanol production facility and other customers.

Consolidation, Policy [Policy Text Block]

Principles of Consolidation

The accompanying condensed consolidated unaudited financial statements consolidate the operating results and financial position of GFE, and its 50.6% owned subsidiary, HLBE (through GFE's 100% ownership of Project Viking, LLC). Given the Company’s control over the operations of HLBE and its majority voting interest, the Company consolidates the condensed consolidated unaudited financial statements of HLBE with GFE's condensed consolidated unaudited financial statements. The remaining 49.4% ownership of HLBE is included in the condensed consolidated unaudited financial statements as a non-controlling interest. HLBE, through its wholly owned subsidiary, HLBE Pipeline Company, LLC, owns 73% of Agrinatural Gas, LLC (“Agrinatural”). Given HLBE’s control over the operations of Agrinatural and its majority voting interest, HLBE consolidates the financial statements of Agrinatural with its consolidated unaudited financial statements, with the equity and earnings attributed to the remaining 27% noncontrolling interest. All intercompany balances and transactions are eliminated in consolidation.

Use of Estimates, Policy [Policy Text Block]

Segment Reporting

Operating segments are defined as components of an enterprise for which separate financial information is available that is evaluated regularly by the chief operating decision maker or decision making group in deciding how to allocate resources and in assessing performance. The Company has determined that it has one reportable business segment, the manufacture and marketing of fuel-grade ethanol and the co-products of the ethanol production process. Although the Company also realizes relatively immaterial revenue from natural gas pipeline operations at Agrinatural, the Company's chief operating decision maker reviews financial information of the Company as a whole for purposes of assessing financial performance and making operating decisions and does not separately review Agrinatural's operating performance information. Accordingly, the Company considers itself to be operating in a single industry segment.

Accounting Estimates

Management uses estimates and assumptions in preparing these condensed consolidated unaudited financial statements in accordance with generally accepted accounting principles in the United States of America. 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. The Company uses estimates and assumptions in accounting for the following significant matters, among others: economic lives of property, plant, and equipment, valuation of commodity derivatives, inventory, and inventory purchase and sale commitments, and the assumptions used in the impairment analysis of long-lived assets and goodwill. Actual results may differ from previously estimated amounts, and such differences may be material to our condensed consolidated unaudited financial statements. The Company periodically reviews estimates and assumptions, and the effects of revisions are reflected in the period in which the revision is made.

Revenue Recognition, Policy [Policy Text Block]

Revenue Recognition

The Company generally sells ethanol and related products pursuant to marketing agreements. Revenues from the production of ethanol and the related products are recorded when the customer has taken title and assumed the risks and rewards of ownership, prices are fixed or determinable and collectability is reasonably assured. Ethanol and related products are generally shipped free on board (FOB) shipping point. The Company believes there are no ethanol sales, during any given month, which should be considered contingent and recorded as deferred revenue.

In accordance with the Company's agreements for the marketing and sale of ethanol and related products, marketing fees and commissions due to the marketers are deducted from the gross sales price as earned. These fees and commissions are recorded net of revenues, as they do not provide an identifiable benefit that is sufficiently separable from the sale of ethanol and related products. Shipping costs paid by the Company to the marketer in the sale of ethanol are not specifically identifiable and, as a result, are recorded based on the net selling price reported to the Company from the marketer. Shipping costs incurred by the Company in the sale of distillers' grains and corn oil are included in cost of goods sold.

Inventory, Policy [Policy Text Block]

Inventory

Inventory is stated at the lower of cost or net realizable value in accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) No. 2015-11 issued in July 2015. Cost for all inventories is determined using the first in first out method (“FIFO”).  Net realizable value is the estimated selling prices in the ordinary course of business less reasonably predictable costs of completion, disposal, and transportation.  Inventory consists of raw materials, work in process, finished goods, and spare parts.  Corn is the primary raw material along with other raw materials.  Finished goods consist of ethanol, distillers' grains, and corn oil.

Derivatives, Policy [Policy Text Block]

Derivative Instruments

From time to time the Company enters into derivative transactions to hedge its exposures to commodity price fluctuations. The Company is required to record these derivatives on the balance sheets at fair value.

In order for a derivative to qualify as a hedge, specific criteria must be met and appropriate documentation maintained. Gains and losses from derivatives that do not qualify as hedges, or are undesignated, must be recognized immediately in earnings. If the derivative does qualify as a hedge, depending on the nature of the hedge, changes in the fair value of the derivative will be either offset against the change in fair value of the hedged assets, liabilities, or firm commitments through earnings or recognized in other comprehensive income until the hedged item is recognized in earnings. Changes in the fair value of undesignated derivatives are recorded in earnings.

Additionally, the Company is required to evaluate its contracts to determine whether the contracts are derivatives. Certain contracts that literally meet the definition of a derivative may be exempted 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 accounting and reporting requirements, and therefore, are not marked to market in our condensed consolidated unaudited financial statements.

In order to reduce the risks caused by market fluctuations, the Company occasionally hedges its anticipated corn, natural gas, and denaturant purchases and ethanol sales by entering into options and futures contracts. These contracts are used with the intention to fix the purchase price of anticipated requirements for corn in the Company's ethanol production activities and the related sales price of ethanol. The fair value of these contracts is based on quoted prices in active exchange-traded or over-the-counter market conditions. Although the Company believes its commodity derivative positions are economic hedges, none have been formally designated as a hedge for accounting purposes and derivative positions are recorded on the balance sheet at their fair market value, with changes in fair value recognized in current period earnings or losses. The Company does not enter into financial instruments for trading or speculative purposes.

The Company has adopted authoritative guidance related to “Derivatives and Hedging,” and has included the required enhanced quantitative and qualitative disclosure about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of gains and losses from derivative instruments, and disclosures about credit-risk-related contingent features in derivative agreements. See further discussion in Note 4.

Reclassification, Policy [Policy Text Block]

Correction Of An Immaterial Error

The Company revised the condensed consolidated unaudited statement of cash flows for the nine months ended July 31, 2015, to correct for a non-cash acquisition of property and equipment resulting in an increase in cash provided by operating activities of $3,359,225 and a corresponding decrease in net cash provided by investing activities.

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Inventory (Tables)

9 Months Ended

Jul. 31, 2016

Inventory in Process [Abstract]

Schedule of Inventory, Current [Table Text Block]

	July 31, 2016		October 31, 2015
	(unaudited)
Raw materials	$	2,284,305	$	4,504,388
Supplies		2,624,123		2,631,452
Work in process		1,500,729		1,445,084
Finished goods		4,353,853		3,631,101
Totals	$	10,763,010	$	12,212,025

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Derivative Instruments (Tables)

9 Months Ended

Jul. 31, 2016

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Schedule of Derivative Instruments, Gain (Loss) in Statement of Financial Performance [Table Text Block]

The following tables provide details regarding the gains and losses from Company's derivative instruments in statements of operations, none of which are designated as hedging instruments:

	Statement of	Three Months Ended July 31,
	Operations Location	2016		2015
Corn contracts	Cost of Goods Sold	$	1,261,468	$	869,850
Ethanol contracts	Revenues		(1,375,892)		—
Natural gas contracts	Cost of Goods Sold		—		—
Total gain (loss)		$	(114,424)	$	869,850

	Statement of	Nine Months Ended  July 31,
	Operations Location	2016		2015
Corn contracts	Cost of Goods Sold	$	1,238,098	$	257,490
Ethanol contracts	Revenues		(1,271,172)		—
Natural gas contracts	Cost of Goods Sold		32,358		—
Total gain (loss)		$	(716)	$	257,490

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Fair Value (Tables)

9 Months Ended

Jul. 31, 2016

Fair Value Disclosures [Abstract]

Schedule of Fair Value, Assets and Liabilities Measured on Recurring Basis [Table Text Block]

The following table provides information on those derivative instruments measured at fair value on a recurring basis at July 31, 2016:

			Fair Value Measurement Using
			Quoted Prices		Significant Other		Significant
	Carrying Amount		in Active Markets		Observable Inputs		Unobservable Inputs
Financial Asset:	in Balance Sheet		(Level 1)		(Level 2)		(Level 3)
Commodity Derivative Instruments - Ethanol	$	890,998	$	890,998	$	—	$	—
Financial Liabilities:
Commodity Derivative Instruments - Ethanol	$	776,515	$	776,515	$	—	$	—
Commodity Derivative Instruments - Corn	$	977,150	$	977,150	$	—	$	—

The following table provides information on those derivative instruments measured at fair value on a recurring basis at October 31, 2015:

			Fair Value Measurement Using
			Quoted Prices		Significant Other		Significant
	Carrying Amount		in Active Markets		Observable Inputs		Unobservable Inputs
Financial Asset:	in Balance Sheet		(Level 1)		(Level 2)		(Level 3)
Commodity Derivative Instruments - Corn	$	677,149	$	677,149	$	—	$	—
Financial Liabilities:
Commodity Derivative Instruments - Corn	$	1,114	$	1,114	$	—	$	—

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Debt Facilities (Tables)

9 Months Ended

Jul. 31, 2016

Debt Disclosure [Abstract]

Schedule of Long-term Debt Instruments [Table Text Block]

	July 31, 2016		October 31, 2015
HERON LAKE BIOENERGY:		(unaudited)
Revolving term loan to lending institution, see terms below	$	5,122,574	$	4,822,777
Assessments payable		1,779,849		1,963,405
Note payable to electrical company		87,500		143,750
Note payable to noncontrolling interest member of Agrinatural		200,000		300,000
Totals		7,189,923		7,229,932
Less amounts due within one year		504,125		517,957
Net long-term debt	$	6,685,798	$	6,711,975

Schedule of Maturities of Long-term Debt [Table Text Block]

Estimated annual maturities of debt at July 31, 2016, are as follows based on the most recent debt agreements:

2016	$	504,125
2017		436,341
2018		322,570
2019		318,253
2020		339,097
After 2020		5,269,537
Total debt	$	7,189,923

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Summary of Significant Accounting Policies - (Details) gal in Millions	9 Months Ended
	Jul. 31, 2016 gal	Jul. 31, 2015 USD ($)
Plant production capacity	60.0
Measurement, Rolling Twelve Months	twelve
Production (Actual)	70.0
Prior Period Reclassification Adjustment | $		$ 3,359,225
Heron Lake Bioenergy [Member]
Plant production capacity	60.0
Production (Actual)	72.3
Equity Method Investment, Ownership Percentage	50.60%
Noncontrolling Interest, Ownership Percentage by Noncontrolling Owners	49.40%
Project Viking, LLC [Member]
Equity Method Investment, Ownership Percentage	100.00%
Agrinatural, LLC [Member]
Equity Method Investment, Ownership Percentage	73.00%
Noncontrolling Interest, Ownership Percentage by Noncontrolling Owners	27.00%

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Risks and Uncertainties Narrative (Details)	9 Months Ended
	Jul. 31, 2016
Minimum [Member]
Concentration Risk [Line Items]
Sales Revenue, Goods, Net, Percentage	75.00%
Minimum [Member] | Corn Contracts [Member]
Concentration Risk [Line Items]
Percent of Cost of Goods Sold	65.00%
Maximum [Member]
Concentration Risk [Line Items]
Sales Revenue, Goods, Net, Percentage	85.00%
Percent of Cost of Goods Sold	85.00%

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Inventory (Details) - USD ($)	9 Months Ended
	Jul. 31, 2016	Jul. 31, 2015	Oct. 31, 2015
Inventory [Abstract]
Raw materials	$ 2,284,305		$ 4,504,388
Supplies	2,624,123		2,631,452
Work in process	1,500,729		1,445,084
Finished goods	4,353,853		3,631,101
Total inventory, net	10,763,010		$ 12,212,025
Loss on ethanol inventories	$ 108,000	$ 0

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Derivative Instrument - Asset And Liabilities (Details)	9 Months Ended
	Jul. 31, 2016 USD ($) gal bu	Oct. 31, 2015 USD ($)
Derivatives, Fair Value [Line Items]
Derivative Assets, Current	$ 890,998	$ 677,149
Derivative Liabilities, Current	$ 1,753,665	1,114
Corn Contracts [Member]
Derivatives, Fair Value [Line Items]
Total notional amount outstanding | bu	6,525,000
Ethanol Contracts [Member]
Derivatives, Fair Value [Line Items]
Total notional amount outstanding | gal	840,000
Granite Falls Energy, LLC [Member]
Derivatives, Fair Value [Line Items]
Restricted Cash and Cash Equivalents, Current	$ 1,738,000
Granite Falls Energy, LLC [Member] | Corn Contracts [Member]
Derivatives, Fair Value [Line Items]
Total notional amount outstanding | bu	2,650,000
Derivative Liabilities, Current	$ 227,000	1,114
Granite Falls Energy, LLC [Member] | Ethanol Contracts [Member]
Derivatives, Fair Value [Line Items]
Total notional amount outstanding | gal	420,000
Derivative Liabilities, Current	$ 776,515
Heron Lake Bio-energy LLC [Member]
Derivatives, Fair Value [Line Items]
Restricted Cash and Cash Equivalents, Current	$ 63,000
Heron Lake Bio-energy LLC [Member] | Corn Contracts [Member]
Derivatives, Fair Value [Line Items]
Total notional amount outstanding | bu	3,875,000
Derivative Assets, Current		$ 677,149
Derivative Liabilities, Current	$ 750,150
Heron Lake Bio-energy LLC [Member] | Ethanol Contracts [Member]
Derivatives, Fair Value [Line Items]
Derivative Assets, Current	$ 890,998

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Derivative Instrument - Income Statement (Details) - USD ($)	3 Months Ended		9 Months Ended
	Apr. 30, 2016	Apr. 30, 2015	Jul. 31, 2016	Jul. 31, 2015
Derivative Instruments, Gain (Loss) [Line Items]
Derivative Instruments, Gain (Loss) Recognized in Income, Net	$ (114,424)	$ 869,850
Not Designated as Hedging Instrument [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Derivative Instruments, Gain (Loss) Recognized in Income, Net			$ (716)	$ 257,490
Not Designated as Hedging Instrument [Member] | Natural Gas Contracts [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Derivative Instruments, Gain (Loss) Recognized in Income, Net			32,358
Not Designated as Hedging Instrument [Member] | Cost of Sales [Member] | Corn Contracts [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Derivative Instruments, Gain (Loss) Recognized in Income, Net	1,261,468	$ 869,850	1,238,098	$ 257,490
Not Designated as Hedging Instrument [Member] | Sales [Member] | Ethanol Contracts [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Derivative Instruments, Gain (Loss) Recognized in Income, Net	$ (1,375,892)		$ (1,271,172)

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Fair Value (Details) - USD ($)	Jul. 31, 2016	Oct. 31, 2015
Derivative [Line Items]
Derivative Asset, Current	$ 890,998	$ 677,149
Ethanol Contracts [Member] | Fair Value, Measurements, Recurring [Member] | Carrying (Reported) Amount, Fair Value Disclosure [Member]
Derivative [Line Items]
Derivative Asset, Current		677,149
Derivative Liabilities	776,515
Ethanol Contracts [Member] | Fair Value, Inputs, Level 1 [Member] | Fair Value, Measurements, Recurring [Member]
Derivative [Line Items]
Derivative Asset, Current		677,149
Derivative Liabilities	776,515
Corn Contracts [Member] | Fair Value, Measurements, Recurring [Member] | Carrying (Reported) Amount, Fair Value Disclosure [Member]
Derivative [Line Items]
Derivative Asset, Current	890,998
Derivative Liabilities	977,150	1,114
Corn Contracts [Member] | Fair Value, Inputs, Level 1 [Member] | Fair Value, Measurements, Recurring [Member]
Derivative [Line Items]
Derivative Asset, Current	890,998
Derivative Liabilities	$ 977,150	$ 1,114

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Debt Facilities - Debt Financing (Details) - USD ($)	Jul. 31, 2016	Oct. 31, 2015
Long-term Debt, Current Maturities	$ 504,125	$ 517,957
Long-term Debt, less current portion	6,685,798	6,711,975
Heron Lake Bioenergy [Member]
Long-term Debt	7,189,923	7,229,932
Long-term Debt, Current Maturities	504,125	517,957
Long-term Debt, less current portion	6,685,798	6,711,975
Agrinatural, LLC [Member]
Notes Payable	200,000	300,000
CoBank [Member] | Heron Lake Bioenergy [Member]
Line of Credit Facility, Amount Outstanding	5,122,574	4,822,777
City/County Jurisdiction [Member] | Heron Lake Bioenergy [Member]
Line of Credit Facility, Amount Outstanding	1,779,849	1,963,405
Federated Electric [Member] | Heron Lake Bioenergy [Member]
Notes Payable	$ 87,500	$ 143,750

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Debt Facilities - Revolving Term Loans (Details) - USD ($)	9 Months Ended	12 Months Ended
	Jul. 31, 2016	Oct. 31, 2015	Apr. 30, 2016	Jul. 31, 2015
CoBank [Member] | Heron Lake Bioenergy [Member]
Line of Credit Facility [Line Items]
Line of Credit Facility, Amount Outstanding	$ 5,122,574	$ 4,822,777
CoBank [Member] | Heron Lake Bioenergy [Member] | Revolving Term Loan [Member]
Line of Credit Facility [Line Items]
Line of Credit Facility, Maximum Borrowing Capacity			$ 21,000,000
Line of Credit Future Reduction, Amount	3,500,000
Line of Credit Facility, Amount Outstanding	$ 5,123,000	$ 4,823,000
Line of Credit Facility, Unused Capacity, Commitment Fee Percentage	0.50%
Debt Instrument, Basis Spread on Variable Rate	3.25%
Debt Instrument, Interest Rate During Period	3.75%	3.45%
CoBank [Member] | Heron Lake Bioenergy [Member] | Revolving Term Loan [Member] | Original Maximum Borrowing Capacity Upon Issuance [Member]
Line of Credit Facility [Line Items]
Line of Credit Facility, Maximum Borrowing Capacity	$ 28,000,000
City/County Jurisdiction [Member] | Heron Lake Bioenergy [Member]
Line of Credit Facility [Line Items]
Line of Credit Facility, Amount Outstanding	1,779,849	$ 1,963,405
City/County Jurisdiction [Member] | Heron Lake Bioenergy [Member] | Water Revenue Bonds [Member]
Line of Credit Facility [Line Items]
Debt Instrument, Face Amount	735,000
City/County Jurisdiction [Member] | Heron Lake Bioenergy [Member] | Water Treatment Plant [Member]
Line of Credit Facility [Line Items]
Line of Credit Facility, Maximum Borrowing Capacity	$ 3,600,000
Debt Instrument, Interest Rate, Stated Percentage Rate Range, Minimum	0.50%
Debt Instrument, Interest Rate, Stated Percentage Rate Range, Maximum	8.73%
Granite Falls Energy [Member] | Revolving Term Loan [Member]
Line of Credit Facility [Line Items]
Line of Credit Facility, Remaining Borrowing Capacity	$ 10,000,000			$ 12,000,000
Debt Instrument, Covenant Description	The credit facility is secured by substantially all assets of the Company. There are no savings account balance collateral requirements as part of this credit facility.
Granite Falls Energy, LLC [Member]
Line of Credit Facility [Line Items]
Line of Credit Future Reduction, Amount	$ 2,000,000
Granite Falls Energy, LLC [Member] | Revolving Term Loan [Member]
Line of Credit Facility [Line Items]
Line of Credit Facility, Maximum Borrowing Capacity	$ 18,000,000
Line of Credit Facility, Interest Rate Description	"One Month LIBOR Index Rate," plus 3.05%.
Heron Lake Bio-energy LLC [Member] | CoBank [Member] | Revolving Term Loan [Member]
Line of Credit Facility [Line Items]
Line of Credit Facility, Remaining Borrowing Capacity	$ 15,877,000

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Debt Facilities - Estimated Annual Maturities (Details) - Heron Lake Bio-energy LLC [Member]	Jul. 31, 2016 USD ($)
Debt Instrument [Line Items]
Long-term Debt, Maturities, Repayments of Principal in Next Rolling Twelve Months	$ 504,125
Long-term Debt, Maturities, Repayments of Principal in Rolling Year Two	436,341
Long-term Debt, Maturities, Repayments of Principal in Rolling Year Three	322,570
Long-term Debt, Maturities, Repayments of Principal in Rolling Year Four	318,253
Long-term Debt, Maturities, Repayments of Principal in Rolling Year Five	339,097
Long-term Debt, Maturities, Repayments of Principal in Rolling Year Five	5,269,537
Long-term Debt	$ 7,189,923

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Leases (Details) - USD ($)	3 Months Ended		9 Months Ended
	Jul. 31, 2016	Jul. 31, 2015	Jul. 31, 2016	Jul. 31, 2015
Granite Falls Energy, LLC [Member]
Operating Leases, Rent Expense			$ 2,510,000	$ 1,800,000
Granite Falls Energy, LLC [Member] | Rail Cars [Member]
Operating Leases, Rent Expense	$ 804,000	$ 596,000
Heron Lake Bioenergy [Member]
Operating Leases, Rent Expense	$ 686,000	$ 525,000	$ 1,931,000	$ 1,572,000

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Members' Equity (Details) - USD ($)	1 Months Ended
	Dec. 31, 2015	Dec. 31, 2014	Jul. 31, 2016	Oct. 31, 2015
Membership Units, Issued			30,606	30,606
Membership Units, Outstanding			30,606	30,606
Membership Units, Authorized			30,606
Granite Falls Energy, LLC [Member]
Distribution Made to Membership, Cash Distribution Paid per Unit	$ 315	$ 1,050
Distribution Made to Member or Limited Partner, Cash Distributions Paid	9,641,000	32,136,000
Heron Lake Bio-energy LLC [Member]
Distribution Made to Member or Limited Partner, Cash Distributions Paid	$ 3,897,000	$ 9,352,000
Distribution Made to Limited Liability Company (LLC) Member, Distributions Paid, Per Unit	$ 0.05	$ 0.12
Heron Lake Bio-energy LLC [Member] | Noncontrolling Interest [Member]
Distribution Made to Member or Limited Partner, Cash Distributions Paid		$ 4,621,000

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Commitments and Contingencies (Details)	9 Months Ended
	Jul. 31, 2016 USD ($) bu
Granite Falls Energy, LLC [Member] | Ethanol Contracts [Member]
Purchase Commitment, Excluding Long-term Commitment [Line Items]
Future Commitment, Dollar	$ 16,030,000
Revenue Concentration, Future Commitment	41.00%
Granite Falls Energy, LLC [Member] | Distillers Grains [Member]
Purchase Commitment, Excluding Long-term Commitment [Line Items]
Future Commitment, Dollar	$ 333,000
Heron Lake Bioenergy [Member] | Corn Contracts [Member]
Purchase Commitment, Excluding Long-term Commitment [Line Items]
Inventory, Outside storage | bu	3,826,000
Heron Lake Bioenergy [Member] | Ethanol Contracts [Member]
Purchase Commitment, Excluding Long-term Commitment [Line Items]
Future Commitment, Dollar	$ 17,100,000
Revenue Concentration, Future Commitment	44.00%
Heron Lake Bioenergy [Member] | Distillers Grains [Member]
Purchase Commitment, Excluding Long-term Commitment [Line Items]
Future Commitment, Dollar	$ 1,393,000
Granite Falls Energy [Member] | Corn Oil [Member]
Purchase Commitment, Excluding Long-term Commitment [Line Items]
Future Commitment, Dollar	582,000
Heron Lake Bioenergy [Member] | Corn Oil [Member]
Purchase Commitment, Excluding Long-term Commitment [Line Items]
Future Commitment, Dollar	$ 621,000