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 April 30, 2017

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 checkmark 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, a smaller reporting company, or an an emerging growth company. See the definitions of "large accelerated filer," "accelerated filer", "smaller reporting company" and "emerging growth company" in Rule 12b-2 of the Exchange Act:

Large Accelerated Filer	☐	Non-Accelerated Filer	☒
Accelerated Filer	☐	Smaller Reporting Company	☐
		Emerging Growth Company	☐

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

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 June 14, 2017 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	17
Item 3. Quantitative and Qualitative Disclosures about Market Risk	38
Item 4. Controls and Procedures	39
PART I. OTHER INFORMATION	40
Item 1. Legal Proceedings	40
Item 1A. Risk Factors	40
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	40
Item 3. Defaults Upon Senior Securities	40
Item 4. Mine Safety Disclosures	40
Item 5. Other Information	41
Item 6. Exhibits	41
SIGNATURES	42

2

PART IFINANCIAL INFORMATION

Item 1.  Financial Statements

GRANITE FALLS ENERGY, LLC AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

	April 30, 2017		October 31, 2016
ASSETS	(unaudited)
Current Assets
Cash	$	17,041,777	$	13,797,857
Restricted Cash		178,766		—
Accounts receivable		609,634		6,654,994
Inventory		13,992,183		18,341,413
Commodity derivative instruments		357,436		1,228,926
Prepaid expenses and other current assets		584,864		325,989
Total current assets		32,764,660		40,349,179
Property and Equipment, net		74,940,629		78,968,016
Goodwill		1,372,473		1,372,473
Investment Deposit		750,000		—
Other Assets		762,180		781,254
Total Assets	$	110,589,942	$	121,470,922
LIABILITIES AND MEMBERS' EQUITY
Current Liabilities
Current maturities of long-term debt	$	444,123	$	490,057
Checks drawn in excess of bank balance		—		1,866,683
Accounts payable		3,327,146		5,624,840
Corn payable to FCE		1,609,263		5,358,111
Commodity derivative instruments		7,813		—
Accrued expenses		1,445,675		997,319
Total current liabilities		6,834,020		14,337,010
Long-Term Debt, less current portion		1,281,710		1,393,669
Commitments and Contingencies
Members' Equity
Members' equity attributable to Granite Falls Energy, LLC consists of 30,606 units authorized,  issued, and outstanding at both April 30, 2017 and October 31, 2016		78,520,606		83,684,529
Non-controlling interest		23,953,606		22,055,714
Total members' equity		102,474,212		105,740,243
Total Liabilities and Members' Equity	$	110,589,942	$	121,470,922

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 April 30,				Six Months Ended April 30,
	2017		2016		2017		2016
	(unaudited)		(unaudited)		(unaudited)		(unaudited)
Revenues	$	52,802,058	$	50,974,398	$	107,378,122	$	101,976,052
Cost of Goods Sold		48,845,558		48,700,701		96,576,715		98,269,478
Gross Profit		3,956,500		2,273,697		10,801,407		3,706,574
Operating Expenses		1,584,534		1,489,496		3,191,755		2,890,342
Operating Income		2,371,966		784,201		7,609,652		816,232
Other Income (Expense):
Other income, net		19,979		31,128		410,873		98,807
Interest income		5,060		1,737		6,885		4,536
Interest expense		(33,997)		(104,678)		(75,607)		(180,642)
Total other income (expense), net		(8,958)		(71,813)		342,151		(77,299)
Net Income	$	2,363,008	$	712,388	$	7,951,803	$	738,933
Less: Net Income Attributable to Non-controlling Interest		(515,531)		(12,874)		(1,944,536)		(27,893)
Net Income Attributable to Granite Falls Energy, LLC	$	1,847,477	$	699,514	$	6,007,267	$	711,040
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	$	60.36	$	22.86	$	196.28	$	23.23
Distributions Per Unit	$	—	$	—	$	365.00	$	315.00

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

	Six Months Ended April 30,
	2017		2016
	(unaudited)		(unaudited)
Cash Flows from Operating Activities:
Net income	$	7,951,803	$	738,933
Adjustments to reconcile net income to net cash provided by operations:
Depreciation and amortization		5,003,751		4,778,933
Change in fair value of commodity derivative instruments		(132,392)		(113,708)
Gain on sale of asset		(45,000)		—
Changes in operating assets and liabilities:
Restricted cash		(178,766)		(630,941)
Commodity derivative instruments		1,011,695		822,194
Accounts recievable		6,045,360		7,767,738
Inventory		4,349,230		479,699
Prepaid expenses and other current assets		(258,875)		(194,517)
Accounts payable		(6,234,042)		(830,857)
Accrued expenses		448,356		323,107
Net Cash Provided by Operating Activities		17,961,120		13,140,581
Cash Flows from Investing Activities:
Payment for investment deposit		(750,000)		—
Payments for capital expenditures		(769,790)		(2,611,556)
Proceeds from disposal of asset		45,000		—
Net Cash Used in Investing Activities		(1,474,790)		(2,611,556)
Cash Flows from Financing Activities:
Proceeds from long-term debt		—		7,611,180
Payments on long-term debt		(157,893)		(7,786,568)
Payments on checks drawn in excess of bank balance		(1,866,683)		(838,449)
Purchase of subsidiary units attributable to non-controlling interest		(46,644)		—
Distributions to non-controlling interests		—		(2,006,558)
Member distributions paid		(11,171,190)		(9,640,887)
Net Cash Used in Financing Activities		(13,242,410)		(12,661,282)
Net Increase (Decrease) in Cash		3,243,920		(2,132,257)
Cash - Beginning of Period		13,797,857		12,696,536
Cash - End of Period	$	17,041,777	$	10,564,279
Supplemental Cash Flow Information
Cash paid during the period for:
Interest expense	$	75,607	$	180,642
Supplemental Disclosure of Noncash Investing and Financing Activities
Capital expenditures and construction in process included in accounts payable	$	187,500	$	881,703

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

April 30, 2017

1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Business

Granite Falls Energy, LLC (“GFE”) 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.

Additionally, GFE owns a majority interest in Heron Lake BioEnergy, LLC (“HLBE”). 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. HLBE owns a majority interest in Agrinatural Gas, LLC (“Agrinatural”), which operates a natural gas pipeline that provides natural gas to HLBE's ethanol production facility and other customers.

All references to “we”, “us”, “our”, and the “Company” collectively refer to GFE and its wholly-owned and majority-owned subsidiaries.

Basis of Presentation and Principles of Consolidation

The condensed consolidated unaudited financial statements as of April 30, 2017, consolidate the operating results and financial position of GFE, and its approximately 50.7% 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 49.3% 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 approximately 73% of 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 approximately 27% noncontrolling interest. All significant intercompany balances and transactions are eliminated in 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, 2016, 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.

6

Granite Falls Energy, LLC and Subsidiaries

Notes to Condensed Consolidated Unaudited Financial Statements

April 30, 2017

Reportable Operating Segments

Accounting Standards Codification (“ASC”) 280, “Segment Reporting,” establishes the standards for reporting information about segments in financial statements. 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. Therefore, in applying the criteria set forth in ASC 280, the Company determined that based on the nature of the products and production process and the expected financial results, the Company’s operations at GFE’s ethanol plant and HLBE’s plant, including the production and sale of ethanol and its co-products, are aggregated into one reporting segment.

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

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 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, which includes 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.

Agrinatural recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the fee for the arrangement is fixed or determinable and collectability is reasonably assured.

7

Granite Falls Energy, LLC and Subsidiaries

Notes to Condensed Consolidated Unaudited Financial Statements

April 30, 2017

Inventory

Inventory is stated at the lower of cost or net realizable value. 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.

Investment

On  November 1, 2016, GFE subscribed to purchase 1,500 capital units of Ringneck Energy & Feed, LLC (“Ringneck”) at a price of $5,000 per unit for a total of $7,500,000.  GFE paid a down payment of $750,000 in connection with the subscription, and signed a promissory note for $6,750,000 for the remaining balance of the subscription. If Ringneck accepts GFE’s subscription, GFE will be required to pay Ringneck the entire amount due under the promissory note within 20 days of receiving notice from Ringneck that it is due. If GFE fails to pay the entire amount due, GFE will be charged 12% interest per year, and Ringneck may seek legal action to force GFE to pay. If Ringneck does not meet certain conditions of its offering or rejects GFE’s subscription, GFE expects that its promissory note will be cancelled and our down payment will be refunded to us.

8

Granite Falls Energy, LLC and Subsidiaries

Notes to Condensed Consolidated Unaudited Financial Statements

April 30, 2017

Ringneck is a South Dakota limited liability company that intends to build an 80 million gallon per year ethanol manufacturing plant in outside of Onida, South Dakota in Sully County. If Ringneck accepts our subscription, our investment is sufficient to secure the Company the right to appoint one director to the board of directors of Ringneck.  

The investment is accounted for by the equity method, under which the Company’s share of the net income of the investee is recognized as income in the Company’s Consolidated Statement of Operations and added to the investment account, and distributions received from the affiliates are treated as a reduction of the investment.

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 - 90% 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.

The supply and demand for ethanol are impacted by federal and state legislation and regulation, most significantly the Renewable Fuels Standard (“RFS”), and any changes in legislation or regulation could cause the demand for ethanol to decline or its supply to increase, which could have a material adverse effect on our business, results of operations and financial condition, and the ability to operate at a profit.

The supply and demand for ethanol are impacted by federal and state legislation and regulation, most significantly the Renewable Fuels Standard (“RFS”), and any changes in legislation or regulation could cause the demand for ethanol to decline or its supply to increase, which could have a material adverse effect on our business, results of operations and financial condition, and the ability to operate at a profit.

On November 23, 2016, the U.S. Environmental Protection Agency (the “EPA”) announced the final rule for 2017 Renewable Volume Obligation (“RVO”) requirements, which is set at 15.0 billion gallons for corn-based ethanol, which equates to the original requirements set by the RFS. However, in January 2017, the Trump administration imposed a government-wide freeze on new and pending regulations, which included the 2017 RVOs that were originally intended to go into effect on February 10, 2017. On March 20, 2017, following the termination of the Trump administration’s regulatory freeze, the EPA allowed the previously announced 2017 RVOs to go into effect. Additionally, opponents of ethanol such as large oil companies will likely continue their efforts to repeal or reduce the RFS through lawsuits or lobbying of and legislative efforts in Congress. Successful reduction or repeal of the blending requirements of the RFS and/or continued political uncertainty under the new administration regarding the RFS could result in a significant decrease in ethanol demand. If demand for ethanol decreases, it could materially adversely affect our business, results of operations and financial condition.

Ethanol has historically traded at a discount to gasoline. However, any declines in crude oil and unleaded gasoline prices could have a negative impact on the market price of ethanol which could cause ethanol to trade at a premium to gasoline. When ethanol trades at a premium to gasonline, a disincentive for discretionary blending of ethanol beyond the required RFS blend rate results. 

9

Granite Falls Energy, LLC and Subsidiaries

Notes to Condensed Consolidated Unaudited Financial Statements

April 30, 2017

Management anticipates that ethanol prices will continue to change in relation to changes in corn and energy prices. If corn, crude oil and gasoline prices decrease, that could have a negative impact on ethanol pricing and demand, which could result in a material adverse effect on our business, results of operations and financial condition. Further, the ethanol industry is currently experiencing growth in production capacity, largely through plant optimization and expansions versus new construction. If ethanol supply increases at a greater pace compared to ethanol demand, it could result in oversupply and negatively affecting prices unless additional demand can be created.

3.   INVENTORY

Inventories consist of the following:

	April 30, 2017		October 31, 2016
	(unaudited)
Raw materials	$	3,443,209	$	9,098,492
Supplies		2,861,629		2,755,958
Work in process		1,378,603		1,347,754
Finished goods		6,308,742		5,139,209
Totals	$	13,992,183	$	18,341,413

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 $0 and $232,000 for the six months ended April 30, 2017 and 2016, respectively.

4.   DERIVATIVE INSTRUMENTS

As of April 30, 2017, the total notional amount of GFE’s outstanding corn derivative instruments was approximately 2,050,000 bushels, comprised of long corn positions on 1,325,000 bushels that were entered into to hedge forecasted ethanol sales through July 2017, and short corn positions on 725,000 bushels that were entered into to hedge forecasted corn purchases through May 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 April 30, 2017, the total notional amount of GFE’s outstanding ethanol derivative instruments was approximately 2,940,000 gallons that were entered into to hedge forecasted ethanol sales through September 2017.

As of April 30, 2017, GFE had approximately $197,000 due to a broker related to margin requirements for commodity derivative instrument positions held by a broker.

As of April 30, 2017, the total notional amount of HLBE’s outstanding corn derivative instruments was approximately 3,315,000 bushels, comprised of long corn positions on 1,200,000 bushels that were entered into to hedge forecasted ethanol sales through July 2017, and short corn positions on 2,115,000 bushels that were entered into to hedge forecasted corn purchases through July 2018. There may be offsetting positions that are not shown on a net basis that could lower the notional amount of positions outstanding.

As of April 30, 2017, the total notional amount of HLBE’s outstanding ethanol derivative instruments was approximately 2,940,000 gallons that were entered into to hedge forecasted ethanol sales through September 2017.

As of April 30, 2017,  HLBE maintained approximately $179,000 of cash collateral (restricted cash) and had approximately $218,000 due to broker related to corn derivatives held by a broker.

10

Granite Falls Energy, LLC and Subsidiaries

Notes to Condensed Consolidated Unaudited Financial Statements

April 30, 2017

The following tables provide details regarding the Company's derivative instruments at April 30, 2017, none of which were designated as hedging instruments:

	Consolidated Balance Sheet location	Assets		Liabilities
Corn contracts - GFE	Commodity derivative instruments	$	—	$	7,813
Corn contracts - HLBE	Commodity derivative instruments		60,813		—
Ethanol contracts - GFE	Commodity derivative instruments		146,843		—
Ethanol contracts - HLBE	Commodity derivative instruments		149,780		—
Totals		$	357,436	$	7,813

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

	Consolidated Balance Sheet location	Assets		Liabilities
Corn contracts - GFE	Commodity derivative instruments	$	63,050	$	—
Corn contracts - HLBE	Commodity derivative instruments		388,525		—
Ethanol Contracts - GFE	Commodity derivative instruments		503,538		—
Ethanol Contracts - HLBE	Commodity derivative instruments		273,813		—
Totals		$	1,228,926	$	—

At October 31, 2016, the Company did not have any cash collateral (restricted cash) related to margin requirements for commodity derivative instrument positions held by a broker.

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

	Statement of	Three Months Ended  April 30,				Six Months Ended April 30,
	Operations Location	2017		2016		2017		2016
Corn contracts	Cost of Goods Sold	$	602,490	$	(240,768)	$	545,862	$	(23,370)
Ethanol contracts	Revenues		(689,727)		22,258		(413,470)		104,720
Natural gas contracts	Cost of Goods Sold		—		32,358		—		32,358
Total gain (loss)		$	(87,237)	$	(186,152)	$	132,392	$	113,708

5.   FAIR VALUE

The following table provides information on those derivative assets and liabilities measured at fair value on a recurring basis at April 30, 2017:

					Fair Value Measurement Using
	Carrying Amount in				Quoted Prices		Significant Other		Significant
	Consolidated Balance Sheet				in Active Markets		Observable Inputs		Unobservable Inputs
Financial Asset:	April 30, 2017		Fair Value		(Level 1)		(Level 2)		(Level 3)
Commodity Derivative Instruments - Corn	$	60,813	$	60,813	$	60,813	$	—	$	—
Commodity Derivative Instruments - Ethanol	$	296,623	$	296,623	$	37,063	$	259,560	$	—
Financial Liabilities:
Commodity Derivative Instruments - Corn	$	7,813	$	7,813	$	7,813	$	—	$	—

11

Granite Falls Energy, LLC and Subsidiaries

Notes to Condensed Consolidated Unaudited Financial Statements

April 30, 2017

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

					Fair Value Measurement Using
	Carrying Amount in				Quoted Prices		Significant Other		Significant
	Consolidated Balance Sheet				in Active Markets		Observable Inputs		Unobservable Inputs
Financial Asset:	October 31, 2016		Fair Value		(Level 1)		(Level 2)		(Level 3)
Commodity Derivative Instruments - Corn	$	451,575	$	451,575	$	451,575	$	—	$	—
Commodity Derivative Instruments - Ethanol	$	777,351	$	777,351	$	777,351	$	—	$	—

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. We determine the fair value of ethanol Level 2 instruments by model-based techniques in which all significant inputs are observable in the markets noted above.

6.   DEBT FACILITIES

Debt financing consists of the following:

	April 30, 2017		October 31, 2016
	(unaudited)
GRANITE FALLS ENERGY:
Revolving term loan, see terms below.	$	—	$	—
Term note payable to Fagen Energy, see terms below.		—		—
HERON LAKE BIOENERGY:
Revolving term note payable to lending institution, see terms below.		—		—
Assessment payable as part of water treatment agreement, due in semi-annual installments of $189,393 with interest at 6.55%, enforceable by statutory lien, with the final payment due in 2021. HLBE made deposits for one years' worth of debt service payments of approximately $364,000, which is included with other assets that are held on deposit to be applied with the final payments of the assessment.		1,516,977		1,517,046
Assessment payable as part of water supply agreement, due in monthly installments of $3,942 with interest at 8.73%, enforceable by statutory lien, with the final payment due in 2019.		77,606		97,930
Note payable to electrical company with monthly payments of $6,250 with interest at 0.00% and a 1.00% maintenance fee due each October, due September 2017. The electrical company is a member of HLBE.		31,250		68,750
Note payable to non-controlling interest member of Agrinatural.  Interest is at One Month LIBOR plus 4.0%, which was approximately 5.00% and 4.53% at April 30, 2017 and October 31, 2016, respectively.  The note is considered due on demand with payments due at Agrinatural's Board of Managers' discretion.		100,000		200,000
Totals		1,725,833		1,883,726
Less: amounts due within one year		444,123		490,057
Net long-term debt	$	1,281,710	$	1,393,669

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Granite Falls Energy, LLC and Subsidiaries

Notes to Condensed Consolidated Unaudited Financial Statements

April 30, 2017

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.   However,  the amount available for borrowing by GFE 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 April 30, 2017 and October 31, 2016. Therefore, the aggregate amount available for borrowing by GFE on this facility was $8,000,000 and $10,000,000 at April 30, 2017 and October 31, 2016, respectively.

The interest rate is based on the bank's “One Month LIBOR Index Rate”, plus 3.05%, which equated to 4.05% and 3.25% at April 30, 2017 and October 31, 2016, respectively.

The credit facility also requires GFE to comply with certain financial covenants, including including restriction of the payment of dividends and maintenance of certain financial ratios including minimum working capital and a debt service coverage ratio as defined by the credit facility.  As of April 30, 2017 and October 31, 2016, GFE was in compliance with these financial covenants and expects to be in compliance throughout fiscal 2017. 

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

In connection with GFE’s subscription for investment in Ringneck in November 2016, GFE entered into a credit facility with Fagen Energy which allows GFE to borrow up to $7.5 million of variable-rate, amortizing non-recourse debt from Fagen Energy using the Ringneck investment as collateral. The Fagen Energy loan bears interest from date funds are first advanced on the loan through maturity, at a rate per annum equal to the sum of (x) the One Month LIBOR Index Rate plus (y) 3.05% per annum, with an interest rate floor of 3.55%. 

The Fagen Energy loan  requires annual interest payments only for the first two years of the loan and monthly principal and interest payments for years 3 through 9 based on a 7-year amortization period.  The monthly amortized payments will be re-amortized following any change in interest rate. The entire outstanding principal balance of the loan, plus any accrued and unpaid interest thereon, is due and payable in full on November 1, 2025. GFE is permitted to voluntarily prepay all or any portion of the outstanding balance of this loan at any time without premium or penalty.

Pursuant to a pledge agreement and commercial security agreement entered into in connection with the Fagen Energy loan, GFE’s obligations are secured by all of its right, title, and interest in its investment in Ringneck, including the 1,500 units subscribed for by GFE. The loan is non-recourse to all of GFE’s other assets, meaning that in the event of default, the only remedy available to Fagen Energy will be to foreclose and seize all of GFE’s right, title and interest in its investment in Ringneck. GFE expects to use the proceeds of the loan to finance its balance of its investment in Ringneck.  As of April 30, 2017, there were no amounts outstanding under this credit facility.

Heron Lake BioEnergy:

HLBE has a revolving term note payable with a lender, under which HLBE could initially borrow, repay, and re-borrow in an amount up to $28,000,000 at any time prior to the March 1, 2022 maturity date. However, the amount available for borrowing by HLBE under this facility reduces by by $3,500,000 annually, beginning March 1, 2015 and continuing each anniversary thereafter until maturity.  HLBE had no outstanding balance on the revolving term note payable at April 30, 2017, and October 31, 2016.  Therefore, the aggregate principal amount available for borrowing by HLBE on this facility was $17,500,000 and $21,000,000 at April 30, 2017 and October 31, 2016, 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, which was 4.25% and 3.45% at April 30, 2017, and October 31, 2016, respectively. 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.

13

Granite Falls Energy, LLC and Subsidiaries

Notes to Condensed Consolidated Unaudited Financial Statements

April 30, 2017

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 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, including restriction of the payment of dividends, restrictions on loans and advances to Agrinatural and the 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 April 30, 2017 and October 31, 2016, HLBE was in compliance with these financial covenants and expects to be in compliance throughout fiscal 2017.

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. HLBE agreed to pay CoBank an annual fee of $2,500 as the agent for AgStar.

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 April 30, 2017 and October 31, 2016, there were a total of approximately $1,595,000  and $1,615,000, 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 April 30, 2017, are as follows based on the most recent debt agreements:

2018	$	444,123
2019		322,733
2020		306,706
2021		326,798
2022		325,473
Total debt	$	1,725,833

7.   LEASES

GFE leases equipment, primarily rail cars, under operating leases through December 2026. Rent expense for these leases was approximately $747,000 and $812,000 for the three months ended April 30, 2017 and 2016, repectively, and approximately $1,625,000 and $1,706,000 for the six months ended April 30, 2017 and 2016, repectively.

HLBE leases equipment, primarily rail cars, under operating leases through January 2027.  Rent expense for these leases was approximately $438,000 and $710,000 for the three months ended April 30, 2017 and 2016, repectively, and approximately $978,000 and $1,245,000 for the six months ended April 30, 2017 and 2016, repectively

14

Granite Falls Energy, LLC and Subsidiaries

Notes to Condensed Consolidated Unaudited Financial Statements

April 30, 2017

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 April 30, 2017 and October 31, 2016, GFE had 30,606 membership units authorized, issued, and outstanding.

In December 2016, the Board of Governors of GFE declared a cash distribution of $365 per unit or approximately $11,171,000, for unit holders of record as of December 22, 2016.  The distribution was paid in January 2017.

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 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. At December 17, 2015, GFE owned 39,420,949 Class A membership units and 15,000,000 Class B units of HLBE, and received an aggregate distribution from HLBE of $1,971,000.  The remaining $1,926,000 was distributed by HLBE to the non-controlling interest.

In April 2017, GFE purchased 54,875 units of HLBE from noncontrolling unit holders of HLBE at a price of $0.85 per unit for a total purchase price of approximately $47,000.

9.   COMMITMENTS AND CONTINGENCIES

Corn Storage and Grain Handling Agreement and Purchase Commitments

GFE has a corn storage and grain handling agreement with Farmers Cooperative Elevator Company (FCE), a member. Under the agreement, GFE agrees to purchase all of the corn needed for the operation of the plant from FCE. The price of the corn purchased will be the bid price the member establishes for the plant plus a set fee per bushel. 

On February 27, 2017, GFE and FCE executed an amendment to the corn storage and grain handling agreement with an effective date of February 21, 2017. Pursuant to the terms of the amendment, the parties agreed to amend their corn storage and grain handling agreement to accelerate the termination date of the agreement to midnight August 31, 2017.  Additionally, GFE may begin posting bids for the purchase of corn beginning June 1, 2017 and thereafter, but may not accept delivery of corn at its Granite Falls, Minnesota plant until September 1, 2017.  In exchange for the early termination, GFE agreed to pay an early termination fee to FCE of approximately $255,000 on or before August 31, 2017, which is included as a component of corn payable to FCE within the condensed consolidated balance sheets at April 30, 2017. Prior to the amendment, the termination date of the corn storage and grain handling agreement was set to expire on November 2017.

At April 30, 2017, GFE had no forward corn contracts.

At April 30, 2017, HBLE had cash and basis contracts for forward corn purchase commitments for approximately 6,653,000 bushels for delivery periods through March 2018.

HLBE Corn Purchases - Members

HLBE purchased corn from board members of approximately $2,569,000 and $2,990,000 for the three months ended April 30, 2017 and 2016, respectively, and approximately $5,594,000 and $8,636,000 for the six months ended April 30, 2017 and 2016, respectively.

15

Granite Falls Energy, LLC and Subsidiaries

Notes to Condensed Consolidated Unaudited Financial Statements

April 30, 2017

Ethanol Contracts

At April 30, 2017, GFE had fixed and basis contracts to sell approximately $14,000,000 of ethanol for various delivery periods through June 2017.  

At April 30, 2017, HLBE had fixed and basis contracts to sell approximately $13,810,000 of ethanol for various delivery periods through June 2017.  

Distillers' Grain Contracts

At April 30, 2017, GFE had forward contracts to sell approximately $852,000 of distillers' grain for deliveries through May 2017.

At April 30, 2017, HLBE had forward contracts to sell approximately $137,000 of distillers' grains for delivery through May 2017.

Corn Oil

At April 30, 2017, GFE had forward contracts to sell approximately $275,000 of corn oil for delivery through May 2017.

At April 30, 2017, HLBE had forward contracts to sell approximately $379,000 of corn oil for delivery through June 2017.

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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 six months ended April 30, 2017 and 2016. 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, 2016.

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, 2016 and of this report on Form 10-Q. These risks and uncertainties include, but are not limited to, the following:

· Fluctuations in the price of ethanol as a result of a number of factors, including: the price and availability of competing fuels; the overall supply and demand for ethanol and corn; the price of gasoline, crude oil and corn; and government policies;

· Fluctuations in the price of crude oil and gasoline and the impact of lower oil and gasoline prices on ethanol prices and demand;

· Fluctuations in the availability and price of corn, resulting from factors such as domestic stocks, demand from corn-consuming industries, such as the ethanol industry, prices for alternative crops, increasing input costs, changes in government policies, shifts in global markets or damaging growing conditions, such as plant disease or adverse weather, including drought;

· Fluctuations in the availability and price of natural gas, which is may be affected by by factors such as weather, drilling economics, overall economic conditions and government regulations;

· Negative operating margins which may result from lower ethanol and/or high corn prices;

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

· Overcapacity and oversupply in the ethanol industry;

· Ethanol may trading at a premium to gasoline at times, resulting in a disincentive for discretionary blending of ethanol beyond the requirements of the Renewable Fuels Standard (“RFS”) and consequently negatively impacting ethanol prices and demand;

· Changes in federal and/or state laws and environmental regulations including elimination, waiver or reduction of the corn-based ethanol use requirement in the RFS and legislative acts taken by state governments such as California related to low-carbon fuels, may have an adverse effect on our business; 

· Any impairment of the transportation, storage and blending infrastructure that prevents ethanol from reaching markets;

· Any effect on prices and demand for our products resulting from actions in international markets, particularly the Chinese government’s imposition of increased tariffs on ethanol exported to China and anti-dumping and countervailing duties on U.S. distillers’ grains exported to China;

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

· Effect of our risk mitigation strategies and hedging activities on our financial performance and cash flows;

· Competition from alternative fuels and alternative fuel additives;

· Changes or advances in plant production capacity or technical difficulties in operating the plant; and

· Our reliance on key management personnel.

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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 (“Granite Falls Energy” or “GFE”) is a Minnesota limited liability company that owns and operates a dry mill cornbased, natural gas fired ethanol plant.  Additionally, through a wholly owned subsidiary, Project Viking, L.L.C. (“Project Viking”), GFE owns a majority interest of Heron Lake BioEnergy, LLC (“Heron Lake BioEnergy” or “HLBE”), a Minnesota limited liability company that also owns and operates a dry mill cornbased, natural gas fired ethanol plant. As of April 30, 2017, we control approximately 50.7% of HLBE's outstanding membership units through Project Viking.  Additionally, through a wholly owned subsidiary, HLBE Pipeline Company, LLC (“HLBE Pipeline Company”), HLBE owns a majority interest of Agrinatural Gas, LLC (“Agrinatural”), which operates a natural gas pipeline. Unless the context otherwise requires, references to “we”, “us”, “our”, and the “Company” refer to Granite Falls Energy and its wholly-owned and majority-owned subsidiaries.

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 GFE’s ethanol plant located in Granite Falls, Minnesota and at HLBE’s ethanol plant near Heron Lake, Minnesota.    

The GFE ethanol plant has an approximate annual production capacity of 60 million gallons of denatured ethanol, but has obtained EPA pathway approval and permits from the Minnesota Pollution Control Authority (“MPCA”) to increase our production capacity to approximately 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 has obtained EPA pathway approval and permits from the MPCA to increase our production capacity to approximately 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. 

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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.

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. Pursuant to a corn storage and grain handling agreement, Farmers Cooperative Elevator (“FCE”) is the exclusive supplier of corn to the GFE plant. However, on February 27, 2017, GFE and FCE executed an amendment to corn storage and grain handling agreement pursuant to which, the parties agreed to amend the agreement to accelerate the termination date of the agreement to midnight August 31, 2017.  Prior to the amendment, the termination date of the corn storage and grain handling agreement was set to expire on November 2017. Under the terms of the amendment, GFE may begin posting bids for the purchase of corn beginning June 1, 2017 and thereafter, but may not accept delivery of corn at its Granite Falls, Minnesota plant until September 1, 2017.  In exchange for the early termination, GFE agreed to pay an early termination fee to FCE of approximately $255,000 on or before August 31, 2017. 

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 management services agreement automatically renews 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, 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.

On November 1, 2016, we subscribed to purchase 1,500 capital units of Ringneck Energy & Feed, LLC (“Ringneck”) at a price of $5,000 per unit for a total of $7,500,000.  If Ringneck accepts our subscription, our investment is sufficient to secure the Company the right to appoint one director to the board of directors of Ringneck. Details regarding our subscription for investment in Ringneck are provided below in the section below titled “Investments.”

In connection with our subscription, we entered into a credit facility with Fagen Energy, LLC (“Fagen Energy”), which allows GFE to borrow up to $7.5 million of variable-rate, amortizing non-recourse debt using the Ringneck investment as collateral. Details of the Fagen Energy credit facility are provided below in the section below entitled “Indebtedness - Granite Falls Energy - Credit Facility with Fagen Energy”.

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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.

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 plants. These operational improvements include exploring methods to improve ethanol yield per bushel and increasing production output at our plants to take full advantage of our permitted production capacities, 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.

Additionally, we expect to continue to conduct routine maintenance and repair activities at our ethanol plants. We anticipate using cash we generate from our operations and our revolving term loan 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, “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, 2016, and “PART II - Item 1A. Risk Factors” of our quarterly report on Form 10-Q for the three months ended January 31, 2017.

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. 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.

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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.

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 may be tightly compressed or negative. If the corn-ethanol spread is compressed or negative for sustained period, it is possible that our operating margins will decline or become negative and our plants may not generate adequate cash flow for operations. In such cases, we may reduce or cease production at our plants in order to minimize our variable costs and optimize cash flow.

Management currently believes that our margins will remain steady during the remainder of fiscal year 2017. However, low crude oil and unleaded gasoline prices or further decreases in the price of such commodities could have a negative impact on the market price of ethanol which could adversely impact our profitability. Further, the ethanol industry is currently experiencing growth in production capacity, largely through plant optimization and expansions versus new construction. If ethanol supply increases at a greater pace compared to ethanol demand, it could result in oversupply and negatively affecting prices unless additional demand can be created.

Domestic ethanol inventories continued to increase during the three and six months ended April 30, 2017. The increased supply of ethanol was partially absorbed by higher blending rates resulting from higher gasoline demand. During the three months ended April 30, 2017, ethanol futures continued trading at a discount to gasoline, after trading at a premium for much of fiscal year 2016, which improved the economics of ethanol blending and encouraging discretionary blending as an oxygenate and octane enhancer for gasoline. Additionally, as the U.S. moves into its traditional summer driving season, gasoline demand and ethanol consumption is expected to increase over the next several months.  Management anticipates that increased gasoline demand in the summer months will positively impact ethanol prices.

Although ethanol exports have provided support for ethanol prices, export demand for ethanol is less consistent compared to domestic demand which can lead to ethanol price volatility.  If ethanol exports are lower during fiscal year 2017 compared to 2016, it could result in lower ethanol prices and could negatively impact our profitability. According to the U.S. Energy Information Administration (“EIA”), net U.S. ethanol exports are forecasted to exceed one billion gallons in 2017.  However, China, which was the second largest importer of U.S. ethanol in 2016, increased its ethanol import tariff from 5% to 30% as of January 1, 2017 on imports of U.S. ethanol. While ethanol exports to China continue, if ethanol prices increase, these exports to China may cease. Further, ethanol exports could potentially be higher without the higher Chinese tariff. However, it is possible that declines in domestic ethanol prices could result if export demand for U.S. ethanol by China decreases due to the higher tariff.

Despite the fall off of Chinese exports, ethanol export activity to other destinations has remained strong. Year-to-date domestic ethanol exports through March 31, 2017, were up approximately 56.4% compared to the same period in 2016, as reported by the EIA.   Increases in export sales of ethanol to a variety of foreign markets resulted from high blending demand from a variety of customers. For exports through March 31, 2017, the EIA reports that Brazil accounted for approximately 37.5% of the domestic ethanol export volumes, while Canada, India, the Philippines, and United Arab Emirates and accounted for approximately 18.9%, 18.3%, 8.0, and 5.36%, respectively.

Due the price of corn relative to sugar, corn-based ethanol from the United States continues to be more competitive relative to sugarcane-based Brazilian ethanol. As a result, U.S. ethanol was more attractive in the Brazilian market. However, both the Brazilian sugarcane industry and Brazilian ethanol producers are pushing the Brazilian government to institute a tariff on imported ethanol. To date, no tariff has been implemented. If Brazil's trade counsel imposes a tariff on ethanol imports from the U.S., demand from Brazil could decrease even if sugar prices remain high. Additionally, it is possible that declines in domestic ethanol prices could result if Brazilian export demand for U.S. ethanol declines, unless additional demand from domestic discretionary blending or other foreign markets develop.

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Our margins have also been, and could continue to be, negatively impacted due to the lower prices received for our distillers’ grains due to lower export demand and oversupply in the domestic market, along with increased corn and soybean availability.  Export demand from China and Vietnam, historically two of the largest importers of U.S. produced distillers grains, has significantly declined. Last year, China began an anti-dumping and countervailing duty investigation related to distillers grains imported from the U.S. which contributed to a decline in distillers grains shipped to China. In January 2017, the Chinese issued final tariffs on U.S. distillers grains. The Chinese distillers grains anti-dumping tariffs range from 42.2% to 53.7% and the anti-subsidy tariffs range from 11.2% to 12%. As a result of the imposition of these duties, exports of U.S. distillers’ grains to China have signicantly declined.

Additionally, exports of U.S. distillers’ grains to Vietnam have halted completely due to Vietnam’s imposition of stricter regulations on fumigation. In December 2016, Vietnam's Plant Protection Department issued a ruling that only methyl bromide would be acceptable as fumigation for bulk and container shipments of distillers’ grains, banning phosphine, the chemical generally used in the U.S. industry. The ruling cited concerns about containers arriving infested with the larger cabinet beetle although some in the industry believe that the infestation may be taking place as fumigated U.S. containers move overseas and are exposed to other containers on the ship that may carry insects.  Management anticipates distillers’ grains prices will remain lower during the remaining quarters of our 2017 fiscal year, unless additional domestic demand or other foreign markets develop.

Corn oil prices have also been adversely impacted by oversupply of corn oil due to the substantial increase in corn oil production during the last few years.  Additionally, corn oil prices have been impacted by the oversupply of soybeans and the resulting lower price of soybean oil which competes with corn oil for biodiesel production. However, despite the expiration of the biodiesel blenders' tax credit, demand from the biodiesel industry for corn oil remains relatively strong, offsetting some of the impact of lower soybean oil prices and oversupply of corn oil. However, biodiesel production may not continue at its current level, especially if the biodiesel blenders' credit is not renewed. Renewal of biodiesel blenders' tax credit could lead to increased biodiesel production, which, in turn, could result in increased demand for corn oil.

Management anticipates continued lower corn prices due to the balance between corn supply and demand. Lower corn prices are primarily the result of the strong corn harvest in the fall of 2016, which increased the supply of corn available to the market.   However, as we progress into the U.S. growing season, we may still experience some short term corn price volatility in response to summer weather impacts on the current crop. Additionally, the South American corn crop is expected to be large. If the South American harvest is as large as anticipated, it could put downward pressure on corn prices in the U.S. due to increase in global supply.

Management anticipates relatively stable natural gas prices during the rest of our 2017 fiscal year. Management does not expect significant shifts in market natural gas prices unless there are disruptions in natural gas production which impact natural gas supplies. If a shortage of natural gas were to occur in the future, it could result in significantly higher natural gas prices which could negatively impact our profitability.

Government Supports and Regulation

On November 23, 2016, the Environmental Protection Agency (“EPA”) announced the final rule for 2017 renewable volume obligations (“RVOs”), which is set at 15.0 billion gallons for corn-based ethanol.  This rule is set at 100% of the original statutory requirement for conventional ethanol, and is considered a favorable outcome by the industry. However, in January 2017, the Trump administration imposed a broad-based regulatory freeze on new and pending regulations, which included the 2017 RVOs that were originally intended to go into effect on February 10, 2017. On March 20, 2017, following the termination of the Trump administration’s regulatory freeze, the EPA allowed the previously announced 2017 RVOs to go into effect.

On March 2, 2017, the Consumer and Fuel Retailer Choice Act was introduced in the U.S. Senate and the House of Representatives, proposing to lift restrictions on the sale of E15 between June 1 and September 15 by extending the Reid Vapor Pressure waiver, also known as the One-Pound Waiver, to gasoline blended with 15% ethanol. Also on March 2, 2017, the RFS Elimination Act and RFS Reform Act were introduced in the House of Representatives, proposing to repeal the RFS program and cap the amount of ethanol allowed to be blended with conventional gasoline at 10% beginning in 2017. 

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Current ethanol production capacity exceeds the EPA’s 2017 RVO mandates which can be satisfied by corn based ethanol.  Future demand will be influenced by economic incentives to blend based on the relative value of gasoline versus ethanol, taking into consideration the octane value of ethanol, environmental requirements and the RFS RVO requirements. A significant increase in supply beyond the RFS RVO mandates could have an adverse impact on ethanol prices. Moreover, beyond the federal mandates, there are limited markets for ethanol. Further, if opponents of ethanol are successful in their efforts to repeal or reduce the RFS through lawsuits or lobbying of Congress. If such efforts are successful in further reducing or repealing the blending requirements of the RFS, a significant decrease in ethanol demand may result and could have a material adverse effect on our results of operations, cash flows and financial condition, unless additional demand from exports or discretionary blending develops.

Results of Operations for the Three Months Ended April 31, 2017 and 2016 

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 April 30, 2017 (amounts in thousands).  

	Three Months Ended  April 30,
	2017				2016
	(unaudited)				(unaudited)
Income Statement Data	Amount		%		Amount		%
Revenue	$	52,802	100.0	%	$	50,974	100.0	%
Cost of Goods Sold		48,845	92.5	%		48,701	95.5	%
Gross Profit		3,957	7.5	%		2,273	4.5	%
Operating Expenses		1,585	3.0	%		1,489	2.9	%
Operating Income		2,372	4.5	%		784	1.6	%
Other Expense, net		(9)	(0.0)	%		(72)	(0.1)	%
Net Income		2,363	4.5	%		712	1.5	%
Less: Net Income Attributable to Non-controlling Interest		(516)	(1.0)	%		(13)	(0.0)	%
Net Income Attributable to Granite Falls Energy, LLC	$	1,847	3.5	%	$	699	1.5	%

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 99.2%  and 99.3%  of our total revenues for the three months ended April 30, 2017 and 2016, respectively.  The remaining approximately 0.8% and 0.7% attributable to miscellaneous other revenue for the three months ended April 30, 2017 and 2016, respectively, 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.  

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 April 30, 2017:

	Three Months Ended  April 30, 2017
	Sales Revenue		% of Total Revenues
Revenue Sources	(in thousands)
Ethanol sales	$	43,310	82.0	%
Distillers' grains sales		6,999	13.3	%
Corn oil sales		2,062	3.9	%
Miscellaneous other		431	0.8	%
Total Revenues	$	52,802	100.0	%

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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 condensed consolidated unaudited statements of operations for the three months ended April 30, 2016:

	Three Months Ended  April 30, 2016
	Sales Revenue		% of Total Revenues
Revenue Sources	(in thousands)
Ethanol sales	$	40,590	79.6	%
Distillers' grains sales		7,958	15.6	%
Corn oil sales		2,057	4.1	%
Miscellaneous other		369	0.7	%
Total Revenues	$	50,974	100.0	%

Our total consolidated revenues increased by approximately 3.6% for the three months ended April 30, 2017, as compared to the three months ended April 30, 2016 due primarily to increases in the average price received and quantities sold for our ethanol and corn oil.  The following table reflects quantities of our three primary products sold and the average net prices received for the three months ended April 30, 2017 and 2016: 

	Three Months Ended  April 30, 2017			Three Months Ended  April 30, 2016
	Quantity Sold	Avg. Net Price		Quantity Sold	Avg. Net Price
Product	(in thousands)			(in thousands)
Ethanol (gallons)	31,741	$	1.36	31,214	$	1.30
Distillers' grains (tons)	76	$	91.85	72	$	111.08
Corn oil (pounds)	7,768	$	0.27	7,951	$	0.26

Ethanol

Total revenues from sales of ethanol increased by approximately 6.7%  for the three months ended April 30, 2017 compared to the same period of 2016 due to an increase of approximately 4.9% in the average price per gallon we received for our ethanol, coupled with a 1.7% increase in volume sold. This aggregate increase in the number of gallons sold is attributable to an approximately 2.8%  and 0.6% increase in the number of gallons sold at the GFE and HLBE plants, respectively, during the three months ended April 30, 2017 as compared to same period of 2016.  The increase in the volumes of ethanol sold at our plants was due to the timing of ethanol shipments, as well as a a 6% increase in ethanol production at the GFE plant. We are currently operating our plants above their nameplate capacities. Management anticipates relatively stable ethanol production and sales during our 2017 fiscal year.

The increase in average market price for the three months ended April 30, 2017 compared to the same period of 2016 is due to several factors. Strong domestic demand due to increased domestic driving and strong export demand, as well as higher market prices for crude oil and gasoline, put upward pressure on ethanol prices counter-balancing downward price pressure from the increase in domestic stocks due to increased domestic production.  In comparison, for the three months ended April 30, 2016, lower crude oil and gasoline prices, oversupply of ethanol and the reduction of the volume obligations set forth in the RFS by the EPA in November 2015 had a negative effect on ethanol prices.  

From time to time, we engage in hedging activities with respect to our ethanol sales. At April 30, 2017,  GFE had approximately 2.9 million gallons of fixed and basis contracts for forward ethanol sales, for delivery periods through September 2017, valued at approximately $14.0 million. At April 30, 2017,  HLBE had approximately 2.9 million gallons of fixed and basis contracts for forward ethanol sales, for delivery periods through September 2017, valued at approximately $13.8 million.    Separately, ethanol derivative instruments resulted in a loss of approximately $690,000 during the three months ended April 30, 2017, and a gain of approximately $22,000 during the three months ended April 30, 2016. 

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Distillers' Grains

Total revenues from sales of distillers’ grains decreased by approximately 12.1%  for the three months ended April 30, 2017 compared to the same period of 2016.  This decrease was due to an approximately 17.3% decline in the average price per ton we received for our distillers’ grains, offset by an approximately 6.4% increase in the volumes sold from period to period. The increase in total tons of distillers’ grains sold during the three months ended April 30, 2017 compared to the same period of 2016 was due to a decrease in the amount of modified wet distillers’ grains and corn oil produced and increase in the amount of dried distillers’ grains produced at both plants. Management anticipates relatively stable distillers’ grains production going forward.    However, we may vary the amounts of dried and modified wet distillers’ and corn oil grains production, and resulting sales, based upon market conditions.

This decline in the market price of distillers’ grains is due to lower domestic demand and lower export demand, particularly from China as well as Vietnam. Reduced export demand from China and Vietnam, combined with lower corn and soybean prices, has led to an oversupply of distillers’ grains in the domestic market which has resulted in a decline in the price of distillers’ grains. Domestic demand for distillers’ grains could also remain low due to expansion of production capacity in the ethanol industry and end-users switching to lower priced alternatives.

At April 30, 2017, GFE had forward distillers’ grains sales contracts valued at approximately $852,000 for various delivery periods through May 2017 and HLBE had forward distillers’ grains sales contracts valued at approximately $137,000 for various delivery periods through May 2017.

Corn Oil

Total revenues from sales of corn oil increased by approximately 0.3%  for the three months ended April 30, 2017 compared to the same period of 2016 due to an approximately 2.6% increase in the average price per pound received for our corn oil, which was offset by an approximately 2.3% decrease in pounds sold from period to period.

The decrease in pounds sold from period to period was attributable to an approximately 20.1%  decrease in the volume sold at the HLBE plant for the three months ended April  30, 2017 compared to the same period of 2016, offset by a 16.9%  increase in the volume sold at the GFE plant.  The decrease in pounds sold at the HLBE plant was due primarily to due to decreased oil extraction rates per bushel of corn and increased distillers’ grains production during the 2017 period. The increase in pounds sold at the GFE plant was due primarily to due increased ethanol production and improved oil extraction rates per bushel of corn from period to period.  Management anticipates that the corn oil production our ethanol plants will be relatively stable going forward.

At April 30, 2017, GFE and HLBE had forward corn oil sales contracts valued at approximately $275,000 and $379,000, respectively, at for various delivery periods through June 2017.

Cost of Goods Sold

Our cost of goods sold increased by approximately 0.3%  for the three months ended April 30, 2017, as compared to the three months ended April 30, 2016.  However, as a percentage of revenues, our cost of goods sold decreased to approximately 92.5% for the three months ended April 30, 2017, as compared to approximately 95.5% for the same period in 2016 due to the expansion of the margin between the price of ethanol and the price of corn. The cost of goods sold per gallon of ethanol sold for the three months ended April 30, 2017 was approximately $1.42 per gallon of ethanol sold compared to approximately $1.46 per gallon of ethanol produced three months ended April 30, 2016.

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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 April 30, 2017:

	Three Months Ended  April 30, 2017
	Cost		% of Cost of Goods Sold
	(in thousands)
Corn costs	$	34,203	70.0	%
Natural gas costs		3,047	6.2	%
All other components of costs of goods sold		11,595	23.8	%
Total Cost of Goods Sold	$	48,845	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 April 30, 2016:

	Three Months Ended  April 30, 2016
	Cost		% of Cost of Goods Sold
	(in thousands)
Corn costs	$	34,623	71.1	%
Natural gas costs		2,269	4.7	%
All other components of costs of goods sold		11,809	24.2	%
Total Cost of Goods Sold	$	48,701	100.0	%

Corn

Our aggregate cost of corn was approximately 1.2%  less for the three months ended April 30, 2017 compared to the same period of 2016,  due to an approximately 4.4% decrease in the average price per bushel paid for corn, partially offset by a 3.4% increase in the number of bushels of corn processed from period to period.  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 April 30, 2017 was approximately $0.12 greater than the corn-ethanol price spread we experienced for same period of 2016.

The decrease in corn prices was primarily due to lower market prices as a result of the strong 2016 harvest and the expected 2016 carryout. Corn supplies have been sufficient locally and we have had no difficulty sourcing corn during the three months ended April 30, 2017. Management anticipates corn prices to remain low due to the balance between corn supply and demand as a result of the larger corn crops harvested in recent years along with relatively stable corn demand.  However, we may still experience short term volatility due to weather conditions, domestic and world supply and demand, current and anticipated stocks, agricultural policy and and other factors and could significantly impact our costs of production. If corn prices rise, it will have a negative effect on our operating margins unless the price of ethanol and distillers’ grains out paces rising corn prices.

From time to time we enter into forward purchase contracts for our commodity purchases and sales. At April  30, 2017,  GFE had no forward corn contracts. At April  30, 2017, HLBE had approximately 6.7 million bushels of cash and basis contracts for forward corn purchase commitments for delivery periods through March 2018.  

Our corn derivative positions resulted in a  gain of approximately $602,000 for the three months ended April 30, 2017, which decreased cost of goods sold, compared to losses of approximately $241,000 related to corn derivative instruments for the same period of 2016.  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.

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Natural Gas

Our cost of goods sold related to natural gas costs increased approximately 34.3% for the three months ended April 30, 2017, as compared to the  three months ended April 30, 2016.    This increase in cost of natural gas from period to period as was primarily the result of an increase in the average price per MMBTU of natural gas due to increased domestic and export demand and lower production which used up natural gas stocks that built up in 2015. Management anticipates that natural gas prices may increase in the future if natural gas producer continue to decrease production or shut down wells. Natural gas prices will continue to be dependent upon major supply disruptions due to production problems or catastrophic weather events.

We had no gain or loss on natural gas derivative instruments during the three months ended April 30, 2017.  Comparatively, we had a gain of approximately $32,000 on our natural gas derivative instruments during the three months ended April 30, 2016.

Operating Expenses

Operating expenses include wages, salaries and benefits of administrative employees at the plant, insurance, professional fees and similar costs. Our operating expenses increased by 6.4%  for the three months ended April 30, 2017 compared to the same period ended 2016.   This increase was primarily due to an increase in our property taxes which was a result of the expiration of the State of Minnesota’s JOBZ program, which expired on December 31, 2015. Under the JOBZ program, our plants were exempt from property tax. 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 2017 fiscal year.

Operating Income

We had income from operations of approximately $2.4 million for the three months ended April 30, 2017, compared to income from operations of approximately $784,000 for the three months ended April 30, 2016. This increase in our operating income is primarily due to the widening of our operating margins due to higher average prices received for our ethanol and corn oil at our plants.

Other Expense, Net

Our net other expense for the three months ended April 30, 2017 was approximately $9,000, compared to a net other expense of approximately $72,000 for the three months ended April 30, 2016.  We had less net other expense for the three months ended April  30, 2017 compared to the same period of 2016 due to decreased interest expense because we had less borrowings under our credit facilities during the 2017 period.

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Results of Operations for the Six Months EndedApril 30, 2017 and 2016

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 six months ended April 30, 2017 and 2016 (amounts in thousands).

	Six Months Ended April 30,
	2017				2016
	(unaudited)				(unaudited)
Income Statement Data	Amount		%		Amount		%
Revenue	$	107,378	100.0	%	$	101,976	100.0	%
Cost of Goods Sold		96,577	89.9	%		98,269	96.4	%
Gross Profit		10,801	10.1	%		3,707	3.6	%
Operating Expenses		3,192	3.0	%		2,890	2.8	%
Operating Income		7,609	7.1	%		817	0.8	%
Other Income (Expense), net		342	0.3	%		(77)	(0.1)	%
Net Income		7,951	7.4	%		740	0.7	%
Less: Net Income Attributable to Non-controlling Interest		(1,944)	(1.8)	%		(28)	(0.0)	%
Net Income Attributable to Granite Falls Energy, LLC	$	6,007	5.6	%	$	712	0.7	%

Revenues

Revenues from our three primary products: ethanol, distillers’ grains and corn oil, represented approximately 99.0%  and 99.1% of our total consolidated revenues for the six months ended April 30, 2017 and 2016, respectively. Miscellaneous other revenues attributable to incidental sales of corn syrup and Agrinatural revenues (net of eliminations) represented 1.0%and 0.9% of our consolidated revenues for the six months ended April 30, 2017 and 2016, 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 six months ended April 30, 2017:

	Six Months Ended  April 30, 2017
Revenue Sources	Sales Revenue		% of Total Revenues
Ethanol sales	$	87,232	81.2	%
Distillers' grains sales		14,647	13.6	%
Corn oil sales		4,482	4.2	%
Miscellaneous other		1,017	1.0	%
Total Revenues	$	107,378	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 six months ended April 30, 2016:

	Six Months Ended  April 30, 2016
Revenue Sources	Sales Revenue		% of Total Revenues
Ethanol sales	$	80,708	79.1	%
Distillers' grains sales		16,489	16.2	%
Corn oil sales		3,872	3.8	%
Miscellaneous other		907	0.9	%
Total Revenues	$	101,976	100.0	%

Our total consolidated revenues increased by approximately 5.3% for the six months ended April 30, 2017, as compared to the six months ended April 30, 2016.  This increase is due primarily to increases in the average prices received for our ethanol and corn oil, partially offset by decreases in the the average prices received for our distillers’ grains.  

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The following table reflects quantities of our three primary products sold and the average net prices received for the six months ended April 30, 2017 and 2016.  

	Six Months Ended  April 30, 2017			Six Months Ended  April 30, 2016
Product	Quantity Sold	Avg. Net Price		Quantity Sold	Avg. Net Price
Ethanol (gallons)	62,569	$	1.39	61,787	$	1.31
Distillers' grains (tons)	156	$	93.92	149	$	110.62
Corn oil (pounds)	16,658	$	0.27	16,060	$	0.24

Ethanol

Total consolidated revenues from ethanol sales increased by approximately 8.1% for the six months ended April 30, 2017 as compared to the same period in 2016, due primarily to an  approximately 6.7%  increase in the average price received from period to period, coupled with an approximately 1.3% increase in total volume of ethanol sold in the 2017 period. The increase in gallons of ethanol sold from period to period was primarily due to a 4.2% increase in the volumes sold at the GFE plant from period to period due to increased production, partially offset by a 1.6% decrease in the volume of ethanol sold at at the HLBE plant during the 2017 period. 

The increase in average market price for the six months ended April 30, 2017, as compared to the same period of 2016 is due to increased domestic driving demand and export demand which put upward pressure on ethanol prices during the 2017 period. In 2016, lower crude oil and unleaded gasoline prices and an increase in national supply had a negative effect on ethanol prices during the six months ended April 30, 2016.

Our ethanol derivative instruments resulted in a loss of approximately $413,000 during the six months ended April 30, 2017.  Comparatively, ethanol derivative instruments resulted in a gain of approximately $105,000 during the six months ended April 30, 2016.

Distillers' Grains

Total revenue from the sales of distillers' grains decreased by approximately 11.2% during the six months ended April 30, 2017 compared to the same period of 2016.  The decline in distillers' grains revenues is primarily attributable to an approximately 13.0% decrease from period to period in the average price received for distillers' grains, which partially mitigated by an approximately 2.1%  increase in aggregate tons sold. This increase was attributable to increased ethanol production at the GFE plant and reduced corn oil production at the HLBE plant during the six months ended April 30, 2017, which in turn increased the aggregate volumes of distillers’ grains produced and sold our plants from period to period.  Management attributes lower distillers' grains prices for the six months ended April 30, 2017 to lower domestic demand due to lower priced alternative feeds and lower export demand, particularly from China.

Corn Oil

Total corn oil sales increased by approximately 15.7% for the six months ended April 30, 2017 compared to the same period of 2016.  This increase was due to an approximately 3.7% increase in pounds of corn oil sold from period to period coupled with an approximately 11.6% increase in the price per pound received by the plants for corn oil from period to period. The increase in volume sold is largely attributable to the improved oil extraction rates per bushel of corn during six months ended April 30, 2017. 

The increase in volume sold for the six months ended April 30, 2017 compared to the same period of 2016 is due primarily to an increase of 24.0% in pounds of corn oil sold at the GFE plant, offset by a 13.2% decrease in the pounds of corn oil sold at the HLBE plant during the 2017 period. The pound of corn oil sold increased at the GFE due to ethanol production and corn oil extraction rates achieved at the GFE plant.  The decrease in volume sold at the HLBE for the six months ended April 30, 2017 compared to the same period of 2016 is attributable to reduced ethanol production and reduced oil yield at the HLBE during the six months ended April 30, 2017.

Management attributes the increase in the corn oil prices we experienced, in part, to increased demand from the biodiesel industry, as well as increased demand from the corn oil feed market.

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Cost of Goods Sold

Our cost of goods sold decreased by approximately 1.7% for the six months ended April 30, 2017, as compared to the six months ended April 30, 2016.  Additionally, as a percentage of revenues, our cost of goods sold decreased to approximately 89.9% for the six months ended April 30, 2017, as compared to approximately 96.4% for the same period in 2016 due to the wider margin between the price of ethanol and the price of corn from period to period. The cost of goods sold per gallon of ethanol produced for the six months ended April 30, 2017 was approximately $1.37 per gallon of ethanol sold compared to approximately $1.41 per gallon of ethanol produced for the six months ended April 30, 2016. 

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 six months ended April 30, 2017:

	Six Months Ended  April 30, 2017
	Cost		% of Cost of Goods Sold
	(in thousands)
Corn costs	$	70,019	72.5	%
Natural gas costs		6,480	6.7	%
All other components of costs of goods sold		20,078	20.8	%
Total Cost of Goods Sold	$	96,577	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 six months ended April 30, 2016:

	Six Months Ended  April 30, 2016
	Cost		% of Cost of Goods Sold
	(in thousands)
Corn costs	$	73,545	74.8	%
Natural gas costs		4,916	5.0	%
All other components of costs of goods sold		19,808	20.2	%
Total Cost of Goods Sold	$	98,269	100.0	%

Corn

Our cost of goods sold related to corn was approximately 4.8% less for the six months ended April 30, 2017 compared to the same period of 2016, due primarily to an approximately 6.3% decrease in the average price per bushel paid for corn, which was offset by a 1.5% increase in the number of bushels of corn processed from period to period.  For the six months ended April 30, 2017 and 2016, our plants processed approximately 21.8 million and 21.4 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 six months ended April 30, 2017, was approximately $0.16 greater than the corn-ethanol price spread we experienced for same period of 2016. The decrease in corn prices was primarily driven by the strong corn harvest in the fall of 2016, resulting in a sufficient local supply of corn to the market.

We had a gain related to corn derivative instruments of approximately $546,000 for the six months ended April 30, 2017, which decreased our cost of goods sold. We had a  loss related to corn derivative instruments of approximately $23,000 for the six months ended April 30, 2016, which increased 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 six months ended April 30, 2017, we experienced a 31.8% increase in our overall natural gas costs compared to the same period of 2016.  Additionally, natural gas costs comprised a slightly larger portion of our cost of goods sold from period to period increasing to approximately 6.7% from approximately 5.0% for the six months ended April 30, 2017 and 2016, respectively. The increase in natural gas costs was primarily due to higher energy prices during the 2017 period.  Our higher average price per MMBTU of natural gas for the six month ended April 30, 2017, was due to increased domestic and export demand during the 2017 period and lower natural gas production during 2016 which used up natural gas stocks.  Comparatively, natural gas prices were lower in the 2016 period due to large natural gas stocks that built up in 2015.

We had no gain or loss on natural gas derivative instruments during the six months ended April 30, 2017. In comparison, our natural gas derivative positions resulted in a gain of approximately $32,000 during the six months ended April 30, 2016, which decreased our cost of goods sold.

Operating Expenses

Our operating expenses increased by approximately 10.4% for the six months ended April 30, 2017 compared to the same period ended 2016. This increase was primarily due to an increase in our property taxes which was a result of the expiration of the State of Minnesota’s JOBZ program, which expired on December 31, 2015.

Operating Income

We had income from operations of approximately $7.6 million for the six months ended April 30, 2017, compared to income from operations of approximately $817,000 for the six months ended April 30, 2016. This increase resulted largely from increased prices for our ethanol relative to the price of corn and improved operating margin.

Other Income (Expense), Net

We had net other income of approximately $342,000 during the six months ended April 30, 2017 compared to net other expense of approximately $77,000 the six months ended April 30, 2016.  We had more other income during the six months ended April 30, 2017 compared to the six months ended April 30, 2016 due to patronage income and decreased interest expense as a result of fewer borrowings under our credit facilities during the 2017 period. 

Investments

On November 1, 2016, we subscribed to purchase 1,500 capital units of Ringneck at a price of $5,000 per unit for a total of $7,500,000.  We paid a down payment of $750,000 in connection with our subscription, and signed a promissory note for $6,750,000 for the remaining balance of the subscription. If Ringneck accepts our subscription, we will be required to pay Ringneck the entire amount due under the promissory note within 20 days of receiving notice from Ringneck that it is due. If we fail to pay the entire amount due, we will be charged 12% interest per year, and Ringneck may seek legal action to force us to pay. If Ringneck does not meet certain conditions of its offering or rejects our subscription, we expect that our promissory note will be cancelled and our down payment will be refunded to us.

Ringneck is a South Dakota limited liability company that intends to build an 80 million gallon per year ethanol manufacturing plant in outside of Onida, South Dakota in Sully County. If Ringneck accepts our subscription, our investment is sufficient to secure the Company the right to appoint one director to the board of directors of Ringneck. The units we expect to acquire in Ringneck will be subject to restrictions on transfer, therefore, this should not be considered a liquid investment.  If our subscription is accepted, it may take a significant amount of time before we realize a return on our investment, if we realize a return on the investment at all.

Ringneck is offering the sale of its units pursuant to a private placement memorandum. Additionally, because Ringneck is not conducting a federally-registered offering, we do not expect that information about Ringneck will be available via the SEC’s EDGAR filing system. Therefore, it may be difficult for our investors to obtain information about Ringneck.

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In connection with our subscription, GFE entered into a credit facility with Fagen Energy, which allows GFE to borrow up to $7.5 million of variable-rate, amortizing non-recourse debt using the Ringneck investment as collateral. Details of the Fagen Energy credit facility are provided below in the section below entitled “Indebtedness - Granite Falls Energy - Credit Facility with Fagen Energy”.

Changes in Financial Condition at April 30, 2017 and October 31, 2016

The following table highlights our financial condition at April 30, 2017 and October 31, 2016 (amounts in thousands):

	April 30, 2017		October 31, 2016
	(unaudited)
Current Assets	$	32,765	$	40,349
Total Assets	$	110,590	$	121,470
Current Liabilities	$	6,834	$	14,337
Long-Term Debt, less currrent portion	$	1,282	$	1,394
Members' Equity attributable to Granite Falls Energy, LLC	$	78,521	$	83,685
Non-controlling Interest	$	23,954	$	22,056

Total assets decreased approximately 9.0%  at April 30, 2017 compared to October 31, 2016. The decrease in our total assets is primarily due to an approximately $7.6 million decrease in total current assets at April 30, 2017 compared to October 31, 2016. The change in our current assets is due to decreases of approximately $6.0 million in accounts receivable, $4.3 million in inventory and $871,000 decrease in the value of our commodity derivative instruments at April 30, 2017, offset by an approximately $3.2 million increase in cash on hand. Also contributing to the decrease in total assets was a decrease of approximately $4.0 million in net property and equipment due to depreciation expense during the six months ended April  30, 2017, offset by capital expenditures.

Current liabilities decreased by approximately $7.5 million at April 30, 2017 compared to October 31, 2016.  This decrease was mainly due to decreases of approximately $3.7 million in corn payable to FCE, approximately $2.3 million in accounts payable, and approximately  $1.9 million in checks drawn in excess of bank balance at April 30, 2017compared to October 31, 2016. The decrease in our corn payable to FCE and accounts payable is due to the timing of payments to vendors and lower corn prices during the six months ended April 30, 2017 which reduced the amount of corn payable at April 30, 2017.  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 generates is used to pay down outstanding balances on its line of credit with AgStar.  

Our long-term debt decreased approximately $112,000 at April 30, 2017 compared to October 31, 2016. The decrease is mostly due to payments on the note payable to the minority owner of Agrinatural, as well as payments on the note payable to the electric company and assessments paid under industrial water supply treatment agreement with the City of Heron Lake and Jackson County.

Members’ equity attributable to Granite Falls Energy, LLC at April 30, 2017 compared to October 31, 2016 decreased by approximately $5.2 million. The approximately 6.2% decrease was related to the distribution to our members of approximately $11.2 million during January 2017, offset by our approximately $6.0 million of net income attributable to GFE during the six months ended April 30, 2017. 

Noncontrolling interest totaled approximately $24.0 million and $22.1 million at April 30, 2017 and October 31, 2016, respectively.  This is directly related to recognition of the 49.3% noncontrolling interest in HLBE.

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.

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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 six months ended April 30, 2017 and 2016 (amounts in thousands): 

	2017		2016
	(unaudited)		(unaudited)
Net cash provided by operating activities	$	17,961	$	13,141
Net cash used in investing activities	$	(1,475)	$	(2,612)
Net cash used in financing activities	$	(13,242)	$	(12,661)
Net increase (decrease) in cash	$	3,244	$	(2,132)

Operating Cash Flows

During the six months ended April 30, 2017, cash flows from operating activities increased by approximately $4.8 million compared to the six months ended April 30, 2016. This increase from period to period resulted largely from an approximately $7.2 million increase in our net income, offset by a net decrease of approximately $2.6 million of various working capital items from period to period.

Investing Cash Flows

Cash used in investing activities was approximately $1.1 million less for the six months ended April 30, 2017, compared to the six months ended April 30, 2016. This decrease was due primarily to reduced payments of approximately $1.8 million for capital expenditures for the six months ended April 30, 2017.  This decrease was partially offset by $750,000 of cash used by GFE during the six months ended April 30, 2017 for the initial payment on our subscription for its Ringneck investment. Comparatively, during the six months ended April 30, 2016, we used cash at the GFE plant for our grain bin storage expansion and at HLBE plant for our RTO replacement project,  as well as plant improvements.        

Financing Cash Flows

Cash used in financing activities was approximately $581,000 more for the six months ended April 30, 2017 compared to the same period of 2016. For the six months ended April 30, 2017, we made payments of approximately $11.2 million in distributions to our unit holders, approximately $1.9 million reduction in checks drawn in excess of bank balance, principal payments of approximately $158,000 on HLBE’s long-term debt, and purchased approximately $47,000 of units in HLBE.  In comparison, for the same period in 2016,  we made payments of approximately $9.6 million in distributions to our unit holders and approximately $2.0 million to non-controlling interests, approximately $838,000 reduction in checks drawn in excess of bank balance, principal payments of approximately $7.8 million on HLBE’s long-term debt,  offset by approximately proceeds of approximately $9.9 million on HLBE’s long-term debt. 

Indebtedness

GFE’s United FCS Credit Facility

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

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Under GFE’s long-term revolving term loan, GFE 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 semi-annually, beginning September 1, 2014, with the final payment due on March 1, 2018.  There was no outstanding balance on the revolving term loan at January 31, 2017. Therefore, the aggregate principal amount available for borrowing under this revolving term loan facility at April 30, 2017 and October 31, 2016 was $10.0 million and $8.0 million, respectively.  

The interest rate is based on the bank's One Month London Interbank Offered Rate (“LIBOR”) Index Rate, plus 3.05%, which equated to 4.05% and 3.25% at April 30, 2017 and October 31, 2016, respectively.

GFE’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. 

As of April 30, 2017, GFE was in compliance with these financial covenants. Management’s current financial projections indicate that GFE will be in compliance with its financial covenants for the next 12 months and we expect to remain in compliance thereafter. However, if market conditions deteriorate in the future, circumstances may develop which could result in GFE violating the financial covenants or other terms of its credit facility. If GFE fails to comply with the terms of its credit agreement with United FCS, and United FCS refuses to waive the non-compliance, United FCS could terminate the credit facility and any commitment to loan funds to GFE.

GFE’s Other Credit Arrangement

In connection with GFE’s subscription for investment in Ringneck, GFE entered into a credit facility with Fagen Energy which allows GFE to borrow up to $7.5 million of variable-rate, amortizing, non-recourse debt from Fagen Energy using the Ringneck investment as collateral. Fagen Energy is an affiliate of Fagen, Inc., the design-builder for the our plants and a member of GFE. The Fagen Energy loan bears interest from date funds are first advanced on the loan through maturity, at a rate per annum equal to the sum of (x) the One Month LIBOR Index Rate plus (y) 3.05% per annum, with an interest rate floor of 3.55%. 

The Fagen Energy loan  requires annual interest payments only for the first two years of the loan and monthly principal and interest payments for years 3 through 9 based on a 7-year amortization period.  The monthly amortized payments will be re-amortized following any change in interest rate. The entire outstanding principal balance of the loan, plus any accrued and unpaid interest thereon, is due and payable in full on November 1, 2025. GFE is permitted to voluntarily prepay all or any portion of the outstanding balance of this loan at any time without premium or penalty.

Pursuant to a pledge agreement and commercial security agreement entered into in connection with the Fagen Energy loan, GFE’s obligations are secured by all of its right, title, and interest in its investment in Ringneck, including the 1,500 units subscribed for by GFE. The loan is non-recourse to all of GFE’s other assets, meaning that in the event of default, the only remedy available to Fagen Energy will be to foreclose and seize all of GFE’s right, title and interest in its investment in Ringneck. GFE expects to use the proceeds of the loan to finance its balance of its investment in Ringneck.  As of April 30, 2017 and October 31, 2016, there were no amounts outstanding under this credit facility.

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HLBE’s AgStar Credit Facility

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 on March 1 each year until maturity. There was no outstanding balance on the revolving term loan at April 30, 2017 or October 31, 2016. Therefore, the aggregate principal commitment under this facility at April 30, 2017 and October 31, 2016 was $17.5 million and $21.0 million, respectively.  

Interest on the revolving term loan accrues at a variable rate equal to 3.25% above the One-Month LIBOR Index rate, which was 4.25% and 3.45% at April 30, 2017 and October 31, 2016, respectively. 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.

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 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. 

· 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.

As of April 30, 2017 and October 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 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. If HLBE fails to comply with the terms of its credit agreement with AgStar, and AgStar refuses to waive the non-compliance, AgStar could terminate the credit facility and any commitment to loan funds to HLBE.

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HLBE’s Other 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 $1.6 million in outstanding water revenue bonds at April 30, 2017 and October 31, 2016. 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 $31,000 and $69,000 at April 30, 2017 and October 31, 2016, respectively.

HLBE also has a note payable to the noncontrolling owner of Agrinatural in the amount of in the amount of $100,000 and $200,000 at April 30, 2017 and October 31, 2016, respectively. Interest on the note is the One-Month LIBOR rate plus 4.0% and the note is due on demand. Payment of the note is due on demand at the discretion of the board of managers of Agrinatural.  The interest rate on this note payable was 5.00% and 4.53% at April 30, 2017 and October 31, 2016, respectively.

Agrinatural Credit Facilities

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.

Interest on the Original Agrinatural Credit Facility 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.  Accrued interest is due and payable on a monthly basis.

On March 30, 2015, HLBE entered into an 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. 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.

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In exchange for the Original 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, 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 $2.2 million at April 30, 2017 and $2.4 million at October 31, 2016.

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 to increase the amount of the capital expenditures allowed by Agrinatural during the term of the facilty.  HLBE and Agrinatural also executed an allonge to the negotiable promissory note dated March 30, 2015 to defer a portion of the principal payments required for 2016, which such deferred principal payments continue to accrue interest at the rate set forth in the note and become a part of the balloon payment due at maturity.

As provided in the amendment, for calendar years 2017, 2018 and 2019, Agrinatural may, without consent of HLBE, proceed with and pay for capital expenditures in an amount up to $100,000 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. Prior to the amendment, Agrinatural’s capital expenditures were restricted to $100,000 per year.

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 $2.8 million at April 30, 2017 and $2.9 million at October 31, 2016.

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 April 30, 2017, our critical accounting estimates continue to include those described in our annual report on Form 10-K for the fiscal year ended October 31, 2016. 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 United States of America.  

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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.

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, HLBE's credit facilities with AgStar 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 April 30, 2017, GFE had no exposure to interest rate risk as we had no amounts outstanding on our credit facility with United FCS.  As of April 30, 2017, HLBE’s exposure to interest rate risk results primarily from its its note payable to the noncontrolling owner of Agrinatural, as HLBE had no exposure to interest rate risk under its credit facility with AgStar as it had no amounts outstanding under this credit facility.  Below is a sensitivity analysis we prepared regarding HLBE's income exposure to changes in interest rates.

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
April 30, 2017		April 30, 2017		Adverse Change		Change to Income
$	100,000	5.00	%	5.50	%	$	500

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 April 30, 2017, GFE had price protection in place for approximately 10% of its anticipated corn needs and approximately 10% of its ethanol sales for the next 12 months. As of April 30, 2017, HBLE had price protection in place for approximately 15% of its anticipated corn needs and approximately 10% 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.

38

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 April 30, 2017, 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 April 30, 2017.  

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

	Estimated Volume Requirements		Hypothetical Adverse Change in
	for the next 12 months		Price as of		Approximate Adverse Change to
	(net of forward and futures contracts)	Unit of Measure	April 30, 2017		Income
Ethanol	120,200,000	Gallons	10	%	$	17,100,000
Corn	38,400,000	Bushels	10	%	$	12,200,000
Natural Gas	3,400,000	MMBTU	10	%	$	1,200,000

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.

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 April 30, 2017. 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.

39

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

The risk factors below should be read in conjunction with the risk factors previously discussed in Item 1A of our Form 10-K for the fiscal year ended October 31, 2016, as supplemented by the risk factors disclosed in Item 1A of our Form 10-Q for the three months ended January 31, 2017. 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.

The Brazilian sugarcane industry and ethanol producers are pushing for tariffs on ethanol imported to Brazil.  If a tariff is implemented, it could negatively impact market ethanol prices.

In response to efforts of the Brazilian sugarcane industry and ethanol producers, the Brazilian government is currently contemplating implementing a tariff on ethanol produced in the United States and exported to Brazil.  If imposed, tariffs are expected to be at levels of 16% to 20%.  The Brazilian government is expected to make a final decision on the potential tariff over the summer 2017.  We cannot estimate the exact effect this tariff would have on the overall domestic ethanol market.  However, it is possible a tariff at the levels contemplated could reduce export demand for U.S. ethanol in Brazil. As a result, it could lead to an oversupply of ethanol in the United States which could negatively impact domestic ethanol prices. Ethanol prices may decrease to a level which does not allow us to operate our ethanol plants profitably.

Many ethanol producers are expanding their production capacity which could lead to an oversupply of ethanol in the United States.  

Recently, many ethanol producers have commenced projects to expand their ethanol production capacities. These expansions could result in a significant increase in the supply of ethanol in the United States. Currently, ethanol prices are supported by ethanol exports which may not continue at their current levels. While many in the ethanol industry are working to increase the amount of ethanol that is used domestically, specifically in the form of E15, which contains 15% ethanol as compared to the 10% ethanol which is used in most current blends, adoption of E15 has not been as rapid as most ethanol producers would like. Also, the additional ethanol capacity which is being constructed may exceed current domestic and export demand. If an oversupply of ethanol were to occur, it could negatively impact domestic ethanol prices which could negatively impact our ability to profitably operate our ethanol plants.

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.

40

Item 5.Other Information

None.

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*
101	The following financial information from Granite Falls Ethanol, LLC's Quarterly Report on Form 10-Q for the three and six months ended April 30, 2017, formatted in XBRL (eXtensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets at April 30, 2017 and October 31, 2016; (ii) the Condensed Consolidated Statements of Operations for the three and six months ended April 30, 2017 and 2016; (iii) the Condensed Consolidated Statements of Cash Flows for the six months ended April 30, 2017 and 2016; and (iv) Notes to Condensed Consolidated Unaudited Financial Statements.*

*   Filed herewith.

41

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:   June 14,  2017	/s/ Steve Christensen
	Steve Christensen
	Chief Executive Officer
	/s/ Stacie Schuler
Date:   June 14, 2017	Stacie Schuler
	Chief Financial Officer

42

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:	June 14, 2017	/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:	June 14, 2017	/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 April 30, 2017, 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:	June 14, 2017	/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 April 30, 2017, 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:	June 14, 2017	/s/ Stacie Schuler
		Stacie Schuler, Chief Financial Officer
		(Principal Financial Officer)

XML

Document and Entity Information Document - shares	6 Months Ended
	Apr. 30, 2017	Jun. 14, 2017
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	Apr. 30, 2017
Document Fiscal Year Focus	2017
Document Fiscal Period Focus	Q2
Amendment Flag	false
Entity Common Stock, Shares Outstanding		30,606
Entity Current Reporting Status	Yes

XML

Condensed Consolidated Balance Sheets - USD ($)	Apr. 30, 2017	Oct. 31, 2016
Current Assets
Cash	$ 17,041,777	$ 13,797,857
Restricted Cash	178,766
Accounts receivable	609,634	6,654,994
Inventory	13,992,183	18,341,413
Commodity derivative instruments	357,436	1,228,926
Prepaid expenses and other current assets	584,864	325,989
Total current assets	32,764,660	40,349,179
Property, Plant and Equipment
Property and Equipment, net	74,940,629	78,968,016
Goodwill	1,372,473	1,372,473
Investment	750,000
Other Assets, Noncurrent	762,180	781,254
Total Assets	110,589,942	121,470,922
Current Liabilities
Current maturities of long-term debt	444,123	490,057
CHecks drawn in excess of bank balance		1,866,683
Accounts payable	3,327,146	5,624,840
Corn payable to FCE	1,609,263	5,358,111
Commodity derivative instruments	7,813
Accrued expenses	1,445,675	997,319
Total current liabilities	6,834,020	14,337,010
Long-term Debt, less current portion	1,281,710	1,393,669
Commitments and Contingencies
Members' equity attributable to Granite Falls Energy, LLC consists of 30,606 units authorized, issued, and outstanding at both April 30, 2017 and October 31, 2016	78,520,606	83,684,529
Non-controlling interest	23,953,606	22,055,714
Total members' equity	102,474,212	105,740,243
Total Liabilities and Members’ Equity	$ 110,589,942	$ 121,470,922

XML

Condensed Consolidated Balance Sheets (Parenthetical) - shares	Apr. 30, 2017	Oct. 31, 2016
Condensed Balance Sheets [Abstract]
Common Units Authorized	30,606	30,606
Common Units Issued	30,606	30,606
Common Units Outstanding	30,606	30,606

XML

Condensed Consolidated Statements of Operations - USD ($)	3 Months Ended		6 Months Ended
	Apr. 30, 2017	Apr. 30, 2016	Apr. 30, 2017	Apr. 30, 2016
Condensed Statements of Operations [Abstract]
Revenues	$ 52,802,058	$ 50,974,398	$ 107,378,122	$ 101,976,052
Cost of Goods Sold	48,845,558	48,700,701	96,576,715	98,269,478
Gross Profit	3,956,500	2,273,697	10,801,407	3,706,574
Operating Expenses	1,584,534	1,489,496	3,191,755	2,890,342
Operating Income	2,371,966	784,201	7,609,652	816,232
Other Income (Expense)
Other income, net	19,979	31,128	410,873	98,807
Interest income	5,060	1,737	6,885	4,536
Interest expense	(33,997)	(104,678)	(75,607)	(180,642)
Total other income (expense), net	(8,958)	(71,813)	342,151	(77,299)
Net Income	2,363,008	712,388	7,951,803	738,933
Less: Net Income Attributable to Non-controlling Interest	(515,531)	(12,874)	(1,944,536)	(27,893)
Net Income Attributable to Granite Falls Energy, LLC	$ 1,847,477	$ 699,514	$ 6,007,267	$ 711,040
Weighted Average Units Outstanding - Basic and Diluted	30,606	30,606	30,606	30,606
Net Income Per Unit - Basic and Diluted	$ 60.36	$ 22.86	$ 196.28	$ 23.23
Distributions Per Unit - Basic and Diluted			$ 365.00	$ 315.00

XML

Condensed Consolidated Statements of Cash Flows - USD ($)	6 Months Ended
	Apr. 30, 2017	Apr. 30, 2016
Cash Flows from Operating Activities
Net income	$ 7,951,803	$ 738,933
Adjustments to reconcile net income to net cash provided by operations:
Depreciation and amortization	5,003,751	4,778,933
Change in fair value of commodity derivative instruments	(132,392)	(113,708)
Gain on sale of asset	(45,000)
Change in operating assets and liabilities
Restricted cash	(178,766)	(630,941)
Commodity derivative instruments	1,011,695	822,194
Accounts receivable	6,045,360	7,767,738
Inventory	4,349,230	479,699
Prepaid expenses and other current assets	(258,875)	(194,517)
Accounts payable	(6,234,042)	(830,857)
Accrued expenses	448,356	323,107
Net Cash Provided by Operating Activities	17,961,120	13,140,581
Cash Flows from Investing Activities
Payment for investment deposit	(750,000)
Payments for capital expenditures	(769,790)	(2,611,556)
Proceeds from sale of assets	45,000
Net Cash Used in Investing Activities	(1,474,790)	(2,611,556)
Cash Flows from Financing Activities
Proceeds from long-term debt		7,611,180
Payments on long-term debt	(157,893)	(7,786,568)
Proceeds (payments) from checks drawn in excess of bank balance	(1,866,683)	(838,449)
Purchase of subsidiary units attributable to non-controlling interest	(46,644)
Distributions to non-controlling interests		(2,006,558)
Member distributions paid	(11,171,190)	(9,640,887)
Net Cash Used in Financing Activities	(13,242,410)	(12,661,282)
Net Decrease in Cash	3,243,920	(2,132,257)
Cash - Beginning of Period	13,797,857	12,696,536
Cash - End of Period	17,041,777	10,564,279
Cash paid during the period for:
Interest Expense	75,607	180,642
Supplemental Disclosure of Noncash Investing, Operating and Financing Activities
Capital expenditures and construction in process included in accounts payable	$ 187,500	$ 881,703

XML

Summary of Significant Accounting Policies

6 Months Ended

Apr. 30, 2017

Accounting Policies [Abstract]

Summary of Significant Account Policies

1.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Business

Granite Falls Energy, LLC (“GFE”) 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.

Additionally, GFE owns a majority interest in Heron Lake BioEnergy, LLC (“HLBE”). 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. HLBE owns a majority interest in Agrinatural Gas, LLC (“Agrinatural”), which operates a natural gas pipeline that provides natural gas to HLBE's ethanol production facility and other customers. 

All references to “we”, “us”, “our”, and the “Company” collectively refer to GFE and its wholly-owned and majority-owned subsidiaries.

Basis of Presentation and Principles of Consolidation

The condensed consolidated unaudited financial statements as of April 30, 2017, consolidate the operating results and financial position of GFE, and its approximately 50.7% 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 49.3% 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 approximately 73% of 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 approximately 27% noncontrolling interest. All significant intercompany balances and transactions are eliminated in 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, 2016, 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.

Reportable Operating Segments

Accounting Standards Codification (“ASC”) 280, “Segment Reporting,” establishes the standards for reporting information about segments in financial statements. 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. Therefore, in applying the criteria set forth in ASC 280, the Company determined that based on the nature of the products and production process and the expected financial results, the Company’s operations at GFE’s ethanol plant and HLBE’s plant, including the production and sale of ethanol and its co-products, are aggregated into one reporting segment.

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

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 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, which includes 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.

Agrinatural recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the fee for the arrangement is fixed or determinable and collectability is reasonably assured.

Inventory

Inventory is stated at the lower of cost or net realizable value. 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.

Investment

On  November 1, 2016, GFE subscribed to purchase 1,500 capital units of Ringneck Energy & Feed, LLC (“Ringneck”) at a price of $5,000 per unit for a total of $7,500,000.  GFE paid a down payment of $750,000 in connection with the subscription, and signed a promissory note for $6,750,000 for the remaining balance of the subscription. If Ringneck accepts GFE’s subscription, GFE will be required to pay Ringneck the entire amount due under the promissory note within 20 days of receiving notice from Ringneck that it is due. If GFE fails to pay the entire amount due, GFE will be charged 12% interest per year, and Ringneck may seek legal action to force GFE to pay. If Ringneck does not meet certain conditions of its offering or rejects GFE’s subscription, GFE expects that its promissory note will be cancelled and our down payment will be refunded to us.

Ringneck is a South Dakota limited liability company that intends to build an 80 million gallon per year ethanol manufacturing plant in outside of Onida, South Dakota in Sully County. If Ringneck accepts our subscription, our investment is sufficient to secure the Company the right to appoint one director to the board of directors of Ringneck.  

The investment is accounted for by the equity method, under which the Company’s share of the net income of the investee is recognized as income in the Company’s Consolidated Statement of Operations and added to the investment account, and distributions received from the affiliates are treated as a reduction of the investment.

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Risks and Uncertainties

6 Months Ended

Apr. 30, 2017

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 - 90% 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.

The supply and demand for ethanol are impacted by federal and state legislation and regulation, most significantly the Renewable Fuels Standard (“RFS”), and any changes in legislation or regulation could cause the demand for ethanol to decline or its supply to increase, which could have a material adverse effect on our business, results of operations and financial condition, and the ability to operate at a profit.

The supply and demand for ethanol are impacted by federal and state legislation and regulation, most significantly the Renewable Fuels Standard (“RFS”), and any changes in legislation or regulation could cause the demand for ethanol to decline or its supply to increase, which could have a material adverse effect on our business, results of operations and financial condition, and the ability to operate at a profit.

On November 23, 2016, the U.S. Environmental Protection Agency (the “EPA”) announced the final rule for 2017 Renewable Volume Obligation (“RVO”) requirements, which is set at 15.0 billion gallons for corn-based ethanol, which equates to the original requirements set by the RFS. However, in January 2017, the Trump administration imposed a government-wide freeze on new and pending regulations, which included the 2017 RVOs that were originally intended to go into effect on February 10, 2017. On March 20, 2017, following the termination of the Trump administration’s regulatory freeze, the EPA allowed the previously announced 2017 RVOs to go into effect. Additionally, opponents of ethanol such as large oil companies will likely continue their efforts to repeal or reduce the RFS through lawsuits or lobbying of and legislative efforts in Congress. Successful reduction or repeal of the blending requirements of the RFS and/or continued political uncertainty under the new administration regarding the RFS could result in a significant decrease in ethanol demand. If demand for ethanol decreases, it could materially adversely affect our business, results of operations and financial condition.

Ethanol has historically traded at a discount to gasoline. However, any declines in crude oil and unleaded gasoline prices could have a negative impact on the market price of ethanol which could cause ethanol to trade at a premium to gasoline. When ethanol trades at a premium to gasonline, a disincentive for discretionary blending of ethanol beyond the required RFS blend rate results. 

Management anticipates that ethanol prices will continue to change in relation to changes in corn and energy prices. If corn, crude oil and gasoline prices decrease, that could have a negative impact on ethanol pricing and demand, which could result in a material adverse effect on our business, results of operations and financial condition. Further, the ethanol industry is currently experiencing growth in production capacity, largely through plant optimization and expansions versus new construction. If ethanol supply increases at a greater pace compared to ethanol demand, it could result in oversupply and negatively affecting prices unless additional demand can be created.

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Inventory

6 Months Ended

Apr. 30, 2017

Inventory [Abstract]

Inventory

3.   INVENTORY

Inventories consist of the following:

	April 30, 2017		October 31, 2016
	(unaudited)
Raw materials	$	3,443,209	$	9,098,492
Supplies		2,861,629		2,755,958
Work in process		1,378,603		1,347,754
Finished goods		6,308,742		5,139,209
Totals	$	13,992,183	$	18,341,413

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 $0 and $232,000 for the six months ended April 30, 2017 and 2016, respectively.

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Derivative Instruments

6 Months Ended

Apr. 30, 2017

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments and Hedging Activities Disclosure [Text Block]

4.   DERIVATIVE INSTRUMENTS

As of April 30, 2017, the total notional amount of GFE’s outstanding corn derivative instruments was approximately 2,050,000 bushels, comprised of long corn positions on 1,325,000 bushels that were entered into to hedge forecasted ethanol sales through July 2017, and short corn positions on 725,000 bushels that were entered into to hedge forecasted corn purchases through May 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 April 30, 2017, the total notional amount of GFE’s outstanding ethanol derivative instruments was approximately 2,940,000 gallons that were entered into to hedge forecasted ethanol sales through September 2017.

As of April 30, 2017, GFE had approximately $197,000 due to a broker related to margin requirements for commodity derivative instrument positions held by a broker.

As of April 30, 2017, the total notional amount of HLBE’s outstanding corn derivative instruments was approximately 3,315,000 bushels, comprised of long corn positions on 1,200,000 bushels that were entered into to hedge forecasted ethanol sales through July 2017, and short corn positions on 2,115,000 bushels that were entered into to hedge forecasted corn purchases through July 2018. There may be offsetting positions that are not shown on a net basis that could lower the notional amount of positions outstanding.

As of April 30, 2017, the total notional amount of HLBE’s outstanding ethanol derivative instruments was approximately 2,940,000 gallons that were entered into to hedge forecasted ethanol sales through September 2017.

As of April 30, 2017, HLBE maintained approximately $179,000 of cash collateral (restricted cash) and had approximately $218,000 due to broker related to corn derivatives held by a broker.

The following tables provide details regarding the Company's derivative instruments at April 30, 2017, none of which were designated as hedging instruments:

	Consolidated Balance Sheet location	Assets		Liabilities
Corn contracts - GFE	Commodity derivative instruments	$	—	$	7,813
Corn contracts - HLBE	Commodity derivative instruments		60,813		—
Ethanol contracts - GFE	Commodity derivative instruments		146,843		—
Ethanol contracts - HLBE	Commodity derivative instruments		149,780		—
Totals		$	357,436	$	7,813

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

	Consolidated Balance Sheet location	Assets		Liabilities
Corn contracts - GFE	Commodity derivative instruments	$	63,050	$	—
Corn contracts - HLBE	Commodity derivative instruments		388,525		—
Ethanol Contracts - GFE	Commodity derivative instruments		503,538		—
Ethanol Contracts - HLBE	Commodity derivative instruments		273,813		—
Totals		$	1,228,926	$	—

At October 31, 2016, the Company did not have any cash collateral (restricted cash) related to margin requirements for commodity derivative instrument positions held by a broker.

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

	Statement of	Three Months Ended  April 30,				Six Months Ended April 30,
	Operations Location	2017		2016		2017		2016
Corn contracts	Cost of Goods Sold	$	602,490	$	(240,768)	$	545,862	$	(23,370)
Ethanol contracts	Revenues		(689,727)		22,258		(413,470)		104,720
Natural gas contracts	Cost of Goods Sold		—		32,358		—		32,358
Total gain (loss)		$	(87,237)	$	(186,152)	$	132,392	$	113,708

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Fair Value

6 Months Ended

Apr. 30, 2017

Fair Value [Abstract]

Fair Value

5.   FAIR VALUE

The following table provides information on those derivative assets and liabilities measured at fair value on a recurring basis at April 30, 2017:

					Fair Value Measurement Using
	Carrying Amount in				Quoted Prices		Significant Other		Significant
	Consolidated Balance Sheet				in Active Markets		Observable Inputs		Unobservable Inputs
Financial Asset:	April 30, 2017		Fair Value		(Level 1)		(Level 2)		(Level 3)
Commodity Derivative Instruments - Corn	$	60,813	$	60,813	$	60,813	$	—	$	—
Commodity Derivative Instruments - Ethanol	$	296,623	$	296,623	$	37,063	$	259,560	$	—
Financial Liabilities:
Commodity Derivative Instruments - Corn	$	7,813	$	7,813	$	7,813	$	—	$	—

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

					Fair Value Measurement Using
	Carrying Amount in				Quoted Prices		Significant Other		Significant
	Consolidated Balance Sheet				in Active Markets		Observable Inputs		Unobservable Inputs
Financial Asset:	October 31, 2016		Fair Value		(Level 1)		(Level 2)		(Level 3)
Commodity Derivative Instruments - Corn	$	451,575	$	451,575	$	451,575	$	—	$	—
Commodity Derivative Instruments - Ethanol	$	777,351	$	777,351	$	777,351	$	—	$	—

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. We determine the fair value of ethanol Level 2 instruments by model-based techniques in which all significant inputs are observable in the markets noted above.

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Debt Facilities

6 Months Ended

Apr. 30, 2017

Debt Disclosure [Abstract]

Debt Disclosure [Text Block]

6.   DEBT FACILITIES

Debt financing consists of the following:

	April 30, 2017		October 31, 2016
	(unaudited)
GRANITE FALLS ENERGY:
Revolving term loan, see terms below.	$	—	$	—
Term note payable to Fagen Energy, see terms below.		—		—
HERON LAKE BIOENERGY:
Revolving term note payable to lending institution, see terms below.		—		—
Assessment payable as part of water treatment agreement, due in semi-annual installments of $189,393 with interest at 6.55%, enforceable by statutory lien, with the final payment due in 2021. HLBE made deposits for one years' worth of debt service payments of approximately $364,000, which is included with other assets that are held on deposit to be applied with the final payments of the assessment.		1,516,977		1,517,046
Assessment payable as part of water supply agreement, due in monthly installments of $3,942 with interest at 8.73%, enforceable by statutory lien, with the final payment due in 2019.		77,606		97,930
Note payable to electrical company with monthly payments of $6,250 with interest at 0.00% and a 1.00% maintenance fee due each October, due September 2017. The electrical company is a member of HLBE.		31,250		68,750
Note payable to non-controlling interest member of Agrinatural.  Interest is at One Month LIBOR plus 4.0%, which was approximately 5.00% and 4.53% at April 30, 2017 and October 31, 2016, respectively.  The note is considered due on demand with payments due at Agrinatural's Board of Managers' discretion.		100,000		200,000
Totals		1,725,833		1,883,726
Less: amounts due within one year		444,123		490,057
Net long-term debt	$	1,281,710	$	1,393,669

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.  However, the amount available for borrowing by GFE 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 April 30, 2017 and October 31, 2016. Therefore, the aggregate amount available for borrowing by GFE on this facility was $8,000,000 and $10,000,000 at April 30, 2017 and October 31, 2016, respectively.

The interest rate is based on the bank's “One Month LIBOR Index Rate”, plus 3.05%, which equated to 4.05% and 3.25% at April 30, 2017 and October 31, 2016, respectively.

The credit facility also requires GFE to comply with certain financial covenants, including including restriction of the payment of dividends and maintenance of certain financial ratios including minimum working capital and a debt service coverage ratio as defined by the credit facility.  As of April 30, 2017 and October 31, 2016, GFE was in compliance with these financial covenants and expects to be in compliance throughout fiscal 2017. 

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

In connection with GFE’s subscription for investment in Ringneck in November 2016, GFE entered into a credit facility with Fagen Energy which allows GFE to borrow up to $7.5 million of variable-rate, amortizing non-recourse debt from Fagen Energy using the Ringneck investment as collateral. The Fagen Energy loan bears interest from date funds are first advanced on the loan through maturity, at a rate per annum equal to the sum of (x) the One Month LIBOR Index Rate plus (y) 3.05% per annum, with an interest rate floor of 3.55%. 

The Fagen Energy loan  requires annual interest payments only for the first two years of the loan and monthly principal and interest payments for years 3 through 9 based on a 7-year amortization period.  The monthly amortized payments will be re-amortized following any change in interest rate. The entire outstanding principal balance of the loan, plus any accrued and unpaid interest thereon, is due and payable in full on November 1, 2025. GFE is permitted to voluntarily prepay all or any portion of the outstanding balance of this loan at any time without premium or penalty.

Pursuant to a pledge agreement and commercial security agreement entered into in connection with the Fagen Energy loan, GFE’s obligations are secured by all of its right, title, and interest in its investment in Ringneck, including the 1,500 units subscribed for by GFE. The loan is non-recourse to all of GFE’s other assets, meaning that in the event of default, the only remedy available to Fagen Energy will be to foreclose and seize all of GFE’s right, title and interest in its investment in Ringneck. GFE expects to use the proceeds of the loan to finance its balance of its investment in Ringneck.  As of April 30, 2017, there were no amounts outstanding under this credit facility.

Heron Lake BioEnergy:

HLBE has a revolving term note payable with a lender, under which HLBE could initially borrow, repay, and re-borrow in an amount up to $28,000,000 at any time prior to the March 1, 2022 maturity date. However, the amount available for borrowing by HLBE under this facility reduces by by $3,500,000 annually, beginning March 1, 2015 and continuing each anniversary thereafter until maturity.  HLBE had no outstanding balance on the revolving term note payable at April 30, 2017, and October 31, 2016.  Therefore, the aggregate principal amount available for borrowing by HLBE on this facility was $17,500,000 and $21,000,000 at April 30, 2017 and October 31, 2016, 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, which was 4.25% and 3.45% at April 30, 2017, and October 31, 2016, respectively. 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.

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 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, including restriction of the payment of dividends, restrictions on loans and advances to Agrinatural and the 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 April 30, 2017 and October 31, 2016, HLBE was in compliance with these financial covenants and expects to be in compliance throughout fiscal 2017.

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. HLBE agreed to pay CoBank an annual fee of $2,500 as the agent for AgStar.

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 April 30, 2017 and October 31, 2016, there were a total of approximately $1,595,000 and $1,615,000, 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 April 30, 2017, are as follows based on the most recent debt agreements:

2018	$	444,123
2019		322,733
2020		306,706
2021		326,798
2022		325,473
Total debt	$	1,725,833

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Leases

6 Months Ended

Apr. 30, 2017

Leases [Abstract]

Leases

7.   LEASES

GFE leases equipment, primarily rail cars, under operating leases through December 2026. Rent expense for these leases was approximately $747,000 and $812,000 for the three months ended April 30, 2017 and 2016, repectively, and approximately $1,625,000 and $1,706,000 for the six months ended April 30, 2017 and 2016, repectively.

HLBE leases equipment, primarily rail cars, under operating leases through January 2027.  Rent expense for these leases was approximately $438,000 and $710,000 for the three months ended April 30, 2017 and 2016, repectively, and approximately $978,000 and $1,245,000 for the six months ended April 30, 2017 and 2016, repectively

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Members' Equity

6 Months Ended

Apr. 30, 2017

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 April 30, 2017 and October 31, 2016, GFE had 30,606 membership units authorized, issued, and outstanding.

In December 2016, the Board of Governors of GFE declared a cash distribution of $365 per unit or approximately $11,171,000, for unit holders of record as of December 22, 2016.  The distribution was paid in January 2017.

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 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. At December 17, 2015, GFE owned 39,420,949 Class A membership units and 15,000,000 Class B units of HLBE, and received an aggregate distribution from HLBE of $1,971,000.  The remaining $1,926,000 was distributed by HLBE to the non-controlling interest.

In April 2017, GFE purchased 54,875 units of HLBE from noncontrolling unit holders of HLBE at a price of $0.85 per unit for a total purchase price of approximately $47,000.

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Commitments and Contingencies

6 Months Ended

Apr. 30, 2017

Commitments and Contingencies [Abstract]

Commitments and Contingencies

9.   COMMITMENTS AND CONTINGENCIES

Corn Storage and Grain Handling Agreement and Purchase Commitments

GFE has a corn storage and grain handling agreement with Farmers Cooperative Elevator Company (FCE), a member. Under the agreement, GFE agrees to purchase all of the corn needed for the operation of the plant from FCE. The price of the corn purchased will be the bid price the member establishes for the plant plus a set fee per bushel. 

On February 27, 2017, GFE and FCE executed an amendment to the corn storage and grain handling agreement with an effective date of February 21, 2017. Pursuant to the terms of the amendment, the parties agreed to amend their corn storage and grain handling agreement to accelerate the termination date of the agreement to midnight August 31, 2017.  Additionally, GFE may begin posting bids for the purchase of corn beginning June 1, 2017 and thereafter, but may not accept delivery of corn at its Granite Falls, Minnesota plant until September 1, 2017.  In exchange for the early termination, GFE agreed to pay an early termination fee to FCE of approximately $255,000 on or before August 31, 2017, which is included as a component of corn payable to FCE within the condensed consolidated balance sheets at April 30, 2017. Prior to the amendment, the termination date of the corn storage and grain handling agreement was set to expire on November 2017.

At April 30, 2017, GFE had no forward corn contracts.

At April 30, 2017, HBLE had cash and basis contracts for forward corn purchase commitments for approximately 6,653,000 bushels for delivery periods through March 2018.

HLBE Corn Purchases - Members

HLBE purchased corn from board members of approximately $2,569,000 and $2,990,000 for the three months ended April 30, 2017 and 2016, respectively, and approximately $5,594,000 and $8,636,000 for the six months ended April 30, 2017 and 2016, respectively.

Ethanol Contracts

At April 30, 2017, GFE had fixed and basis contracts to sell approximately $14,000,000 of ethanol for various delivery periods through June 2017.

At April 30, 2017, HLBE had fixed and basis contracts to sell approximately $13,810,000 of ethanol for various delivery periods through June 2017.

Distillers' Grain Contracts

At April 30, 2017, GFE had forward contracts to sell approximately $852,000 of distillers' grain for deliveries through May 2017.

At April 30, 2017, HLBE had forward contracts to sell approximately $137,000 of distillers' grains for delivery through May 2017.

Corn Oil

At April 30, 2017, GFE had forward contracts to sell approximately $275,000 of corn oil for delivery through May 2017.

At April 30, 2017, HLBE had forward contracts to sell approximately $379,000 of corn oil for delivery through June 2017.

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Summary of Significant Accounting Policies (Policies)

6 Months Ended

Apr. 30, 2017

Accounting Policies [Abstract]

Nature of Business

Nature of Business

Granite Falls Energy, LLC (“GFE”) 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.

Additionally, GFE owns a majority interest in Heron Lake BioEnergy, LLC (“HLBE”). 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. HLBE owns a majority interest in Agrinatural Gas, LLC (“Agrinatural”), which operates a natural gas pipeline that provides natural gas to HLBE's ethanol production facility and other customers. 

All references to “we”, “us”, “our”, and the “Company” collectively refer to GFE and its wholly-owned and majority-owned subsidiaries.

Basis of Presentation and Significant Accounting Policies

Basis of Presentation and Principles of Consolidation

The condensed consolidated unaudited financial statements as of April 30, 2017, consolidate the operating results and financial position of GFE, and its approximately 50.7% 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 49.3% 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 approximately 73% of 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 approximately 27% noncontrolling interest. All significant intercompany balances and transactions are eliminated in 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, 2016, 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.

Reportable Operating Segments

Reportable Operating Segments

Accounting Standards Codification (“ASC”) 280, “Segment Reporting,” establishes the standards for reporting information about segments in financial statements. 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. Therefore, in applying the criteria set forth in ASC 280, the Company determined that based on the nature of the products and production process and the expected financial results, the Company’s operations at GFE’s ethanol plant and HLBE’s plant, including the production and sale of ethanol and its co-products, are aggregated into one reporting segment.

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

Accounting Estimates

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 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, which includes 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

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.

Agrinatural recognizes revenue when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the fee for the arrangement is fixed or determinable and collectability is reasonably assured.

Derivative Instruments

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.

Investment

On  November 1, 2016, GFE subscribed to purchase 1,500 capital units of Ringneck Energy & Feed, LLC (“Ringneck”) at a price of $5,000 per unit for a total of $7,500,000.  GFE paid a down payment of $750,000 in connection with the subscription, and signed a promissory note for $6,750,000 for the remaining balance of the subscription. If Ringneck accepts GFE’s subscription, GFE will be required to pay Ringneck the entire amount due under the promissory note within 20 days of receiving notice from Ringneck that it is due. If GFE fails to pay the entire amount due, GFE will be charged 12% interest per year, and Ringneck may seek legal action to force GFE to pay. If Ringneck does not meet certain conditions of its offering or rejects GFE’s subscription, GFE expects that its promissory note will be cancelled and our down payment will be refunded to us.

Ringneck is a South Dakota limited liability company that intends to build an 80 million gallon per year ethanol manufacturing plant in outside of Onida, South Dakota in Sully County. If Ringneck accepts our subscription, our investment is sufficient to secure the Company the right to appoint one director to the board of directors of Ringneck.  

The investment is accounted for by the equity method, under which the Company’s share of the net income of the investee is recognized as income in the Company’s Consolidated Statement of Operations and added to the investment account, and distributions received from the affiliates are treated as a reduction of the investment.

Investment

Investment

On  November 1, 2016, GFE subscribed to purchase 1,500 capital units of Ringneck Energy & Feed, LLC (“Ringneck”) at a price of $5,000 per unit for a total of $7,500,000.  GFE paid a down payment of $750,000 in connection with the subscription, and signed a promissory note for $6,750,000 for the remaining balance of the subscription. If Ringneck accepts GFE’s subscription, GFE will be required to pay Ringneck the entire amount due under the promissory note within 20 days of receiving notice from Ringneck that it is due. If GFE fails to pay the entire amount due, GFE will be charged 12% interest per year, and Ringneck may seek legal action to force GFE to pay. If Ringneck does not meet certain conditions of its offering or rejects GFE’s subscription, GFE expects that its promissory note will be cancelled and our down payment will be refunded to us.

Ringneck is a South Dakota limited liability company that intends to build an 80 million gallon per year ethanol manufacturing plant in outside of Onida, South Dakota in Sully County. If Ringneck accepts our subscription, our investment is sufficient to secure the Company the right to appoint one director to the board of directors of Ringneck.  

The investment is accounted for by the equity method, under which the Company’s share of the net income of the investee is recognized as income in the Company’s Consolidated Statement of Operations and added to the investment account, and distributions received from the affiliates are treated as a reduction of the investment.

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Inventory (Tables)

6 Months Ended

Apr. 30, 2017

Inventory in Process [Abstract]

Schedule of Inventory, Current [Table Text Block]

	April 30, 2017		October 31, 2016
	(unaudited)
Raw materials	$	3,443,209	$	9,098,492
Supplies		2,861,629		2,755,958
Work in process		1,378,603		1,347,754
Finished goods		6,308,742		5,139,209
Totals	$	13,992,183	$	18,341,413

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Derivative Instruments (Tables)

6 Months Ended

Apr. 30, 2017

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Schedule of Derivative Instruments in Statement of Financial Position, Fair Value [Table Text Block]

The following tables provide details regarding the Company's derivative instruments at April 30, 2017, none of which were designated as hedging instruments:

	Consolidated Balance Sheet location	Assets		Liabilities
Corn contracts - GFE	Commodity derivative instruments	$	—	$	7,813
Corn contracts - HLBE	Commodity derivative instruments		60,813		—
Ethanol contracts - GFE	Commodity derivative instruments		146,843		—
Ethanol contracts - HLBE	Commodity derivative instruments		149,780		—
Totals		$	357,436	$	7,813

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

	Consolidated Balance Sheet location	Assets		Liabilities
Corn contracts - GFE	Commodity derivative instruments	$	63,050	$	—
Corn contracts - HLBE	Commodity derivative instruments		388,525		—
Ethanol Contracts - GFE	Commodity derivative instruments		503,538		—
Ethanol Contracts - HLBE	Commodity derivative instruments		273,813		—
Totals		$	1,228,926	$	—

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Fair Value (Tables)

6 Months Ended

Apr. 30, 2017

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 assets and liabilities measured at fair value on a recurring basis at April 30, 2017:

					Fair Value Measurement Using
	Carrying Amount in				Quoted Prices		Significant Other		Significant
	Consolidated Balance Sheet				in Active Markets		Observable Inputs		Unobservable Inputs
Financial Asset:	April 30, 2017		Fair Value		(Level 1)		(Level 2)		(Level 3)
Commodity Derivative Instruments - Corn	$	60,813	$	60,813	$	60,813	$	—	$	—
Commodity Derivative Instruments - Ethanol	$	296,623	$	296,623	$	37,063	$	259,560	$	—
Financial Liabilities:
Commodity Derivative Instruments - Corn	$	7,813	$	7,813	$	7,813	$	—	$	—

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

					Fair Value Measurement Using
	Carrying Amount in				Quoted Prices		Significant Other		Significant
	Consolidated Balance Sheet				in Active Markets		Observable Inputs		Unobservable Inputs
Financial Asset:	October 31, 2016		Fair Value		(Level 1)		(Level 2)		(Level 3)
Commodity Derivative Instruments - Corn	$	451,575	$	451,575	$	451,575	$	—	$	—
Commodity Derivative Instruments - Ethanol	$	777,351	$	777,351	$	777,351	$	—	$	—

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Debt Facilities (Tables)

6 Months Ended

Apr. 30, 2017

Debt Disclosure [Abstract]

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

	April 30, 2017		October 31, 2016
	(unaudited)
GRANITE FALLS ENERGY:
Revolving term loan, see terms below.	$	—	$	—
Term note payable to Fagen Energy, see terms below.		—		—
HERON LAKE BIOENERGY:
Revolving term note payable to lending institution, see terms below.		—		—
Assessment payable as part of water treatment agreement, due in semi-annual installments of $189,393 with interest at 6.55%, enforceable by statutory lien, with the final payment due in 2021. HLBE made deposits for one years' worth of debt service payments of approximately $364,000, which is included with other assets that are held on deposit to be applied with the final payments of the assessment.		1,516,977		1,517,046
Assessment payable as part of water supply agreement, due in monthly installments of $3,942 with interest at 8.73%, enforceable by statutory lien, with the final payment due in 2019.		77,606		97,930
Note payable to electrical company with monthly payments of $6,250 with interest at 0.00% and a 1.00% maintenance fee due each October, due September 2017. The electrical company is a member of HLBE.		31,250		68,750
Note payable to non-controlling interest member of Agrinatural.  Interest is at One Month LIBOR plus 4.0%, which was approximately 5.00% and 4.53% at April 30, 2017 and October 31, 2016, respectively.  The note is considered due on demand with payments due at Agrinatural's Board of Managers' discretion.		100,000		200,000
Totals		1,725,833		1,883,726
Less: amounts due within one year		444,123		490,057
Net long-term debt	$	1,281,710	$	1,393,669

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

Estimated annual maturities of debt at April 30, 2017, are as follows based on the most recent debt agreements:

2018	$	444,123
2019		322,733
2020		306,706
2021		326,798
2022		325,473
Total debt	$	1,725,833

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Summary of Significant Accounting Policies (Details) $ / shares in Units, gal in Millions		3 Months Ended	6 Months Ended
	Nov. 01, 2016 USD ($) $ / shares shares	Apr. 30, 2016 gal	Apr. 30, 2017 shares gal
Plant production capacity			60.0
Measurement, Rolling Twelve Months			twelve
Production (Actual)			70.0
Heron Lake BioEnergy, LLC
Plant production capacity			60.0
Production (Actual)			72.3
Equity Method Investment, Ownership Percentage			100.00%
Noncontrolling Interest, Ownership Percentage by Noncontrolling Owners			49.30%
Granite Falls Energy, LLC
Equity Method Investment, Ownership Percentage			50.70%
Agrinatural, LLC [Member]
Equity Method Investment, Ownership Percentage			73.00%
Noncontrolling Interest, Ownership Percentage by Noncontrolling Owners			27.00%
Agrinatural, LLC [Member] | Maximum [Member]
Revenues of subsidiary, percentage			1.00%
Ring-neck Energy & Feed, LLC
Investment
Down payment | $	$ 750,000
Promissory note | $	$ 6,750,000
Period of written notice of creditor for promissory note to become due	20 days
Interest rate if promissory note amount is not paid in full when due	12.00%
Expected ethanol production capacity		80.0
Capital Units [Member] | Ring-neck Energy & Feed, LLC
Investment
Subscribe to purchase capital units, in units | shares	1,500		1,500
Price per unit paid | $ / shares	$ 5,000
Total price | $	$ 7,500,000

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Risks and Uncertainties Narrative (Details) - gal		6 Months Ended
	Nov. 23, 2016	Apr. 30, 2017
UNITED STATES
Concentration Risk [Line Items]
Expected ethanol production capacity	15,000,000,000
Minimum [Member]
Concentration Risk [Line Items]
Sales Revenue, Goods, Net, Percentage		75.00%
Minimum [Member] | Corn Contracts
Concentration Risk [Line Items]
Percent of Cost of Goods Sold		65.00%
Maximum [Member]
Concentration Risk [Line Items]
Sales Revenue, Goods, Net, Percentage		90.00%
Percent of Cost of Goods Sold		85.00%

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Inventory (Details) - USD ($)	6 Months Ended
	Apr. 30, 2017	Apr. 30, 2016	Oct. 31, 2016
Inventory [Abstract]
Raw materials	$ 3,443,209		$ 9,098,492
Supplies	2,861,629		2,755,958
Work in process	1,378,603		1,347,754
Finished goods	6,308,742		5,139,209
Total inventory, net	13,992,183		$ 18,341,413
Loss on ethanol inventories	$ 0	$ 232,000

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Derivative Instruments - Assets And Liabilities (Details)	6 Months Ended
	Apr. 30, 2017 USD ($) bu gal	Oct. 31, 2016 USD ($)
Derivatives, Fair Value [Line Items]
Cash collateral (restricted cash)	$ 178,766
Derivative Assets, Current	357,436	$ 1,228,926
Derivative Liabilities, Current	$ 7,813
Corn Contracts
Derivatives, Fair Value [Line Items]
Total nonmonetary notional amount outstanding | bu	2,050,000
Corn Contracts | Long position
Derivatives, Fair Value [Line Items]
Total nonmonetary notional amount outstanding | bu	1,325,000
Corn Contracts | Short position
Derivatives, Fair Value [Line Items]
Total nonmonetary notional amount outstanding | bu	725,000
Ethanol Contracts
Derivatives, Fair Value [Line Items]
Total nonmonetary notional amount outstanding | gal	2,940,000
Granite Falls Energy, LLC
Derivatives, Fair Value [Line Items]
Due to a broker related to margin requirements	$ 197,000
Heron Lake BioEnergy, LLC
Derivatives, Fair Value [Line Items]
Due to a broker related to margin requirements	218,000
Cash collateral (restricted cash)	$ 179,000
Heron Lake BioEnergy, LLC | Corn Contracts
Derivatives, Fair Value [Line Items]
Total nonmonetary notional amount outstanding | bu	3,315,000
Heron Lake BioEnergy, LLC | Corn Contracts | Long position
Derivatives, Fair Value [Line Items]
Total nonmonetary notional amount outstanding | bu	1,200,000
Heron Lake BioEnergy, LLC | Corn Contracts | Short position
Derivatives, Fair Value [Line Items]
Total nonmonetary notional amount outstanding | bu	2,115,000
Heron Lake BioEnergy, LLC | Ethanol Contracts
Derivatives, Fair Value [Line Items]
Total nonmonetary notional amount outstanding | gal	2,940,000
Not Designated as Hedging Instruments
Derivatives, Fair Value [Line Items]
Derivative Assets, Current	$ 357,436	1,228,926
Derivative Liabilities, Current	7,813
Not Designated as Hedging Instruments | Granite Falls Energy, LLC | Corn Contracts
Derivatives, Fair Value [Line Items]
Derivative Assets, Current		63,050
Derivative Liabilities, Current	7,813
Not Designated as Hedging Instruments | Granite Falls Energy, LLC | Ethanol Contracts
Derivatives, Fair Value [Line Items]
Derivative Assets, Current	146,843	503,538
Not Designated as Hedging Instruments | Heron Lake BioEnergy, LLC | Corn Contracts
Derivatives, Fair Value [Line Items]
Derivative Assets, Current	60,813	388,525
Not Designated as Hedging Instruments | Heron Lake BioEnergy, LLC | Ethanol Contracts
Derivatives, Fair Value [Line Items]
Derivative Assets, Current	$ 149,780	$ 273,813

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Derivative Instrument - Income Statement (Details) - Not Designated as Hedging Instruments - USD ($)	3 Months Ended		6 Months Ended
	Apr. 30, 2017	Apr. 30, 2016	Apr. 30, 2017	Apr. 30, 2016
Derivative Instruments, Gain (Loss) [Line Items]
Derivative Instruments, Gain (Loss) Recognized in Income, Net	$ (87,237)	$ (186,152)	$ 132,392	$ 113,708
Cost of Sales [Member] | Corn Contracts
Derivative Instruments, Gain (Loss) [Line Items]
Derivative Instruments, Gain (Loss) Recognized in Income, Net	602,490	(240,768)	545,862	(23,370)
Cost of Sales [Member] | Natural Gas Contracts [Member]
Derivative Instruments, Gain (Loss) [Line Items]
Derivative Instruments, Gain (Loss) Recognized in Income, Net		32,358		32,358
Sales [Member] | Ethanol Contracts
Derivative Instruments, Gain (Loss) [Line Items]
Derivative Instruments, Gain (Loss) Recognized in Income, Net	$ (689,727)	$ 22,258	$ (413,470)	$ 104,720

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Fair Value (Details) - Fair Value, Measurements, Recurring - USD ($)	Apr. 30, 2017	Oct. 31, 2016
Corn Contracts | Carrying (Reported) Amount, Fair Value Disclosure
Derivative [Line Items]
Derivative Asset	$ 60,813	$ 451,575
Derivative Liabilities	7,813
Corn Contracts | Estimate of Fair Value Measurement
Derivative [Line Items]
Derivative Asset	60,813	451,575
Derivative Liabilities	7,813
Corn Contracts | Fair Value, Inputs, Level 1
Derivative [Line Items]
Derivative Asset	60,813	451,575
Derivative Liabilities	7,813
Ethanol Contracts | Carrying (Reported) Amount, Fair Value Disclosure
Derivative [Line Items]
Derivative Asset	296,623	777,351
Ethanol Contracts | Estimate of Fair Value Measurement
Derivative [Line Items]
Derivative Asset	296,623	777,351
Ethanol Contracts | Fair Value, Inputs, Level 1
Derivative [Line Items]
Derivative Asset	37,063	$ 777,351
Ethanol Contracts | Fair Value, Inputs, Level 2
Derivative [Line Items]
Derivative Asset	$ 259,560

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Debt Facilities - Granite Falls Energy And Heron Lake BioEnergy (Details) - USD ($)		6 Months Ended	12 Months Ended
	Nov. 01, 2016	Apr. 30, 2017	Oct. 31, 2016
Line of Credit Facility [Line Items]
Long-term Debt		$ 1,725,833
Less: amounts due within one year		444,123	$ 490,057
Net long term debt		$ 1,281,710	1,393,669
Assessments payable as part of water supply agreement, with interest at 8.73%, due in 2019
Line of Credit Facility [Line Items]
Debt Instrument, Interest Rate, Stated Percentage		8.73%
Semi-annual payment		$ 3,942
Note payable to electrical company, due September 2017
Line of Credit Facility [Line Items]
Debt Instrument, Interest Rate, Stated Percentage		0.00%
Maintenance fee (as a percent)		1.00%
Monthly payment		$ 6,250
Note payable to noncontrolling interest member of Agrinatural, Interest One Month LIBOR plus 4.0 %
Line of Credit Facility [Line Items]
Debt Instrument, Interest Rate, Stated Percentage		4.00%
Heron Lake BioEnergy, LLC
Line of Credit Facility [Line Items]
Long-term Debt		$ 1,725,833	1,883,726
Less: amounts due within one year		444,123	490,057
Net long term debt		1,281,710	1,393,669
Heron Lake BioEnergy, LLC | City/County Jurisdiction [Member]
Line of Credit Facility [Line Items]
Line of Credit Facility, Amount Outstanding		1,595,000	1,615,000
Heron Lake BioEnergy, LLC | Revolving Term Loan
Line of Credit Facility [Line Items]
Line of Credit Facility, Amount Outstanding		0	0
Line of Credit Facility, Remaining Borrowing Capacity		17,500,000	$ 21,000,000
Debt Instrument, Fee Amount		2,500
Long-term Debt		$ 28,000,000
Heron Lake BioEnergy, LLC | Revolving Term Loan | CoBank [Member]
Line of Credit Facility [Line Items]
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		4.25%	3.45%
Heron Lake BioEnergy, LLC | Water Treatment Plant [Member] | City/County Jurisdiction [Member]
Line of Credit Facility [Line Items]
Line of Credit Facility, Maximum Borrowing Capacity		$ 3,600,000
Debt Instrument, Face Amount		$ 735,000
Heron Lake BioEnergy, LLC | Assessments payable as part of water treatment agreement, with interest at 6.55%, due in 2021
Line of Credit Facility [Line Items]
Debt Instrument, Interest Rate, Stated Percentage		6.55%
Long-term Debt		$ 1,516,977	$ 1,517,046
Semi-annual payment		$ 189,393
Period of worth of debt		1 year
Deposit on debt service payments		$ 364,000
Ring-neck Energy & Feed, LLC
Line of Credit Facility [Line Items]
Down payment	$ 750,000
Granite Falls Energy, LLC
Line of Credit Facility [Line Items]
Line of Credit Future Reduction, Amount		2,000,000
Granite Falls Energy, LLC | Revolving Term Loan
Line of Credit Facility [Line Items]
Line of Credit Facility, Amount Outstanding		0	0
Line of Credit Facility, Maximum Borrowing Capacity		18,000,000
Line of Credit Facility, Remaining Borrowing Capacity		$ 8,000,000	10,000,000
Debt Instrument, Covenant Description		The credit facility is secured by substantially all assets of GFE. There are no savings account balance collateral requirements as part of this credit facility.
Heron Lake BioEnergy, LLC | Revolving Term Loan
Line of Credit Facility [Line Items]
Line of Credit Future Reduction, Amount		$ 3,500,000
Heron Lake BioEnergy, LLC | Assessments payable as part of water supply agreement, with interest at 8.73%, due in 2019
Line of Credit Facility [Line Items]
Long-term Debt		77,606	97,930
Heron Lake BioEnergy, LLC | Note payable to electrical company, due September 2017
Line of Credit Facility [Line Items]
Long-term Debt		31,250	68,750
Heron Lake BioEnergy, LLC | Note payable to noncontrolling interest member of Agrinatural, Interest One Month LIBOR plus 4.0 %
Line of Credit Facility [Line Items]
Long-term Debt		$ 100,000	$ 200,000
Minimum [Member] | Heron Lake BioEnergy, LLC | Water Treatment Plant [Member] | City/County Jurisdiction [Member]
Line of Credit Facility [Line Items]
Debt Instrument, Interest Rate, Stated Percentage		0.50%
Maximum [Member] | Heron Lake BioEnergy, LLC | City/County Jurisdiction [Member]
Line of Credit Facility [Line Items]
Debt Instrument, Interest Rate, Stated Percentage		8.73%
Maximum [Member] | Granite Falls Energy, LLC
Line of Credit Facility [Line Items]
Debt Instrument, Interest Rate, Effective Percentage		4.05%	3.25%
Debt Instrument, Basis Spread on Variable Rate		3.05%
Fagen Energy, LLC Credit Facility [Member]
Line of Credit Facility [Line Items]
Line of Credit Facility, Amount Outstanding		$ 0
Down payment		$ 7,500,000
Maximum period of interest payments		2 years
Debt instrument amortization period after first two years		7 years
Credit facility terms		The Fagen Energy loan  requires annual interest payments only for the first two years of the loan and monthly principal and interest payments for years 3 through 9 based on a 7-year amortization period.  The monthly amortized payments will be re-amortized following any change in interest rate. The entire outstanding principal balance of the loan, plus any accrued and unpaid interest thereon, is due and payable in full on November 1, 2025. GFE is permitted to voluntarily prepay all or any portion of the outstanding balance of this loan at any time without premium or penalty.
LIBOR [Member] | Fagen Energy, LLC Credit Facility [Member]
Line of Credit Facility [Line Items]
Debt instrument, period of moving average on variable rate		1 month
Debt Instrument, Basis Spread on Variable Rate		3.05%
LIBOR [Member] | Fagen Energy, LLC Credit Facility [Member] | Minimum [Member]
Line of Credit Facility [Line Items]
Debt Instrument, Interest Rate, Stated Percentage		3.55%
Capital Units [Member] | Ring-neck Energy & Feed, LLC
Line of Credit Facility [Line Items]
Subsidiary or Equity Method Investee, Cumulative Number of Shares Issued for All Transactions	1,500	1,500

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Debt Facilities - Estimated Annual Maturities (Details)	Apr. 30, 2017 USD ($)
Debt Disclosure [Abstract]
Long-term Debt, Maturities, Repayments of Principal in Next Rolling Twelve Months	$ 444,123
Long-term Debt, Maturities, Repayments of Principal in Rolling Year Two	322,733
Long-term Debt, Maturities, Repayments of Principal in Rolling Year Three	306,706
Long-term Debt, Maturities, Repayments of Principal in Rolling Year Four	326,798
Long-term Debt, Maturities, Repayments of Principal in Rolling Year Five	325,473
Long-term Debt	$ 1,725,833

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Leases (Details) - USD ($)	6 Months Ended
	Apr. 30, 2017	Apr. 30, 2016
Granite Falls Energy, LLC | Rail Cars [Member]
Operating Leases, Rent Expense	$ 747,000	$ 812,000
Heron Lake BioEnergy, LLC
Operating Leases, Rent Expense	$ 438,000	$ 710,000

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Members' Equity (Details) - USD ($)		1 Months Ended			6 Months Ended		12 Months Ended
	Dec. 17, 2015	Apr. 30, 2017	Jan. 31, 2017	Jan. 31, 2016	Apr. 30, 2017	Apr. 30, 2016	Oct. 31, 2016
Common Stock, Shares Authorized		30,606			30,606		30,606
Common Units Issued		30,606			30,606		30,606
Membership Units, Outstanding		30,606			30,606		30,606
Distribution Made to Member or Limited Partner, Cash Distributions Paid					$ 11,171,190	$ 9,640,887
Granite Falls Energy, LLC
Distribution Made to Membership, Cash Distribution Paid per Unit				$ 315	$ 365
Distribution Made to Member or Limited Partner, Cash Distributions Paid			$ 11,171,000				$ 9,641,000
Heron Lake BioEnergy, LLC
Distribution Made to Member or Limited Partner, Cash Distributions Paid				$ 3,897,000
Distributions received	$ 1,971,000
Distribution Made to Limited Liability Company (LLC) Member, Distributions Paid, Per Unit				$ 0.05
Units purchased		54,875
Price per unit		$ 0.85			$ 0.85
Total purchase price		$ 47,000
Heron Lake BioEnergy, LLC | Noncontrolling Interest [Member]
Distribution Made to Member or Limited Partner, Cash Distributions Paid	$ 1,926,000			$ 2,007,000
Heron Lake BioEnergy, LLC | Capital Unit, Class A [Member]
Common Units Issued	39,420,949
Heron Lake BioEnergy, LLC | Capital Unit, Class B [Member]
Common Units Issued	15,000,000

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Commitments and Contingencies (Details)	3 Months Ended		6 Months Ended
	Apr. 30, 2017 USD ($) contract	Apr. 30, 2016 USD ($)	Apr. 30, 2017 USD ($) contract bu	Apr. 30, 2016 USD ($)
Distillers' Grains [Member]
Purchase Commitment, Excluding Long-term Commitment [Line Items]
Future Commitment, Dollar			$ 852,000
Granite Falls Energy, LLC
Purchase Commitment, Excluding Long-term Commitment [Line Items]
Early termination fee payable	$ 255,000		$ 255,000
Granite Falls Energy, LLC | Corn Contracts
Purchase Commitment, Excluding Long-term Commitment [Line Items]
Number of derivative contracts | contract	0		0
Granite Falls Energy, LLC | Corn Contracts | Board Members
Purchase Commitment, Excluding Long-term Commitment [Line Items]
Amount of corn purchased	$ 2,569,000	$ 2,990,000	$ 5,594,000	$ 8,636,000
Granite Falls Energy, LLC | Corn Oil [Member]
Purchase Commitment, Excluding Long-term Commitment [Line Items]
Future Commitment, Dollar			275,000
Granite Falls Energy, LLC | Ethanol Contracts
Purchase Commitment, Excluding Long-term Commitment [Line Items]
Future Commitment, Dollar			$ 14,000,000
Heron Lake BioEnergy, LLC | Corn Contracts
Purchase Commitment, Excluding Long-term Commitment [Line Items]
Inventory, Outside storage | bu			6,653,000
Heron Lake BioEnergy, LLC | Corn Oil [Member]
Purchase Commitment, Excluding Long-term Commitment [Line Items]
Future Commitment, Dollar			$ 379,000
Heron Lake BioEnergy, LLC | Ethanol Contracts
Purchase Commitment, Excluding Long-term Commitment [Line Items]
Future Commitment, Dollar			13,810,000
Heron Lake BioEnergy, LLC | Distillers' Grains [Member]
Purchase Commitment, Excluding Long-term Commitment [Line Items]
Future Commitment, Dollar			$ 137,000