10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended July 31, 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 September 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	18
Item 3. Quantitative and Qualitative Disclosures about Market Risk	40
Item 4. Controls and Procedures	42
PART I. OTHER INFORMATION	42
Item 1. Legal Proceedings	42
Item 1A. Risk Factors	43
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	44
Item 3. Defaults Upon Senior Securities	44
Item 4. Mine Safety Disclosures	44
Item 5. Other Information	44
Item 6. Exhibits	45
SIGNATURES	45

2

PART IFINANCIAL INFORMATION

Item 1.  Financial Statements

GRANITE FALLS ENERGY, LLC AND SUBSIDIARIES

Condensed Consolidated Balance Sheets

	July 31, 2017		October 31, 2016
ASSETS	(unaudited)
Current Assets
Cash	$	20,375,684	$	13,797,857
Restricted cash		144,345		—
Accounts receivable		2,187,964		6,654,994
Inventory		12,898,923		18,341,413
Commodity derivative instruments		311,382		1,228,926
Prepaid expenses and other current assets		565,715		325,989
Total current assets		36,484,013		40,349,179
Property and Equipment, net		73,711,995		78,968,016
Goodwill		1,372,473		1,372,473
Investment Deposit		750,000		—
Other Assets		752,643		781,254
Total Assets	$	113,071,124	$	121,470,922
LIABILITIES AND MEMBERS' EQUITY
Current Liabilities
Current maturities of long-term debt	$	436,341	$	490,057
Checks drawn in excess of bank balance		—		1,866,683
Accounts payable		4,403,666		5,624,840
Corn payable to FCE		1,368,098		5,358,111
Accrued expenses		544,588		997,319
Total current liabilities		6,752,693		14,337,010
Long-Term Debt, less current portion		1,122,391		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 July 31, 2017 and October 31, 2016		80,570,226		83,684,529
Non-controlling interest		24,625,814		22,055,714
Total members' equity		105,196,040		105,740,243
Total Liabilities and Members' Equity	$	113,071,124	$	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 July 31,				Nine Months Ended July 31,
	2017		2016		2017		2016
	(unaudited)		(unaudited)		(unaudited)		(unaudited)
Revenues	$	54,250,994	$	58,018,553	$	161,629,116	$	159,994,605
Cost of Goods Sold		50,047,853		51,716,678		146,624,568		149,986,152
Gross Profit		4,203,141		6,301,875		15,004,548		10,008,453
Operating Expenses		1,463,014		1,284,016		4,654,769		4,174,358
Operating Income		2,740,127		5,017,859		10,349,779		5,834,095
Other Income (Expense):
Other income, net		51,660		2,962		462,533		101,769
Interest income		16,730		1,848		23,614		6,384
Interest expense		(86,688)		(152,403)		(162,295)		(333,045)
Total other income (expense), net		(18,298)		(147,593)		323,852		(224,892)
Net Income	$	2,721,829	$	4,870,266	$	10,673,631	$	5,609,203
Less: Net Income Attributable to Non-controlling Interest		(672,208)		(1,377,444)		(2,616,744)		(1,405,337)
Net Income Attributable to Granite Falls Energy, LLC	$	2,049,621	$	3,492,822	$	8,056,887	$	4,203,866
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	$	66.97	$	114.12	$	263.25	$	137.35
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

	Nine Months Ended July 31,
	2017		2016
	(unaudited)		(unaudited)
Cash Flows from Operating Activities:
Net income	$	10,673,631	$	5,609,203
Adjustments to reconcile net income to net cash provided by operations:
Depreciation and amortization		7,094,707		7,212,835
Change in fair value of commodity derivative instruments		(461,723)		716
Gain on sale of assets		(95,300)		—
Changes in operating assets and liabilities:
Restricted cash		(144,345)		(1,800,483)
Commodity derivative instruments		1,379,267		1,537,986
Accounts recievable		4,467,030		2,747,632
Inventory		5,442,490		1,449,015
Prepaid expenses and other current assets		(239,726)		(191,716)
Accounts payable		(5,299,721)		(1,630,272)
Accrued expenses		(452,731)		(8,830)
Net Cash Provided by Operating Activities		22,363,579		14,926,086
Cash Flows from Investing Activities:
Payment for investment deposit		(750,000)		—
Payments for capital expenditures		(1,721,541)		(4,238,444)
Proceeds from disposal of assets		95,300		—
Net Cash Used in Investing Activities		(2,376,241)		(4,238,444)
Cash Flows from Financing Activities:
Proceeds from long-term debt		—		9,820,223
Payments on long-term debt		(324,994)		(9,860,232)
Payments on checks drawn in excess of bank balance		(1,866,683)		(347,235)
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		(13,409,511)		(12,034,689)
Net Increase (Decrease) in Cash		6,577,827		(1,347,047)
Cash - Beginning of Period		13,797,857		12,696,536
Cash - End of Period	$	20,375,684	$	11,349,489
Supplemental Cash Flow Information
Cash paid during the period for:
Interest expense	$	162,295	$	333,045
Supplemental Disclosure of Noncash Investing and Financing Activities
Capital expenditures and construction in process included in accounts payable	$	88,534	$	154,169

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

5

Granite Falls Energy, LLC and Subsidiaries

Notes to Condensed Consolidated Unaudited Financial Statements

July 31, 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 July 31, 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 (“SEC”). 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

July 31, 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

July 31, 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. By letter dated July 12, 2017, GFE was notified of Ringneck’s acceptance of GFE’s subscription and that payment of the balance of GFE’s subscription due under the promissory note was due not later than August 2, 2017.  Subsequent to the end of the third fiscal quarter, on August 2, 2017, GFE borrowed $7.5 million under its credit facility with Project Hawkeye, LLC (“Project Hawkeye”), an affiliate of Fagen, Inc., which is a member of GFE, and paid $6,750,000 to Ringneck as payment of the remaining balance of GFE’s subscription.  See Note 6 below for the terms of GFE’s credit facility with Project Hawkeye.

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. GFE’s investment is sufficient to secure the

8

Granite Falls Energy, LLC and Subsidiaries

Notes to Condensed Consolidated Unaudited Financial Statements

July 31, 2017

Company the right to appoint one director to the board of directors of Ringneck and GFE has appointed Steve Christensen, its CEO to serve as its appointed director.  

The investment will be 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. Market fluctuations in the price of and demand for these products may have a significant adverse effect on the Company’s operations, profitability and the availability and adequacy of cash flow to meet the Company’s working capital requirements.

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.  On March 20, 2017, the previously announced 2017 RVOs went into effect.

On July 5, 2017, the EPA announced the proposed rule for 2018 RVOs, which maintains the number of gallons that may be met by corn-based ethanol at 15.0 billion gallons. However, the total 2018 annual volume requirement for renewable fuel in the proposed 2018 rule is set at 19.24 billion gallons of renewable fuels, significantly below the 26 billion gallons statutorily mandated for 2018. According to the RFS, if mandatory renewable fuel volumes are reduced by at least 20% for two consecutive years, the EPA is required to modify, or reset, statutory volumes through 2022. With the 2018 being the first year the total proposed RVOs are more than 20% below statutory levels, the EPA administrator has directed  EPA staff to initiate the required technical analysis to inform a reset rule. If 2019 RVOs are also more than 20% below statutory levels, an RVO reset will be triggered under the RFS. This will require the EPA to modify statutory volumes through 2022 within one year of the trigger event, with the standard for review based on the same factors to be utilized when the EPA sets RVOs post-2022.

9

Granite Falls Energy, LLC and Subsidiaries

Notes to Condensed Consolidated Unaudited Financial Statements

July 31, 2017

Beginning in January 2016, various ethanol and agricultural industry groups petitioned a federal appeals court to hear a legal challenge to of the EPA’s decision to reduce the total renewable fuel volume requirements for 2016 through use of its “inadequate domestic supply” waiver authority. On July 28, 2017, the U.S. Court of Appeals for the D.C. Circuit ruled in favor of the petitioners, concluding the EPA erred in its exercise of  “inadequate domestic supply” waiver authority by considering demand-side constraints. As a result, the Court vacated the EPA’s decision to reduce the total renewable fuel volume requirements for 2016, and remanded to the EPA to address the 2016 total renewable fuels volume requirements. While management believes the decision should benefit the ethanol industry overall by clarifying the EPA's waiver analysis is limited to consideration of  supply-side factors only, no direct impact on the Company is expected from the decision.

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 gasoline, 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.

3.   INVENTORY

Inventories consist of the following:

	July 31, 2017		October 31, 2016
	(unaudited)
Raw materials	$	2,351,698	$	9,098,492
Supplies		2,768,156		2,755,958
Work in process		1,303,901		1,347,754
Finished goods		6,475,168		5,139,209
Totals	$	12,898,923	$	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 $65,000 and $108,000 for the nine months ended July 31, 2017 and 2016, respectively.

4.   DERIVATIVE INSTRUMENTS

As of July 31, 2017, the total notional amount of GFE’s outstanding corn derivative instruments was approximately 3,760,000 bushels, comprised of long corn positions on 2,000,000 bushels that were entered into to hedge forecasted ethanol sales through September 2017, and short corn positions on 1,760,000 bushels that were entered into to hedge forecasted corn purchases through December 2018. There may be offsetting positions that are not shown on a net basis that could lower the notional amount of positions outstanding as disclosed above. 

As of July 31, 2017, the total notional amount of GFE’s outstanding ethanol derivative instruments was approximately 1,260,000 gallons that were entered into to hedge forecasted ethanol sales through September 2017.

As of July 31, 2017, GFE had no restriced cash and approximately $95,000 due to a broker related to corn derivatives held by a broker.

10

Granite Falls Energy, LLC and Subsidiaries

Notes to Condensed Consolidated Unaudited Financial Statements

July 31, 2017

As of July 31, 2017, the total notional amount of HLBE’s outstanding corn derivative instruments was approximately 4,800,000 bushels, comprised of long corn positions on 2,000,000 bushels that were entered into to hedge forecasted ethanol sales through September 2017, and short corn positions on 2,800,000 bushels that were entered into to hedge forecasted corn purchases through December 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 July 31, 2017, the total notional amount of HLBE’s outstanding ethanol derivative instruments was approximately 1,260,000 gallons that were entered into to hedge forecasted ethanol sales through September 2017.

As of July 31, 2017,  HLBE had approximately $144,000 of cash collateral (restricted cash) and approximately $95,000 due to broker related to corn derivatives held by a broker.

The following tables provide details regarding the Company's derivative instruments at July 31, 2017, none of which were designated as hedging instruments:

	Consolidated Balance Sheet location	Assets		Liabilities
Corn contracts - GFE	Commodity derivative instruments	$	104,875	$	—
Corn contracts - HLBE	Commodity derivative instruments		104,275		—
Ethanol contracts - GFE	Commodity derivative instruments		51,116		—
Ethanol contracts - HLBE	Commodity derivative instruments		51,116		—
Totals		$	311,382	$	—

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  July 31,				Nine Months Ended July 31,
	Operations Location	2017		2016		2017		2016
Corn contracts	Cost of Goods Sold	$	287,865	$	1,261,468	$	857,218	$	1,238,098
Ethanol contracts	Revenues		(122,765)		(1,375,892)		(395,495)		(1,271,172)
Natural gas contracts	Cost of Goods Sold		—		—		—		32,358
Total gain (loss)		$	165,100	$	(114,424)	$	461,723	$	(716)

11

Granite Falls Energy, LLC and Subsidiaries

Notes to Condensed Consolidated Unaudited Financial Statements

July 31, 2017

5.   FAIR VALUE

The following table provides information on those derivative assets and liabilities measured at fair value on a recurring basis at July 31, 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:	July 31, 2017		Fair Value		(Level 1)		(Level 2)		(Level 3)
Commodity Derivative Instruments - Corn	$	209,150	$	209,150	$	209,150	$	—	$	—
Commodity Derivative Instruments - Ethanol	$	102,232	$	102,232	$	—	$	102,232	$	—

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.

12

Granite Falls Energy, LLC and Subsidiaries

Notes to Condensed Consolidated Unaudited Financial Statements

July 31, 2017

6.   DEBT FACILITIES

Debt financing consists of the following:

	July 31, 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.		1,379,074		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.		67,158		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.		12,500		68,750
Note payable to non-controlling interest member of Agrinatural.  Interest is at One Month LIBOR plus 4.0%, which was approximately 5.23% and 4.53% at July 31, 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		1,558,732		1,883,726
Less: amounts due within one year		436,341		490,057
Net long-term debt	$	1,122,391	$	1,393,669

13

Granite Falls Energy, LLC and Subsidiaries

Notes to Condensed Consolidated Unaudited Financial Statements

July 31, 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 July 31, 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 July 31, 2017 and October 31, 2016. The amount available for borrowing under this facility was further reduced at September 1, 2017 to $6,000,000.

The interest rate is based on the bank's One Month London Interbank Offered Rate (“LIBOR”) Index Rate, plus 3.05%, which equated to 4.28% and 3.25% at July 31, 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.

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, LLC (“Fagen Energy”), an affiliate of Fagen, Inc., which is a member of GFE. The Fagen Energy credit facility would have allowed GFE to borrow up to $7.5 million of variable-rate, amortizing non-recourse debt from Fagen Energy using the Ringneck investment as collateral. Subsequent to the end of the third fiscal quarter, on August 2, 2017, GFE executed a termination and replacement agreement with Fagen Energy and Project Hawkeye, also an affiliate of Fagen, Inc., to terminate the Fagen Energy credit facility and the loan agreements entered into in conection with the Fagen Energy credit facility, and secure a replacement credit facility with Project Hawkeye on substantially the same as the terms under the terminated credit facility with Fagen Energy. On August 2, 2017, the Fagen Energy credit facility was terminated and there were no amounts outstanding at termination. 

On August 2, 2017, simultaneously with the termination of the Fagen Energy credit facility, GFE entered into a replacement credit facility with Project Hawkeye. The terms of the replacement credit facility allow GFE to borrow up to $7.5 million of variable-rate, amortizing non-recourse debt from Project Hawkeye using the Ringneck investment as collateral.  The Project Hawkeye 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 Project Hawkeye 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 August 2, 2026. 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 entered into in connection with the Project Hawkeye 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 Project Hawkeye will be to foreclose and seize all of GFE’s right, title and interest in its investment in Ringneck.

As of July 31, 2017, there were no amounts outstanding under this credit facility.  Subsequent to the end of the third fiscal quarter, on August 2, 2017, GFE borrowed $7.5 million under the Project Hawkeye credit facility to finance the balance of its investment in Ringneck.

14

Granite Falls Energy, LLC and Subsidiaries

Notes to Condensed Consolidated Unaudited Financial Statements

July 31, 2017

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 July 31, 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 July 31, 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 LIBOR Index rate, which was 4.48% and 3.45% at July 31, 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 part of the credit facility closing, HLBE entered into an Administrative Agency Agreement with CoBank, ACP (“CoBank”).  CoBank purchased a participation interest in the revolving term loan and was appointed the administrative agent for the purpose of servicing the loan.  As a result, CoBank will act as the agent for lender with respect to the credit facility. HLBE agreed to pay CoBank an annual fee of $2,500 for its services as administrative agent.

Estimated annual maturities of debt at July 31, 2017, are as follows based on the most recent debt agreements:

2018	$	436,341
2019		322,319
2020		318,253
2021		339,097
2022		142,722
Total debt	$	1,558,732

7.   LEASES

GFE leases equipment, primarily rail cars, under operating leases through December 2026. Rent expense for these leases was approximately $770,000 and $804,000 for the three months ended July 31, 2017 and 2016, repectively, and approximately $2,395,000 and $2,510,000 for the nine months ended July 31, 2017 and 2016, repectively.

HLBE leases equipment, primarily rail cars, under operating leases through January 2027.  Rent expense for these leases was approximately $619,000 and $686,000 for the three months ended July 31, 2017 and 2016, repectively, and approximately $1,597,000 and $1,931,000 for the nine months ended July 31, 2017 and 2016, repectively

8.   MEMBERS' EQUITY

GFE has one class of membership units.   The units have no par value and have identical rights, obligations and privileges.  Income and losses are allocated to all members based upon their respective percentage of units held. As of July 31, 2017 and October 31, 2016, GFE had 30,606 membership units authorized, issued, and outstanding.

15

Granite Falls Energy, LLC and Subsidiaries

Notes to Condensed Consolidated Unaudited Financial Statements

July 31, 2017

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 had a corn storage and grain handling agreement with Farmers Cooperative Elevator Company (FCE), a member. Under the agreement, GFE previously agreed to purchase all of the corn needed for the operation of the plant from FCE. The price of the corn purchased was 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 began 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.  Subsequent to the end of third fiscal quarter, in exchange for the early termination, GFE paid an early termination fee to FCE of approximately $255,000, which was included as a component of corn payable to FCE within the condensed consolidated balance sheets at July 31, 2017. Prior to the amendment, the termination date of the corn storage and grain handling agreement was set to expire on November 2017.

At July 31, 2017, GFE had cash and basis contracts for forward corn contracts for approximately 3,049,000 bushels for delivery periods through December 2017.

At July 31, 2017,  HLBE had cash and basis contracts for forward corn purchase commitments for approximately 3,607,000 bushels for delivery periods through July 2018.

HLBE Corn Purchases - Members

HLBE purchased corn from board members of approximately $143,000 and $4,119,000 for the three months ended July 31, 2017 and 2016, respectively, and approximately $5,737,000 and $12,755,000 for the nine months ended July 31, 2017 and 2016, respectively.

Ethanol Contracts

At July 31, 2017, GFE had fixed and basis contracts to sell approximately $12,760,000 of ethanol for various delivery periods through September 2017.  

At July 31, 2017, HLBE had fixed and basis contracts to sell approximately $12,528,000 of ethanol for various delivery periods through September 2017.  

16

Granite Falls Energy, LLC and Subsidiaries

Notes to Condensed Consolidated Unaudited Financial Statements

July 31, 2017

Distillers' Grain Contracts

At July 31, 2017, GFE had forward contracts to sell approximately $1,000,000 of distillers' grain for deliveries through August 2017.

At July 31, 2017, HLBE had forward contracts to sell approximately $394,000 of distillers' grains for delivery through August 2017.

Corn Oil

At July 31, 2017, GFE had forward contracts to sell approximately $458,000 of corn oil for delivery through August 2017.

At July 31, 2017, HLBE had forward contracts to sell approximately $770,000 of corn oil for delivery through September 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 nine months ended July 31, 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 Securities and Exchange Commission (“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 as supplemented by the risk factors disclosed in Item 1A of our Form 10-Q for the three months ended January 31, 2017 and April 30, 2017 and 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 imposition of tariffs on ethanol imported to Brazil and/or 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

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· Our reliance on key management personnel.

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 July 31, 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.

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We market and sell the products produced at the GFE and HLBE plants primarily using third party marketers. The markets in which our products are sold may be local, regional, national, and international and depend primarily upon the efforts of third party marketers. We have contracted with Eco-Energy, LLC to market all of the ethanol produced at our ethanol plants.  We also independently market a small portion of the ethanol production at the GFE plant as E-85 to local retailers. 

We have contracted with Renewable Products Marketing Group, LLC (“RPMG”) to market the distillers’ grains produced at the GFE plant and with Gavilon Ingredients, LLC to market distillers’ grains produced at the HLBE plant. We have contracted with RPMG to market all of corn oil produced at our ethanol plants. HLBE also occasionally independently markets and sells excess corn syrup from the distillation process at the Heron Lake plant to local livestock feeders.

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. In exchange for the early termination, GFE paid an early termination fee to FCE of approximately $255,000 during the third fiscal quarter of 2017.  GFE began posting bids for the purchase of corn beginning June 1, 2017 and thereafter, and began accepting delivery of corn at its Granite Falls, Minnesota plant on September 1, 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.

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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.  By letter dated July 12, 2017, GFE was notified of Ringneck’s acceptance of GFE’s subscription and that payment of the balance of GFE’s subscription due under the promissory note was due not later than August 2, 2017.  Subsequent to the end of the third fiscal quarter, on August 2, 2017, GFE borrowed $7.5 million under its credit facility with Project Hawkeye, LLC (“Project Hawkeye”), an affiliate of Fagen, Inc., which is a member of GFE, and paid $6,750,000 to Ringneck as payment of the remaining balance of GFE’s subscription. Details regarding our subscription for investment in Ringneck are provided below in the section below titled “Investments.”  Details of the Project Hawkeye credit facility are provided below in the section below entitled “Indebtedness - Granite Falls Energy - GFE’s Other Credit Arrangement”.

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 reports on Form 10-Q for the three months ended January 31, 2017 and April 30, 2017.

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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.

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.

Given the relatively flat nature of ethanol prices during the three months ended July 31, 2017 as compared to historical average prices, management currently believes that the ethanol outlook for the remainder of our fiscal year will remain at the current levels and that our margins will remain tight despite certain favorable market conditions.  Continued low prices for crude oil and unleaded gasoline or further decreases in the price of such commodities could have a significant negative impact on the market price of ethanol, which could adversely impact our profitability. This negative impact could worsen in the event that domestic ethanol inventories remain high, or if U.S. exports of ethanol decline.

Domestic ethanol inventories continued to increase during the three and nine months ended July 31, 2017. According to the U.S. Energy Information Administration (“EIA”), through the first half of calendar 2017, increasing ethanol production rates have outpaced domestic E10 gasoline demand and export growth, leading to elevated ethanol inventory levels at a time when they are typically falling to meet peak summer driving demand. The average daily domestic ethanol production reported by the EIA slowed to 1.01 million barrels per day during the three months ended July 31, 2017, down slightly from 1.02 million barrels per day during the three months ended April 30, 2017, due in part to plant shutdowns for routine maintenance. Average daily production, however, increased 2.6% during the three months ended July 31, 2017 compared with the same period last year and increased by 4.3% for the nine months ended July 31, 2017 compared with the same period of 2016 due to increased domestic production capacity.

Gasoline domestic demand remains flat as compared to 2016 levels. The EIA released in its Short Term Energy Outlook report of April 5, 2017, that U.S. gasoline demand is expected to maintain 2016 levels of approximately 9.3 million barrels per day in 2017. During the three months ended July 31, 2017, ethanol continued trading at a discount to gasoline, improving the economics of ethanol blending and encouraging discretionary blending as an oxygenate and octane enhancer for gasoline.

Exports of ethanol have also been increasing,  however export demand for ethanol is less consistent compared to domestic demand which can lead to ethanol price volatility.The EIA reports that year-to-date domestic ethanol exports through June 30, 2017, were 601.1 million gallons, up 12.0%, from 537.0 million gallons for the comparable period in 2016. Brazil accounted for 36% of the domestic ethanol export volumes through June 30, 2017, while Canada, India, the Philippines and United Arab Emirates accounted for 20.4%, 12.3%, 5.5% and 2.2%, respectively. China, the second largest importer of U.S. ethanol in 2016, increased its ethanol import tariff from 5% to 30% as of January 1, 2017. As a result of the increased tariff, China has imported negligible volumes year-to-date.

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Recently, on August 23, 2017, Brazil’s Chamber of Foreign Trade announced it would recommend imposing a 20% tariff on U.S. ethanol imports after a 600 million liter tariff rate quota. According EIA data, through the June 30, 2017, approximately 1,045 million liters of ethanol have been exported to Brazil from the U.S., already exceeding the Brazilian tariff free quota.  However, on June 27, 2017, the Energy Regulatory Commission of Mexico approved the use of 10% ethanol blends, effective immediately, up from 5.8%, in all but three of its largest cities: Mexico City, Guadalajara and Monterrey, which could lead to increased exports to Mexico. Any decrease in U.S. ethanol exports could adversely impact the market price of ethanol unless domestic demand increases or foreign markets are developed. If ethanol exports decrease, this could lead to increased domestic ethanol stocks and reduce the market price of ethanol. Unless additional demand can be found in new foreign or domestic markets, a continued level of current ethanol stocks or any increase in domestic ethanol supply could further adversely impact the price of ethanol.

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 had halted completely due to Vietnam’s imposition of stricter regulations on fumigation in December 2016. However, in a statement issued September 1, 2017, the U.S. Grains Council announced that Vietnam is lifting its suspension of U.S. distillers’ grains imports and easing fumigation requirements, potentially reopening a major market for U.S. distillers’ grains. Management anticipates distillers’ grains prices will remain lower during the remainder 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. Management also attributes lower corn oil prices, in part, to continued demand for corn oil from the biodiesel industry. Management anticipates lower demand for corn oil from the biodiesel industry may result if the proposed 2018 renewable volume obligations (“RVOs”) are finalized as the proposed rule reduces the renewable volume requirements for biodiesel from the statutory mandate.  If the demand for corn oil from the biodiesel industry declines due these lower mandates, corn oil prices could be adversely impacted.

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.   According to the August 10, 2017 estimate of supply and demand provided by the U.S. Department of Agriculture (the “USDA”), the USDA estimates the 2017 corn supply to be 14.2 billion bushels, suggesting slightly lower corn prices for the remainder of our 2017 fiscal year and into the 2018 fiscal year.

Although natural gas prices remained steady during the three months ended July 31, 2017, management anticipates short-term increases and volatility in natural gas prices for the remainder of fiscal year 2017 due to disruptions to natural gas production and damage to natural gas infrastructure resulting from Hurricane Harvey’s late August landfall.  The storm has resulted in extensive damage and flooding in Texas and Louisiana, especially in the coastal areas of these states. A full assessment of the extent of the damage is expected to be completed in the weeks ahead. There is still considerable uncertainty as to the extent of infrastructure damage and the ultimate amount of lost production from Hurricane Harvey. Therefore, we are uncertain as to how Hurricane Harvey will impact long term natural gas prices. However, management anticipates that the long-term impact of Hurricane Harvey natural gas prices will be less than the impact felt from Hurricane Katrina in 2005 due to shifts in where production takes place.  Since 2005, greater levels of production take place at inland basins, which are generally less affected by storms.We expect natural gas prices to be volatile or increase in the short to mid term given the unpredictable market situation.  Increases in the price of natural gas increases our cost of production and negatively impacts our profit margins.

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Government Supports and Regulation

The ethanol industry is dependent on several economic incentives to produce ethanol, the most significant of which is the federal Renewable Fuels Standard (the “RFS”). The RFS has been, and we expect will continue to be, a significant factor impacting ethanol usage. Under the provisions of the RFS, the Environmental Protection Agency (“EPA”) must publish an annual rule that establishes the number of gallons of different types of renewable fuels, including corn-based ethanol, that must be blended with gasoline in the U.S. by refineries, blenders, distributors and importers, which affects the domestic market for ethanol. The EPA assigns individual refiners, blenders and importers the renewable volume obligations (“RVOs”) they are obligated to use based on their percentage of total fuel sales. The EPA has the authority to waive the RVO requirements, in whole or in part, if there is inadequate domestic renewable fuel supply or the requirement severely harms the economy or the environment.

On November 23, 2016, the EPA announced the final rule for 2017 RVOs, which was set at 15.0 billion gallons for corn-based ethanol, 100% of the original statutory requirement for conventional ethanol. On March 20, 2017, the previously announced 2017 RVOs went into effect.

On July 5, 2017, the EPA announced the proposed rule for 2018 RVOs, which would set the 2018 annual volume requirement for renewable fuel at 19.24 billion gallons of renewable fuels, slightly less than the 19.28 billion gallons required under the final 2017 rule and significantly below the 26 billion gallons statutorily mandated for 2018. However, the proposed 2018 rule does maintain the number of gallons which may be met by corn-based ethanol at 15.0 billion gallons. The comment period for the proposed 2018 rule closed on August 31, 2017. By statute, the EPA is required to issue a final rule setting 2018 RVOs by November 30, 2017.

According to the RFS, if mandatory renewable fuel volumes are reduced by at least 20% for two consecutive years, the EPA is required to modify, or reset, statutory volumes through 2022. With the 2018 being the first year the total proposed RVOs are more than 20% below statutory levels, the EPA administrator has directed  EPA staff to initiate the required technical analysis to inform a reset rule. If 2019 RVOs are also more than 20% below statutory levels, an RVO reset will be triggered under the RFS. This will require the EPA to modify statutory volumes through 2022 within one year of the trigger event, with the standard for review based on the same factors to be utilized when the EPA sets RVOs post-2022.

Beginning in January 2016, various ethanol and agricultural industry groups petitioned a federal appeals court to hear a legal challenge to of the EPA’s decision to reduce the total renewable fuel volume requirements for 2016 through use of its “inadequate domestic supply” waiver authority. The “inadequate domestic supply” waiver provision of RFS authorizes the EPA to consider supply-side factors affecting the volume of renewable fuel that is available to refiners, blenders, and importers to meet the statutory volume requirements. EPA argued that the waiver provision also permitted it to consider demand-side factors, such as the availability of renewable fuel to the ultimate consumer.  On July 28, 2017, the U.S. Court of Appeals for the D.C. Circuit ruled in favor of the petitioners, concluding the EPA erred in its exercise of  “inadequate domestic supply” waiver authority by considering demand-side constraints. As a result, the Court vacated the EPA’s decision to reduce the total renewable fuel volume requirements for 2016, and remanded to the EPA to address the 2016 total renewable fuels volume requirements. While management believes the decision should benefit the ethanol industry overall by clarifying the EPA's waiver analysis is limited to consideration of  supply-side factors only, no direct impact on the Company is expected from the decision.

Current conventional ethanol production capacity exceeds both the final 2017 and proposed 2018 RVO mandates that 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. Moreover, beyond the federal mandates, there are limited markets for ethanol. Although the proposed 2018 rule’s maintenance of the 15 billion gallon RVO for corn-based ethanol signals support from the EPA and the Trump administration for domestic ethanol production, the Trump administration could still elect to materially modify, repeal or otherwise invalidate the RFS. It is unclear what regulatory framework and renewable volume requirements, if any, will emerge as a result of such reforms; however, any such reform could adversely affect the demand and price for ethanol and our profitability.

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Environmental and Other Regulations

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

HLBE’s air permit requires certain on-going performance testing to be completed periodically to ensure compliance with minor source emission limits. On May 12, 2017, HLBE submitted a letter to the Minnesota Pollution Control Agengy (“MPCA”) regarding the results of certain non-compliant tests and proposed certain amendments permit conditions and adjustments to other components of plant operations and production to ensure compliance with minor source emission limits. Since that time HLBE has had continuing discussions with MPCA to resolve these non-compliant tests by agreement with MPCA. Such resolution may result in the payment of a civil penalty, which could be substantial, or other sanctions and remedies available to MPCA. Accordingly, HLBE anticipates additional future expense associated with these issues, including its ongoing discussions with the MPCA. There can be no assurance that HLBE will succeed in our discussions with the MPCA or enter into an agreement relating to its non-compliant emissions tests. Pending the resolution of this air permit issue, HLBE continues to operate subject to the compliance agreement.

Results of Operations for the Three Months Ended July 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 July 31, 2017 and 2016 (amounts in thousands).  

	Three Months Ended  July 31,
	2017				2016
	(unaudited)				(unaudited)
Income Statement Data	Amount		%		Amount		%
Revenue	$	54,251	100.0	%	$	58,019	100.0	%
Cost of Goods Sold		50,048	92.3	%		51,717	89.1	%
Gross Profit		4,203	7.7	%		6,302	10.9	%
Operating Expenses		1,463	2.7	%		1,284	2.2	%
Operating Income		2,740	5.0	%		5,018	8.7	%
Other Expense, net		(18)	(0.0)	%		(148)	(0.3)	%
Net Income		2,722	5.0	%		4,870	8.4	%
Less: Net Income Attributable to Non-controlling Interest		(672)	(1.2)	%		(1,377)	(2.4)	%
Net Income Attributable to Granite Falls Energy, LLC	$	2,050	3.8	%	$	3,493	6.0	%

Revenues

Our consolidated revenue is derived principally from sales of our three primary products: ethanol, distillers’ grains and corn oil. Revenues from these products represented approximately 99.6% of our total revenues for the three months ended July 31, 2017 and 2016.  The remaining approximately 0.4%  attributable to miscellaneous other revenue for the three months ended July 31, 2017 and 2016, is made up of incidental sales of corn syrup at HLBE's plant and revenues from natural gas pipeline operations at Agrinatural, net of intercompany eliminations for distribution fees paid by HLBE to Agrinatural for natural gas transportation services.  

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The following table shows the sources of our consolidated revenue and the approximate percentage of revenues from those sources to total revenues in our unaudited condensed consolidated statements of operations for the three months ended July 31, 2017:

	Three Months Ended  July 31, 2017
	Sales Revenue		% of Total Revenues
Revenue Sources	(in thousands)
Ethanol sales	$	44,146	81.4	%
Distillers' grains sales		7,213	13.3	%
Corn oil sales		2,676	4.9	%
Miscellaneous other		216	0.4	%
Total Revenues	$	54,251	100.0	%

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

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

Our total consolidated revenues decreased by approximately 6.5% for the three months ended July 31, 2017, as compared to the three months ended July 31, 2016 due primarily to the significant decrease in the average price received for distillers’ grains, as well as decreases in the average price received 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 July 31, 2017 and 2016: 

	Three Months Ended  July 31, 2017			Three Months Ended  July 31, 2016
	Quantity Sold	Avg. Net Price		Quantity Sold	Avg. Net Price
Product	(in thousands)			(in thousands)
Ethanol (gallons)	31,998	$	1.38	32,283	$	1.40
Distillers' grains (tons)	78	$	92.39	79	$	128.57
Corn oil (pounds)	9,461	$	0.28	9,091	$	0.29

Ethanol

Total revenues from sales of ethanol decreased by approximately 2.0%  for the three months ended July 31, 2017 compared to the same period of 2016 due to a decrease of approximately 1.1% in the average price per gallon we received for our ethanol, coupled with a 0.9% decrease in volume sold. This aggregate decrease in the number of gallons sold is attributable to an approximately 0.5% and 1.2%  decrease in the number of gallons sold at the GFE and HLBE plants, respectively, during the three months ended July 31, 2017 as compared to same period of 2016.  The decrease in the volumes of ethanol sold at our plants was due to the timing of ethanol shipments. We are currently operating our plants above their nameplate capacities. Management anticipates relatively stable ethanol production and sales during our 2017 fiscal year.

The decrease in average market price for the three months ended July 31, 2017 compared to the same period of 2016 is due to several factors. Although domestic driving demand increased, industry-wide production outpaced domestic and foreign demand during the 2017 period causing an increase in national ethanol supply and restricting the growth of ethanol prices.  

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From time to time, we engage in hedging activities with respect to our ethanol sales. At  July 31, 2017,  GFE had approximately 1.3 million gallons of fixed and basis contracts for forward ethanol sales, for various delivery periods through September 2017, valued at approximately $12.8 million. At July 31, 2017,  HLBE had approximately 1.3 million gallons of fixed and basis contracts for forward ethanol sales, for various delivery periods through September 2017, valued at approximately $12.5 million.    Separately, ethanol derivative instruments resulted in losses of approximately $123,000 and $1.4 million during the three months ended July 31, 2017, and July 31, 2016, respectively. 

Distillers' Grains

Total revenues from sales of distillers’ grains decreased by approximately 28.8%  for the three months ended July 31, 2017 compared to the same period of 2016.  This decrease was due to an approximately 28.1% decline in the average price per ton we received for our distillers’ grains,  coupled with an approximately 0.9% decrease in the volumes sold from period to period. The decrease in total tons of distillers’ grains sold during the three months ended July 31, 2017 compared to the same period of 2016 was due to an approximately 7.9% decrease in distillers’ grains produced at GFE’s plant, offset by an approximately 10.4% increase in distillers’ grain production at the HLBE plant. The decrease in tons produced at the GFE plant was due primarily to decreased ethanol production which resulting in decreased distillers’ grains yield during the 2017 period. The increase in tons produced at the HLBE plant was due primarily to an increase in distillers’ grains yield from period to period.

The 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 may also remain low due to expansion of production capacity in the ethanol industry and end-users switching to lower priced alternatives. Management anticipates that distillers grains prices will remain lower during our 2017 fiscal year unless China reduces or eliminates its tariffs.

For the three months ended July 31, 2017, we sold approximately 97.4% of our total distillers’ grains in the dried form and approximately 2.6% of our total distillers’ grains in the modified/wet form. By comparison, for the three months ended July 31, 2016, we sold approximately 96.6% of our total distillers’ grains in the dried form and approximately 3.4% of our total distillers’ grains in the modified/wet form. We determine the mix between dried distillers’ grains and modified/wet distillers’ grains we sell at each of our plants based on market conditions for each plant and the relative profitability of selling the different forms of distillers’ grains. Management anticipates that we will maintain the current mix between dried distillers’ grains and modified/wet distillers’ grains going forward unless market conditions change in a way that favors one product over the other.

At July 31, 2017, GFE had forward distillers’ grains sales contracts valued at approximately $1.0 million for various delivery periods through August 2017 and HLBE had forward distillers’ grains sales contracts valued at approximately $394,000 for various delivery periods through August 2017.

Corn Oil

Total revenues from sales of corn oil increased by approximately 2.7%  for the three months ended July 31, 2017 compared to the same period of 2016 due to an approximately 4.1% increase in pounds sold, which was offset by an approximately 1.4% decrease in the average price per pound received for our corn oil from period to period.

Management attributes the decrease in corn oil prices was due, in part, to decreased corn oil demand from the biodiesel industry. Management expects corn oil prices will remain relatively steady in the near term. However, management anticipates continued lower demand for corn oil from the biodiesel industry since the proposed volume obligations in the 2018 RFS for biodiesel are lower than statutory levels, which management believes will negatively impact biodiesel production. Additionally, the production capacity increase that is occurring throughout the ethanol industry may also result in oversupply that may negatively affecting prices unless plants curtail corn oil production or additional demand can be created.

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The increase in pounds sold from period to period was attributable to an approximately 9.7%  increase in the volume sold at the HLBE plant for the three months ended July 31, 2017 compared to the same period of 2016, offset by a 2.0%  decrease in the volume sold at the GFE plant.  The decrease in pounds sold at the GFE plant was due primarily to due to decreased oil extraction rates per bushel of corn during the 2017 period. The increase in pounds sold at the HLBE plant was due primarily to 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 July 31, 2017, GFE had forward corn oil sales contracts valued at approximately $458,000 for various delivery periods through August 2017. At July 31, 2017, HLBE had forward corn oil sales contracts valued at approximately $770,000 for various delivery periods through September 2017.

Cost of Goods Sold

Our cost of goods sold decreased by approximately 3.2%  for the three months ended July 31, 2017, as compared to the three months ended July 31, 2016.  However, as a percentage of revenues, our cost of goods sold increased slightly to approximately 92.3% for the three months ended July 31, 2017, as compared to approximately 89.1% for the same period in 2016 due primarily to the significant decline in the price of distillers’ grains which exceeded the decline in the price of corn from period to period.  Approximately 90% of our total costs of goods sold is attributable to our ethanol production segment. Therefore, the cost of goods sold per gallon of ethanol sold for the three months ended July 31, 2017 was approximately $1.39 per gallon of ethanol sold compared to approximately $1.45 per gallon of ethanol produced three months ended July 31, 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 three months ended July 31, 2017:

	Three Months Ended  July 31, 2017
	Cost		% of Cost of Goods Sold
	(in thousands)
Corn costs	$	36,602	73.1	%
Natural gas costs		2,817	5.6	%
All other components of costs of goods sold		10,629	21.3	%
Total Cost of Goods Sold	$	50,048	100.0	%

The following table shows the costs of corn, natural gas and all other components of cost of goods sold and the approximate percentage of costs of those components to total costs of goods sold in our unaudited condensed consolidated statements of operations for the three months ended July 31, 2016:

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

Corn

Our aggregate cost of corn was approximately 4.1%  less for the three months ended July 31, 2017 compared to the same period of 2016,  due to an approximately 5.1% decrease in the average price per bushel paid for corn, partially offset by a 1.0% 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 July 31, 2017 was approximately $0.05 more 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 ample market supplies of corn pushing prices down. Management anticipates that corn prices will remain relatively lower

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into the foreseeable future as corn is plentiful, projections for the 2017 harvest remain strong although lower than previously forecasted and there is 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 July 31, 2017,  GFE had approximately 3.0 million bushels of cash and basis contracts for forward corn purchase commitments for delivery periods through December 2017. At July 31, 2017, HLBE had approximately 3.6 million bushels of cash and basis contracts for forward corn purchase commitments for delivery periods through July 2018.  

Our corn derivative positions resulted in gains of approximately $288,000 and $1.3 million for the three months ended July 31, 2017 and 2016, respectively, which decreased cost of goods sold.  We recognize the gains or losses that result from the changes in the value of our derivative instruments from corn in cost of goods sold as the changes occur. As corn prices fluctuate, the value of our derivative instruments are impacted, which affects our financial performance. We anticipate continued volatility in our cost of goods sold due to the timing of the changes in value of the derivative instruments relative to the cost and use of the commodity being hedged.

Natural Gas

Our cost of goods sold related to natural gas costs increased approximately 15.5% for the three months ended July 31, 2017, as compared to the  three months ended July 31, 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 be volatile in the short-term and will increase given the considerable uncertainty as to the extent of infrastructure damage and amount of lost natural gas production from Hurricane Harvey. Management also anticipates higher natural gas prices during as we move towards the winter months due to the typical seasonal natural gas cost increases experienced during the winter months. If a shortage of natural gas were to occur due to the impacts of Hurricane Harvey or other events, it could result in significantly higher natural gas prices which could negatively impact our profitability.

We had no gain or loss on natural gas derivative instruments during the three months ended July 31, 2017 and 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 13.9%  for the three months ended July 31, 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

Our income from operations for the three months ended July 31, 2017 decreased by approximately $2.3 million compared to the same period of 2016.  This decrease resulted largely from decreased prices for our distillers’ grains and ethanol at our plants and the narrowing of our net operating margin. 

Other Expense, Net

Our net other expense for the three months ended July 31, 2017 was approximately $18,000, compared to a net other expense of approximately $148,000 for the three months ended July 31, 2016.  We had less net other expense for the

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three months ended July 31, 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.

Results of Operations for the Nine months ended July 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 nine months ended July 31, 2017 and 2016 (amounts in thousands).

	Nine Months Ended July 31,
	2017				2016
	(unaudited)				(unaudited)
Income Statement Data	Amount		%		Amount		%
Revenue	$	161,629	100.0	%	$	159,995	100.0	%
Cost of Goods Sold		146,625	90.7	%		149,986	93.7	%
Gross Profit		15,004	9.3	%		10,009	6.3	%
Operating Expenses		4,655	2.9	%		4,174	2.6	%
Operating Income		10,349	6.4	%		5,835	3.6	%
Other Income (Expense), net		324	0.2	%		(225)	(0.1)	%
Net Income		10,673	6.6	%		5,610	3.5	%
Less: Net Income Attributable to Non-controlling Interest		(2,616)	(1.6)	%		(1,405)	(0.9)	%
Net Income Attributable to Granite Falls Energy, LLC	$	8,057	5.0	%	$	4,205	2.6	%

Revenues

Revenues from our three primary products: ethanol, distillers’ grains and corn oil, represented approximately 99.2% of our total consolidated revenues for the nine months ended July 31, 2017 and 2016. Miscellaneous other revenues attributable to incidental sales of corn syrup and Agrinatural revenues (net of eliminations) represented approximately 0.8% of our consolidated revenues for the nine months ended July 31, 2017 and 2016.

The following table shows the sources of our consolidated revenue and the approximate percentage of revenues from those sources to total revenues in our unaudited condensed consolidated statements of operations for the nine months ended July 31, 2017:

	Nine Months Ended  July 31, 2017
Revenue Sources	Sales Revenue		% of Total Revenues
Ethanol sales	$	131,378	81.3	%
Distillers' grains sales		21,860	13.5	%
Corn oil sales		7,158	4.5	%
Miscellaneous other		1,233	0.8	%
Total Revenues	$	161,629	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 unaudited condensed consolidated statements of operations for the nine months ended July 31, 2016:

	Nine Months Ended  July 31, 2016
Revenue Sources	Sales Revenue		% of Total Revenues
Ethanol sales	$	125,746	78.6	%
Distillers' grains sales		26,613	16.6	%
Corn oil sales		6,479	4.1	%
Miscellaneous other		1,157	0.7	%
Total Revenues	$	159,995	100.0	%

Our total consolidated revenues increased by approximately 1.0% for the nine months ended July 31, 2017, as compared to the nine months ended July 31, 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.  

The following table reflects quantities of our three primary products sold and the average net prices received for the nine months ended July 31, 2017 and 2016.  

	Nine Months Ended  July 31, 2017			Nine Months Ended  July 31, 2016
Product	Quantity Sold	Avg. Net Price		Quantity Sold	Avg. Net Price
Ethanol (gallons)	94,567	$	1.39	94,070	$	1.34
Distillers' grains (tons)	234	$	93.41	228	$	116.82
Corn oil (pounds)	26,119	$	0.27	25,151	$	0.26

Ethanol

Total consolidated revenues from ethanol sales increased by approximately 4.5% for the nine months ended July 31, 2017 as compared to the same period in 2016, due primarily to an  approximately 3.9%  increase in the average price received from period to period, coupled with an approximately 0.5% 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 2.6% increase in the volumes sold at the GFE plant from period to period due to increased production, partially offset by an approximate 1.4% decrease in the volume of ethanol sold at at the HLBE plant during the 2017 period. 

Management attributes the increase in ethanol prices to stronger ethanol demand in the market and improved gasoline prices which both impacted ethanol demand and prices during the nine months ended July 31, 2017. Comparatively, lower crude oil and unleaded gasoline prices and an increase in national supply had a negative effect on ethanol prices during the 2016 period.

Our ethanol derivative instruments resulted in losses of approximately $395,000 and $1.3 million during the nine months ended July 31, 2017 and 2016, respectively.

Distillers' Grains

Total revenue from the sales of distillers' grains decreased by approximately 17.9% during the nine months ended July 31, 2017 compared to the same period of 2016.  The decline in distillers' grains revenues is primarily attributable to an approximately 20.0% decrease from period to period in the average price received for distillers' grains, which partially mitigated by an approximately 2.7%  increase in aggregate tons sold. This increase in tons sold during the nine months ended July 31, 2017 compared to the same period of 2016 was due to an approximately 5.0% increase in amount of dried distillers’ grains sold at the HLBE plant from period to period.    Management attributes lower distillers' grains prices for the nine months ended July 31, 2017 to lower domestic demand due to lower priced alternative feeds and lower export demand, particularly from China.

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Corn Oil

Total corn oil sales increased by approximately 10.5% for the nine months ended July 31, 2017 compared to the same period of 2016.  This increase was due to an approximately 3.8% increase in pounds of corn oil sold from period to period coupled with an approximately 6.4% 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 nine months ended July 31, 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.

Cost of Goods Sold

Our cost of goods sold decreased by approximately 2.2% for the nine months ended July 31, 2017, as compared to the nine months ended July 31, 2016.  Additionally, as a percentage of revenues, our cost of goods sold decreased to approximately 90.7% for the nine months ended July 31, 2017, as compared to approximately 93.7% 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. Approximately 90% of our total costs of goods sold is attributable to our ethanol production segment. Therefore, the cost of goods sold per gallon of ethanol produced for the nine months ended July 31, 2017 was approximately $1.38 per gallon of ethanol sold compared to approximately $1.43 per gallon of ethanol produced for the nine months ended July 31, 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 nine months ended July 31, 2017:

	Nine Months Ended  July 31, 2017
	Cost		% of Cost of Goods Sold
	(in thousands)
Corn costs	$	106,621	72.7	%
Natural gas costs		9,297	6.4	%
All other components of costs of goods sold		30,707	20.9	%
Total Cost of Goods Sold	$	146,625	100.0	%

The following table shows the costs of corn, natural gas, and all other components of cost of goods sold and the approximate percentage of costs of those components to total costs of goods sold in our unaudited condensed consolidated statements of operations for the nine months ended July 31, 2016:

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

Corn

Our cost of goods sold related to corn was approximately 4.6% less for the nine months ended July 31, 2017 compared to the same period of 2016, due primarily to an approximately 5.8% decrease in the average price per bushel paid for corn, which was offset by a 1.3% increase in the number of bushels of corn processed from period to period.  For the nine months ended July 31, 2017 and 2016, our plants processed approximately 32.9 million and 32.5 million bushels of corn, respectively. The corn-ethanol price spread (the difference between the price per gallon of ethanol and the price per bushel of grain divided by 2.8) for the nine months ended July 31, 2017, was approximately $0.12 more 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.

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We had gains related to corn derivative instruments of approximately $857,000 and $1.2 million for the nine months ended July 31, 2017 and 2016, respectively, which decreased our cost of goods sold. We anticipate continued volatility in our cost of goods sold due to the timing of the changes in value of the derivative instruments relative to the cost and use of the commodity being hedged.

Natural Gas

For the nine months ended July 31, 2017, we experienced a 26.4% increase in our overall natural gas costs compared to the same period of 2016.  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 nine months ended July 31, 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 nine months ended July 31, 2017. In comparison, our natural gas derivative positions resulted in a gain of approximately $32,000 during the nine months ended July 31, 2016, which decreased our cost of goods sold.

Operating Expenses

Our operating expenses increased by approximately 11.5% for the nine months ended July 31, 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 $10.3 million for the nine months ended July 31, 2017, compared to income from operations of approximately $5.8 million for the nine months ended July 31, 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 $324,000 during the nine months ended July 31, 2017 compared to net other expense of approximately $225,000 the nine months ended July 31, 2016.  We had more other income during the nine months ended July 31, 2017 compared to the nine months ended July 31, 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.  By letter dated July 12, 2017, GFE was notified of Ringneck’s acceptance of GFE’s subscription and that payment of the balance of GFE’s subscription due under the promissory note was due no later than August 2, 2017.  On August 2, 2017, GFE borrowed $7.5 million under its credit facility with Project Hawkeye, LLC (“Project Hawkeye”), an affiliate of Fagen, Inc., which is a member of GFE, and paid the remaining balance due on GFE’s subscription of $6,750,000 to Ringneck.  See below for the terms of GFE’s credit facility with Project Hawkeye.

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. GFE’s investment is sufficient to the right to appoint one director to the board of directors of Ringneck and GFE has appointed Steve Christensen, its CEO to serve as its appointed director. The units we acquired in Ringneck are subject to restrictions on transfer, therefore, this should not be considered a liquid investment.  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.

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Because Ringneck did not conduct a federally-registered offering and currently is not subject to SEC registration and reporting requirements, 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.

In connection with our subscription, GFE entered into a credit facility with Project Hawkeye,  pursuant to which GFE borrowed $7.5 million to finance the investment in Ringneck. Details of the Project Hawkeye credit facility are provided below in the section below entitled “Indebtedness - GFE’s Other Credit Arrangement”.

Changes in Financial Condition at July 31, 2017 and October 31, 2016

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

	July 31, 2017		October 31, 2016
	(unaudited)
Current Assets	$	36,484	$	40,349
Total Assets	$	113,071	$	121,471
Current Liabilities	$	6,753	$	14,337
Long-Term Debt, less currrent portion	$	1,122	$	1,394
Members' Equity attributable to Granite Falls Energy, LLC	$	80,570	$	83,685
Non-controlling Interest	$	24,626	$	22,056

The decrease in total assets is primarily due to an approximately $3.9 million decrease in total current assets at July 31, 2017 compared to October 31, 2016. The change in our current assets is due to decreases of approximately $4.5 million in accounts receivable,  $5.4 million in inventory and an approximately $918,000 decrease in the value of our commodity derivative instruments at July 31, 2017, offset by an approximately $6.6 million increase in cash on hand. Also contributing to the decrease in total assets was a decrease of approximately $5.3 million in net property and equipment due to depreciation expense during the nine months ended July 31, 2017, offset by capital expenditures.

Current liabilities decreased by approximately $7.6 million at July 31, 2017 compared to October 31, 2016.  This decrease was mainly due to decreases of approximately $4.0 million in corn payable to FCE, approximately $1.2 million in accounts payable, and approximately  $1.4 million in the current portion of our long-term debt at July 31, 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 nine months ended July 31, 2017 which reduced the amount of corn payable at July 31, 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 Compeer.  

Our long-term debt decreased approximately $271,000 at July 31, 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 July 31, 2017 compared to October 31, 2016 decreased by approximately $3.1 million. The decrease was related to the distribution to our members of approximately $11.2 million during January 2017, offset by our approximately $8.1 million of net income attributable to GFE during the nine months ended July 31, 2017. 

Non-controlling interest totaled approximately $24.6 million and $22.1 million at July 31, 2017 and October 31, 2016, respectively.  This is directly related to recognition of the 49.3% noncontrolling interest in HLBE.

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Liquidity And Capital Resources

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

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

Cash Flows

The following table shows our cash flows for the nine months ended July 31, 2017 and 2016 (amounts in thousands): 

	2017		2016
	(unaudited)		(unaudited)
Net cash provided by operating activities	$	22,364	$	14,926
Net cash used in investing activities	$	(2,376)	$	(4,238)
Net cash used in financing activities	$	(13,410)	$	(12,035)
Net increase (decrease) in cash	$	6,578	$	(1,347)

Operating Cash Flows

During the nine months ended July 31, 2017, cash flows from operating activities increased by approximately $7.4 million compared to the nine months ended July 31, 2016. This increase from period to period resulted largely from an approximately $5.1 million increase in our net income, coupled with a net increase of approximately $2.3 million of various working capital items from period to period.

Investing Cash Flows

Cash used in investing activities was approximately $1.9 million less for the nine months ended July 31, 2017, compared to the nine months ended July 31, 2016. This decrease was due primarily to reduced payments of approximately $2.5 million for capital expenditures for the nine months ended July 31, 2017.  This decrease was partially offset by $750,000 of cash used by GFE during the nine months ended July 31, 2017 for the initial payment on our subscription for its Ringneck investment. Comparatively, during the nine months ended July 31, 2016, we used cash at the GFE plant for our grain bin storage expansion and at HLBE plant for our RTO replacement project,  as well as plant improvements.        

Financing Cash Flows

Cash used in financing activities was approximately $1.4 million more for the nine months ended July 31, 2017 compared to the same period of 2016. For the nine months ended July 31, 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 $325,000 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 $347,000 reduction in checks drawn in excess of bank balance, principal payments of approximately $9.9 million on HLBE’s long-term debt,  offset by proceeds of approximately $9.8  million on HLBE’s long-term debt. 

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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.

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 July 31, 2017 and October 31, 2016. Therefore, the aggregate principal amount available for borrowing under this revolving term loan facility at July 31, 2017 and October 31, 2016 was $8.0 million and $10.0 million, respectively.  The amount available for borrowing under this facility was further reduced at September 1, 2017 to $6.0 million.

The interest rate is based on the bank's One Month London Interbank Offered Rate (“LIBOR”) Index Rate, plus 3.05%, which equated to 4.28% and 3.25% at July 31, 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 July 31, 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 in November 2016, GFE entered into a credit facility with Fagen Energy, LLC (“Fagen Energy”), an affiliate of Fagen, Inc., which is a member of GFE. The Fagen Energy credit facility would have allowed GFE to borrow up to $7.5 million of variable-rate, amortizing non-recourse debt from Fagen Energy using the Ringneck investment as collateral. On August 2, 2017, GFE executed a termination and replacement agreement with Fagen Energy and Project Hawkeye, also an affiliate of Fagen, Inc., to terminate the Fagen Energy credit facility and the loan agreements entered into in conection with the Fagen Energy credit facility, and secure a replacement credit facility with Project Hawkeye on substantially the same as the terms under the terminated credit facility with Fagen Energy.  

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On August 2, 2017, the Fagen Energy credit facility was terminated and there were no amounts outstanding at termination. Simultaneously with the termination of the Fagen Energy credit facility, GFE entered into a replacement credit facility with Project Hawkeye. The terms of the replacement credit facility allow GFE to borrow up to $7.5 million of variable-rate, amortizing non-recourse debt from Project Hawkeye using the Ringneck investment as collateral.  The Project Hawkeye 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 Project Hawkeye 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 August 2, 2026. 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 entered into in connection with the Project Hawkeye 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 Project Hawkeye will be to foreclose and seize all of GFE’s right, title and interest in its investment in Ringneck.

As of July 31, 2017, there were no amounts outstanding under the Project Hawkeye credit facility.  Subsequent to the end of the third fiscal quarter, on August 2, 2017, GFE borrowed $7.5 million under the Project Hawkeye credit facility to finance the balance of its investment in Ringneck.

HLBE’s Compeer Credit Facility

HLBE has a comprehensive credit credit facility with Compeer Financial, formerly known as AgStar Financial Services, FCLA (“Compeer”), 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 Compeer loans and was appointed the administrative agent for the purpose of servicing the loans. 

Under the Compeer 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 July 31, 2017 or October 31, 2016. Therefore, the aggregate principal commitment under this facility at July 31, 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 4.48% and 3.45% at July 31, 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 Compeer 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 Compeer. 

· 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,

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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 Compeer 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 Compeer.

As of July 31, 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 Compeer credit facility. If HLBE fails to comply with the terms of its credit agreement with Compeer, and Compeer refuses to waive the non-compliance, Compeer could terminate the credit facility and any commitment to loan funds to HLBE.

HLBE’s Other Credit Arrangements

In addition to HLBE's primary credit arrangement with Compeer, 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 $1.4 million in outstanding water revenue bonds at July 31, 2017 and October 31, 2016. HLBE classifies its obligations under these bonds as assessments payable. The interest rates on the bonds range from 6.55% 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 until maturity in September 2017. 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 $12,500 and $69,000 at July 31, 2017 and October 31, 2016, respectively. The Company expects to repay the full amount of this loan in September 2017.

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 July 31, 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 5.23% and 4.53% at July 31, 2017 and October 31, 2016, respectively.

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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.

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 $2.1 million at July 31, 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.

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As provided in the Amendment, for calendar year 2016, Agrinatural may, without consent of the Company, proceed with and pay for capital expenditures in an amount up to $300,000 plus the amount of contributions in aid of construction received by Agrinatural from customers for capital improvements (“CIAC”), less a reserve for distribution to the Agrinatural members to cover the income or other taxes imposed as a result of receipt of CIAC in an amount equal to 40% of CIAC. For calendar years 2017, 2018 and 2019, 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 $2.6 million at July 31, 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 July 31, 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.  

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 Compeer and HLBE’s note payable to the minority owner of Agrinatural. The specifics of these credit facilities are discussed in greater detail in “Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations - Indebtedness.”

As of July 31, 2017, GFE had no exposure to interest rate risk as we had no amounts outstanding on our credit facility with United FCS.  As of July 31, 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 Compeer 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.

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The sensitivity analysis below shows the anticipated effect on our income from a 10% adverse change in interest rates for a one-year period.

Outstanding Variable
Rate Debt at		Interest Rate at		Interest Rate Following 10%		Approximate Adverse
July 31, 2017		July 31, 2017		Adverse Change		Change to Income
$	100,000	5.23	%	5.75	%	$	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  July 31, 2017, GFE had price protection in place for approximately 13.0% and 20.0% of its anticipated corn and natural gas needs, respectively, and approximately approximately 2.0%  and 6.5% of its ethanol and distillers’ grains sales, respectively, for the next 12 months. As of July 31, 2017,  HLBE had price protection in place for approximately 16.5% of its anticipated corn needs and approximately 2.0%  and 6.0% of its ethanol and distillers’ grains sales, respectively, for the next 12 months. Through these contracts we hope to minimize risk from future market price fluctuations and basis fluctuations. As input prices move in reaction to market trends and information, our income statement will be affected depending on the impact such market movements have on the value of our derivative instruments. Depending on market movements, crop prospects and weather, these price protection positions may cause immediate adverse effects, but are expected to produce long-term positive growth for us.

A sensitivity analysis has been prepared to estimate our exposure to ethanol, corn and natural gas price risk. Market risk related to these factors is estimated as the potential change in income resulting from a hypothetical 10% adverse change in the fair value of our corn and natural gas prices and average ethanol price as of July 31, 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 July 31, 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	July 31, 2017		Income
Ethanol	126,000,000	Gallons	10	%	$	19,300,000
Corn	37,300,000	Bushels	10	%	$	11,700,000
Natural Gas	3,000,000	MMBTU	10	%	$	809,000

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

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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 July 31, 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.

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.

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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 and April 30, 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 government has imposed tariffs on ethanol exports to Brazil, which may negatively affect the demand and pricing for ethanol.

On August 23, 2017, Brazil’s Chamber of Foreign Trade announced it would recommend imposing a 20% tariff on U.S. ethanol imports after a 600 million liter tariff rate quota. According EIA data, through the June 30, 2017, approximately 1,045 million liters of ethanol have been exported to Brazil from the U.S., already exceeding the Brazilian tariff free quota. We cannot estimate the exact effect this tariff would have on the overall domestic ethanol market.  It is possible the tariff could reduce ethanol prices in the domestic market by decreasing Brazilian import demand for U.S. ethanol. Additionally, if ethanol prices increase, exports to Brazil may cease as a result of the tariff. Further, ethanol exports could potentially be higher without the Brazilian tariff. Any decrease in ethanol prices or demand may negatively impact our ability to profitably operate our ethanol plants.

State and federal government mandates affecting ethanol usage could change and impact the ethanol market.

Our operations could be adversely impacted by legislation or EPA actions, as set forth below or otherwise, that may reduce the RFS mandate. Similarly, should federal mandates regarding oxygenated gasoline be repealed, the market for domestic ethanol could be adversely impacted. 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 mandate, may affect future demand. A significant increase in supply beyond the RFS mandate could have an adverse impact on ethanol prices. Moreover, changes to RFS could negatively impact the price of ethanol or cause imported sugarcane ethanol to become more economical than domestic ethanol.

On July 5, 2017, the EPA proposed the 2018 RVOs which maintains the RVO for conventional ethanol at 15.0 billion gallons, but reduces the overall biofuel target to 19.24 billion gallons for 2018 by decreasing volume obligations for advanced alternatives. According to the RFS, if mandatory renewable fuel volumes are reduced by at least 20% for two consecutive years, the EPA is required to modify, or reset, statutory volumes through 2022. With the 2018 being the first year the total proposed RVOs are more than 20% below statutory levels, the EPA administrator has directed the EPA staff to initiate the required technical analysis to inform a reset rule. If 2019 RVOs are also more than 20% below statutory levels, an RVO reset will be triggered under the RFS. This will require the EPA to modify statutory volumes through 2022 within one year of the trigger event, with the standard for review based on the same factors to be utilized when the EPA sets RVOs post-2022.

The U.S. Appeals Court for the D.C. Circuit ruled on July 28, 2017 in favor of various ethanol and agricultural industry groups aligned as petitionors against the EPA. The decision concluded the EPA erred in how it interpreted the “inadequate domestic supply” waiver provision of RFS in setting the 2016 RVOs. The Court concluded that the EPA was limited by the statute to consider only supply-side factors affecting the volume of renewable fuel that is available to refiners, blenders, and importers to meet the statutory volume requirements, and was not allowed to consider the volume of renewable fuel that is available to ultimate consumers or the demand-side constraints that affect the consumption of renewable fuel by consumers. As a result, the Court vacated the EPA’s decision to reduce the total renewable fuel volume requirements for 2016 through use of its “inadequate domestic supply” waiver authority, and remanded to the EPA to address the 2016 RVOs. While management does not anticipate any direct impact from the decision, the overall industry is expected to benefit from the limitation of the EPA's waiver analysis to the supply-side factors only.

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Natural gas production disruptions and/or infastrure damage resulting from Hurricane Harvey may cause natural prices to increase, which could reduce our profitability.

Management anticipates short-term increases and volatility in natural gas prices for the remainder of fiscal year 2017 due to disruptions to natural gas production and damage to natural gas infrastructure resulting from Hurricane Harvey’s late August landfall.  The storm has resulted in extensive damage and flooding in Texas and Louisiana, especially in the coastal areas of these states. A full assessment of the extent of the damage is expected to be completed in the weeks ahead. There is still considerable uncertainty as to the extent of infrastructure damage and the ultimate amount of lost production from Hurricane Harvey. Therefore, we are uncertain as to how Hurricane Harvey will impact long term natural gas prices. However, management anticipates that the long-term impact of Hurricane Harvey natural gas prices will be less than the impact felt from Hurricane Katrina in 2005 due to shifts in where production takes place.  Since 2005, greater levels of production take place at inland basins, which are generally less affected by storms.We expect natural gas prices to be volatile or increase in the short to mid term given the unpredictable market situation.  Increases in the price of natural gas increases our cost of production and negatively impacts our profit margins..

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

None.

Item 3.   Defaults Upon Senior Securities

None.

Item 4.Mine Safety Disclosures

None.

Item 5.Other Information

None.

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Item 6.   Exhibits.

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

Exhibit No.	Exhibit
10.1	Agreement of Termination and To Execute Substitute Promissory Note; Commercial Security Agreement and Pledge Agreement (Ringneck Investment) Dated August 2, 2017 between Granite Falls Energy, LLC, Fagen Energy, LLC and Project Hawkeye, LLC
10.2	Promissory Note issued August 2, 2017 by Granite Falls Energy, LLC as borrower to Project Hawkeye, LLC as lender in principal amount of $7,500,000
10.3	Pledge Agreement Dated August 2, 2017 between Granite Falls Energy, LLC and Project Hawkeye, LLC
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 nine months ended July 31, 2017, formatted in XBRL (eXtensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets at July 31, 2017 and October 31, 2016; (ii) the Condensed Consolidated Statements of Operations for the three and nine months ended July 31, 2017 and 2016; (iii) the Condensed Consolidated Statements of Cash Flows for the nine months ended July 31, 2017 and 2016; and (iv) Notes to Condensed Consolidated Unaudited Financial Statements.*

*   Filed herewith.

SIGNATURES

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

	GRANITE FALLS ENERGY, LLC
Date:   September 14,  2017	/s/ Steve Christensen
	Steve Christensen
	Chief Executive Officer
	/s/ Stacie Schuler
Date:   September 14, 2017	Stacie Schuler
	Chief Financial Officer

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EX-10.1

AGREEMENT OF TERMINATION AND TO EXECUTE SUBSTITUTE PROMISSORY

NOTE; COMMERCIAL SECURITY AGREEMENT AND PLEDGE AGREEMENT

(RING-NECK INVESTMENT)

WHEREAS, Fagen Energy, LLC and Granite Falls Energy, LLC previously negotiated a loan from Fagen Energy, LLC to Granite Falls Energy, LLC, for investment by Granite Falls Energy, LLC into Ring-neck Energy & Feed, LLC ("Ring-neck"); and

WHEREAS, said negotiations and agreement were memorialized by the execution of the following:

1) Promissory Note executed by Granite Falls Energy, LLC in favor of Fagen Energy, LLC dated November 1, 2016.

2) Commercial Security Agreement executed by Granite Falls Energy, LLC in favor of Fagen Energy, LLC dated November 1, 2016.

3) Pledge Agreement executed by Granite Falls Energy, LLC in favor of Fagen Energy, LLC dated November 1, 2016.

WHEREAS, the Ring-neck project is proceeding to financial close; no amounts have been lent pursuant to the above described agreements; the parties desire to cancel and terminate said agreements, provided that the parties as described hereafter enter into identical agreements (newly dated, with the lender being Project Hawkeye, L.L.C.).

NOW, THEREFORE, the parties agree as follows:

a) The above recitals are incorporated herein.

b) The Promissory Note; Commercial Security Agreement and Pledge Agreement, all dated November 1, 2016 by and between Granite Falls Energy, LLC (as Borrower) and Fagen Energy, LLC (as Lender) are cancelled and terminated and shall be without further force and effect, provided that the documents described in paragraph (c) below are fully and completely executed and take full force and effect.

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c) Granite Falls Energy, LLC (as Borrower) and Project Hawkeye, L.L.C. (as Lender) shall enter into a promissory note and pledge agreement substantially in the same form as the respective documents dated November 1, 2016 except that:

i) Project Hawkeye, L.L.C. shall be the Lender; and

ii) The documents shall be dated August 2, 2017.

d) Upon full execution of said documents by and between Granite Falls Energy, LLC and Project Hawkeye, L.L.C., any and all agreements by and between Granite Falls Energy, LLC and Fagen Energy, LLC dated November 1, 2016 shall be deemed terminated and shall be without any force or effect. Upon execution of the agreements described in paragraph (c) above and execution of this Agreement, the original agreements dated November 1, 2016 shall be delivered by Fagen Energy, LLC to Granite Falls Energy, LLC.

e) Granite Falls Energy, LLC has previously placed $750,000 into Ring-neck and accordingly $7.5 million shall be lent by Project Hawkeye, L.L.C. to Granite Falls Energy, LLC on the agreements when fully executed, with the funds handled as follows:

i) Granite Falls Energy, LLC shall place $6,750,000 into Ring-neck; and

ii) Granite Falls Energy, LLC shall retain $750,000 (representing the $750,000 that Granite Falls Energy, LLC previously placed directly into Project Hawkeye, L.L.C.). Said $750,000 shall remain entirely, without claim by Fagen Energy, LLC or Project Hawkeye, L.L.C., the funds and property of Granite Falls Energy, LLC.

f) There are no other agreements, oral or written, regarding the transactions described herein, except for this Agreement of Termination and to Execute Substitute Promissory Note; Commercial Security Agreement and Pledge Agreement (Ring-neck Investment) and the corresponding Promissory Note and Pledge Agreement dated August 2, 2017 to be executed and to be in full force and effect by and between Granite Falls Energy, LLC and Project Hawkeye, L.L.C.

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August 2, 2017

FAGEN ENERGY, LLC	PROJECT HAWKEYE, L.L.C.
By: /s/ Ron Fagen	By: /s/ Ron Fagen
Its:    Secretary/Treasurer	Its:    Managing Member

GRANITE FALLS ENERGY, LLC

By:    /s/ Steve A. Christensen

Its:   GM/CEO

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EX-10.2

PROMISSORY NOTE

Borrower:  Granite Falls Energy, LLCLender:Project Hawkeye, L.L.C.

15045 Hwy. 23 SE501 W Hwy 212, PO Box 159

P. O. Box 216Granite Falls, MN  56241-0159

Granite Falls, MN  56241-0216

Principal Amount:  $7,500,000.00Date of Note:  August 2, 2017

PROMISE TO PAY.  Granite Falls Energy, LLC (“Borrower”) promises to pay to Fagen Project Hawkeye, L.L.C. (“Lender”), or order, in lawful money of the United States of America, the principal amount of Seven Million Five Hundred Thousand and no/100 Dollars ($7,500,000.00), or so much as may be outstanding, together with interest on the unpaid outstanding principal balance of each advance. Interest shall be calculated from the date of each advance until repayment of each advance.

PAYMENT.  This is a nonrecourse loan and Lender’s only remedy in case of default by Borrower is to seize the Ring-neck Energy & Feed, LLC units owned by Granite Falls Energy, LLC, including any rights to payment to Borrower corresponding to those units.  Borrower will purchase 1,500 units in Ring-neck Energy & Feed, LLC with the funds extended pursuant to this Promissory Note.  Lender shall have no right of recourse against Borrower for payment or collection, except for Borrower’s right to funds from and ownership of units in Ring-neck Energy & Feed, LLC. 

Subject to the above nonrecourse provisions, interest only payments shall occur for years one (1) and two (2) of this Promissory Note, such payments due on the first and second anniversary of this Promissory Note.  The Promissory Note shall be equally amortized thereafter on a seven (7) year term (years three (3) through nine (9) of this Promissory Note), based upon monthly payments due on the first day of each month, with the first monthly payment due on the 26th month anniversary of this Promissory Note.  The amortized payments will be re-amortized (reset) based upon any change in interest rate. 

Based upon the current interest rate, the amortized monthly payments beginning on the 26th month anniversary of this Promissory Note, shall be $89,285.72 each month. 

On August 2, 2026, the entire principal balance together with all accrued interest shall be due and payable.

Unless otherwise agreed or required by applicable law, payments will be applied first to any accrued unpaid interest; then to principal; then to any unpaid collection costs; and then to any late charges.  The annual interest rate for this Promissory Note is computed on a 365/360 accrual basis; that is, by applying the ratio of the annual interest rate over a period of 360 days, multiplied by the outstanding principal balance, multiplied by the actual number of days the principal balance is outstanding.  Borrower will pay Lender at Lender’s address shown above or at such other place as Lender may designate in writing.

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VARIABLE INTEREST RATE.  The interest rate on this Promissory Note is subject to change from time to time based on changes to the interest rate on the revolving loan that Granite Falls Energy, LLC currently has with CoBank (currently 3.05%+ one month LIBOR, with a floor of 3.55%).  The interest rate will be established based upon that interest rate charged on said revolving loan as of the date funds are first advanced on this Promissory Note.  If that formula for determining an interest rate becomes unavailable during the term of this loan, Lender may set the interest rate based upon the interest rate then being charged by CoBank on revolving loans similar to the revolving loan currently in effect between CoBank, as Lender and Granite Falls Energy, LLC, as Borrower.  The interest rate change will not occur more than once a month.  The interest rate as determined shall not be less than 3.55% per annum.  NOTICE:  Under no circumstances will the interest rate on this Promissory Note be more than the maximum rate allowed by applicable law. 

PREPAYMENT; MINIMUM INTEREST CHARGE.  Borrower may pay without penalty all or a portion of the amount owed earlier than it is due.  Early payments will not, unless agreed to by Lender in writing, relieve Borrower of Borrower’s obligation to continue to make payments under the payment schedule.  Rather, early payments will reduce the principal balance due and may result in Borrower’s making fewer payments.  Borrower agrees not to send Lender payments marked “paid in full”, “without recourse”, or similar language.  If Borrower sends such a payment, Lender may accept it without losing any of Lender’s rights under this Note, and Borrower will remain obligated to pay any further amount owed to Lender. 

DEFAULT.  Each of the following shall constitute an event of default (“Event of Default”) under this Note:

Payment Default.  Borrower fails to make any payment when due under this Note.

Other Defaults.  Borrower fails to comply with or to perform any other term, obligation, covenant or condition contained in this Note or in any of the related documents or to comply with or to perform any term, obligation, covenant or condition contained in any other agreement between Lender and Borrower.

Default in Favor of Third Parties.  Borrower or any Grantor defaults under any loan, extension of credit, security agreement, purchase or sales agreement, or any other agreement, in favor of any other creditor or person that may materially affect any of Borrower’s property or Borrower’s ability to repay this Promissory Note or perform Borrower’s obligations under this Promissory Note or any of the related documents.

False Statements.  Any warranty, representation or statement made or furnished to Lender by Borrower or on Borrower’s behalf under this Promissory Note or the related documents is false or misleading in any material respect, either now or at the time made or furnished or becomes false or misleading at any time thereafter.

Insolvency.  The dissolution of Borrower (regardless of whether election to continue is made) or any other termination of Borrower’s existence as a going business, the insolvency of Borrower, the appointment of a receiver for any part of Borrower’s

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property, any assignment for the benefit of creditors, any type of creditor workout, or the commencement of any proceeding under any bankruptcy or insolvency laws by or against Borrower.

Creditor or Forfeiture Proceedings.  Commencement of foreclosure or forfeiture proceedings, whether by judicial proceeding, self-help, repossession or any other method, by any creditor of Borrower or by any governmental agency against any collateral securing the loan.  This includes a garnishment of any of Borrower’s accounts, including deposit accounts.  However, this Event of Default shall not apply if there is a good faith dispute by Borrower as to the validity or reasonableness of the claim which is the basis of the creditor or forfeiture proceeding and if Borrower gives Lender written notice of the creditor or forfeiture proceeding and deposits with Lender monies or a surety bond for the creditor or forfeiture proceeding, in an amount determined by Lender, in its sole discretion, as being an adequate reserve or bond for the dispute.

Adverse Change.  A material adverse change occurs in Borrower’s financial condition, or Lender believes the prospect of payment or performance of this Promissory Note is impaired.

LENDER’S RIGHTS.  Upon default, Lender may declare the entire unpaid balance on this Promissory Note and all accrued unpaid interest immediately due.  This is a nonrecourse loan and Lender’s only remedy in case of default by Borrower is to seize the Ring-neck Energy & Feed, LLC units owned by Granite Falls Energy, LLC, including any rights to payment to Borrower corresponding to those units.  Borrower will purchase 1,500 units in Ring-neck Energy & Feed, LLC with the funds extended pursuant to this Promissory Note.  Lender shall have no right of recourse against Borrower for payment or collection, except for Borrower’s right to funds from and ownership of units in Ring-neck Energy & Feed, LLC.  Lender’s sole remedy will be against the assets of Borrower in Ring-neck Energy & Feed, LLC.  Lender shall have no right to collect funds from Borrower or execute on assets of Borrower, except for the right of Lender to execute on Borrower’s interests in Ring-neck Energy & Feed, LLC (a South Dakota ethanol facility). 

ATTORNEYS’ FEES; EXPENSES.  Lender may hire or pay someone else to help collect this Promissory Note if Borrower does not pay.  Any such costs will be added to amounts owed pursuant to this Promissory Note.  This includes, subject to any limits under applicable law, Lender’s reasonable attorneys’ fees and Lender’s legal expenses, whether or not there is a lawsuit, including reasonable attorneys’ fees, expenses for bankruptcy proceedings (including efforts to modify or vacate any automatic stay or injunction), and appeals.  If not prohibited by applicable law, any court costs, in addition to all other sums provided by law, may be added to amounts owed and due pursuant to this Note. 

JURY WAIVER.  Lender and Borrower hereby waive the right to any jury trial in any action, proceeding, or counterclaim brought by either Lender or Borrower against the other.

GOVERNING LAW.  This Note will be governed by, construed and enforced in accordance with federal law and the laws of the State of Minnesota.  This Note has been accepted by Lender in the State of Minnesota. 

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DISHONORED ITEM FEE.  Borrower will pay a fee to Lender of $15.00 if Borrower makes a payment on Borrower’s loan and the check or preauthorized charge with which Borrower pays is later dishonored. 

SUCCESSOR INTERESTS.  The terms of this Promissory Note shall be binding upon Borrower, and upon Borrower’s, successors and assigns, and shall inure to the benefit of Lender and its successors and assigns.

GENERAL PROVISIONS.  Lender may delay or forgo enforcing any of its rights or remedies under this Note without losing them.  Borrower and any other person who signs, guarantees or endorses this Promissory Note, to the extent allowed by law, waive presentment, demand for payment, and notice of dishonor.  Upon any change in the terms of this Note, and unless otherwise expressly stated in writing, no party who signs this Promissory Note, whether as maker, guarantor, accommodation maker or endorser, shall be released from liability.  All such parties agree that Lender may renew or extend (repeatedly and for any length of time) this loan or release any party or guarantor or collateral; or impair, fail to realize upon or perfect Lender’s security interest in the collateral; and take any other action deemed necessary by Lender without the consent of or notice to anyone.  All such parties also agree that Lender may modify this loan without the consent of or notice to anyone other than the party with whom the modification is made.  The obligations under this Promissory Note are joint and several.

NONRECOURSE.  THIS IS A NONRECOURSE LOAN, LENDER’S SOLE REMEDY IF BORROWER DOES NOT PAY OR OTHERWISE DEFAULTS IS TO EXECUTE ON ANY AND ALL OWNERSHIP INTERESTS AND RIGHTS HELD BY BORROWER IN RING-NECK ENERGY & FEED, LLC (A SOUTH DAKOTA ETHANOL FACILITY).  SIMULTANEOUSLY HEREWITH, BORROWER IS EXECUTING A SEPARATE PLEDGE AGREEMENT IN FAVOR OF LENDER SECURING ALL OF BORROWER’S RIGHT, TITLE AND INTEREST IN AND TO RING-NECK ENERGY & FEED, LLC TO LENDER TO SECURE ALL AMOUNTS AND OBLIGATIONS EVIDENCED BY THIS PROMISSORY NOTE. 

PRIOR TO SIGNING THIS NOTE, BORROWER READ AND UNDERSTOOD ALL THE PROVISIONS OF THIS PROMISSORY NOTE, INCLUDING THE VARIABLE INTEREST RATE PROVISIONS.  BORROWER AGREES TO THE TERMS OF THIS PROMISSORY NOTE.

BORROWER ACKNOWLEDGES RECEIPT OF A COMPLETED COPY OF THIS PROMISSORY NOTE.

BORROWER:

GRANITE FALLS ENERGY, LLC

By:/s/ Steve A. Christensen

Its:GM/CEO

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EX-10.3

PLEDGE AGREEMENT

THIS PLEDGE AGREEMENT is entered into this 2nd day of August, 2017 between Granite Falls Energy, LLC, a Minnesota Limited Liability Company (hereinafter as "Grantor"); and Project Hawkeye, L.L.C. (hereinafter as "Lender").

GRANT OF SECURITY INTEREST.  For valuable consideration, Grantor grants to Lender a security interest in the Collateral to secure the indebtedness and agrees that Lender shall have the rights stated in this Agreement with respect to the Collateral, in addition to all other rights which Lender may have by law.

DEFINITIONS.  The following words shall have the following meanings when used in this Agreement:

Agreement.  The word "Agreement" means this Pledge Agreement, as this Pledge Agreement may be amended or modified from time to time, together with all exhibits and schedules attached to this Pledge Agreement from time to time.

Collateral.  The word "Collateral" means the following specifically described property, which Grantor has delivered or agrees to deliver (or cause to be delivered) immediately to Lender, together with all Income and Proceeds as described below:

The membership interests of Grantor in and to Ring-neck Energy & Feed, LLC (a South Dakota ethanol facility) described on Schedule 1 hereto, including money and other rights to payment to Grantor from Ring-neck Energy & Feed, LLC, and all additions, replacements of and substitution for all or any part of Grantor’s right, title and interest in and to Ring-neck Energy & Feed, LLC and all products and proceeds (including but not limited to all insurance payments) of or relating to the foregoing interests of Grantor in and to Ring-neck Energy & Feed, LLC. 

Grantor.  The word "Grantor" means Granite Falls Energy, LLC, a Minnesota Limited Liability Company.

Indebtedness: The word “Indebtedness” means the principal amount under the Note, together with all interest thereon, and (b) the performance of all the covenants, conditions and agreements contained in the Note.

Lender.  The word "Lender" means Project Hawkeye, L.L.C., its successors and assigns.

Note.  The word "Note" means the Note dated August 2, 2017, in the principal amount of $7,500,000.00 from Grantor to Lender, together with all renewals of, extension of, modifications of, refinancings of, consolidations of and substitutions.

Obligor.  The word "Obligor" means and includes without limitation any and all persons or entities obligated to pay money or to perform some other act under the Collateral.

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Proceeds.  The word “Proceeds” shall have such meaning as provided in Section 9-102 of the Uniform Commercial code as in effect from time to time in the State of Minnesota.

Related Documents.  The words "Related Documents" means and include without limitation all promissory notes, credit agreements, loan agreements, guaranties, security agreements, mortgages, deeds of trust, and all other instruments, agreements and documents, whether now or hereafter existing, executed in connection with the Indebtedness.

GRANTOR'S REPRESENTATIONS AND WARRANTIES WITH RESPECT TO THE COLLATERAL.  Grantor represents and warrants to Lender that:

Ownership.  Grantor is the lawful owner of the Collateral free and clear of all security interests, liens, encumbrances and claims of others.

Right to Pledge.  Grantor has the full right, power and authority to enter into this Agreement and to pledge the Collateral.

Binding Effect.  This Agreement is binding upon Grantor, as well as Grantor's heirs, successors, representatives and assigns, and is legally enforceable in accordance with its terms.

No Further Assignment.  Grantor has not, and will not, sell, assign, transfer, encumber or otherwise dispose of any of Grantor's rights in the Collateral except as provided in this Agreement.

No Defaults.  There are no defaults existing under the Collateral, and there are no offsets or counterclaims to be same, Grantor will strictly and promptly perform each of the terms, conditions, covenants and agreements contained in the Collateral which are to be performed by Grantor, if any.

No Violation.  The execution and deliver of this Agreement will not violate any law or agreement governing Grantor or to which Grantor is a party.

LENDER'S RIGHTS AND OBLIGATIONS WITH RESPECT TO COLLATERAL.  Lender may hold the Collateral until all the indebtedness has been paid and satisfied and thereafter may deliver the Collateral to any Grantor.  Lender shall have the following rights in addition to all other rights it may have by law:

Maintenance and Protection of Collateral.  Lender may, but shall not be obligated to, take such steps as it deems necessary or desirable to protect, maintain, insure, store, or care for the Collateral, including payment of any liens or claims against the Collateral.  Lender may charge any cost incurred in so doing to Grantor.

Transactions with Others.  Lender may (a) extend time for payment or other performance, (b) grant a renewal or change in terms of conditions, or (c) compromise, compound or release any obligation, with any one or more Obligors, endorsers, or Guarantors of the Indebtedness as Lender deems advisable, without obtaining the prior written consent of Grantor, and no such act or failure to act shall affect Lender’s rights against Grantor or the Collateral.

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All Collateral Secures Indebtedness.  All collateral shall be security for the Indebtedness, whether the Collateral is located at one or more offices or branches of Lender and whether or not the office or branch where the Indebtedness is created is aware of or relies upon the Collateral.

Dividends.  Lender agrees that the Grantor may, unless an Event of Default shall have occurred and be continuing, receive and retain all dividends and other distributions with respect to the Collateral.

Power of Attorney.  Grantor irrevocably appoints Lender as Grantor's attorney-in-fact, with full power of substitution, (a) to demand, collect, receive, receipt for, sue and recover all Income and Proceeds and other sums of money and other property which may now or hereafter become due, owing or payable from the Obligors in accordance with the terms of the Collateral; (b) to execute, sign and endorse any and all instruments, receipts, checks, drafts and warrants issued in payment for the Collateral; (c) to settle or compromise any and all claims arising under the Collateral, and in the place and stead of Grantor, execute and deliver Grantor's release and a quittance for Grantor; (d) to file any claim or claims or to take any action or institute or take part in any proceedings, either in Lender's own name or in the name of Grantor, or otherwise, which in the discretion of Lender may seem to be necessary or advisable; and (e) to execute the Grantor's name and to deliver to the Obligators on Grantor's behalf, at the time and in the manner specified by the Collateral, any necessary instruments or documents.

Perfection of Security Interest.  Upon request of Lender, Grantor will deliver to Lender any and all of the documents evidencing or constituting the Collateral.  Grantor hereby appoints Lender as Grantor's irrevocable attorney-in-fact for the purpose of executing any documents necessary to perfect or to continue the security interest granted by this Agreement.

EXPENDITURES BY LENDER.  If not discharged or paid when due, Lender may (but shall not be obligated to) discharge or pay any amounts required to be discharged or paid by Grantor under this Agreement, including without limitation all taxes, liens, security interests, encumbrances, and other claims, at any time levied or placed on the Collateral.  Lender also may (but shall not be obligated to) pay all costs for insuring, maintaining and preserving the Collateral.  All such expenditures incurred or paid by Lender for such purposes will then bear interest at the rate charged under the Note from the date incurred or paid by Lender to the date of repayment by Grantor.  All such expenses shall become a part of the Indebtedness and, at Lender's option, will (a) be payable on demand, (b) be added to the balance of the Note and be apportioned among and be payable with any installment payments to become due during either (i) the term of any applicable insurance policy or (ii) the remaining term of the Note, or (c) be treated as a balloon payment which will be due and payable at the Note's maturity.  This Agreement also will secure payment of these amounts.  Such right shall be in addition to all other rights and remedies to which Lender may be entitled upon the occurrence of an Event of Default.

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LIMITATIONS ON OBLIGATIONS OF LENDER.  Lender shall use ordinary reasonable care in the physical preservation and custody of the Collateral in Lender's possession, but shall have no other obligation to protect the Collateral or its value.  In particular, but without limitation, Lender shall have no responsibility for (a) any depreciation in value of the Collateral or for the collection or protection of any income and Proceeds from the Collateral, (b) preservation  of rights against parties to the Collateral or against third persons, (c) ascertaining any maturities, calls, conversion, exchanges, offers, tenders, or similar matters relating to any of the Collateral, or (d) informing Grantor about any of the above, whether or not Lender has or is deemed to have knowledge of such matters.  Except as provided above, Lender shall have no liability for depreciation or deterioration of the Collateral.

EVENTS OF DEFAULT.  Each of the following shall constitute an Event of Default under this Agreement:

Default on Indebtedness.  Failure of Grantor to make any payment when due on the indebtedness.

Other Defaults.  Failure of Grantor to comply with or to perform any other term, obligation, covenant or condition contained in this Agreement or in any of the Related Documents or in any other agreement between Lender and Grantor.  If any default, other than a Default on Indebtedness, is curable and if Grantor has not been given a prior notice of a breach of the same provision of this Agreement, it may be cured (and no Event of Default will have occurred) if Grantor, after Lender sends written notice demanding cure of such default, (a) cures the default within fifteen (15) days; or (b), if the cure requires more than fifteen (15) days, immediately initiates steps which Lender deems in Lender's sole discretion to be sufficient to cure the default and thereafter continues and completes all reasonable and necessary steps sufficient to produce compliance as soon as reasonably practical.

False Statements.  Any warranty, representation or statement made or furnished to Lender by or on behalf of Grantor under this Agreement is false or misleading in any material respect, either now or at the time made or furnished.

Defective Collateralization.  This Agreement or any of the Related Documents ceases to be in full force and effect (including failure of any collateral documents to create a valid and perfected security interest or lien) at any time and for any reason.

Insolvency.  The dissolution or termination of Grantor's existence as a going business, the insolvency of Grantor, the appointment of a receiver for any part of Grantor's property, any assignment for the benefit of creditors, or the commencement of any proceeding under any bankruptcy or insolvency laws by or against Grantor.

Creditor or Forfeiture Proceedings.  Commencement of foreclosure or forfeiture proceedings, whether by judicial proceeding, self-help repossession or any other method, by any creditor of Grantor or by any governmental agency against the Collateral or any other collateral security the Indebtedness.  However, this Event of Default shall not apply if there is a good faith dispute by Grantor as to the validity or reasonableness of the claim which is the basis of the creditor or forfeiture proceeding and if Grantor gives Lender written notice of the creditor or forfeiture proceeding and deposits with Lender monies or a surety bond for the creditor or forfeiture proceeding, in an amount determined by Lender, in its sole discretion,

4

as being an adequate reserve or bond for the dispute.

Insecurity.  Lender, in good faith, deems itself insecure.

RIGHTS AND REMEDIES ON DEFAULT.  If an Event of Default occurs under this Agreement, at any time thereafter, Lender may exercise any one or more of the following rights and remedies:

Accelerate Indebtedness.  Declare all indebtedness, including any prepayment penalty which Grantor would be required to pay, immediately due and payable, without notice of any kind to Grantor.

Collect the Collateral.  Collect any of the Collateral and, at Lender's option and to the extent permitted by applicable law, retain possession of the Collateral while suing on the Indebtedness.

Sell the Collateral.  Sell the Collateral, at Lender's discretion, as a unit or in parcels, at one or more public or private sales.  Unless the Collateral is perishable or threatens to decline speedily in value or is of a type customarily sold on a recognized market, Lender shall give or mail to Grantor or any of them, notice at least ten (10) days in advance of the time and place of any public sale, or of the date after which any private sale may be made.  Grantor agrees that any requirement of reasonable notice is satisfied if Lender mails notice by ordinary mail addressed to Grantor, or any of the, at the last address Grantor has given Lender in writing.  If a public sale is held, there shall be sufficient compliance with all requirements or notice to the public by a single publication in any newspaper of general circulation in the county where the Collateral is located, setting forth the time and place of sale and a brief description of the property to be sold.  Lender may be a purchaser at any public sale.

Register Securities.  Register any securities included in the Collateral in Lender's name and exercise any rights normally incident to the ownership of securities.

Sell Securities.  Sell any securities included in the Collateral in the manner consistent with applicable federal and state securities laws, notwithstanding any other provision of this or any other agreement.  If, because of restrictions under such laws, Lender is or believes it is unable to sell the securities in an open market transaction, Grantor agrees that Lender shall have no obligation to delay sale until the securities can be registered, and may make a private sale to one or more persons or to a restricted group of persons even through such sale may result in a price that is less favorable than might be obtained in an open market transaction, and such a sale shall be considered commercially reasonable.  If any securities held as Collateral are "restricted securities" as defined in the Rules of the Securities and Exchange Commission (such as Regulation D or Rule 144) or state securities departments under state "Blue Sky" laws, or if Grantor is an affiliate of the issuer of the securities, Grantor agrees that neither Borrower nor any member of the borrower's family and neither Grantor nor any member of Grantor's family will sell or dispose of any securities of such issuer without containing Lender's prior written consent.

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Foreclosure.  Maintain a judicial suit for foreclosure and sale of the Collateral.

Transfer Title.  Effect transfer of title upon sale of all or part of the Collateral.  For this purpose, Grantor irrevocably appoints Lender as its attorney-in-fact to execute endorsements, assignments and instruments in the name of Grantor and each of them (if more than one) as shall be necessary or reasonable.

Other Rights and Remedies.  Have and exercise any or all of the rights and remedies of a secured creditor under the provisions of the Uniform Commercial Code, at law, in equity, or otherwise.

Application of Proceeds.  Apply any cash which is part of the Collateral, or which is received from the collection or sale of the Collateral, to reimbursement of any expenses, including any costs for registration of securities, commissions incurred in connection with a sale, attorney fees as provided below, and court costs, whether or not there is a lawsuit and including any fees on appeal, incurred by Lender in connection with the collection and sale of such collateral and to the payment of the indebtedness of Grantor to Lender, with any excess funds to be paid to Grantor as the interests of Grantor may appear.  Grantor agrees, to the extent permitted by law, to pay any deficiency after application of the proceeds of the Collateral to the Indebtedness.

Cumulative Remedies.  All of Lender's rights and remedies, whether evidenced by this Agreement or by any other writing, shall be cumulative and may be exercised singularly or concurrently.  Election by Lender to pursue any remedy shall not exclude pursuit of any other remedy, and an election to make expenditures or to take action to perform an obligation of Grantor under this Agreement, after Grantor's failure to perform, shall not affect Lender's right to declare a default and to exercise its remedies.

MISCELLANEOUS PROVISIONS.  The following miscellaneous provisions are a part of this Agreement:

Amendments.  This Agreement, together with any Related Documents, constitutes the entire understanding and agreement of the parties as to the matters set forth in this Agreement.  No alteration of or amendment to this Agreement shall be effective unless given in writing and signed by the party or parties sought to be charged or bound by the alteration or amendment.

Applicable Law.  This Agreement has been delivered to Lender and accepted by Lender in the State of Minnesota.  If there is a lawsuit, Grantor agrees upon Lender's require to submit to the jurisdiction of the courts of Lyon County, the State of Minnesota.  This Agreement shall be governed by and construed in accordance with the laws of the State of Minnesota.

Attorneys' Fees; Expenses.  Grantor agrees to pay upon demand all of Lender's costs and expenses, including attorney's fees and Lender's legal expenses, incurred in connection with the enforcement of this Agreement.  Lender may pay someone else to help enforce this Agreement, and Grantor shall pay the costs and expenses of such enforcement.  Costs and expenses include Lender's Attorneys' fees and legal expenses whether or not there is a lawsuit, including attorneys' fees and legal expenses for bankruptcy proceedings (and including efforts to modify or vacate any automatic stay or injunction), appeals, and any anticipated post-judgment collection services.  Grantor also shall pay all court costs and such additional fees as may be directed by the court.

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Statutory Rights Not Waived.  Notwithstanding any other provision of this Agreement, Grantor does not waive or agree to forego any of Grantor's statutory rights unless the waiver of such a right is expressly authorized by law.

Caption Headings.  Caption headings in this Agreement are for convenience purposes only and are not to be used to interpret or define the provisions of this Agreement.

Multiple Parties.  All obligations of Grantor under this Agreement shall be joint and several, and all references to Grantor shall mean each and every Grantor.  This means that each of the persons signing below is responsible for all obligations in this Agreement.

Notices. All notices required to be given under this Agreement shall be given in writing and shall be effective when actually delivered or when deposited with a nationally recognized overnight courier or deposited in the United States mail, first class, postage prepaid, addressed to the party to whom the notice is to be given at the address shown above.  Any party may change its address for notices under this Agreement by giving applicable law, if there is more than one Grantor, notice to the Grantor will constitute notice to all Grantors.  For notice purposes, Grantor agrees to keep Lender informed at all times of Grantor's current address(es).

Severability.  If a court of competent jurisdiction finds any provision of this Agreement to be invalid or unenforceable as to any person or circumstance, such finding shall not render that provision invalid or unenforceable as to any other persons or circumstances.  If feasible, any such offending provision shall be deemed to be modified to be within the limits of enforceability or validity; however, if the offending provision cannot be so modified, it shall be stricken and all other provisions of this Agreement in all other respects shall remain valid and enforceable.

Successor Interests.  Subject to the limitations set forth above on transfer of the Collateral, this Agreement shall be binding upon and inure to the benefit of the parties, their successors and assigns.

Waiver.  Lender shall not be deemed to have waived any rights under this Agreement unless such wavier is given in writing and signed by Lender.  No delay or omission on the part of Lender in exercising any right shall operate as a waiver of such right or any other right.  A waiver by Lender of a provision of this Agreement shall not prejudice or constitute a waiver of Lender's right otherwise to demand strict compliance with that provision or any other provision of this Agreement.  No prior waiver by lender, nor any course of dealing between Lender and Grantor, shall constitute a waiver of any of Lender's rights or of a any of Grantor's obligations as to any future transactions.  Whenever the Consent of Lender is required under this Agreement, the granting of such consent by Lender in any instance shall not constitute continuing consent to subsequent instances where such consent is required and in all cases such consent may be granted or withheld in the sole discretion of Lender.

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This Pledge Agreement is being granted to secure that certain nonrecourse Promissory Note of identical date. All terms and conditions of this Pledge Agreement shall be construed in light of the nonrecourse nature of said Promissory Note and the security granted hereby shall be limited only to Grantor’s right, title and interest in and to assets and proceeds from Ring-neck Energy & Feed, LLC corresponding to Grantor’s ownership of 1,500 membership units in and to Ring-neck Energy & Feed, LLC.  This Pledge Agreement does not grant any security or collateral in any other assets of Grantor, but grants security and collateral only in Grantor’s right, title and interest (membership units) as held in Ring-neck Energy & Feed, LLC and any proceeds or amount due from Ring-neck Energy & Feed, LLC to Grantor. 

Moreover, this Pledge Agreement does not grant any right to claim amounts direct from Grantor or assert claims for monetary payment from Grantor.  Any and all claims related to this Pledge Agreement, whether for payment on said Promissory Note, attorneys’ fees or other costs of collection, shall be limited to claims against Grantor’s interest in and to and right of payments from Ring-neck Energy & Feed, LLC.

This Pledge Agreement is intended to grant a purchase money security interest.  However, Lender is entitled to request a subordination regarding the 1,500 membership units in Ring-neck Energy & Feed, LLC from any prior outstanding security interest granted by Grantor. 

EACH GRANTOR ACKNOWLEDGES HAVING READ ALL THE PROVISIONS OF THIS PLEDGE AGREEMENT, AND EACH GRANTOR AGREES TO ITS TERMS. THIS AGREEMENT IS DATED AUGUST 2, 2017.

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Dated:  August 2, 2017 

GRANITE FALLS ENERGY, LLC

By: /s/ Steve A. Christensen

Its:  GM/CEO

PROJECT HAWKEYE, L.L.C.

By: /s/ Ron Fagen

Its:  Managing Member

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EX-31.1

EXHIBIT 31.1

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

(SECTION 302 CERTIFICATION)

I, Steve Christensen, certify that:

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

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

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

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

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

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

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

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

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

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

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

Date:	September 14, 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:	September 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 July 31, 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:	September 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 July 31, 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:	September 14, 2017	/s/ Stacie Schuler
		Stacie Schuler, Chief Financial Officer
		(Principal Financial Officer)

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Document and Entity Information Document - shares	9 Months Ended
	Jul. 31, 2017	Sep. 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	Jul. 31, 2017
Document Fiscal Year Focus	2017
Document Fiscal Period Focus	Q3
Amendment Flag	false
Entity Common Stock, Shares Outstanding		30,606
Entity Current Reporting Status	Yes

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Condensed Consolidated Balance Sheets - USD ($)	Jul. 31, 2017	Oct. 31, 2016
Current Assets
Cash	$ 20,375,684	$ 13,797,857
Restricted cash	144,345
Accounts receivable	2,187,964	6,654,994
Inventory	12,898,923	18,341,413
Commodity derivative instruments	311,382	1,228,926
Prepaid expenses and other current assets	565,715	325,989
Total current assets	36,484,013	40,349,179
Property, Plant and Equipment
Property and Equipment, net	73,711,995	78,968,016
Goodwill	1,372,473	1,372,473
Investment	750,000
Other Assets	752,643	781,254
Total Assets	113,071,124	121,470,922
Current Liabilities
Current maturities of long-term debt	436,341	490,057
Checks drawn in excess of bank balance		1,866,683
Accounts payable	4,403,666	5,624,840
Corn payable to FCE	1,368,098	5,358,111
Accrued expenses	544,588	997,319
Total current liabilities	6,752,693	14,337,010
Long-term Debt, less current portion	1,122,391	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 July 31, 2017 and October 31, 2016	80,570,226	83,684,529
Non-controlling interest	24,625,814	22,055,714
Total members' equity	105,196,040	105,740,243
Total Liabilities and Members’ Equity	$ 113,071,124	$ 121,470,922

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Condensed Consolidated Balance Sheets (Parenthetical) - shares	Jul. 31, 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

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Condensed Consolidated Statements of Operations - USD ($)	3 Months Ended		9 Months Ended
	Jul. 31, 2017	Jul. 31, 2016	Jul. 31, 2017	Jul. 31, 2016
Condensed Statements of Operations [Abstract]
Revenues	$ 54,250,994	$ 58,018,553	$ 161,629,116	$ 159,994,605
Cost of Goods Sold	50,047,853	51,716,678	146,624,568	149,986,152
Gross Profit	4,203,141	6,301,875	15,004,548	10,008,453
Operating Expenses	1,463,014	1,284,016	4,654,769	4,174,358
Operating Income	2,740,127	5,017,859	10,349,779	5,834,095
Other Income (Expense)
Other income, net	51,660	2,962	462,533	101,769
Interest income	16,730	1,848	23,614	6,384
Interest expense	(86,688)	(152,403)	(162,295)	(333,045)
Total other income (expense), net	(18,298)	(147,593)	323,852	(224,892)
Net Income	2,721,829	4,870,266	10,673,631	5,609,203
Less: Net Income Attributable to Non-controlling Interest	(672,208)	(1,377,444)	(2,616,744)	(1,405,337)
Net Income Attributable to Granite Falls Energy, LLC	$ 2,049,621	$ 3,492,822	$ 8,056,887	$ 4,203,866
Weighted Average Units Outstanding - Basic and Diluted (in units)	30,606	30,606	30,606	30,606
Net Income Per Unit - Basic and Diluted (in dollars per unit)	$ 66.97	$ 114.12	$ 263.25	$ 137.35
Distributions Per Unit (in dollars per unit)			$ 365.00	$ 315.00

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Condensed Consolidated Statements of Cash Flows - USD ($)	9 Months Ended
	Jul. 31, 2017	Jul. 31, 2016
Cash Flows from Operating Activities
Net income	$ 10,673,631	$ 5,609,203
Adjustments to reconcile net income to net cash provided by operations:
Depreciation and amortization	7,094,707	7,212,835
Change in fair value of commodity derivative instruments	(461,723)	716
Gain on sale of assets	(95,300)
Change in operating assets and liabilities
Restricted cash	(144,345)	(1,800,483)
Commodity derivative instruments	1,379,267	1,537,986
Accounts receivable	4,467,030	2,747,632
Inventory	5,442,490	1,449,015
Prepaid expenses and other current assets	(239,726)	(191,716)
Accounts payable	(5,299,721)	(1,630,272)
Accrued expenses	(452,731)	(8,830)
Net Cash Provided by Operating Activities	22,363,579	14,926,086
Cash Flows from Investing Activities
Payment for investment deposit	(750,000)
Payments for capital expenditures	(1,721,541)	(4,238,444)
Proceeds from disposal of assets	95,300
Net Cash Used in Investing Activities	(2,376,241)	(4,238,444)
Cash Flows from Financing Activities
Proceeds from long-term debt		9,820,223
Payments on long-term debt	(324,994)	(9,860,232)
Payments on checks drawn in excess of bank balance	(1,866,683)	(347,235)
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	(13,409,511)	(12,034,689)
Net Increase (Decrease) in Cash	6,577,827	(1,347,047)
Cash - Beginning of Period	13,797,857	12,696,536
Cash - End of Period	20,375,684	11,349,489
Cash paid during the period for:
Interest Expense	162,295	333,045
Supplemental Disclosure of Noncash Investing, Operating and Financing Activities
Capital expenditures and construction in process included in accounts payable	$ 88,534	$ 154,169

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Summary of Significant Accounting Policies

9 Months Ended

Jul. 31, 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 July 31, 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 (“SEC”). 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. By letter dated July 12, 2017, GFE was notified of Ringneck’s acceptance of GFE’s subscription and that payment of the balance of GFE’s subscription due under the promissory note was due not later than August 2, 2017. Subsequent to the end of the third fiscal quarter, on August 2, 2017, GFE borrowed $7.5 million under its credit facility with Project Hawkeye, LLC (“Project Hawkeye”), an affiliate of Fagen, Inc., which is a member of GFE, and paid $6,750,000 to Ringneck as payment of the remaining balance of GFE’s subscription.  See Note 6 below for the terms of GFE’s credit facility with Project Hawkeye.

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. GFE’s investment is sufficient to secure the Company the right to appoint one director to the board of directors of Ringneck and GFE has appointed Steve Christensen, its CEO to serve as its appointed director.  

The investment will be 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

9 Months Ended

Jul. 31, 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. Market fluctuations in the price of and demand for these products may have a significant adverse effect on the Company’s operations, profitability and the availability and adequacy of cash flow to meet the Company’s working capital requirements.

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.  On March 20, 2017, the previously announced 2017 RVOs went into effect.

On July 5, 2017, the EPA announced the proposed rule for 2018 RVOs, which maintains the number of gallons that may be met by corn-based ethanol at 15.0 billion gallons. However, the total 2018 annual volume requirement for renewable fuel in the proposed 2018 rule is set at 19.24 billion gallons of renewable fuels, significantly below the 26 billion gallons statutorily mandated for 2018. According to the RFS, if mandatory renewable fuel volumes are reduced by at least 20% for two consecutive years, the EPA is required to modify, or reset, statutory volumes through 2022. With the 2018 being the first year the total proposed RVOs are more than 20% below statutory levels, the EPA administrator has directed  EPA staff to initiate the required technical analysis to inform a reset rule. If 2019 RVOs are also more than 20% below statutory levels, an RVO reset will be triggered under the RFS. This will require the EPA to modify statutory volumes through 2022 within one year of the trigger event, with the standard for review based on the same factors to be utilized when the EPA sets RVOs post-2022.

Beginning in January 2016, various ethanol and agricultural industry groups petitioned a federal appeals court to hear a legal challenge to of the EPA’s decision to reduce the total renewable fuel volume requirements for 2016 through use of its “inadequate domestic supply” waiver authority. On July 28, 2017, the U.S. Court of Appeals for the D.C. Circuit ruled in favor of the petitioners, concluding the EPA erred in its exercise of  “inadequate domestic supply” waiver authority by considering demand-side constraints. As a result, the Court vacated the EPA’s decision to reduce the total renewable fuel volume requirements for 2016, and remanded to the EPA to address the 2016 total renewable fuels volume requirements. While management believes the decision should benefit the ethanol industry overall by clarifying the EPA's waiver analysis is limited to consideration of  supply-side factors only, no direct impact on the Company is expected from the decision.

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 gasoline, 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

9 Months Ended

Jul. 31, 2017

Inventory [Abstract]

Inventory

3.   INVENTORY

Inventories consist of the following:

	July 31, 2017		October 31, 2016
	(unaudited)
Raw materials	$	2,351,698	$	9,098,492
Supplies		2,768,156		2,755,958
Work in process		1,303,901		1,347,754
Finished goods		6,475,168		5,139,209
Totals	$	12,898,923	$	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 $65,000 and $108,000 for the nine months ended July 31, 2017 and 2016, respectively.

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Derivative Instruments

9 Months Ended

Jul. 31, 2017

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments and Hedging Activities Disclosure [Text Block]

4.   DERIVATIVE INSTRUMENTS

As of July 31, 2017, the total notional amount of GFE’s outstanding corn derivative instruments was approximately 3,760,000 bushels, comprised of long corn positions on 2,000,000 bushels that were entered into to hedge forecasted ethanol sales through September 2017, and short corn positions on 1,760,000 bushels that were entered into to hedge forecasted corn purchases through December 2018. There may be offsetting positions that are not shown on a net basis that could lower the notional amount of positions outstanding as disclosed above.

As of July 31, 2017, the total notional amount of GFE’s outstanding ethanol derivative instruments was approximately 1,260,000 gallons that were entered into to hedge forecasted ethanol sales through September 2017.

As of July 31, 2017, GFE had no restriced cash and approximately $95,000 due to a broker related to corn derivatives held by a broker.

As of July 31, 2017, the total notional amount of HLBE’s outstanding corn derivative instruments was approximately 4,800,000 bushels, comprised of long corn positions on 2,000,000 bushels that were entered into to hedge forecasted ethanol sales through September 2017, and short corn positions on 2,800,000 bushels that were entered into to hedge forecasted corn purchases through December 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 July 31, 2017, the total notional amount of HLBE’s outstanding ethanol derivative instruments was approximately 1,260,000 gallons that were entered into to hedge forecasted ethanol sales through September 2017.

As of July 31, 2017, HLBE had approximately $144,000 of cash collateral (restricted cash) and approximately $95,000 due to broker related to corn derivatives held by a broker.

The following tables provide details regarding the Company's derivative instruments at July 31, 2017,  none of which were designated as hedging instruments:

	Consolidated Balance Sheet location	Assets		Liabilities
Corn contracts - GFE	Commodity derivative instruments	$	104,875	$	—
Corn contracts - HLBE	Commodity derivative instruments		104,275		—
Ethanol contracts - GFE	Commodity derivative instruments		51,116		—
Ethanol contracts - HLBE	Commodity derivative instruments		51,116		—
Totals		$	311,382	$	—

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  July 31,				Nine Months Ended July 31,
	Operations Location	2017		2016		2017		2016
Corn contracts	Cost of Goods Sold	$	287,865	$	1,261,468	$	857,218	$	1,238,098
Ethanol contracts	Revenues		(122,765)		(1,375,892)		(395,495)		(1,271,172)
Natural gas contracts	Cost of Goods Sold		—		—		—		32,358
Total gain (loss)		$	165,100	$	(114,424)	$	461,723	$	(716)

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Fair Value

9 Months Ended

Jul. 31, 2017

Fair Value Disclosures [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 July 31, 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:	July 31, 2017		Fair Value		(Level 1)		(Level 2)		(Level 3)
Commodity Derivative Instruments - Corn	$	209,150	$	209,150	$	209,150	$	—	$	—
Commodity Derivative Instruments - Ethanol	$	102,232	$	102,232	$	—	$	102,232	$	—

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

9 Months Ended

Jul. 31, 2017

Debt Disclosure [Abstract]

Debt Disclosure [Text Block]

6.   DEBT FACILITIES

Debt financing consists of the following:

	July 31, 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.		1,379,074		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.		67,158		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.		12,500		68,750
Note payable to non-controlling interest member of Agrinatural.  Interest is at One Month LIBOR plus 4.0%, which was approximately 5.23% and 4.53% at July 31, 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		1,558,732		1,883,726
Less: amounts due within one year		436,341		490,057
Net long-term debt	$	1,122,391	$	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 July 31, 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 July 31, 2017 and October 31, 2016. The amount available for borrowing under this facility was further reduced at September 1, 2017 to $6,000,000.

The interest rate is based on the bank's One Month London Interbank Offered Rate (“LIBOR”) Index Rate, plus 3.05%, which equated to 4.28% and 3.25% at July 31, 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.

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, LLC (“Fagen Energy”), an affiliate of Fagen, Inc., which is a member of GFE. The Fagen Energy credit facility would have allowed GFE to borrow up to $7.5 million of variable-rate, amortizing non-recourse debt from Fagen Energy using the Ringneck investment as collateral. Subsequent to the end of the third fiscal quarter, on August 2, 2017, GFE executed a termination and replacement agreement with Fagen Energy and Project Hawkeye, also an affiliate of Fagen, Inc., to terminate the Fagen Energy credit facility and the loan agreements entered into in conection with the Fagen Energy credit facility, and secure a replacement credit facility with Project Hawkeye on substantially the same as the terms under the terminated credit facility with Fagen Energy. On August 2, 2017, the Fagen Energy credit facility was terminated and there were no amounts outstanding at termination. 

On August 2, 2017, simultaneously with the termination of the Fagen Energy credit facility, GFE entered into a replacement credit facility with Project Hawkeye. The terms of the replacement credit facility allow GFE to borrow up to $7.5 million of variable-rate, amortizing non-recourse debt from Project Hawkeye using the Ringneck investment as collateral.  The Project Hawkeye 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 Project Hawkeye 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 August 2, 2026. 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 entered into in connection with the Project Hawkeye 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 Project Hawkeye will be to foreclose and seize all of GFE’s right, title and interest in its investment in Ringneck.

As of July 31, 2017, there were no amounts outstanding under this credit facility.  Subsequent to the end of the third fiscal quarter, on August 2, 2017, GFE borrowed $7.5 million under the Project Hawkeye credit facility to finance the balance of its investment in Ringneck.

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 July 31, 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 July 31, 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 LIBOR Index rate, which was 4.48% and 3.45% at July 31, 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 part of the credit facility closing, HLBE entered into an Administrative Agency Agreement with CoBank, ACP (“CoBank”).  CoBank purchased a participation interest in the revolving term loan and was appointed the administrative agent for the purpose of servicing the loan.  As a result, CoBank will act as the agent for lender with respect to the credit facility. HLBE agreed to pay CoBank an annual fee of $2,500 for its services as administrative agent.

Estimated annual maturities of debt at July 31, 2017, are as follows based on the most recent debt agreements:

2018	$	436,341
2019		322,319
2020		318,253
2021		339,097
2022		142,722
Total debt	$	1,558,732

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Leases

9 Months Ended

Jul. 31, 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 $770,000 and $804,000 for the three months ended July 31, 2017 and 2016, repectively, and approximately $2,395,000 and $2,510,000 for the nine months ended July 31, 2017 and 2016, repectively.

HLBE leases equipment, primarily rail cars, under operating leases through January 2027.  Rent expense for these leases was approximately $619,000 and $686,000 for the three months ended July 31, 2017 and 2016, repectively, and approximately $1,597,000 and $1,931,000 for the nine months ended July 31, 2017 and 2016, repectively

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Members' Equity

9 Months Ended

Jul. 31, 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 July 31, 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

9 Months Ended

Jul. 31, 2017

Commitments and Contingencies [Abstract]

Commitments and Contingencies

9.   COMMITMENTS AND CONTINGENCIES

Corn Storage and Grain Handling Agreement and Purchase Commitments

GFE had a corn storage and grain handling agreement with Farmers Cooperative Elevator Company (FCE), a member. Under the agreement, GFE previously agreed to purchase all of the corn needed for the operation of the plant from FCE. The price of the corn purchased was 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 began 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.  Subsequent to the end of third fiscal quarter, in exchange for the early termination, GFE paid an early termination fee to FCE of approximately $255,000, which was included as a component of corn payable to FCE within the condensed consolidated balance sheets at July 31, 2017. Prior to the amendment, the termination date of the corn storage and grain handling agreement was set to expire on November 2017.

At July 31, 2017, GFE had cash and basis contracts for forward corn contracts for approximately 3,049,000 bushels for delivery periods through December 2017.

At July 31, 2017,  HLBE had cash and basis contracts for forward corn purchase commitments for approximately 3,607,000 bushels for delivery periods through July 2018.

HLBE Corn Purchases - Members

HLBE purchased corn from board members of approximately $143,000 and $4,119,000 for the three months ended July 31, 2017 and 2016, respectively, and approximately $5,737,000 and $12,755,000 for the nine months ended July 31, 2017 and 2016, respectively.

Ethanol Contracts

At July 31, 2017, GFE had fixed and basis contracts to sell approximately $12,760,000 of ethanol for various delivery periods through September 2017.

At July 31, 2017, HLBE had fixed and basis contracts to sell approximately $12,528,000 of ethanol for various delivery periods through September 2017.

Distillers' Grain Contracts

At July 31, 2017, GFE had forward contracts to sell approximately $1,000,000 of distillers' grain for deliveries through August 2017.

At July 31, 2017, HLBE had forward contracts to sell approximately $394,000 of distillers' grains for delivery through August 2017.

Corn Oil

At July 31, 2017, GFE had forward contracts to sell approximately $458,000 of corn oil for delivery through August 2017.

At July 31, 2017, HLBE had forward contracts to sell approximately $770,000 of corn oil for delivery through September 2017.

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Summary of Significant Accounting Policies (Policies)

9 Months Ended

Jul. 31, 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 July 31, 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 (“SEC”). 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.

Inventory

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

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

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. By letter dated July 12, 2017, GFE was notified of Ringneck’s acceptance of GFE’s subscription and that payment of the balance of GFE’s subscription due under the promissory note was due not later than August 2, 2017. Subsequent to the end of the third fiscal quarter, on August 2, 2017, GFE borrowed $7.5 million under its credit facility with Project Hawkeye, LLC (“Project Hawkeye”), an affiliate of Fagen, Inc., which is a member of GFE, and paid $6,750,000 to Ringneck as payment of the remaining balance of GFE’s subscription.  See Note 6 below for the terms of GFE’s credit facility with Project Hawkeye.

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. GFE’s investment is sufficient to secure the Company the right to appoint one director to the board of directors of Ringneck and GFE has appointed Steve Christensen, its CEO to serve as its appointed director.  

The investment will be 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)

9 Months Ended

Jul. 31, 2017

Inventory in Process [Abstract]

Schedule of Inventory

	July 31, 2017		October 31, 2016
	(unaudited)
Raw materials	$	2,351,698	$	9,098,492
Supplies		2,768,156		2,755,958
Work in process		1,303,901		1,347,754
Finished goods		6,475,168		5,139,209
Totals	$	12,898,923	$	18,341,413

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Derivative Instruments (Tables)

9 Months Ended

Jul. 31, 2017

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Schedule of derivative instruments in Statements of Financial Position

The following tables provide details regarding the Company's derivative instruments at July 31, 2017,  none of which were designated as hedging instruments:

	Consolidated Balance Sheet location	Assets		Liabilities
Corn contracts - GFE	Commodity derivative instruments	$	104,875	$	—
Corn contracts - HLBE	Commodity derivative instruments		104,275		—
Ethanol contracts - GFE	Commodity derivative instruments		51,116		—
Ethanol contracts - HLBE	Commodity derivative instruments		51,116		—
Totals		$	311,382	$	—

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	$	—

Schedule of gains (losses) from derivative instruments

	Statement of	Three Months Ended  July 31,				Nine Months Ended July 31,
	Operations Location	2017		2016		2017		2016
Corn contracts	Cost of Goods Sold	$	287,865	$	1,261,468	$	857,218	$	1,238,098
Ethanol contracts	Revenues		(122,765)		(1,375,892)		(395,495)		(1,271,172)
Natural gas contracts	Cost of Goods Sold		—		—		—		32,358
Total gain (loss)		$	165,100	$	(114,424)	$	461,723	$	(716)

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Fair Value (Tables)

9 Months Ended

Jul. 31, 2017

Fair Value Disclosures [Abstract]

Schedule of derivative assets and liabilities measured at fair value

The following table provides information on those derivative assets and liabilities measured at fair value on a recurring basis at July 31, 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:	July 31, 2017		Fair Value		(Level 1)		(Level 2)		(Level 3)
Commodity Derivative Instruments - Corn	$	209,150	$	209,150	$	209,150	$	—	$	—
Commodity Derivative Instruments - Ethanol	$	102,232	$	102,232	$	—	$	102,232	$	—

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)

9 Months Ended

Jul. 31, 2017

Debt Disclosure [Abstract]

Schedule of debt financing

	July 31, 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.		1,379,074		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.		67,158		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.		12,500		68,750
Note payable to non-controlling interest member of Agrinatural.  Interest is at One Month LIBOR plus 4.0%, which was approximately 5.23% and 4.53% at July 31, 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		1,558,732		1,883,726
Less: amounts due within one year		436,341		490,057
Net long-term debt	$	1,122,391	$	1,393,669

Schedule of annual maturities of debt

Estimated annual maturities of debt at July 31, 2017, are as follows based on the most recent debt agreements:

2018	$	436,341
2019		322,319
2020		318,253
2021		339,097
2022		142,722
Total debt	$	1,558,732

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Summary of Significant Accounting Policies (Details) gal in Millions	9 Months Ended
	Jul. 31, 2017 segment gal
Summary of significant accounting policies
Number of reportable segments | segment	1
Granite Falls Energy, LLC Excluding Heron Lake BioEnergy, LLC
Summary of significant accounting policies
Plant production capacity	60.0
Production volume permitted	70.0
Heron Lake BioEnergy, LLC
Summary of significant accounting policies
Plant production capacity	60.0
Production volume permitted	72.3
Heron Lake BioEnergy, LLC
Summary of significant accounting policies
Ownership percentage	50.70%
Noncontrolling Interest, Ownership Percentage by Noncontrolling Owners	49.30%
Project Viking, LLC
Summary of significant accounting policies
Ownership percentage	100.00%
Agrinatural, LLC | Maximum
Summary of significant accounting policies
Revenues of subsidiary, percentage	1.00%
Agrinatural, LLC | Heron Lake BioEnergy, LLC
Summary of significant accounting policies
Ownership percentage	73.00%
Noncontrolling Interest, Ownership Percentage by Noncontrolling Owners	27.00%

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Summary of Significant Accounting Policies, Investments (Details) $ / shares in Units, gal in Millions			9 Months Ended
	Aug. 02, 2017 USD ($)	Nov. 01, 2016 USD ($) director $ / shares shares gal	Jul. 31, 2017 USD ($)	Jul. 31, 2016 USD ($)
Investment
Payment for equity method investment			$ 750,000
Proceeds from long-term debt				$ 9,820,223
Ringneck Energy & Feed, LLC
Investment
Expected ethanol production capacity | gal		80
Number of directors Company has the right to appoint | director		1
Granite Falls Energy, LLC Excluding Heron Lake BioEnergy, LLC | Ringneck Energy & Feed, LLC
Investment
Units purchased | shares		1,500
Price per unit (in dollars per unit) | $ / shares		$ 5,000
Total cost		$ 7,500,000
Payment for equity method investment	$ 6,750,000	750,000
Note payable		$ 6,750,000
Granite Falls Energy, LLC Excluding Heron Lake BioEnergy, LLC | Fagen Energy, LLC Credit Facility | Ringneck Energy & Feed, LLC
Investment
Proceeds from long-term debt	$ 7,500,000

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Risks and Uncertainties Narrative (Details) gal in Millions	9 Months Ended	12 Months Ended
	Jul. 31, 2017	Dec. 31, 2019	Dec. 31, 2018 Y gal	Jul. 05, 2017 gal	Nov. 23, 2016 gal
Ethanol
Concentration Risk [Line Items]
Renewable volume obligation				15,000	15,000
Renewable Fuels
Concentration Risk [Line Items]
Renewable volume obligation			26,000
Percentage mandatory renewable fuel volumes are reduced			20.00%
Number of consecutive years | Y			2
Period to modify volumes after trigger event		1 year
Renewable Fuels | Proposed plan
Concentration Risk [Line Items]
Renewable volume obligation			19,240
Minimum | Renewable Fuels
Concentration Risk [Line Items]
Percentage below statutory levels		20.00%	20.00%
Minimum | Product | Ethanol
Concentration Risk [Line Items]
Average percentage	75.00%
Minimum | Product | Corn
Concentration Risk [Line Items]
Average percentage	65.00%
Maximum | Product | Ethanol
Concentration Risk [Line Items]
Average percentage	90.00%
Maximum | Product | Corn
Concentration Risk [Line Items]
Average percentage	85.00%

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Inventory (Details) - USD ($)	9 Months Ended
	Jul. 31, 2017	Jul. 31, 2016	Oct. 31, 2016
Inventory
Raw materials	$ 2,351,698		$ 9,098,492
Supplies	2,768,156		2,755,958
Work in process	1,303,901		1,347,754
Finished goods	6,475,168		5,139,209
Total inventory, net	12,898,923		$ 18,341,413
Ethanol
Inventory
Loss on inventories	$ 65,000	$ 108,000

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Derivative Instruments - Assets And Liabilities (Details)	9 Months Ended
	Jul. 31, 2017 USD ($) bu gal	Oct. 31, 2016 USD ($)
Derivatives, Fair Value [Line Items]
Cash collateral (restricted cash)	$ 144,345
Derivative asset, carrying value	$ 311,382	$ 1,228,926
Granite Falls Energy, LLC Excluding Heron Lake BioEnergy, LLC | Corn Contracts
Derivatives, Fair Value [Line Items]
Total nonmonetary notional amount outstanding | bu	3,760,000
Cash collateral (restricted cash)	$ 0
Due to a broker related to margin requirements	$ 95,000
Granite Falls Energy, LLC Excluding Heron Lake BioEnergy, LLC | Corn Contracts | Long position
Derivatives, Fair Value [Line Items]
Total nonmonetary notional amount outstanding | bu	2,000,000
Granite Falls Energy, LLC Excluding Heron Lake BioEnergy, LLC | Corn Contracts | Short position
Derivatives, Fair Value [Line Items]
Total nonmonetary notional amount outstanding | bu	1,760,000
Granite Falls Energy, LLC Excluding Heron Lake BioEnergy, LLC | Ethanol Contracts
Derivatives, Fair Value [Line Items]
Total nonmonetary notional amount outstanding | gal	1,260,000
Heron Lake BioEnergy, LLC
Derivatives, Fair Value [Line Items]
Cash collateral (restricted cash)	$ 144,000
Due to a broker related to margin requirements	$ 95,000
Heron Lake BioEnergy, LLC | Corn Contracts
Derivatives, Fair Value [Line Items]
Total nonmonetary notional amount outstanding | bu	4,800,000
Heron Lake BioEnergy, LLC | Corn Contracts | Long position
Derivatives, Fair Value [Line Items]
Total nonmonetary notional amount outstanding | bu	2,000,000
Heron Lake BioEnergy, LLC | Corn Contracts | Short position
Derivatives, Fair Value [Line Items]
Total nonmonetary notional amount outstanding | bu	2,800,000
Heron Lake BioEnergy, LLC | Ethanol Contracts
Derivatives, Fair Value [Line Items]
Total nonmonetary notional amount outstanding | gal	1,260,000
Not Designated as Hedging Instruments
Derivatives, Fair Value [Line Items]
Derivative asset, carrying value	$ 311,382	1,228,926
Not Designated as Hedging Instruments | Granite Falls Energy, LLC Excluding Heron Lake BioEnergy, LLC | Corn Contracts
Derivatives, Fair Value [Line Items]
Derivative asset, carrying value	104,875	63,050
Not Designated as Hedging Instruments | Granite Falls Energy, LLC Excluding Heron Lake BioEnergy, LLC | Ethanol Contracts
Derivatives, Fair Value [Line Items]
Derivative asset, carrying value	51,116	503,538
Not Designated as Hedging Instruments | Heron Lake BioEnergy, LLC | Corn Contracts
Derivatives, Fair Value [Line Items]
Derivative asset, carrying value	104,275	388,525
Not Designated as Hedging Instruments | Heron Lake BioEnergy, LLC | Ethanol Contracts
Derivatives, Fair Value [Line Items]
Derivative asset, carrying value	$ 51,116	$ 273,813

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Derivative Instrument - Income Statement (Details) - Not Designated as Hedging Instruments - USD ($)	3 Months Ended		9 Months Ended
	Jul. 31, 2017	Jul. 31, 2016	Jul. 31, 2017	Jul. 31, 2016
Derivative Instruments, Gain (Loss) [Line Items]
Gains (losses) on derivative instruments	$ 165,100	$ (114,424)	$ 461,723	$ (716)
Cost of Goods Sold | Corn Contracts
Derivative Instruments, Gain (Loss) [Line Items]
Gains (losses) on derivative instruments	287,865	1,261,468	857,218	1,238,098
Cost of Goods Sold | Natural Gas Contracts
Derivative Instruments, Gain (Loss) [Line Items]
Gains (losses) on derivative instruments				32,358
Revenues | Ethanol Contracts
Derivative Instruments, Gain (Loss) [Line Items]
Gains (losses) on derivative instruments	$ (122,765)	$ (1,375,892)	$ (395,495)	$ (1,271,172)

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Fair Value (Details) - Fair Value, Measurements, Recurring - USD ($)	Jul. 31, 2017	Oct. 31, 2016
Corn Contracts | Carrying (Reported) Amount, Fair Value Disclosure
Fair value
Derivative asset, fair value	$ 209,150	$ 451,575
Corn Contracts | Estimate of Fair Value Measurement
Fair value
Derivative asset, fair value	209,150	451,575
Corn Contracts | Fair Value, Inputs, Level 1
Fair value
Derivative asset, fair value	209,150	451,575
Ethanol Contracts | Carrying (Reported) Amount, Fair Value Disclosure
Fair value
Derivative asset, fair value	102,232	777,351
Ethanol Contracts | Estimate of Fair Value Measurement
Fair value
Derivative asset, fair value	102,232	777,351
Ethanol Contracts | Fair Value, Inputs, Level 1
Fair value
Derivative asset, fair value		$ 777,351
Ethanol Contracts | Fair Value, Inputs, Level 2
Fair value
Derivative asset, fair value	$ 102,232

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Debt Facilities - Granite Falls Energy And Heron Lake BioEnergy (Details) - USD ($)			9 Months Ended
	Aug. 02, 2017	Nov. 01, 2016	Jul. 31, 2017	Jul. 31, 2016	Sep. 01, 2017	Nov. 30, 2016	Oct. 31, 2016
Line of Credit Facility [Line Items]
Long-term Debt			$ 1,558,732				$ 1,883,726
Less: amounts due within one year			436,341				490,057
Net long term debt			1,122,391				$ 1,393,669
Savings collateral			144,345
Proceeds from long-term debt				$ 9,820,223
Granite Falls Energy, LLC Excluding Heron Lake BioEnergy, LLC | Ringneck Energy & Feed, LLC
Line of Credit Facility [Line Items]
Units purchased		1,500
Heron Lake BioEnergy, LLC
Line of Credit Facility [Line Items]
Savings collateral			$ 144,000
Revolving Term Loan | Granite Falls Energy, LLC Excluding Heron Lake BioEnergy, LLC
Line of Credit Facility [Line Items]
Debt Instrument, Interest Rate, Effective Percentage			4.28%				3.25%
Savings collateral			$ 0
Line of Credit Facility, Maximum Borrowing Capacity			18,000,000
Line of Credit Future Reduction, Amount			2,000,000
Line of Credit Facility, Amount Outstanding			0				$ 0
Line of Credit Facility, Remaining Borrowing Capacity			$ 8,000,000		$ 6,000,000		$ 10,000,000
Fagen Energy, LLC Credit Facility | Granite Falls Energy, LLC Excluding Heron Lake BioEnergy, LLC
Line of Credit Facility [Line Items]
Line of Credit Facility, Maximum Borrowing Capacity						$ 7,500,000
Line of Credit Facility, Amount Outstanding	$ 0
Fagen Energy, LLC Credit Facility | Granite Falls Energy, LLC Excluding Heron Lake BioEnergy, LLC | Ringneck Energy & Feed, LLC
Line of Credit Facility [Line Items]
Proceeds from long-term debt	7,500,000
Revolving term note payable to lending institution | Heron Lake BioEnergy, LLC
Line of Credit Facility [Line Items]
Debt Instrument, Interest Rate, Effective Percentage			4.48%				3.45%
Line of Credit Facility, Maximum Borrowing Capacity			$ 28,000,000
Line of Credit Future Reduction, Amount			3,500,000
Line of Credit Facility, Amount Outstanding			0				$ 0
Line of Credit Facility, Remaining Borrowing Capacity			$ 17,500,000				21,000,000
Line of credit unused commitment fee (as a percent)			0.50%
Assessments payable as part of water treatment agreement, with interest at 6.55%, due in 2021 | Heron Lake BioEnergy, LLC
Line of Credit Facility [Line Items]
Long-term Debt			$ 1,379,074				1,517,046
Semi-annual payment			$ 189,393
Debt Instrument, Interest Rate, Stated Percentage			6.55%
Period of worth of debt			1 year
Deposit on debt service payments			$ 364,000
Assessments payable as part of water supply agreement, with interest at 8.73%, due in 2019 | Heron Lake BioEnergy, LLC
Line of Credit Facility [Line Items]
Long-term Debt			$ 67,158				97,930
Debt Instrument, Interest Rate, Stated Percentage			8.73%
Monthly payment			$ 3,942
Note payable to electrical company, due September 2017 | Heron Lake BioEnergy, LLC
Line of Credit Facility [Line Items]
Long-term Debt			$ 12,500				68,750
Debt Instrument, Interest Rate, Stated Percentage			0.00%
Monthly payment			$ 6,250
Maintenance fee (as a percent)			1.00%
Note payable to noncontrolling interest member of Agrinatural, Interest One Month LIBOR plus 4.0 % | Heron Lake BioEnergy, LLC
Line of Credit Facility [Line Items]
Long-term Debt			$ 100,000				$ 200,000
Debt Instrument, Interest Rate, Effective Percentage			5.23%				4.53%
Project Hawkeye Loan | Granite Falls Energy, LLC Excluding Heron Lake BioEnergy, LLC
Line of Credit Facility [Line Items]
Line of Credit Facility, Maximum Borrowing Capacity	$ 7,500,000
Line of Credit Facility, Amount Outstanding			$ 0
Interest rate floor	3.55%
Maximum period of interest payments	2 years
Debt instrument amortization period after first two years	7 years
Proceeds from long-term debt	$ 7,500,000
Project Hawkeye Loan | Granite Falls Energy, LLC Excluding Heron Lake BioEnergy, LLC | Ringneck Energy & Feed, LLC
Line of Credit Facility [Line Items]
Units purchased	1,500
CoBank | Heron Lake BioEnergy, LLC
Line of Credit Facility [Line Items]
Debt Instrument, Fee Amount			$ 2,500
One Month LIBOR | Revolving Term Loan | Granite Falls Energy, LLC Excluding Heron Lake BioEnergy, LLC
Line of Credit Facility [Line Items]
Debt Instrument, Basis Spread on Variable Rate			3.05%
One Month LIBOR | Revolving term note payable to lending institution | Heron Lake BioEnergy, LLC
Line of Credit Facility [Line Items]
Debt Instrument, Basis Spread on Variable Rate			3.25%
One Month LIBOR | Note payable to noncontrolling interest member of Agrinatural, Interest One Month LIBOR plus 4.0 % | Heron Lake BioEnergy, LLC
Line of Credit Facility [Line Items]
Debt Instrument, Basis Spread on Variable Rate			4.00%
One Month LIBOR | Project Hawkeye Loan | Granite Falls Energy, LLC Excluding Heron Lake BioEnergy, LLC
Line of Credit Facility [Line Items]
Debt Instrument, Basis Spread on Variable Rate	3.05%

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Debt Facilities - Estimated Annual Maturities (Details) - USD ($)	Jul. 31, 2017	Oct. 31, 2016
Debt Disclosure [Abstract]
2018	$ 436,341
2019	322,319
2020	318,253
2021	339,097
2022	142,722
Long-term Debt	$ 1,558,732	$ 1,883,726

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Leases (Details) - USD ($)	3 Months Ended		9 Months Ended
	Jul. 31, 2017	Jul. 31, 2016	Jul. 31, 2017	Jul. 31, 2016
Granite Falls Energy, LLC Excluding Heron Lake BioEnergy, LLC
Lease
Operating Leases, Rent Expense	$ 770,000	$ 804,000	$ 2,395,000	$ 2,510,000
Heron Lake BioEnergy, LLC
Lease
Operating Leases, Rent Expense	$ 619,000	$ 686,000	$ 1,597,000	$ 1,931,000

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Members' Equity (Details)		1 Months Ended			9 Months Ended
	Dec. 17, 2015 USD ($) shares	Apr. 30, 2017 USD ($) $ / shares shares	Dec. 31, 2016 USD ($) $ / shares	Dec. 31, 2015 USD ($) $ / shares	Jul. 31, 2017 USD ($) item $ / shares shares	Jul. 31, 2016 USD ($) $ / shares	Oct. 31, 2016 shares
Number of classes of membership units | item					1
Membership Units, Par value | $ / shares					$ 0
Common Units Authorized | shares					30,606		30,606
Common Units Issued | shares					30,606		30,606
Common Units Outstanding | shares					30,606		30,606
Distribution per unit declared (in dollars per unit) | $ / shares			$ 365	$ 315	$ 365.00	$ 315.00
Amount of distribution declared			$ 11,171,000	$ 9,641,000
Amount of distribution paid					$ 11,171,190	$ 9,640,887
Heron Lake BioEnergy, LLC
Distribution per unit declared (in dollars per unit) | $ / shares				$ 0.05
Amount of distribution declared				$ 3,897,000
Heron Lake BioEnergy, LLC | Noncontrolling Interest
Amount of distribution declared				$ 2,007,000
Amount of distribution paid	$ 1,926,000
Heron Lake BioEnergy, LLC
Distributions received	$ 1,971,000
Units purchased | shares		54,875
Price per unit (in dollars per unit) | $ / shares		$ 0.85
Total purchase price		$ 47,000
Heron Lake BioEnergy, LLC | Capital Unit, Class A
Common Units Outstanding | shares	39,420,949
Heron Lake BioEnergy, LLC | Capital Unit, Class B
Common Units Outstanding | shares	15,000,000

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Commitments and Contingencies (Details) - USD ($)	3 Months Ended		9 Months Ended
	Jul. 31, 2017	Jul. 31, 2016	Jul. 31, 2017	Jul. 31, 2016
Granite Falls Energy, LLC Excluding Heron Lake BioEnergy, LLC
Purchase Commitment, Excluding Long-term Commitment [Line Items]
Early termination fee payable	$ 255,000		$ 255,000
Granite Falls Energy, LLC Excluding Heron Lake BioEnergy, LLC | Corn Contracts
Purchase Commitment, Excluding Long-term Commitment [Line Items]
Forward contracts			3,049,000
Granite Falls Energy, LLC Excluding Heron Lake BioEnergy, LLC | Corn Oil
Purchase Commitment, Excluding Long-term Commitment [Line Items]
Future Commitment, Dollar			458,000
Granite Falls Energy, LLC Excluding Heron Lake BioEnergy, LLC | Ethanol Contracts
Purchase Commitment, Excluding Long-term Commitment [Line Items]
Future Commitment, Dollar			12,760,000
Granite Falls Energy, LLC Excluding Heron Lake BioEnergy, LLC | Distillers' Grains
Purchase Commitment, Excluding Long-term Commitment [Line Items]
Future Commitment, Dollar			1,000,000
Heron Lake BioEnergy, LLC | Corn Contracts
Purchase Commitment, Excluding Long-term Commitment [Line Items]
Forward contracts			3,607,000
Heron Lake BioEnergy, LLC | Corn Contracts | Board Members
Purchase Commitment, Excluding Long-term Commitment [Line Items]
Amount of corn purchased	$ 143,000	$ 4,119,000	5,737,000	$ 12,755,000
Heron Lake BioEnergy, LLC | Corn Oil
Purchase Commitment, Excluding Long-term Commitment [Line Items]
Future Commitment, Dollar			770,000
Heron Lake BioEnergy, LLC | Ethanol Contracts
Purchase Commitment, Excluding Long-term Commitment [Line Items]
Future Commitment, Dollar			12,528,000
Heron Lake BioEnergy, LLC | Distillers' Grains
Purchase Commitment, Excluding Long-term Commitment [Line Items]
Future Commitment, Dollar			$ 394,000