10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x	Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
For the fiscal quarter ended September 30, 2019
o	Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.
Commission file number 000-53202

HOMELAND ENERGY SOLUTIONS, LLC
(Exact name of registrant as specified in its charter)
Iowa	20-3919356
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
2779 Highway 24, Lawler, Iowa	52154
(Address of principal executive offices)	(Zip Code)
(563) 238-5555
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None

Title of each class Trading Symbol(s) Name of each exchange on which registered

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.        x Yes o No

Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted 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 such files).

x Yes    o No

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

Large accelerated filer	o	Accelerated filer	o
Non-accelerated filer	x	Smaller Reporting Company	o
(Do not check if a smaller reporting company)		Emerging Growth Company	o
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.			o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). o Yes x No

As of November 14, 2019, we had 90,420 membership units outstanding. On June 13, 2013, the Company entered into an agreement with Steve Retterath, the Company's largest equity holder, to repurchase and retire all of the units owned by Mr. Retterath. The Company agreed to repurchase and retire 25,860 membership units owned by Mr. Retterath in exchange for $30 million. Recently, a court ruled that the repurchase agreement was valid and enforceable. The Company's position is as of the closing date of the original agreement, Mr. Retterath is no longer the equitable owner of any membership units in the Company. As a result, the Company has recorded a $30 million short-term liability related to the amount the Company agreed to pay Mr. Retterath to repurchase his membership units and has correspondingly reduced members' equity on the balance sheet. The 90,420 membership units outstanding include the contested membership units the Company agreed to repurchase from Mr. Retterath.

INDEX

	Page No.
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	25
Item 4. Controls and Procedures	25
Part II. OTHER INFORMATION	26
Item 1. Legal Proceedings	26
Item 1A. Risk Factors	26
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds	27
Item 3. Defaults Upon Senior Securities	27
Item 4. Mine Safety Disclosures	27
Item 5. Other Information	27
Item 6. Exhibits	27
Signatures	28

PART I.        FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

Homeland Energy Solutions, LLC

Balance Sheets

	September 30, 2019		December 31, 2018
ASSETS	(Unaudited)		(Audited)
CURRENT ASSETS
Cash and cash equivalents	$	19,195,937	$	28,751,994
Trading securities	52,224,179		30,553,821
Accounts receivable	3,630,526		7,231,721
Inventory	13,421,558		14,750,199
Prepaid and other	3,534,209		3,345,961
Derivative instruments	647,975		929,383
Total current assets	92,654,384		85,563,079
PROPERTY AND EQUIPMENT
Land and improvements	23,169,342		23,169,342
Buildings	8,718,139		8,718,139
Equipment	218,987,373		212,760,113
Construction in progress	2,873,621		4,131,692
	253,748,475		248,779,286
Less accumulated depreciation	125,145,366		113,583,362
Total property and equipment	128,603,109		135,195,924
OTHER ASSETS
Right of use asset operating leases	5,187,724		—
Utility rights, net of amortization of $1,694,288 and $1,591,994	613,741		716,035
Other assets	4,173,106		4,118,614
Total other assets	9,974,571		4,834,649
TOTAL ASSETS	$	231,232,064	$	225,593,652

See Notes to Unaudited Financial Statements.

3

Homeland Energy Solutions, LLC

Balance Sheets (continued)

	September 30, 2019		December 31, 2018
LIABILITIES AND MEMBERS' EQUITY	(Unaudited)		(Audited)
CURRENT LIABILITIES
Accounts payable	$	8,561,480	$	13,177,598
Due to former member	30,000,000		30,000,000
Accrued expenses	1,299,259		1,370,498
Current portion long term debt	6,000,000		6,000,000
Current portion operating lease liability	1,574,828		—
Total current liabilities	47,435,567		50,548,096
COMMITMENTS AND CONTINGENCIES (Note 5)	—		—
LONG-TERM LIABILITIES
Term note	14,961,307		17,950,754
Operating lease liability	3,612,896		—
Total long-term liabilities	18,574,203		17,950,754
MEMBERS' EQUITY (64,560 units issued and outstanding)	165,222,294		157,094,802
TOTAL LIABILITIES AND MEMBERS' EQUITY	$	231,232,064	$	225,593,652

See Notes to Unaudited Financial Statements.

4

Homeland Energy Solutions, LLC

Statements of Operations

(Unaudited)

	Three Months Ended			Three Months Ended			Nine Months Ended			Nine Months Ended
	September 30, 2019			September 30, 2018			September 30, 2019			September 30, 2018
Revenue	$	76,896,475		$	77,391,884		$	243,831,429		$	238,202,792
Costs of goods sold	72,369,032			69,955,591			229,136,006			212,749,745
Gross profit	4,527,443			7,436,293			14,695,423			25,453,047
Selling, general and administrative expenses	726,263			895,382			2,870,660			2,743,212
Operating income	3,801,180			6,540,911			11,824,763			22,709,835
Other income (expense)
Interest (expense)	(263,774		)	(337,620		)	(671,656		)	(1,061,558		)
Interest income	11,312			3,865			33,855			10,315
Other income	441,874			196,911			1,782,530			518,265
Total other income (expense)	189,412			(136,844		)	1,144,729			(532,978		)
Net income	$	3,990,592		$	6,404,067		$	12,969,492		$	22,176,857
Basic & diluted net income per capital unit	$	61.81		$	99.18		$	200.89		$	343.40
Weighted average number of units outstanding for the calculation of basic & diluted net income per capital unit	64,560			64,573			64,560			64,581
Distribution per Unit	$	—		$	—		$	75		$	150

See Notes to Unaudited Financial Statements.

5

Homeland Energy Solutions, LLC

Statements of Cash Flows

(Unaudited)

	Nine Months Ended			Nine Months Ended
	September 30, 2019			September 30, 2018
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	12,969,492		$	22,176,857
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	11,674,851			11,338,982
Unrealized gain on risk management activities	281,408			(601,027		)
Unrealized gain on trading securities activities	(1,670,358		)	(31,204		)
Change in working capital components:
Accounts receivable	3,601,195			(5,620,894		)
Inventory	1,328,641			2,845,364
Prepaid and other	(188,248		)	135,447
Accounts payable and other accrued expenses	(3,148,504		)	(2,924,112		)
Net cash provided by operating activities	24,848,477			27,319,413
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of trading securities	(30,000,000		)	—
Sales of trading securities	10,000,000			—
Issuance of Note Receivable	(350,000		)	—
Payment Received on Note Receivable	150,000			—
Payments for equipment and construction in progress	(6,508,042		)	(8,126,799		)
Decrease (increase) in other assets	145,508			(651,244		)
Net cash (used in) investing activities	(26,562,534		)	(8,778,043		)
CASH FLOWS FROM FINANCING ACTIVITIES
Distribution to members	(4,842,000		)	(9,687,750		)
Payments on long-term borrowings	(3,000,000		)	(3,000,000		)
Repurchase of Membership Units	—			(65,000		)
Net cash (used in) financing activities	(7,842,000		)	(12,752,750		)
Net (decrease) increase in cash and cash equivalents	(9,556,057		)	5,788,620
Cash and Cash Equivalents - Beginning	28,751,994			29,568,227
Cash and Cash Equivalents - Ending	$	19,195,937		$	35,356,847
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for interest, net of capitalized interest of $179,142 and $0	$	577,279		$	1,066,973
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES
Establishment of lease liability and right-of-use asset	$	6,320,411		$	—
Accounts payable issued for property and equipment additions	$	257,226		$	78,286

See Notes to Unaudited Financial Statements.

6

Homeland Energy Solutions, LLC

Statements of Changes in Members' Equity

	Members' Equity
Balance - December 31, 2017	$	151,600,547
Net income for the three-month period ended March 31, 2018	5,072,754
Balance - March 31, 2018	156,673,301
Net income for the three-month period ended June 30, 2018	10,700,036
Member distribution	(9,687,750		)
Balance - June 30, 2018	157,685,587
Net income for the three-month period ended September 30, 2018	6,404,067
Repurchase of units	(65,000		)
Balance - September 30, 2018	$	164,024,654

	Members' Equity
Balance - December 31, 2018	$	157,094,802
Net income for the three-month period ended March 31, 2019	4,719,055
Balance - March 31, 2019	161,813,857
Net income for the three-month period ended June 30, 2019	4,259,845
Member distributions	(4,842,000		)
Balance - June 30, 2019	161,231,702
Net income for the three-month period ended September 30, 2019	3,990,592
Balance - September 30, 2019	$	165,222,294

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

7

Homeland Energy Solutions, LLC

Notes to Unaudited Financial Statements

1. NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

The accompanying unaudited condensed financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted as permitted by such rules and regulations. These financial statements and related notes should be read in conjunction with the financial statements and notes thereto included in the Company's audited financial statements for the year ended December 31, 2018, contained in the Company's annual report on Form 10-K for 2018.

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

Nature of Business

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

Organization

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

Significant Accounting Policies:

Accounting Estimates

Management uses estimates and assumptions in preparing these financial statements in accordance with United States Generally Accepted Accounting Principles. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Actual results could differ from those estimates.

Cash & Cash Equivalents

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

Trading Securities

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

At September 30, 2019, trading securities consisted of short term bond mutual funds with an approximate cost of $52,044,000 and fair value of $52,224,000. At December 31, 2018, trading securities consisted of corporate bonds and short term bond mutual funds with an approximate cost of $31,292,000 and fair value of $30,554,000. For the three and nine months ended September 30, 2019, the Company recorded interest, dividend and net realized and unrealized gains from these investments of approximately $397,000 and $1,670,000, respectively, included in other income on the statement of operations. During the same time period of 2018, the Company recorded interest, dividends and net unrealized gains and losses from these investments of approximately $127,000 and $31,000, respectively.

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

8

Homeland Energy Solutions, LLC

Notes to Unaudited Financial Statements

Receivables

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

Note Receivable

The Company has a note receivable from an unrelated company. The Company carries the note at the current principal balance included in other assets. The note commenced in July, 2019 with a face value of $350,000 and matures August, 2021.

Investments

The Company has a less than 20% investment interest in Renewable Products Marketing Group, LLC ("RPMG"). This investment is being accounted for under the equity method of accounting, as the Company has significant influence, under which the Company's share of net income is recognized as income in the Company's statement of operations and added to the investment account. The investment balance is included in other assets and the income recognized as other income. The investment is evaluated for indications of impairment on a regular basis. A loss would be recognized when the fair value is determined to be less than the carrying value.

Revenue and Cost Recognition

In the first quarter of 2018, the Company adopted Accounting Standards Update (ASU) 2014-9, Revenue from Contracts with Customers (Topic 606). Under the ASU, revenue is recognized when a customer obtains control of promised goods or services in an amount that reflects the consideration the entity expects to receive in exchange for those goods or services. In addition, the standard requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The Company applied the five-step method outlined in the ASU to all contracts with customers and elected the modified retrospective implementation method. The Company generally has a single performance obligation in its arrangements with customers. The Company believes for its contracts with customers, control is transferred at a point in time, typically upon delivery to the customers. When the Company performs shipping and handling activities after the transfer of control to the customers (e.g., when control transfers prior to delivery), they are considered as fulfillment activities, and accordingly, the costs are accrued for when the related revenue is recognized. The Company generally expenses sales commissions when incurred because the amortization period would have been less than one year. The implementation of the new standard does not have any material impact on the measurement or recognition of revenue of prior periods, however additional disclosures have been added in accordance with the ASU.

The following is a description of principal activities from which we generate revenue. Revenues from contracts with customers are recognized when control of the promised goods or services are transferred to our customers, in an amount that reflects the consideration that we expect to receive in exchange for those goods or services.

• sales of ethanol;

• sales of distiller grains; and

• sales of corn oil;

All revenue recognized in the income statement is considered to be revenue from contracts with customers. The disaggregation of revenue according to product line, along with accounts receivable from contracts with customers, is as disclosed in Note 5.

Shipping costs incurred by the Company in the sale of ethanol and distiller grains are not specifically identifiable and as a result, revenue from the sale of ethanol and distiller grains is recorded based on the net selling price reported to the Company from the marketer. Rail car lease costs incurred by the Company in the sale and shipment of distiller grain products are included in the cost of goods sold.

Inventories

Inventories are generally valued at the lower of cost (first-in, first-out) or net realizable value.  In the valuation of inventories and purchase commitments, net realizable value is defined as estimated selling price in the ordinary course of business less reasonably predictable costs of completion, disposal, and transportation.

9

Homeland Energy Solutions, LLC

Notes to Unaudited Financial Statements

Property & Equipment

The Company reviews its property and equipment for impairment whenever events indicate that the carrying amount of the asset group may not be recoverable. If circumstances require an asset group be tested for possible impairment, the Company first compares undiscounted cash flows expected to be generated by the asset group to the carrying value of the asset group. If the carrying value of the asset group is not recoverable on an undiscounted cash flow basis, an impairment is recognized to the extent that the carrying value exceeds its fair value. Fair value is determined through various valuation techniques including discounted cash flow models, quoted market values and third-party independent appraisals, as considered necessary.

Derivative Instruments

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

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

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

Realized and unrealized gains and losses related to derivative contracts related to corn and natural gas are included as a component of cost of goods sold and derivative contracts related to ethanol are included as a component of revenue in the accompanying financial statements. The fair values of contracts entered through commodity exchanges are presented on the accompanying balance sheet as derivative instruments. All contracts with the same counter party are reported on a net basis.

Committed Shares to be Redeemed

On June 13, 2013, the Company entered into an agreement with Steve Retterath, the Company's largest member, to repurchase and retire all of the membership units owned by Mr. Retterath. The Company agreed to close on this repurchase on or before August 1, 2013. The Company agreed to repurchase and retire 25,860 membership units owned by Mr. Retterath in exchange for $30 million, to be paid in two equal installments payable at closing and on July 1, 2014. The transaction failed to close by the scheduled date due to objections by Mr. Retterath. Due to all conditions of the agreement being met prior to, or on, August 1, 2013, and a court ruling which found the agreement to be binding and enforceable, the Company believes that it has a binding agreement with Mr. Retterath; as such the commitment to repurchase and retire the membership units is reflected in the financial statements as a current liability, due to former member, as if the transaction had closed on August 1, 2013. See Note 9 for additional information.

Net Income per Unit

Basic and diluted net income per unit is computed by dividing net income by the weighted average number of members' units and members' unit equivalents outstanding during the period. There were no member unit equivalents outstanding during the periods presented; accordingly, the Company's basic and diluted net income per unit are the same.

Prior to, or on, August 1, 2013, the Company believes it has a binding agreement with Steve Retterath to repurchase and retire all 25,860 membership units owned by Mr. Retterath. These membership units have thus been excluded in the determination of net income per capital unit as presented in the Statement of Operations. The Company is currently involved in litigation with Mr. Retterath. There is potential that Mr. Retterath will continue as a unit holder upon conclusion of the litigation and said membership units would not be redeemed under the repurchase agreement. If the units are not redeemed, basic and diluted net income per unit, including the 25,860 units, for the three and nine months ended September 30, 2019 would be $44.13 and $143.44, respectively. Net income per unit for the three and nine months ended September 30, 2018 would have been $70.82 and $245.21, respectively.

10

Homeland Energy Solutions, LLC

Notes to Unaudited Financial Statements

Risks and Uncertainties

The Company has certain risks and uncertainties that it will experience during volatile market conditions, which can have a severe impact on operations. The Company's revenues are derived from the sale and distribution of ethanol, distiller grains and corn oil to customers primarily located in the United States. Corn for the production process is supplied to the plant primarily from local agricultural producers and from purchases on the open market. For the nine months ended September 30, 2019, ethanol sales averaged approximately 78% of total revenues, while approximately 18% of revenues were generated from the sale of distiller grains. Corn oil sales attributed approximately 4% of revenues during this time period. For the nine months ended September 30, 2019, corn costs averaged approximately 79% of cost of goods sold.

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

Recent & Pending Accounting Pronouncements

In February 2016, FASB issued ASU No. 2016-02 "Leases" ("ASU 2016-02"). ASU 2016-02 requires the recognition of lease assets and lease liabilities by lessees for all leases greater than one year in duration and classified as operating leases under previous GAAP. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, and for interim periods within that fiscal year. Under the new guidance, lessees will be required to recognize the following for all leases (with the exception of short-term leases): (1) a lease liability, which is a lessee's obligation to make lease payments arising from a lease, measured on a discounted cash flow basis; and (2) a "right of use" asset, which is an asset that represents the lessee's right to use the specified asset for the lease term. The Company adopted this accounting standard effective January 1, 2019. Upon adoption, the Company elected a practical expedient which allows existing leases to retain their classification as operating leases. The Company has elected to account for lease and related nonlease components as a single lease component. See Note 6 for more detailed information regarding leases.

In August 2018, FASB issued ASU No. 2018-13 "Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement" ("ASU 2018-13"). ASU 2018-13 changes some of the disclosure requirements related to fair value measurements related to the Level 1, 2 and 3 investments. ASU 2018-13 is effective for fiscal years beginning after December 15, 2019, and for interim periods within that fiscal year. The Company is currently evaluating the impact of its pending adoption of the new standard on the financial statement.

2.    INVENTORY

Inventory consisted of the following as of September 30, 2019 and December 31, 2018:

	September 30, 2019		December 31, 2018
Raw Materials	$	7,222,899	$	8,983,124
Work in Process	2,576,989		2,295,715
Finished Goods	3,621,670		3,471,360
Totals	$	13,421,558	$	14,750,199

3.    DEBT

Master Loan Agreement with Home Federal Savings Bank

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

11

Homeland Energy Solutions, LLC

Notes to Unaudited Financial Statements

Term Revolving Loan

Under the terms of the Second Supplement to the Master Loan Agreement, dated June 29, 2017, the Company has a $30 million term revolving loan which has a maturity date of December 31, 2022. Interest on the term revolving loan is due monthly and accrues at a rate equal to the one month LIBOR plus 310 basis points, 5.19% on September 30, 2019. There was no balance outstanding on the term revolving loan and $30 million available to be drawn as of September 30, 2019 and December 31, 2018, respectively.

Term Debt

Under the terms of the Fourth Supplement to the Master Loan Agreement, dated June 29, 2017, the Company has a $30 million term loan which has a maturity date of December 31, 2022. Interest on the term loan is at a fixed rate of 4.79%. The Company is required to make monthly interest payments beginning July 1, 2017 and bi-annual principal payments of $3 million beginning on June 30, 2018. The long-term portion of the outstanding debt is presented net of unamortized debt issuance costs of $38,693 and $49,246 as of September 30, 2019 and December 31, 2018, respectively.

At September 30, 2019, the Company had the following debt maturities on the term loan for the twelve month periods ended September 30:

2020	$	6,000,000
2021	6,000,000
2022	6,000,000
2023	3,000,000
Total principal payments	$	21,000,000

Covenants

During the term of the loans, the Company is subject to certain financial covenants at various times calculated monthly, quarterly or annually, including restriction of the payment of dividends and capital expenditures and maintenance of certain financial ratios including the minimum working capital and a fixed charge ratio as defined by the Master Loan Agreement. Failure to comply with the protective loan covenants or maintain the required financial ratios may cause acceleration of the outstanding principal balances on the loans and/or the imposition of fees, charges or penalties. The Company is in compliance with all debt covenants as of September 30, 2019.

4.    RELATED PARTY TRANSACTIONS

Due to former member

On June 13, 2013, we entered into an agreement with Steve Retterath, the Company's largest member, to repurchase and retire all of the units owned by Mr. Retterath. The Company agreed to close on this repurchase on or before August 1, 2013. The Company agreed to repurchase and retire 25,860 membership units owned by Mr. Retterath in exchange for $30 million, to be paid in two equal installments payable at closing and on July 1, 2014. The transaction failed to close by the scheduled date due to objections by Mr. Retterath. The Company believes that it has a binding agreement with Mr. Retterath. On August 14, 2013, the Company filed a lawsuit against Mr. Retterath in Iowa state court to enforce the terms of the repurchase agreement. The Company is asking the Iowa state court to require Mr. Retterath to complete the repurchase agreement pursuant to its terms.

Mr. Retterath contends he is not bound by the agreement.  The Company's position is as of the closing date, Mr. Retterath is no longer the equitable owner of any membership units in the Company. As a result, in 2013 the Company recorded a $30 million short-term liability related to the amount the Company agreed to pay Mr. Retterath to repurchase his membership units and correspondingly reduced members' equity on the balance sheet. If the Company is ultimately unsuccessful in its lawsuit against Mr. Retterath, the Company will reevaluate the accounting considerations made during the period of time that the lawsuit is pending.

Other matters

The Company has purchased corn and materials from members of its Board of Directors who own or manage elevators or are local producers of corn. Purchases during the three and nine months ended September 30, 2019 totaled approximately $1,016,000 and $2,995,000 respectively, and during the three and nine months ended September 30, 2018 totaled approximately $1,364,000 and $2,902,000, respectively. There is nothing due to these members at September 30, 2019 and December 31, 2018, respectively.

12

Homeland Energy Solutions, LLC

Notes to Unaudited Financial Statements

5.    COMMITMENTS, CONTINGENCIES, AGREEMENTS

Ethanol, corn oil, and distiller grains marketing agreements and major customers

The Company has entered into a marketing agreement with RPMG to sell all ethanol produced at the plant at a mutually agreed on price, less commission and transportation charges. As of September 30, 2019, the Company had no commitments to sell ethanol at fixed prices and 50 million of its produced gallons of ethanol at basis price levels indexed against exchanges for delivery through December 31, 2019.

The Company has entered into a marketing agreement with RPMG to sell all corn oil produced at the plant at a mutually agreed on price, less marketing fees and transportation charges. As of September 30, 2019, the Company had commitments to sell approximately 12 million pounds of corn oil at various fixed and basis price levels indexed against exchanges for delivery through December 31, 2019.

The Company also has an investment in RPMG, included in other assets, totaling approximately $2,402,000 and $2,522,000 as of September 30, 2019 and December 31, 2018, respectively.

The Company has entered into a marketing agreement to sell all distiller grains produced at the plant to CHS, an unrelated party, at a mutually agreed on price, less commission and transportation charges. The agreement was renewed for another one year term on April 1, 2019. The agreement calls for automatic renewal for successive one-year terms unless 90-day prior written notice is given before the current term expires. As of September 30, 2019, the Company had approximately 49,000 tons of distiller grains sales commitments for delivery through February 2020 at various fixed prices.

Sales and marketing fees related to the agreements in place for the three and nine months ended September 30, 2019 and 2018 were approximately as follows:

	Three Months Ended		Nine Months Ended		Three Months Ended		Nine Months Ended
	September 30, 2019		September 30, 2019		September 30, 2018		September 30, 2018
Sales ethanol	$	59,737,000	$	189,683,000	$	58,473,000	$	181,645,000
Sales distiller grains	13,689,000		43,944,000		15,662,000		47,312,000
Sales corn oil	3,471,000		10,205,000		3,257,000		9,246,000
Marketing fees ethanol	$	61,000	$	183,000	$	66,000	$	198,000
Marketing fees distiller grains	89,000		491,000		225,000		647,000
Marketing fees corn oil	27,000		78,000		26,000		76,000
	As of September 30, 2019		As of December 31, 2018
Amount due from RPMG	$	1,749,000	$	4,927,000
Amount due from CHS	1,881,000		2,170,000

At September 30, 2019, the Company had approximately $18,366,000 in outstanding priced corn purchase commitments for bushels at various prices and approximately 2,750,000 bushels of basis contracts through April 2021 accounted for under the normal purchase exclusion.

The Company has commitments for minimum purchases of various utilities such as natural gas and electricity over the next 12 months totaling approximately $12,775,000 accounted for under the normal purchase exclusion.

13

Homeland Energy Solutions, LLC

Notes to Unaudited Financial Statements

As of September 30, 2019, the Company had locked in place approximately 5,069,500 decatherms of natural gas at fixed prices through December 31, 2020 accounted for under the normal purchase exclusion. As of September 30, 2018, approximately 4,982,000 decatherms of natural gas was locked into place at fixed prices through December 31, 2019.

6.    LEASE OBLIGATIONS

Effective January 1, 2019, the Company adopted ASU 2016-02, Leases (Topic 842). The Company elected the option to apply the transition provisions at the adoption date instead of the earliest comparative period presented in the financial statements. By making this election, the Company has not applied retrospective reporting for 2018. The Company elected the short-term lease exception provided for in the standard and therefore only recognized right-of-use assets and lease liabilities for leases with a term greater than one year. The Company elected the package of practical expedients to not re-evaluate existing contracts as containing a lease or the lease classification unless it was not previously assessed against the lease criteria. In addition, the Company did not reassess initial direct costs for any existing leases.

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

The Company leases rail cars and rail moving equipment with original terms up to 7 years. The Company is obligated to pay costs of insurance, taxes, repairs and maintenance pursuant to the terms of the leases. These costs are in addition to regular lease payments and are not included in lease expense. Rent expense incurred for the operating leases during the three and nine months ended September 30, 2019 was approximately $460,000 and $1,314,000, respectively, and for the same period in 2018 was approximately $371,000 and $1,124,000, respectively. The lease agreements have maturity dates ranging from March 2022 to October 2025. The weighted average remaining life of the lease term for these leases was 3.15 years as of September 30, 2019.

The discount rate used in determining the lease liability for each individual lease was the Company's estimated incremental borrowing rate of 4.79%. The right-of-use asset operating lease, included in other assets, and operating lease liability, included in current and long term liabilities was $5,187,724 as of September 30, 2019.

At September 30, 2019, the Company had the following approximate minimum rental commitments under non-cancelable operating leases for the twelve month period ended September 30:

2020	$	1,789,000
2021	1,789,000
2022	1,356,000
2023	438,000
2024	134,000
2025	125,000
Total lease commitments	$	5,631,000

A reconciliation of the undiscounted future payments in the schedule above and the lease liability recognized in the consolidated balance sheet as of September 30, 2019, is shown below.

Undiscounted future payments	$	5,631,000
Discount effect	(443,276		)
	$	5,187,724

14

Homeland Energy Solutions, LLC

Notes to Unaudited Financial Statements

7. DERIVATIVE INSTRUMENTS

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

To reduce price risk caused by market fluctuations, the Company generally follows a policy of using exchange traded futures and options contracts to reduce its net position of merchandisable agricultural commodity inventories and forward cash purchase and sales contracts and uses exchange traded futures and options contracts to reduce price risk. Exchange-traded futures contracts are valued at market price. Changes in market price of exchange traded futures and options contracts related to corn and natural gas are recorded in costs of goods sold and changes in market prices of contracts related to the sale of ethanol, if applicable, are recorded in revenues.

The Company uses futures or options contracts to fix the purchase price of anticipated volumes of corn to be purchased and processed in a future month. The Company's plant will grind approximately 67 million bushels of corn per year.  Over the next twelve months, the Company has hedged and anticipates hedging between 5% and 25% of its anticipated annual grind.  At September 30, 2019, the Company has hedged portions of its anticipated monthly purchases for corn averaging approximately 11% of its anticipated monthly grind over the next twelve months.

The following table represents the approximate amount of realized/unrealized gains (losses) and changes in fair value recognized in earnings on commodity contracts for the three and nine months ending September 30, 2019 and 2018 and the fair value of derivatives as of September 30, 2019 and December 31, 2018:

	Income Statement Classification	Realized Gain		Change In Unrealized Gain (Loss)			Total Gain
Derivatives not designated as hedging instruments:
Commodity contracts for the
three months ended September 30, 2019	Cost of Goods Sold	$	2,431,000	$	2,102,000		$	4,533,000
Commodity contracts for the
three months ended September 30, 2018	Cost of Goods Sold	$	2,811,000	$	(842,000	)	$	1,969,000
Commodity contracts for the
nine months ended September 30, 2019	Cost of Goods Sold	$	1,113,000	$	2,102,000		$	3,215,000
Commodity contracts for the
nine months ended September 30, 2018	Cost of Goods Sold	$	2,406,000	$	901,000		$	3,307,000

	Balance Sheet Classification	September 30, 2019			December 31, 2018
Futures contracts
In gain position		$	2,421,000		$	271,000
In loss position		(66,000		)	(19,000		)
Cash (owed to) held by broker		(1,707,000		)	677,000
	Current Asset	$	648,000		$	929,000

15

Homeland Energy Solutions, LLC

Notes to Unaudited Financial Statements

8.    FAIR VALUE MEASUREMENTS

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

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

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

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

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

Trading securities: Trading securities consisting of corporate bonds and short term bond mutual funds are reported at fair value utilizing Level 1 inputs. Trading securities are measured at fair value using prices obtained from pricing services.

Derivative financial instruments: Commodity futures and exchange-traded commodity options contracts are reported at fair value utilizing Level 1 inputs. For these contracts, the Company obtains 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 CBOT and NYMEX markets. 

The following table summarizes financial assets and financial liabilities measured at fair value on a recurring basis as of September 30, 2019 and December 31, 2018, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value:

	Total			Level 1			Level 2		Level 3
As of September 30, 2019
Trading securities, assets	$	52,224,000		$	52,224,000		$	—	$	—
Derivative financial instruments
Assets	$	2,421,000		$	2,421,000		$	—	$	—
Liabilities	(66,000		)	(66,000		)	—		—
As of December 31, 2018
Trading securities, assets	$	30,554,000		$	30,554,000		$	—	$	—
Derivative financial instruments
Assets	$	271,000		$	271,000		—		—
Liabilities	(19,000		)	(19,000		)	—		—

The Company's financial assets and liabilities not recorded at fair value, for which carrying value approximates fair value, consists of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses. Additionally, fixed rate term debt, carried at book value of $21,000,000 at September 30, 2019, had an estimated fair value of approximately $21,007,000, determined

16

Homeland Energy Solutions, LLC

Notes to Unaudited Financial Statements

based on a discounted cash flows model. As of December 31, 2018, carrying value of long term debt carried at book value of $24,000,000 at December 31, 2018, had an estimated fair value of approximately $23,520,000.

9.    LITIGATION MATTERS

Retterath

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

GS Cleantech Corporation

On August 9, 2013, GS Cleantech Corporation (GS Cleantech), a subsidiary of Greenshift Corporation, filed a complaint against the Company alleging that the Company's operation of a corn oil extraction process licensed by the Company infringes patent rights claimed by GS Cleantech. GS Cleantech seeks royalties, damages and potentially triple damages associated with the alleged infringement, as well as attorney's fees from the Company. The Company filed a motion for summary judgment which was granted by the Court. GS Cleantech is appealing this decision.

17

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This report contains forward-looking statements that involve future events, our future performance and our expected future operations and actions. In some cases you can identify forward-looking statements by the use of words such as "may," "will," "should," "anticipate," "believe," "expect," "plan," "future," "intend," "could," "estimate," "predict," "hope," "potential," "continue," or the negative of these terms or other similar expressions. These forward-looking statements are only our predictions and involve numerous assumptions, risks and uncertainties. Our actual results or actions may differ materially from these forward-looking statements for many reasons, including the reasons described in this report or in our Annual Report on Form 10-K for the fiscal year ended December 31, 2018. We are not under any duty to update the forward-looking statements contained in this report. We cannot guarantee future results, levels of activity, performance or achievements. We caution you not to put undue reliance on any forward-looking statements, which speak only as of the date of this report. You should read this report and the documents that we reference in this report and have filed as exhibits, completely and with the understanding that our actual future results may be materially different from what we currently expect. We qualify all of our forward-looking statements by these cautionary statements.

Overview

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

Results of Operations

Comparison of Fiscal Quarters Ended September 30, 2019 and 2018

The following table shows the results of our operations and the percentage of revenues, cost of goods sold, operating expenses and other items to total revenues in our statement of operations for the three months ended September 30, 2019 and 2018:

	2019			2018
Income Statement Data	Amount		%	Amount			%
Revenue	$	76,896,475	100.0	$	77,391,884		100.0
Costs of goods sold	72,369,032		94.1	69,955,591			90.4
Gross profit	4,527,443		5.9	7,436,293			9.6
Selling, general and administrative expenses	726,263		0.9	895,382			1.2
Operating income	3,801,180		4.9	6,540,911			8.5
Other income (expense)	189,412		0.2	(136,844		)	(0.2	)
Net income	$	3,990,592	5.2	$	6,404,067		8.3

Revenue

Our total revenue for our third quarter of 2019 was approximately 1% less than our total revenue for our third quarter of 2018. Management attributes this decrease in revenue with decreased distiller grains revenue, partially offset by increased ethanol revenue during the 2019 period.

For our third quarter of 2019, our total ethanol revenue was approximately 2% greater than our third quarter of 2018 due to higher average ethanol prices. The average price we received for our ethanol during our third quarter of 2019 was approximately 6% greater than during our third quarter of 2018. Management attributes this increase in ethanol prices with higher corn prices and ethanol plants shutting down due to poor margins during the 2019 period. Management anticipates ethanol prices to remain

18

steady for the rest of our 2019 fiscal year. If export demand decreases, it may result in additional excess ethanol in the United States market which could negatively impact prices.

We sold approximately 3% fewer gallons of ethanol during our third quarter of 2019 compared to the same period of 2018. Management attributes this decrease in ethanol sales with decreased production at the plant following our fall shutdown. Management anticipates increased production during the fourth quarter of our 2019 fiscal year.

Our total distiller grains revenue was approximately 13% less during our third quarter of 2019 compared to the same period of 2018, due primarily to decreased dried distiller grains prices. The average price we received for our dried distiller grains was approximately 6% less during our third quarter of 2019 compared to the same period of 2018. We sell nearly all of our distiller grains in the dried form. Management attributes these lower distiller grains prices to supply and demand imbalances which have decreased distiller grains prices. Market corn prices are higher but distiller grains prices have not kept pace with increases in corn prices. Distiller grains are typically used as a feed substitute for corn and soybean meal. Management anticipates distiller grains prices will remain lower unless China reenters the distillers grains market, which could result in a significant increase in distiller grains demand. However, due to recent trade tensions between the United States and China, it is not anticipated that China will reenter the distiller grains market in the near term.

We sold approximately 6% fewer total tons of distiller grains during our third quarter of 2019 compared to the same period of 2018. This decrease was due to decreased production of distiller grains due to our decreased total production along with increased corn oil production. As we extract more corn oil from our distiller grains, it results in fewer tons of distiller grains production. Management anticipates distiller grains production will remain steady during the fourth quarter of our 2019 fiscal year.

Our total corn oil revenue was approximately 7% greater for our third quarter of 2019 compared to the same period of 2018 due to increased corn oil sales and relatively flat corn oil prices during the 2019 period. We sold approximately 4% more pounds of corn oil during our third quarter of 2019 compared to the same period of 2018 primarily because of improved corn oil extraction at the ethanol plant. The average price we received for our corn oil was comparable during our third quarter of 2019 compared to the same period of 2018.

Cost of Goods Sold

Our two primary costs of production are corn costs and natural gas costs. Our total cost of goods sold was approximately 3% greater for our third quarter of 2019 compared to the same period of 2018. Our cost of goods sold related to corn, without taking into account derivative instruments, was approximately 13% greater during our third quarter of 2019 compared to our third quarter of 2018, primarily due to higher corn costs per bushel during the 2019 period. Our average cost per bushel of corn was approximately 16% greater during our third quarter of 2019 compared to our third quarter of 2018 due to increased corn demand and late planting during 2019 which raises concerns about the size of the corn crop that will be harvested in the fall of 2019. We processed approximately 3% fewer bushels of corn during our third quarter of 2019 compared to our third quarter of 2018 due to reduced overall production at the ethanol plant during the 2019 period. Management anticipates corn prices will remain higher due to the late harvest and concerns regarding the amount of corn that will be harvested in the fall of 2019. Management expects that the late planting and poor weather conditions could result in higher corn prices into our 2020 fiscal year.

Our total cost of goods sold related to natural gas was less during our third quarter of 2019 compared to the same period of 2018 primarily due to lower average natural gas prices. During our third quarter of 2019, the average delivered price we paid per MMBtu of natural gas was approximately 7% less compared to the same period of 2018. We used approximately 2% fewer MMBtu of natural gas during our third quarter of 2019 compared to our third quarter of 2018 due to reduced production. Management anticipates natural gas prices will be higher in the remaining months of our 2019 fiscal year due to increased natural gas usage for heating. If we experience another cold and long winter, it could result in even higher natural gas prices during the winter months. In an effort to offset the risk of such increases, the Company has locked in pricing for approximately 85% of its anticipated natural gas needs through the end of 2019. Further, if a shortage of natural gas were to occur, it could result in significantly higher natural gas prices which could negatively impact our profitability.

We engage in risk management activities that are intended to fix the purchase price of the corn and natural gas we require to produce ethanol, distiller grains and corn oil. During our third quarter of 2019, we had a realized gain of approximately $2,339,000 and an unrealized gain of approximately $2,103,000 related to our corn and natural gas derivative instruments. During our third quarter of 2018, we had a realized gain of approximately $2,811,000 and an unrealized loss of approximately $842,000 related to our corn derivative instruments. We recognize the gains or losses that result from changes in the value of our corn and natural gas derivative instruments in cost of goods sold as the changes occur. Our plant is expected to use approximately 67 million bushels of corn per year following our expansion. As of September 30, 2019, the Company has hedged portions of its anticipated

19

monthly purchases for corn averaging approximately between 5% and 25% of its anticipated monthly grind for the next twelve months.

Selling, General and Administrative Expenses

Our selling, general and administrative expenses were less during our third quarter of 2019 than our third quarter of 2018, due primarily to fewer legal expenses as compared to 2018.

Other Income (Expense)

We had less interest expense during our third quarter of 2019 compared to the same period of 2018 due to less borrowing on our loans and interest that was capitalized during the 2019 period. We had more other income during our third quarter of 2019 compared to the same period of 2018 due to more income earned from our equity method investments in 2019.

Comparison of Nine Months Ended September 30, 2019 and 2018

The following table shows the results of our operations and the percentage of revenues, cost of goods sold, operating expenses and other items to total revenues in our statement of operations for the nine months ended September 30, 2019 and 2018:

	2019			2018
Income Statement Data	Amount		%	Amount			%
Revenue	$	243,831,429	100.0	$	238,202,792		100.0
Costs of goods sold	229,136,006		94.0	212,749,745			89.3
Gross profit	14,695,423		6.0	25,453,047			10.7
Selling, general and administrative expenses	2,870,660		1.2	2,743,212			1.2
Operating income	11,824,763		4.8	22,709,835			9.5
Other income (expense)	1,144,729		0.5	(532,978		)	(0.2	)
Net income	$	12,969,492	5.3	$	22,176,857		9.3

Revenue

Our total revenue for our nine months ended September 30, 2019 was approximately 2% greater than our total revenue for our nine months ended September 30, 2018.

For our nine months ended September 30, 2019, our total ethanol revenue was approximately 4% greater than our nine months ended September 30, 2018 due to increased ethanol production from our completed expansion. The average price we received for our ethanol during our nine months ended September 30, 2019 was the same as we received during our nine months ended September 30, 2018.

We sold approximately 4% more gallons of ethanol during our nine months ended September 30, 2019 compared to the same period of 2018.

Our total distiller grains revenue was approximately 7% less during our nine months ended September 30, 2019 compared to the same period of 2018, primarily due to decreased distiller grains prices. The average price we received for our dried distiller grains was approximately 7% less during our nine months ended September 30, 2019 compared to the same period of 2018. We sold approximately the same amount of total tons of distiller grains during our nine months ended September 30, 2019 compared to the same period of 2018.

Our total corn oil revenue was approximately 10% greater for our nine months ended September 30, 2019 compared to the same period of 2018 due to increased corn oil prices and increased corn oil sales during the 2019 period. We sold approximately 3% more pounds of corn oil during our nine months ended September 30, 2019 compared to the same period of 2018 primarily because of increased corn oil extraction efficiency during the 2019 period along with increased total production at the ethanol

20

plant. The average price we received for our corn oil was approximately 7% greater during our nine months ended September 30, 2019 compared to the same period of 2018.

Cost of Goods Sold

Our total cost of goods sold was approximately 8% greater for our nine months ended September 30, 2019 compared to the same period of 2018. Our cost of goods sold related to corn, without taking into account derivative instruments, was approximately 12% greater during our nine months ended September 30, 2019 compared to our nine months ended September 30, 2018 due to higher corn prices and increased corn consumption. Our average cost per bushel of corn was approximately 8% more during our nine months ended September 30, 2019 compared to our nine months ended September 30, 2018 due to unfavorable weather conditions which impacted our corn supply area during 2018. In addition, wet and cold weather delayed planting and resulted in uncertainty about the corn crop in the area that supplies the plant. Our increased corn consumption due to the plant expansion project may have resulted in higher market corn prices. We processed approximately 4% more bushels of corn during our nine months ended September 30, 2019 compared to our nine months ended September 30, 2018 due to increased production at the ethanol plant.

We experienced decreased natural gas prices during our nine months ended September 30, 2019 compared to the same period of 2018 primarily due to ample natural gas supplies and relatively consistent demand. During our nine months ended September 30, 2019, the average delivered price we paid per MMBtu of natural gas was approximately 7% less compared to the same period of 2018. We used approximately 4% more MMBtu of natural gas during nine months ended September 30, 2019 compared to our nine months ended September 30, 2018 due to increased production at the ethanol plant due to our plant expansion project.

We engage in risk management activities that are intended to fix the purchase price of the corn and natural gas we require to produce ethanol, distiller grains and corn oil. During our nine months ended September 30, 2019, we had a realized gain of approximately $1,021,000 related to our corn and natural gas derivative instruments and an unrealized gain of approximately $2,102,000 related to our corn derivative instruments. During our nine months ended September 30, 2018, we had a realized gain of approximately $2,406,000 and an unrealized gain of approximately $901,000 related to our corn derivative instruments. We recognize the gains or losses that result from changes in the value of our corn and natural gas derivative instruments in cost of goods sold as the changes occur.

Selling, General and Administrative Expenses

Our selling, general and administrative expenses were greater during nine months ended September 30, 2019 than our nine months ended September 30, 2018, primarily due to increased legal expenses in 2019 as compared to 2018.

Other Income (Expense)

We had less interest expense during our nine months ended September 30, 2019 compared to the same period of 2018 due to having less borrowing during the 2019 period as well as interest that was capitalized into capital projects in 2019. We had more other income during our nine months ended September 30, 2019 compared to the same period of 2018 due to more income earned from our equity method investment in the 2019 period.

Changes in Financial Condition for the Nine Months Ended September 30, 2019

Balance Sheet Data	September 30, 2019		December 31, 2018
Total current assets	$	92,654,384	$	85,563,079
Total property and equipment	128,603,109		135,195,924
Total other assets	9,974,571		4,834,649
Total Assets	$	231,232,064	$	225,593,652
Total current liabilities	$	47,435,567	$	50,548,096
Total long-term liabilities	18,574,203		17,950,754
Total members' equity	165,222,294		157,094,802
Total Liabilities and Members' Equity	$	231,232,064	$	225,593,652

21

We had less cash and cash equivalents as of September 30, 2019 compared to December 31, 2018 due to cash invested in mutual funds along with cash we used in our operations. As of September 30, 2019, the value of our trading securities was greater compared to the trading securities we had at December 31, 2018 due to increased investment in trading securities and market changes. In order to fund our purchase obligation related to the Retterath repurchase agreement, we have allocated $30 million of our trading securities to the Retterath repurchase. Our accounts receivable was less at September 30, 2019 compared to December 31, 2018 due to the timing of our quarter end with respect to shipments of our ethanol and payments from our marketer along with decreased production which results in decreased accounts receivable. We had less inventory on hand at September 30, 2019 compared to December 31, 2018 primarily due to having less corn inventory at September 30, 2019. We had slightly more prepaid expenses at September 30, 2019 compared to December 31, 2018 due to prepaid quarterly and annual dues. The value of our derivative instruments was less at September 30, 2019 compared to December 31, 2018 due primarily to less cash which is held in our margin account with our commodities broker at September 30, 2019.

Our net property and equipment was lower at September 30, 2019 compared to December 31, 2018 due to the net effect of capital expenditures offset by depreciation. The value of our other assets was greater at September 30, 2019 compared to December 31, 2018 due to a change in accounting treatment for leases which we implemented.

Our current liabilities were less at September 30, 2019 compared to December 31, 2018, primarily due to decreased accounts payable as of September 30, 2019. Our accounts payable was less at September 30, 2019 compared to December 31, 2018 due primarily to having less deferred corn payments at September 30, 2019. Our accrued expenses were slightly higher at September 30, 2019 compared to December 31, 2018 due to less deferred corn payments accrued at December 31, 2018. We also added the current portion of our operating leases due to a change in accounting treatment for leases which we implemented.

Our long-term liabilities were greater at September 30, 2019 compared to December 31, 2018 due to the long term portion of our operating leases which are included in our long term liabilities due to a change in accounting treatment for leases which is reflected on our balance sheet at September 30, 2019.

Liquidity and Capital Resources

Our primary sources of liquidity as of September 30, 2019 were cash from our operations and our $30 million long-term revolving loan. Our credit facilities are described in greater detail below under "Short-Term and Long-Term Debt Sources." As of September 30, 2019, we had $30.0 million available pursuant to our revolving loan and approximately $19.2 million in cash and cash equivalents. We also had $52 million at September 30, 2019 of trading securities, of which $30 million is set aside related to the Retterath repurchase agreement. Based on financial forecasts performed by our management, we anticipate that we will have sufficient cash from our revolving loan and cash from our operations to continue to operate the ethanol plant at capacity for the next 12 months and beyond. However, should we experience unfavorable operating conditions in the future, we may have to secure additional debt or equity financing for working capital or other purposes.

The following table shows cash flows for the nine months ended September 30, 2019 and 2018:

	2019			2018
Net cash provided by operating activities	$	24,848,477		$	27,319,413
Net cash (used in) investing activities	(26,562,534		)	(8,778,043		)
Net cash (used for) financing activities	(7,842,000		)	(12,752,750		)
Cash at beginning of period	28,751,994			29,568,227
Cash and cash equivalents at end of period	$	19,195,937		$	35,356,847

Cash Flow From Operations

Our operations provided less cash during our first nine months of 2019 compared to the same period of 2018 due primarily to decreased net income during the 2019 period due to poor operating margins in the ethanol industry.

Cash Flow From Investing Activities

We used more cash from investing activities during our first nine months of 2019 compared to the first nine months of 2018 due to purchases of trading securities during the 2019 period.

22

Cash Flow From Financing Activities

We used less cash for financing activities during our first nine months of 2019 compared to the first nine months of 2018 due to decreased distributions and debt payments during the 2019 period.

Short-Term and Long-Term Debt Sources

Master Loan Agreement with Home Federal Savings Bank

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

Term Loan

We have a $30 million term loan with a fixed interest rate of 4.79%.  We will pay interest on the Term Loan monthly with semi-annual principal payments of $3 million commencing on June 30, 2018.  The maturity date of the Term Loan is December 31, 2022.  We have the ability to prepay principal on the Term Loan without penalty or premium by giving Home Federal thirty days advance notice.  If we choose to refinance the Term Loan within the first thirty-six months following the closing, we may be required to pay Home Federal a prepayment fee.  In the event we default on the Term Loan, Home Federal can charge a default interest rate 2% in excess of the current interest rate. As of September 30, 2019, we had approximately $21 million outstanding on the Term Loan. 

Revolving Loan

We have a $30 million term revolving loan which has a maturity date of December 31, 2022. Interest on the Revolving Loan accrues at 310 basis points in excess of the 30-day London Interbank Offered Rate (LIBOR). We are required to make monthly payments of interest until the maturity date on December 31, 2022, on which date the unpaid principal balance of the Revolving Loan becomes due. We agreed to pay a fee of 30 basis points on a per annum basis on the unused portion of the Revolving Loan payable on a quarterly basis. As of September 30, 2019, we had $0 outstanding on the Revolving Loan and $30 million available to be drawn. Interest accrued on the Revolving Loan as of September 30, 2019 at a rate of 5.19% per year.

Covenants

In connection with the Master Loan Agreement, we are required to comply with certain debt covenants and financial ratios. We agreed to a debt service coverage ratio of 1:15 to 1:00 and agreed to increase our minimum working capital covenant from $27.5 million to $30 million once our expansion is complete.  We are permitted to pay distributions to our members up to 100% of our net income for the year in which the distributions are paid provided that immediately prior to the distribution and after giving effect to the distribution, no default exists and we are in compliance with all of our loan covenants including compliance with the financial covenants.  Further, our maximum capital expenditure covenant was increased from $5 million to $10 million per year.      

As of September 30, 2019, we were in compliance with all of our debt covenants and financial ratios. Management anticipates that we will be in compliance with all of our debt covenants and financial ratios for at least the next 12 months.

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

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

Application of Critical Accounting 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

23

contingent assets and liabilities, and the reported revenues and expenses.  Of the significant accounting policies described in the notes to our financial statements, we believe that the following are the most critical:

Derivative Instruments

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

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

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

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

Revenue Recognition

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

Off-Balance Sheet Arrangements

We do not have any off-balance sheet arrangements.

24

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to the impact of market fluctuations associated with commodity prices as discussed below. We have no exposure to foreign currency risk as all of our business is conducted in U.S. Dollars and we have no amounts outstanding on variable interest rate debt. We use derivative financial instruments as part of an overall strategy to manage market risk. We use cash, futures and option contracts to hedge changes to the commodity prices of corn, natural gas and ethanol. We do not enter into these derivative financial instruments for trading or speculative purposes, nor do we designate these contracts as hedges for accounting purposes.

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

As of September 30, 2019, we had price protection in place for approximately 11% of our anticipated corn needs, 85% of our natural gas needs and none of our ethanol sales for the next 12 months. A sensitivity analysis has been prepared to estimate our exposure to ethanol, corn and natural gas price risk. Market risk related to these factors is estimated as the potential change in income resulting from a hypothetical 10% adverse change in the average cost of our corn and natural gas prices and average ethanol price as of September 30, 2019, net of the forward and future contracts used to hedge our market risk for corn and natural gas usage requirements. The volumes are based on our expected use and sale of these commodities for a one year period from September 30, 2019. The results of this analysis, which may differ from actual results, are as follows:

	Estimated Volume Requirements for the next 12 months (net of forward and futures contracts)	Unit of Measure	Hypothetical Adverse Change in Price	Approximate Adverse Change to income
Natural Gas	720,000	MMBTU	10%	$	(216,000	)
Ethanol	200,000,000	Gallons	10%	(28,000,000		)
Corn	60,000,000	Bushels	10%	(22,800,000		)

For comparison purposes, our sensitivity analysis for our third quarter of 2018 is set forth below.

	Estimated Volume Requirements for the next 12 months (net of forward and futures contracts)	Unit of Measure	Hypothetical Adverse Change in Price	Approximate Adverse Change to income
Natural Gas	742,000	MMBTU	10%	$	(244,860	)
Ethanol	200,000,000	Gallons	10%	(24,000,000		)
Corn	58,000,000	Bushels	10%	(20,880,000		)

ITEM 4. CONTROLS AND PROCEDURES.

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

Our management, including our President and Chief Executive Officer (the principal executive officer), James Broghammer, along with our Chief Financial Officer, (the principal financial officer), Beth Eiler, have reviewed and evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2019. Based on this review and evaluation, these officers believe that our disclosure controls and procedures are effective in ensuring that material information related to us is

25

recorded, processed, summarized and reported within the time periods required by the forms and rules of the Securities and Exchange Commission.

For the fiscal quarter ended September 30, 2019, there has been no change in our internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II.

ITEM 1. LEGAL PROCEEDINGS.

Retterath Lawsuit

On August 14, 2013, the Company filed a lawsuit against Steve Retterath in the Iowa state court located in Polk County, Iowa. The purpose of the lawsuit is to enforce the terms of the repurchase agreement the Company executed with Mr. Retterath on June 13, 2013. The Company asked the Iowa state court to require Mr. Retterath to perform his obligations under the repurchase agreement pursuant to its terms. Mr. Retterath removed the case to federal court in the Federal District Court for the Southern District of Iowa in December 2013. The Company believed that this removal was improper and as a result the Company moved to remand the case back to the Iowa state court in Polk County which was granted. Mr. Retterath answered the lawsuit in August 2014, denying the validity of the repurchase agreement. In addition, the Iowa state court permitted Jason Retterath and Annie Retterath, the son and daughter-in-law of Steve Retterath, to be added as parties to the Iowa state lawsuit. In February 2015, the Company filed a motion for summary judgment asking the Iowa state court to enforce the repurchase agreement. The Retteraths also filed motions for summary judgment asking the Iowa state court to find the repurchase agreement invalid. On October 16, 2015, the Iowa state court entered a ruling granting Homeland's motion for summary judgment and determined no membership vote was required as Mr. Retterath has contended. The Iowa state court also denied the summary judgment motions filed by Mr. Retterath and his son and daughter-in-law.

Mr. Retterath and his son and daughter-in-law filed a motion to add a significant number of additional parties to the Iowa lawsuit along with additional claims against the Company. We filed a resistance to Mr. Retterath's attempts to expand the scope of the Iowa lawsuit. In November 2016, the Iowa Court ruled that our original claims against Mr. Retterath would proceed to trial in January 2017 as scheduled and that any other issues that remain following that trial would be litigated after a ruling is issued in the January 2017 trial. The trial was held in January 2017. On June 15, 2017, the Iowa Court ruled in favor of Homeland that the repurchase agreement was valid and directed Mr. Retterath to perform his obligations under the repurchase agreement by August 1, 2017. Mr. Retterath subsequently filed motions with the Iowa Court to reconsider its ruling or alternatively award Mr. Retterath a new trial. Mr. Retterath also asked the Iowa Court to stay his obligation to perform the repurchase agreement until these motion are ruled on by the Iowa Court. The Iowa Court granted Mr. Retterath's stay while the court considered his post-trial motions. On May 7, 2018, the Iowa Court denied Mr. Retterath's motions for a new trial and to reconsider the Iowa Court's prior ruling. Mr. Retterath filed an appeal of the Iowa Court's decision which is pending with the Iowa Supreme Court.

GS Cleantech Patent Litigation

On August 9, 2013, GS Cleantech Corporation ("GS Cleantech"), a subsidiary of Greenshift Corporation, filed a complaint in the United States District for the Northern District of Iowa against the Company. The Company is one of more than twenty ethanol manufacturers that were sued by GS Cleantech. The complaint alleges that the Company's operation of a corn oil extraction process infringes patent rights claimed by GS Cleantech. GS Cleantech seeks royalties, damages and potentially triple damages associated with the alleged infringement, as well as attorney's fees. The complaint was transferred to the United States District Court for the Southern District of Indiana due to a finding that the action involves questions of fact common to several other lawsuits which were joined in a multi-district litigation ("MDL"). The MDL Court developed two tracks of defendants in this litigation. The first track includes defendants which were originally sued by GS Cleantech in 2010 and a second track of defendants sued in 2013 which includes the Company. On October 23, 2014, the MDL Court granted summary judgment in favor of the first track defendants and found that the GS Cleantech patents which the Company is alleged to have infringed are invalid. Further, in a January 16, 2015 decision, the MDL ruled in favor of a stipulated motion for partial summary judgment finding that all of the GS Cleantech patents in the suit were invalid and, therefore, not infringed.  GS Cleantech filed its notice of appeal for these decisions.

ITEM 1A. RISK FACTORS.

There has not been any material change to the risk factors previously disclosed in our annual report on Form 10-K for the fiscal year ended December 31, 2018.

26

ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

None.

ITEM 5. OTHER INFORMATION.

None.

ITEM 6. EXHIBITS, FINANCIAL STATEMENT SCHEDULES.

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

Exhibit No.	Exhibit
31.1	Certificate Pursuant to 17 CFR 240.13a-14(a)*
31.2	Certificate Pursuant to 17 CFR 240.13a-14(a)*
32.1	Certificate Pursuant to 18 U.S.C. Section 1350*
32.2	Certificate Pursuant to 18 U.S.C. Section 1350*
101	The following financial information from Homeland Energy Solutions, LLC's Quarterly Report on Form 10-Q for the quarter ended September 30, 2019, formatted in XBRL (eXtensible Business Reporting Language): (i) Balance Sheets as of September 30, 2019 and December 31, 2018, (ii) Statements of Operations for the three and nine months ended September 30, 2019 and 2018, (iii) Statements of Cash Flows for the nine months ended September 30, 2019 and 2018, and (iv) the Notes to Unaudited Financial Statements.**

________________________________

(*) Filed herewith.

(**) Furnished herewith.

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

		HOMELAND ENERGY SOLUTIONS, LLC
Date:	November 14, 2019	/s/ James Broghammer
		James Broghammer
		President and Chief Executive Officer (Principal Executive Officer)
Date:	November 14, 2019	/s/ Beth Eiler
		Beth Eiler
		Chief Financial Officer (Principal Financial Officer)

28

EX-31.1

CERTIFICATIONS

I, James Broghammer, certify that:

1.    I have reviewed this quarterly report on Form 10-Q of Homeland Energy Solutions, 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 officer(s) 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 officer(s) 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:	November 14, 2019	/s/ James Broghammer
		James Broghammer, Chief Executive Officer

EX-31.2

CERTIFICATIONS

I, Beth Eiler, certify that:

1.    I have reviewed this quarterly report on Form 10-Q of Homeland Energy Solutions, 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 officer(s) 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 officer(s) 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:	November 14, 2019	/s/ Beth Eiler
		Beth Eiler, Chief Financial Officer

EX-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 this quarterly report on Form 10-Q of Homeland Energy Solutions, LLC (the “Company”) for the fiscal quarter ended September 30, 2019, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, James Broghammer, 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.

Dated:	November 14, 2019	/s/ James Broghammer
		James Broghammer,
		Chief Executive Officer

EX-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 this quarterly report on Form 10-Q of Homeland Energy Solutions, LLC (the “Company”) for the fiscal quarter ended September 30, 2019, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Beth Eiler, 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.

Dated:	November 14, 2019	/s/ Beth Eiler
		Beth Eiler,
		Chief Financial Officer

XML

Fair Value Measurements

9 Months Ended

Sep. 30, 2019

Fair Value Disclosures [Abstract]

Fair Value Measurements

    FAIR VALUE MEASUREMENTS

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

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

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

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

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

Trading securities: Trading securities consisting of corporate bonds and short term bond mutual funds are reported at fair value utilizing Level 1 inputs. Trading securities are measured at fair value using prices obtained from pricing services.

Derivative financial instruments: Commodity futures and exchange-traded commodity options contracts are reported at fair value utilizing Level 1 inputs. For these contracts, the Company obtains 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 CBOT and NYMEX markets. 

The following table summarizes financial assets and financial liabilities measured at fair value on a recurring basis as of September 30, 2019 and December 31, 2018, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value:

	Total			Level 1			Level 2		Level 3
As of September 30, 2019
Trading securities, assets	$	52,224,000		$	52,224,000		$	—	$	—
Derivative financial instruments
Assets	$	2,421,000		$	2,421,000		$	—	$	—
Liabilities	(66,000		)	(66,000		)	—		—
As of December 31, 2018
Trading securities, assets	$	30,554,000		$	30,554,000		$	—	$	—
Derivative financial instruments
Assets	$	271,000		$	271,000		—		—
Liabilities	(19,000		)	(19,000		)	—		—

The Company's financial assets and liabilities not recorded at fair value, for which carrying value approximates fair value, consists of cash and cash equivalents, accounts receivable, accounts payable and accrued expenses. Additionally, fixed rate term debt, carried at book value of $21,000,000 at September 30, 2019, had an estimated fair value of approximately $21,007,000, determined based on a discounted cash flows model. As of December 31, 2018, carrying value of long term debt carried at book value of $24,000,000 at December 31, 2018, had an estimated fair value of approximately $23,520,000.

XML

Related Party Transactions

9 Months Ended

Sep. 30, 2019

Related Party Transactions [Abstract]

Related Party Transactions

RELATED PARTY TRANSACTIONS

Due to former member

On June 13, 2013, we entered into an agreement with Steve Retterath, the Company's largest member, to repurchase and retire all of the units owned by Mr. Retterath. The Company agreed to close on this repurchase on or before August 1, 2013. The Company agreed to repurchase and retire 25,860 membership units owned by Mr. Retterath in exchange for $30 million, to be paid in two equal installments payable at closing and on July 1, 2014. The transaction failed to close by the scheduled date due to objections by Mr. Retterath. The Company believes that it has a binding agreement with Mr. Retterath. On August 14, 2013, the Company filed a lawsuit against Mr. Retterath in Iowa state court to enforce the terms of the repurchase agreement. The Company is asking the Iowa state court to require Mr. Retterath to complete the repurchase agreement pursuant to its terms.

Mr. Retterath contends he is not bound by the agreement.  The Company's position is as of the closing date, Mr. Retterath is no longer the equitable owner of any membership units in the Company. As a result, in 2013 the Company recorded a $30 million short-term liability related to the amount the Company agreed to pay Mr. Retterath to repurchase his membership units and correspondingly reduced members' equity on the balance sheet. If the Company is ultimately unsuccessful in its lawsuit against Mr. Retterath, the Company will reevaluate the accounting considerations made during the period of time that the lawsuit is pending.

Other matters

The Company has purchased corn and materials from members of its Board of Directors who own or manage elevators or are local producers of corn. Purchases during the three and nine months ended September 30, 2019 totaled approximately $1,016,000 and $2,995,000 respectively, and during the three and nine months ended September 30, 2018 totaled approximately $1,364,000 and $2,902,000, respectively. There is nothing due to these members at September 30, 2019 and December 31, 2018, respectively.

XML

Debt (Tables)

9 Months Ended

Sep. 30, 2018

Debt Disclosure [Abstract]

Schedule of Debt Maturities

At September 30, 2019, the Company had the following debt maturities on the term loan for the twelve month periods ended September 30:

2020	$	6,000,000
2021	6,000,000
2022	6,000,000
2023	3,000,000
Total principal payments	$	21,000,000

XML

Commitments, Contingencies, Agreements and Subsequent Events - Related Party (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018	Dec. 31, 2018
RPMG [Member]
Related Party Transaction [Line Items]
Related Party Transaction, Due from (to) Related Party	$ 1,749,000		$ 1,749,000		$ 4,927,000
CHS [Member]
Related Party Transaction [Line Items]
Related Party Transaction, Due from (to) Related Party	1,881,000		1,881,000		$ 2,170,000
Ethanol [Member] | Investor [Member]
Related Party Transaction [Line Items]
Sales	59,737,000	$ 58,473,000	189,683,000	$ 181,645,000
Marketing Fees	61,000	66,000	183,000	198,000
Distillers Grains [Member] | Investor [Member]
Related Party Transaction [Line Items]
Sales	13,689,000	15,662,000	43,944,000	47,312,000
Marketing Fees	89,000	225,000	491,000	647,000
Corn Oil [Member] | Investor [Member]
Related Party Transaction [Line Items]
Sales	3,471,000	3,257,000	10,205,000	9,246,000
Marketing Fees	$ 27,000	$ 26,000	$ 78,000	$ 76,000

XML

Derivative Instruments (Details) bu in Millions	9 Months Ended
	Sep. 30, 2019 bu
Corn [Member]
Derivative [Line Items]
Concentration Risk, Amount of Material	67
Designated as Hedging Instrument [Member] | Corn [Member]
Derivative [Line Items]
Derivative, Nonmonetary Notional Amount, Percent of Required Need, Coverage	11.00%
Designated as Hedging Instrument [Member] | Corn [Member] | Minimum [Member]
Derivative [Line Items]
Derivative, Nonmonetary Notional Amount, Percent of Required Need, Yearly Average	5.00%
Designated as Hedging Instrument [Member] | Corn [Member] | Maximum [Member]
Derivative [Line Items]
Derivative, Nonmonetary Notional Amount, Percent of Required Need, Yearly Average	25.00%

XML

Nature of Business and Significant Accounting Policies - Risks and Uncertainties (Details)	9 Months Ended
	Sep. 30, 2019
Sales Revenue, Segment [Member] | Ethanol [Member]
Concentration Risk [Line Items]
Concentration Risk, Percentage	78.00%
Sales Revenue, Segment [Member] | Distillers Grains [Member]
Concentration Risk [Line Items]
Concentration Risk, Percentage	18.00%
Sales Revenue, Segment [Member] | Corn Oil [Member]
Concentration Risk [Line Items]
Concentration Risk, Percentage	4.00%
Cost of Goods, Segment [Member] | Corn [Member]
Concentration Risk [Line Items]
Concentration Risk, Percentage	79.00%

XML

Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2019

Fair Value Disclosures [Abstract]

Schedule of Financial Assets and Financial Liabilities Measured at Fair Value

The following table summarizes financial assets and financial liabilities measured at fair value on a recurring basis as of September 30, 2019 and December 31, 2018, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value:

	Total			Level 1			Level 2		Level 3
As of September 30, 2019
Trading securities, assets	$	52,224,000		$	52,224,000		$	—	$	—
Derivative financial instruments
Assets	$	2,421,000		$	2,421,000		$	—	$	—
Liabilities	(66,000		)	(66,000		)	—		—
As of December 31, 2018
Trading securities, assets	$	30,554,000		$	30,554,000		$	—	$	—
Derivative financial instruments
Assets	$	271,000		$	271,000		—		—
Liabilities	(19,000		)	(19,000		)	—		—

XML

Statements of Changes in Members' Equity	USD ($)
Members' Equity, Balance at Dec. 31, 2017	$ 151,600,547
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	5,072,754
Members' Equity, Balance at Mar. 31, 2018	156,673,301
Members' Equity, Balance at Dec. 31, 2017	151,600,547
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	22,176,857
Member distribution	(9,687,750)
Members' Equity, Balance at Sep. 30, 2018	164,024,654
Members' Equity, Balance at Mar. 31, 2018	156,673,301
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	10,700,036
Member distribution	(9,687,750)
Members' Equity, Balance at Jun. 30, 2018	157,685,587
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	6,404,067
Repurchase of units	(65,000)
Members' Equity, Balance at Sep. 30, 2018	164,024,654
Members' Equity, Balance at Dec. 31, 2018	157,094,802
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	4,719,055
Members' Equity, Balance at Mar. 31, 2019	161,813,857
Members' Equity, Balance at Dec. 31, 2018	157,094,802
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	12,969,492
Member distribution	(4,842,000)
Members' Equity, Balance at Sep. 30, 2019	165,222,294
Members' Equity, Balance at Mar. 31, 2019	161,813,857
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	4,259,845
Member distribution	(4,842,000)
Members' Equity, Balance at Jun. 30, 2019	161,231,702
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Net income	3,990,592
Members' Equity, Balance at Sep. 30, 2019	$ 165,222,294

XML

Balance Sheets - USD ($)	Sep. 30, 2019	Dec. 31, 2018
CURRENT ASSETS
Cash and cash equivalents	$ 19,195,937	$ 28,751,994
Trading securities	52,224,179	30,553,821
Accounts receivable	3,630,526	7,231,721
Inventory	13,421,558	14,750,199
Prepaid and other	3,534,209	3,345,961
Derivative instruments	647,975	929,383
Total current assets	92,654,384	85,563,079
PROPERTY AND EQUIPMENT
Land and improvements	23,169,342	23,169,342
Buildings	8,718,139	8,718,139
Equipment	218,987,373	212,760,113
Construction in progress	2,873,621	4,131,692
Gross property and equipment	253,748,475	248,779,286
Less accumulated depreciation	125,145,366	113,583,362
Total property and equipment	128,603,109	135,195,924
OTHER ASSETS
Right of use asset operating leases, net	5,187,724	0
Utility rights, net of amortization of $1,660,190 and $1,591,994	613,741	716,035
Other assets	4,173,106	4,118,614
Total other assets	9,974,571	4,834,649
TOTAL ASSETS	231,232,064	225,593,652
CURRENT LIABILITIES
Accounts payable	8,561,480	13,177,598
Due to former member	30,000,000	30,000,000
Accrued expenses	1,299,259	1,370,498
Current portion long term debt	6,000,000	6,000,000
Current portion operating lease liability	1,574,828	0
Total current liabilities	47,435,567	50,548,096
COMMITMENTS AND CONTINGENCIES	0	0
LONG-TERM LIABILITIES
Term note	14,961,307	17,950,754
Operating lease liability	3,612,896	0
Total long-term liabilities	18,574,203	17,950,754
MEMBERS' EQUITY (64,560 units issued and outstanding)	165,222,294	157,094,802
TOTAL LIABILITIES AND MEMBERS' EQUITY	$ 231,232,064	$ 225,593,652

XML

Nature of Business and Significant Accounting Policies - Note Receivable (Details) $ in Thousands	Sep. 30, 2019 USD ($)
Nature of Business and Significant Accounting Policies [Abstract]
Note receivable, face value	$ 350

XML

Nature of Business and Significant Accounting Policies - Product (Details) - Ethanol [Member] gal in Millions	9 Months Ended
	Sep. 30, 2019 gal
Product Information [Line Items]
Annual Production Capacity, Minimum	100
Annual Production Capacity, Current	190

XML

Nature of Business and Significant Accounting Policies

9 Months Ended

Sep. 30, 2019

Nature of Business and Significant Accounting Policies [Abstract]

Nature of Business and Significant Accounting Policies

NATURE OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

The accompanying unaudited condensed financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted as permitted by such rules and regulations. These financial statements and related notes should be read in conjunction with the financial statements and notes thereto included in the Company's audited financial statements for the year ended December 31, 2018, contained in the Company's annual report on Form 10-K for 2018.

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

Nature of Business

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

Organization

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

Significant Accounting Policies:

Accounting Estimates

Management uses estimates and assumptions in preparing these financial statements in accordance with United States Generally Accepted Accounting Principles. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Actual results could differ from those estimates.

Cash & Cash Equivalents

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

Trading Securities

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

At September 30, 2019, trading securities consisted of short term bond mutual funds with an approximate cost of $52,044,000 and fair value of $52,224,000. At December 31, 2018, trading securities consisted of corporate bonds and short term bond mutual funds with an approximate cost of $31,292,000 and fair value of $30,554,000. For the three and nine months ended September 30, 2019, the Company recorded interest, dividend and net realized and unrealized gains from these investments of approximately $397,000 and $1,670,000, respectively, included in other income on the statement of operations. During the same time period of 2018, the Company recorded interest, dividends and net unrealized gains and losses from these investments of approximately $127,000 and $31,000, respectively.

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

Receivables

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

Note Receivable

The Company has a note receivable from an unrelated company. The Company carries the note at the current principal balance included in other assets. The note commenced in July, 2019 with a face value of $350,000 and matures August, 2021.

Investments

The Company has a less than 20% investment interest in Renewable Products Marketing Group, LLC ("RPMG"). This investment is being accounted for under the equity method of accounting, as the Company has significant influence, under which the Company's share of net income is recognized as income in the Company's statement of operations and added to the investment account. The investment balance is included in other assets and the income recognized as other income. The investment is evaluated for indications of impairment on a regular basis. A loss would be recognized when the fair value is determined to be less than the carrying value.

Revenue and Cost Recognition

In the first quarter of 2018, the Company adopted Accounting Standards Update (ASU) 2014-9, Revenue from Contracts with Customers (Topic 606). Under the ASU, revenue is recognized when a customer obtains control of promised goods or services in an amount that reflects the consideration the entity expects to receive in exchange for those goods or services. In addition, the standard requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The Company applied the five-step method outlined in the ASU to all contracts with customers and elected the modified retrospective implementation method. The Company generally has a single performance obligation in its arrangements with customers. The Company believes for its contracts with customers, control is transferred at a point in time, typically upon delivery to the customers. When the Company performs shipping and handling activities after the transfer of control to the customers (e.g., when control transfers prior to delivery), they are considered as fulfillment activities, and accordingly, the costs are accrued for when the related revenue is recognized. The Company generally expenses sales commissions when incurred because the amortization period would have been less than one year. The implementation of the new standard does not have any material impact on the measurement or recognition of revenue of prior periods, however additional disclosures have been added in accordance with the ASU.

The following is a description of principal activities from which we generate revenue. Revenues from contracts with customers are recognized when control of the promised goods or services are transferred to our customers, in an amount that reflects the consideration that we expect to receive in exchange for those goods or services.

• sales of ethanol;

• sales of distiller grains; and

• sales of corn oil;

All revenue recognized in the income statement is considered to be revenue from contracts with customers. The disaggregation of revenue according to product line, along with accounts receivable from contracts with customers, is as disclosed in Note 5.

Shipping costs incurred by the Company in the sale of ethanol and distiller grains are not specifically identifiable and as a result, revenue from the sale of ethanol and distiller grains is recorded based on the net selling price reported to the Company from the marketer. Rail car lease costs incurred by the Company in the sale and shipment of distiller grain products are included in the cost of goods sold.

Inventories

Inventories are generally valued at the lower of cost (first-in, first-out) or net realizable value.  In the valuation of inventories and purchase commitments, net realizable value is defined as estimated selling price in the ordinary course of business less reasonably predictable costs of completion, disposal, and transportation.

Property & Equipment

The Company reviews its property and equipment for impairment whenever events indicate that the carrying amount of the asset group may not be recoverable. If circumstances require an asset group be tested for possible impairment, the Company first compares undiscounted cash flows expected to be generated by the asset group to the carrying value of the asset group. If the carrying value of the asset group is not recoverable on an undiscounted cash flow basis, an impairment is recognized to the extent that the carrying value exceeds its fair value. Fair value is determined through various valuation techniques including discounted cash flow models, quoted market values and third-party independent appraisals, as considered necessary.

Derivative Instruments

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

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

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

Realized and unrealized gains and losses related to derivative contracts related to corn and natural gas are included as a component of cost of goods sold and derivative contracts related to ethanol are included as a component of revenue in the accompanying financial statements. The fair values of contracts entered through commodity exchanges are presented on the accompanying balance sheet as derivative instruments. All contracts with the same counter party are reported on a net basis.

Committed Shares to be Redeemed

On June 13, 2013, the Company entered into an agreement with Steve Retterath, the Company's largest member, to repurchase and retire all of the membership units owned by Mr. Retterath. The Company agreed to close on this repurchase on or before August 1, 2013. The Company agreed to repurchase and retire 25,860 membership units owned by Mr. Retterath in exchange for $30 million, to be paid in two equal installments payable at closing and on July 1, 2014. The transaction failed to close by the scheduled date due to objections by Mr. Retterath. Due to all conditions of the agreement being met prior to, or on, August 1, 2013, and a court ruling which found the agreement to be binding and enforceable, the Company believes that it has a binding agreement with Mr. Retterath; as such the commitment to repurchase and retire the membership units is reflected in the financial statements as a current liability, due to former member, as if the transaction had closed on August 1, 2013. See Note 9 for additional information.

Net Income per Unit

Basic and diluted net income per unit is computed by dividing net income by the weighted average number of members' units and members' unit equivalents outstanding during the period. There were no member unit equivalents outstanding during the periods presented; accordingly, the Company's basic and diluted net income per unit are the same.

Prior to, or on, August 1, 2013, the Company believes it has a binding agreement with Steve Retterath to repurchase and retire all 25,860 membership units owned by Mr. Retterath. These membership units have thus been excluded in the determination of net income per capital unit as presented in the Statement of Operations. The Company is currently involved in litigation with Mr. Retterath. There is potential that Mr. Retterath will continue as a unit holder upon conclusion of the litigation and said membership units would not be redeemed under the repurchase agreement. If the units are not redeemed, basic and diluted net income per unit, including the 25,860 units, for the three and nine months ended September 30, 2019 would be $44.13 and $143.44, respectively. Net income per unit for the three and nine months ended September 30, 2018 would have been $70.82 and $245.21, respectively.

Risks and Uncertainties

The Company has certain risks and uncertainties that it will experience during volatile market conditions, which can have a severe impact on operations. The Company's revenues are derived from the sale and distribution of ethanol, distiller grains and corn oil to customers primarily located in the United States. Corn for the production process is supplied to the plant primarily from local agricultural producers and from purchases on the open market. For the nine months ended September 30, 2019, ethanol sales averaged approximately 78% of total revenues, while approximately 18% of revenues were generated from the sale of distiller grains. Corn oil sales attributed approximately 4% of revenues during this time period. For the nine months ended September 30, 2019, corn costs averaged approximately 79% of cost of goods sold.

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

Recent & Pending Accounting Pronouncements

In February 2016, FASB issued ASU No. 2016-02 "Leases" ("ASU 2016-02"). ASU 2016-02 requires the recognition of lease assets and lease liabilities by lessees for all leases greater than one year in duration and classified as operating leases under previous GAAP. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, and for interim periods within that fiscal year. Under the new guidance, lessees will be required to recognize the following for all leases (with the exception of short-term leases): (1) a lease liability, which is a lessee's obligation to make lease payments arising from a lease, measured on a discounted cash flow basis; and (2) a "right of use" asset, which is an asset that represents the lessee's right to use the specified asset for the lease term. The Company adopted this accounting standard effective January 1, 2019. Upon adoption, the Company elected a practical expedient which allows existing leases to retain their classification as operating leases. The Company has elected to account for lease and related nonlease components as a single lease component. See Note 6 for more detailed information regarding leases.

In August 2018, FASB issued ASU No. 2018-13 "Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement" ("ASU 2018-13"). ASU 2018-13 changes some of the disclosure requirements related to fair value measurements related to the Level 1, 2 and 3 investments. ASU 2018-13 is effective for fiscal years beginning after December 15, 2019, and for interim periods within that fiscal year. The Company is currently evaluating the impact of its pending adoption of the new standard on the financial statement.

XML

Balance Sheets (Parenthetical) - USD ($)	Sep. 30, 2019	Dec. 31, 2018
OTHER ASSETS
Utility rights, accumulated amortization	$ 1,694,288	$ 1,591,994
MEMBERS’ EQUITY
Members Capital units issued	64,560	64,560
Members Capital units outstanding	64,560	64,560

XML

Commitments, Contingencies, Agreements and Subsequent Events (Tables)

9 Months Ended

Sep. 30, 2019

Commitments, Contingencies and Agreements [Abstract]

Schedule of Sales and Marketing Fees Related to In Place Agreements

Sales and marketing fees related to the agreements in place for the three and nine months ended September 30, 2019 and 2018 were approximately as follows:

	Three Months Ended		Nine Months Ended		Three Months Ended		Nine Months Ended
	September 30, 2019		September 30, 2019		September 30, 2018		September 30, 2018
Sales ethanol	$	59,737,000	$	189,683,000	$	58,473,000	$	181,645,000
Sales distiller grains	13,689,000		43,944,000		15,662,000		47,312,000
Sales corn oil	3,471,000		10,205,000		3,257,000		9,246,000
Marketing fees ethanol	$	61,000	$	183,000	$	66,000	$	198,000
Marketing fees distiller grains	89,000		491,000		225,000		647,000
Marketing fees corn oil	27,000		78,000		26,000		76,000
	As of September 30, 2019		As of December 31, 2018
Amount due from RPMG	$	1,749,000	$	4,927,000
Amount due from CHS	1,881,000		2,170,000

XML

Litigation Matters

9 Months Ended

Sep. 30, 2019

Litigations Matters [Abstract]

Litigation Matters

LITIGATION MATTERS

Retterath

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

GS Cleantech Corporation

On August 9, 2013, GS Cleantech Corporation (GS Cleantech), a subsidiary of Greenshift Corporation, filed a complaint against the Company alleging that the Company's operation of a corn oil extraction process licensed by the Company infringes patent rights claimed by GS Cleantech. GS Cleantech seeks royalties, damages and potentially triple damages associated with the alleged infringement, as well as attorney's fees from the Company. The Company filed a motion for summary judgment which was granted by the Court. GS Cleantech is appealing this decision.

XML

Commitments, Contingencies, Agreements and Subsequent Events

9 Months Ended

Sep. 30, 2019

Commitments, Contingencies and Agreements [Abstract]

Commitments, Contingencies, Agreements and Subsequent Events

COMMITMENTS, CONTINGENCIES, AGREEMENTS

Ethanol, corn oil, and distiller grains marketing agreements and major customers

The Company has entered into a marketing agreement with RPMG to sell all ethanol produced at the plant at a mutually agreed on price, less commission and transportation charges. As of September 30, 2019, the Company had no commitments to sell ethanol at fixed prices and 50 million of its produced gallons of ethanol at basis price levels indexed against exchanges for delivery through December 31, 2019.

The Company has entered into a marketing agreement with RPMG to sell all corn oil produced at the plant at a mutually agreed on price, less marketing fees and transportation charges. As of September 30, 2019, the Company had commitments to sell approximately 12 million pounds of corn oil at various fixed and basis price levels indexed against exchanges for delivery through December 31, 2019.

The Company also has an investment in RPMG, included in other assets, totaling approximately $2,402,000 and $2,522,000 as of September 30, 2019 and December 31, 2018, respectively.

The Company has entered into a marketing agreement to sell all distiller grains produced at the plant to CHS, an unrelated party, at a mutually agreed on price, less commission and transportation charges. The agreement was renewed for another one year term on April 1, 2019. The agreement calls for automatic renewal for successive one-year terms unless 90-day prior written notice is given before the current term expires. As of September 30, 2019, the Company had approximately 49,000 tons of distiller grains sales commitments for delivery through February 2020 at various fixed prices.

Sales and marketing fees related to the agreements in place for the three and nine months ended September 30, 2019 and 2018 were approximately as follows:

	Three Months Ended		Nine Months Ended		Three Months Ended		Nine Months Ended
	September 30, 2019		September 30, 2019		September 30, 2018		September 30, 2018
Sales ethanol	$	59,737,000	$	189,683,000	$	58,473,000	$	181,645,000
Sales distiller grains	13,689,000		43,944,000		15,662,000		47,312,000
Sales corn oil	3,471,000		10,205,000		3,257,000		9,246,000
Marketing fees ethanol	$	61,000	$	183,000	$	66,000	$	198,000
Marketing fees distiller grains	89,000		491,000		225,000		647,000
Marketing fees corn oil	27,000		78,000		26,000		76,000
	As of September 30, 2019		As of December 31, 2018
Amount due from RPMG	$	1,749,000	$	4,927,000
Amount due from CHS	1,881,000		2,170,000

At September 30, 2019, the Company had approximately $18,366,000 in outstanding priced corn purchase commitments for bushels at various prices and approximately 2,750,000 bushels of basis contracts through April 2021 accounted for under the normal purchase exclusion.

The Company has commitments for minimum purchases of various utilities such as natural gas and electricity over the next 12 months totaling approximately $12,775,000 accounted for under the normal purchase exclusion.

As of September 30, 2019, the Company had locked in place approximately 5,069,500 decatherms of natural gas at fixed prices through December 31, 2020 accounted for under the normal purchase exclusion. As of September 30, 2018, approximately 4,982,000 decatherms of natural gas was locked into place at fixed prices through December 31, 2019.

XML

Commitments, Contingencies, Agreements and Subsequent Events - Supply Commitments (Details) tons in Thousands, $ in Thousands, lb in Millions, gal in Millions	9 Months Ended
	Sep. 30, 2019 USD ($) gal lb tons	Dec. 31, 2018 USD ($)
Supply Commitment [Line Items]
Automatic renewal period	1 year
Period of written notice prior to current term expiration	90 days
Ethanol [Member] | Supply Commitment [Member]
Supply Commitment [Line Items]
Supply Commitment, Minimum Amount at Basis Price Levels, Mass | gal	50
Corn Oil [Member] | Supply Commitment [Member]
Supply Commitment [Line Items]
Supply Commitment, Remaining Minimum Amount Committed, Weight | lb	12
Distillers Grains [Member] | Supply Commitment [Member]
Supply Commitment [Line Items]
Supply Commitment, Remaining Minimum Amount Committed, Weight | tons	49
Investor [Member]
Supply Commitment [Line Items]
Equity Method Investments | $	$ 2,402	$ 2,522

XML

Lease Obligations - Reconciliation of Undiscounted Future Payments (Details)	Sep. 30, 2019 USD ($)
Reconciliation of Undiscounted Future Payments
Total undiscounted lease commitments	$ 5,631,000
Discount effect	(443,276)
Operating lease liability	$ 5,187,724

XML

Nature of Business and Significant Accounting Policies - Committed Shares to be Redeemed and Net Income per Unit (Details)	3 Months Ended		9 Months Ended
	Sep. 30, 2019 USD ($) $ / shares	Sep. 30, 2018 $ / shares	Sep. 30, 2019 USD ($) installment $ / shares shares	Sep. 30, 2018 $ / shares	Dec. 31, 2018 USD ($)
Related Party Transaction [Line Items]
Number of units redeemed | shares			25,860
Payments to repurchase units | $	$ 30,000,000		$ 30,000,000		$ 30,000,000
Basic and diluted earning per share, including redeemed shares (in dollars per share) | $ / shares	$ 44.13	$ 70.82	$ 143.44	$ 245.21
Director [Member]
Related Party Transaction [Line Items]
Number of units redeemed | shares			25,860
Payments to repurchase units | $	$ 30,000,000		$ 30,000,000
Number of payment installments | installment			2

XML

Derivative Instruments (Tables)

9 Months Ended

Sep. 30, 2019

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Schedule of Derivatives Realized and Unrealized Gains (Losses)

The following table represents the approximate amount of realized/unrealized gains (losses) and changes in fair value recognized in earnings on commodity contracts for the three and nine months ending September 30, 2019 and 2018 and the fair value of derivatives as of September 30, 2019 and December 31, 2018:

	Income Statement Classification	Realized Gain		Change In Unrealized Gain (Loss)			Total Gain
Derivatives not designated as hedging instruments:
Commodity contracts for the
three months ended September 30, 2019	Cost of Goods Sold	$	2,431,000	$	2,102,000		$	4,533,000
Commodity contracts for the
three months ended September 30, 2018	Cost of Goods Sold	$	2,811,000	$	(842,000	)	$	1,969,000
Commodity contracts for the
nine months ended September 30, 2019	Cost of Goods Sold	$	1,113,000	$	2,102,000		$	3,215,000
Commodity contracts for the
nine months ended September 30, 2018	Cost of Goods Sold	$	2,406,000	$	901,000		$	3,307,000

Schedule of Derivatives Balance Sheet Classification

	Balance Sheet Classification	September 30, 2019			December 31, 2018
Futures contracts
In gain position		$	2,421,000		$	271,000
In loss position		(66,000		)	(19,000		)
Cash (owed to) held by broker		(1,707,000		)	677,000
	Current Asset	$	648,000		$	929,000

XML

Inventory (Details) - USD ($)	Sep. 30, 2019	Dec. 31, 2018
Inventory Disclosure [Abstract]
Raw Materials	$ 7,222,899	$ 8,983,124
Work in Process	2,576,989	2,295,715
Finished Goods	3,621,670	3,471,360
Inventory	$ 13,421,558	$ 14,750,199

XML

Label	Element	Value
Cash and Cash Equivalents, at Carrying Value	us-gaap_CashAndCashEquivalentsAtCarryingValue	$ 35,356,847

XML

Statements of Cash Flows - USD ($)	9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$ 12,969,492	$ 22,176,857
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	11,674,851	11,338,982
Unrealized gain on risk management activities	281,408	(601,027)
Unrealized gain on trading securities activities	(1,670,358)	(31,204)
Change in working capital components:
Accounts receivable	3,601,195	(5,620,894)
Inventory	1,328,641	2,845,364
Prepaid and other	(188,248)	135,447
Accounts payable and other accrued expenses	(3,148,504)	(2,924,112)
Net cash provided by operating activities	24,848,477	27,319,413
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of trading securities	(30,000,000)	0
Sales of trading securities	10,000,000	0
Issuance of Note Receivable	(350,000)	0
Payment Received on Note Receivable	150,000	0
Payments for equipment and construction in progress	(6,508,042)	(8,126,799)
Decrease (increase) in other assets	145,508	(651,244)
Net cash (used in) investing activities	(26,562,534)	(8,778,043)
CASH FLOWS FROM FINANCING ACTIVITIES
Distribution to members	(4,842,000)	(9,687,750)
Payments on long-term borrowings	(3,000,000)	(3,000,000)
Repurchase of Membership Units	0	(65,000)
Net cash (used in) financing activities	(7,842,000)	(12,752,750)
Net increase in cash and cash equivalents	(9,556,057)	5,788,620
Cash and Cash Equivalents - Beginning	28,751,994	29,568,227
Cash and Cash Equivalents - Ending	19,195,937
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for interest, net of capitalized interest of $179,142 and $0	577,279	1,066,973
Capitalized interest	179,142	0
SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING AND FINANCING ACTIVITIES
Establishment of lease liability and right-of-use asset	6,320,411	0
Accounts payable issued for property and equipment additions	$ 257,226	$ 78,286

XML

Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2019	Nov. 14, 2019
Document and Entity Information [Abstract]
Entity Registrant Name	HOMELAND ENERGY SOLUTIONS LLC
Entity Central Index Key	0001366744
Current Fiscal Year End Date	--12-31
Entity Filer Category	Non-accelerated Filer
Document Type	10-Q
Document Period End Date	Sep. 30, 2019
Document Fiscal Year Focus	2019
Document Fiscal Period Focus	Q3
Amendment Flag	false
Entity Emerging Growth Company	false
Entity Small Business	false
Entity Current Reporting Status	Yes
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		90,420

XML

Fair Value Measurements (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Director [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Long-term Debt, Gross	$ 21,000	$ 24,000
Long-term Debt, Fair Value	21,007	23,520
Fair Value, Measurements, Recurring [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Trading securities, assets	52,224	30,554
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 1 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Trading securities, assets	52,224	30,554
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 2 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Trading securities, assets	0	0
Fair Value, Measurements, Recurring [Member] | Fair Value, Inputs, Level 3 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Trading securities, assets	0	0
Fair Value, Measurements, Recurring [Member] | Commodity Contract [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Assets	2,421	271
Liabilities	(66)	(19)
Fair Value, Measurements, Recurring [Member] | Commodity Contract [Member] | Fair Value, Inputs, Level 1 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Assets	2,421	271
Liabilities	(66)	(19)
Fair Value, Measurements, Recurring [Member] | Commodity Contract [Member] | Fair Value, Inputs, Level 2 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Assets	0	0
Liabilities	0	0
Fair Value, Measurements, Recurring [Member] | Commodity Contract [Member] | Fair Value, Inputs, Level 3 [Member]
Fair Value, Balance Sheet Grouping, Financial Statement Captions [Line Items]
Assets	0	0
Liabilities	$ 0	$ 0

XML

Debt

9 Months Ended

Sep. 30, 2019

Debt Disclosure [Abstract]

Debt

DEBT

Master Loan Agreement with Home Federal Savings Bank

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

Term Revolving Loan

Under the terms of the Second Supplement to the Master Loan Agreement, dated June 29, 2017, the Company has a $30 million term revolving loan which has a maturity date of December 31, 2022. Interest on the term revolving loan is due monthly and accrues at a rate equal to the one month LIBOR plus 310 basis points, 5.19% on September 30, 2019. There was no balance outstanding on the term revolving loan and $30 million available to be drawn as of September 30, 2019 and December 31, 2018, respectively.

Term Debt

Under the terms of the Fourth Supplement to the Master Loan Agreement, dated June 29, 2017, the Company has a $30 million term loan which has a maturity date of December 31, 2022. Interest on the term loan is at a fixed rate of 4.79%. The Company is required to make monthly interest payments beginning July 1, 2017 and bi-annual principal payments of $3 million beginning on June 30, 2018. The long-term portion of the outstanding debt is presented net of unamortized debt issuance costs of $38,693 and $49,246 as of September 30, 2019 and December 31, 2018, respectively.

At September 30, 2019, the Company had the following debt maturities on the term loan for the twelve month periods ended September 30:

2020	$	6,000,000
2021	6,000,000
2022	6,000,000
2023	3,000,000
Total principal payments	$	21,000,000

Covenants

During the term of the loans, the Company is subject to certain financial covenants at various times calculated monthly, quarterly or annually, including restriction of the payment of dividends and capital expenditures and maintenance of certain financial ratios including the minimum working capital and a fixed charge ratio as defined by the Master Loan Agreement. Failure to comply with the protective loan covenants or maintain the required financial ratios may cause acceleration of the outstanding principal balances on the loans and/or the imposition of fees, charges or penalties. The Company is in compliance with all debt covenants as of September 30, 2019.

XML

Derivative Instruments - Income Statement (Details) - Commodity Contract [Member] - Not Designated as Hedging Instrument [Member] - Cost of Sales [Member] - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Derivative Instruments, Gain (Loss) [Line Items]
Realized Gain	$ 2,431	$ 2,811	$ 1,113	$ 2,406
Change In Unrealized Gain (Loss)	2,102	(842)	2,102	901
Total Gain	$ 4,533	$ 1,969	$ 3,215	$ 3,307

XML

Debt (Details)	9 Months Ended
	Sep. 30, 2019 USD ($) loan_agreement	Sep. 30, 2018 USD ($)	Dec. 31, 2018 USD ($)	Jun. 30, 2018 USD ($)	Jun. 29, 2017 USD ($)
Debt Instrument [Line Items]
Debt Instrument, Interest Rate, Stated Percentage				4.79%
Debt Instrument, Periodic Payment, Principal		$ 3,000,000
Unamortized debt issuance costs	$ 38,693		$ 49,246
Debt Maturities [Abstract]
2020				$ 6,000,000
2021				6,000,000
2022				6,000,000
2023				3,000,000
Total principal payments	$ 14,961,307		17,950,754	$ 21,000,000
Home Federal Savings Bank [Member]
Debt Instrument [Line Items]
Number of loan agreements | loan_agreement	2
Line of Credit [Member] | Home Federal Savings Bank [Member] | Term Revolving Loan [Member]
Debt Instrument [Line Items]
Line of Credit Facility, Maximum Borrowing Capacity	$ 30,000,000
Debt Instrument, Basis Spread on Variable Rate	3.10%
Line of Credit Facility, Interest Rate at Period End	5.19%
Line of Credit Facility, Fair Value of Amount Outstanding	$ 0		$ 0
Line of Credit Facility, Remaining Borrowing Capacity	30,000,000
Line of Credit [Member] | Home Federal Savings Bank [Member] | Long-term Debt [Member]
Debt Instrument [Line Items]
Term note					$ 30,000,000
Total expansion project [Member]
Debt Instrument [Line Items]
Estimated expansion project costs	$ 42,000,000

XML

Commitments, Contingencies, Agreements and Subsequent Events - Purchase Commitments (Details) bu in Thousands, MMBTU in Thousands, $ in Thousands	9 Months Ended
	Sep. 30, 2019 USD ($) MMBTU bu	Sep. 30, 2018 MMBTU
Corn [Member]
Long-term Purchase Commitment [Line Items]
Estimated expansion project costs	$ 18,366
Long-term Purchase Commitment, Minimum Mass Required | bu	2,750
Public Utilities, Inventory, Fuel [Member]
Long-term Purchase Commitment [Line Items]
Long-term Purchase Commitment, Period	12 months
Purchase Commitment, Remaining Minimum Amount Committed	$ 12,775
Natural Gas [Member]
Long-term Purchase Commitment [Line Items]
Long-term Purchase Commitment, Minimum Energy Volume Required | MMBTU	5,070	4,982

XML

Inventory (Tables)

9 Months Ended

Sep. 30, 2019

Inventory Disclosure [Abstract]

Schedule of Inventory

Inventory consisted of the following as of September 30, 2019 and December 31, 2018:

	September 30, 2019		December 31, 2018
Raw Materials	$	7,222,899	$	8,983,124
Work in Process	2,576,989		2,295,715
Finished Goods	3,621,670		3,471,360
Totals	$	13,421,558	$	14,750,199

XML

Derivative Instruments

9 Months Ended

Sep. 30, 2019

Derivative Instruments and Hedging Activities Disclosure [Abstract]

Derivative Instruments

DERIVATIVE INSTRUMENTS

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

To reduce price risk caused by market fluctuations, the Company generally follows a policy of using exchange traded futures and options contracts to reduce its net position of merchandisable agricultural commodity inventories and forward cash purchase and sales contracts and uses exchange traded futures and options contracts to reduce price risk. Exchange-traded futures contracts are valued at market price. Changes in market price of exchange traded futures and options contracts related to corn and natural gas are recorded in costs of goods sold and changes in market prices of contracts related to the sale of ethanol, if applicable, are recorded in revenues.

The Company uses futures or options contracts to fix the purchase price of anticipated volumes of corn to be purchased and processed in a future month. The Company's plant will grind approximately 67 million bushels of corn per year.  Over the next twelve months, the Company has hedged and anticipates hedging between 5% and 25% of its anticipated annual grind.  At September 30, 2019, the Company has hedged portions of its anticipated monthly purchases for corn averaging approximately 11% of its anticipated monthly grind over the next twelve months.

The following table represents the approximate amount of realized/unrealized gains (losses) and changes in fair value recognized in earnings on commodity contracts for the three and nine months ending September 30, 2019 and 2018 and the fair value of derivatives as of September 30, 2019 and December 31, 2018:

	Income Statement Classification	Realized Gain		Change In Unrealized Gain (Loss)			Total Gain
Derivatives not designated as hedging instruments:
Commodity contracts for the
three months ended September 30, 2019	Cost of Goods Sold	$	2,431,000	$	2,102,000		$	4,533,000
Commodity contracts for the
three months ended September 30, 2018	Cost of Goods Sold	$	2,811,000	$	(842,000	)	$	1,969,000
Commodity contracts for the
nine months ended September 30, 2019	Cost of Goods Sold	$	1,113,000	$	2,102,000		$	3,215,000
Commodity contracts for the
nine months ended September 30, 2018	Cost of Goods Sold	$	2,406,000	$	901,000		$	3,307,000

	Balance Sheet Classification	September 30, 2019			December 31, 2018
Futures contracts
In gain position		$	2,421,000		$	271,000
In loss position		(66,000		)	(19,000		)
Cash (owed to) held by broker		(1,707,000		)	677,000
	Current Asset	$	648,000		$	929,000

XML

Related Party Transactions (Details)	3 Months Ended		9 Months Ended
	Sep. 30, 2019 USD ($)	Sep. 30, 2018 USD ($)	Sep. 30, 2019 USD ($) installment shares	Sep. 30, 2018 USD ($)	Dec. 31, 2018 USD ($)
Related Party Transaction [Line Items]
Number of units redeemed | shares			25,860
Due to former member	$ 30,000,000		$ 30,000,000		$ 30,000,000
Purchases from Related Party	1,016,000	$ 1,364,000	$ 2,995,000	$ 2,902,000
Director [Member]
Related Party Transaction [Line Items]
Number of units redeemed | shares			25,860
Due to former member	$ 30,000,000		$ 30,000,000
Number of payment installments | installment			2

XML

Lease Obligations (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018	Dec. 31, 2018
Operating Leased Assets [Line Items]
Lease term (up to)	7 years		7 years
Weighted average remaining lease term (years)	3 years 1 month 24 days		3 years 1 month 24 days
Right-of-use asset operating lease	$ 5,187,724		$ 5,187,724		$ 0
Weighted average discount rate (percent)	4.79%		4.79%
Approximate Minimum Rental Commitments
Total undiscounted lease commitments	$ 5,631,000		$ 5,631,000
Railroad Transportation Equipment [Member]
Operating Leased Assets [Line Items]
Rent expense	460,000		1,314,000
Rent expense		$ 371,000		$ 1,124,000
Approximate Minimum Rental Commitments
2020	1,789,000		1,789,000
2021	1,789,000		1,789,000
2022	1,356,000		1,356,000
2023	438,000		438,000
2024	134,000		134,000
2025	125,000		125,000
Total undiscounted lease commitments	$ 5,631,000		$ 5,631,000

XML

Derivative Instruments - Balance Sheet (Details) - USD ($) $ in Thousands	Sep. 30, 2019	Dec. 31, 2018
Other Current Assets [Member]
Derivatives, Fair Value [Line Items]
Other Receivables from Broker-Dealers and Clearing Organizations	$ (1,707)	$ 677
Derivative Instruments Not Designated as Hedging Instruments, Asset, at Fair Value	648	929
Commodity Contract [Member] | Other Current Assets [Member]
Derivatives, Fair Value [Line Items]
Derivative Asset, Fair Value, Gross Asset	2,421	271
Commodity Contract [Member] | Other Liabilities [Member]
Derivatives, Fair Value [Line Items]
Derivative Liability, Fair Value, Gross Liability	$ (66)	$ (19)

XML

Nature of Business and Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2019

Nature of Business and Significant Accounting Policies [Abstract]

Accounting Estimates

Accounting Estimates

Management uses estimates and assumptions in preparing these financial statements in accordance with United States Generally Accepted Accounting Principles. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Actual results could differ from those estimates.

Cash and Cash Equivalents

Cash & Cash Equivalents

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

Trading Securities

Trading Securities

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

At September 30, 2019, trading securities consisted of short term bond mutual funds with an approximate cost of $52,044,000 and fair value of $52,224,000. At December 31, 2018, trading securities consisted of corporate bonds and short term bond mutual funds with an approximate cost of $31,292,000 and fair value of $30,554,000. For the three and nine months ended September 30, 2019, the Company recorded interest, dividend and net realized and unrealized gains from these investments of approximately $397,000 and $1,670,000, respectively, included in other income on the statement of operations. During the same time period of 2018, the Company recorded interest, dividends and net unrealized gains and losses from these investments of approximately $127,000 and $31,000, respectively.

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

Receivables

Receivables

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

Investments

Investments

The Company has a less than 20% investment interest in Renewable Products Marketing Group, LLC ("RPMG"). This investment is being accounted for under the equity method of accounting, as the Company has significant influence, under which the Company's share of net income is recognized as income in the Company's statement of operations and added to the investment account. The investment balance is included in other assets and the income recognized as other income. The investment is evaluated for indications of impairment on a regular basis. A loss would be recognized when the fair value is determined to be less than the carrying value.

Revenue and Cost Recognition

Revenue and Cost Recognition

In the first quarter of 2018, the Company adopted Accounting Standards Update (ASU) 2014-9, Revenue from Contracts with Customers (Topic 606). Under the ASU, revenue is recognized when a customer obtains control of promised goods or services in an amount that reflects the consideration the entity expects to receive in exchange for those goods or services. In addition, the standard requires disclosure of the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The Company applied the five-step method outlined in the ASU to all contracts with customers and elected the modified retrospective implementation method. The Company generally has a single performance obligation in its arrangements with customers. The Company believes for its contracts with customers, control is transferred at a point in time, typically upon delivery to the customers. When the Company performs shipping and handling activities after the transfer of control to the customers (e.g., when control transfers prior to delivery), they are considered as fulfillment activities, and accordingly, the costs are accrued for when the related revenue is recognized. The Company generally expenses sales commissions when incurred because the amortization period would have been less than one year. The implementation of the new standard does not have any material impact on the measurement or recognition of revenue of prior periods, however additional disclosures have been added in accordance with the ASU.

The following is a description of principal activities from which we generate revenue. Revenues from contracts with customers are recognized when control of the promised goods or services are transferred to our customers, in an amount that reflects the consideration that we expect to receive in exchange for those goods or services.

• sales of ethanol;

• sales of distiller grains; and

• sales of corn oil;

All revenue recognized in the income statement is considered to be revenue from contracts with customers. The disaggregation of revenue according to product line, along with accounts receivable from contracts with customers, is as disclosed in Note 5.

Shipping costs incurred by the Company in the sale of ethanol and distiller grains are not specifically identifiable and as a result, revenue from the sale of ethanol and distiller grains is recorded based on the net selling price reported to the Company from the marketer. Rail car lease costs incurred by the Company in the sale and shipment of distiller grain products are included in the cost of goods sold.

Inventories

Inventories

Inventories are generally valued at the lower of cost (first-in, first-out) or net realizable value.  In the valuation of inventories and purchase commitments, net realizable value is defined as estimated selling price in the ordinary course of business less reasonably predictable costs of completion, disposal, and transportation.

Property & Equipment

Property & Equipment

The Company reviews its property and equipment for impairment whenever events indicate that the carrying amount of the asset group may not be recoverable. If circumstances require an asset group be tested for possible impairment, the Company first compares undiscounted cash flows expected to be generated by the asset group to the carrying value of the asset group. If the carrying value of the asset group is not recoverable on an undiscounted cash flow basis, an impairment is recognized to the extent that the carrying value exceeds its fair value. Fair value is determined through various valuation techniques including discounted cash flow models, quoted market values and third-party independent appraisals, as considered necessary.

Derivative Instruments

Derivative Instruments

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

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

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

Realized and unrealized gains and losses related to derivative contracts related to corn and natural gas are included as a component of cost of goods sold and derivative contracts related to ethanol are included as a component of revenue in the accompanying financial statements. The fair values of contracts entered through commodity exchanges are presented on the accompanying balance sheet as derivative instruments. All contracts with the same counter party are reported on a net basis.

Committed Shares to be Redeemed

Committed Shares to be Redeemed

On June 13, 2013, the Company entered into an agreement with Steve Retterath, the Company's largest member, to repurchase and retire all of the membership units owned by Mr. Retterath. The Company agreed to close on this repurchase on or before August 1, 2013. The Company agreed to repurchase and retire 25,860 membership units owned by Mr. Retterath in exchange for $30 million, to be paid in two equal installments payable at closing and on July 1, 2014. The transaction failed to close by the scheduled date due to objections by Mr. Retterath. Due to all conditions of the agreement being met prior to, or on, August 1, 2013, and a court ruling which found the agreement to be binding and enforceable, the Company believes that it has a binding agreement with Mr. Retterath; as such the commitment to repurchase and retire the membership units is reflected in the financial statements as a current liability, due to former member, as if the transaction had closed on August 1, 2013. See Note 9 for additional information.

Net Income per Unit

Net Income per Unit

Basic and diluted net income per unit is computed by dividing net income by the weighted average number of members' units and members' unit equivalents outstanding during the period. There were no member unit equivalents outstanding during the periods presented; accordingly, the Company's basic and diluted net income per unit are the same.

Prior to, or on, August 1, 2013, the Company believes it has a binding agreement with Steve Retterath to repurchase and retire all 25,860 membership units owned by Mr. Retterath. These membership units have thus been excluded in the determination of net income per capital unit as presented in the Statement of Operations. The Company is currently involved in litigation with Mr. Retterath. There is potential that Mr. Retterath will continue as a unit holder upon conclusion of the litigation and said membership units would not be redeemed under the repurchase agreement. If the units are not redeemed, basic and diluted net income per unit, including the 25,860 units, for the three and nine months ended September 30, 2019 would be $44.13 and $143.44, respectively. Net income per unit for the three and nine months ended September 30, 2018 would have been $70.82 and $245.21, respectively.

Risks and Uncertainties

Risks and Uncertainties

The Company has certain risks and uncertainties that it will experience during volatile market conditions, which can have a severe impact on operations. The Company's revenues are derived from the sale and distribution of ethanol, distiller grains and corn oil to customers primarily located in the United States. Corn for the production process is supplied to the plant primarily from local agricultural producers and from purchases on the open market. For the nine months ended September 30, 2019, ethanol sales averaged approximately 78% of total revenues, while approximately 18% of revenues were generated from the sale of distiller grains. Corn oil sales attributed approximately 4% of revenues during this time period. For the nine months ended September 30, 2019, corn costs averaged approximately 79% of cost of goods sold.

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

Recent & Pending Accounting Pronouncements

Recent & Pending Accounting Pronouncements

In February 2016, FASB issued ASU No. 2016-02 "Leases" ("ASU 2016-02"). ASU 2016-02 requires the recognition of lease assets and lease liabilities by lessees for all leases greater than one year in duration and classified as operating leases under previous GAAP. ASU 2016-02 is effective for fiscal years beginning after December 15, 2018, and for interim periods within that fiscal year. Under the new guidance, lessees will be required to recognize the following for all leases (with the exception of short-term leases): (1) a lease liability, which is a lessee's obligation to make lease payments arising from a lease, measured on a discounted cash flow basis; and (2) a "right of use" asset, which is an asset that represents the lessee's right to use the specified asset for the lease term. The Company adopted this accounting standard effective January 1, 2019. Upon adoption, the Company elected a practical expedient which allows existing leases to retain their classification as operating leases. The Company has elected to account for lease and related nonlease components as a single lease component. See Note 6 for more detailed information regarding leases.

In August 2018, FASB issued ASU No. 2018-13 "Fair Value Measurement (Topic 820): Disclosure Framework - Changes to the Disclosure Requirements for Fair Value Measurement" ("ASU 2018-13"). ASU 2018-13 changes some of the disclosure requirements related to fair value measurements related to the Level 1, 2 and 3 investments. ASU 2018-13 is effective for fiscal years beginning after December 15, 2019, and for interim periods within that fiscal year. The Company is currently evaluating the impact of its pending adoption of the new standard on the financial statement.

XML

Lease Obligations

9 Months Ended

Sep. 30, 2019

Leases [Abstract]

Lease Obligations

LEASE OBLIGATIONS

Effective January 1, 2019, the Company adopted ASU 2016-02, Leases (Topic 842). The Company elected the option to apply the transition provisions at the adoption date instead of the earliest comparative period presented in the financial statements. By making this election, the Company has not applied retrospective reporting for 2018. The Company elected the short-term lease exception provided for in the standard and therefore only recognized right-of-use assets and lease liabilities for leases with a term greater than one year. The Company elected the package of practical expedients to not re-evaluate existing contracts as containing a lease or the lease classification unless it was not previously assessed against the lease criteria. In addition, the Company did not reassess initial direct costs for any existing leases.

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

The Company leases rail cars and rail moving equipment with original terms up to 7 years. The Company is obligated to pay costs of insurance, taxes, repairs and maintenance pursuant to the terms of the leases. These costs are in addition to regular lease payments and are not included in lease expense. Rent expense incurred for the operating leases during the three and nine months ended September 30, 2019 was approximately $460,000 and $1,314,000, respectively, and for the same period in 2018 was approximately $371,000 and $1,124,000, respectively. The lease agreements have maturity dates ranging from March 2022 to October 2025. The weighted average remaining life of the lease term for these leases was 3.15 years as of September 30, 2019.

The discount rate used in determining the lease liability for each individual lease was the Company's estimated incremental borrowing rate of 4.79%. The right-of-use asset operating lease, included in other assets, and operating lease liability, included in current and long term liabilities was $5,187,724 as of September 30, 2019.

At September 30, 2019, the Company had the following approximate minimum rental commitments under non-cancelable operating leases for the twelve month period ended September 30:

2020	$	1,789,000
2021	1,789,000
2022	1,356,000
2023	438,000
2024	134,000
2025	125,000
Total lease commitments	$	5,631,000

A reconciliation of the undiscounted future payments in the schedule above and the lease liability recognized in the consolidated balance sheet as of September 30, 2019, is shown below.

Undiscounted future payments	$	5,631,000
Discount effect	(443,276		)
	$	5,187,724

XML

Nature of Business and Significant Accounting Policies - Investments (Details)	Sep. 30, 2019
Renewable Products Marketing Group, LLC [Member]
Schedule of Equity Method Investments [Line Items]
Ownership percentage	20.00%

XML

Nature of Business and Significant Accounting Policies - Trading Securities (Details) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018	Dec. 31, 2018
Debt and Equity Securities, FV-NI [Line Items]
Trading securities, cost	$ 52,044,000		$ 52,044,000		$ 31,292,000
Due to former member	30,000,000		$ 30,000,000		30,000,000
Number of units redeemed			25,860
Director [Member]
Debt and Equity Securities, FV-NI [Line Items]
Due to former member	30,000,000		$ 30,000,000
Number of units redeemed			25,860
Other Nonoperating Income (Expense) [Member]
Debt and Equity Securities, FV-NI [Line Items]
Net realized and unrealized gains (losses)	397,000	$ 127,000	$ 1,670,000	$ 31,000
Fair Value, Measurements, Recurring [Member]
Debt and Equity Securities, FV-NI [Line Items]
Trading securities at fair value	$ 52,224,000		$ 52,224,000		$ 30,554,000

XML

Lease Obligations (Tables)

9 Months Ended

Sep. 30, 2019

Leases [Abstract]

Schedule of Operating Leases Minimum Rental Commitments

At September 30, 2019, the Company had the following approximate minimum rental commitments under non-cancelable operating leases for the twelve month period ended September 30:

2020	$	1,789,000
2021	1,789,000
2022	1,356,000
2023	438,000
2024	134,000
2025	125,000
Total lease commitments	$	5,631,000

A reconciliation of the undiscounted future payments in the schedule above and the lease liability recognized in the consolidated balance sheet as of September 30, 2019, is shown below.

Undiscounted future payments	$	5,631,000
Discount effect	(443,276		)
	$	5,187,724

XML

Inventory

9 Months Ended

Sep. 30, 2019

Inventory Disclosure [Abstract]

Inventory

INVENTORY

Inventory consisted of the following as of September 30, 2019 and December 31, 2018:

	September 30, 2019		December 31, 2018
Raw Materials	$	7,222,899	$	8,983,124
Work in Process	2,576,989		2,295,715
Finished Goods	3,621,670		3,471,360
Totals	$	13,421,558	$	14,750,199

XML

Statements of Operations - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2019	Sep. 30, 2018	Sep. 30, 2019	Sep. 30, 2018
Income Statement [Abstract]
Revenue	$ 76,896,475	$ 77,391,884	$ 243,831,429	$ 238,202,792
Cost of goods sold	72,369,032	69,955,591	229,136,006	212,749,745
Gross profit	4,527,443	7,436,293	14,695,423	25,453,047
Selling, general and administrative expenses	726,263	895,382	2,870,660	2,743,212
Operating income	3,801,180	6,540,911	11,824,763	22,709,835
Other Income (expense)
Interest (expense)	(263,774)	(337,620)	(671,656)	(1,061,558)
Interest income	11,312	3,865	33,855	10,315
Other Income	441,874	196,911	1,782,530	518,265
Total other income (expense)	189,412	(136,844)	1,144,729	(532,978)
Net income	$ 3,990,592	$ 6,404,067	$ 12,969,492	$ 22,176,857
Basic & diluted net income per capital unit (in dollars per unit)	$ 61.81	$ 99.18	$ 200.89	$ 343.40
Weighted average number of units outstanding for the calculation of basic & diluted net income per capital unit (units)	64,560	64,573	64,560	64,581
Distribution per Unit (in dollars per unit)	$ 0	$ 0	$ 75	$ 150