highwater-20240430

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


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

	For the quarterly period ended	April 30, 2024

	OR

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

	For the transition period from to .

	COMMISSION FILE NUMBER
	000-53588

HIGHWATER ETHANOL, LLC

(Exact name of registrant as specified in its charter)


Minnesota									20-4798531
(State or other jurisdiction of incorporation or organization)									(I.R.S. Employer Identification No.)


24500 US Highway 14,	Lamberton,	MN	56152
(Address of principal executive offices)			(Zip Code)

(507) 752-6160

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

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

☐ Yes ☒ No

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date: As of June 13, 2024 there were 4,754 membership units outstanding.

INDEX


			Page Number
PART I. FINANCIAL INFORMATION			3
Item 1. Financial Statements			3
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations			16
Item 3. Quantitative and Qualitative Disclosures about Market Risk			26
Item 4. Controls and Procedures			27
PART II. OTHER INFORMATION			28
Item 1. Legal Proceedings			28
Item 1A. Risk Factors			28
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds			28
Item 3. Defaults Upon Senior Securities			28
Item 4. Mine Safety Disclosures			28
Item 5. Other Information			28
Item 6. Exhibits			28
SIGNATURES			30

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

HIGHWATER ETHANOL, LLC

Condensed Balance Sheets


ASSETS	April 30, 2024		October 31, 2023
	(Unaudited)
Current Assets
Cash and cash equivalents	$	20,984,465	$	41,519,800
Derivative instruments	530,181		923,251

Accounts receivable	3,251,049		2,935,253
Inventories	13,228,547		16,113,187
Prepaids and other	533,253		756,026
Total current assets	38,527,495		62,247,517

Property and Equipment
Land and land improvements	13,210,145		13,210,145
Buildings	39,945,026		38,862,183
Office equipment	1,231,526		1,231,526
Plant and process equipment	88,044,910		87,740,728
Vehicles	160,259		160,259
Construction in progress	1,628,308		1,072,117
	144,220,174		142,276,958
Less accumulated depreciation	(114,602,655)		(109,998,247)
Net property and equipment	29,617,519		32,278,711

Other Assets
Investments	4,959,883		4,876,963
Right of use asset - operating leases	27,890		110,040
Right of use asset - finance leases	755,116		823,763
Other	—		208,232
Deposits	493,330		493,330
Total other assets	6,236,219		6,512,328

Total Assets	$	74,381,233	$	101,038,556


LIABILITIES AND MEMBERS' EQUITY	April 30, 2024		October 31, 2023
	(Unaudited)
Current Liabilities
Accounts payable	$	9,969,929	$	18,760,447
Accrued expenses	778,314		1,562,707


Current portion of operating lease liability	27,888		110,038
Current portion of finance lease liability	135,603		131,933
Total Current Liabilities	10,911,734		20,565,125

Long-Term Liabilities
Finance lease liability	711,327		780,059
Total Long-Term Liabilities	711,327		780,059

Commitments and Contingencies

Members' Equity
Members' equity, 4,754 and 4,754 units outstanding	62,758,172		79,693,372

Total Liabilities and Members’ Equity	$	74,381,233	$	101,038,556

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

HIGHWATER ETHANOL, LLC

Condensed Unaudited Statements of Operations


	Three Months Ended				Six Months Ended
	April 30, 2024		April 30, 2023		April 30, 2024		April 30, 2023

Revenues	$	32,543,357	$	48,711,980	$	69,779,814	$	97,573,545

Cost of Goods Sold	33,339,994		46,044,506		68,939,565		91,556,970

Gross Profit (Loss)	(796,637)		2,667,474		840,249		6,016,575

Operating Expenses	1,096,957		1,085,532		2,380,428		2,283,645

Operating Income (Loss)	(1,893,594)		1,581,942		(1,540,179)		3,732,930

Other Income (Expense)
Interest income	174,245		25,256		541,258		84,925
Other income	119,421		90,336		214,132		202,056
Interest expense	(52,609)		(54,417)		(115,899)		(119,129)

Income from equity method investments	53,350		104,711		127,388		179,023
Total other income (expense), net	294,407		165,886		766,879		346,875

Net Income (Loss)	$	(1,599,187)	$	1,747,828	$	(773,300)	$	4,079,805

Weighted Average Units Outstanding	4,754		4,757		4,754		4,760
Net Income (Loss) Per Unit, Basic and Diluted	$	(336.39)	$	367.42	$	(162.66)	$	857.10
Distributions Declared Per Unit	$	—	$	—	$	3,400	$	3,200

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

HIGHWATER ETHANOL, LLC

Statements of Changes in Members' Equity (Unaudited)


	Members' Equity

Balance - October 31, 2022	$	78,293,068

Net income for the three-month period ended January 31, 2023	2,331,977

Member distribution	(15,240,000)

Member unit repurchase, 2 units	(19,000)

Balance - January 31, 2023	65,366,045

New income for the three-month period ended April 30, 2023	1,747,828

Member unit repurchase, 7 units	(70,000)

Balance - April 30, 2023	$	67,043,873


	Members' Equity

Balance - October 31, 2023	$	79,693,372

Net income for the three-month period ended January 31, 2024	825,887

Member distribution	(16,161,900)



Balance - January 31, 2024	64,357,359

Net Loss for the three-month period ended April 30, 2024	(1,599,187)




Balance - April 30, 2024	$	62,758,172

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

HIGHWATER ETHANOL, LLC

Condensed Unaudited Statements of Cash Flows


	Six Months Ended
	April 30, 2024		April 30, 2023

Cash Flows from Operating Activities
Net income (loss)	$	(773,300)	$	4,079,805
Adjustments to reconcile net income (loss) to net cash (used in) provided by operations
Depreciation and amortization	4,881,288		5,124,323
Earnings in excess of distributions (distributions in excess of earnings) from equity method investments	193,045		(109,023)
Non-cash patronage income	(380,000)		(286,571)



Changes in working capital components


Accounts receivable	(315,796)		726,571
Inventories	2,884,639		2,280,957
Derivative instruments	393,070		538,097
Prepaids and other	222,774		307,071
Accounts payable	(8,837,206)		(11,214,378)
Accrued expenses	(784,395)		(425,896)
Net cash (used in) provided by operating activities	(2,515,881)		1,020,956

Cash Flows from Investing Activities
Capital expenditures	(1,896,528)		(481,898)
Proceeds from (purchase of) investments	104,034		(580,708)

Net cash used in investing activities	(1,792,494)		(1,062,606)

Cash Flows from Financing Activities
Member unit repurchases	—		(89,000)
Payment on finance lease liability	(65,060)		(61,588)
Member distributions	(16,161,900)		(15,240,000)
Net cash used in financing activities	(16,226,960)		(15,390,588)

Net Decrease in Cash and Cash Equivalents	(20,535,335)		(15,432,238)

Cash and Cash equivalents – Beginning of Period	41,519,800		29,790,258

Cash and Cash equivalents – End of Period	$	20,984,465	$	14,358,020

Supplemental Cash Flow Information
Cash paid for interest	$	24,338	$	27,812

Supplemental Disclosure of Noncash Financing and Investing Activities


Capital expenditures included in accounts payable	$	86,888	$	178,343

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

HIGHWATER ETHANOL, LLC

Notes to Condensed Unaudited Financial Statements

April 30, 2024

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accompanying unaudited condensed interim 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. The accompanying balance sheet and related notes as of October 31, 2023 are derived from the audited financial statements as of that date. These condensed 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 October 31, 2023, contained in the Company’s Form 10-K.

In the opinion of management, the interim condensed financial statements reflect all adjustments, consisting of only normal recurring adjustments, considered necessary for fair presentation of the Company's financial position as of April 30, 2024 and the results of operations and cash flows for all periods presented.

Nature of Business

Highwater Ethanol, LLC, (a Minnesota Limited Liability Company) operates an ethanol plant near Lamberton, Minnesota. The ethanol plant was constructed as a 50 million gallon per year nameplate ethanol plant. The plant currently operates in excess of its nameplate capacity due to the approval of air permit by the Minnesota Pollution Control Agency which allows for 70.2 million gallons of denatured ethanol per 12-month rolling average. The Company produces and sells, primarily through third-party professional marketers, fuel ethanol and co-products of the fuel ethanol production process in the continental United States.

Accounting Estimates

Management uses estimates and assumptions in preparing these financial statements in accordance with 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. The Company uses estimates and assumptions in accounting for significant matters, among others, the carrying value of property and equipment and related impairment testing, inventory valuation, and derivative instruments. Actual results could differ from those estimates and such differences may be material to the financial statements. The Company periodically reviews estimates and assumptions and the effects of revisions are reflected in the period in which the revision is made.

Revenue Recognition

ASC Topic 606, Revenue from Contracts with Customers, further details the Company’s requirement to recognize revenue of transferred goods or services to customers in an amount which is expected to be received in exchange for those goods or services. Five steps are required as part of the guidance: 1. Identify the contract 2. Identify the performance obligations 3. Determine the transaction price 4. Allocate the transaction price to the performance obligation 5. Recognize revenue when each performance obligation is satisfied.

The Company generally sells ethanol and related products pursuant to marketing agreements. The Company’s products are shipped FOB shipping point. The Company recognizes revenue when control of goods is transferred. For ethanol sales by single manifest railcars and trucks, and distillers grains sales, control transfers when loaded. For ethanol sales by unit trains, control transfers once the last railcar of the unit train has loaded and the shipping documentation transferred to the marketer.

In accordance with the Company’s agreements for the marketing and sale of ethanol and related products, marketing fees and freight due to the marketers are deducted from the gross sales price at the time incurred. Revenue is recorded net of these marketing fees and freight as they do not provide an identifiable benefit that is sufficiently separable from the sale of ethanol and related products.

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.

HIGHWATER ETHANOL, LLC

Notes to Condensed Unaudited Financial Statements

April 30, 2024

•ethanol sales

•modified distillers grains sales

•dried distillers grains sales

•corn oil sales

Disaggregation of revenue:

All revenue recognized in the statement of operations is considered to be revenue from contracts with customers. The following table depicts the disaggregation of revenue according to product line for the three and six months ended April 30, 2024 and 2023:


	Three Months Ended April 30, 2024		Three Months Ended April 30, 2023		Six Months Ended April 30, 2024		Six Months Ended April 30, 2023
Revenue Sources	Amount		Amount		Amount		Amount

Ethanol Sales	$	23,503,555	$	35,666,080	$	49,653,156	$	70,707,286
Modified Distillers Grains Sales	2,012,253		2,894,548		4,194,306		6,255,476
Dried Distillers Grains Sales	4,492,025		6,921,665		10,196,124		13,062,393
Corn Oil Sales	2,535,524		3,229,687		5,736,228		7,548,390
Total Revenues	$	32,543,357	$	48,711,980	$	69,779,814	$	97,573,545

Contract assets and contract liabilities:

The Company receives payments from customers based upon contractual billing schedules; accounts receivable are recorded when the right to consideration becomes unconditional. Contract liabilities include payments received in advance of performance under the contract, and are realized with the associated revenue recognized under the contract.

The Company had short term contract liabilities from contracts with customers of $479,478 at April 30, 2024 and $34,599 and $0 at October 31, 2023 and October 31, 2022.

Shipping Costs

Shipping costs incurred by the Company in the sale of ethanol, dried distillers grains and corn oil are not specifically identifiable and as a result, revenue from the sale of those products is recorded based on the net selling price reported to the Company from the marketer.

Segment Reporting

Operating segments are defined as components of an enterprise for which separate financial information is available that is evaluated regularly by the chief operating decision maker or decision making group in deciding how to allocate resources and in assessing performance. The Company has determined that it has one reportable business segment, the manufacturing and marketing of fuel-grade ethanol and the co-products of the ethanol production process. The Company's chief operating decision maker reviews financial information of the Company as a whole for purposes of assessing financial performance and making operating decisions. Accordingly, the Company considers itself to be operating in a single industry segment.

Derivative Instruments

Derivatives are recognized in the balance sheets and the measurement of these instruments are at fair value. In order for a derivative to qualify as a hedge, specific criteria must be met and appropriate documentation maintained. Gains and losses from derivatives that do not qualify as hedges, or are undesignated, must be recognized immediately in earnings. If the derivative does qualify as a hedge, depending on the nature of the hedge, changes in the fair value of the derivative will be either offset

HIGHWATER ETHANOL, LLC

Notes to Condensed Unaudited Financial Statements

April 30, 2024

against the change in fair value of the hedged assets, liabilities, or firm commitments through earnings or recognized in other comprehensive income until the hedged item is recognized in earnings.

Contracts are evaluated to determine whether the contracts are derivatives. Certain contracts that meet the definition of a derivative may be exempted as “normal purchases or normal sales”. Normal purchases and normal sales are contracts that provide for the purchase or sale of something other than a financial instrument or derivative instrument that will be delivered in quantities expected to be used or sold over a reasonable period in the normal course of business. Contracts that meet the requirements of normal purchases or sales are documented as normal and exempted from accounting as derivatives, therefore, are not marked to market in our financial statements.

The Company enters into ethanol, corn and natural gas derivatives in order to protect cash flows from fluctuations caused by volatility in prices. These derivatives are not designated as effective hedges for accounting purposes. For derivative instruments that are not accounted for as hedges, or for the ineffective portions of qualifying hedges, the change in fair value is recorded through earnings in the period of change. Ethanol derivative changes in fair market value are included in revenue. Corn and natural gas derivative changes in fair market value are included in costs of goods sold.

Carrying Value of Long-Lived Assets

Long-lived assets, such as property and equipment, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If circumstances require a long-lived asset group be tested for possible impairment, the Company first compares undiscounted cash flows expected to be generated by an asset group to the carrying value of the asset group. If the carrying value of the long-lived asset group is not recoverable on an undiscounted cash flow basis, 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.

In accordance with the Company’s policy for evaluating impairment of long-lived assets described above, when a triggering event occurs management evaluates the recoverability of the facilities based on projected future cash flows from operations over the facilities’ estimated useful lives. In determining the projected future undiscounted cash flows, the Company makes significant assumptions concerning the future viability of the ethanol industry, the future price of corn in relation to the future price of ethanol and the overall demand in relation to production and supply capacity. The Company has not recorded any impairment for the six months ended April 30, 2024 and 2023.

Fair Value of Financial Instruments

The carrying value of cash and cash equivalents, accounts receivable, and accounts payable, and other working capital items approximate fair value at April 30, 2024 due to the short maturity nature of these instruments (Level 2).

Derivative instruments are carried at fair value, based on dealer quotes and live trading levels (Note 5).

Investments

The Company has a 5% investment interest in an unlisted company, Renewable Products Marketing Group, LLC (RPMG), who markets the Company’s ethanol. The Company also has a 7% ownership interest in Lawrenceville Tank, LLC (LT), which owns and operates a trans load/tank facility near Atlanta, Georgia. These investments are flow-through entities and are being accounted for by the equity method of accounting under which the Company’s share of net income is recognized as income in the Company’s statements of operations and added to the investment account. Distributions or dividends received from the investment are treated as a reduction of the investment account. The Company consistently follows the practice of recognizing the net income (loss) from equity method investments based on the most recent reliable data. Therefore, the net income (loss) which is reported in the Company's statement of operations for the period ended April 30, 2024 is based on the investee’s results of operations for the period ended March 31, 2024.

The Company has cost method of investments in cooperatives. The corresponding patronage income is recorded in costs of goods sold.

HIGHWATER ETHANOL, LLC

Notes to Condensed Unaudited Financial Statements

April 30, 2024

Grants

The Minnesota State Legislature established the Bioincentive Program in 2015 to encourage commercial-scale production of advanced biofuels, renewable chemicals, and biomass thermal energy through production incentive payments. Eligible producers of cellulosic ethanol may receive $0.16 per gallon of cellulosic ethanol produced subject to program funding limitations. The Company received awards from the Bioincentive Program of approximately $92,000, recorded in the first quarter of fiscal 2024 in other income, and $116,000, recorded in the second quarter of fiscal 2024 in other income. The Company received awards from the Bioincentive Program of approximately $100,000, recorded in the first quarter of fiscal 2023 in other income, and $81,000, recorded in the second quarter of fiscal 2023 in other income.

2. UNCERTAINTIES

The Company derives substantially all of its revenues from the sale of ethanol, distillers grains and corn oil. These products are commodities and the market prices for these products display substantial volatility and are subject to a number of factors which are beyond the control of the Company. The Company’s most significant manufacturing inputs are corn and natural gas. The price of these commodities is also subject to substantial volatility and uncontrollable market factors. In addition, these input costs do not necessarily fluctuate with the market prices for ethanol and distillers grains. As a result, the Company is subject to significant risk that its operating margins can be reduced or eliminated due to the relative movements in the market prices of its products and major manufacturing inputs. As a result, market fluctuations in the price of or demand for these commodities can have a significant adverse effect on the Company’s operations, profitability, and availability of cash flows to make loan payments and maintain compliance with the loan agreement.

3. RECEIVABLES

Receivables consisted of the following at:


	April 30, 2024		October 31, 2023

Trade receivables	$	2,300,502	$	1,812,631
Other receivables	950,547		1,122,622
Total	$	3,251,049	$	2,935,253

4. INVENTORIES

Inventories consisted of the following at:


	April 30, 2024		October 31, 2023

Raw materials	$	4,108,784	$	7,861,508
Spare parts and supplies	5,867,596		5,432,982
Work in process	961,121		1,073,564
Finished goods	2,291,046		1,745,133
Total	$	13,228,547	$	16,113,187

The Company recorded a lower of cost or net realizable value write-down on finished goods inventory of approximately $18,000 and $0 at April 30, 2024 and October 31, 2023, respectively.

5. DERIVATIVE INSTRUMENTS

As of April 30, 2024, the Company had entered into corn, natural gas and ethanol derivative instruments, which are required to be recorded as either assets or liabilities at fair value in the balance sheet. The Company uses these instruments to manage risks from changes in market rates and prices. Derivatives qualify for treatment as hedges when there is a high correlation between the change in fair value of the derivative instrument and the related change in value of the underlying hedged item. The

HIGHWATER ETHANOL, LLC

Notes to Condensed Unaudited Financial Statements

April 30, 2024

Company may designate the hedging instruments based upon the exposure being hedged as a fair value hedge or a cash flow hedge. The derivative instruments outstanding are not designated as hedges for accounting purposes.

Commodity Contracts

The following tables provide details regarding the Company's derivative instruments at April 30, 2024 and October 31, 2023:


Instrument	Balance Sheet location	April 30, 2024		October 31, 2023



Corn, natural gas and ethanol contracts
In gain position		$	28,295	$	812
In loss position		(717,325)		(1,497,801)
Deposits with broker		1,219,211		2,420,240
	Current assets	$	530,181	$	923,251

These contracts and related deposits are subject to a master netting arrangements and, therefore, are presented on a net basis on the balance sheet.

The Company has 1,662,000 bushels of corn inventory delivered under delayed-pricing contracts as of April 30, 2024. The contracts have various pricing deadlines through August 31, 2024.

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


	Statement of	Three Months Ended April 30,
	Operations location	2024		2023
Ethanol contracts	Revenues	$	4,697	$	15,941
Corn contracts	Cost of goods sold	(81,705)		134,913
Natural gas contracts	Cost of goods sold	(1,886)		(3,872)

	Statement of	Six Months Ended April 30,
	Operations location	2024		2023
Ethanol contracts	Revenues	$	15,071	$	76,406
Corn contracts	Cost of goods sold	(92,506)		448,587
Natural gas contracts	Cost of goods sold	8,157		80,003

6. FAIR VALUE MEASUREMENTS

The following table provides information on those assets (liabilities) measured at fair value on a recurring basis.


	Fair Value as of		Fair Value Measurement Using
	April 30, 2024		Level 1		Level 2		Level 3
Derivative instruments - commodities
In gain position	$	28,295	$	—	$	28,295	$	—
In loss position	(717,325)		(7,204)		(710,121)		—

HIGHWATER ETHANOL, LLC

Notes to Condensed Unaudited Financial Statements

April 30, 2024


	Fair Value as of		Fair Value Measurement Using
	October 31, 2023		Level 1		Level 2		Level 3
Derivative instruments - commodities
In gain position	$	812	$	812	$	—	$	—
In loss position	$	(1,497,801)	$	(13,466)	$	(1,484,335)	$	—

The Company determines the fair values of commodities by obtaining the fair value measurements from an independent pricing service based on dealer quotes and live trading levels from the Chicago Board of Trade.

7. DEBT FINANCING

The Company had no long-term debt at April 30, 2024 or October 31, 2023, respectively.

Bank Financing

The Company has a loan facility with Compeer Financial f/k/a AgStar Financial Services, PCA ("Compeer") that includes a $20,000,000 Term Revolving Loan and a Revolving Line of Credit Loan. The loan facility with Compeer is secured by substantially all business assets and also subjects the Company to various financial and non-financial covenants.

Term Revolving Loan

The Term Revolving Loan is for $20,000,000, and has a variable interest rate based on the Wall Street Journal's Prime Rate plus 10 basis points with a minimum interest rate of 2.10%. The applicable interest rate at April 30, 2024 was 8.60%. The Term Revolving Loan may be advanced, repaid and re-borrowed during the term. Monthly interest payments are due on the Term Revolving Loan. Payment of all amounts outstanding are due on November 1, 2027. The outstanding balance on this note was $0 at April 30, 2024. The Company pays interest at a rate of 1.50% on amounts outstanding for letters of credit which also reduce the amount available under the Term Revolving Loan. The Company has no letters of credit outstanding at April 30, 2024. The Company is also required to pay unused commitment fees for the Term Revolving Loan.

Revolving Line of Credit Loan

The Revolving Line of Credit Loan is for an amount equal to the borrowing base, with a maximum limit of $10,000,000, and has a variable interest rate based on the Wall Street Journal's Prime Rate plus 10 basis points with a minimum interest rate of 2.10%. The amount available to borrow per the borrowing base calculations at April 30, 2024 was approximately $0. The applicable interest rate at April 30, 2024 was 8.60%. The Revolving Line of Credit Loan may be advanced, repaid and re-borrowed during the term. Monthly interest payments are due on the Revolving Line of Credit Loan with payment of all amounts outstanding due on November 1, 2024. The maturity date may be extended for up to four additional one year terms upon written request of the Company which will be deemed automatically granted by Compeer upon written certification that there is no event of default. The Company has previously been granted one extension. The outstanding balance on this note was $0 at April 30, 2024. The Company is also required to pay unused commitment fees for the Revolving Line of Credit Loan.

Covenants and other Miscellaneous Terms

The loan facility with Compeer is secured by substantially all business assets. The Company executed a mortgage creating a first lien on its real estate and plant and a security interest in all personal property located on the premises and assigned all rents and leases to property, marketing contracts, risk management services contract, and natural gas, electricity, water service and grain procurement agreements.

The Company is also subject to various financial and non-financial covenants that limit distributions and debt and require minimum working capital requirements. The Company is limited to annual capital expenditures of $5,000,000 without prior approval, incurring additional debt over certain amounts without prior approval, and making additional investments as described in the Second Amended and Restated Credit Agreement without prior approval. The minimum working capital is $9,000,000, which is calculated as current assets plus the amount available for drawing under our Term Revolving Loan, and

HIGHWATER ETHANOL, LLC

Notes to Condensed Unaudited Financial Statements

April 30, 2024

undrawn amounts on outstanding letters of credit less current liabilities, and is measured quarterly. The Company is allowed to make distributions to members as frequently as monthly in an amount equal to 75% of net income if working capital is greater than or equal to $9,000,000, or an unlimited amount of net income if working capital is greater than or equal to $12,000,000.

8. LEASES

The Company leases rail cars for its facility to transport dried distillers grains to its end customers. We classified these identified assets as operating leases after assessing the terms under lease classification guidance.

The Company has a contract for use of a natural gas pipeline which transports natural gas from the Northern Natural Gas pipeline to the Company’s facility. This natural gas line has no alternate use and is specifically for the benefit of the Company. The contract has minimum volume requirements as well as a fixed monthly fee. This contract meets the definition of a lease and is classified as a finance lease.

The Company determines if an arrangement is a lease or contains a lease at inception. Right of use assets and lease liabilities are recognized at commencement date based on the present value of lease payments over the lease term. The discount rate used in determining the lease liability for each individual lease is the Company's estimated incremental borrowing rate at the time the lease is entered into. An incremental borrowing rate of 5.5% was utilized for each of the Company's leases.

The Company’s operating and finance leases have remaining lease terms of approximately 2 months and 5.5 years, respectively. These leases include options to extend the lease. When it is reasonably certain the Company will exercise those options, the Company will update the remaining terms of the leases. The Company does not have lease arrangements with residual value guarantees, sale leaseback terms or material restrictive covenants.

The following table summarizes the remaining maturities of the Company’s operating and finance lease liabilities as of April 30, 2024:


For the Period Ending April 30,	Operating Leases		Finance Leases
2025	$	28,080	$	178,800
2026	—		178,800
2027	—		178,800
2028	—		178,800
2029	—		178,800
Thereafter	—		89,400
Totals	28,080		983,400
Amount representing interest	(192)		(136,470)
Lease liability	$	27,888	$	846,930


Lease Cost	Three Months ended April 30, 2024		Six Months ended April 30, 2024		Three Months ended April 30, 2023		Six Months ended April 30, 2023

Operating lease cost	$	42,120	$	84,240	$	42,120	$	84,240
Short term lease cost	19,009		34,699		11,737		21,931
Finance lease cost
Amortization of leased assets	34,324		68,647		34,324		68,647
Interest on lease liabilities	11,946		24,338		13,695		27,812

Net lease cost	$	107,399	$	211,924	$	101,876	$	202,630

HIGHWATER ETHANOL, LLC

Notes to Condensed Unaudited Financial Statements

April 30, 2024

9. COMMITMENTS AND CONTINGENCIES

Marketing Agreements

The Company has an ethanol marketing agreement with a marketer (RPMG) to purchase, market, and distribute the ethanol produced by the Company. Based on the terms of the marketing agreement, RPMG will use commercially reasonable efforts to obtain the best price for all ethanol sold subject to the terms of the marketing agreement. RPMG shall have discretion to fix the price, terms and conditions of the sale of ethanol that is sold and marketed as Indexed Gallons. The Company also entered into a member control agreement with the marketer whereby the Company made capital contributions and became a minority owner of the marketer. The member control agreement became effective on February 1, 2011 and provides the Company a membership interest with voting rights. The marketing agreement will terminate if the Company ceases to be a member. The Company will assume certain of the member’s rail car leases if the agreement is terminated. The Company can sell its ethanol either through an index arrangement or at an agreed upon fixed price. The marketing agreement is perpetual until terminated according to the agreement. The Company may be obligated to continue to market its ethanol through the marketer for a period of time. The amended agreement requires minimum capital amounts invested as required under the agreement.

The Company has a distillers grains marketing agreement with a marketer (RPMG) to purchase and market all of the distillers grains produced at the plant beginning January 1, 2023. The Company pays a fee to the marketer to market distillers grains to third party end purchasers and the Company reimburses the marketer for certain charges paid to third parties. The marketer must market the distillers grains using commercially reasonable efforts and endeavor to maximize price and minimize freight and other costs but does not guarantee the price that will be obtained from the sale. Following an initial term, the agreement will be automatically extended for additional terms unless either party gives proper notice of non-extension.

The Company has a crude corn oil marketing agreement with a marketer (RPMG) to market and distribute all corn oil to be produced at the plant for an initial term. Under the agreement, the Company must provide estimates of production and inventory of corn oil. The marketer may execute sales contracts with buyers for future delivery of corn oil. The Company receives a percentage of the F.O.B. sale price less a marketing fee, actual freight and transportation costs and certain taxes and other charges related to the purchase, delivery or sale. The Company is required to provide corn oil meeting certain specifications as provided in the agreement and the agreement provides for a process for rejection of nonconforming corn oil. The agreement automatically renews for successive terms unless terminated in accordance with the agreement.

Construction Project

The Company entered into an agreement on December 21, 2023 with Nelson Baker Biotech, Inc. to construct one fermentation tank which is expected to increase efficiencies. The construction commenced in May 2024 and is expected to be completed in the fall of 2024 at an approximate cost of $4,000,000.

Regulatory Agencies

The Company is subject to oversight from regulatory agencies regarding environmental concerns which arise in the ordinary course of its business.

Forward Contracts

In the ordinary course of business, we enter into forward contracts for our commodity purchases and sales. Forward contracts outstanding are as follows at April 30, 2024:


	Quantity	Average Price		Date Delivery Through

Purchase of corn (in bushels):
Basis contracts	2,898,491
Priced contracts	2,013,604	$	4.35	12/31/2025
Total	4,912,095

Purchase of natural gas (in dekatherms):
Priced contracts	2,405,150	$	3.50	3/31/2027
Total	2,405,150

Purchase of denaturant (in gallons):
Priced contracts	138,750	$	1.81	5/31/2024
Total	138,750

Sales of dry distillers grains (in tons):
Priced contracts	12,400	$	146.45	9/30/2024
Total	12,400

Sales of modified distillers grains (in tons)
Priced contracts	9,500	$	92.73	9/30/2024
Total	9,500

Sales of corn oil (in pounds)
Priced contracts	468,000	$	0.41	5/31/2024
Total	468,000

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

We prepared the following discussion and analysis to help you better understand our financial condition, changes in our financial condition, and results of operations for the six month periods ended April 30, 2024, compared to the same periods of the prior fiscal year. This discussion should be read in conjunction with the condensed financial statements and notes and the information contained in the Company's Annual Report on Form 10-K for the fiscal year ended October 31, 2023.

Forward-Looking Statements

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 “will,” “may,” “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. Many factors could cause actual results to differ materially from those projected in forward-looking statements. While it is impossible to identify all such factors, factors that could cause actual results to differ materially from those estimated by us include, but are not limited to:


			Changes in the availability and price of corn and natural gas;
			Reduction or elimination of the Renewable Fuel Standard;
			Volatile commodity and financial markets;
			Changes in legislation benefiting renewable fuels;
			Our ability to comply with the financial covenants contained in our credit agreements with our lenders;
			Our ability to profitably operate the ethanol plant and maintain a positive spread between the selling price of our products and our raw material costs;
			Results of our hedging activities and other risk management strategies;
			Ethanol and distillers grains supply exceeding demand and corresponding price reductions;
			Our ability to generate cash flow to invest in our business and service our debt;
			Changes in the environmental regulations that apply to our plant operations and changes in our ability to comply with such regulations;
			Changes in our business strategy, capital improvements or development plans;
			Changes in plant production capacity or technical difficulties in operating the plant;
			Changes in general economic conditions or the occurrence of certain events causing an economic impact in the agriculture, oil or automobile industries;
			Lack of transportation, storage and blending infrastructure preventing ethanol from reaching high demand markets;
			Changes in federal and/or state laws or policies impacting the ethanol industry;
			Changes and advances in ethanol production technology and the development of alternative fuels and energy sources and advanced biofuels;
			Competition from alternative fuel additives;
			Changes in interest rates and lending conditions;
			Decreases in the price we receive for our ethanol and distillers grains;
			Our inability to secure credit or obtain additional equity financing we may require in the future;
			Our ability to retain key employees and maintain labor relations;
			Changes in the price of oil and gasoline;
			Competition from clean power systems using fuel cells and plug-in hybrids;
			International trade disputes and the imposition of tariffs by foreign governments on our products;
			Use by the EPA of small refinery exemptions;
			A slowdown in global and regional economic activity, reduced demand for our products and the potential for labor shortages and shipping disruptions resulting from the COVID-19 pandemic;
			Global economic uncertainty, rising inflation, market disruptions and increased volatility in commodity prices caused in part by the Russian invasion of Ukraine and resulting sanctions by the United States and other countries; and
			Competition from the increased use of electric vehicles.

The cautionary statements referred to in this section also should be considered in connection with any subsequent written or oral forward-looking statements that may be issued by us or persons acting on our behalf. We are not under any duty to update the forward-looking statements contained in this report. Furthermore, 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.

Available Information

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

Overview

Highwater Ethanol, LLC (“we,” “our,” “Highwater Ethanol” or the “Company”) was formed as a Minnesota limited liability company organized on May 2, 2006, for the purpose of constructing, owning, and operating an ethanol plant near Lamberton, Minnesota. Since August 2009, we have been engaged in the production of ethanol and distillers grains at the plant. In October 2019, our air permit application to the Minnesota Pollution Control Agency to allow for 70.2 million gallons of denatured ethanol per 12-month rolling average was approved.

On February 16, 2024, we amended our TFX Throughput Service Agreement (the "Amendment") with Northern Natural Gas Company ("NNG") for transportation of natural gas. The Amendment has an effective date of November 1, 2024 and extends the term through October 31, 2029. We will pay the tariff rate in effect from time to time for natural gas. NNG has allocated to us 5,000 dekatherms of natural gas per day.

We expect to fund our operations during the next 12 months using cash flow from our continuing operations and our current credit facilities. However, should we experience unfavorable operating conditions in the ethanol industry that prevent us

from profitably operating the ethanol plant, we may need to seek additional funding.

Results of Operations for the Three Months Ended April 30, 2024 and 2023

The following table shows the results of our operations and the approximate percentage of revenues, cost of goods sold, operating expenses and other items to total revenues in our unaudited statements of operations for the three months ended April 30, 2024 and 2023:


	2024				2023
Statements of Operations Data	Amount (unaudited)		%		Amount (unaudited)		%

Revenues	$	32,543,357	100.00	%	$	48,711,980	100.00	%
Cost of Goods Sold	33,339,994		102.45	%	46,044,506		94.52	%
Gross Profit (Loss)	(796,637)		(2.45)	%	2,667,474		5.48	%
Operating Expenses	1,096,957		3.37	%	1,085,532		2.23	%
Operating Income (Loss)	(1,893,594)		(5.82)	%	1,581,942		3.25	%
Other Income, net	294,407		0.91	%	165,886		0.34	%
Net Income (Loss)	$	(1,599,187)	(4.91)	%	$	1,747,828	3.59	%

The following table shows the sources of our revenue for the three months ended April 30, 2024 and 2023:


	2024				2023
Revenue Sources	Amount (Unaudited)		%		Amount (Unaudited)		%

Ethanol Sales	$	23,503,555	72.22	%	$	35,666,080	73.22	%
Modified Distillers Grains Sales	2,012,253		6.19	%	2,894,548		5.94	%
Dried Distillers Grains Sales	4,492,025		13.80	%	6,921,665		14.21	%
Corn Oil Sales	2,535,524		7.79	%	3,229,687		6.63	%
Total Revenues	$	32,543,357	100.00	%	$	48,711,980	100.00	%

Revenue

Ethanol

Our ethanol revenues were lower for the three months ended April 30, 2024, as compared to the three months ended April 30, 2023. Revenue from ethanol sales decreased by approximately 34.1% during the three months ended April 30, 2024, as compared to the three months ended April 30, 2023, due primarily to lower ethanol prices and a decrease in number of gallons sold during the three months ended April 30, 2024.

The average price per gallon of ethanol sold for the three months ended April 30, 2024 was approximately 33.5% lower than the average price we received for the three months ended April 30, 2023. Ethanol prices were lower due primarily to lower corn and energy prices and an increase in ethanol stocks resulting from a period of higher industry-wide production.

On April 19, 2024, the Environmental Protection Agency announced the issuance of an emergency waiver to allow E15 to be sold during the summer months which is likely to have a positive effect on ethanol demand. Other factors likely to affect ethanol prices in the future include domestic corn prices and corn supply, energy prices and inventory levels. In addition, trade disputes with foreign governments, changes in foreign ethanol demand, global economics and increased volatility in commodity prices could impact the market price of ethanol.

The number of gallons of ethanol sold during the three months ended April 30, 2024 decreased by approximately 1.0%, as compared to the three months ended April 30, 2023 due to timing of shipments. Our ethanol production levels for the three months ended April 30, 2024 were at an annual rate of approximately 69 million gallons. Management anticipates that the amount of ethanol produced could decrease in the future if operating conditions worsen and we reduce ethanol production levels. Ethanol production could also decrease if delayed rail car shipments affect our ability to get sufficient rail cars to transport our ethanol.

We had gains related to ethanol based derivative instruments of $4,697 and $15,941 for the three months ended April 30, 2024 and 2023, respectively. These gains increased our ethanol revenue during these periods.

Distillers Grains

Revenue from distillers grains sales decreased by approximately 33.7% during the three months ended April 30, 2024, as compared to the three months ended April 30, 2023 primarily due to lower distillers grains prices and a decrease in tons of distillers grains sold during our three months ended April 30, 2024 compared to the same period of 2023.

For the three months ended April 30, 2024, the average price per ton of dried distillers grains sold was approximately 34.3% lower than the average price we received during the three months ended April 30, 2023, due primarily to decreases in the domestic prices of corn and soybeans and lower seasonal demand for the period. For the three months ended April 30, 2024, the average price per ton of modified distillers grains sold was approximately 29.8% lower than during the three months ended April 30, 2023, due to decreases in the domestic prices of corn and soybeans and decreased demand in our area.

Distillers grains prices typically change in proportion to domestic corn and other feed products including soybeans. Domestic demand for distillers grains could decrease due to declining prices of corn or other feed products or decreasing cattle numbers resulting from droughts in the western and southern United States. Other factors likely to affect distillers grains prices include prices and availability of other commodities, the continued imposition by China of anti-dumping and anti-subsidy duties on distillers grains produced in the United States and other trade actions by the United States and foreign governments.

The tons of dried distillers grains sold during the three months ended April 30, 2024, decreased by approximately 1.2%, as compared to the three months ended April 30, 2023. The tons of modified distillers grains sold during the three months ended April 30, 2024, decreased by approximately 1.0%, as compared to the three months ended April 30, 2023. Management anticipates that the amount of distillers grains produced may decrease in the future if operating conditions worsen and there is a reduction in ethanol production levels which would then have a corresponding effect on distillers grains. In addition, an increase in ethanol or corn oil yields could have a negative effect of distillers grains production levels.

Corn Oil

Revenue from corn oil sales decreased by approximately 21.5% during the three months ended April 30, 2024, as compared to the three months ended April 30, 2023. This is primarily the result of a decrease in the price of corn oil sold and a decrease in pounds of corn oil sold for the period. The average price per pound of corn oil sold was approximately 21.1% lower during the three months ended April 30, 2024, as compared to the three months ended April 30, 2023, due primarily to an increase in corn oil and soy oil production which outpaced demand. Factors likely to affect corn oil prices include corn oil and soy oil supply, biodiesel demand, prices of corn and soybeans, the status of the biodiesel blenders' tax credit and new crop corn oil content.

The pounds of corn oil sold during the three months ended April 30, 2024, decreased by approximately 1.0% compared to the three months ended April 30, 2023. Management anticipates that the amount of corn oil produced may decrease in the future if there is a reduction in ethanol production levels which would then have a corresponding effect on corn oil. However, an increase in corn oil yields due to improved efficiencies or a corn crop with higher oil content could contribute to higher corn oil production levels.

At April 30, 2024, we had 468,000 pounds of forward corn oil sales contracts valued at approximately $192,000 for various delivery periods through May 31, 2024.

Cost of Goods Sold

Our two largest costs of production are corn (73.2% of cost of goods sold for the three months ended April 30, 2024) and natural gas (6.4% of cost of goods sold for the three months ended April 30, 2024). Our total cost of goods sold was approximately 28.6% less during the three months ended April 30, 2024, as compared to the three months ended April 30, 2023.

Corn

Our average price per bushel of corn for the three months ended April 30, 2024 decreased by approximately 35.8% per bushel, as compared to the three months ended April 30, 2023, primarily due to a lower market value for corn as a result of increases in projected stocks due to a large fall corn crop in the United States. We used approximately 1.3% less bushels of corn in the three months ended April 30, 2024, as compared to the three months ended April 30, 2023.

Management expects there to be an adequate corn supply available in our area to operate the ethanol plant. However, corn prices are dependent on weather conditions, supply and demand, stocks and other factors which could contribute to price volatility and significantly impact our costs of production. In addition, corn prices could continue to be impacted in the future by global economic uncertainty, rising inflation, market disruptions and increased volatility in commodity prices.

At April 30, 2024, we had approximately 2,898,000 bushels of forward fixed basis corn purchase contracts and approximately 2,014,000 bushels of forward fixed price corn contracts valued at approximately $8,759,000. These purchase contracts are for various delivery periods through December 31, 2025.

We had gains (losses) related to corn derivative instruments of ($81,705) and $134,913 for the three months ended April 30, 2024 and 2023, respectively, which reduced (increased) our cost of goods sold during these periods.

Natural Gas

The average market price per MMBTU of natural gas was approximately 14.1% higher for the three months ended April 30, 2024, as compared to the three months ended April 30, 2023, due primarily to higher transportation rates paid to Northern Natural Gas Company. Factors such as industry production problems or large increases in natural gas demand in the future could have a negative effect on natural gas prices.

For the three months ended April 30, 2024, we used approximately the same MMBTUs of natural gas as compared to the three months ended April 30, 2023.

At April 30, 2024, we had approximately 2,405,000 MMBTUs of forward natural gas purchase contracts valued at approximately $8,409,000 for various delivery periods through March 31, 2027.

We had losses related to natural gas derivative instruments of ($1,886) and ($3,872), which increased our cost of goods sold during these periods.

Operating Expense

We had operating expenses for the three months ended April 30, 2024 of $1,096,957, as compared to operating expenses of $1,085,532 for the three months ended April 30, 2023. Management attributes this increase in operating expenses primarily to an increase in insurance and consulting fees for the three months ended April 30, 2024, as compared to the three months ended April 30, 2023. Management continues to pursue strategies to optimize efficiencies and maximize production. These efforts may result in a decrease in our operating expenses on a per gallon basis. However, because these expenses do not vary with the level of production at the plant, we expect our operating expenses to remain relatively steady.

Other Income, net

We had total other income, net for the three months ended April 30, 2024 of $294,407, as compared to $165,886 for the three months ended April 30, 2023. Our other income, net for the three months ended April 30, 2024, was higher due primarily to an increase in interest income.

Results of Operations for the Six Months Ended April 30, 2024 and 2023


	2024				2023
Statements of Operations Data	Amount (unaudited)		%		Amount (unaudited)		%

Revenues	$	69,779,814	100.00	%	$	97,573,545	100.00	%
Cost of Goods Sold	$	68,939,565	98.80	%	$	91,556,970	93.83	%
Gross Profit	$	840,249	1.20	%	$	6,016,575	6.17	%
Operating Expenses	$	2,380,428	3.41	%	$	2,283,645	2.34	%
Operating Income (Loss)	$	(1,540,179)	(2.21)	%	$	3,732,930	3.83	%
Other Income, net	$	766,879	1.10	%	$	346,875	0.36	%
Net Income (Loss)	$	(773,300)	(1.11)	%	$	4,079,805	4.18	%

The following table shows the sources of our revenue for the six months ended April 30, 2024 and 2023:


	2024				2023
Revenue Sources	Amount (Unaudited)		%		Amount (Unaudited)		%

Ethanol Sales	$	49,653,156	71.16	%	$	70,707,286	72.46	%
Modified Distillers Grains Sales	4,194,306		6.01	%	6,255,476		6.41	%
Dried Distillers Grains Sales	10,196,124		14.61	%	13,062,393		13.39	%
Corn Oil Sales	5,736,228		8.22	%	7,548,390		7.74	%
Total Revenues	$	69,779,814	100.00	%	$	97,573,545	100.00	%

Revenue

Ethanol

Our ethanol revenues were lower for the six months ended April 30, 2024, as compared to the six months ended April 30, 2023. Revenue from ethanol sales decreased by approximately 29.8% during the six months ended April 30, 2024, as compared to the six months ended April 30, 2023, due primarily to a decrease in the average price per gallon of ethanol sold during the three months ended April 30, 2024.

The average price per gallon of ethanol sold for the six months ended April 30, 2024 was approximately 30.0% lower than the average price we received for the six months ended April 30, 2023. Ethanol prices were lower due primarily to lower corn and energy prices and an increase in ethanol stocks resulting from a period of higher industry-wide production.

The number of gallons of ethanol sold during the six months ended April 30, 2024 were approximately the same as compared to the six months ended April 30, 2023. Our ethanol production levels for the six months ended April 30, 2024 were at an annual rate of approximately 69 million gallons. Management anticipates that the amount of ethanol produced could further decrease in the future if operating conditions worsen and we reduce ethanol production levels. Ethanol production could also decrease if delayed rail car shipments affect our ability to get sufficient rail cars to transport our ethanol.

We had gains related to ethanol based derivative instruments of $15,071 and $76,406 for the six months ended April 30, 2024 and 2023, respectively. These gains increased our ethanol revenue during these periods.

Distillers Grains

Revenue from distillers grains sales decreased by approximately 25.5% during the six months ended April 30, 2024, as compared to the six months ended April 30, 2023 primarily due to lower distillers grains prices during our six months ended April 30, 2024 compared to the same period of 2023.

For the six months ended April 30, 2024, the average price per ton of dried distillers grains sold was approximately 23.8% lower than the average price we received during the six months ended April 30, 2023, due primarily to decreases in the domestic prices of corn and soybeans and lower seasonal demand for the period. For the six months ended April 30, 2024, the average price per ton of modified distillers grains sold was approximately 26.2% lower than during the six months ended April 30, 2023, due to decreases in the domestic prices of corn and soybeans and decreased demand in our area.

The tons of dried distillers grains sold during the six months ended April 30, 2024, increased by approximately 2.5%, as compared to the six months ended April 30, 2023. The tons of modified distillers grains sold during the six months ended April 30, 2024, decreased by approximately 9.1%, as compared to the six months ended April 30, 2023. Management anticipates that the amount of distillers grains produced may decrease in the future if operating conditions worsen and there is a reduction in ethanol production levels which would then have a corresponding effect on distillers grains. In addition, an increase in ethanol or corn oil yields could have a negative effect of distillers grains production levels.

Corn Oil

Revenue from corn oil sales decreased by approximately 24.0% during the six months ended April 30, 2024, as compared to the six months ended April 30, 2023. This is primarily the result of a decrease in the price of corn oil sold during the six months ended April 30, 2024, partially offset by an increase in pounds of corn oil sold for the period. The average price per pound of corn oil sold was approximately 24.6% lower during the six months ended April 30, 2024, as compared to the six months ended April 30, 2023, due primarily to an increase in corn oil and soy oil production which outpaced demand. Factors likely to affect corn oil prices include corn oil and soy oil supply, biodiesel demand, prices of corn and soybeans, the status of the biodiesel blenders' tax credit and new crop corn oil content.

The pounds of corn oil sold during the six months ended April 30, 2024, increased by approximately 0.78% compared to the six months ended April 30, 2023. Management anticipates that the amount of corn oil produced may decrease in the future if there is a reduction in ethanol production levels which would then have a corresponding effect on corn oil. However, an increase in corn oil yields due to improved efficiencies or a corn crop with higher oil content could contribute to higher corn oil production levels.

At April 30, 2024, we had 468,000 pounds of forward corn oil sales contracts valued at approximately $192,000 for various delivery periods through May 31, 2024.

Cost of Goods Sold

Our two largest costs of production are corn (74.9% of cost of goods sold for the six months ended April 30, 2024) and natural gas (6.8% of cost of goods sold for the six months ended April 30, 2024). Our total cost of goods sold was approximately 24.7% less during the six months ended April 30, 2024, as compared to the six months ended April 30, 2023.

Corn

Our average price per bushel of corn for the six months ended April 30, 2024 decreased by approximately 31.5% per bushel, as compared to the six months ended April 30, 2023, primarily due to a lower market value for corn as a result of increases in projected stocks due to a large fall corn crop in the United States. We used approximately 1.7% less bushels of corn in the six months ended April 30, 2024, as compared to the six months ended April 30, 2023.

We had gains (losses) related to corn derivative instruments of $(92,506) and $448,587 for the six months ended April 30, 2024 and 2023, respectively, which reduced (increased) our cost of goods sold during these periods.

Natural Gas

The average market price per MMBTU of natural gas was approximately 22.8% higher for the six months ended April 30, 2024, as compared to the six months ended April 30, 2023, due primarily to higher transportation rates paid to Northern Natural Gas Company. Factors such as industry production problems or large increases in natural gas demand in the future could have a negative effect on natural gas prices. Factors such as industry production problems or large increases in natural gas demand in the future could also have a negative effect on natural gas prices.

For the six months ended April 30, 2024, we used approximately the same MMBTUs of natural gas as compared to the six months ended April 30, 2023.

At April 30, 2024, we had approximately 2,405,000 MMBTUs of forward natural gas purchase contracts valued at approximately $8,409,000 for various delivery periods through March 31, 2027.

We had gains related to natural gas derivative instruments of $8,157 and $80,003, which reduced our cost of goods sold during these periods.

Operating Expense

We had operating expenses for the six months ended April 30, 2024 of $2,380,428, as compared to operating expenses of $2,283,645 for the six months ended April 30, 2023. Management attributes this increase in operating expenses primarily to an increase in insurance and consulting fees for the six months ended April 30, 2024, as compared to the six months ended April 30, 2023. Management continues to pursue strategies to optimize efficiencies and maximize production. These efforts may result in a decrease in our operating expenses on a per gallon basis. However, because these expenses do not vary with the level of production at the plant, we expect our operating expenses to remain relatively steady.

Other Income, net

We had total other income, net for the six months ended April 30, 2024 of $766,879, as compared to $346,875 for the six months ended April 30, 2023. Our other income, net for the six months ended April 30, 2024, was higher due primarily to an increase in interest income.

Changes in Financial Condition for the Six Months Ended April 30, 2024

The following table highlights the changes in our financial condition as of April 30, 2024 from our previous fiscal year ended October 31, 2023:


	April 30, 2024		October 31, 2023
Current Assets	$	38,527,495	$	62,247,517
Current Liabilities	10,911,734		20,565,125
Long-Term Liabilities	711,327		780,059

Current Assets

The decrease in current assets is primarily the result of decreases in cash and cash equivalents at April 30, 2024, as compared to October 31, 2023, due primarily to cash distributions of $16,161,900 paid to our members on December 4, 2023.

Current Liabilities

The decrease in current liabilities is primarily the result of decreases in accounts payable at April 30, 2024, as compared to October 31, 2023, due primarily to a decrease in corn prices and timing of deferred corn payments.

Long-Term Liabilities

Long-term liabilities decreased at April 30, 2024, as compared to October 31, 2023, due primarily to decreasing liabilities owed under a contract for use of a natural gas pipeline to transport natural gas to our facility.

Liquidity and Capital Resources

Based on financial forecasts prepared by our management, we anticipate that we will have sufficient cash on hand, cash from our current credit facilities, and cash from our operations to continue to operate the ethanol plant for the next 12 months. We do not currently anticipate seeking additional equity or debt financing in the near term in order to fund operations. However, if market conditions worsen, we could have difficulty maintaining our liquidity and may need to rely on our revolving lines of credit or seek increases.

The following table shows cash flows for the six months ended April 30, 2024 and 2023:


	2024		2023
	(unaudited)		(unaudited)
Net cash (used in) provided by operating activities	$	(2,515,881)	$	1,020,956
Net cash used in investing activities	(1,792,494)		(1,062,606)
Net cash used in financing activities	(16,226,960)		(15,390,588)

Cash Flow From Operations

We used more cash in operating activities for the six months ended April 30, 2024, as compared to the same period in 2023. This decrease in cash from operations was primarily due to a decrease in net income and changes in accounts receivable, accounts payable, and inventories for the six months ended April 30, 2024, as compared to the same period in 2023.

Cash Flow From Investing Activities

We used more cash in investing activities for the six months period ended April 30, 2024, as compared to the same period in 2023. This change was primarily due to an increase in capital expenditures during the six months ended April 30, 2024.

Cash Flow From Financing Activities

We used more cash in financing activities during the six month ended April 30, 2024, as compared to the same period in 2023. Our cash used in financing activities increased primarily due to increased distributions to our members during the six months ended April 30, 2024.

Short-Term and Long-Term Debt Sources

Our loan facility with Compeer Financial f/k/a AgStar Financial Services, PCA ("Compeer") includes a $20,000,000 Term Revolving Loan and a Revolving Line of Credit Loan. Our loan facility with Compeer is secured by substantially all business assets and also subjects the Company to various financial and non-financial covenants.

Term Revolving Loan

The Term Revolving Loan is for up to $20,000,000 with a variable interest rate based on the Wall Street Journal's Prime Rate plus 10 basis points with a minimum interest rate of 2.10%. The applicable interest rate at April 30, 2024 was 8.60%. The Term Revolving Loan may be advanced, repaid and re-borrowed during the term. Monthly interest payments are due on the Term Revolving Loan with payment of all amounts outstanding due on November 1, 2027. The outstanding balance on this note was $0 at April 30, 2024. We pay interest at a rate of 1.50% on amounts outstanding for letters of credit which also reduce the amount available under the Term Revolving Loan. We had no letters of credit outstanding at April 30, 2024. We are also required to pay unused commitment fees for the Term Revolving Loan.

Revolving Line of Credit Loan

The Revolving Line of Credit Loan is for an amount equal to the borrowing base, with a maximum limit of $10,000,000 with a variable interest rate based on the Wall Street Journal's Prime Rate plus 10 basis points with a minimum interest rate of 2.10%. The amount available to borrow per the borrowing base calculations at April 30, 2024 was approximately $0. The applicable interest rate at April 30, 2024 was 8.60%. The Revolving Line of Credit Loan may be advanced, repaid and re-borrowed during the term. Monthly interest payments are due on the Revolving Line of Credit Loan with payment of all amounts outstanding due on November 1, 2024. The maturity date may be extended for up to four

additional one year terms upon our written request which will be deemed automatically granted by Compeer upon written certification that there is no event of default. The Company has previously been granted one extension. The outstanding balance on this note was $0 at April 30, 2024. We are also required to pay unused commitment fees for the Revolving Line of Credit Loan.

Covenants and Other Miscellaneous Financing Agreement Terms

The loan facility with Compeer is secured by substantially all business assets. We executed a mortgage in favor of Compeer creating a first lien on our real estate and plant and a security interest in all personal property located on the premises and assigned in favor of Compeer, all rents and leases to our property, our marketing contracts, our risk management services contract, and our natural gas, electricity, water service and grain procurement agreements.

We are also subject to various financial and non-financial covenants that limit distributions and new debt and require minimum working capital requirements. We are limited to annual capital expenditures of $5,000,000 without prior approval, incurring additional debt over certain amounts without prior approval, and making additional investments as described in the Amended and Restated Credit Agreement without prior approval of Compeer. We are required to maintain a minimum working capital requirement of $9,000,000, which is calculated as current assets plus the amount available for drawing under the Term Revolving Loan and undrawn amounts on outstanding letters of credit, less current liabilities, and is measured quarterly. We are allowed to make cash distributions to members as frequently as monthly in an amount equal to 75% of net income if working capital is greater than or equal to $9,000,000, or an unlimited amount if working capital is greater than or equal to $12,000,000.

Presently, we are meeting our liquidity needs and complying with our financial covenants and the other terms of our loan agreements. We will continue to work with Compeer to try to ensure that the terms of our loan agreements are met going forward. However, we cannot provide any assurance that our actions will result in sustained profitable operations or that we will not be in violation of our loan covenants or in default on our principal payments in the future. Should unfavorable market conditions result in our violation of the terms or covenants of our loan and we fail to obtain a waiver of any such term or covenant, Compeer could deem us in default of our loans and require us to immediately repay a significant portion or possibly the entire outstanding balance of our loans. In the event of a default, Compeer could also elect to proceed with a foreclosure action on our plant.

Grants

The Minnesota State Legislature established the Bioincentive Program in 2015 to encourage commercial-scale production of advanced biofuels, renewable chemicals, and biomass thermal energy through production incentive payments. Eligible producers of cellulosic ethanol may receive $0.16 per gallon of cellulosic ethanol produced subject to program funding limitations. We received awards from the Bioincentive Program of approximately $92,000, recorded in the first quarter of fiscal 2024 in other income, and $116,000, recorded in the second quarter of fiscal 2024 in other income. We received awards from the Bioincentive Program of approximately $100,000, recorded in the first quarter of fiscal 2023 in other income, and $81,000, recorded in the second quarter of fiscal 2023 in other income.

Capital Expenditures

We commenced a construction project during our 2023 fiscal year to expand our lab and add additional office space. This project was completed during the second quarter of our 2024 fiscal year at a cost of approximately $1,100,000 which was funded from operations.

We have also approved a project to add an additional fermentation tank which is expected to increase efficiencies, cost approximately $4,000,000, and be funded from operations and existing debt facilities. We entered into an agreement on December 21, 2023 with Nelson Baker Biotech, Inc. to construct the fermentation tank. Construction commenced in May 2024 and is expected to be completed in the fall of 2024. The amendment to our air permit to add the fermentation tank was proved by the Minnesota Pollution Control Agency on March 4, 2022.

Critical Accounting Estimates

Management uses various estimates and assumptions in preparing our financial statements in accordance with generally accepted accounting principles. These estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Accounting estimates that are the most important to the presentation of our results of operations and financial condition, and which require the greatest use of

judgment by management, are designated as our critical accounting estimates. We have the following critical accounting estimates:

Long-Lived Assets

We review long-lived assets for impairment whenever events or changes in circumstances indicate that the related carrying amounts may not be recoverable. Impairment testing for assets requires various estimates and assumptions, including an allocation of cash flows to those assets and, if required, an estimate of the fair value of those assets. Our estimates are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable. These valuations require the use of management's assumptions, which do not reflect unanticipated events and circumstances that may occur. Given the significant assumptions required and the possibility that actual conditions will differ, we consider the assessment of carrying value of property and equipment to be a critical accounting estimate.

Inventory Valuation

We value our inventory at lower of cost or net realizable value. Our estimates are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable. These valuations require the use of management's assumptions which do not reflect unanticipated events and circumstances that may occur. In our analysis, we consider corn costs and ethanol prices, break-even points for our plant and our risk management strategies in place through our derivative instruments. Given the significant assumptions required and the possibility that actual conditions will differ, we consider the valuation of the lower of cost or net realizable value on inventory to be a critical accounting estimate.

Derivatives

We are exposed to market risks from changes in interest rates, corn, natural gas, and ethanol prices. We may seek to minimize these commodity price fluctuation risks through the use of derivative instruments. In the event we utilize derivative instruments, we will attempt to link these instruments to financing plans, sales plans, market developments, and pricing activities. Such instruments in and of themselves can result in additional costs due to unexpected directional price movements.

We have entered into ethanol, corn and natural gas derivatives in order to protect cash flows from fluctuations caused by volatility in commodity prices. In practice, as markets move, we actively attempt to manage our risk and adjust hedging strategies as appropriate. We do not use hedge accounting which would match the gain or loss on our hedge positions to the specific commodity contracts being hedged. Instead, we use fair value accounting for our hedge positions, which means that as the current market price of our hedge position changes, the gains and losses are immediately recognized in our statement of operations. The immediate recognition of hedging gains and losses under fair value accounting can cause net income (loss) 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 April 30, 2024, the fair values of our commodity-based derivative instruments are a net liability of approximately $689,000. As the prices of the hedged commodity moves in reaction to market trends and information, our statement of operations will be affected depending on the impact such market movements have on the value of our derivative instruments. Depending on market movements, crop prospects and weather, these price protection positions may cause immediate adverse effects, but are expected to protect the Company over the term of the contracts for the hedged amounts.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

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

Interest Rate Risk

We are exposed to market risk from changes in interest rates. Exposure to interest rate risk results primarily from our Term Revolving Loan and Revolving Line of Credit Loan, each bearing a variable interest rate. As of April 30, 2024, we had $0 outstanding on the Term Revolving Loan and the Revolving Line of Credit Loan. As of April 30, 2024, interest accrues on these loans at a variable interest rate based on the Wall Street Journal's Prime Rate plus 10 basis points with a minimum interest rate of 2.10% and the applicable interest rate was 8.60%. Given the balance owed on these loans as of April 30, 2024, we have

determined that our exposure to market risk from changes in interest rates is not material. The specifics of each loan are discussed in greater detail in “Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations - Liquidity and Capital Resources.”

Commodity Price Risk

We expect to be exposed to market risk from changes in commodity prices. Exposure to commodity price risk results from our dependence on corn and natural gas in the ethanol production process and the sale of ethanol and distillers grains. We may seek to minimize the risks from fluctuations in the prices of raw material inputs through the use of corn commodity-based and natural gas derivatives. These derivatives are not designated as effective hedges for accounting purposes. For derivative instruments that are not accounted for as hedges, or for the ineffective portions of qualifying hedges, the change in fair value is recorded through earnings in the period of change. Corn and natural gas derivative changes in fair market value are included in costs of goods sold.

In the ordinary course of business, we enter into forward contracts for our commodity purchases. At April 30, 2024, we had 2,898,491 bushels of forward fixed basis corn purchase contracts and 2,013,604 bushels of forward fixed price corn purchase contracts valued at approximately $8,759,000. These purchase contracts are for various delivery periods through December 31, 2025. At April 30, 2024, we had 2,405,150 MMBTUs of forward natural gas fixed price purchase contracts valued at approximately $8,409,000 for delivery periods through March 31, 2027. In addition, at April 30, 2024, we had 138,750 gallons of forward fixed price denaturant purchase contracts valued at approximately $250,000 for delivery periods through May 31, 2024.

In the ordinary course of business, we enter into forward contracts for our commodity sales. At April 30, 2024, we had 12,400 tons of forward fixed price dried distillers grains sales contracts valued at approximately $1,816,000 for delivery periods through September 30, 2024. At April 30, 2024, we had 9,500 tons of forward fixed price modified distillers grains sales contracts valued at approximately $881,000 for delivery periods through September 30, 2024. At April 30, 2024, we had 468,000 pounds of forward fixed price corn oil sales contracts valued at approximately $192,000 for delivery periods through May 31, 2024.

We recorded gains (losses) due to changes in the fair value of our outstanding corn derivative future positions of approximately ($81,705) and $134,913 for the three months ended April 30, 2024 and 2023, respectively. We recorded gains due to changes in the fair value of our outstanding ethanol derivative future positions of approximately $4,697 and $15,941 for the three months ended April 30, 2024 and 2023, respectively. For the the three months ended April 30, 2024 and 2023, we recorded losses due to the change in fair value of our outstanding natural gas derivative future positions of approximately ($1,886) and ($3,872), respectively.

As commodity prices move in reaction to market trends and information, our income statement will be affected depending on the impact such market movements have on the value of our derivative instruments. Depending on market movements, crop prospects and weather, these price protection positions may cause immediate adverse effects, but are expected to produce long-term positive growth for us.

A sensitivity analysis has been prepared to estimate our exposure to ethanol, distillers grains, 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 and distillers grains prices as of April 30, 2024, 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 April 30, 2024. The results of this analysis, which may differ from actual results, are approximately as follows:


	Estimated Volume Requirements for the next 12 months (net of forward and futures contracts)	Unit of Measure	Hypothetical Adverse Change in Price as of April 30, 2024		Approximate Adverse Change to Income
Natural Gas	95,000	MMBTU	10	%		$	18,905
Ethanol	69,000,000	Gallons	10	%		$	10,488,000
Corn	18,246,405	Bushels	10	%		$	7,718,229
DDGs	107,600	Tons	10	%		$	1,560,200

Item 4. Controls and Procedures

Disclosure Controls and Procedures

Our management is responsible for maintaining disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports that the Company files or submits under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms. In addition, the disclosure controls and procedures must ensure that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required financial and other required disclosures.

Our management, including our Chief Executive Officer (the principal executive officer), Brian Kletscher, along with our Chief Financial Officer (the principal financial officer), Lucas Schneider, have reviewed and evaluated the effectiveness of our disclosure controls and procedures (as defined in Rule 13a-15(e) and Rule 15d-15(e) under the Exchange Act) as of April 30, 2024. Based on this review and evaluation, these officers have concluded that our disclosure controls and procedures are effective to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods required by the forms and rules of the Securities and Exchange Commission; and to ensure that the information required to be disclosed by an issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to our management including our principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the three months ended April 30, 2024, which were identified in connection with management’s evaluation required by paragraph (d) of rules 13a-15 and 15d-15 under the Exchange Act, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

None.

Item 1A. Risk Factors

None.

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.

(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.INS						Inline XBRL Instance Document – the instance document does not appear on the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document
101.SCH						Inline XBRL Taxonomy Extension Schema Document
101.CAL						Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF						Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB						Inline XBRL Taxonomy Extension Label Linkbase Document
101.PRE						Inline XBRL Presentation Linkbase Document
104						Cover Page Interactive Data File (formatted as Inline XBRL and contained in the Interactive Data Files submitted as Exhibit 101).

(+) Confidential Treatment Requested.

* Filed herewith.

** Furnished herewith.

SIGNATURES

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


		HIGHWATER ETHANOL, LLC

Date:	June 13, 2024	/s/ Brian Kletscher
		Brian Kletscher
		Chief Executive Officer
		(Principal Executive Officer)

Date:	June 13, 2024	/s/ Lucas Schneider
		Lucas Schneider
		Chief Financial Officer
		(Principal Financial and Accounting Officer)

Cover - shares	6 Months Ended
Cover - shares	Apr. 30, 2024	Jun. 13, 2024
Cover [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Apr. 30, 2024
Document Transition Report	false
Entity File Number	000-53588
Entity Registrant Name	HIGHWATER ETHANOL, LLC
Entity Incorporation, State or Country Code	MN
Entity Tax Identification Number	20-4798531
Entity Address, Address Line One	24500 US Highway 14,
Entity Address, City or Town	Lamberton,
Entity Address, State or Province	MN
Entity Address, Postal Zip Code	56152
City Area Code	507
Local Phone Number	752-6160
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		4,754
Entity Central Index Key	0001371451
Current Fiscal Year End Date	--10-31
Document Fiscal Year Focus	2024
Document Fiscal Period Focus	Q2
Amendment Flag	false

Condensed Balance Sheets (Parenthetical) - shares	Apr. 30, 2024	Oct. 31, 2023
Statement of Financial Position [Abstract]
Members' equity, units outstanding (in shares)	4,754	4,754

Statements of Changes in Members' Equity (Unaudited) (Parenthetical) - shares	3 Months Ended
	Apr. 30, 2023	Jan. 31, 2023
Members' Equity [Abstract]
Member unit repurchase (in units)	7	2

UNCERTAINTIES	6 Months Ended
UNCERTAINTIES	Apr. 30, 2024
Risks and Uncertainties [Abstract]
UNCERTAINTIES	UNCERTAINTIES The Company derives substantially all of its revenues from the sale of ethanol, distillers grains and corn oil. These products are commodities and the market prices for these products display substantial volatility and are subject to a number of factors which are beyond the control of the Company. The Company’s most significant manufacturing inputs are corn and natural gas. The price of these commodities is also subject to substantial volatility and uncontrollable market factors. In addition, these input costs do not necessarily fluctuate with the market prices for ethanol and distillers grains. As a result, the Company is subject to significant risk that its operating margins can be reduced or eliminated due to the relative movements in the market prices of its products and major manufacturing inputs. As a result, market fluctuations in the price of or demand for these commodities can have a significant adverse effect on the Company’s operations, profitability, and availability of cash flows to make loan payments and maintain compliance with the loan agreement.

DEBT FINANCING	6 Months Ended
DEBT FINANCING	Apr. 30, 2024
Debt Disclosure [Abstract]
DEBT FINANCING	DEBT FINANCING The Company had no long-term debt at April 30, 2024 or October 31, 2023, respectively. Bank Financing The Company has a loan facility with Compeer Financial f/k/a AgStar Financial Services, PCA ("Compeer") that includes a $20,000,000 Term Revolving Loan and a Revolving Line of Credit Loan. The loan facility with Compeer is secured by substantially all business assets and also subjects the Company to various financial and non-financial covenants. Term Revolving Loan The Term Revolving Loan is for $20,000,000, and has a variable interest rate based on the Wall Street Journal's Prime Rate plus 10 basis points with a minimum interest rate of 2.10%. The applicable interest rate at April 30, 2024 was 8.60%. The Term Revolving Loan may be advanced, repaid and re-borrowed during the term. Monthly interest payments are due on the Term Revolving Loan. Payment of all amounts outstanding are due on November 1, 2027. The outstanding balance on this note was $0 at April 30, 2024. The Company pays interest at a rate of 1.50% on amounts outstanding for letters of credit which also reduce the amount available under the Term Revolving Loan. The Company has no letters of credit outstanding at April 30, 2024. The Company is also required to pay unused commitment fees for the Term Revolving Loan. Revolving Line of Credit Loan The Revolving Line of Credit Loan is for an amount equal to the borrowing base, with a maximum limit of $10,000,000, and has a variable interest rate based on the Wall Street Journal's Prime Rate plus 10 basis points with a minimum interest rate of 2.10%. The amount available to borrow per the borrowing base calculations at April 30, 2024 was approximately $0. The applicable interest rate at April 30, 2024 was 8.60%. The Revolving Line of Credit Loan may be advanced, repaid and re-borrowed during the term. Monthly interest payments are due on the Revolving Line of Credit Loan with payment of all amounts outstanding due on November 1, 2024. The maturity date may be extended for up to four additional one year terms upon written request of the Company which will be deemed automatically granted by Compeer upon written certification that there is no event of default. The Company has previously been granted one extension. The outstanding balance on this note was $0 at April 30, 2024. The Company is also required to pay unused commitment fees for the Revolving Line of Credit Loan. Covenants and other Miscellaneous Terms The loan facility with Compeer is secured by substantially all business assets. The Company executed a mortgage creating a first lien on its real estate and plant and a security interest in all personal property located on the premises and assigned all rents and leases to property, marketing contracts, risk management services contract, and natural gas, electricity, water service and grain procurement agreements. The Company is also subject to various financial and non-financial covenants that limit distributions and debt and require minimum working capital requirements. The Company is limited to annual capital expenditures of $5,000,000 without prior approval, incurring additional debt over certain amounts without prior approval, and making additional investments as described in the Second Amended and Restated Credit Agreement without prior approval. The minimum working capital is $9,000,000, which is calculated as current assets plus the amount available for drawing under our Term Revolving Loan, and undrawn amounts on outstanding letters of credit less current liabilities, and is measured quarterly. The Company is allowed to make distributions to members as frequently as monthly in an amount equal to 75% of net income if working capital is greater than or equal to $9,000,000, or an unlimited amount of net income if working capital is greater than or equal to $12,000,000.


			/s/ Brian Kletscher
			Brian Kletscher, Chief Executive Officer
			Dated:			June 13, 2024


			/s/ Lucas Schneider
			Lucas Schneider, Chief Financial Officer
			Dated:			June 13, 2024

Condensed Balance Sheets - USD ($)	Apr. 30, 2024	Oct. 31, 2023
Current Assets
Cash and cash equivalents	$ 20,984,465	$ 41,519,800
Derivative instruments	530,181	923,251
Accounts receivable	3,251,049	2,935,253
Inventories	13,228,547	16,113,187
Prepaids and other	533,253	756,026
Total current assets	38,527,495	62,247,517
Property and Equipment
Land and land improvements	13,210,145	13,210,145
Buildings	39,945,026	38,862,183
Office equipment	1,231,526	1,231,526
Plant and process equipment	88,044,910	87,740,728
Vehicles	160,259	160,259
Construction in progress	1,628,308	1,072,117
Gross property and equipment	144,220,174	142,276,958
Less accumulated depreciation	(114,602,655)	(109,998,247)
Net property and equipment	29,617,519	32,278,711
Other Assets
Investments	4,959,883	4,876,963
Right of use asset - operating leases	27,890	110,040
Right of use asset - finance leases	755,116	823,763
Other	0	208,232
Deposits	493,330	493,330
Total other assets	6,236,219	6,512,328
Total Assets	74,381,233	101,038,556
Current Liabilities
Accounts payable	9,969,929	18,760,447
Accrued expenses	778,314	1,562,707
Current portion of operating lease liability	27,888	110,038
Current portion of finance lease liability	135,603	131,933
Total Current Liabilities	10,911,734	20,565,125
Long-Term Liabilities
Finance lease liability	711,327	780,059
Total Long-Term Liabilities	711,327	780,059
Commitments and Contingencies
Members' Equity
Members' equity, 4,754 and 4,754 units outstanding	62,758,172	79,693,372
Total Liabilities and Members’ Equity	$ 74,381,233	$ 101,038,556

Condensed Unaudited Statements of Operations - USD ($)	3 Months Ended		6 Months Ended
Condensed Unaudited Statements of Operations - USD ($)	Apr. 30, 2024	Apr. 30, 2023	Apr. 30, 2024	Apr. 30, 2023
Income Statement [Abstract]
Revenues	$ 32,543,357	$ 48,711,980	$ 69,779,814	$ 97,573,545
Cost of Goods Sold	33,339,994	46,044,506	68,939,565	91,556,970
Gross Profit (Loss)	(796,637)	2,667,474	840,249	6,016,575
Operating Expenses	1,096,957	1,085,532	2,380,428	2,283,645
Operating Income (Loss)	(1,893,594)	1,581,942	(1,540,179)	3,732,930
Other Income (Expense)
Interest income	174,245	25,256	541,258	84,925
Other income	119,421	90,336	214,132	202,056
Interest expense	(52,609)	(54,417)	(115,899)	(119,129)
Income from equity method investments	53,350	104,711	127,388	179,023
Total other income (expense), net	294,407	165,886	766,879	346,875
Net Income (Loss)	$ (1,599,187)	$ 1,747,828	$ (773,300)	$ 4,079,805
Weighted Average Units Outstanding - Basic (in shares)	4,754	4,757	4,754	4,760
Weighted Average Units Outstanding - Diluted (in shares)	4,754	4,757	4,754	4,760
Net Income (Loss) Per Unit, Basic (in dollars per share)	$ (336.39)	$ 367.42	$ (162.66)	$ 857.10
Net Income (Loss) Per Unit, Diluted (in dollars per share)	(336.39)	367.42	(162.66)	857.10
Distributions Declared Per Unit (in dollars per share)	$ 0	$ 0	$ 3,400	$ 3,200

Statements of Changes in Members' Equity (Unaudited) - USD ($)	Total	Members' Equity
Members' Equity, beginning balance at Oct. 31, 2022		$ 78,293,068
Members' Equity [Roll Forward]
Net income (loss)		2,331,977
Member distribution		(15,240,000)
Member unit repurchase		(19,000)
Members' Equity, ending balance at Jan. 31, 2023		65,366,045
Members' Equity, beginning balance at Oct. 31, 2022		78,293,068
Members' Equity [Roll Forward]
Net income (loss)	$ 4,079,805
Members' Equity, ending balance at Apr. 30, 2023		67,043,873
Members' Equity, beginning balance at Jan. 31, 2023		65,366,045
Members' Equity [Roll Forward]
Net income (loss)	1,747,828	1,747,828
Member unit repurchase		(70,000)
Members' Equity, ending balance at Apr. 30, 2023		67,043,873
Members' Equity, beginning balance at Oct. 31, 2023	79,693,372	79,693,372
Members' Equity [Roll Forward]
Net income (loss)		825,887
Member distribution		(16,161,900)
Members' Equity, ending balance at Jan. 31, 2024		64,357,359
Members' Equity, beginning balance at Oct. 31, 2023	79,693,372	79,693,372
Members' Equity [Roll Forward]
Net income (loss)	(773,300)
Members' Equity, ending balance at Apr. 30, 2024	62,758,172	62,758,172
Members' Equity, beginning balance at Jan. 31, 2024		64,357,359
Members' Equity [Roll Forward]
Net income (loss)	(1,599,187)	(1,599,187)
Members' Equity, ending balance at Apr. 30, 2024	$ 62,758,172	$ 62,758,172

Condensed Unaudited Statements of Cash Flows - USD ($)	6 Months Ended
Condensed Unaudited Statements of Cash Flows - USD ($)	Apr. 30, 2024	Apr. 30, 2023
Cash Flows from Operating Activities
Net income (loss)	$ (773,300)	$ 4,079,805
Adjustments to reconcile net income (loss) to net cash (used in) provided by operations
Depreciation and amortization	4,881,288	5,124,323
Earnings in excess of distributions (distributions in excess of earnings) from equity method investments	193,045	(109,023)
Non-cash patronage income	(380,000)	(286,571)
Changes in working capital components
Accounts receivable	(315,796)	726,571
Inventories	2,884,639	2,280,957
Derivative instruments	393,070	538,097
Prepaids and other	222,774	307,071
Accounts payable	(8,837,206)	(11,214,378)
Accrued expenses	(784,395)	(425,896)
Net cash (used in) provided by operating activities	(2,515,881)	1,020,956
Cash Flows from Investing Activities
Capital expenditures	(1,896,528)	(481,898)
Proceeds from (purchase of) investments	104,034
Proceeds from (purchase of) investments		(580,708)
Net cash used in investing activities	(1,792,494)	(1,062,606)
Cash Flows from Financing Activities
Member unit repurchases	0	(89,000)
Payment on finance lease liability	(65,060)	(61,588)
Member distributions	(16,161,900)	(15,240,000)
Net cash used in financing activities	(16,226,960)	(15,390,588)
Net Decrease in Cash and Cash Equivalents	(20,535,335)	(15,432,238)
Cash and Cash equivalents – Beginning of Period	41,519,800	29,790,258
Cash and Cash equivalents – End of Period	20,984,465	14,358,020
Supplemental Cash Flow Information
Cash paid for interest	24,338	27,812
Supplemental Disclosure of Noncash Financing and Investing Activities
Capital expenditures included in accounts payable	$ 86,888	$ 178,343

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Narrative (Details) gal in Millions	6 Months Ended
	Apr. 30, 2024 USD ($) segment gal	Apr. 30, 2023 USD ($)	Jan. 31, 2024 USD ($)	Oct. 31, 2023 USD ($)	Jan. 31, 2023 USD ($)	Oct. 31, 2022 USD ($)
Product Information [Line Items]
Short term contract liabilities from contracts with customers	$ 479,478			$ 34,599		$ 0
Number of reportable segment \| segment	1
Number of operating segments \| segment	1
Impairment of long-lived assets	$ 0	$ 0
Renewable Fuels Marketing Group (RPMG)
Product Information [Line Items]
Ownership percentage	5.00%
Lawrenceville Tank, LLC
Product Information [Line Items]
Ownership percentage	7.00%
Ethanol
Product Information [Line Items]
Annual production capacity (in gallons) \| gal	50.0
Denatured Ethanol
Product Information [Line Items]
Annual production capacity (in gallons) \| gal	70.2
Grant \| Biofuel Producer Program
Product Information [Line Items]
Government grant received	$ 116,000	$ 81,000	$ 92,000		$ 100,000

RECEIVABLES - Schedule of Receivables (Details) - USD ($)	Apr. 30, 2024	Oct. 31, 2023
Accounts, Notes, Loans and Financing Receivable [Line Items]
Accounts receivable	$ 3,251,049	$ 2,935,253
Trade receivables
Accounts, Notes, Loans and Financing Receivable [Line Items]
Accounts receivable	2,300,502	1,812,631
Other receivables
Accounts, Notes, Loans and Financing Receivable [Line Items]
Accounts receivable	$ 950,547	$ 1,122,622

INVENTORIES - Schedule of Inventory (Details) - USD ($)	Apr. 30, 2024	Oct. 31, 2023
Inventory Disclosure [Abstract]
Raw materials	$ 4,108,784	$ 7,861,508
Spare parts and supplies	5,867,596	5,432,982
Work in process	961,121	1,073,564
Finished goods	2,291,046	1,745,133
Total	$ 13,228,547	$ 16,113,187

INVENTORIES - Narrative (Details) - USD ($) $ in Thousands	6 Months Ended	12 Months Ended
INVENTORIES - Narrative (Details) - USD ($) $ in Thousands	Apr. 30, 2024	Oct. 31, 2023
Inventory Disclosure [Abstract]
Inventory write-down	$ 18	$ 0

DERIVATIVE INSTRUMENTS - Schedule of Derivatives Instruments (Details) - USD ($)	Apr. 30, 2024	Oct. 31, 2023
Derivatives, Fair Value [Line Items]
Derivative asset, fair value	$ 530,181	$ 923,251
Not designated as hedging instrument \| Commodity Contract
Derivatives, Fair Value [Line Items]
In gain position	28,295	812
In loss position	(717,325)	(1,497,801)
Deposits with broker	$ 1,219,211	$ 2,420,240

DERIVATIVE INSTRUMENTS - Narrative (Details) bu in Thousands	Apr. 30, 2024 bu
Corn Delayed Pricing Contract \| Not designated as hedging instrument
Derivative [Line Items]
Derivative, nonmonetary notional amount	1,662

FAIR VALUE MEASUREMENTS (Details) - Recurring - USD ($)	Apr. 30, 2024	Oct. 31, 2023
Commodity Contract
Derivative instruments - commodities
In loss position	$ (717,325)	$ (1,497,801)
Level 1 \| Commodity Contract
Derivative instruments - commodities
In loss position	(7,204)	(13,466)
Level 2 \| Commodity Contract
Derivative instruments - commodities
In loss position	(710,121)	(1,484,335)
Level 3 \| Commodity Contract
Derivative instruments - commodities
In loss position	0	0
Commodity Contract
Derivative instruments - commodities
In gain position	28,295	812
Commodity Contract \| Level 1
Derivative instruments - commodities
In gain position	0	812
Commodity Contract \| Level 2
Derivative instruments - commodities
In gain position	28,295	0
Commodity Contract \| Level 3
Derivative instruments - commodities
In gain position	$ 0	$ 0

DEBT FINANCING (Details)	6 Months Ended
DEBT FINANCING (Details)	Apr. 30, 2024 USD ($) extension	Oct. 31, 2023 USD ($)
Debt Instrument [Line Items]
Outstanding balance	$ 0	$ 0
Annual capital expenditure limit	5,000,000
Working capital requirement	9,000,000
75 percent of net income
Debt Instrument [Line Items]
Working capital requirement	$ 9,000,000
Restrictive covenants (as a percent)	75.00%
Unlimited Amount
Debt Instrument [Line Items]
Working capital requirement	$ 12,000,000
Revolving Credit Facility
Debt Instrument [Line Items]
Basis spread on variable rate (as a percent)	0.10%
Effective interest rate	8.60%
Outstanding balance	$ 0
Maximum borrowing capacity	10,000,000
Current borrowing capacity	$ 0
Debt instrument, number of extensions \| extension	4
Debt extension period	1 year
Number of extension previously granted \| extension	1
Minimum \| Revolving Credit Facility
Debt Instrument [Line Items]
Debt stated interest rate	2.10%
Notes payable to banks \| Term Revolving Loan
Debt Instrument [Line Items]
Debt instrument, face amount	$ 20,000,000
Basis spread on variable rate (as a percent)	0.10%
Effective interest rate	8.60%
Outstanding balance	$ 0
Notes payable to banks \| Term Revolving Loan \| Letter of Credit
Debt Instrument [Line Items]
Effective interest rate	1.50%
Letters of credit outstanding balance	$ 0
Notes payable to banks \| Term Revolving Loan \| Minimum
Debt Instrument [Line Items]
Debt stated interest rate	2.10%

LEASES - Narrative (Details)	Apr. 30, 2024
Leases [Abstract]
Operating lease discount rate	5.50%
Operating leases remaining lease terms	2 months
Finance leases remaining lease terms	5 years 6 months

LEASES - Maturities of Operating and Financing Lease Liabilities (Details)	Apr. 30, 2024 USD ($)
Operating Leases
2025	$ 28,080
2026	0
2027	0
2028	0
2029	0
Thereafter	0
Totals	28,080
Amount representing interest	(192)
Lease liability	27,888
Finance Leases
2025	178,800
2026	178,800
2027	178,800
2028	178,800
2029	178,800
Thereafter	89,400
Totals	983,400
Amount representing interest	(136,470)
Lease liability	$ 846,930

LEASES - Lease Cost (Details) - USD ($)	3 Months Ended		6 Months Ended
LEASES - Lease Cost (Details) - USD ($)	Apr. 30, 2024	Apr. 30, 2023	Apr. 30, 2024	Apr. 30, 2023
Leases [Abstract]
Operating lease cost	$ 42,120	$ 42,120	$ 84,240	$ 84,240
Short term lease cost	19,009	11,737	34,699	21,931
Amortization of leased assets	34,324	34,324	68,647	68,647
Interest on lease liabilities	11,946	13,695	24,338	27,812
Net lease cost	$ 107,399	$ 101,876	$ 211,924	$ 202,630

COMMITMENTS AND CONTINGENCIES - Marketing Agreements (Details) $ in Thousands	Dec. 21, 2023 USD ($) tank
Commitments and Contingencies Disclosure [Abstract]
Number of fermentation tank to construct \| tank	1
Cost for fermentation tank \| $	$ 4,000

COMMITMENTS AND CONTINGENCIES - Forward Contracts (Details)	Apr. 30, 2024 bu MMBTU lb T gal $ / gal $ / T $ / MMBTU $ / bu $ / lb
Distillers grains
Supply Commitment [Line Items]
Derivative, nonmonetary notional amount	12,400
Modified distillers grains
Supply Commitment [Line Items]
Derivative, nonmonetary notional amount	9,500
Corn oil
Supply Commitment [Line Items]
Derivative, nonmonetary notional amount \| lb	468,000
Corn contracts
Supply Commitment [Line Items]
Derivative, nonmonetary notional amount \| bu	4,912,095
Natural gas
Supply Commitment [Line Items]
Derivative, nonmonetary notional amount \| MMBTU	2,405,150
Denaturant
Supply Commitment [Line Items]
Derivative, nonmonetary notional amount \| gal	138,750
Basis contracts \| Corn contracts
Supply Commitment [Line Items]
Derivative, nonmonetary notional amount \| bu	2,898,491
Priced contracts \| Distillers grains
Supply Commitment [Line Items]
Derivative, nonmonetary notional amount	12,400
Derivative, average forward price (USD per unit) \| $ / T	146.45
Priced contracts \| Modified distillers grains
Supply Commitment [Line Items]
Derivative, nonmonetary notional amount	9,500
Derivative, average forward price (USD per unit) \| $ / T	92.73
Priced contracts \| Corn oil
Supply Commitment [Line Items]
Derivative, nonmonetary notional amount \| lb	468,000
Derivative, average forward price (USD per unit) \| $ / lb	0.41
Priced contracts \| Corn contracts
Supply Commitment [Line Items]
Derivative, nonmonetary notional amount \| bu	2,013,604
Derivative, average forward price (USD per unit) \| $ / bu	4.35
Priced contracts \| Natural gas
Supply Commitment [Line Items]
Derivative, nonmonetary notional amount \| MMBTU	2,405,150
Derivative, average forward price (USD per unit) \| $ / MMBTU	3.50
Priced contracts \| Denaturant
Supply Commitment [Line Items]
Derivative, nonmonetary notional amount \| gal	138,750
Derivative, average forward price (USD per unit) \| $ / gal	1.81