3.   REVENUE



Revenue by Source

All revenues from contracts with customers under ASC Topic 606 are recognized at a point in time. The following table disaggregates revenue by major source for the three and nine months ended July 31, 2021 and 2020:






                      Three Months Ended July 31, 2021
                                (unaudited)
                                   Total
Ethanol              $                       69,910,835
Distillers' Grains                           14,001,314
Corn Oil                                      4,816,842
Other                                           410,734
Natural Gas Pipeline                            119,087
Total Revenues       $                       89,258,812

                      Three Months Ended July 31, 2020
                                (unaudited)
                                   Total
Ethanol              $                       27,592,807
Distillers' Grains                            5,019,310
Corn Oil                                      1,321,973
Other                                            71,519
Natural Gas Pipeline                            125,991
Total Revenues       $                       34,131,600

                      Nine Months Ended July 31, 2021
                                (unaudited)
                                   Total
Ethanol              $                      163,826,073
Distillers' Grains                           35,737,294
Corn Oil                                     11,344,245
Other                                           939,993
Natural Gas Pipeline                            849,954
Total Revenues       $                      212,697,559

                      Nine Months Ended July 31, 2020
                                (unaudited)
                                   Total
Ethanol              $                       92,198,500
Distillers' Grains                           22,040,430
Corn Oil                                      4,744,656
Other                                           559,242
Natural Gas Pipeline                          1,052,020
Total Revenues       $                      120,594,848




                                       11



  Table of Contents

Granite Falls Energy, LLC and Subsidiaries

         Notes to Condensed Consolidated Unaudited Financial Statements

                                 July 31, 2021



Payment Terms

The Company has contractual payment terms with each respective marketer that sells ethanol, distillers' grains and corn oil. These terms are 10 calendar days after the transfer of control date. The Company has contractual payment terms with natural gas customers of 20 days.

Shipping and Handling Costs

Shipping and handling costs related to contracts with customers for sale of goods are accounted for as a fulfillment activity and are included in cost of goods sold. Accordingly, amounts billed to customers for such costs are included as a component of revenue.





4.   INVENTORY

Inventories consist of the following:






                   July 31,  2021      October 31,  2020
                    (unaudited)
Raw materials     $      8,867,354    $         4,893,502
Supplies                 3,205,598              3,070,458
Work in process          2,325,312              1,480,871
Finished goods           8,268,863              4,346,974
Totals            $     22,667,127    $        13,791,805

The Company performs a lower of cost or net realizable value analysis on inventory to determine if the net realizable values of certain inventories are less than their carrying value, which is attributable primarily to decreases in market prices of corn and ethanol. Based on the lower of cost or net realizable value analysis, as a component of cost of goods sold, the Company recorded a loss on ethanol inventories of approximately $720,000 and $648,000 for the nine months ended July 31, 2021 and 2020, respectively. Based on the lower of cost or net realizable value analysis, as a component of cost of goods sold, the Company recorded a loss on corn inventories of approximately $0 and $184,000 for the nine months ended July 31, 2021 and 2020, respectively.





5.   DERIVATIVE INSTRUMENTS

As of July 31, 2021, the total notional amount of GFE's outstanding corn derivative instruments was approximately 1,205,000 bushels, comprised of short corn futures positions on bushels that were entered into to hedge forecasted corn purchases through December 2022. Additionally, there are corn options positions of 3,075,000 bushels through December 2021. There may be offsetting positions that are not shown on a net basis that could lower the notional amount of positions outstanding.

As of July 31, 2021, the total notional amount of HLBE's outstanding corn derivative instruments was approximately 655,000 bushels, comprised of short corn futures positions that were entered into to hedge forecasted corn purchases through July 2022. Additionally, there are corn options positions of 575,000 bushels through December 2021. There may be offsetting positions that are not shown on a net basis that could lower the notional amount of positions outstanding.

As of July 31, 2021, GFE had approximately $1,539,000 of cash collateral (restricted cash) related to derivatives held by a broker.

As of July 31, 2021, HLBE had approximately $337,000 of cash collateral (restricted cash) related to derivatives held by a broker.





                                       12



  Table of Contents

                   Granite Falls Energy, LLC and Subsidiaries

         Notes to Condensed Consolidated Unaudited Financial Statements

                                 July 31, 2021

The following tables provide details regarding the Company's derivative instruments at July 31, 2021, none of which were designated as hedging instruments:

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