General





The following management discussion and analysis provides information which
management believes is relevant to an assessment and understanding of our
financial condition and results of operations. This discussion should be read in
conjunction with the financial statements included herewith and notes to the
financial statements and our Annual Report on Form 10-K for the year ended
September 30, 2021, including the financial statements, accompanying notes and
the risk factors contained herein.





           CAUTIONARY STATEMENTS REGARDING FORWARD-LOOKING STATEMENTS



This quarterly report on Form 10-Q of Southwest Iowa Renewable Energy, LLC (the
"Company," "SIRE," "we," or "us") contains historical information, as well as
forward-looking statements that involve known and unknown risks and relate to
future events, our future financial performance, or our expected future
operations and actions. In some cases, you can identify forward-looking
statements by terminology such as "may," "will," "should," "expect," "plan,"
"anticipate," "believe," "estimate," "future," "intend," "could,"
"hope," "predict," "target," "potential," or "continue" or the negative of these
terms or other similar expressions. These forward-looking statements are only
our predictions based on current information and involve numerous assumptions,
risks and uncertainties. Our actual results or actions may differ materially
from these forward-looking statements for many reasons, including the reasons
described in this report. While it is impossible to identify all such factors,
factors that could cause actual results to differ materially from those
estimated by us include, without limitation:

• Changes in the availability and price of corn, natural gas, and steam;

• Negative impacts resulting from reductions in, or other modifications to, the

renewable fuel volume requirements under the Renewable Fuel Standard;

• Our inability to comply with our credit agreements required to continue our

operations;

• Negative impacts that our hedging activities may have on our operations;




  • Decreases in the market prices of ethanol, distillers grains;

• Ethanol supply exceeding demand and corresponding ethanol price reductions;

• Changes in the environmental regulations that apply to our plant operations;

• 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;

• Changes in other federal or state laws and regulations relating to the


    production and use of ethanol;






  • Changes and advances in ethanol production technology;

• Competition from larger producers as well as competition from alternative fuel

additives;

• Changes in interest rates and lending conditions of our loan covenants;




  • Volatile commodity and financial markets;

• Decreases in export demand due to the imposition of duties and tariffs by

foreign governments on ethanol and distiller grains produced in the United

States;

• Disruptions, failures or security breaches relating to our information

technology infrastructure;

• Trade actions by the Biden Administration, particularly those affecting the

biofuels and agricultural sectors and related industries; and

• Disruption caused by health epidemics, such as the ongoing COVID-19 pandemic,

and the adverse impact of such epidemics on global economic and business


    conditions.




These forward-looking statements are based on management's estimates,
projections and assumptions as of the date hereof and include various
assumptions that underlie such statements.  Any expectations based on these
forward-looking statements are subject to risks and uncertainties and other
important factors, including those discussed in the management discussion and
analysis, in our Annual Report on Form 10-K for the fiscal year ended September
30, 2021 ("Fiscal 2021") under the section entitled "Risk Factors" and in our
other prior Securities and Exchange Commission filings. These and many other
factors could affect our future financial condition and operating results and
could cause actual results to differ materially from expectations set forth in
the forward-looking statements made in this document or elsewhere by Company or
on its behalf. We undertake no obligation to revise or update any
forward-looking statements. The forward-looking statements contained in this
quarterly report on Form 10-Q are included in the safe harbor protection
provided by Section 27A of the Securities Act of 1933, as amended, and Section
21E of the Securities Exchange Act of 1934, as amended (the "Exchange Act").





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General Overview and Recent Developments





The Company is an Iowa limited liability company, located in Council Bluffs,
Iowa, formed in March 2005. The Company is permitted to produce 140 million
gallons of ethanol annually. We began producing ethanol in February 2009 and
sell our ethanol, distillers grains, distillers corn oil, corn condensed
distillers solubles ("syrup") and carbon dioxide, in the continental United
States, Mexico, and the Pacific Rim.



On November 26, 2019, the Environmental Protection Agency (the "EPA") approved
the Company's petition as an "Efficient Producer" to increase the D-6 RINs
generated by our facility for up to 147 million gallons of ethanol produced
annually, provided the non-grandfathered ethanol produced satisfies the 20%
lifecycle GHG ("Greenhouse gas") impacts reduction requirements specified in the
Clean Air Act for renewable fuel. The Company must comply with all registration
provisions in order to register for the production of non-grandfathered ethanol,
and the registration application must be accepted by the EPA before the facility
is eligible to generate RIN's for non-grandfathered ethanol produced. The
Company anticipates completing the registration process by the end of the second
quarter in the fiscal year ending September 30, 2022 ("Fiscal 2022").



On February 10, 2022, our Board of Directors declared a distribution of $1,250
per unit to its members. The distributions are expected to be paid on or around
February 17, 2022 to members of record on February 10, 2022. Based on the
current number of units outstanding, the aggregate payment will be approximately
$11.2 million.

Ongoing Impact of the COVID-19 Pandemic on our Business





At present, municipalities, regulators, and other government actors continue to
deal with the COVID-19 pandemic and its effects. The situation surrounding
COVID-19 continues to evolve rapidly and the ultimate duration and impact of the
pandemic, including the spread of variants, remains highly uncertain and subject
to change. We continue to monitor the impact of COVID-19 on our business,
including how it will impact our employees, customers, vendors and business
partners.



Although we continue to regularly monitor the financial health of companies in
our supply chain, financial hardship on our suppliers or sub-suppliers caused by
the COVID-19 pandemic could cause a disruption in our ability to obtain raw
materials or components required to produce our products, adversely affecting
our operations. Additionally, restrictions or disruptions of transportation,
such as reduced availability of truck, rail or air transport, port closures and
increased border controls or closures, may result in higher costs and delays,
both on obtaining raw materials and shipping finished products to customers,
which could harm our profitability, make our products less competitive, or cause
our customers to seek alternative suppliers.



On April 14, 2020 and January 28, 2021, the Company received two $1.1 million
loans under the PPP Loan legislation. These PPP loans were eligible for
forgiveness based upon various factors, including, without limitation, our
payroll cost over an eight-to-twenty-four-week period starting upon the receipt
of the funds. As discussed in greater detail in Note 4 to our financial
statements included herein, the Company applied for forgiveness of the PPP loans
from the SBA and was notified on December 24, 2021 that the loans had been
forgiven in full. Due to the PPP loans being forgiven in the first three months
of Fiscal 2022, we recognized one-time income of $2.2 million.

Market Factors Impacting Operations





For the three months ended December 31, 2021 compared to the three months ended
December 31, 2020, the average price per gallon of ethanol sold increased by 66%
due to reduced stocks, increasing demand and higher corn and energy prices.
There have also been increased prices for crude oil and gasoline in the first
three months of  Fiscal 2022 compared to the first three months of 2021 due to
reduced supply world-wide, and an increase in driving compared to the beginning
of Fiscal 2021 when there were lockdown orders and restrictions on travel
imposed by many authorities in response to the COVID pandemic.



Corn prices increased 18% when comparing the first three months of Fiscal 2022
to the first three months of Fiscal 2021 which is a continuation of the high
price of corn we experienced during the latter half of Fiscal 2021. Weather,
world supply and demand, current and anticipated stocks, agricultural policy and
other factors can contribute to volatility in corn prices. Such changes have a
material effect on our cost of goods sold with corn being one of our primary
inputs.



Management anticipates that ethanol prices will continue to change in relation
to changes in corn and energy prices. If corn, crude oil and gasoline prices
remain high or further increase, that could have a significant impact on the
market price of ethanol and our net income, particularly should ethanol stocks
remain low.



During Fiscal 2021, the Company faced significant challenges with respect to
transportation and logistics. Like many companies, the ongoing impacts of the
COVID-19 pandemic on coastal ports and the trucking industry had a material
effect on our ability to timely, economically, and consistently ship products
both domestically and abroad.  Management continues to explore various options
to mitigate these challenges, but expects them to be a factor in Fiscal 2022.
Management does not know when these logistics challenges will dissipate.



The average market price per ton of distillers grains sold in the first three
months of Fiscal 2022 increased by 27% compared to the average price per ton of
distillers grains sold for the same period in Fiscal 2021. This increase in the
market price of distillers grains is primarily due to higher corn and soybean
meal prices which resulted in end users seeking out distillers grains as the
lower cost alternative. Management anticipates that distillers grains prices
will continue to be affected by the price of corn and soybean meal. If there
continues to be an oversupply of soybean meal, that could have a negative effect
on the price of distillers grains. An increase in supply as certain ethanol
plants return to higher production levels as operating conditions improve could
also have a negative effect on distillers grains prices.




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Key Operating Measures



The following table provides comparative data relating to certain operating
measures during the three months ended December 31, 2021, and December 31, 2020.



                                                             Three Months         Three Months
                                                            Ended December       Ended December
                      Description                              31, 2021             31, 2020
Production (Den gal) (in millions)                                    32.31                33.02
Ethanol Yield (den gal/bu)                                             2.93                 2.92
Ethanol Price (per gal)                                    $           2.16     $           1.30
Corn Price (per bu)                                        $           5.27     $           4.45
Distillers Corn Oil Yield (lbs/bu)                                     1.06                 0.92
BTU's/gallon                                                         21,356               23,064
Steam/Nat Gas cost per MMBTU                               $           3.61     $           3.06
kWh/gallon                                                             0.66                 0.63
Chemical Cost ($/gal)                                      $           0.09     $           0.08




As the table above indicates, during the three months ended December 31, 2021
our performance against the operating measures improved in some categories, but
was met with challenges in other categories. We faced some challenges in the
first three months of Fiscal 2022 with production output due to multiple power
outages and the normal maintenance issues that accompany the power outages. The
price per gallon of ethanol increased significantly over the same period last
year due to supply shortages and increased demand for both gasoline and ethanol.
The yield we obtained for both ethanol and distillers corn oil increased in the
first three months of Fiscal 2022, with distillers corn oil having a significant
increase and impact on revenue. We continue to focus on operating the plant more
efficiently, and that can be seen in our continued reduction of BTU's per
gallon. Inflation has impacted various components during the first three months
of Fiscal 2022, notably in the cost of chemicals. These changes directly
increase our cost of goods sold, and we do not expect them to decrease in the
near future.



Due to the impact of inflation that all industries are currently experiencing,
the goals set out in our "5-10-20" were hampered in the first three months of
Fiscal 2022. As a reminder, the "5" represents a goal of 5% increase in
efficiency/yield, the "10" represents a goal of 10% reduction in production
expense from fiscal year 2019 levels by the end of Fiscal 2022.



Cost Per Gallon    YTD 2022      FY 2021      FY 2020      FY 2019
       Variable        0.220        0.217        0.207        0.244
          Fixed        0.108        0.107        0.129        0.121
            G&A        0.054        0.044        0.043        0.038
          Total        0.382        0.368        0.379        0.403




While we continue to show improvement on an overall cost perspective compared to
fiscal year 2019, the impact of inflation on chemical costs, the price of labor
and other durable goods, indicate that maintaining the achievement generated in
Fiscal 2021 will prove to be a significant challenge. Our management team
continues to explore opportunities to reduce costs and more efficient and
effective means of operating the Company.



Our management team also continues to evaluate opportunities to add value to our
production process by diversifying into high protein feed along with measures to
reduce the carbon index ("CI") of the ethanol we produce. We believe that
consolidation and innovation within the ethanol industry, coupled with our
location, good operating efficiencies and our solid team may provide new
opportunities for our plant.





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Regulatory Developments



Renewable Fuel Standard



The ethanol industry receives support through the Federal Renewable Fuels
Standard (the "RFS") which has been, and continues to be, a driving factor in
the growth of ethanol usage. The RFS requires that each year a certain amount of
renewable fuels must be used in the United States. The RFS is a national program
that allows refiners to use renewable fuel blends in those areas of the country
where it is most cost-effective. The EPA is responsible for revising and
implementing regulations to ensure that transportation fuel sold in the United
States contains a minimum volume of renewable fuel. The RFS statutory volume
requirement increases incrementally each year until the United States is
statutorily required to use 36 billion gallons of renewable fuels by calendar
year 2022. The EPA has the authority, however, to waive the RFS statutory volume
requirements, in whole or in part, provided that there is either inadequate
domestic renewable fuel supply or the implementation of the requirement would
severely harm the economy or environment of a state, region or the United
States.



Annually, the EPA is required by statute to pass a rule that establishes the
number of gallons of different types of renewable fuels that must be used in the
United States which is called the renewable volume obligation. For 2020, 2021,
and 2022 the statutory volume requirements for renewable fuels were 30 billion
gallons, 33 billion gallons, and 36 billion gallons, respectively. In 2019 the
EPA set the 2020 renewable volume obligation at 20.09 billion gallons of
renewable fuels-far below the statutory threshold. On December 7, 2021, the EPA
issued a proposed rule (the "Proposed Rule") to revise the 2020 renewable volume
obligations ("RVOs") and establish renewable volume obligations for 2021 and
2022. The Proposed Rule would retroactively reduce the 2020 renewable volume
obligation to 17.13 billion gallons. For 2021, the EPA's Proposed Rule is
proposing to set the renewable volume obligation at 18.52 billion gallons, and
20.77 billion gallons for 2022. The EPA will accept public comment on the
Proposed Rule through February 4, 2022, following which the EPA will release a
final rule, which may be materially different than the Proposed Rule.



In November 2021, the EPA announced a proposed rulemaking to extend RFS
compliance deadlines for 2019 and 2020.  The 2019 extension applies only to
small refineries, but the 2020 extension applies to all refineries.  This allows
oil refineries to delay providing proof that they are in compliance with the
RFS' biofuel blending requirements. This delay continues to cause uncertainty
and instability within the renewable fuels marketplace and could impact the
price of ethanol during Fiscal 2022.



 Federal mandates supporting the use of renewable fuels like the RFS are a
significant driver of ethanol demand in the U.S. Under the RFS, the EPA assigns
individual refiners, blenders, and importers the volume of renewable fuels they
are obligated to use based on their percentage of total domestic transportation
fuel sales. The mechanism that provides accountability in RFS compliance is the
Renewable Identification Number ("RIN"). RIN's are a tradeable commodity given
that if refiners (obligated parties) need additional RIN's to be compliant, they
have to purchase them from those that have excess. Thus, there is an economic
incentive to use renewable fuels like ethanol, or in the alternative, buy RIN's.
Obligated parties use RINs to show compliance with RFS-mandated volumes. RINs
are attached to renewable fuels by ethanol producers and detached when the
renewable fuel is blended with transportation fuel or traded in the open market.
The market price of detached RINs affects the price of ethanol in certain
markets and influences the purchasing decisions by obligated parties.



Although renewable volume obligations establish the number of gallons of
renewable fuel that must be blended into the nation's fuel supply, these
obligations do not take into account waivers granted by the EPA to small
refiners for "hardship."  The EPA can, in consultation with the Department of
Energy, waive the obligation for individual smaller refineries that are
suffering "disproportionate economic hardship" due to compliance with the RFS.
To qualify for this "small refinery waiver," the refineries must be under total
throughput of 75,000 barrels per day and state their case for an exemption in an
application to the EPA each year. In a separate action on December 7, 2021, the
EPA proposed denying 65 small refinery waiver petitions in a break from past
practice under the Trump administration. On December 8, 2021, a federal court of
appeals granted the EPA's request to remand to the EPA 31 small refinery
exemptions granted during the Trump administration. Broadly, such small refinery
waivers reduce the demand for, and the price for RINs which in turn can impact
the price of ethanol.





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State Initiatives and Mandates





In 2006, Iowa passed legislation promoting the use of renewable fuels in
Iowa. One of the most significant provisions of the Iowa renewable fuels
legislation was a renewable fuels targeted set of tax credits encouraging an
escalating percentage of the gasoline sold in Iowa to consist of, be blended
with, or be replaced by, renewable fuels. To receive the tax credit, retailers
of gasoline are required to reach escalating annual targets of the percentage of
their gasoline sales that consist of, are blended with, or are replaced by,
renewable fuels. This renewable fuel tax credit originally required 10% of the
gasoline that retailers sold to fall within the renewable fuels definitions to
receive the credit and has increased incrementally to 25% as of January 1, 2020.
This tax credit automatically repealed itself on January 1, 2021 for tax years
beginning on or after that date.

Industry Factors Affecting our Results of Operations





Ethanol prices increased 66% during the three months ended December 31, 2021, as
compared to the same period in the previous fiscal year. This was coupled with
an increase of 2.8% in ethanol shipments during the three months ended December
31, 2021, as compared to the prior year.



The latest estimates of supply and demand provided by the United States
Department of Agriculture (the "USDA") changed the estimate for 2021 ending corn
production to 15.1 billion bushels, up 7% from 2020. As of December 1, 2021,
corn stored was up 3% compared to the same time in 2020. The USDA maintained
their forecast for corn consumption used for ethanol and co-products to
5.2 billion bushels for the 2021/2022 crop year. The USDA did revise down the
corn used for ethanol for the 2020/2021 crop year to 5.032 billion bushels.
Their previous estimate was 5.035 billion bushels. The USDA increased their corn
price estimates for fiscal 2021 to $5.45 per bushel, up from the original
estimate of $4.53. Yield per acre for 2021/22 is projected to be 177. The
original estimate was 171.4.



The US Energy Information Administration ("EIA") released its Short-Term Energy
Outlook report in January 2022 and indicated that US ethanol production
increased in 2021 from 2020, but still remained lower than 2019. Ethanol
production was 8% higher in 2021 compared to 2020. The EIA estimates an increase
of 4% over 2021 levels in both 2022 and 2023. Ethanol consumption increased 10%
in 2021 compared to 2020, and the EIA anticipates ethanol consumption will rise
2% in 2022 compared to 2021 and another 2% in 2023.

We currently believe that our margins will lower back down to more normal levels after reaching historic highs during the first three months of Fiscal 2022.

As


discussed in greater depth above, in December, 2021, the EPA issued a
long-awaited biofuel blending mandate proposal that cut the RVOs for 2020 and
2021, but restored 2022's RVO, allowing it to be satisfied with up to 15 billion
gallons of ethanol and an additional 5.77 billion gallons of other advanced
biofuels. In January 2022, rumors circulated in the market that this 15 billion
gallon number for 2022 may be rolled back in the final rule. This market
speculation reduced RIN prices after the rebound RIN prices experienced in
response to the December EPA announcement Uncertainty with biofuel regulations
will continue to cause fluctuations in our margins. Lower supply and challenges
with transportation will also have a direct impact on our margins as all forms
of transportation are dealing with a reduced workforce due to vaccine mandates
and quarantine requirements.



Our distiller grain margins have been impacted positively in the short term due
to the current high corn prices which has resulted in increased demand for our
dried distiller grains ("DDG") and wet distiller grains ("WDG"). We experienced
a price increase of 27% for the three months ended December 31, 2021, as
compared to the three months ended December 31, 2020, on a 5% decrease in tons
sold for those same periods. In 2019, the U.S. implemented tariffs on a cross
section of Chinese products, and China did not order products from the U.S.,
including DDG. In January 2020, the U.S. and China signed a "Phase One
Agreement" where the U.S. lowered tariffs in exchange for China reinstating
orders for U.S. products, including agriculture products. We cannot forecast how
much demand from China will come back into the marketplace, or if additional
demand can be created from other foreign markets or domestically. In 2020, China
re-entered the DDG import market, but did not reach the levels necessary to be
included in the top 10 countries of DDG imports. During 2021, the export rates
of distillers grains varied, but in November, record exports were sent to Mexico
of 0.3 million metric tons. As of November, exports of DDG's were 10.66 million
metric tons, up 6% compared to the same period in 2020.



On December 18, 2019, Congress extended the biodiesel tax credit through 2022
with retroactive application to January 1, 2018. The extension of the tax credit
may increase demand for distillers corn oil, which is a feedstock for biodiesel,
and could have a positive impact on distillers corn oil prices in the future.





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Results of Operations

The following table shows our results of operations, stated as a percentage of revenue for the three months ended December 31, 2021, and 2020.





                                    Three Months Ended December 31, 2021       Three Months Ended December 31, 2020
                                      Amounts             % of Revenues          Amounts             % of Revenues
                                      in 000's                                   in 000's
Income Statement Data
Revenues                            $    101,651                    100.0 %    $     55,410                    100.0 %
Cost of Goods Sold
Material Costs                            59,427                     58.4 %          40,553                     73.2 %
Variable Production Expense                7,101                      7.0 %           6,286                     11.3 %
Fixed Production Expense                   6,352                      6.3 %           5,853                     10.6 %
Gross Margin                              28,771                     28.3 %           2,718                      4.9 %
General and Administrative
Expenses                                   1,721                      1.7 %           1,335                      2.4 %
Interest and other (income)
expense, net                              (1,778 )                   (1.8 )%            272                      0.5 %
Net Income (Loss)                   $     28,828                     28.3 %    $      1,111                      2.0 %




Revenues



Our revenue from operations is derived from three primary sources: sales of
ethanol, distillers grains, and distillers corn oil. The chart below displays
statistical information regarding our revenues. During the three months ended
December 31, 2021, the average price per gallon of ethanol increased by 66% as
compared to the same period in 2020, compounded by a 2.8% increase in gallons of
ethanol sold, primarily due to the impact of the COVID-19 pandemic on the
ethanol industry during prior periods and the start of economic recovery
experienced during the current period. The net effect was a 72% increase in
ethanol revenue for the three months ended December 31, 2021.



An increase in the average price per ton of distillers grains of approximately
27% offset with a 5% decrease in volume sold resulted in an increase of 15.7% in
revenue for this category in the three months ended December 31, 2021 as
compared to the same three month period in 2020. The decrease in volume sold was
due to a reduction in ethanol production and logistical challenges.



Distillers corn oil revenue increased 66.4% in the three months ended December
31, 2021, compared to the three months ended December 31, 2020 with a 110.2%
increase in price compounded by a higher volume of 16.3%. Distillers corn oil
prices increased principally as a result of increased biodiesel production. Our
market for distillers corn oil is primarily local middlemen that compete for our
available supply. On December 18, 2019, Congress extended the biodiesel tax
credit through 2022 with retroactive application to January 1, 2018. The
extension of the tax credit may increase demand for distillers corn oil, which
is a feedstock for biodiesel, which positively impacted prices for distillers
corn oil during the three months ended December 31, 2021 and could continue
to positively impact distillers corn oil prices in the future.




--------------------------------------------------------------------------------







                                    Three Months Ended December 31, 2021

Three Months Ended December 31, 2020


                                     Amounts in

Amounts in


                                       000's              % of Revenues         000's              % of Revenues
Product Revenue Information
Denatured and Undenatured Ethanol   $     77,910                    76.7 %   $     39,309                    70.9 %
Distillers Grains                         14,937                    14.7 %         12,627                    22.8 %
Distillers Corn Oil                        7,762                     7.6 %          3,190                     5.8 %
Other                                      1,042                     1.0 %            284                     0.5 %




Cost of Goods Sold



Our cost of goods sold as a percentage of our revenues was 71.4% and 96.8% for
the three months ended December 31, 2021, and 2020, respectively. Our two
primary costs of producing ethanol and distillers grains are corn and energy,
with steam and natural gas as our primary energy sources.  Cost of goods sold
also includes net (gains) or losses from derivatives and hedging relating to
corn.  The average price of corn used in ethanol production per bushel increased
18% in the three months ended December 31, 2021, compared to the three months
ended December 31, 2020. Due to maintenance challenges in, the volume of ethanol
produced decreased by 2.2% for the three months ended December 31, 2021, as
compared to the same period in fiscal 2020.



Realized and unrealized gains (losses) related to our derivatives and hedging
related to corn resulted in a $0.3 million increase to our cost of goods sold
for the three months ended December 31, 2021, compared to a decrease of
$1.0 million for the three months ended December 31, 2020. We recognize the
gains or losses that result from the changes in the value of our derivative
instruments related to corn in cost of goods sold as the changes occur.  As corn
prices fluctuate, the value of our derivative instruments is impacted, which
affects our financial performance.  We anticipate continued volatility in our
cost of goods sold due to the timing of the changes in value of the derivative
instruments relative to the cost and use of the commodity being hedged.



Variable production expenses increased 13% when comparing the three months ended
December 31, 2021, to the three months ended December 31, 2020due to an increase
in the cost of chemicals and utilities.



Fixed production expenses increased 8.5% for the three months ended December 31,
2021, compared to the three months ended December 31, 2020, due to an increase
in lease expense as a result of having fewer cars on sub-lease and minor
increases in payroll expenses.



General and administrative expenses include salaries and benefits of
administrative employees, professional fees and other general administrative
costs. Our general and administrative expenses for the three months ended
December 31, 2021, increased 28.9% compared to the three months ended December
31, 2020,primarily due to increased property taxes, payroll expenses and legal
and accounting fees associated with being registered with the Securities and
Exchange Commission.

Interest and Other (Income) Expense, Net





Our interest and other (income) expenses, net, were ($1.8) million for three
months ended December 31, 2021, and $0.2 million for the three months ended
December 31, 2020. As discussed above and in Note 4 to our financial statements
contained herein, in connection with the forgiveness our PPP loans in December
2021, we recognized one-time income of $2.2 million during the three months
ended December 31, 2021.





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Selected Financial Data



Modified EBITDA is defined as net income plus interest expense net of interest
income, plus depreciation and amortization, or EBITDA, as adjusted for
unrealized hedging (gains) losses.  Modified EBITDA is not required by or
presented in accordance with generally accepted accounting principles in the
United States of America ("GAAP") and should not be considered as an alternative
to net income, operating income or any other performance measure derived in
accordance with GAAP, or as an alternative to cash flow from operating
activities or as a measure of our liquidity.

We present modified EBITDA because we consider it to be an important supplemental measure of our operating performance and it is considered by our management and Board of Directors as an important operating metric in their assessment of our performance.





We believe modified EBITDA allows us to better compare our current operating
results with corresponding historical periods and with the operational
performance of other companies in our industry because it does not give effect
to potential differences caused by variations in capital structures (affecting
relative interest expense, including the impact of write-offs of deferred
financing costs when companies refinance their indebtedness), the amortization
of intangibles (affecting relative amortization expense), unrealized hedging
(gains) losses and other items that are unrelated to underlying operating
performance. We also present modified EBITDA because we believe it is frequently
used by securities analysts and investors as a measure of performance.  There
are a number of material limitations to the use of modified EBITDA as an
analytical tool, including the following:

• Modified EBITDA does not reflect our interest expense or the cash requirements

to pay our principal and interest. Because we have borrowed money to finance

our operations, interest expense is a necessary element of our costs and our


    ability to generate profits and cash flows. Therefore, any measure that
    excludes interest expense may have limitations.

• Although depreciation and amortization are non-cash expenses in the period

recorded, the assets being depreciated and amortized may have to be replaced

in the future, and modified EBITDA does not reflect the cash requirements for


    such replacement.  Because we use capital assets, depreciation and
    amortization expense is a necessary element of our costs and ability to
    generate profits. Therefore, any measure that excludes depreciation and
    amortization expense may have limitations.




We compensate for these limitations by relying heavily on our GAAP financial
measures and by using modified EBITDA as supplemental information. We believe
that consideration of modified EBITDA, together with a careful review of our
GAAP financial measures, is the most informed method of analyzing our
operations. Because modified EBITDA is not a measurement determined in
accordance with GAAP and is susceptible to varying calculations, modified
EBITDA, as presented, may not be comparable to other similarly titled measures
of other companies. The following table provides a reconciliation of modified
EBITDA to net income (in thousands except per unit data):



                                  Three Months Ended      Three Months Ended
                                  December 31, 2021        December 31, 2020

EBITDA
Net Income (Loss)                $             28,828     $             1,111
Interest Expense                                  405                     464
Depreciation                                    2,836                   2,760
EBITDA                                         32,069                   4,335

Unrealized Hedging (Gain) Loss                 (1,198 )                   276

Modified EBITDA                  $             30,871     $             4,611








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Liquidity and Capital Resources





The Company has certain loan agreements with FCSA, PCA and CoBank (the "FCSA
Credit Facility"), which provides the Company with a term loan in the amount of
$30 million (the "Term Loan"), a revolving term loan in the amount of $40
million (the "Revolving Term Loan") and a $10 million revolving line of credit
(the "Revolving Credit Loan"). The FCSA Credit Facility is secured by a security
interest on all of the Company's assets.



The Term Loan provides for semi-annual payments by the Company to FCSA of $3.75
million, which beginning September 1, 2020, and a maturity date of November 15,
2024. The February 26, 2021, amendment to the credit agreement modified the Term
Loan to only require the Company to make one principal payment of $3.75 million
during 2021, which payment was made on March 1, 2021, and thereafter requires
the Company to make four equal semi-annual payments of $3.75 million on each
March 1 and September 1, through September 1, 2023 (the "Restated Term
Note"). All remaining amounts due under the Restated Term Note are due and
payable on the maturity date of November 15, 2024.



At December 31, 2021, there was an outstanding balance of $4.7 million on the
Revolving Term Loan. Any outstanding amounts due under the Revolving Term Loan
are due and payable on the maturity date of November 15, 2024.

At December 31, 2021, there was no outstanding balance under the Revolving Credit Loan. Effective February 1, 2022, we amended the terms of the Revolving Credit Loan to extend the maturity date from February 1, 2022 to March 1, 2022.





Under the FCSA Credit Facility, the Company has the right to select from several
LIBOR based interest rate options with respect to each of the loans, with a
LIBOR spread of 3.4% per annum. The interest rate at December 31, 2021 was
3.51%. As of December 31, 2021, there was $35.3 million available under the
Revolving Term Loan. The provisions of the FSCA Credit Facility provides for the
adjustment of the interest rate applicable to each in connection with the
phasing out of LIBOR. The interest rate for each of the Company's promissory
notes thereunder is calculated using LIBOR +340 basis points until the
occurrence of certain events. Upon the earliest occurrence of one of the
specified events, the interest rate applicable to such promissory notes converts
to a variant of the secured overnight financing rate ("SOFR"), as established
from time to time by the Federal Reserve Bank of New York, plus a corresponding
spread.

As of December 31, 2021, we had a cash balance of $0.8 million, $35.3 million available under the Revolving Term Loan and $10 million available under the Revolving Credit Loan.

Primary Working Capital Needs





During the second quarter of Fiscal 2022, we estimate that we will require cash
of approximately $72 million for our primary input of corn and $3.5 million for
our energy sources of electricity, steam, and natural gas. Capital expenditure
requirements for the second quarter are expected to be $2 million.



Although there is uncertainty related to the impact of the COVID-19 pandemic on
our future results, management believes that the Company has sufficient cash
available to fund operations for the next twelve months generated by cash from
our continuing operations and available cash under our Revolving Term Loan. We
cannot estimate the availability of funds for hedging in the future.



Commodity Price Risk



Our operations are highly dependent on commodity prices, especially prices for
corn, ethanol and distillers grains and the spread between them (the "crush
margin"). As a result of price volatility for these commodities, our operating
results may fluctuate substantially. The price and availability of corn are
subject to significant fluctuations depending upon a number of factors that
affect commodity prices in general, including crop conditions, weather,
governmental programs and foreign purchases. We may experience increasing costs
for corn and natural gas and decreasing prices for ethanol and distillers grains
which could significantly impact our operating results. Because the market price
of ethanol is not directly related to corn prices, ethanol producers are
generally not able to compensate for increases in the cost of corn through
adjustments in prices for ethanol. We continue to monitor corn and ethanol
prices and manage the "crush margin" to affect our longer-term profitability.



We enter into various derivative contracts with the primary objective of
managing our exposure to adverse price movements in the commodities used for,
and produced in, our business operations and, to the extent we have working
capital available and available market conditions are appropriate, we engage in
hedging transactions which involve risks that could harm our business. We
measure and review our net commodity positions on a daily basis. Our daily net
agricultural commodity position consists of inventory, forward purchase and sale
contracts, over-the-counter and exchange traded derivative instruments.  The
effectiveness of our hedging strategies is dependent upon the cost of
commodities and our ability to sell sufficient products to use all of the
commodities for which we have futures contracts. Although we actively manage our
risk and adjust hedging strategies as appropriate, there is no assurance that
our hedging activities will successfully reduce the risk caused by market
volatility which may leave us vulnerable to high commodity prices.
Alternatively, we may choose not to engage in hedging transactions in the
future. As a result, our future results of operations and financial conditions
may also be adversely affected during periods in which price changes in corn,
ethanol and distillers grain do not work in our favor.



In addition, as described above, hedging transactions expose us to the risk of
counterparty non-performance where the counterparty to the hedging contract
defaults on its contract or, in the case of over-the-counter or exchange-traded
contracts, where there is a change in the expected differential between the
price of the commodity underlying the hedging agreement and the actual prices
paid or received by us for the physical commodity bought or sold. We have, from
time to time, experienced instances of counterparty non-performance but losses
incurred in these situations were not significant.




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Although we believe our hedge positions accomplish an economic hedge against our
future purchases and sales, management has chosen not to use hedge accounting,
which would match any gain or loss on our hedge positions to the specific
commodity purchase being hedged. We are using fair value accounting for our
hedge positions, which means as the current market price of our hedge positions
changes, the realized or unrealized gains and losses are immediately recognized
in the current period (commonly referred to as the "mark to market" method). The
immediate recognition of hedging gains and losses under fair value accounting
can cause net income to be volatile from quarter to quarter due to the timing of
the change in the value of the derivative instruments relative to the cost and
use of the commodity being hedged. As corn 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, our
hedging strategies may cause immediate adverse effects, but are expected to
produce long-term positive impact.



In the event we do not have sufficient working capital to enter into hedging
strategies to manage our commodities price risk, we may be forced to purchase
our corn and market our ethanol at spot prices and as a result, we could be
further exposed to market volatility and risk. However, during the past year,
the spot market has been advantageous.



Credit and Counterparty Risks



Through our normal business activities, we are subject to significant credit and
counterparty risks that arise through normal commercial sales and purchases,
including forward commitments to buy and sell, and through various other
over-the-counter (OTC) derivative instruments that we utilize to manage risks
inherent in our business activities. We define credit and counterparty risk as a
potential financial loss due to the failure of a counterparty to honor its
obligations. The exposure is measured based upon several factors, including
unpaid accounts receivable from counterparties and unrealized gains (losses)
from OTC derivative instruments (including forward purchase and sale
contracts). We actively monitor credit and counterparty risk through credit
analysis (by our marketing agent).

Impact of Hedging Transactions on Liquidity





Our operations and cash flows are highly impacted by commodity prices, including
prices for corn, ethanol, distillers grains and natural gas. We attempt to
reduce the market risk associated with fluctuations in commodity prices through
the use of derivative instruments, including forward corn contracts and
over-the-counter exchange-traded futures and option contracts. Our liquidity
position may be positively or negatively affected by changes in the underlying
value of our derivative instruments. When the value of our open derivative
positions decrease, we may be required to post margin deposits with our brokers
to cover a portion of the decrease or we may require significant liquidity with
little advanced notice to meet margin calls. Conversely, when the value of our
open derivative positions increase, our brokers may be required to deliver
margin deposits to us for a portion of the increase. We continuously monitor and
manage our derivative instruments portfolio and our exposure to margin calls and
while we believe we will continue to maintain adequate liquidity to cover such
margin calls from operating results and borrowings, we cannot estimate the
actual availability of funds from operations or borrowings for hedging
transactions in the future.



The effects, positive or negative, on liquidity resulting from our hedging
activities tend to be mitigated by offsetting changes in cash prices in our
business. For example, in a period of rising corn prices, gains resulting from
long grain derivative positions would generally be offset by higher cash prices
paid to farmers and other suppliers in local corn markets. These offsetting
changes do not always occur, however, in the same amounts or in the same period.



We expect that a $1.00 per bushel fluctuation in market prices for corn would
impact our cost of goods sold by approximately $45 million, or $0.34 per gallon,
assuming our plant operates at 100% of our capacity. We expect the annual impact
to our results of operations due to a $0.50 decrease in ethanol prices will
result in approximately a $65 million decrease in revenue.

Critical Accounting Estimates





For a discussion of the Critical Accounting Estimates material to an
understanding of our business and financial results, members should carefully
review the discussion of such estimates in our annual report on Form 10-K for
the year ended September 30, 2021, in Part II, Item 7, "Management's Discussion
and Analysis of Financial Condition and Results of Operations," under "Summary
of Critical Accounting Policies and Estimates." At this time, there have been no
material changes to the estimates disclosed in our annual report on Form 10-K
for the year ended September 30, 2021, nor have the material facts underlying
those estimates changed in a manner.

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