General

We prepared the following discussion and analysis to help readers better understand our financial condition, changes in our financial condition, and results of operations for the fiscal year ended October 31, 2021. This discussion should be read in conjunction with the consolidated financial statements included herewith and notes to the consolidated financial statements thereto and the risk factors contained herein.





Overview



Our business consists primarily of the production and sale of ethanol and its
co-products (wet, modified wet and dried distillers' grains, corn oil and corn
syrup) locally, and throughout the continental U.S.  Our production operations
are carried out at GFE's plant located in Granite Falls, Minnesota and HLBE's
ethanol plant near Heron Lake, Minnesota.

The GFE plant has an annual production capacity of approximately 63 million gallons of denatured ethanol, but is currently permitted to produce up to 70 million gallons of undenatured ethanol on a twelve month rolling sum basis.

The


HLBE plant has an approximate annual production capacity of 65 million gallons
of denatured ethanol, but is currently permitted production capacity to produce
approximately 72 million gallons of undenatured ethanol on a twelve-month
rolling sum basis.  We intend to continue working toward increasing production
to take advantage of the additional production allowed pursuant to our permits
as long as we believe it is profitable to do so.

HLBE also owns a 100% interest in Agrinatural, which is a natural gas distribution and sales company located in Heron Lake, Minnesota that owns approximately 190 miles of natural gas pipeline and provides natural gas to HLBE's ethanol plant and other commercial, agricultural and residential customers through a connection with the natural gas pipeline facilities of Northern Border Pipeline Company. Agrinatural's revenues are generated through natural gas distribution fees and sales.





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Plan of Operations Through October 31, 2022





During the twelve months ended October 31, 2021, the Company and the ethanol
industry as a whole benefited from improved market conditions, as the effects of
the COVID-19 pandemic subsided and demand for transportation fuel rebounded.
 Due to the reduction in demand for transportation fuel, the ethanol industry
experienced record-low ethanol prices in 2020, and we experienced prolonged
negative operating margins, significantly lower cash flow from operations and
substantial net losses. Economists estimated the ethanol industry suffered $8
billion in losses in 2020 due, in large part, to the effects of the pandemic,
according to the Journal of Agricultural and Food Industrial Organization. In
the 2021 fiscal year, the Company experienced increased market prices for our
principal prices and improved profitability, as compared to the fiscal year
ended October 31, 2020. However, the pandemic is ongoing and various dynamic
factors, including the spread of new coronavirus variants, make it difficult to
forecast the long-term effects of the pandemic on our industry as a whole and
our Company specifically. Further, tangential effects of the COVID-19 pandemic,
including supply chain bottlenecks, labor market volatility, and price increases
of raw materials may adversely affect our operations and profitability.



It is possible that even after the pandemic subsides, there will be permanent
changes to social and economic patterns that will reduce demand for ethanol. For
example, increased adoption of "work from home" policies or tele-commuting, and
the use virtual meetings, may permanently reduce business travel and thereby
reduce the demand for transportation fuel, including the ethanol we produce.



Over the next year, we will continue our focus on operational improvements at
our plants. These operational improvements include exploring methods to improve
ethanol yield per bushel and increasing production output at our plants,
continued emphasis on safety and environmental regulation, reducing our
operating costs, and optimizing our margin opportunities through prudent
risk-management policies.



In addition, we expect to continue to conduct routine maintenance and repair
activities at the ethanol plants to maintain current plant infrastructure, as
well as some small capital projects to improve operating efficiency. We
anticipate using cash we generate from our operations and our credit facilities
for each plant to finance these plant upgrade projects.

Trends and Uncertainties Impacting Our Operations

The principal factors affecting our results of operations and financial conditions are the market prices for corn, ethanol, distillers' grains and natural gas, as well as governmental programs designed to create incentives for the use of corn-based ethanol.


Our operations are highly dependent on commodity prices, especially prices for
corn, ethanol, distillers' grains and natural gas. As a result, our operating
results can fluctuate substantially due to volatility in these commodity
markets. The price and availability of corn is subject to significant
fluctuations depending upon a number of factors that affect commodity prices in
general, including crop conditions, yields, domestic and global stocks, weather,
federal policy and foreign trade. Natural gas prices are influenced by severe
weather in the summer and winter and hurricanes in the spring, summer and fall.
Other factors include North American exploration and production, and the amount
of natural gas in underground storage during injection and withdrawal seasons.
Ethanol prices are sensitive to world crude oil supply and demand, domestic
gasoline supply and demand, the price of crude oil, gasoline and corn, the price
of substitute fuels and octane enhancers, refining capacity and utilization,
government regulation and incentives and consumer demand for alternative fuels.
Distillers' grains prices are impacted by livestock numbers on feed, prices for
feed alternatives and supply, which is associated with ethanol plant production.



In the ethanol industry, it is generally expected that 2.8 gallons of denatured
ethanol will be produced for each bushel of grain processed in the production
cycle. Because the market price of ethanol is not always directly related to
corn, at times ethanol prices may lag price movements in corn prices
and corn-ethanol price spread (the difference between the price per gallon of
ethanol and the price per bushel of grain divided by 2.8) may be tightly
compressed or negative. If the corn-ethanol spread is compressed or negative for
sustained period, it is possible that our operating margins will decline or
become negative and our ethanol plants may not generate adequate cash flow for
operations. In such cases, we may reduce or cease production at our ethanol
plants in order to minimize our variable costs and optimize cash flow.

For the fiscal year ended October 31, 2021 compared to fiscal year ended October 31, 2020, our average price per gallon of ethanol sold increased by approximately 65%. Ethanol prices were higher during the fiscal year ended



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October 31, 2021, due primarily to the fact that the effects of the COVID-19
pandemic subsided in the fiscal year 2021, resulting in increased demand for
transportation fuel, including the ethanol we produce. While demand for
transportation fuel has increased, it is possible that new coronavirus variants,
additional government lockdowns, or other factors could reduce demand for
transportation fuel and thereby decrease the price of the ethanol we produce.
Additionally, the continued issuance hardship exemptions from the RVOs may
further decrease domestic demand for ethanol. Management believes that the
ethanol outlook will remain volatile in the fiscal year 2022.



Exports of ethanol decreased slightly in our fiscal year 2021, after increasing
slightly each of the previous two fiscal years. Export demand for ethanol is
less consistent compared to domestic demand which can lead to ethanol price
volatility. The decrease in ethanol exports is due to various factors, including
a decrease in trading with Brazil, which had been one of the top two largest
importers of U.S. ethanol, due to the expiration of a Brazilian import quota.
The USDA projects that U.S. ethanol exports will increase slightly in 2022 due
to both volume and price gains due, in part, to increased renewable fuel
blending requirements in the United Kingdom, India, and other nations.



On September 1, 2017, Brazil's Chamber of Foreign Trade imposed a 20% tariff on
U.S. ethanol imports in excess of 150 million liters, or 39.6 million gallons,
per quarter. The tariff was renewed in September 2019, but the import quota was
raised to 187.5 million liters, or 49.5 million gallons, per quarter. In
December 2020, the import quota expired, thereby subjecting all Brazilian
imports of U.S. ethanol to a 20% tariff. These tariffs have had and will likely
continue to have a negative impact on the export market demand and prices for
ethanol produced in the United States. Any decrease in U.S. ethanol exports
could adversely impact the market price of ethanol unless domestic demand
increases or additional foreign markets are developed.



U.S. ethanol exports to China increased during the 2021 fiscal year, following
the execution of a "phase one" trade agreement with China. The agreement, signed
by former President Donald Trump on January 15, 2020, includes a commitment by
China to purchase agricultural products, including ethanol, over the course of
two years.  There is, however, no guarantee that exports of ethanol to China
will continue or increase.  Additionally, the imposition of tariffs and duties
on ethanol imported from the U.S., as well as increased production of ethanol
and similar fuels in other countries, can also negatively impact domestic export
demand.




Corn prices increased significantly in fiscal year 2021, due in part to the
improved domestic economy as well as increased demand from China and drought in
South America's corn-growing regions. Corn prices remained above $5 per bushel
for most of the year and peaked above $7 per bushel in May 2021.

The latest USDA supply and demand projections estimate the 2020-2021 ending corn
stocks at approximately 1.24 billion bushels, and project the 2021-2022 U.S.
corn production to be approximately 15.1 billion bushels, which is slightly less
than the 2020-2021 production, with corn consumption for ethanol and co-products
slightly higher at approximately 5.3 billion bushels, suggesting higher corn
prices into fiscal 2022. In fiscal year 2021, China substantially increased its
purchase of U.S. corn reducing U.S. inventories and increasing prices. Increases
in domestic ethanol production in fiscal year 2021, also contributed to elevated
corn prices. Weather, world supply and demand, current and anticipated stocks,
agricultural policy and other factors can contribute to volatility in corn
prices. If corn prices rise, it will have a negative effect on our operating
margins unless the price of ethanol and our other primary products outpace
rising corn prices.

Distillers' grain prices increased in 2021 compared to 2020, due to increased
supply as a result of increased production. Top export markets include Mexico,
Vietnam, South Korea, Indonesia, Turkey, Thailand, and Canada. Export demand
from China, historically one of the largest importers of U.S. produced
distillers' grains, has significantly declined. In 2017, China imposed
significant anti-dumping and anti-subsidies on distillers' grains imported from
the U.S. which resulted in significant declines in exports of U.S. distillers'
grains to China. The imposition of these duties has resulted in a significant
decline in demand from this top importer requiring U.S. producers to seek out
alternative markets. Exports to China remain substantially below the pre-tariff
export levels, and there is no guarantee that distillers' grains exports to
China will return to pre-tariff levels.

On January 15, 2020, President Trump signed a "phase one" trade agreement with
China. The agreement includes a commitment by China to purchase agricultural
products over the next two years, including distillers' grains. The agreement
will also provide U.S. manufacturers of DDGS with a streamlined process for
registration and licensing in order to facilitate U.S. exports to China. While
this agreement appears positive for the industry, there is no guarantee that the
agreement will be fully implemented, nor is there a guarantee that exports to
China return to pre-tariff levels.

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Management anticipates distillers' grains prices will remain steady during our
2022 fiscal year, unless additional domestic demand or other foreign markets
develop. Domestic demand for distillers' grains could remain low if corn prices
decline and end-users switch to lower priced alternatives.

Corn oil prices increased significantly in fiscal year 2021, due in part to elevated corn prices and strong demand for biodiesel and livestock feed.





Given the inherent volatility in ethanol, distillers' grains, non-food grade
corn oil, grain and natural gas prices, we cannot predict the likelihood that
the spread between ethanol, distillers' grains, non-food grade corn oil and
grain prices in future periods will be consistent compared to historical
periods.



Results of Operations for the Fiscal Years Ended October 31, 2021 and 2020



The following table shows the results of our operations and the percentage of
revenues, costs of goods sold, operating expenses and other items to total
revenues in our audited consolidated statements of operations for the fiscal
years ended October 31, 2021 and 2020 (amounts in thousands):


                                                 Fiscal Year Ended October 31,
                                                 2021                      2020
Statement of Operations Data              Amount         %          Amount         %
Revenue                                 $   309,615    100.0 %    $  164,954     100.0 %
Cost of Goods Sold                          282,847     91.4 %       176,031     106.7 %
Gross Profit (Loss)                          26,768      8.6 %      (11,077)     (6.7) %
Operating Expenses                            8,127      2.6 %         8,581       5.2 %
Goodwill Impairment                               -        - %         1,372       0.8 %
Operating Income (Loss)                      18,641      6.0 %      (21,030)    (12.7) %
Other Income, net                             7,389      2.4 %           463       0.3 %
Net Income (Loss)                            26,030      8.4 %      (20,567)    (12.4) %
Less: Net (Income) Loss Attributable
to Non-controlling Interest                 (2,373)    (0.8) %         7,289       4.4 %
Net Income (Loss) Attributable to
Granite Falls Energy, LLC               $    23,657      6.7 %    $ (13,278)     (8.0) %




Revenues

Our revenues from operations come from three primary sources: sales of fuel ethanol, sales of distillers' grains and sales of corn oil. Our remaining consolidated revenues are attributable to miscellaneous other revenue from incidental sales of corn syrup at HLBE's plant and revenues generated from natural gas pipeline operations at Agrinatural.

The following table shows the sources of our consolidated revenue and the approximate percentage of revenues from those sources to total revenues in our audited consolidated statements of operations for the fiscal year ended October 31, 2021 (amounts in thousands):






                                  Fiscal Year Ended October 31, 2021
Revenue Sources                Sales Revenue          % of Total Revenues
Ethanol sales               $           240,875                     77.8 %
Distillers' grains sales                 49,186                     15.9 %
Corn oil sales                           17,148                      5.5 %
Miscellaneous other                       2,406                      0.8 %
Total Revenues              $           309,615                    100.0 %




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The following table shows the sources of our consolidated revenue and the approximate percentage of revenues from those sources to total revenues in our audited consolidated statements of operations for the fiscal year ended October 31, 2020 (amounts in thousands):






                                  Fiscal Year Ended October 31, 2020
Revenue Sources                Sales Revenue          % of Total Revenues
Ethanol sales               $           126,605                     76.8 %
Distillers' grains sales                 29,673                     17.9 %
Corn oil sales                            6,590                      4.0 %
Miscellaneous other                       2,086                      1.3 %
Total Revenues              $           164,954                    100.0 %

Our total consolidated revenues increased by approximately 87.7% for the fiscal year ended October 31, 2021, as compared to the fiscal year 2020, due to increases in both the prices received for and in the quantities sold of our ethanol, distillers' grains, and corn oil.


The following table reflects quantities of our three primary products sold and
the average net prices received for the fiscal years ended October 31, 2021 and
2020 (quantities in thousands):




                          Fiscal Year Ended October 31, 2021

Fiscal Year Ended October 31, 2020


                          Quantity Sold          Avg. Net Price        Quantity Sold          Avg. Net Price
Product                   (in thousands)                               (in thousands)
Ethanol (gallons)                    126,746    $           1.90                  105,172    $           1.20
Distillers' grains                       288    $         170.75                      240    $         123.43
(tons)
Corn oil (pounds)                     35,963    $           0.48                   27,528    $           0.24




Ethanol



Total revenues from sales of ethanol increased by approximately 90.3% for fiscal
year 2021 compared to the fiscal year 2020 due primarily to an approximately
20.5% increase in the volumes sold from period to period, coupled with an
approximately 58.3% increase in the average price per gallon we received for our
ethanol. The increase in price is primarily due to an increase in demand for
transportation fuel, including the ethanol we produce, as a result of the larger
economic rebound from the COVID-19 pandemic. The increase in the quantity of
ethanol sold was due primarily to our increased production in fiscal year 2021
compared to the prior year, due to the fact that we operated our plants
throughout the 2021 fiscal year and idled them for a portion of the 2020 fiscal
year. Management anticipates steady ethanol production and sales during our 2022
fiscal year, as compared to our 2021 fiscal year.



We occasionally engage in hedging activities with respect to our ethanol sales.
We recognize the gains or losses that result from the changes in the value of
these derivative instruments in revenues as the changes occur. At October 31,
2021, GFE had fixed and basis contracts for forward ethanol sales for various
delivery periods through December 2021 valued at approximately $19.6 million,
and HLBE had fixed and basis contracts for forward ethanol sales for various
delivery periods through December 2021 valued at approximately $18.7 million.
Separately, ethanol derivative instruments resulted in a gain of approximately
$210,000 during the fiscal year ended October 31, 2021, and a loss of
approximately $350,000 during the fiscal year ended October 31, 2020.



Distillers' Grains



Total revenues from sales of distillers' grains increased approximately 65.8%
for fiscal year 2021 compared to fiscal year 2020. The increase in distillers'
grains revenues is primarily attributable to an approximately 20.0% increase in
the tons of distillers' grains sold during fiscal year 2021 compared to fiscal
year 2020, coupled with an approximately 38.3% increase in the average price per
ton we received for our distillers' grains from period to period.



The increase in the market price of distillers' grains is due to increased
demand for livestock feed and higher prices for soybean meal, which is a
competitive product to distillers' grains. The increase in total tons of
distillers' grains sold during fiscal year 2021 compared to the fiscal
year 2020 was due increased production at both plants, as a result of operating
the plants year-round in the fiscal year 2021, after the plants for portions of
the fiscal year 2020 due to the effects of the COVID-19 pandemic and HLBE's
boiler malfunction. Management anticipates steady distillers' grains production
during our 2022 fiscal year, as compared to our 2021 fiscal year.



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At October 31, 2021, GFE had forward contracts to sell approximately $1.3
million of distillers' grains for delivery through November 2021, and HLBE had
forward contracts to sell approximately $1.6 million of distillers' grains for
delivery through December 2021.



Corn Oil



Separating the corn oil from our distillers' grains decreases the total tons of
distillers' grains that we sell; however, our corn oil has a higher per ton
value than our distillers' grains. Total revenues from sales of corn oil
increased by approximately 160.2% for fiscal year 2021 compared to the fiscal
year 2020. This increase is attributable to an approximately 30.6% increase in
pounds sold from period to period, coupled with an approximately 100% increase
in the average price per pound of corn oil sold from period to period.
Management attributes the increase in corn oil prices to increased demand for
biodiesel and livestock feed. Management attributes the increase in corn oil
sales during fiscal year 2021 as compared to 2020 primarily to increased
production at the plants as a result of the GFE plant and HLBE plant being idled
during portions of the fiscal year 2020 as a result of the COVID-19 pandemic and
HLBE's boiler malfunction.



Although management believes that corn oil prices will remain relatively steady,
prices may decrease if there is an oversupply of corn oil production resulting
from increased production rates at ethanol plants or if biodiesel producers
begin to utilize lower-priced alternatives such as soybean oil or if biodiesel
blenders' tax credit is not renewed and biodiesel production declines.

At October 31, 2021, GFE had forward corn oil sales contracts to sell approximately $1.7 million for delivery through December 2021, and HLBE had forward corn oil sales contracts to sell approximately $1.5 million for delivery through December 2021.





Cost of Goods Sold




Our cost of goods sold increased by approximately 60.7% for the fiscal year
ended October 31, 2021, as compared to the fiscal year ended October 31, 2020.
However, cost of goods sold, as a percentage of revenues, decreased
to approximately 91.4% for the fiscal year ended October 31, 2021, as compared
to approximately 106.7% for the 2020 fiscal year due to an improved margin
between the price of ethanol and the price of corn.  Approximately 90% of our
total costs of goods sold is attributable to ethanol production. As a result,
the cost of goods sold per gallon of ethanol produced for the fiscal year ended
October 31, 2021 was approximately $2.23 per gallon of ethanol sold compared to
approximately $1.67 per gallon of ethanol sold for the fiscal year ended October
31, 2020.



The following table shows the costs of corn and natural gas (our two largest
single components of costs of goods sold), as well as all other components of
cost of goods sold, which includes processing ingredients, depreciation expense,
electricity, and wages, salaries and benefits of production personnel, and the
approximate percentage of costs of those components to total costs of goods sold
in our audited consolidated statements of operations for the fiscal year ended
October 31, 2021 (amounts in thousands):




                                                       Fiscal Year Ended October 31, 2021
                                                      Cost                % of Cost of Goods Sold
                                                 (in thousands)
Corn costs                                     $           228,483                         80.8 %
Natural gas costs                                           12,618                          4.5 %

All other components of costs of goods sold                 41,746         

               14.8 %
Total Cost of Goods Sold                       $           282,847                        100.0 %




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The following table shows the costs of corn, natural gas and all other
components of cost of goods sold and the approximate percentage of costs of
those components to total costs of goods sold in our audited consolidated
statements of operations for the fiscal year ended October 31, 2020 (amounts in
thousands):




                                                       Fiscal Year Ended October 31, 2020
                                                      Cost                % of Cost of Goods Sold
                                                 (in thousands)
Corn costs                                     $           126,289                         71.8 %
Natural gas costs                                            9,209                          5.2 %

All other components of costs of goods sold                 40,533         

               23.0 %
Total Cost of Goods Sold                       $           176,031                        100.0 %




Corn Costs



Our cost of goods sold related to corn increased approximately 80.9% for our
2021 fiscal year compared to our 2020 fiscal year, due to an approximately 19.1%
increase in the number of bushels of corn processed from period to period,
coupled with an approximately 51.9% increase in the average price per bushel
paid for corn from period to period. The corn-ethanol price spread (the
difference between the price per gallon of ethanol and the price per bushel of
grain divided by 2.8) for our 2021 fiscal year was $0.04 more than the
corn-ethanol price spread we experienced for the same period of 2020.



For our fiscal years ended October 31, 2021 and 2020, our plants processed
approximately 42.2 million and 35.4 million bushels of corn, respectively. This
increase in corn consumption was due primarily to the fact that we idled
production at our plants in the fiscal year 2020 due to the effects of the
COVID-19 pandemic and the boiler malfunction at HLBE's plant.  Management
anticipates steady corn consumption during our 2022 fiscal year compared to our
2021 fiscal year provided that we can achieve operating margins that allow us to
continue to operate the ethanol plants at capacity.



The increase in our cost per bushel of corn was a result of elevated corn prices
caused primarily by export demand, including demand for corn from China and
South America. Due to these factors, management anticipates that corn prices
will be higher during our 2022 fiscal year.



From time to time, we enter into forward purchase contracts for our corn
purchases. At October 31, 2021, GFE had forward corn purchase contracts
for approximately 4.9 million bushels for deliveries through December 2022 and
HLBE had forward corn purchase contracts for approximately 3.2 million bushels
for deliveries through December 2022.



Our corn derivative positions resulted in a loss of approximately $8.2 million
and $2.4 million for the fiscal years ended October 31, 2021, and October 31,
2020, respectively, which increased our cost of goods sold. We recognize the
gains or losses that result from the changes in the value of our derivative
instruments from corn in cost of goods sold as the changes occur.  As corn
prices fluctuate, the value of our derivative instruments are impacted, which
affects our financial performance. We anticipate continued volatility in our
cost of goods sold due to the timing of the changes in value of the derivative
instruments relative to the cost and use of the commodity being hedged.



Natural Gas Costs




For our 2021 fiscal year, we experienced an increase of approximately 37.0% in
our overall natural gas costs compared to our 2020 fiscal year.  Management
attributes the increase in natural gas costs to an increase in production, as we
operated out plants throughout the year in the 2021 fiscal year after idling our
plants for portions of the 2020 fiscal year. Further, natural gas prices spiked
in early 2021 due to severe weather in Texas and other areas that disrupted the
production and transportation of natural gas. Management anticipates higher
natural gas prices during the winter months due to the typical seasonal natural
gas cost increases experienced during the winter months.



Operating Expense

Operating expenses include wages, salaries and benefits of administrative employees at the plants, insurance, professional fees and similar costs.


 Operating expenses as a percentage of revenues decreased  to 2.6% of revenues
for our fiscal year ended October 31, 2021 compared to 5.2% of revenues for our
fiscal year ended October 31, 2020. This

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decrease was primarily due to a significant increase in revenues and the recognition of the approximately $1.8 million loss on disposal of assets related to HLBE's boiler during the 2020 fiscal year.


Our efforts to optimize efficiencies and maximize production may result in a
decrease in our operating expenses on a per gallon basis. Additionally, because
HLBE has de-registered from the SEC and is no longer required to file SEC
reports as a result of the Merger, we expect our operating expenses related to
certain filing fees and regulatory costs to decrease. However, due to inflation,
labor shortages, or other unforeseen issues, it is possible that our operating
expenses will remain steady or increase during our 2022 fiscal year.

Operating Income (Loss)


Our operating margin increased approximately $39.7 million during the past year
as we recorded operating income of approximately $18.6 million in our fiscal
year ended October 31, 2021, compared with an operating loss of approximately
$21.0 million in our fiscal year ended October 31, 2020. The increase in our
operating income resulted largely from increased prices for all our principal
products coupled with increased production at both our plants.



Other Income, Net



We had net other income for our fiscal year ended October 31, 2021 of
approximately $7.4 million compared to net other income of approximately
$463,000 for our fiscal year ended October 31, 2020. We had more other income
during fiscal year 2021 compared to fiscal year 2020 due in part to an increase
in investment income during the 2021 fiscal year, the PPP loan forgiveness
income recognized during fiscal year 2021, and the recognition of the MVCPLA
patronage capital credit income.

Changes in Financial Condition at October 31, 2021 and 2020

The following table highlights the changes in our financial condition at October 31, 2021 compared to October 31, 2020 (amounts in thousands):






                                                   October 31, 2021     October 31, 2020
Current Assets                                     $          64,814    $          31,715
Total Assets                                       $         145,137    $         116,198
Current Liabilities                                $          30,024    $          31,252

Long-Term Debt, less current portion               $          27,621    $

5,876


Operating lease, long-term liabilities             $          12,102    $

15,755


Other Long-Term Liabilities                        $           1,468    $

1,422


Members' Equity attributable to Granite Falls
Energy, LLC                                        $          73,922    $          52,112
Non-controlling Interest                           $               -    $           9,780

Total assets increased by approximately $28.9 million and current assets increased by approximately $33.1 million at October 31, 2021 compared to October 31, 2020. The increase in total assets was primarily due to an increase in cash, accounts receivable, and inventory in the 2021 period.





Total current liabilities decreased by approximately $1.2 million at October 31,
2021 compared to October 31, 2020. This decrease was mainly due to a decrease in
current maturities of long-term debt, which occurred because certain HLBE debt
was classified as current as of October 31, 2020, due to loan covenant
violations, was reclassified as long-term debt as of October 31, 2021. The
decrease in current maturities of long-term debt was partially offset by an
increase in accounts payable.



Long-term debt, less current portion, totaled approximately $27.6 million at
October 31, 2021, which is approximately $21.7 million greater than our
long-term debt, less current portion, at October 31, 2020. The increase is
primarily due to the execution of the 2021 Credit Facility, which provided loans
to finance the acquisition of HLBE's non-controlling interest and to fund
continued operations.

Members' equity attributable to Granite Falls Energy, LLC at October 31, 2021 increased by approximately $21.8 million compared to October 31, 2020. The increase was due primarily to the net income attributable to Granite Falls Energy, LLC for the 2021 fiscal year.





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There was no non-controlling interest at October 31, 2021, due to the Merger, in which GFE acquired HLBE's remaining approximately 49.3% non-controlling interest.

Liquidity and Capital Resources

Our principal sources of liquidity consist of cash provided by operations, cash on hand, and available borrowings under our credit facility with AgCountry.

Our


principal uses of cash are to purchase raw materials necessary to operate the
ethanol plants, capital expenditures to maintain and upgrade our plants, to make
debt service payments, and to make distribution payments to our members.



We do not currently anticipate any significant purchases of property and
equipment that would require us to secure additional capital in the next twelve
months. For our 2022 fiscal year, we anticipate completion of several small
capital projects to maintain current plant infrastructure and improve operating
efficiency.  We expect to have sufficient cash generated by continuing
operations and availability on our credit facilities and other loans to fund our
operations and complete our capital expenditures during our 2022 fiscal year.

However, should unfavorable operating conditions occur in the ethanol industry that prevent us from profitably operating our plants, we may need to seek additional debt or equity funding or idle ethanol production.

Management continues to evaluate conditions in the ethanol industry and explore opportunities to improve the efficiency and profitability of our operations which may require additional capital to supplement cash generated from operations and our current debt.

Year Ended Compared October 31, 2021 to Year Ended October 31, 2020





The following table summarizes cash flows for the fiscal years ended October 31
(amounts in thousands):




                                                                2021        2020

Net cash provided by (used in) operating activities           $  19,867   $

(3,647)


Net cash used in investing activities                         $ (4,258)   $

(5,826)


Net cash provided by financing activities                     $   1,748   $

9,479

Net increase in cash, cash equivalents and restricted cash $ 17,357 $


      6




Operating Cash Flows



During the fiscal year ended October 31, 2021, net cash provided by operating
activities increased by approximately $20.6 million compared to the fiscal year
ended October 31, 2020. This increase was due primarily to an approximately
$46.6 million increase in net income, which was partially offset an
approximately $12.7 million decrease in accounts receivable, approximately $7.0
million decrease in inventory, and an approximately $6.9 million decrease in
commodity derivative instruments.



Investing Cash Flows



Cash used in investing activities was approximately $1.6 million less during
fiscal year 2021 as compared to fiscal year 2020. During fiscal year 2021, we
used approximately $4.3 million of cash related capital expenditures at the GFE
and HLBE plants. Comparatively, during fiscal year 2020, we used approximately
$5.8 million for capital expenditures at the GFE and HLBE plants.



Financing Cash Flows



We were provided with approximately $1.7 million by financing activities during
fiscal year 2021, compared to being provided with approximately $9.5 million by
financing activities during fiscal year 2020. The decrease was primarily
attributable to the fact that we used approximately $14.0 million to acquire the
non-controlling interest in fiscal year 2021, compared with using approximately
$2.0 million to acquired non-controlling interest in fiscal year 2020.
Additionally, in fiscal year 2021, we had proceeds on long-term debt of
approximately $36.2 million and made payments on long-term debt of approximately
$21.0 million, as compared with fiscal year 2020, when we had proceeds on
long-term debt of approximately $66.3 million and made payments of long-term
debt of approximately $56.8 million.



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Credit Arrangements



On September 27, 2021, GFE finalized loan documents for an amended credit
facility (the "2021 Credit Facility") with AgCountry. CoBank serves as
AgCountry's administrative agent for the 2021 Credit Facility. We entered into
the 2021 Credit Facility to finance the acquisition of HLBE's non-controlling
interest and consolidate certain debts of GFE and HLBE. The loan documents
include an Amended and Restated Credit Agreement (the "Credit Agreement"), which
amends and replaces the Company's credit agreement with AgCountry dated
September 27, 2018.



As of October 31, 2021, GFE had indebtedness consisting of the following loans
and agreements: the Credit Agreement, a $20 million revolving credit promissory
note, a $500,000 amended and restated letter of credit promissory note, a $20
million amended and restated revolving term promissory note, a $25 million
single advance term promissory note, a $2.4 million single advance term
promissory note, and the Project Hawkeye credit facility. During the fiscal year
2021, two SBA Paycheck Protection Program loans to HLBE and two SBA Paycheck
Protection Program loans to GFE were forgiven in full.

Additional information regarding our credit arrangements is available in Part II - Item 8. Financial Statements, Note 10 - DEBT FACILITIES, and Note 16 COMMITMENTS AND CONTINGENCIES.

Off-Balance Sheet Arrangements

We currently have no off-balance sheet arrangements.

Critical Accounting Estimates





Management uses estimates and assumptions in preparing our financial statements
in accordance with generally accepted accounting principles in the United States
of America. 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.  Our significant accounting policies are
summarized in Part II - Item 8. Financial Statements, Note 1 - SUMMARY OF
SIGNIFICANT ACCOUNTING POLICIES.







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