Annual Report for Year Ended September 31, 2006

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

[X]

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended September 30, 2006

[ ]

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from ________________to_______________

Commission file number: 0-50714

Western Plains Energy, L.L.C.

(Exact name of registrant as specified in its charter)

Kansas	48-1247506
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

3022 County Road 18, Oakley, Kansas 67748

(Address of principal executive offices)

Registrant’s telephone number, including area code: (785) 672-8810

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: Class A Capital Units

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o No x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes o No x

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

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o Accelerated filer o Non-accelerated filer x

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

The aggregate market value of the capital units held by non-affiliates of the registrant as of September 30, 2006, was $27,468,000, computed by reference to the price at which membership units were last sold. There is no established public trading market for our securities.

As of December 29, 2006, 2,286 Class A Capital Units, 1,744 Class B Capital Units and 50 Class C Capital Units of the registrant were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE: None.

TABLE OF CONTENTS

PART I
Item 1.	Business	1
Item 1A.	Risk Factors	12
Item 2.	Properties	18
Item 3.	Legal Proceedings	19
Item 4.	Submission of Matters to a Vote of Security Holders	19

PART II
Item 5.	Market for Registrant’s Equity	20
Item 6.	Selected Financial Data	21
Item 7.	Management’s Discussion and Analysis	22
Item 7A.	Quantitative and Qualitative Disclosures About Market Risk	38
Item 8.	Financial Statements and Supplementary Data	40
Item 9.	Changes in and Disagreements with Accountants	40
Item 9A.	Controls and Procedures	40

PART III
Item 10.	Directors, Executive Officers and Corporate Governance	41
Item 11.	Executive Compensation	47
Item 12.	Security Ownership and Related Stockholder Matters	48
Item 13.	Related Party Transactions	49
Item 14.	Principal Accounting Fees and Services	50

PART IV		50
Item 15.	Exhibits, Financial Statements and Schedules

SIGNATURES		51

Additional Information

Descriptions in this report are qualified by reference to the contents of any contract, agreement or other document described herein and are not necessarily complete. Reference is made to each such contract, agreement or document as an exhibit to this report, or incorporated by reference as permitted by regulations of the Securities and Exchange Commission. For more information regarding these documents, see the section titled “Item 13. Exhibits” in this report.

Special Note Regarding Forward-Looking Statements

Please see the note under "Item 6. Management's Discussion and Analysis or Plan of Operation," for a description of special factors potentially affecting forward-looking statements included in this report.

Item 1. Business

Our business focuses on the production and sale of ethanol and its co-products. Ethanol is a type of alcohol which in the U.S. is typically produced from corn. Ethanol is primarily used as a blend component for gasoline, and is typically added by refiners or distributors to increase octane and reduce tailpipe emissions from vehicles. The ethanol industry has grown significantly over the past few years, increasing production capacity in the U.S. by approximately 88% between 2002 and 2006. We believe ethanol production will continue to grow as a result of many factors, some of which are its favorable production economics relative to gasoline, a shortage of domestic petroleum refining capacity, its clean-burning characteristics and federally mandated renewable fuel usage. We also believe that E85 (see “Our Products and Their Markets,” below) will also become increasingly important over time as an alternative to unleaded gasoline.

We produce fuel grade ethanol by processing corn and milo utilizing what’s known as “dry-milling” technology. The grain is received by semitrailer truck, weighed and cleaned of rocks and debris before it is conveyed to one of two concrete storage silos. The grain is then transported to a hammer mill or grinder where it is ground into flour and conveyed into a slurry tank for processing. We add water, heat and enzymes to break the ground grain into a mash. The mash is heat sterilized and pumped into a tank where other enzymes are added to convert the starches into glucose sugars. Next, the mash is pumped into one of four fermenters, where yeast is added to begin a 48 to 50 hour batch fermentation process. A distillation process vaporizes the alcohol from the mash. The alcohol is further dried in a rectifier and molecular sieve. The resulting 200 proof-alcohol is then pumped to shift tanks and blended to achieve a mixture consisting of approximately 95% ethanol and 5% gasoline as it is pumped into denatured ethanol storage tanks.

Grain mash exiting the distillation process is pumped into one of several centrifuges. Water from the centrifuges, called thin stillage, is condensed into a thicker syrup called condensed solubles. The solids that exit the centrifuge are called distillers wet grains (“WDGS”). A portion of these distillers wet grains are sold in that form and a portion are subsequently dried and mixed with condensed solubles to produce distillers grains with solubles, which may be used as animal feed and are known as distillers dry grains (“DDGS”). See "Our Products and Their Markets," below. During fiscal year 2006, we produced 45.9 million gallons of fuel grade ethanol and 3.6 million and 385,197 tons of WDGS and DDGS, respectively.

We were organized as a Kansas limited liability company in 2001. We constructed our facility, located in western Kansas, during 2003 and began production of ethanol in January 2004. Our historic nameplate production was 30 million gallons of ethanol per year. During fiscal year 2005, we completed construction on an expansion of our facility to give us nameplate capacity of 40 million gallons of ethanol per year.

Recent Developments

In October 2006, we acquired a grain storage facility on an adjacent property. In addition to purchasing this grain storage facility, we are currently constructing two new grain storage bins and hammer mills on our property which will increase our grain storage capacity by 567% if all additional storage space is utilized. It is anticipated that construction of the new storage facilities will be completed by spring or summer of 2007. We believe the increase in storage capacity will allow us to more efficiently operate our ethanol plant. The risk of production interruption due to an inability to receive new shipments of grain is lessened. We will also benefit by having increased flexibility in when we make grain purchases as a result of being able to time purchases farther in advance of anticipated need for production.

In June 2006, we paid off our term loan with our lender, AgCountry Farm Credit Services, FLCA (“AgCountry”). We maintain a revolving line of credit with AgCountry. On October 1, 2006, pursuant to our lending agreement, the amount of credit available was reduced to $4 million and the interest rate decreased to LIBOR plus 2.5%, however we currently do not have an outstanding balance. The revolving line of credit is subject to the terms of our credit agreement with AgCountry dated July 2003, as amended (“Credit Agreement”), which includes a minimum working capital requirement and a defined leverage ratio. See “Item 7. Management’s Discussion and Analysis” for additional information related to our indebtedness.

In December 2005, we purchased 80 acres of land adjacent to our property, which included 95 acre feet of water rights. The well on this property was converted from agricultural use to industrial use and during fiscal 2006 we completed improvements on the land necessary for piping the water from the well to our ethanol plant. This water supplements the source that we have used historically for our ethanol production.

The ethanol industry underwent some demographic changes during the last fiscal year. In addition to dramatic growth in the number of operating and proposed ethanol plants which are locally owned and operated, the industry also began to experience a trend toward consolidation. A few large ethanol producers began expanding their businesses by constructing or acquiring additional ethanol plants in new markets, developing their own marketing and resale services and changing their organizational form to a corporate structure to allow their equity to be publicly traded on national securities exchanges. Some examples of these companies are VeraSun Energy Corporation, Aventine Renewable Energy Holdings, Inc. and US BioEnergy Corporation.

In keeping with this trend, potential buyers approached our management during fiscal 2006 in an effort to acquire our plant. While we entertained discussions with all interested groups, as of the date of this report we have not entered into a definitive agreement for any sale or other transaction. It is our expectation that this trend toward consolidation in the industry will continue in the foreseeable future as the industry matures.

Our Products and Their Markets

Ethanol. We produce ethanol to be used as a fuel component that serves as:

• An octane enhancer in fuels;

• An oxygenated fuel additive that can reduce carbon monoxide vehicle emissions; and

• A non-petroleum-based gasoline extender.

Ethanol in its primary form is mostly used for blending with unleaded gasoline and other fuel products. The implementation of the federal Clean Air Act has made ethanol fuels an important domestic renewable fuel additive. According to the American Coalition for Ethanol (“ACE”), approximately one-third of all gasoline sold in the U.S. is blended with ethanol. Most of the ethanol is blended as E10, a mixture of 10% ethanol and 90% petroleum gasoline. This fuel is covered by warranty for use in all makes and models of vehicles. Some ethanol is blended as E85, a mixture of 85% ethanol and 15% gasoline. This mixture is used in flexible fuel vehicles (“FFVs”). Used as a fuel oxygenate, ethanol provides a means to reduce carbon monoxide vehicle emissions.

The principal purchasers of ethanol are generally the refined and wholesale gasoline marketer or blender. The principal end markets for our ethanol are petroleum terminals on the east and west coasts of the United States. During the 2006 fiscal year, 89% of our net revenue was derived from the sale of ethanol, and we expect the sale of ethanol to comprise a substantial majority of our revenue in the future. The remainder of our revenue is derived from the sale of distillers grains, discussed in more detail below.

Distillers Grains. A principal co-product of the ethanol production process is distillers grains, which is a high-protein, high-energy animal feed supplement primarily marketed to the dairy and beef industry. By using the dry-milling ethanol production process with a dryer system that can produce two moisture levels, we are able to produce both WDGS and DDGS. WDGS are processed grain mash and condensed solubles that contain approximately 65% moisture. It has a shelf life slightly longer than three days and is sold to nearby markets. DDGS are mash that has been dried to 10% moisture. It has an almost indefinite shelf life and is sold and shipped via truck or railcar to many markets regardless of their vicinity to our ethanol plant. During the 2006 fiscal year, approximately 11% of our net revenue was derived from the sale of distillers grains, and we expect the sale of distillers grains to continue to comprise a minority of our revenue in the future when compared to our revenue from ethanol.

Corn and Milo Procurement. During the 2006 fiscal year, we used approximately 16.3 million bushels of corn and milo to produce ethanol. We obtained a majority of this grain from producers in western Kansas, where our plant is located. According to the Kansas Agricultural Statistic Service, approximately 90.4 million bushels of corn for grain were produced in the northwest and west central portions of Kansas in calendar 2005. We believe that grain producers in proximity to our plant will produce sufficient grain for our needs for the foreseeable future. In the event such producers are unable to deliver our requirements, we believe an adequate supply is available from producers in other states, such as Nebraska and Colorado.

Under the terms of our operating agreement, the holders of our Class A membership units are entitled to a freight allowance for grain sold to us or distillers grains acquired from us. During the 2006 fiscal year, our Board of Managers approved a freight allowance for grain delivered pursuant to this arrangement. The allowance during the fiscal year was insignificant.

We enter into hedging transactions in an effort to stabilize the price that we pay for such grain. Hedging involves the acquisition of option and futures contracts, designed as hedges of specific volumes of grain expected to be used in our production process. We also use derivative financial instruments to manage the exposure to price risk related to grain purchases. At September 30, 2006, we had open long and short positions in option contracts, which positions were recorded in our financial statements at fair value. As a result, we recorded $95,293 of unrealized losses in accumulated comprehensive losses at September 30, 2006 with respect to option and future contracts.

We anticipate that our increased storage capacity will assist us in reducing our risk from price fluctuations for grain in the future. By increasing our storage capacity, we have greater flexibility in determining when we purchase grain. To the extent we can purchase and store large amounts of grain in advance of our needs, it will reduce price volatility and the adverse impact of increases in grain prices.

The price and availability of corn and milo are subject to significant fluctuations depending upon a number of factors which affect grain commodity prices in general, including crop conditions, pestilence, weather, supply and demand, government programs and foreign purchases. Because the market price of ethanol is not related to grain prices, ethanol producers are generally not able to compensate for increases in the cost of grain through adjustments and prices charged for their ethanol. Therefore, any increase in the cost of grain or transportation expenses would adversely affect our business.

Drought and other environmental occurrences could adversely effect the production and availability of corn, milo and other grain products in the future. Because of its relative aridity, the western United States is more susceptible to drought than certain other areas of the country. The drought experienced in the western United States during 2002 was partially mitigated between 2003 and 2006, but there is no assurance that the conditions during 2002 will not repeat. In that event, we anticipate that our grain requirements could be satisfied from other parts of the country, although transportation costs would be significantly higher.

An increase in the number of ethanol plants in our geographic region may also adversely affect the availability of corn, milo and other grain products to us in the future. According to the Renewable Fuels Association (“RFA”), between January 2002 and December 2006, the number of ethanol plants currently producing fuel grade ethanol in the U.S. increased from 61 to 97 and an additional 33 ethanol plants are currently under construction. Some of these plants are located in Kansas, eastern Colorado and southwestern Nebraska and they may compete with us for procurement of local grain. On a national level, the emergence of new ethanol plants will increase competition with us for our grain requirements that we may be forced to satisfy from other parts of the country.

All of the corn and milo we purchase is tested and must meet high quality control standards to ensure the efficient operation and quality production of our plant. We use the United States Department of Agriculture's grade requirements for U.S. Number Two Corn and U.S. Number Two Grain Sorghum. From time to time, we also accept grain that does not meet the criteria for U.S. Number Two Corn or U.S. Number Two Grain Sorghum or is otherwise substandard. When we do, we discount the price or make other allowances to account for the lesser grade quality or condition at delivery.

Other Raw Materials. The other critical raw materials for the production of ethanol are water and natural gas. Water is mixed with the processed grain to begin the fermentation process. Natural gas is used to heat the resulting mixture in conjunction with the fermentation process.

An adequate supply of water is important to our ethanol business. We currently have water wells to the north and east of our plant site from which we pipe water to our facility. There are two additional wells located on our property which are not currently permitted for industrial use. We believe that we have sufficient water to operate our plant. However, should we require more water, we believe that we can obtain it from the existing wells on our property. See “Item 2. Description of Property.” We have received all necessary permits to obtain water and believe that we currently are operating in compliance with all regulations of the Kansas Department of Agriculture, Division of Water Resources.

In order to be assured of a steady source of natural gas, we entered into a Natural Gas Service Agreement with Midwest Energy, Inc. (“Midwest”) in September 2003 pursuant to which they deliver natural gas to our plant. We purchase the gas from another third party. This agreement supplements a previous agreement with Kinder Morgan Energy Partners and Kinder Morgan Interstate Gas Transmission LLC to deliver the gas to Midwest. In exchange for our agreement not to bypass its local gas distribution system, Midwest agreed to install and maintain a gas main directly to our property in Gove County, Kansas. We pay a monthly charge based on the amount of gas utilized each month. The rates are fixed through December 31, 2008, and are subject to change thereafter based on increases or decreases applicable to distribution services generally and subject to review by the Kansas Corporation Commission. Our contract with Midwest extends through December 31, 2013.

We also contract with Post Rock Gas, LLC ("PRG") to acquire the gas that is transported by Kinder Morgan and Midwest to our plant. Our agreement with PRG commenced in December 2003 and is terminable by either party on not less than 30 days' advance notice. The price we paid for gas during the 2006 fiscal year was determined by reference to a published "spot" price. We believe our agreements with PRG, Kinder Morgan and Midwest will provide an ample supply of natural gas for the foreseeable future.

Our agreement with PRG helps us manage our risk from natural gas price fluctuations. At the time we purchased some of our contracts for natural gas, the market was experiencing a great deal of price uncertainty. Due to this uncertainty, we purchased amounts of gas for all of the plant’s needs through calendar 2006 and implemented derivative instruments on a portion of our requirements to allow us to benefit in the event natural gas prices declined. Prices for natural gas decreased during the second half of fiscal 2006 as the market supply recovered from hurricane-related shortages during the first part of the fiscal year. We currently have contracts in place to supply approximately 18% of our natural gas needs beginning in calendar 2007.

We have entered into an agreement with U.S. Energy Service, Inc. under which U.S. Energy Service provides consulting services to us to help us manage our energy use and costs. The agreement is effective through August 31, 2007 and is renewable for additional one-year terms unless terminated by either party with 30 days advance notice.

We sell essentially all of our products to two marketing firms, which in turn sell to other purchasers. We have executed an exclusive marketing agreement to market the ethanol produced at our plant with Ethanol Products, LLC (“Ethanol Products”) of Wichita, Kansas. The agreement is effective for an initial term of five years beginning January 2004 and is automatically renewable for subsequent five-year terms unless terminated by either party prior to expiration. Ethanol Products has agreed to purchase all of the ethanol that is produced at our plant and is solely responsible for determining the price and terms at which the ethanol acquired from our plant is sold and to whom it will be sold. In exchange, we receive the gross sales price of the ethanol, less the costs of transportation and storage and an administrative fee of $0.01 per gallon sold. In the event that our relationship with Ethanol Products is interrupted for any reason, we believe that we would be able to locate another entity to market our ethanol. However, any interruption could temporarily disrupt the sale of our principal product and adversely affect our operating results.

We have also executed an exclusive agreement to market all of our distillers grains with United Bio Energy Ingredients, LLC (“UBE”), an affiliate of ICM, Inc. ICM was the general contractor for our ethanol plant. Under the terms of that agreement, we receive the gross selling price of all distillers grains sold by UBE, less applicable transportation costs and a fee of 2-2.5 % of the gross selling price depending on whether we sell DDGS or WDGS. The initial term of the agreement with UBE was for one year expiring September 30, 2006 and was automatically renewed for an additional one year term. The annual automatic renewal will continue unless the agreement is terminated by either party following 90 days advance written notice. As with the marketing arrangement with Ethanol Products, any interruption in our relationship with UBE could temporarily affect our business, although we believe that we could find another entity to market our grains.

Transportation and Delivery

The grain that we receive is delivered by trucks. Due to our proximity to Interstate 70, transportation to and from the plant is efficient. Distillers grains are transported exclusively by semitruck. UBE, as our exclusive purchaser of distillers grains, selects the carrier.

Our plant was designed with a rail spur and connection to the Union Pacific railway system, which facilitates transporting our ethanol to national markets. Our plant is also located adjacent to Interstate 70. We ship our ethanol by rail and by truck, determined with reference to a review and analysis of the current market conditions, transportation costs and applicable environmental regulations. The target for rail-transported ethanol includes the State of California, the southwest and eastern United States. Ethanol targeted for more proximate markets is transported by truck.

Legislation and Federal and State Supports or Subsidies

Legislation. The Energy Policy Act, which was enacted in 2005, will likely enhance the use of ethanol as a fuel additive for the foreseeable future. The Energy Policy Act established the first ever Renewable Fuel Standard (“RFS”) in federal law, requiring that at least 4 billion gallons of ethanol and biodiesel be used in 2006, increasing to at least 7.5 billion gallons in 2012. For reference purposes, approximately 4.3 billion (including 3.9 billion fuel grade) gallons of ethanol was produced during calendar 2005. Pursuant to this law, the United States Environmental Protection Agency (“EPA”) is directed to promulgate rules requiring refineries, blenders, distributors and importers to introduce or sell volumes of ethanol and biodiesel into commerce in accordance with the annual RFS. The following table describes minimum ethanol and biodiesel use for years 2006 through 2012 established by the Energy Policy Act:

	Ethanol Demand
Year	(in billions of gallons)
2006	4.0
2007	4.7
2008	5.4
2009	6.1
2010	6.8
2011	7.4
2012	7.5

For years 2013 and thereafter, the EPA is directed to establish a new RFS, based on the amount of ethanol expected to be sold in commerce in each of those years. The use of ethanol and biodiesel in 2013 shall not be less than the percentage of 7.5 billion gallons to the total volume of U.S. gasoline supply in 2012. While the precise impact of this law cannot yet be determined, we anticipate that it will maintain or enhance production of ethanol in the United States, since it sets minimum standards for use.

The American Jobs Creation Act of 2004 contained the Volumetric Ethanol Excise Tax Credit ("VEETC"). This law amended the Federal gasoline excise tax structure effective January 1, 2005. As amended, the law creates a new volumetric ethanol excise tax credit of $0.51 per gallon of ethanol blended at 10%. The credit provided by VEETC replaced an exemption which allowed ethanol blended fuel to be taxed at a lower rate than regular gasoline. The use of ethanol as a fuel additive is enhanced by the availability of a credit from the federal gasoline excise tax.

In addition to the legislation discussed above, ethanol sales have been favorably affected by other legislation, including the Clear Air Act Amendments of 1990, particularly the federal oxygenation program, which became effective November 1, 1992. The program requires the sale of oxygenated motor fuels during the fall and winter months in certain major metropolitan areas to reduce carbon monoxide pollution. Ethanol use also has increased due to a second Clean Air Act program, the Reformulated Gasoline Program. This program became effective January 1, 1995, and requires the sale of reformulated gasoline in certain major urban areas to reduce pollutants, including those that contribute to ground level ozone, better known as smog.

The use of ethanol as an oxygenate to blend with fuel to comply with federal mandates also has been aided by federal tax policy. The Energy Tax Act of 1978 exempted ethanol blended gasoline from the federal gas tax as a means of stimulating the development of a domestic ethanol industry and mitigating the United States' dependence on foreign oil. As amended, the federal gasoline tax credit currently allows the market price of ethanol to compete with the price of domestic gasoline. Although the federal tax credit is not directly available to us, it allows us to sell our ethanol at prices that are competitive with other less expensive additives and gasoline.

Fuel grade ethanol prices traditionally have varied directly with the wholesale price of gasoline. However, in some states, fuel grade ethanol typically sells for a higher price per gallon than wholesale gasoline because of the aforementioned excise tax incentives. Historically, fuel grade ethanol prices also have reflected a premium due to the oxygenate and octane enhancing properties of this motor fuel additive.

Federal Ethanol Supports. During fiscal 2006, we participated in the United States Department of Agriculture Commodity Credit Corporation Bioenergy Program and earned $224,630 from the program. The purpose of the program is to encourage increased purchases of eligible commodities for the purpose of expanding the production of commercial fuel grade ethanol and commercial biodiesel and support new production capacity for such bioenergy. The program was terminated June 30, 2006 and therefore we do not expect to receive amounts under this program during fiscal 2007.

A federal tax credit for small ethanol producers is generally available to our company and its members. Eligibility to receive the credit is based upon plant capacity and the Energy Policy Act increased the capacity limit from 30 million to 60 million gallons of production. Ethanol producers that qualify for the credit can deduct from their federal income tax $0.10 per gallon on the first 15 million gallons produced annually. The small producer credit is scheduled to expire by its terms on December 31, 2008. Due to the pass-through nature of our partnership taxation structure, we expect this credit will be passed through to our members. However, the amount of any such credit received by our members must also be included in his or her gross income, which could result in taxation on the amount of the credit passed through to the member. Also, the use of the credit by our members may be limited, so each member should consult his or her tax advisor. This tax credit may foster additional growth in ethanol plants of a larger size and increase competition in this particular plant size category.

State Ethanol Supports. The State of Kansas provides an incentive production payment to ethanol producers. The production incentive available to Kansas ethanol producers that commence production after July 1, 2001 and sell at least 5 million gallons consists of a direct payment of $0.075 per gallon for up to 15 million gallons per year. Accordingly, the maximum amount a Kansas ethanol producer can currently receive in a year is $1,125,000. These incentive payments are available for the first seven years of production. The available statewide funding for these incentive payments was $1.5 million per year for 2002-2004 and will increase to $3.5 million per year for 2005-2011 plus any excess balance carried over from the prior year's current production account. Any shortfall in the available funds will result in a pro rata decrease in the incentives paid to the individual ethanol producers. During the 2006 fiscal year, we were entitled to the maximum amount available to producers. We received payments of $902,936, and have accrued an additional $222,064 which we expect to receive subsequent to the end of the calendar year.

We are unable to predict what effect, if any, expiration or termination of federal and state subsidies will have on the market or price for our ethanol. However, either event may adversely affect our business. See "Item 6. Management's Discussion and Analysis or Plan of Operation," for further information relating to supports and subsidies.

Environmental Matters

The construction and expansion of our plant required various state and local permits to comply with existing governmental regulations designed to protect the environment and worker safety. While we are also subject to regulations on emissions by the EPA, current EPA rules did not require us to obtain any permits or approvals in connection with the construction and operation of our business. Additional expenditures which may be required to achieve or maintain compliance with future laws and more stringent standards for environmental matters may also limit our operating flexibility.

Our ethanol production requires us to emit a significant amount of carbon dioxide into the air. Current Kansas law regulating emissions does not restrict or prevent us from emitting carbon dioxide gas into the air, but this could change in the future. However, the EPA has promulgated National Emissions Standards for Hazardous Air Pollutants (“NESHAP”), under the Clean Air Act and it could apply to our facility if the emissions of hazardous air pollutants exceed certain thresholds. If our facility is authorized to emit hazardous air pollutants above the threshold level, then we are required to comply with NESHAP for our manufacturing process and would be required to come into compliance with another NESHAP standard applicable to boilers and process heaters by September 13, 2007. We could also be subject to environmental or nuisance claims from adjacent property owners or residents in the area based on foul smells or other air or water discharges from the plant.

We obtained what we believe are all the necessary air and water permits to operate our plant before we commenced operations, including a permit to discharge wastewater from our plant. Under normal conditions, our plant utilizes a closed system and will not discharge process wastewater, but we obtained a permit to discharge wastewater in case of emergency failure of our wastewater treatment equipment. We also obtained a permit to discharge water used in our cooling tower and boiler.

In addition to the foregoing regulations affecting air and water quality, we are subject to regulation for our fuel storage tanks. If we are found to have violated federal, state or local environmental regulations in the future, we could incur liability for clean-up costs, damage claims from third parties and civil or criminal penalties that could adversely affect our business.

Our Competitive Strengths

Plant expansion and improvements. We expanded the nameplate capacity of our ethanol plant in fiscal 2005 to 40 million gallons per year. The expansion included, among other things, a 750,000 gallon beer well, expansion of our existing cooling towers by one cell, a new cooling pump, a new style burner and a new centrifuge. The expansion was built on our existing plant site by ICM, Inc., the contractor for our original plant, and did not require the acquisition of any additional property. Our expansion was placed into service during the second quarter of fiscal 2005. We believe our increase in production capacity positions us favorably in the marketplace. According to the ACE, our plant is currently the second-largest producer in Kansas and we may benefit over smaller producers from an increase in name recognition or purchasing power due to our size.

Plant technology and efficiency. At September 30, 2006, our plant was producing ethanol at or above the nameplate capacity, primarily due to capital improvements we made in addition to the expansion. We purchased and installed an additional boiler to provide additional steam to our plant and upgraded our thermal oxidizer which helps maintain more consistent temperatures during the manufacturing process. We believe we will continue to compete as a low-cost producer of ethanol in the future due to the improved efficiency from our equipment upgrades.

Proximity to grain. The proximity of our plant to producers of the grain we need to make ethanol favors us over some of our competitors. Local producers generally produce more than enough grain to meet our requirements, and the close proximity for delivery can result in competitively favorable prices for us. Additionally, many local grain producers are members of our company who supply us at competitive prices.

Reduction of debt. In June 2006, we paid off the outstanding balance on our term loan with AgCountry. We maintain a revolving line of credit in the amount of $4 million with AgCountry at an interest rate of LIBOR plus 2.5%, however we currently do not have an outstanding balance. The reduction of our debt positions us favorably over other competitors who have long-term debt. As a result eliminating payments on long-term debt, we may be less sensitive to fluctuations in revenue as a result of changes in the price of ethanol or the costs of our raw materials as compared to other ethanol plants that are required to make payments under long-term debt contracts. Additionally, our improved cash position allows us to have more flexibility in determining how to use working capital.

We are in direct competition with numerous other ethanol producers, many of which have greater resources than we do. According to the RFA, eight producers in the State of Kansas produce approximately 210 million gallons of fuel grade ethanol annually and additional ethanol production facilities are currently under construction. Nationally, fuel grade ethanol plants produced over 3.9 billion gallons of ethanol in 2005, a 15% increase from 2004 and 121% increase since 2001. We also expect that additional ethanol producers will enter the market if the demand for ethanol continues to increase. Our ethanol plant competes with other ethanol producers on the basis of price and, to a lesser extent, delivery service. We believe we can compete favorably with other ethanol producers due to our proximity to ample corn and milo supplies at generally favorable prices.

The largest ethanol producers include Abengoa Bioenergy Corp., Archer Daniels Midland Company, Aventine Renewable Energy, LLC, Cargill, Inc., Hawkeye Renewables, LLC, New Energy Corporation and VeraSun Energy Corporation, all of which are capable of producing more ethanol than we produce. In addition, there are many regional, farmer-owned entities recently formed, or in the process of formation, of a similar size and with similar resources to ours. Most ethanol plants also produce distillers grains.

In addition, new plants are under construction and plans to expand existing plants have been announced, which would increase the ethanol production capacity of our competitors. We are unable to determine the number and production capacity of plants that ultimately may be constructed, the timing of such construction or the effect of resulting production upon the demand or price for our ethanol.

We may also compete with international ethanol producers from countries such as Brazil, who may have lower production costs and comparable transportation costs to coastal markets and countries like Costa Rica and El Salvador and others subject to favorable tariff treatment by the U.S. under the Caribbean Basin Initiative.

We also compete with non-ethanol oxygenates which may cost less to produce than ethanol. Alternative fuels, gasoline oxygenates and ethanol production methods are continually under development by ethanol and oil companies with far greater resources than we have. Development of new products and methods of ethanol production by larger and financially stronger competitors could provide them with significant competitive advantages over us and thus could harm our business. These companies, some of which are publicly traded on national securities exchanges, generally have access to larger capital and financing markets and thus may be able to obtain financing easier and at more favorable terms than us.

Research and Development

During the 2006 fiscal year, we participated in research and development programs sponsored by our suppliers. This research was focused primarily on energy reduction and other issues related to plant operation and production methods to develop more efficient methods of producing ethanol. We did not make any material expenditures on research and development during that time.

As of the date of filing this report, we have 34 full-time employees. These include a General Manager, a plant manager who oversees plant operations and production, a commodities manager to oversee grain acquisition and risk management, a safety director, a lab manager, a maintenance manager, a controller, an office manager and an administrative assistant. The remainder of our employees includes administrative, production and maintenance support personnel. None of our employees are the subject of collective bargaining by labor unions, and we believe that we enjoy excellent relations with our employees.

From time to time, we also retain the services of outside consultants to supplement the services provided by our employees. These include engineering, construction, legal, accounting and financial advisors. We believe that we can obtain the services of all personnel necessary to operate our business.

Item 1A. Risk Factors

You should carefully read and consider the risks and uncertainties below and the other information contained in this report. The risks and uncertainties below are not the only risks we may face. The following risks, together with additional risks and uncertainties not currently known to us or that we currently deem immaterial could impair our financial condition and results of operation.

Risks Related to Our Business

We are a relatively new company with a limited operating history in an emerging growth industry. We commenced production of ethanol at our plant in January 2004. Accordingly, we have a limited operating history from which you can evaluate our business and prospects. Our operating results have fluctuated significantly in the past and could fluctuate significantly in the future as a result of a variety of factors, including those discussed throughout this report. Many of these factors are outside our control. As a result of these factors, our operating results may not be indicative of future operating results and you should not rely on them as indications of our future performance. In addition, our prospects must be considered in light of the risks and uncertainties encountered by an early-stage company and in rapidly growing industries, such as the ethanol industry, where supply and demand may change substantially in a short amount of time.

Our business is not diversified. Our success depends largely upon our ability to profitably operate our ethanol plant. We do not have any other lines of business or other sources of revenue if we are unable to operate our ethanol plant and manufacture ethanol and distillers grains. If economic or political factors adversely affect the market for ethanol, the company has no other line of business to rely on if the ethanol business declines. Our business would also be significantly harmed if our ethanol plant could not operate at full capacity for any extended period of time.

Our revenues will be greatly affected by the price at which we can sell our ethanol and distillers grains. The prices of ethanol and distillers grains can be volatile as a result of a number of factors. These factors include the overall supply and demand, the price of gasoline, level of government support, and the availability and price of competing products. For instance, the price of ethanol tends to increase as the price of gasoline increases, and the price of ethanol tends to decrease as the price of gasoline decreases. Any lowering of gasoline prices will likely also lead to lower prices for ethanol, which may decrease our ethanol sales and reduce revenues.

Our financial performance is significantly dependent on corn and natural gas prices. Our results of operations and financial condition are significantly affected by the cost and supply of corn and natural gas. If our region becomes saturated by ethanol plants, the corn for ethanol could consume a significant portion of the total corn production in our region, which would likely drive up local corn prices. The amount of corn we used in our operations increased 17% from 2005 to 2006 as a result of our plant expansion. If more corn-based ethanol plants are constructed or existing plants expand their capacity, the increase in demand for local corn and natural gas may drive up the prices of those commodities. Generally, we cannot pass on increases in input prices to our customers. Changes in the price and supply of corn and natural gas are subject to and determined by market forces over which we have no control.

Corn, as with most other crops, is affected by weather, disease and other environmental conditions. The price of corn is also influenced by general economic, market and government factors. These factors include weather conditions, farmer planting decisions, domestic and foreign government farm programs and policies, global demand and supply and quality. Changes in the price of corn can significantly affect our business. While the average price of corn decreased 3% in fiscal 2006 when compared to fiscal 2005, the price of corn reached a ten-year high around the end of our fiscal year. We expect corn prices to remain high into fiscal 2007. If a period of high corn prices is sustained for some time, such pricing may reduce our ability to generate revenues because of the higher cost of operating and may make ethanol uneconomical to use in fuel markets. We cannot offer any assurance that we will be able to offset any increase in the price of corn by increasing the price of our products. If we cannot offset increases in the price of corn, our financial performance may be materially and adversely affected.

The price of natural gas is also affected by market and environmental conditions and other factors beyond our control. The prices for and availability of natural gas are subject to volatile market conditions, including supply shortages and infrastructure incapacities. Seasonal changes tend to affect the price of natural gas and increases during colder months tend to increase our costs of production. Significant disruptions in the supply of natural gas could impair our ability to manufacture ethanol for our customers. Furthermore, increases in natural gas prices or changes in our natural gas costs relative to natural gas costs paid by competitors may adversely affect our results of operations and financial condition.

The spread between ethanol and corn prices can vary significantly. Corn costs significantly impact our cost of goods sold. Our gross margins are principally dependent upon the spread between ethanol and corn prices. Subsequent to fiscal year end, the spread between ethanol and corn prices has been small, primarily as a result of high corn prices and decreasing ethanol prices. However, this spread fluctuated significantly in 2006 and may fluctuate significantly in the future. Any reduction in the spread between ethanol and corn prices, whether as a result of an increase in corn prices or a reduction in ethanol prices, would adversely affect our results of operations and financial condition.

The price of ethanol may decrease as new ethanol plants become operational. We do not expect higher prices for ethanol during 2006 to be sustainable as supply from new and existing ethanol plants increases to meet increased demand. Increased production of ethanol may lead to lower prices. The increased production of ethanol could have other adverse effects. For example, the increased production could lead to increased supplies of co-products from the production of ethanol, such as distillers grains. Those increased supplies could outpace demand, which would lead to lower prices for those by-products. Also, the increased production of ethanol could result in increased demand for corn. This could result in higher prices for corn and corn production creating lower profits. There can be no assurance as to the price of ethanol or distillers grains in the future. Any downward changes in the price of ethanol and/or distillers grains may result in less revenue which would decrease our profitability.

We sell all of the ethanol we produce to Ethanol Products under our ethanol marketing agreement. Ethanol Products is the sole buyer of all of our ethanol, and we rely heavily on its marketing efforts to successfully sell our product. Because Ethanol Products sells ethanol for a number of other producers, we have limited control over its sales efforts. Our financial performance is dependent upon the financial health of Ethanol Products, as a significant portion of our accounts receivable are attributable to Ethanol Products. If Ethanol Products breaches the ethanol marketing agreement or is not in the financial position to purchase and market all of the ethanol we produce, we could experience a material loss and we may not have any readily available means to sell our ethanol, and our financial performance will be adversely and materially affected. If our agreement with Ethanol Products terminates, we may seek other arrangements to sell our ethanol, including selling our own product, but we give no assurance that our sales efforts would achieve results comparable to those achieved by Ethanol Products.

We sell all of the distillers grains we produce to UBE under our distillers grains marketing agreement. UBE is the sole buyer of all of our distillers grains that we sell locally, and we rely heavily on its marketing efforts to successfully sell our product. Because UBE sells distillers grains for a number of other producers, we have limited control over its sales efforts. Our financial performance is dependent in part upon the financial health of UBE, as a significant portion of our accounts receivable are attributable to UBE. If UBE breaches the distillers grains marketing agreement or is not in the financial position to purchase and market all of the distillers grains we produce, we could experience a material loss and we may not have any readily available means to sell our distillers grains, and our financial performance will be adversely and materially affected. If our agreement with UBE terminates, we may seek other arrangements to sell our distillers grains, including selling our own product, but there is no assurance that our sales efforts would achieve results comparable to those achieved by UBE.

We engage in hedging transactions that may be costly and ineffective. We are exposed to market risk from changes in commodity prices. Exposure to commodity price risk results from our dependence on corn and natural gas in the ethanol production process. We seek to minimize the risks from fluctuations in the prices of corn and natural gas through the use of hedging instruments. The effectiveness of our hedging strategies is dependent upon the cost of corn and natural gas and our ability to sell sufficient products to use all of the corn and natural gas for which we have futures contracts. There is no assurance that our hedging activities will successfully reduce the risk caused by price fluctuation which may leave us vulnerable to high corn and natural prices. Alternatively, we may choose not to engage in hedging transactions in the future. As a result, our results of operations and financial conditions may also be adversely affected during periods in which corn and/or natural gas prices increase.

Hedging activities themselves can result in costs because price movements in corn and natural gas contracts are highly volatile and are influenced by many factors that are beyond our control. There are several variables that could affect the extent to which our derivative instruments are impacted by price fluctuations in the cost of corn or natural gas. However, it is likely that commodity cash prices will have the greatest impact on the derivatives instruments with delivery dates nearest the current cash price. We may incur such costs and they may be significant.

Advances in ethanol production technology could require us to incur costs to update our plant or could otherwise hinder our ability to compete or operate profitably. Advances and changes in the technology of ethanol production are expected to occur. Such advances and changes may make the ethanol production technology installed in our plant less desirable or obsolete. These advances could also allow our competitors to produce ethanol at a lower cost than us. If we are unable to adopt or incorporate technological advances, our ethanol production methods and processes could be less efficient than our competitors, which could cause our plant to become uncompetitive or completely obsolete. If our competitors develop, obtain or license technology that is superior to ours or that makes our technology obsolete, we may be required to incur significant costs to enhance or acquire new technology so that our ethanol production remains competitive. Alternatively, we may be required to seek third-party licenses, which could also result in significant expenditures. We cannot assure you that third-party licenses will be available or, once obtained, will continue to be available on commercially reasonable terms, if at all. These costs could negatively impact our financial performance by increasing our operating costs and reducing our net income.

Risks Related to Ethanol Industry

New plants or decreases in the demand for ethanol may result in excess production capacity. The supply of domestically produced ethanol is at an all-time high. The RFA estimates that ethanol production in calendar 2005 reached a record 4.3 billion gallons and that this amount will be surpassed in calendar 2006. Production of fuel grade ethanol has increased 121% since 2001. There are at least 97 production facilities currently operating in the United States with more under construction or planned for construction in the foreseeable future. Excluding our facility, Kansas currently has at least 10 ethanol plants operating or under currently under construction and approximately 10 more in various stages of planning. Excess capacity in the ethanol industry would have an adverse impact on our results of operations, cash flows and general financial condition. Excess capacity may also result or intensify from increases in production capacity coupled with insufficient demand. If the demand for ethanol does not grow at the same pace as increases in supply, we would expect the price for ethanol to decline. If excess capacity in the ethanol industry occurs, the market price of ethanol may decline to a level that is inadequate to generate sufficient cash flow to cover our costs.

We operate in a competitive industry and compete with larger, better financed entities. There is significant competition among ethanol producers with numerous producer and privately owned ethanol plants planned and operating throughout the Midwest and elsewhere in the United States. The number of ethanol plants being developed and constructed in the United States continues to increase at a rapid pace. The recent passage of the Energy Policy Act of 2005 included a renewable fuels mandate that we expect will further increase the number of domestic ethanol production facilities. The largest ethanol producers include Abengoa Bioenergy Corp., Archer Daniels Midland Company, Aventine Renewable Energy, LLC, Cargill, Inc., Hawkeye Renewables, LLC, New Energy Corp. and VeraSun Energy Corporation, each of which are capable of producing more ethanol than we expect to produce. Larger, better financed ethanol producers may be able to expand their production capacity and adapt to new technologies easier than us. Archer Daniels Midland is currently the largest ethanol producer in the U.S. and controls a significant portion of the ethanol market. If the demand for ethanol does not grow at the same pace as increases in supply, we expect that lower prices for ethanol will result which may adversely affect our ability to generate profits and our financial condition.

We compete with other gasoline additives. Our ethanol plant also competes with producers of other gasoline additives made from raw materials other than corn having similar octane and oxygenate values as ethanol, including but not limited to methyl tertiary butyl ether (“MTBE”). Alternative fuels, gasoline oxygenates and alternative ethanol production methods are also continually under development. The major oil companies have significantly greater resources than we have to market MTBE, to develop alternative products, and to influence legislation and public perception of MTBE and ethanol. These companies also have significant resources to begin production of ethanol should they choose to do so.

Competition from the advancement of alternative fuels may lessen the demand for ethanol. Alternative fuels, gasoline oxygenates and ethanol production methods are continually under development. A number of automotive, industrial and power generation manufacturers are developing alternative clean power systems using fuel cells or clean burning gaseous fuels. Like ethanol, the emerging fuel cell industry offers a technological option to address increasing worldwide energy costs, the long-term availability of petroleum reserves and environmental concerns. Fuel cells have emerged as a potential alternative to certain existing power sources because of their higher efficiency, reduced noise and lower emissions. Fuel cell industry participants are currently targeting the transportation, stationary power and portable power markets in order to decrease fuel costs, lessen dependence on crude oil and reduce harmful emissions. If the fuel cell and hydrogen industries continue to expand and gain broad acceptance, and hydrogen becomes readily available to consumers for motor vehicle use, we may not be able to compete effectively. This additional competition could reduce the demand for ethanol, resulting in lower ethanol prices that might adversely affect our results of operations and financial condition.

Cellulose-based ethanol may compete with corn-based ethanol in the future . Especially in the Midwest, most ethanol is currently produced from corn and other raw grains, such as milo or sorghum. The current trend in ethanol production research is to develop an efficient method of producing ethanol from cellulose-based biomass, such as agricultural waste, forest residue, municipal solid waste, and energy crops. This trend is driven by the fact that cellulose-based biomass is generally cheaper than corn, and producing ethanol from cellulose-based biomass would create opportunities to produce ethanol in areas which are unable to grow corn. The Energy Policy Act of 2005 included incentives designed to boost production of cellulose-based ethanol. Although current cellulose technology is not sufficiently efficient to be competitive, new conversion technologies may be developed in the future and one of our competitors recently announced it was beginning construction on a facility slated to be cellulose-based. If an efficient method of producing ethanol from cellulose-based biomass is developed, we may not be able to compete effectively. We do not believe it will be cost-effective to convert our ethanol plant into a plant which will use cellulose-based biomass to produce ethanol. If we are unable to produce ethanol as cost-effectively as cellulose-based producers, our ability to generate revenue and financial condition will be negatively impacted.

Ethanol imported from Caribbean basin countries and Brazil may be a less expensive alternative to our ethanol. Ethanol produced or processed in certain countries in Central America and the Caribbean region is eligible for tariff reduction or elimination upon importation to the United States under a program known as the Caribbean Basin Initiative. Large ethanol producers, such as Cargill, have expressed interest in building dehydration plants in participating Caribbean Basin countries, such as El Salvador, which would convert ethanol into fuel-grade ethanol for shipment to the United States. Ethanol imported from Caribbean Basin countries may be a less expensive alternative to domestically produced ethanol. Competition from ethanol imported from Caribbean Basin countries may affect our ability to sell our ethanol profitably, adversely affect our results of operations and financial condition.

Brazil is currently the world’s largest exporter of ethanol. In Brazil, ethanol is produced primarily from sugarcane, which is also used to produce food-grade sugar. Ethanol imported from Brazil may be a less expensive alternative to domestically produced ethanol, which is primarily made from corn. Tariffs presently protecting U.S. ethanol producers may be reduced or eliminated. Competition from ethanol imported from Brazil may affect our ability to sell our ethanol profitably and our financial condition.

Consumer beliefs may affect the demand for ethanol. We believe that certain consumers perceive the use of ethanol to have a negative impact on gasoline prices at the pump. Some consumers also believe that ethanol adds to air pollution and harms car and truck engines. Still other consumers believe that the process of producing ethanol actually uses more fossil energy, such as oil and natural gas, than the amount of ethanol that is produced. These consumer beliefs could potentially be widespread. If consumers choose not to buy ethanol, it would affect the demand for the ethanol we produce which could lower demand for our product and negatively affect our profitability and financial condition.

Risks Related to Regulation and Governmental Action

A change in government policies favorable to ethanol may cause demand for ethanol to decline. Growth and demand for ethanol may be driven primarily by federal and state government policies, such as state laws banning MTBE and the national renewable fuels standard. The continuation of these policies is uncertain, which means that demand for ethanol may decline if these policies change or are discontinued. A decline in the demand for ethanol is likely to cause lower ethanol prices which in turn will negatively affect our results of operations, financial condition and cash flows.

Government incentives for ethanol production may be eliminated in the future. The ethanol industry and our business are assisted by various federal ethanol tax incentives, including those contained in the Energy Policy Act of 2005. The provision of the Energy Policy Act of 2005 likely to have the greatest impact on the ethanol industry is the creation of a 7.5 billion gallon Renewable Fuels Standard (“RFS”). The RFS mandates begin with 4 billion gallons in 2006, and increase to 7.5 billion gallons by 2012. Additionally, the State of Kansas may pass state legislation setting its own renewable fuel standard in the foreseeable future. The RFS helps support a market for ethanol that might disappear without this incentive. The elimination or reduction of tax incentives to the ethanol industry could reduce the market for ethanol, which could reduce prices and our revenues by making it more costly or difficult for us to produce and sell ethanol. If the federal tax incentives are eliminated or sharply curtailed, we believe that a decreased demand for ethanol will result, which could negatively affect our profitability and financial condition.

Changes in environmental regulations or violations of the regulations could reduce our profitability. We are subject to extensive air, water and other environmental laws and regulations. In addition some of these laws require our plant to operate under a number of environmental permits. These laws, regulations and permits can often require expensive pollution control equipment or operation changes to limit actual or potential impacts to the environment. A violation of these laws and regulations or permit conditions can result in substantial fines, damages, criminal sanctions, permit revocations and/or plant shutdowns. We do not assure you that we have been, are or will be at all times in complete compliance with these laws, regulations or permits or that we have had or have all permits required to operate our business. We do not assure you that we will not be subject to legal actions brought by environmental advocacy groups and other parties for actual or alleged violations of environmental laws or our permits. Additionally, any changes in environmental laws and regulations, both at the federal and state level, could require us to invest or spend considerable resources in order to comply with future environmental regulations. The expense of compliance could be significant enough to reduce our profitability and negatively affect our financial condition.

Item 2. Properties.

We currently have an interest in 411 acres of real property in the state of Kansas, most of which is currently undeveloped. In October 2003, we completed an industrial revenue bond financing with Gove County that provides us with property tax savings on our plant site. As part of the financing, title to our plant site and all of our facilities have been transferred to Gove County as security for the repayment of the bonds. We are leasing back the site for an amount that is equal to the amount of the interest that is payable on the bonds. The term of the lease is 30 years or as long as the bonds are outstanding. Also under the terms of the lease, we can repurchase the site for a nominal amount upon repayment of the bonds.

We initially acquired a 53.5 acre parcel of partially developed land in Gove County for the purpose of constructing our plant. Our plant was developed on approximately 20 acres of the 53.5 acre parcel. In February 2002, we acquired a 137 acre parcel approximately one and a half miles east of the parcel where our plant is located. In December 2004, we acquired a 141 acre parcel of land immediately to the east of our plant site. Property measuring approximately 80 acres separated the land surrounding our plant site from the 137 acre parcel we had previously acquired. In December 2005, we acquired the 80 acre parcel for $96,000 and now own a contiguous parcel of property in Gove County.

We acquired water appropriation rights for two wells when we purchased the 137 acre parcel and one well when we purchased the 80 acre parcel. We applied to the Kansas Department of Agriculture, Division of Water Resources to change the type of water use from agricultural irrigation use to industrial use for the well on the 80 acre parcel and constructed a system for delivery of water from that well to our plant. We anticipate the same undertaking if we decide to utilize the wells on the 137 acre parcel, which would be likely to occur in the event we further expand our plant capacity. We have agreed to lease the 137 acre property back to one of the sellers for a period of five years with the amount of rent based on the portion of the land that is dry land acres and the portion that is irrigated acres, with the seller expressly recognizing that the water available for irrigation may be dramatically reduced, and possibly eliminated, if we use the water from this property in our ethanol plant operations.

In addition to our ethanol plant, we also own an administrative building adjacent to the plant. The administrative building consists of approximately 3,000 finished square feet (including a partially finished basement) and provides offices for our administrative staff. We believe our existing facilities are sufficient for the foreseeable future.

Subsequent to fiscal year end, we acquired a grain elevator located on a neighboring parcel for $1,200,000. The underlying land is owned by Union Pacific Railroad and we assumed the prior owner’s lease with the railroad. To further increase our storage capacity for grain, we are constructing additional storage facilities near our ethanol plant. We anticipate that construction will be finished in spring or summer of 2007.

Item 3. Legal Proceedings.

From time to time we may be subject to litigation that is incidental to our business. However, we are not currently a party to any pending legal proceedings that are not routine litigation incidental to our business.

Item 4. Submission of Matters to a Vote of Security Holders.

We did not submit any matter to a vote of our security holders through the solicitation of proxies or otherwise during the fourth quarter of the 2006 fiscal year. Our next annual meeting of members is scheduled for March 2007.

Item 5. Market for Our Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Market Information

There is no public trading market for our capital units. Article 4 of our Third Amended and Restated Operating Agreement (“Operating Agreement”) provides a number of restrictions on the transfer of capital units by our members. In essence, any proposed transfer must be approved by our Board of Managers.

In addition to the restrictions on transfer contained in our operating agreement, we are also subject to limitations imposed by the United States Internal Revenue Code (“Code”). In order to maintain our status as a partnership for income tax purposes, we must not be treated as a “publicly traded partnership” under relevant provisions of the Code. Generally, the Code provides that a publicly traded partnership will be taxed as a corporation. In order to comply with these rules, we do not intend to list any of our capital units on a stock exchange or apply for quotations in any electronic trading system.

In order to comply with the IRS rules but in an effort to provide some liquidity for our members, we designed a “matching service” whereby interested members and prospective purchasers of our units could communicate their interest on an electronic bulletin board maintained by us. Potential buyers and sellers would be matched by the service and would be afforded the opportunity to negotiate an acceptable sales agreement. Any such matching service will require the approval of the Kansas Securities Commission. Although we applied for the matching system approval some time ago, we have not pursued the matter further at this time.

While we currently do not maintain a matching service, holders of our capital units who locate a purchaser or receive an offer to purchase can sell the capital units to the purchaser subject to the approval of the Board of Managers. Our Operating Agreement also allows transfer of the capital units by:

• Last will or the laws of descent;

• Transfers between members of a family; and

• “Block” transfers.

A block transfer is a transfer by a member and any related person, as defined in the Code, of membership interests representing in the aggregate more than 2% of the total interest in our capital or profits in one or more transactions during any 30 calendar day period.

Capital Unit Holders

As of December 29, 2006, there were 2,286 Class A capital units, 1,744 Class B capital units and 50 Class C capital units outstanding, owned by a total of approximately 628 members.

Distributions to Members

Under the terms of our Operating Agreement, we are required to make an annual distribution to our members of a minimum of 20% of the net cash we earn from operations, as defined in the Operating Agreement, as long as net cash from operations exceeds $500,000 for that year. However, we are prohibited from making any distributions if it would violate or cause us to default under any of the terms of any of our credit facilities or debt instruments. Until the credit facility with AgCountry was paid-in-full in June 2006, we sought and received AgCountry’s approval of distributions paid to our members.

During the 2006 fiscal year, we made cash distributions to our members approximately once each quarter for a total of $28,560,000. During the 2005 fiscal year, we distributed a total of $8,608,800 in cash to our members. Future distributions may be subject to a restriction that materially limits our ability to pay such distributions, such as our credit facilities if we have an outstanding balance with our lender. To the extent we are not subject to any restriction that materially limits our ability to pay distributions, however, future distributions in excess of the amount required under our Operating Agreement will be made in the discretion of our Board of Managers.

Securities Authorized for Issuance under Equity Compensation Plans

We currently have no equity compensation plan.

Item 6. Selected Financial Data.

We completed construction of our plant and started operations in January 2004. We changed our fiscal year end from December 31 to September 30 beginning in 2004. The following selected financial data sets forth our summary historical financial data as of and for the years ended September 30, 2006 and 2005, the period January 1, 2004 through September 30, 2004, and for the year ended December 31, 2003. This information was derived from our audited financial statements and notes thereto for each year. Our selected historical financial data is qualified in its entirety by, and should be read in conjunction with, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the financial statements and the notes thereto included elsewhere in this report. For additional information relating to our operations, see “Item 1. Business” and “Item 2. Properties.”

	Year Ended September 30,				Nine Months Ended September 30,		Year Ended December 31,
	2006		2005		2004⁽¹⁾		2003⁽²⁾
Income Statement data:
Net sales	$	108,794,979	$	62,347,178	$	39,862,629	$	--
Net Income (loss)		45,895,967		13,009,369		7,393,563		(532,031	)
Earnings (loss) per capital unit		11,249		3,189		1,812		(433	)
Cash distributions declared per capital unit		7,000		2,110		--		--



		September 30,						December 31,
		2006		2005		2004		2003
Balance Sheet data:
Total assets	$	82,304,265	$	70,731,153	$	73,879,570	$	53,920,581
Total debt (current and long term)⁽³⁾		34,458,846		40,158,220		48,298,319		35,109,968
Members’ equity		47,845,419		30,572,933		25,581,251		18,810,613
Book value per capital unit⁽⁴⁾		11,727		7,493		6,270		4,610

(1) - The information for 2004 represents operations for the nine months ending September 30, 2004 resulting from a change in fiscal year end. We began producing ethanol in January 2004.

(2) - Our company was in start-up phase during 2003 and therefore had no operating revenue.

(3) - Includes a $32,000,000 lease obligation related to our sale and leaseback transaction with Gove County. We sold our property to Gove County in exchange for industrial revenue bonds and the amount of our lease obligation is offset by the amount of interest we receive on the bonds.

(4) - Members’ equity divided by membership units outstanding as of the end of the period.

Item 7. Management’s Discussion and Analysis.

Except for the historical information, the following discussion contains forward-looking statements that are subject to risks and uncertainties. We caution you not to put undue reliance on any forward-looking statements, which speak only as of the date of this report. Our actual results or actions may differ materially from these forward-looking statements for many reasons, including the risks described in “Item 1A - Risk Factors” and elsewhere in this annual report. Our discussion and analysis of our financial condition and results of operations should be read in conjunction with the financial statements and related notes and with the understanding that our actual future results may be materially different from what we currently expect.

The following discussion analyzes our operating results for the three fiscal years ended September 30, 2006 and our financial condition at September 30, 2004, 2005 and 2006, with a particular emphasis on the year ended September 30, 2006. Due to the change of our fiscal year for SEC reporting purposes in 2004, the discussion of our results of operations for fiscal 2004 compares the nine-month period ended September 30, 2004 to the twelve-month period ended September 30, 2005. For that reason, among others, changes from 2004 to 2005 may not be representative of changes to be expected in the future. Additionally, we expanded our ethanol production capacity during the second quarter of fiscal 2005, further complicating the comparison of 2005 to 2004.

We derive revenue from the sale of fuel grade ethanol and distillers grains. We operate in one industry segment for accounting purposes. We commenced production of ethanol in January 2004. Prior to that date, we were considered to be in the development stage for accounting purposes.

Results of Operations for the Year Ended September 30, 2006 compared to September 30, 2005

Overview. The following table highlights certain of our operating results for the years ended September 30, 2006 and 2005. This table should be read in conjunction with our financial statements and accompanying notes under Item 8 of this report:

	Fiscal Year Ended September 30, 2006			Fiscal Year Ended September 30, 2005
Revenue	$	108,794,979		$	62,347,178
Cost of sales		56,127,926			44,092,866
Gross profit		52,667,053			18,254,312
General & administrative expenses		2,235,393			1,716,228
Income from operations		44,746,901			11,050,831
Other income		1,149,066			1,958,538
Interest expense		(241,952	)		(931,710	)
Net income		45,895,967			13,009,369
Net income per unit		11,249			3,189
Comprehensive income		45,832,486			12,977,556

As shown in the table, our operating results improved significantly from 2005 to 2006. The results are primarily attributable to ethanol prices reaching historic highs and favorable grain prices during fiscal 2006 along with strong demand for ethanol. Specifically, the price of and demand for fuel grade ethanol remained high during the summer months of calendar 2006 when ethanol prices typically decrease. This was due in part to the fact that high gasoline prices, most likely the result of hurricane-related shortages the previous fall and winter, helped drive up the price for ethanol and also in part because many refiners delayed their decision to purchase ethanol for MTBE replacement. Additionally, we believe our ethanol marketer was able to take advantage of these favorable prices and capitalize on the market. We do not believe we will experience similar prices for ethanol during fiscal 2007.

During 2005, we also placed into service an expansion of our ethanol plant, which increased our production from a nameplate capacity of 30 million gallons to 40 million gallons. This allowed us to reap the added benefit of ten million gallons of additional nameplate capacity production at historically high prices. The increase in production at favorable prices more than offset the increase in production costs associated with the expansion.

Net Income. Net income for the 2006 fiscal year increased $32,886,598, or approximately 253%, from fiscal 2005. We attribute this increase primarily to a significant increase in revenue as a result of high ethanol prices and an improved profit margin due to relatively stable grain prices and decreasing natural gas costs during the 2006 fiscal year.

Operating income for the 2006 fiscal year increased more dramatically than net income, rising $33,696,070, or approximately 305%, from 2005. Operating income excludes the effect of other income or expense, which primarily includes government grants and subsidies.

Revenue. Revenue for the 2006 fiscal year increased $46,447,801, or approximately 75%, from 2005. Revenue consisted of approximately 90% in ethanol sales and 10% from the sale of distillers grains, an increase by 6% from 2005 in the relative amount of revenue derived from ethanol sales. This increase, again, was due to the favorable price for ethanol during the year.

The increase in revenue for the 2006 fiscal year compared to 2005 is attributable to both an increase in production and historic highs for ethanol prices. The average price that we received for our ethanol increased approximately 21% during fiscal 2006 compared to 2005, adding to the increase in revenue. This report also marks the first time we are reporting revenue for a full fiscal year after expanding our plant capacity. Accordingly, the results of our operations for the 2005 fiscal year included approximately six months of lower production.

Ethanol prices, which typically experience a seasonal decline in the spring and summer months, had an uncharacteristic jump in price from May through September 2006, resulting from high gasoline prices and increased demand for ethanol as a replacement for MTBE. Historically, ethanol prices have been seasonal, increasing in the late summer and fall as gasoline blenders and marketers increase inventory in anticipation of mandatory blending in the winter months, and decreasing in the spring and summer when mandatory blending ceases. The rise in ethanol prices during 2006 was remarkable because it started sooner than the seasonal norm and rose higher than historical norms, due to a variety of factors, including increased prices for gasoline resulting from hurricane-related shortages and the world geopolitical situation. Also remarkable is the fact that ethanol prices, which tend to track with gas prices, remained high despite declines in the price of gasoline and natural gas at the end of summer months. Due to the number of factors affecting the price of ethanol, we are unable to predict with any degree of certainty where prices might be during fiscal 2007, although we do not expect a repeat of fiscal 2006.

Costs of Goods Sold. Our cost of goods sold for the 2006 fiscal year totaled 52% of revenue, resulting in a gross profit margin of 48%. This represents a substantial improvement from 2005, when our profit margin was 29%. We believe this improvement can be attributed to several factors including:

• Higher average prices for ethanol;

• A relatively small increase in the price of grain;

• Lower prices for natural gas in fiscal 2006 compared to 2005; and

• Increased operating efficiencies during 2006.

Grain prices, which represent the significant majority of our cost of goods sold, increased during the second half of fiscal 2006 and reached a ten-year high subsequent to the fiscal year end. However, due in part to our hedging efforts, our cost of grain for the year was relatively constant from 2005. The average price we paid for grain decreased approximately 3% in 2006 as compared to 2005. We believe the increased price of grain stems in part from increased demand, in part attributable to more ethanol plants being placed in production. We expect grain prices to remain at or near record-highs for 2007, adjusted for seasonal fluctuations.

We believe we continue to improve the efficiency with which we operate our plant based on a year-over-year basis. As a result, our production costs (exclusive of commodity costs) continue to decrease.

Energy costs, representing the second largest component of our costs of good sold, saw a steady decrease during our 2006 fiscal year. Natural gas prices saw a significant increase during the summer and fall of calendar 2005 and the winter of calendar 2006 as a result of the hurricanes and the interruption of production in the Gulf of Mexico. Prices almost doubled as a result of the hurricanes, and it took several months for prices to begin falling. We were able to control some of our costs through hedging activities during the year. Due to the high gas prices at the beginning of fiscal 2006, we forward contracted for a substantial amount of our natural gas needs and maintained provisions in our contracts that allowed us to benefit from decreases in prices. We expect gas prices to be less volatile during fiscal 2007.

We continue to believe that hedging is an integral part of our business as a means of risk management. Our strategy is to mitigate the impact of large adverse price changes in costs, such as natural gas and grain, as well as the products we sell. Our operating results include both realized and unrealized gains or losses in these hedging activities. For the 2006 fiscal year, we credited $182,272 to operations relating to grain and other futures contracts, which amount is included in costs of goods sold. In addition, we recorded unrealized losses on grain hedging contracts of $63,481 for the year ended September 30, 2006.

General and Administrative Expenses. General and administrative expenses for the 2006 fiscal year increased $519,165, or approximately 30% from 2005. Significant components of these expenses include salaries, professional fees and insurance. We attribute a portion of the increase to additional administrative expenses to an increase in the cost of professional fees, insurance, advertising expenses, and director expenses. The increase in professional fees, in turn, is attributable to the strategic alternatives that we explored during the year.

Depreciation and Amortization. Depreciation and amortization remained relatively constant from the fiscal year ended September 30, 2005 through the 2006 fiscal year. During that time, depreciation and amortization expenses increased approximately 3.5%. The slight increase during 2006 is attributable to the additional expense of the expansion that we placed in service during 2005.

Other Income. Other income for the 2006 fiscal year decreased by $809,472 from 2005, or approximately 41%. A significant portion of that decrease represents reduced grants and subsidies from state and federal governments, which decreased $1,434,846 from 2005 to 2006, or approximately 52%. The largest factor contributing to the decrease in grants and subsidies was the cessation of the federal Bioenergy Program, administered by the United States Department of Agriculture’s Commodity Credit Corporation. That program paid subsidies to eligible participants for year-over-year increases in ethanol production. However, we received notice during fiscal 2006 that this program was discontinued. Thus, we do not expect to receive other income from this program in 2007.

We were awarded the maximum amount of $1,125,000 from the State of Kansas as part of its state ethanol support program. Interest expense for the 2006 fiscal year decreased $689,758, or approximately 74%, from 2005, primarily as a result of the reduction in our debt.

Results of Operations for the Year Ended September 30, 2005 compared to the Nine Months Ended September 30, 2004

The following table summarizes revenue, cost of sales, operating expenses and other items for the fiscal year ended September 30, 2005 and the nine-month transition period ended September 30, 2004. This table should be read in conjunction with our financial statements and accompanying notes found under Item 8 of this report:

	Fiscal Year Ended September 30, 2005			Nine-month Period Ended September 30, 2004
Revenue	$	62,347,178		$	39,862,629
Cost of sales		44,092,866			32,271,179
Gross profit		18,254,312			7,591,450
General & administrative expenses		1,716,228			1,003,228
Income from operations		11,050,831			1,726,226
Other income		1,958,538			5,661,337
Interest expense		(931,710	)		(738,053	)
Net income		13,009,369			7,393,563
Net income per unit		3,189			1,812
Comprehensive income		12,977,556			6,770,638

As shown in the table, our operating results improved significantly from 2004 to 2005, even accounting for the difference between a nine-month and a twelve-month period. Our improved operating results are generally attributable to favorable grain and ethanol prices which prevailed during fiscal 2005. Also during the second quarter of fiscal 2005, we placed into service an expansion of our ethanol plant, which increased our production from a nameplate capacity of 30 million gallons to 40 million gallons.

Net Income. Net income increased $5,615,806, or approximately 76% in 2005 from the transition period. We attributed this increase to several factors, including:

• A significant increase in revenue during the 2005 fiscal year;

• An increase in our profit margin during fiscal 2005; and

• Relatively consistent costs and expenses.

Operating income for the 2005 fiscal year increased by $9,324,605, or approximately 540%, from the transition period.

Revenue. Revenue for the 2005 fiscal year increased $22,484,549, or approximately 56%, from the transition period. Revenue consisted of approximately 84% in ethanol sales and 16% from the sale of distillers grains, an increase of approximately 3% from the transition period in the relative amount of revenue derived from ethanol sales.

We attribute the increase in revenue for the 2005 fiscal year compared to the transition period to both an increase in production and favorable ethanol prices in latter 2005. In the second quarter of our fiscal year, we placed the expansion to our ethanol plant online, which increased our nameplate capacity by approximately 33%. Accordingly, the results of our operations for the 2005 fiscal year included approximately six months of increased production. The average price that we received for our ethanol increased approximately 7% during fiscal 2005 compared to 2004, adding to the increase in revenue.

	September 30, 2006		September 30, 2005
Working Capital	$	20,127,552	$	3,516,039
Current Assets		22,543,454		7,194,259
Current Liabilities		2,415,902		3,678,220
Long-term Debt		42,944		4,480,000
Members’ Equity		47,845,419		30,572,933

Contractual Obligations	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
Capital lease⁽¹⁾	$	32,000,000	$	-	$	-	$	-	$	32,000,000
Vehicle purchase		29,769		10,824		10,824		8,121		-
Land purchase		48,000		24,000		24,000		-		-
Total	$	32,077,769	$	34,824	$	34,824	$	8,121	$	32,000,000

Period Ended	Fair Value		Effect of Hypothetical Adverse Change - Market Risk
September 30, 2006	$	202,065	$	20,207
September 30, 2005		319,967		31,997

Name	Age	Positions With the Company	Term of Office	Manager Since

Jeff Torluemke⁽¹⁾⁽⁴⁾	47	Chief Executive Officer, Board President, Manager	2006 Annual Meeting*	2001

Richard Sterrett⁽²⁾⁽⁵⁾	62	Chief Financial Officer, Board Vice President, Manager	2008 Annual Meeting	2001

Ben Dickman^(1)(2)(3)	52	Board Secretary, Manager	2006 Annual Meeting	2001

Brian Baalman⁽²⁾⁽³⁾	48	Manager	2007 Annual Meeting	2001

Ron Blaesi⁽¹⁾⁽²⁾	57	Manager	2007 Annual Meeting	2001

Robert Casper⁽⁴⁾	51	Manager	2006 Annual Meeting	2001

Scott Foote⁽²⁾	30	Manager	2008 Annual Meeting	2006

Gary Johnson⁽⁴⁾	59	Manager	2008 Annual Meeting	2001

David Mann^(1)(2)(3)	54	Manager	2007 Annual Meeting	2001

Steven McNinch⁽⁵⁾	38	General Manager	N/A⁽⁵⁾	N/A

	2006		2005
Audit Fees	$	38,050	$	53,010
Audit Related Fees		15,450		0
Tax Fees		0		42,867
All Other Fees		8,185		8,565
Total Fees	$	61,685	$	104,442

			Annual Compensation						Long-Term Compensation Awards
Name and Principal Position	Year		Salary		Bonus		Other		Restricted Stock Awards		Securities Underlying Options		LTIP Payouts		All Other Compensation

Jeff Torluemke,		2006	$	—	$	—	$	—	$	—	$	—	$	—	$	—⁽¹⁾
Chief Executive Officer		2005		—		—		—		—		—		—		—
and President		2004		—		—		—		—		—		—		—

Steven McNinch,		2006⁽²⁾		73,022		30,000		—		—		—		—		—
General Manager

Class	Name	Number of Units	% of Class
Class A	Jeff Torluemke, Manager, Officer⁽¹⁾	35	1.53%
Class A	Richard Sterrett, Manager, Officer⁽²⁾	48	2.10%
Class A	Brian Baalman, Manager⁽³⁾	127	5.56%
Class A	Ronald Blaesi, Manager	12	0.52%
Class A	Ben Dickman, Manager⁽⁴⁾	24	1.05%
Class A	Gary Johnson, Manager	14	0.61%
Class A	David Mann, Manager⁽⁵⁾	14	0.61%
Class A	Managers and Officers as a group	274	11.99%


Class B	Jeff Torluemke, Manager, Officer	107	6.14%
Class B	Richard Sterrett, Manager, Officer⁽⁶⁾	16	0.92%
Class B	Gary Johnson, Manager⁽⁷⁾	18	1.03%
Class B	Scott Foote, Manager⁽⁸⁾	413	23.68%
Class B	Hoxie Feedyard, Inc., Member ⁽⁹⁾	413	23.68%
Class B	Roch Meier, Member⁽¹⁰⁾	100	5.73%
Class B	Brian Baalman, Manager	50	2.87%
Class B	Managers and Officers as a group	604	34.63%


Class C	Robert Casper, Manager⁽¹¹⁾	50	100%
Class C	Ethonol Products, LLC ⁽¹²⁾	50	100%
Class C	Managers and Officers as a group	50	100%


	WESTERN PLAINS ENERGY, L.L.C.

	By:	/s/ Jeff Torluemke
		Jeff Torluemke, Chief Executive Officer and President

Signature	Title	Date

/s/ Jeff Torluemke	President, Chief Executive Officer and Manager	December 28, 2006
Jeff Torluemke

/s/ Richard Sterrett	Vice President, Chief Financial	December 27, 2006
Richard Sterrett	Officer, Chief Accounting
	Officer, Manager

/s/ Gary Johnson	Manager	December 28, 2006
Gary Johnson

/s/ Ronald Blaesi	Manager	December 28, 2006
Ronald Blaesi

/s/ Ben Dickman	Manager	December 28, 2006
Ben Dickman

Report of Independent Registered Public Accounting Firm	F-1

Balance Sheets at September 30, 2006 and 2005	F-2

Statements of Income for the Fiscal Years Ended September 30, 2006 and 2005 and for the Nine Months Ended September 30, 2004	F-3

Statement of Changes in Members' Equity for the Fiscal Years Ended September 30, 2006 and 2005 and for the Nine Months Ended September 30, 2004	F-4

Statements of Cash Flows for the Fiscal Years Ended September 30, 2006 and 2005 and for the Nine Months Ended September 30, 2004	F-5

Notes to Financial Statements	F-6

ASSETS

CURRENT ASSETS	2006			2005
Cash	$	14,990,238		$	1,245,903
Accounts receivable		5,624,619			3,590,867
Accounts receivable - government subsidies		222,064			490,872
Inventory		1,456,464			1,514,260
Prepaid expense		48,004			32,390
Commodities trading account- futures and options contracts		202,065			319,967
Total current assets		22,543,454			7,194,259

PROPERTY AND EQUIPMENT
Land		701,872			605,872
Land improvements		748,371			660,280
Manufacturing equipment		38,378,290			37,950,052
Buildings		1,429,128			1,399,943
Vehicles		316,424			182,158
Office equipment, furniture, fixtures		174,803			211,629
Construction-in-progress		1,099,730			180,000
Spare parts		228,967			41,988
		43,077,585			41,231,922
Less: Accumulated depreciation		(15,859,396	)		(10,278,090	)
		27,218,189			30,953,832

OTHER ASSETS
Investment in industrial development revenue bonds		32,000,000			32,000,000
Loan origination fees, net		264,071			297,779
Financing fees, net		180,717			187,449
Deposits		97,834			97,834
		32,542,622			32,583,062

TOTAL ASSETS	$	82,304,265		$	70,731,153

LIABILITIES AND MEMBERS' EQUITY

CURRENT LIABILITIES
Accounts payable and accrued expenses	$	2,378,714		$	1,971,162
Accrued interest		2,363			6,058
Current portion of long term debt		34,825			1,701,000
Total current liabilities		2,415,902			3,678,220

LONG TERM DEBT		42,944			4,480,000

LEASE OBLIGATION		32,000,000			32,000,000

COMMITMENTS AND CONTINGENCIES

MEMBERS' EQUITY
Class A Capital Units, 2,286 issued		10,910,140			10,910,140
Class B Capital Units, 1,744 issued		8,640,895			8,640,895
Class C Capital Units, 50 issued		250,000			250,000
Membership distributions		(37,168,800	)		(8,608,800	)
Accumulated comprehensive (loss)		(95,293	)		(31,812	)
Retained earnings		65,308,477			19,412,510
Total members' equity		47,845,419			30,572,933

TOTAL LIABILITIES AND MEMBERS' EQUITY	$	82,304,265		$	70,731,153

		FISCAL YEAR	FISCAL YEAR		NINE MONTHS
		ENDED		ENDED		ENDED
		SEPTEMBER 30,		SEPTEMBER 30,		SEPTEMBER 30,
		2006		2005		2004

REVENUE	$	108,794,979	$	62,347,178	$	39,862,629
COST OF SALES		56,127,926		44,092,866		32,271,179
GROSS PROFIT		52,667,053		18,254,312		7,591,450

EXPENSES
General and administrative expenses		2,235,393		1,716,228		1,003,228
Depreciation expense		5,644,319		5,446,248		4,851,327
Amortization expense		40,440		41,005		10,669
Total expenses		7,920,152		7,203,481		5,865,224

Income from operations		44,746,901		11,050,831		1,726,226

Other income (expense)
Interest expense		(241,952)		(931,710)		(738,053)
Interest income		164,052		39,699		-
Interest from industrial development revenue bonds		1,120,000		1,120,000		768,746
Plant lease expense		(1,120,000)		(1,120,000)		(768,746)
Grant and subsidy income		1,349,630		2,784,476		6,380,176
Other income (expense)		(122,666)		66,073		25,214

Total other income		1,149,066		1,958,538		5,667,337

NET INCOME		45,895,967		13,009,369		7,393,563

Unrealized losses on grain contracts		(63,481)		(31,812)		(622,925)

COMPREHENSIVE INCOME	$	45,832,486	$	12,977,557	$	6,770,638

NET INCOME PER UNIT
BASIC AND DILUTED	$	11,249.01	$	3,188.57	$	1,812.15

DISTRIBUTIONS PER UNIT	$	7,000.00	$	2,110.00	$	-
WEIGHTED AVERAGE UNITS OUTSTANDING
BASIC AND DILUTED		4,080		4,080		4,080


																Retained			Accumulated
	Class A				Class B				Class C				Membership			Earnings			Comprehensive
	Units		Amount		Units		Amount		Units		Amount		Distributions			(Deficit)			(Loss)			Total

Balance, December 31, 2003		2,286	$	10,910,140		1,744	$	8,640,895		50	$	250,000	$	-		$	(990,422	)	$	-		$	18,810,613

Change in grain hedging contracts		-		-		-		-		-		-		-			-			(622,925	)		(622,925	)

Net income		-		-		-		-		-		-		-			7,393,563			-			7,393,563

Balance, September 30, 2004		2,286		10,910,140		1,744		8,640,895		50		250,000		-			6,403,141			(622,925	)		25,581,251

Distributions to members		-		-		-		-		-		-		(8,608,800	)		-			-			(8,608,800	)

Change in grain hedging contracts		-		-		-		-		-		-		-			-			591,113			591,113

Net income		-		-		-		-		-		-		-			13,009,369			-			13,009,369

Balance September 30, 2005		2,286		10,910,140		1,744		8,640,895		50		250,000		(8,608,800	)		19,412,510			(31,812	)		30,572,933

Distributions to members		-		-		-		-		-		-		(28,560,000	)		-			-			(28,560,000	)

Change in grain hedging contracts		-		-		-		-		-		-		-			-			(63,481	)		(63,481	)

Net income		-		-		-		-		-		-		-			45,895,967			-			45,895,967

Balance September 30, 2006		2,286	$	10,910,140		1,744	$	8,640,895		50	$	250,000	$	(37,168,800	)	$	65,308,477		$	(95,293	)	$	47,845,419


	Fiscal year ended		Fiscal year ended		Nine-months ended
	Sept. 30, 2006		Sept. 30, 2005		Sept.30, 2004
Ethanol Products
Revenue (including freight)	$	97,066,671	$	51,855,217	$	32,214,104
Marketing fees paid		455,353		355,185		225,899
United Bio Energy
Revenue (including freight)	$	11,728,308	$	10,491,961	$	7,648,525
Marketing fees paid		295.458		261,121		151,703

Exhibit No.	Description	Incorporated by Reference From
3.1(i)	Articles of Organization	Appendix A of our prospectus filed with the Commission pursuant to Rule 424(b)(3) on June 11, 2002 (File No. 333-74982)
3.1(ii)	Third Amended and Restated Operating Agreement	Exhibit 3 to our Form 10-QSB for the quarter ended June 30, 2003
4.1	Form of Class A Capital Unit Certificate	Exhibit 4.1 to our Form SB-2 filed with the Commission on December 12, 2001 (File No. 333-74982)
4.2	Form of Class B Capital Unit Certificate	Exhibit 4.2 to our Form SB-2 filed with the Commission on December 12, 2001 (File No. 333-74982)
4.3	Form of Class C Capital Unit Certificate	Exhibit 4.3 to our Form SB-2 filed with the Commission on December 12, 2001 (File No. 333-74982)
10.1	Credit Agreement with AgCountry Farm Credit Services, FLCA dated July 29, 2003	Exhibit 10.1 to our Form 10-QSB for the quarter ended June 30, 2003
10.2	DDGS/SWGS Marketing Agreement with ICM Marketing, Inc., dated October 1, 2001	Exhibit 10.5 to our Form SB-2 filed with the Commission on December 12, 2001 (File No. 333-74982)
10.3	Ethanol Marketing and Services Agreement with Ethanol Products, LLC, dated October 31, 2001	Exhibit 10.6 to our Form SB-2 filed with the Commission on December 12, 2001 (File No. 333-74982)
10.4	Land Exchange Agreement, dated November 23, 2001	Exhibit 10.9 to our Form SB-2 filed with the Commission on December 12, 2001 (File No. 333-74982)
10.5	Real Estate Purchase Agreement, dated December 21, 2001	Exhibit 10.10 to our Form SB-2 filed with the Commission on May 1, 2002 (File No. 333-74982)
10.6	Well Construction and Pumping Agreement, dated November 19, 2001	Exhibit 10.11 to our Form SB-2 filed with the Commission on December 12, 2001 (File No. 333-74982)
10.7	Design/Build Agreement with ICM Inc., dated April 4, 2002	Exhibit 10.12 to our Form SB-2 filed with the Commission on May 1, 2002 (File No. 333-74982)
10.8	Agreement between the Company and ICM, Inc. dated August 26, 2004 for expansion of our plant	Exhibit 10.7 to our Annual Report on Form 10-KSB for the fiscal year ended September 30, 2004 (File No. 333-749821)
10.9	Agreement between the Company and United Bio Energy Ingredients, LLC, dated August 2, 2004	Exhibit 10.8 to our Annual Report on Form 10-KSB for the fiscal year ended September 30, 2004 (File No. 333-749821)
10.10	Form of Second Amendment to the Credit Agreement with AgCountry dated July 29, 2004	Exhibit 10.9 to our Annual Report on Form 10-KSB for the fiscal year ended September 30, 2004 (File No. 333-749821)
10.11	Promissory Note/Loan Agreement with AgCountry dated November 16, 2004	Exhibit 10.10 to our Annual Report on Form 10-KSB for the fiscal year ended September 30, 2004 (File No. 333-749821)
10.12	Third Amendment to Credit Agreement with AgCountry dated March 7, 2006	Exhibit 10.1 to our Report on Form 8-K dated March 27, 2006 (File No. 0-50714)
10.13	Employment Agreement with Steven McNinch dated February 21, 2006	Exhibit 10.2 to our Report on Form 8-K dated March 27, 2006 (File No. 0-50714)
14.1	Western Plains Energy, L.L.C. Code of Ethics for Principal Executive and Senior Financial Officers	Exhibit 14.1 to our Annual Report on Form 10-KSB for the fiscal year ended September 30, 2005 (File No. 0-50714)
31.1*	Certifications pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934
31.2*	Certifications pursuant to Rule 13a-14(a) or 15d-14(a) under the Securities Exchange Act of 1934, as amended
32*	Certifications pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

___________ * Filed herewith

	2006		2005		2004
Raw materials	$	462,133	$	723,333	$	505,434
Work-in-process		719,689		559,559		399,951
Finished goods		274,642		231,368		350,297
	$	1,456,464	$	1,514,260	$	1,255,682