Commitments and Contingencies

12 Months Ended

Oct. 31, 2012

Commitments and Contingencies [Abstract]

Commitments and Contingencies

COMMITMENTS AND CONTINGENCIES

Corn Storage and Grain Handling Agreement and Purchase Commitments

The Company has a corn storage and grain handling agreement with Farmers Cooperative Elevator (FCE), a member. Under the agreement, the Company agrees to purchase all of the corn needed for the operation of the plant FCE. The price of the corn purchased will be the bid price FCE establishes for the plant plus a set fee of per bushel.

At October 31, 2012, the Company had basis contracts for forward corn purchase commitments with FCE for 1,000,000 bushels for delivery in November and December 2012. At October 31, 2012, the Company also had 885,000 bushels of stored corn totaling approximately $6,511,000 with FCE that is included in inventory.

The Company purchased approximately $148,289,000 of corn from the member during fiscal 2012, of which approximately $1,996,000 is included in corn payable at October 31, 2012. The Company purchased approximately $123,676,000 of corn from the member during fiscal 2011, of which approximately $2,517,000 is included in corn payable at October 31, 2011. The Company purchased approximately $63,089,000 of corn from the member during fiscal 2010.

Ethanol Marketing Agreement

Granite Falls currently has an Ethanol Marketing Agreement (“Eco Agreement”) with Eco-Energy, Inc. (“Eco-Energy”). Pursuant to the Eco Agreement, Eco-Energy agrees to purchase the entire ethanol output of GFE's ethanol plant and to arrange for the transportation of ethanol; however, GFE is responsible for securing all of the rail cars necessary for the transport of ethanol by rail. GFE will pay Eco-Energy a certain percentage of the FOB plant price in consideration of Eco-Energy's services. The contract had an initial term of one year, and will continue to remain in effect until terminated by either party at its unqualified option, by providing written notice of not less than 90 days to the other party.

Ethanol marketing fees and commissions totaled approximately $743,000, $1,006,000, and 825,000 for the fiscal years ended October 31, 2012, 2011 and 2010 respectively, and are included net within revenues.

Ethanol Contracts

At October 31, 2012, the Company had forward contracts to sell approximately $8,747,000 of ethanol for delivery in November 2012 which approximates 75% of its anticipated ethanol sales during that period.

At October 31, 2011, the Company had forward contracts to sell approximately $15,667,000 of ethanol for various delivery periods from November 2011 through December 2011.

Distillers Grain Marketing Agreement

The Company has a Marketing Agreement with RPMG, an unrelated party, for the purpose of marketing and selling all distillers grains produced by the Company. The contract commenced on February 1, 2011 with an initial term of one year, and will continue to remain in effect until terminated by either party at its unqualified option, by providing written notice of not less than 90 days to the other party. Distillers grain commissions totaled approximately $650,000, $460,000 and $210,000 for the fiscal years ended October 31, 2012, 2011 and 2010 respectively, and are included net within revenues.

At October 31, 2012, the Company had forward contracts to sell approximately $1,773,000 of distillers grains for delivery in November 2012 which approximates 65% of its anticipated distillers grain sales during that period.

At October 31, 2011, the Company had forward contracts to sell approximately $4,624,000 of distillers grains for various delivery periods from November 2011 through January 2012.

Natural Gas Contracts

At October 31, 2012, the Company had forward contracts to purchase $719,000 of natural gas at prices with delivery periods from November 2012 through March 2013 which approximates 30% of its anticipated natural gas purchases during that period.

At October 31, 2011, the Company had forward contracts to purchase $1,797,600 of natural gas at prices with delivery periods from November 2011 through March 2012.

Contract for Natural Gas Pipeline to Plant

The Company has an agreement with an unrelated company for the construction of and maintenance of 9.5 miles of natural gas pipeline that will serve the plant. The agreement requires the Company to receive a minimum of 1,400,000 DT of natural gas annually through the term of the agreement. The Company is charged a fee based on the amount of natural gas delivered through the pipeline.

This agreement will continue in effect until December 31, 2015 at which time it will automatically renew for consecutive terms of one year. A twelve months prior written notice is required to be given by either party to terminate this agreement.