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Commitments and Contingencies
12 Months Ended
Oct. 31, 2014
Commitments and Contingencies [Abstract]  
Commitments and Contingencies
COMMITMENTS AND CONTINGENCIES

Corn Storage and Grain Handling Agreement and Purchase Commitments

GFE 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, 2014, GFE had 230,000 bushels of stored corn totaling approximately $1,089,700 with FCE that is included in inventory. At October 31, 2014, GFE had no forward corn purchase commitments.


The Company purchased approximately $82,955,000 of corn from the member during fiscal 2014, of which approximately $1,998,000 is included in corn payable at October 31, 2014. The Company purchased approximately $153,216,000 of corn from the member during fiscal 2013, of which approximately $4,002,000 was included in corn payable at October 31, 2013. The Company purchased approximately $148,289,000 of corn from the member during fiscal 2012.

At October 31, 2014, HLBE had cash and basis contracts for forward corn purchase commitments for approximately 608,000 bushels for deliveries through January 2015.

Ethanol Marketing Agreement

GFE 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.

During the fourth quarter of fiscal year 2013, HLBE entered into a new marketing agreement with Eco-Energy, for the sale of ethanol. Under this ethanol agreement, Eco-Energy will purchase, market and resell 100% of the ethanol produced at the Company's ethanol production facility and the Company will pay Eco-Energy a marketing fee based on a percentage of the applicable sale price of the ethanol. The marketing fee was negotiated based on prevailing market-rate conditions for comparable ethanol marketing services. From the date of acquisition through October 31, 2013, HLBE had an agreement with Gavilon, LLC (“Gavilon”) whereas Gavilon was the exclusive corn supplier and ethanol and distillers’ grains marketer for HLBE production facility. This agreement was terminated on October 31, 2013.

Ethanol marketing fees and commissions totaled approximately $1,318,000, $1,031,000 and $743,000 for the fiscal years ended October 31, 2014, 2013 and 2012 respectively, and are included net within revenues.

Ethanol Contracts

At October 31, 2014, GFE had forward contracts to sell approximately $23,887,000 of ethanol for various delivery periods from November 2014 through March 2015 which approximates 55% of its anticipated ethanol sales during that period.

At October 31, 2014, HLBE had forward contracts to sell approximately $23,915,000 of ethanol for various delivery periods from November 2014 through March 2015 which approximates 55% of its anticipated ethanol sales during that period.

Distillers Grain Marketing Agreement

GFE 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 $518,000, $745,000 and $650,000 for the fiscal years ended October 31, 2014, 2013 and 2012 respectively, and are included net within revenues.

At October 31, 2014, GFE had forward contracts to sell approximately $2,953,000 of distillers grain for deliveries in November 2014 through March 2015 which approximates 45% of its anticipated distillers grain sales during that period.

Gavilon Ingredients, LLC serves as the distillers' grains marketer for HLBE pursuant to an off-take agreement that became effective as of November 1, 2013. Under this agreement, Gavilon Ingredients, LLC purchases all of the distillers' grains produced at our Heron Lake ethanol plant in exchange for a service fee.

At October 31, 2014, HLBE had forward contracts to sell approximately $2,669,000 of distillers' grains for delivery in November 2014 through March 2015 which approximates 34% of its anticipated distillers grain sales during that period.

Corn Oil Marketing Agreement

GFE has a Marketing Agreement with RPMG, an unrelated party, for the purpose of marketing and selling all corn oil produced by the Company. The contract commenced on April 29, 2010 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.

HLBE has a Marketing Agreement with RPMG, an unrelated party, for the purpose of marketing and selling all corn oil produced by the Company. The contract commenced on November 1, 2013 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.

Corn oil commissions totaled approximately $112,000, $74,000 and $55,000 for the fiscal years ended October 31, 2014, 2013 and 2012 respectively, and are included net within revenues.

Natural Gas Contracts

At October 31, 2014, GFE had forward contracts to buy approximately $1,499,000 of natural gas for deliveries in November 2014 through March 2015 which approximates 50% of its anticipated natural gas purchases during that period.    

At October 31, 2014, HLBE had forward contracts to buy approximately $1,356,000 of Natural Gas for deliveries in November 2014 through March 2015 which approximates 50% of its anticipated natural gas purchases during that period.

Contract for Natural Gas Pipeline to Plant

HLBE has a facilities agreement with Northern Border Pipeline Company which allows us access to an existing interstate natural gas pipeline located approximately 16 miles north from the plant. Agrinatural was formed to own and operate the pipeline and transports gas to the Company pursuant to a transportation agreement The Company also has a base agreement for the sale and purchase of natural gas with Constellation NewEnergy-Gas Division, LLC ("Constellation"). HLBE buys all of its natural gas from Constellation and this agreement runs for a three year period from November 1, 2011 to October 31, 2014.

GFE 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.