COMMITMENTS, CONTINGENCIES AND CONCENTRATIONS

Marketing Agreements

The Company has an ethanol marketing agreement with a marketer (RPMG) to purchase, market, and distribute all the ethanol produced by the Company. The Company also entered into a member control agreement with the marketer whereby the Company made capital contributions and became a minority owner of the marketer. The member control agreement became effective on February 1, 2011 and provides the Company a membership interest with voting rights. The marketing agreement will terminate if the Company ceases to be a member. The Company will assume certain of the member’s rail car leases if the agreement is terminated. The Company can sell its ethanol either through an index arrangement or at an agreed upon fixed price. The marketing agreement is perpetual until terminated according to the agreement. The Company may be obligated to continue to market its ethanol through the marketer for a period of time. The amended agreement requires minimum capital amounts invested as required under the agreement. Revenue recognized under this agreement for the years ended October 31, 2019, 2018 and 2017 was $75,781,721, $72,745,341 and $81,196,577 respectively. Accounts receivable under the agreement as of October 31, 2019 and 2018 were $2,217,594 and $236,763 respectively.

The Company has a distillers grains marketing agreement with a marketer to market all the dried distillers grains produced at the plant. Under the agreement the marketer charges a maximum of $2.00 per ton and a minimum of $1.50 per ton price using 2% of the FOB plant price actually received by them for all dried distillers grains removed. The agreement will remain in effect unless otherwise terminated by either party with 120 days notice. Under the agreement, the marketer is responsible for all transportation arrangements for the distribution of the dried distillers grains. The Company markets and sells its modified distillers grains.

The Company has a crude corn oil marketing agreement with a marketer (RPMG) to market all corn oil to be produced at the plant for an initial term. Under the agreement, the Company must provide estimates of production and inventory of corn oil. The marketer may execute sales contracts with buyers for future delivery of corn oil. The Company receives a percentage of the F.O.B. sale price less a marketing fee, actual freight and transportation costs and certain taxes and other charges related to the purchase, delivery or sale. The Company is required to provide corn oil meeting certain specifications as provided in the agreement and the agreement provides for a process for rejection of nonconforming corn oil. The agreement automatically renews for successive terms unless terminated in accordance with the agreement.

Grain Procurement Contract

The Company had a grain origination agreement with a marketer to provide all of the corn needed for operation of the ethanol plant. Under the agreement, the Company purchased corn at the CBOT futures price less the weighted average of the basis prices plus a fixed fee per bushel of corn purchased. The agreement was for an initial five-year term which commenced on July 27, 2016 and automatically renewed for successive one-year terms unless otherwise terminated in accordance with its terms. On January 3, 2019, the Company and the marketer mutually agreed to terminate the grain origination agreement effective as of January 31, 2019.

Regulatory Agencies

The Company is subject to oversight from regulatory agencies regarding environmental concerns which arise in the ordinary course of its business.

Forward Contracts

In the ordinary course of business, we enter into forward contracts for our commodity purchases and sales. Forward contracts are as follows at October 31, 2019:



	Quantity	Average Price		Delivery Date

Purchase of corn (in bushels):
Basis Contracts	190,000			By 7/31/21
Priced Contracts	453,000	$	3.81	By 11/30/20
Total	643,000

Purchase of natural gas (in dekatherms):
Index contracts	—
Priced contracts	2,968,000	$	2.53	By 3/31/21
Total	2,968,000

Purchase of denaturant (in gallons):
Index contracts	—
Priced contracts	101,000	$	1.35	By 12/31/19
Total	101,000

Sales of dry distillers grains (in tons):
Index contracts	—
Priced contracts	8,800	$	133.70	By 1/31/20
Total	8,800

Sales of modified distillers grains (in tons)
Index contracts	—
Priced contracts	29,600	$	75.22	By 7/31/20
Total	29,600

Sales of corn oil (in pounds)
Index contracts	—
Priced contracts	1,056,000	$	0.24	By 11/20/19
Total	1,056,000