COMMITMENTS AND CONTINGENCIES

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.

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 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 and wet distillers grains.

The Company has a corn oil marketing agreement with a marketer (RPMG) which became effective November 15, 2018. The agreement provides for an exclusive marketing arrangement with RPMG for the purposes of marketing and distributing our corn oil in exchange for payment of a marketing fee to RPMG. We may immediately terminate the agreement upon written notice to RPMG if: (1) RPMG fails on three separate occasions within a 12-month period to purchase corn oil or market corn oil, as not otherwise excused under the Agreement; or (2) upon RPMG's insolvency. RPMG may immediately terminate the agreement upon written notice if: (A) during any consecutive three (3) months the actual production or inventory of any corn oil product at the plant varies by twenty (20%) or more from the monthly production and inventory estimates provided to RPMG (other than for reasons permitted under the RPMG Agreement); or (B) upon our insolvency.

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. The Company recorded a lower of cost or net realizable value write-down on the forward fixed price contracts of approximately $626,000 at January 31, 2020. Forward contracts are as follows at January 31, 2020:



	Quantity	Average Price		Delivery Date

Purchase of corn (in bushels):
Basis Contracts	1,906,457			By 7/31/21
Priced Contracts	1,469,085	$	3.87	By 1/31/21
Total	3,375,542

Purchase of natural gas (in dekatherms):
Index contracts	—
Priced contracts	3,170,350	$	2.41	By 3/31/23
Total	3,170,350

Purchase of denaturant (in gallons):
Index contracts	—
Priced contracts	1,242,000	$	1.26	By 12/31/20
Total	1,242,000

Sales of dry distillers grains (in tons):
Index contracts	—
Priced contracts	3,100	$	140.48	By 2/29/20
Total	3,100

Sales of modified distillers grains (in tons)
Index contracts	—
Priced contracts	18,700	$	72.27	By 8/31/20
Total	18,700

Sales of corn oil (in pounds)
Index contracts	—
Priced contracts	1,398,000	$	0.24	By 9/30/20
Total	1,398,000