Forward-Looking Statements



The information in this quarterly report on Form 10-Q for the three-month period
ended March 31, 2022, (including reports filed with the Securities and Exchange
Commission (the "SEC" or "Commission"), contains "forward-looking statements"
that deal with future results, expectations, plans and performance, and should
be read in conjunction with the financial statements and Annual Report on Form
10-K for the year ended December 31, 2021. Forward-looking statements may
include statements which use words such as "believe," "expect," "anticipate,"
"intend," "plan," "estimate," "predict," "hope," "will," "should," "could,"
"may," "future," "potential," or the negatives of these words, and all similar
expressions. Forward-looking statements involve numerous assumptions, risks and
uncertainties. Actual results or actual business or other conditions may differ
materially from those contemplated by any forward-looking statements. Factors
that could cause actual results to differ materially from the forward-looking
statements are identified in our Form 10-K for the year ended December 31, 2021.

We are not under any duty to update the forward-looking statements contained in
this report, nor do we guarantee future results or performance or what future
business conditions will be like. We caution you not to put undue reliance on
any forward-looking statements, which speak only as of the date of this report.

Executive Overview and Summary



We had a record profit during the first quarter of 2022, recording a net income
of $18.3 million, compared to $5.8 million during the first quarter of 2021. Net
income increased due to strong processing margins which continued from the 4th
quarter of 2021. Soybean oil continued to drive profitability, as strong demand
for oil from the food, fuel and export sectors increased margins to record
levels. Soybean meal demand, though not as dynamic as soybean oil, remained
solid during the first quarter, being supported by a strong domestic demand and
an active export program. Steady soybean supply and delivery to both our plants
also contributed to a strong three months. Following reduced production in South
Dakota last year, basis values paid for soybeans were at historically high
levels, reflecting processor desire to secure supplies.

Looking ahead, we anticipate above-average processing margins for the remainder
of 2022 and into 2023. New renewable diesel plants in the Western U.S. are
scheduled to begin production in 2022 which is anticipated to keep soybean oil
demand well above historical levels. Margins, however, could be affected by the
local soybean supply. Until a new soybean crop arrives in the fall, continuing
drought conditions are making it difficult to forecast the quantity and pricing
of soybeans available for purchase.

Long term, we continue to study the feasibility and planning of a new crushing plant near Mitchell, South Dakota.

RESULTS OF OPERATIONS

Comparison of the three months ended March 31, 2022 and 2021



                                                Three Months Ended March 31, 2022                   Three Months Ended March 31, 2021
                                                  $                    % of Revenue                   $                    % of Revenue
Revenue                                   $   171,724,126                   100.0             $   123,627,541                   100.0
Cost of revenues                             (152,914,021)                  (89.0)               (116,998,330)                  (94.6)
Gross profit                                   18,810,105                    11.0                   6,629,211                     5.4
Operating expenses                             (1,398,466)                   (0.8)                 (1,117,842)                   (0.9)

Interest expense                                 (387,560)                   (0.2)                   (317,152)                   (0.3)
Other non-operating income (expense)            1,273,756                     0.7                     589,875                     0.5

Net income                                $    18,297,835                    10.7             $     5,784,092                     4.7

Revenue - Revenue increased $48.1 million, or 38.9%, for the three-month period ended March 31, 2022, compared to the same period in 2021. The increase in revenues was primarily due to an increase in the average


                                       18
--------------------------------------------------------------------------------

sales price of refined soybean oil. The average sales price of soybean oil
increased approximately 62% in the three months ended March 31, 2022 from the
same period in 2021, resulting from surging demand from the renewable diesel and
food sectors.

Gross Profit/Loss - Gross profit increased $12.2 million, or 183.7%, for the
three months ended March 31, 2022, compared to the same period in 2021. The
increase in gross profit was primarily due to increased demand for oil from the
renewable diesel sector as more diesel plants were opened.

Operating Expenses - Administrative expenses, including all selling, general and
administrative expenses, increased approximately $281,000, or 25.1%, during the
three-month period ended March 31, 2022, compared to the same period in 2021.
The increase was primarily due to increases in personnel costs and professional
fees.

Interest Expense - Interest expense increased $70,000, or 22.2%, during the
three months ended March 31, 2022, compared to the same period in 2021. The
increase in interest expense was due to increases in interest rates on our
senior debt with CoBank and borrowings from our lines of credit. As of March 31,
2022, the interest rate on our revolving long-term loan was 2.90%, compared to
2.56% as of March 31, 2021. The average debt level, in addition, increased from
$47.8 million during the three-month period ended March 31, 2021 to $54.7
million for the same period in 2022 due to higher commodity prices and payments
for capital improvements.

Other Non-Operating Income - Other non-operating income (expense), including
patronage dividend income, increased $684,000 during the three-month period
ended March 31, 2022, compared to the same period in 2021. The increase in other
non-operating income was due to a $363,000 increase in gains on our interest
rate hedge instruments and a $335,000 increase in patronage dividend income.
During the three-month period ended March 31, 2022, gains on interest rate
hedges totaled $570,000, compared to $207,000 during the same period in 2021. We
also received $700,000 in patronage distributions from CoBank, a cooperative
lender of which we are a member, during the quarter ended March 31, 2022,
compared to $365,000 during the same period in 2021.

Net Income/Loss - During the three-month period ended March 31, 2022, we generated a net income of $18.3 million, compared to $5.8 million for the same period in 2021. The $12.5 million increase was primarily attributable to an increase in gross profit and other non-operating income.

LIQUIDITY AND CAPITAL RESOURCES



Our primary sources of liquidity are cash provided by operations and borrowings
under our two revolving lines of credit which are discussed below under
"Indebtedness." On March 31, 2022, we had working capital, defined as current
assets less current liabilities, of approximately $36.8 million, compared to
$25.9 million on March 31, 2021. Working capital increased $10.9 million between
periods primarily due to increases in net income during that period. Based on
current plans, we will continue funding our capital and operating needs from
cash from operations and revolving lines of credit.

Comparison of the Three Months Ended March 31, 2022 and 2021



                                                            2022

2021

Net cash provided by (used for) operating activities $ (35,857,338) $ (33,683,127) Net cash provided by (used for) investing activities (733,524)

(1,709,263)

Net cash provided by (used for) financing activities 36,361,121

35,574,484

Cash Flows Used For Operations



The $2.2 million increase in cash flows used for operating activities was due to
an increase in accounts receivable which was largely the result of increased
commodity prices in our industry. During the three-month period ended March 31,
2022, our accounts receivable increased by $6.2 million, compared to a $0.7
million decrease during the same period in 2021. Partially offsetting the
increase in accounts receivable were various changes in other current assets and
liabilities.


                                       19

--------------------------------------------------------------------------------

Cash Flows Used For Investing Activities



The $1.0 million decrease in cash flows used for investing activities during the
three-month period ended March 31, 2022, compared to the same period in 2021,
was due to an $1.1 million decrease in capital improvements. During the three
months ended March 31, 2022, we spent $0.7 million on capital improvements,
compared to $1.8 million during the same period in 2021.

Cash Flows Provided By (Used For) Financing Activities



The $0.8 million increase in cash flows provided by financing activities was
principally due to a $17.1 million increase in net proceeds on borrowings.
During the three months ended March 31, 2022, net proceeds on borrowings
increased $56.9 million, compared to $39.8 million during the same period in
2021. Partially offsetting the increase in net borrowings was an $8.4 million
decrease in outstanding checks-over-bank balance and a $7.9 million increase in
cash distributions to our members during the three-month period ended March 31,
2022, compared to the same period in 2021.

Indebtedness



We have two lines of credit with CoBank, our primary lender, to meet the short
and long-term needs of our operations. The first credit line is a revolving
long-term loan. Under this loan, we may borrow funds as needed up to the credit
line maximum, or $16.0 million, and then pay down the principal whenever excess
cash is available. Repaid amounts may be borrowed up to the available credit
line. The available credit line decreases by $2.0 million every six months until
the credit line's maturity on March 20, 2026. We pay a 0.40% annual commitment
fee on any funds not borrowed. The principal balance outstanding on the
revolving term loan was $16.0 million and $16.9 million as of March 31, 2022 and
December 31, 2021, respectively. Under this loan, there were no additional funds
available to borrow as of March 31, 2022.

The second credit line is a revolving working capital (seasonal) loan. The
primary purpose of this loan is to finance our operating needs. Prior to the
amendments described below, the maximum we could borrow under this line was
$70.0 million until the loan's maturity on December 1, 2022. We pay a 0.20%
annual commitment fee on any funds not borrowed; however, we have the option to
reduce the credit line during any given commitment period listed in the credit
agreement to avoid the commitment fee. As of March 31, 2022 and December 31,
2021, the principal balance outstanding on this credit line was $57.8 million
and $0, respectively, allowing us to borrow an additional $12.2 million as of
March 31, 2022.

On April 27, 2022, we amended our seasonal and revolving term loans with CoBank.
Under the amendments, the principal amount that we may borrow under the seasonal
loan is increased from $70.0 million to $85.0 million until the loan's maturity
date of December 1, 2022. Borrowings under the seasonal loan will now accrue
interest at 2.25% plus Daily Simple SOFR, and borrowings under the revolving
term note will accrue interest at 2.55% plus Daily Simple SOFR. Daily Simple
SOFR is defined under both notes. All other material items and conditions under
the credit agreement, and subsequent amendments to such agreement, remain the
same following the amendments.

Both the revolving and seasonal loans with CoBank are set up with a variable
rate option. The variable rate is set by CoBank and changes weekly on the first
business day of each week. We also have a fixed rate option on both loans
allowing us to fix rates for any period between one day and the entire
commitment period. The annual interest rate on the revolving term loan was 2.90%
and 2.56% as of March 31, 2022 and December 31, 2021, respectively. As of
March 31, 2022 and December 31, 2021, the interest rate on the seasonal loan was
2.65% and 2.31%, respectively. We were in compliance with all covenants and
conditions under the loans as of March 31, 2022.

OFF BALANCE SHEET FINANCING ARRANGEMENTS

We do not utilize variable interest entities or other off-balance sheet financial arrangements.


                                       20

--------------------------------------------------------------------------------

© Edgar Online, source Glimpses