SOUTH DAKOTA SOYBEAN PROCESSORS LLC - Quarter Report: 2018 September (Form 10-Q)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)



x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2018



¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

COMMISSION FILE NO. 000-50253

South Dakota Soybean Processors, LLC

(Exact name of registrant as specified in its charter)



South Dakota		46-0462968
(State or Other Jurisdiction of Incorporation or Organization)		(I.R.S. Employer Identification No.)

100 Caspian Avenue; PO Box 500 Volga, South Dakota		57071
(Address of Principal Executive Offices		(Zip Code)

(605) 627-9240

(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes x No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). x Yes ¨ No

Indicate by check mark whether the registrant is a large accelerated filer, accelerated filer or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):



¨ Large Accelerated Filer	¨ Accelerated Filer	x Non-Accelerated Filer	¨ Smaller Reporting Company
		(do not check if a smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).

¨ Yes x No

APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY

PROCEEDINGS DURING THE PRECEDING FIVE YEARS

Check whether the registrant filed all documents and reports required to be filed by Section 12, 13 or 15(d) of the Exchange Act after the distribution of securities under a plan confirmed by a court. Yes ¨ No ¨

APPLICABLE ONLY TO CORPORATE ISSUERS

State the number of shares outstanding of each of the issuer’s classes of common equity, as of the latest practicable date: On November 8, 2018, the registrant had 30,419,000 capital units outstanding.

Table of Contents



			Page

Part I.	FINANCIAL INFORMATION		3

	Item I.	Financial Statements (Unaudited)	3

	Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15

	Item 3.	Quantitative and Qualitative Disclosures about Market Risk	19

	Item 4.	Controls and Procedures	20

Part II.	OTHER INFORMATION		20

	Item 1.	Legal Proceedings	20

	Item 1A.	Risk Factors	21

	Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	21

	Item 3.	Defaults among Senior Securities	21

	Item 4.	Mine Safety Disclosures	21

	Item 5.	Other Information	21

	Item 6.	Exhibits	21

Signatures			22

PART I – FINANCIAL INFORMATION

Item 1. Financial Statements

South Dakota Soybean Processors, LLC

Condensed Financial Statements

September 30, 2018 and 2017

South Dakota Soybean Processors, LLC

Condensed Balance Sheets



	September 30, 2018			December 31, 2017
	(Unaudited)
Assets
Current assets
Cash and cash equivalents	$	692,206		$	683,523
Trade accounts receivable	22,459,508			19,800,646
Inventories	29,807,213			37,966,087
Margin deposits	2,921,016			4,377,752
Prepaid expenses	864,855			1,578,927
Total current assets	56,744,798			64,406,935

Property and equipment	108,964,780			103,325,413
Less accumulated depreciation	(50,682,577		)	(47,794,105		)
Total property and equipment, net	58,282,203			55,531,308

Other assets
Equity investment in affiliate	6,688,517			1,750,513
Investments in cooperatives	1,552,022			1,527,891
Total other assets	8,240,539			3,278,404

Total assets	$	123,267,540		$	123,216,647

Liabilities and Members' Equity
Current liabilities
Excess of outstanding checks over bank balance	$	4,209,031		$	4,494,963
Current maturities of long-term debt	61,964			60,749
Accounts payable	2,203,473			1,932,758
Accrued commodity purchases	27,897,185			37,642,811
Accrued expenses	2,618,412			2,166,849
Accrued interest	242,890			178,831
Deferred liabilities - current	693,135			2,261,662
Total current liabilities	37,926,090			48,738,623

Long-term debt, net of current maturities and unamortized debt issuance costs	6,335,612			5,102,818

Commitments and contingencies (Notes 7, 8, 13 and 14)

Members' equity
Class A Units, no par value, 30,419,000 units issued and outstanding at September 30, 2018 and December 31, 2017	79,005,838			69,375,206

Total liabilities and members' equity	$	123,267,540		$	123,216,647

The accompanying notes are an integral part of these condensed financial statements.

South Dakota Soybean Processors, LLC

Condensed Statements of Operations (Unaudited)

For the Three and Nine-Month Periods Ended September 30, 2018 and 2017



	Three Months Ended September 30,						Nine Months Ended September 30,
	2018			2017			2018			2017

Net revenues	$	100,303,757		$	93,114,711		$	291,928,015		$	284,339,714

Cost of revenues:
Cost of product sold	70,986,392			74,660,364			227,465,103			231,149,928
Production	6,691,112			6,042,767			19,664,019			18,069,042
Freight and rail	9,879,915			8,037,718			26,954,523			24,944,913
Brokerage fees	155,753			178,515			466,707			512,908
Total cost of revenues	87,713,172			88,919,364			274,550,352			274,676,791

Gross profit (loss)	12,590,585			4,195,347			17,377,663			9,662,923

Operating expenses:
Administration	1,009,383			787,579			2,791,039			2,433,650

Operating income (loss)	11,581,202			3,407,768			14,586,624			7,229,273

Other income (expense):
Interest expense	(314,349		)	(210,612		)	(982,277		)	(520,849		)
Other non-operating income	291,082			141,694			957,290			577,156
Patronage dividend income	49,735			—			146,258			493,201
Total other income (expense)	26,468			(68,918		)	121,271			549,508

Income (loss) before income taxes	11,607,670			3,338,850			14,707,895			7,778,781

Income tax benefit (expense)	—			—			(1,960		)	(1,941		)

Net income (loss)	$	11,607,670		$	3,338,850		$	14,705,935		$	7,776,840


Basic and diluted earnings (loss) per capital unit	$	0.38		$	0.11		$	0.48		$	0.26

Weighted average number of capital units outstanding for calculation of basic and diluted earnings (loss) per capital unit	30,419,000			30,419,000			30,419,000			30,419,000

The accompanying notes are an integral part of these condensed financial statements.

South Dakota Soybean Processors, LLC

Condensed Statements of Cash Flows (Unaudited)

For the Nine Months Ended September 30, 2018 and 2017



	2018			2017
Operating activities
Net income (loss)	$	14,705,935		$	7,776,840
Charges and credits to net income not affecting cash:
Depreciation and amortization	3,097,587			2,589,283
Gain on sales of property and equipment	(271,933		)	(62,955		)
Loss on equity method investment	61,996			—
Non-cash patronage dividends	(24,131		)	(6,816		)
Change in current assets and liabilities	(2,856,996		)	(3,229,415		)
Net cash provided by (used for) operating activities	14,712,458			7,066,937

Investing activities
Purchase of investments	(5,000,000		)	—
Proceeds from sales of property and equipment	309,870			83,008
Purchase of property and equipment	(5,874,304		)	(12,659,701		)
Net cash provided by (used for) investing activities	(10,564,434		)	(12,576,693		)

Financing activities
Change in excess of outstanding checks over bank balances	(285,932		)	(2,774,438		)
Distributions to members	(5,075,303		)	(9,444,789		)
Payments for debt issue costs	(10,500		)	(14,000		)
Proceeds from long-term debt	47,306,495			96,438,268
Principal payments on long-term debt	(46,074,101		)	(89,932,517		)
Net cash provided by (used for) financing activities	(4,139,341		)	(5,727,476		)

Net change in cash and cash equivalents	8,683			(11,237,232		)

Cash and cash equivalents, beginning of period	683,523			11,654,648

Cash and cash equivalents, end of period	$	692,206		$	417,416

Supplemental disclosures of cash flow information
Cash paid during the period for:
Interest	$	918,218		$	480,658

Income taxes	$	—		$	46,461

The accompanying notes are an integral part of these condensed financial statements.

South Dakota Soybean Processors, LLC

Notes to Condensed Financial Statements

Note 1 - Principal Activity and Significant Accounting Policies

The unaudited condensed financial statements contained herein have been prepared pursuant to the rules and regulations of the Securities Exchange Commission. Certain information and note disclosures normally included in annual financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to those rules and regulations, although South Dakota Soybean Processors, LLC (the “Company”, “LLC”, “we”, “our”, or “us”) believes that the disclosures made are adequate to make the information not misleading.

In the opinion of management, all normal recurring adjustments considered necessary for a fair presentation have been included in the accompanying condensed financial statements. The results of operations and cash flows for interim periods are not necessarily indicative of results for a full year due in part to the seasonal nature of some of the Company’s businesses. The balance sheet data as of December 31, 2017 has been derived from audited financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America.

These statements should be read in conjunction with the financial statements and notes thereto for the year ended December 31, 2017, included in the Company’s annual report on Form 10-K filed with the Securities and Exchange Commission on March 21, 2018.

Use of estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Recent accounting pronouncements

The Company has reviewed all recently issued, but not yet effective, accounting pronouncements. The Financial Accounting Standards Board issued Accounting Standards Update No. 2016-02 (Leases). The amendments in this ASU revise the accounting related to lessee accounting. Under the new guidance, lessees will be required to recognize a lease liability and a right-of-use asset for all leases. The new lease guidance also simplified the accounting for sale and leaseback transactions primarily because lessees must recognize lease assets and lease liabilities. The amendments in this ASU are effective for annual reporting periods beginning on January 1, 2019 and should be applied through a modified retrospective transition approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. While early adoption is permitted, the Company does not plan to adopt the standard until the interim period ended March 31, 2019. The Company expects right-of -use assets, current liabilities, and long-term liabilities to increase approximately $7.5 million, $2.7 million, and $4.8 million, respectively, upon adoption of this new standard.

Note 2 - Revenue

ASC 606 Adoption

The Company accounts for all of its revenues from contracts with customers under ASC 606, Revenue from Contracts with Customers, which became effective January 1, 2018. As part of the adoption of ASC 606, the Company applied the new standard on a modified retrospective basis analyzing open contracts as of January 1, 2018. However, no cumulative effect adjustment to retained earnings was necessary as no revenue recognition differences were identified when comparing the revenue recognition criteria under ASC 606 to previous requirements.

Revenue Recognition

The Company principally generates revenue from merchandising and transporting manufactured agricultural products used as ingredients in food, feed, energy and industrial products. Revenue is measured based on the consideration specified in the contract with a customer, and excludes any amounts collected on behalf of third parties (e.g. - taxes). The Company follows a policy of recognizing revenue at a single point in time when it satisfies its performance obligation

South Dakota Soybean Processors, LLC

Notes to Condensed Financial Statements

by transferring control over a product to a customer. Control transfer typically occurs when goods are shipped from our facilities or at other predetermined control transfer points (for instance, destination terms). Shipping and handling costs related to contacts with customers for sale of goods are accounted for as a fulfillment activity and are included in cost of revenues. Accordingly, amounts billed to customers for such costs are included as a component of revenues.

Disaggregation of Revenues

The following table presents a disaggregation of revenue from contracts with customers for the three and nine month periods ended September 30, 2018 and 2017, by product type:



	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017

Soybean meal and hulls	$	70,011,833	$	54,154,629	$	195,009,313	$	170,879,283
Soybean oil and oil byproducts	30,291,924		38,960,082		96,918,702		113,460,431

Totals	$	100,303,757	$	93,114,711	$	291,928,015	$	284,339,714

Note 3 - Accounts Receivable

Accounts receivable are considered past due when payments are not received on a timely basis in accordance with the Company’s credit terms, which is generally 30 days from invoice date. Accounts considered uncollectible are written off. The Company’s estimate of the allowance for doubtful accounts is based on historical experience, its evaluation of the current status of receivables, and unusual circumstances, if any.

The following table presents the aging analysis of trade receivables as of September 30, 2018 and December 31, 2017:



	September 30, 2018		December 31, 2017
Past due:
Less than 30 days past due	$	5,243,003	$	4,461,039
30-60 days past due	369,970		240,280
60-90 days past due	60,692		15,061
Greater than 90 days past due	479		25,715
Total past due	5,674,144		4,742,095
Current	16,785,364		15,058,551

Totals	$	22,459,508	$	19,800,646

South Dakota Soybean Processors, LLC

Notes to Condensed Financial Statements

The following table provides information regarding the Company’s allowance for doubtful accounts receivable as of September 30, 2018 and December 31, 2017:



	September 30, 2018			December 31, 2017

Balances, beginning of period	$	—		$	—
Amounts charged (credited) to costs and expenses	42,909			—
Additions (deductions)	(42,909		)	—

Balances, end of period	$	—		$	—

In general, cash is applied to the oldest outstanding invoice first, unless payment is for a specified invoice. The Company, on a case by case basis, may charge a late fee of 1.5% per month on past due receivables.

Note 4 - Inventories

The Company’s inventories consist of the following at September 30, 2018 and December 31, 2017:



	September 30, 2018		December 31, 2017
Finished goods	$	22,468,186	$	21,273,635
Raw materials	7,079,424		16,432,849
Supplies & miscellaneous	259,603		259,603

Totals	$	29,807,213	$	37,966,087

Finished goods and raw materials are valued at estimated market value, which approximates net realizable value. In addition, futures and option contracts are marked to market through cost of revenues, with unrealized gains and losses recorded in the above inventory amounts. Supplies and other inventories are stated at net realizable value.

Note 5 - Equity Investment in Affiliates

In 2016, the Company purchased convertible promissory notes from Prairie AquaTech, LLC with face amounts totaling $2.0 million. In 2017, the Company converted these notes, along with $161,563 of accrued interest, into 142,489 Series A Units in Prairie AquaTech, LLC. The units approximate 8.9% of Prairie AquaTech, LLC's outstanding equity.

On February 20, 2018, the Company made additional investments in companies affiliated with Prairie AquaTech, LLC. The Company invested $5.0 million in Prairie AquaTech Investments, LLC, which approximates 10.9% of Prairie AquaTech Investments, LLC's outstanding equity. A substantial portion of this investment will be subsequently invested in Prairie AquaTech Manufacturing, LLC, a company formed to construct and operate the manufacturing facility that plans to produce and sell a high protein feed ingredient derived from agricultural products such as soybeans. In addition, the Company contributed various construction and management services in exchange for a 3.3% equity interest in Prairie AquaTech Manufacturing, LLC. The remaining portion of the $5.0 million investment in Prairie AquaTech Investments, LLC was made in Prairie AquaTech, LLC, to which the Company previously invested directly in 2016.

The Company accounts for these investments using the equity method due to the related nature of operations and the Company's ability to exercise significant influence. The Company recognized losses of $61,996 and $0 during the nine months ended September 30, 2018 and 2017, respectively, which is included in other non-operating income (expense).

South Dakota Soybean Processors, LLC

Notes to Condensed Financial Statements

The combined results of operations and financial position of the Company's equity method investments as of September 30, 2018 and December 31, 2017 and for the nine-month periods ended September 30, 2018 and 2017 are summarized below.



	Nine Months Ended September 30,
	2018			2017
Condensed income statement information:
Revenues	$	881,124		$	615,242
Expenses	(4,135,131		)	(2,731,840		)
Other income (expense)	(172,071		)	(35,534		)
Net income (loss)	$	(3,426,078	)	$	(2,152,132	)



	September 30, 2018		December 31, 2017
Condensed balance sheet information:
Assets	$	43,601,422	$	3,981,214
Liabilities	1,625,983		5,527,285
Equity	41,975,439		(1,546,071		)

Note 6 - Property and Equipment

The following is a summary of the Company's property and equipment at September 30, 2018 and December 31, 2017:



	2018							2017
	Cost		Accumulated Depreciation			Net		Net
Land	$	516,326	$	—		$	516,326	$	543,816
Land improvements	1,775,086		(458,632		)	1,316,454		1,397,248
Buildings and improvements	21,526,900		(8,803,716		)	12,723,184		11,567,045
Machinery and equipment	78,862,151		(40,359,931		)	38,502,220		36,911,234
Company vehicles	123,716		(103,939		)	19,777		34,137
Furniture and fixtures	1,534,579		(956,359		)	578,220		567,257
Construction in progress	4,626,022		—			4,626,022		4,510,571

Totals	$	108,964,780	$	(50,682,577	)	$	58,282,203	$	55,531,308

Depreciation of property and equipment was $1,087,935 and $863,514 for the three months ended September 30, 2018 and 2017, respectively, and $3,085,472 and $2,586,423 for the nine months ended September 30, 2018 and 2017, respectively.

Note 7 - Note Payable – Seasonal Loan

The Company has entered into a revolving credit agreement with CoBank which expires December 1, 2018. The purpose of the credit agreement is to finance inventory and accounts receivable. Under this agreement, the Company may borrow up to $30 million until May 1, 2018 and $20 million between May 1, 2018 and December 1, 2018. Interest accrues at a variable rate (4.42% at September 30, 2018). Advances on the revolving credit agreement are secured and limited to qualifying inventory and accounts receivable, net of any accrued commodity purchases. The Company pays a 0.20% annual commitment fee on any funds not borrowed. There were no advances outstanding at September 30, 2018 and December 31, 2017. The remaining funds available to borrow under the terms of the revolving credit agreement were $20.0 million as of September 30, 2018.

South Dakota Soybean Processors, LLC

Notes to Condensed Financial Statements

Note 8 - Long-Term Debt

The following is a summary of the Company's long-term debt at September 30, 2018 and December 31, 2017:



	September 30, 2018			December 31, 2017
Revolving term loan from CoBank, interest at variable rates (4.67% and 4.02% at September 30, 2018 and December 31, 2017, respectively), secured by substantially all property and equipment. Loan matures September 20, 2023.	$	5,743,123		$	4,449,981
Note payable to Brookings Regional Railroad Authority, due in annual principal and interest installments of $75,500, interest rate at 2.00%, secured by railroad track assets. Note matures June 1, 2020.	665,222			725,970
Total debt before debt issuance costs	6,408,345			5,175,951
Less current maturities	(61,964		)	(60,749		)
Less debt issuance costs, net of amortization of $10,769 and $1,616 as of September 30, 2018 and December 31, 2017, respectively	(10,769		)	(12,384		)

Total long-term debt	$	6,335,612		$	5,102,818

The Company entered into an agreement as of March 28, 2017 with CoBank to amend and restate its Credit Agreement, which includes both the revolving term and seasonal loans. Under the terms and conditions of the Credit Agreement, CoBank agreed to make advances to the Company for up to $24,000,000 on the revolving term loan with a variable effective interest rate of 4.56%. The available commitment decreases in scheduled periodic increments of $2,000,000 every six months starting March 20, 2018 until maturity on September 20, 2023. The Company pays a 0.40% annual commitment fee on any funds not borrowed. The debt issuance costs of $24,500 paid by the Company on this amendment and the amendment on the seasonal loan will be amortized over the term of the respective loans. The principal balance outstanding on the revolving term loan was $5,743,123 and $4,449,981 as of September 30, 2018 and December 31, 2017, respectively. The remaining commitments available to borrow on the revolving term loan are approximately $14.3 million as of September 30, 2018.

Under this agreement, the Company is subject to compliance with standard financial covenants and the maintenance of certain financial ratios. The Company was in compliance with all covenants and conditions with CoBank as of September 30, 2018.

Effective March 1, 2013, the State of South Dakota Department of Transportation agreed to loan the Brookings County Regional Railway Authority $964,070 for purposes of making improvements to the railway infrastructure near the Company’s soybean processing facility in Volga, South Dakota. In consideration of this secured loan, the Company agreed to provide a guarantee to the State of South Dakota Department of Transportation for the full amount of the loan, plus interest. This guaranty was converted into a direct obligation of the Company’s on October 16, 2013, when the Company received the entire loan proceeds and assumed responsibility for paying the annual principal and interest payments.

The following are minimum principal payments on long-term debt obligations for the twelve-month periods ended September 30:



2019	$	61,964
2020	603,258
2021	—
2022	1,743,123
2023	4,000,000

Total	$	6,408,345

South Dakota Soybean Processors, LLC

Notes to Condensed Financial Statements

Note 9 - Member Distribution

On February 6, 2018, the Company’s Board of Managers approved a cash distribution of approximately $5.1 million, or 16.7¢ per capital unit. The distribution was paid in accordance with the Company’s operating agreement and distribution policy on February 9, 2018.

Note 10 - Derivative Instruments and Hedging Activities

In the ordinary course of business, the Company enters into contractual arrangements as a means of managing exposure to changes in commodity prices and, occasionally, foreign exchange rates. The Company’s derivative instruments primarily consist of commodity futures, options and forward contracts. Although these contracts may be effective economic hedges of specified risks, they are not designated as, nor accounted for, as hedging instruments. These contracts are recorded on the Company’s condensed balance sheets at fair value as discussed in Note 11, Fair Value.

As of September 30, 2018 and December 31, 2017, the value of the Company’s open futures, options and forward contracts was approximately $(1,679,193) and $(1,545,926), respectively.



		As of September 30, 2018
	Balance Sheet Classification	Asset Derivatives		Liability Derivatives
Derivatives not designated as hedging instruments:
Commodity contracts	Current Assets	$	1,212,080	$	1,541,205
Foreign exchange contracts	Current Assets	3,048,602		4,415,883
Interest rate swaps	Current Liabilities	19,634		2,421

Totals		$	4,280,316	$	5,959,509



		As of December 31, 2017
	Balance Sheet Classification	Asset Derivatives		Liability Derivatives
Derivatives not designated as hedging instruments:
Commodity contracts	Current Assets	$	4,170,434	$	5,728,129
Foreign exchange contracts	Current Assets	61,214		45,792
Interest rate swaps	Current Liabilities	—		3,653

Totals		$	4,231,648	$	5,777,574

During the three and nine-month periods ended September 30, 2018 and 2017, net realized and unrealized gains (losses) on derivative transactions were recognized in the condensed statements of operations as follows:



	Net Gain (Loss) Recognized on Derivative Activities for the				Net Gain (Loss) Recognized on Derivative Activities for the
	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
Derivatives not designated as hedging instruments:
Commodity contracts	$	4,607,791	$	2,709,036	$	2,801,898	$	6,278,645
Foreign exchange contracts	46,342		45,600		6,158		102,872
Interest rate swaps	40,008		—		251,932		—

Totals	$	4,694,141	$	2,754,636	$	3,059,988	$	6,381,517

South Dakota Soybean Processors, LLC

Notes to Condensed Financial Statements

The Company recorded gains (losses) of $3,059,988 and $6,381,517 in cost of revenue related to its commodity derivative instruments for the nine-month periods ended September 30, 2018 and 2017, respectively.

Note 11 - Fair Value

ASC 820, Fair Value Measurements and Disclosures, defines fair value, establishes a comprehensive framework for measuring fair value and expands disclosures which are required about fair value measurements. Specifically, this guidance establishes a hierarchy prioritizing the inputs to valuation techniques, giving the highest priority to quoted prices in active markets for identical assets and liabilities and the lowest priority to unobservable value inputs. The three levels of hierarchy and examples are as follows:


•	Level 1 – Quoted prices are available in active markets for identical assets or liabilities as of the reported date. The types of assets and liabilities included in Level 1 are highly liquid and actively traded instruments with quoted prices, such as equities listed on the New York Stock Exchange and commodity derivative contracts listed on the Chicago Board of Trade (“CBOT”).


•	Level 2 – Pricing inputs are other than quoted prices in active markets, but are either directly or indirectly observable as of the reported date. The types of assets and liabilities in Level 2 are typically either comparable to actively traded securities or contracts, or priced with models using highly observable inputs, such as commodity prices using forward future prices.


•	Level 3 – Significant inputs to pricing that are unobservable as of the reporting date. The types of assets and liabilities included in Level 3 are those with inputs requiring significant management judgment or estimation, such as complex and subjective models and forecasts used to determine the fair value of financial transmission rights.

The following tables set forth financial assets and liabilities measured at fair value in the condensed balance sheets and the respective levels to which fair value measurements are classified within the fair value hierarchy as of September 30, 2018 and December 31, 2017:



	Fair Value as of September 30, 2018
	Level 1			Level 2		Level 3		Total
Financial assets:
Inventory	$	(1,692,890	)	$	30,848,639	$	—	$	29,155,749
Margin deposits (deficits)	$	2,921,016		$	—	$	—	$	2,921,016



	Fair Value as of December 31, 2017
	Level 1			Level 2		Level 3		Total
Financial assets:
Inventory	$	(1,586,664	)	$	38,956,476	$	—	$	37,369,812
Margin deposits	$	4,377,752		$	—	$	—	$	4,377,752

In accordance with ASC 825, Financial Instruments, the Company enters into various commodity derivative instruments, including futures, options, swaps and other agreements. The fair value of the Company’s commodity derivatives is determined using unadjusted quoted prices for identical instruments on the CBOT. The Company estimates the fair market value of their finished goods and raw materials inventories using the market price quotations of similar forward future contracts listed on the CBOT and adjusts for the local market adjustments derived from other grain terminals in our area. This market adjustment caused a negative balance in the Level 1 inventory as of September 30, 2018 and December 31, 2017.

The Company considers the carrying amount of significant classes of financial instruments on the balance sheets, including cash, accounts receivable, and accounts payable, to be reasonable estimates of fair value due to their length or maturity. The fair value of the Company’s long-term debt approximates the carrying value. The interest rates on the long-term debt are similar to rates the Company would be able to obtain currently in the market.

South Dakota Soybean Processors, LLC

Notes to Condensed Financial Statements

The Company has patronage investments in other cooperatives and common stock in a privately held entity. There is no market for their patronage credits or the entity’s common shares, and it is impracticable to estimate fair value of the Company’s investments. These investments are carried on the balance sheet at original cost plus the amount of patronage earnings allocated to the Company, less any cash distributions received.

Note 12 - Related Party Transactions

During the nine months ended September 30, 2018 and 2017, the Company sold soybean products to Prairie AquaTech, LLC totaling $233,233 and $103,171, respectively. On May 15, 2018, the Company sold to Prairie AquaTech Manufacturing, LLC approximately 8 acres of land adjacent to the Company's facility in Volga, South Dakota, for $300,000. The land will be used for the construction and operation of a manufacturing facility.

Note 13 - Commitments

As of September 30, 2018, the Company had unpaid commitments of approximately $188,000 for construction and acquisition of property and equipment, all of which is expected to be incurred by December 2018.

Note 14 - Contingencies

From time to time in the ordinary course of our business, the Company may be named as a defendant in legal proceedings related to various issues, including without limitation, workers’ compensation claims, tort claims, or contractual dispute. The Company carries insurance that provides protection against general commercial liability claims, claims against our directors, officer and employees, business interruption, automobile liability, and workers' compensation. Except for the event listed below, the Company is not currently involved in any material legal proceedings and are not aware of any potential claims.

On November 5, 2015, an incident occurred at our facility in Volga, South Dakota which resulted in the death of an outside contractor. The contractor was in the process of installing a catwalk in the vicinity of an oil storage tank when the incident occurred. No other injuries were reported, and property damage from the accident was limited to the tank and surrounding piping. The U.S. Occupational Safety and Health Administration ("OSHA") initiated an investigation into the incident and later cited the Company for six violations along with assessing a fine of $22,565. On April 21, 2017, the Company was named as a defendant in a lawsuit filed in the U.S. District Court for the District of South Dakota. The plaintiffs, the heirs of the deceased contractor, alleged that the Company did not exercise ordinary care and awareness at the time of the incident, thus resulting in the contractor's death. On April 23, 2018, the Company entered into a settlement agreement with the plaintiffs. All monetary damages of the settlement have been paid by the Company's general liability and umbrella insurance policies.

Note 15 - Subsequent Event

The Company evaluated all of its activities and concluded that no subsequent events have occurred that would require recognition in its financial statements or disclosed in the notes to its financial statements.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

Forward-Looking Statements

The information in this quarterly report on Form 10-Q for the nine-month period ended September 30, 2018, (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, 2017. 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, 2017.

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

During the nine-month period ended September 30, 2018, we recorded a net income of $14.7 million, compared to $7.8 million during the same period in 2017. Several factors contributed to this change.

First, late in the first quarter of 2018, soybean processing margins began to improve on the belief that drought-stressed crops in Argentina would impact South American processors and shift soybean meal export business to the U.S. Since Argentina processes the majority of the soybeans grown there, soybean meal prices began rising faster than soybean prices in the U.S. which resulted in a rapid expansion in board crush margins.

Second, the trade disputes between the U.S. and China caused a dramatic reduction in soybean prices in May 2018. China's implementation of a 25% tariff on U.S. soybeans effectively slowed soybean exports and shifted soybean demand to Brazil and Argentina. Since China does not buy or import soybean meal or oil, soybean meal and oil prices did not fall at the same rate as soybeans which helped generate even higher board crush levels. In addition, the increased demand for soybeans from South America due to the drought made it difficult for processors in South America to compete for beans. As a result, these processors were forced to increase meal premiums, which shifted demand for soybean meal back to the U.S.

Third, the USDA anticipates a record soybean crop in the U.S. this fall, which has contributed to downward pressure on soybean prices and provided us access to an ample supply of soybeans at historically low basis levels.

Finally, our two processing facilities have operated very well in 2018, achieving a record crush volume over the past nine months.

Looking forward, we believe that we will continue to benefit from the above factors affecting the industry and our operations. As long as we have no production problems or changes, we anticipate a profitable fourth quarter. Threats to future profitability include a resolution to the Chinese trade dispute, which may increase soybean prices at a faster pace than soybean meal and oil and cause a sharp reduction in margins. Additionally, the forward board margins are sharply inverted which makes it difficult to secure forward processing margins at currently available levels.

RESULTS OF OPERATIONS

Comparison of the three months ended September 30, 2018 and 2017



	Three Months Ended September 30, 2018					Three Months Ended September 30, 2017
	$			% of Revenue		$			% of Revenue
Revenue	$	100,303,757		100.0		$	93,114,711		100.0
Cost of revenues	(87,713,172		)	(87.4	)	(88,919,364		)	(95.5	)
Operating expenses	(1,009,383		)	(1.0	)	(787,579		)	(0.8	)
Other income (expense)	26,468			—		(68,918		)	(0.1	)
Income tax benefit (expense)	—			—		—			—

Net income	$	11,607,670		11.6		$	3,338,850		3.6

Revenue – Revenue increased $7.2 million, or 7.7%, for the three-month period ended September 30, 2018, compared to the same period in 2017. The increase in revenues is primarily due to a 10.9% increase in the average sales price of soybean meal and a 13.7% increase in the quantity of soybeans processed, which increased the volume of our soybean products available for sale to customers. A severe drought in Argentina, which is responsible for almost 30% of the world's soybean meal exports, shifted demand for meal to the U.S., allowing producers like us to benefit from increased export opportunities.

Gross Profit/Loss – Gross profit increased $8.4 million, or 200.1%, for the three-month period ended September 30, 2018, compared to the same period in 2017. The increase in gross profit is primarily driven by two factors, the effect of a severe drought in Argentina and the threat and imposition of tariffs by China on the U.S. soybean export market. The drought in Argentina, the country responsible for almost 30% of the world's soybean meal exports, shifted demand for meal to the U.S. and allowed producers like us to benefit from increased export opportunities. The threat and imposition of tariffs by China on U.S. soybeans resulted in a decrease in U.S. soybean prices which improved processing margins for our products.

Operating Expenses – Administrative expenses, including all selling, general and administrative expenses, increased $222,000, or 28.2%, for the three-month period ended September 30, 2018, compared to the same period in 2017. The increase is largely due an increase in personnel costs.

Interest Expense – Interest expense increased $104,000, or 49.3%, during the three months ended September 30, 2018, compared to the same period in 2017. The increase in interest expense is due primarily to increased borrowings, which resulted from, or are associated with, increases in inventory quantities, commodity prices, and capital investments along with an increase in interest rates on our senior debt with CoBank. The average debt level during the three-month period ended September 30, 2018 was approximately $29.7 million, compared to $24.8 million for the same period in 2017. As of September 30, 2018, the interest rate on our revolving long-term loan was 4.67%, compared to 3.69% as of September 30, 2017.

Other Non-Operating Income – Other non-operating income, including patronage dividend income, increased $199,000, or 140.5%, during the three months ended September 30, 2018, compared to the same period in 2017. The increase is primarily due to an improvement in the equity method investments in Prairie AquaTech, LLC and affiliates as well as an increase in patronage dividend income. During the three-month period ended September 30, 2018, gains on equity method investments totaled $92,000, compared to $0 during the same period in 2017. In addition, CoBank issued to us a dividend in the amount of $50,000 during the quarter ended September 30, 2018, compared to $0 during the same period in 2017.

Net Income/Loss – During the three-month period ended September 30, 2018, we generated a net income of $11.6 million, compared to $3.3 million for the same period in 2017. The $8.3 million improvement in net income is primarily attributable to increases in gross profit and other non-operating income.

Comparison of the nine months ended September 30, 2018 and 2017



	Nine Months Ended September 30, 2018					Nine Months Ended September 30, 2017
	$			% of Revenue		$			% of Revenue
Revenue	$	291,928,015		100.0		$	284,339,714		100.0
Cost of revenues	(274,550,352		)	(94.0	)	(274,676,791		)	(96.6	)
Operating expenses	(2,791,039		)	(1.0	)	(2,433,650		)	(0.9	)
Other income (expense)	121,271			—		549,508			0.2
Income tax benefit (expense)	(1,960		)	—		(1,941		)	—

Net income	$	14,705,935		5.0		$	7,776,840		2.7

Revenue – Revenue increased $7.6 million, or 2.7%, for the nine-month period ended September 30, 2018, compared to the same period in 2017. The increase in revenues is primarily due to an 8.7% increase in the average sales price of soybean meal, which increased due to severe drought in Argentina. The drought in Argentina, which is responsible for almost 30% of the world's soybean meal exports, shifted demand for meal to the U.S., allowing producers like us to benefit from increased export opportunities.

Gross Profit/Loss – Gross profit increased $7.7 million, or 79.8%, for the nine-month period ended September 30, 2018, compared to the same period in 2017. The increase in gross profit is primarily driven by two factors, the effect of a severe drought in Argentina and the threat and imposition of tariffs by China on the U.S. soybean export market. The drought in Argentina, the country responsible for almost 30% of the world's soybean meal exports, shifted demand for meal to the U.S. and allowed producers like us to benefit from increased export opportunities. The threat and imposition of tariffs by China on U.S. soybeans resulted in a decrease in U.S. soybean prices which has improved processing margins for our products.

Operating Expenses – Administrative expenses, including all selling, general and administrative expenses, increased $357,000, or 14.7%, for the nine-month period ended September 30, 2018, compared to the same period in 2017. The increase is primarily due to an increase in personnel costs.

Interest Expense – Interest expense increased $461,000, or 88.6%, during the nine months ended September 30, 2018, compared to the same period in 2017. The increase in interest expense is due primarily to increased borrowings, which resulted from, or are associated with, increases in inventory quantities, commodity prices, and capital investments, along with an increase in interest rates on our senior debt with CoBank. The average debt level during the nine-month period ended September 30, 2018 was approximately $32.4 million, compared to $20.3 million for the same period in 2017. As of September 30, 2018, the interest rate on our revolving long-term loan was 4.67%, compared to 3.69% as of September 30, 2017.

Other Non-Operating Income – Other non-operating income, including patronage dividend income, remained relatively unchanged during the nine months ended September 30, 2018, compared to the same period in 2017.

Net Income/Loss – During the nine-month period ended September 30, 2018, we generated a net income of $14.7 million, compared to a net income of $7.8 million for the same period in 2017. The $6.9 million improvement in net income is primarily attributable to an increase in gross profit.

LIQUIDITY AND CAPITAL RESOURCES

Our primary sources of liquidity are cash provided by operations and borrowings under our two lines of credit which are discussed below under “Indebtedness.” On September 30, 2018 and 2017, we had working capital, defined as current assets less current liabilities, of approximately $18.8 million and $16.6 million, respectively. While working capital was positively affected by approximately $13.7 million in net income since September 30, 2017, it was offset during the same period by $7.7 million in purchases of property and equipment, $5.1 million in distributions to members, and $5.0 million in investment purchases. Based on our current operating plans, we believe that we will be able to fund our operating and capital needs for the foreseeable future from cash from operations and revolving lines of credit.

The following is a summary of our cash flow from operating, investing and financing activities for each of the nine-month periods ended September 30, 2018 and 2017:



	2018			2017
Net cash provided by operating activities	$	14,712,458		$	7,066,937
Net cash used for investing activities	(10,564,434		)	(12,576,693		)
Net cash used for financing activities	(4,139,341		)	(5,727,476		)

Cash Flows Provided By Operations

The $7.6 million increase in cash flows provided by operating activities is attributed to a $6.9 million increase in net income during the nine-month period ended September 30, 2018, compared to the same period in 2017.

Cash Flows Used For Investing Activities

The $2.0 million decrease in cash flows used for investing activities is primarily due to a $6.8 million decrease on capital improvements during the nine-month period ended September 30, 2018, compared to the same period in 2017. During the nine months ended September 30, 2018, we spent approximately $5.9 million on capital improvements, compared to $12.7 million during the same period in 2017. Partially offsetting the decreased capital improvements was an additional $5.0 million equity investment in Prairie AquaTech, LLC and its affiliates during the nine months ended September 30, 2018, compared to $0 during the same period in 2017.

Cash Flows Used For Financing Activities

The $1.6 million decrease in cash flows provided by financing activities is principally due to a $4.4 million decrease in distributions to members. Distributions to members totaled approximately $5.1 million during the nine-month period ended September 30, 2018, compared to $9.4 million during the same period in 2017. Partially offsetting the decrease in distributions to members was a $2.8 million decrease in net proceeds on borrowings. During the nine months ended September 30, 2018, net proceeds on borrowings was $0.9 million, compared to $3.7 million during the same period in 2017.

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 the terms of this loan, we may borrow funds as needed up to the credit line maximum, or $24.0 million, and then pay down the principal whenever excess cash is available. Repaid amounts may be borrowed up to the available credit line. On March 20, 2018, the available credit line decreased by $2.0 million, and decreases by the same amount every six months thereafter until the credit line’s maturity on September 20, 2023. We pay a 0.40% annual commitment fee on any funds not borrowed. The principal balance outstanding on the revolving term loan is $5.7 million and $4.4 million as of September 30, 2018 and December 31, 2017. Under this loan, $14.3 million in additional funds was available to be borrowed as of September 30, 2018.

The second credit line is a revolving working capital (seasonal) loan that matures on December 1, 2018. The primary purpose of this loan is to finance inventory and receivables. The maximum we may borrow under this credit line until the loan's maturity is $20 million. Borrowing base reports and financial statements are required monthly to justify the balance borrowed on this line. 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 agreement to avoid the commitment fee. As of September 30, 2018 and December 31, 2017, there were no advances outstanding on the seasonal loan, thus making available $20.0 million to borrow as of September 30, 2018.

Both 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 is 4.56% and 4.02% as of September 30, 2018 and December 31, 2017, respectively. As of September 30, 2018 and December 31, 2017, the interest rate on the seasonal loan is 4.42% and 3.77%, respectively. We were in compliance with all covenants and conditions under the loans as of September 30, 2018 and the date of this filing.

We also have a loan with the State of South Dakota Department of Transportation in connection with previous improvements made to the railway infrastructure near our soybean processing facility in Volga, South Dakota. Under this loan, which matures on June 1, 2020, we make annual principal and interest payments of $75,500. The principal balance outstanding on this loan was $665,222 as of September 30, 2018 and December 31, 2017.

OFF BALANCE SHEET FINANCING ARRANGEMENTS

Except as described below, we do not utilize variable interest entities or other off-balance sheet financial arrangements.

Lease Commitments

We have commitments under various operating leases for rail cars, various types of vehicles, and lab and office equipment. Our most significant lease commitments are for rail cars used in the transportation of our products. We have several long-term leases for hopper rail cars and oil tank cars with American Railcar Leasing, GATX Corporation, SMBC Rail Services, Trinity Capital and Wells Fargo Rail. Total lease expenses under these arrangements are approximately $2.4 million and $2.5 million for the nine-month periods ended September 30, 2018 and 2017, respectively.

In addition to rail car leases, we have a few operating leases for various equipment and storage facilities. Total lease expense under these arrangements are $34,000 and $27,000 for the nine months ended September 30, 2018 and 2017, respectively. Some of our leases include purchase options, none of which, however, are for a value less than fair market value at the end of the lease.

Contractual Obligations

The following table shows our contractual obligations for the periods presented:



	Payment due by period
CONTRACTUAL OBLIGATIONS	Total		Less than 1 year		1-3 years		3-5 years		More than 5 years
Long-Term Debt Obligations (1)	$	7,636,000	$	348,000	$	1,201,000	$	6,087,000	$	—

Operating Lease Obligations	8,829,000		2,844,000		4,699,000		1,270,000		16,000

Totals	$	16,465,000	$	3,192,000	$	5,900,000	$	7,357,000	$	16,000


(1)	Represents principal and interest payments on our notes payable, which are included on our Balance Sheet.

RECENT ACCOUNTING PRONOUNCEMENTS

See Note 1 of our Financial Statements under Part I, Item 1, for a discussion on the impact, if any, of the recently pronounced accounting standards.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

There have been no material changes to our critical accounting policies and estimates from those set forth in our Annual Report on Form 10-K for the year ended December 31, 2017.

We did adopt the requirements of ASC 606, Revenue from Contracts with Customers, as of January 1, 2018. However, no revenue recognition policies have been changed from our 2017 fiscal year after comparing the revenue recognition criteria under ASC 606 to previous requirements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

Commodities Risk & Risk Management. To reduce the price change risks associated with holding fixed price commodity positions, we generally take opposite and offsetting positions by entering into commodity futures contracts

(either a straight or options futures contract) on a regulated commodity futures exchange, the CBOT. While hedging activities reduce the risk of loss from changing market prices, such activities also limit the gain potential which otherwise could result from these significant fluctuations in market prices. Our policy is generally to maintain a hedged position within limits, but we can be long or short at any time. Our profitability is primarily derived from margins on soybeans processed, not from hedging transactions. We do not anticipate that our hedging activity will have a significant impact on future operating results or liquidity. Hedging arrangements do not protect against nonperformance of a cash contract.

At any one time, our inventory and purchase contracts for delivery to our facility may be substantial. We have risk management policies and procedures that include net position limits. They are defined by commodity, and include both trader and management limits. This policy and procedure triggers a review by management when any trader is outside of position limits. The position limits are reviewed at least annually with the board of managers. We monitor current market conditions and may expand or reduce the limits in response to changes in those conditions.

An adverse change in market prices would not materially affect our profitability since we generally take opposite and offsetting positions by entering into commodity futures and forward contracts as economic hedges of price risk.

Foreign Currency Risk. We conduct essentially all of our business in U.S. dollars and have minimal direct risk regarding foreign currency fluctuations. Foreign currency fluctuations do, however, impact the ability of foreign buyers to purchase U.S. agricultural products and the competitiveness of and demand for U.S. agricultural products compared to the same products offered by foreign suppliers.

Interest Rate Risk. We manage exposure to interest rate changes by using variable rate loan agreements with fixed rate options. Long-term loan agreements can utilize the fixed option through maturity; however, the revolving ability to pay down and borrow back would be eliminated once the funds were fixed.

As of September 30, 2018, we had $665,222 in fixed rate debt and $40 million of variable rate debt available to borrow. Interest rate changes impact the amount of our interest payments and, therefore, our future earnings and cash flows. Assuming other variables remain constant, a 1.0% increase in interest rates on our variable rate debt could have an estimated impact on profitability of approximately $400,000 per year.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures. Based on their evaluation as of the end of the period covered by this quarterly report on Form 10-Q, our principal executive officer and principal financial officer have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934) are effective to ensure that information required to be disclosed by us in reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in Securities and Exchange Commission rules and forms.

Changes in Internal Control Over Financial Reporting. There were no changes to our internal controls over financial reporting that materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting during the quarter ended September 30, 2018.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings.

From time to time in the ordinary course of our business, we may be named as a defendant in legal proceedings related to various issues, including without limitation, workers’ compensation claims, tort claims, or contractual dispute. We carry insurance that provides protection against general commercial liability claims, claims against our directors, officer and employees, business interruption, automobile liability, and workers' compensation. Except for the event listed below, we are not currently involved in any material legal proceedings and are not aware of any potential claims.

and surrounding piping. The U.S. Occupational Safety and Health Administration ("OSHA") initiated an investigation into the incident and later cited us for seven violations along with assessing a fine of $22,565. On April 21, 2017, we were named as a defendant in a lawsuit filed in the U.S. District Court for the District of South Dakota. The plaintiffs, the heirs of the deceased contractor, alleged that we did not exercise ordinary care and awareness at the time of the incident, thus resulting in his death. On April 23, 2018, we entered into a settlement agreement with the plaintiffs. All monetary damages of the settlement have been paid by and under our general liability and umbrella insurance policies.

Item 1A. Risk Factors.

During the quarter ended September 30, 2018, there were no material changes to the Risk Factors disclosed in Item 1A (Part I) of our 2017 Annual Report on Form 10-K.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

None.

Item 5. Other Information.

None.

Item 6. Exhibits.



Exhibit Number		Description
3.1(i)		Articles of Organization (1)
3.1(ii)		Operating Agreement, as amended (2)
3.1(iii)		Articles of Amendment to Articles of Organization (3)
4.1		Form of Class A Unit Certificate (4)
31.1		Rule 13a-14(a)/15d-14(a) Certification by Chief Executive Officer
31.2		Rule 13a-14(a)/15d-14(a) Certification by Chief Financial Officer
32.1		Section 1350 Certification by Chief Executive Officer
32.2		Section 1350 Certification by Chief Financial Officer

____________________________________________________________________________

(1) Incorporated by reference from Appendix B to the information statement/prospectus filed as a part of the issuer’s Registration Statement on Form S-4 (File No. 333-75804).

(2) Incorporated by reference from the same numbered exhibit to the issuer’s Form 8-K filed on June 22, 2017.

(3) Incorporated by reference from the same numbered exhibit to the issuer’s Form 10-Q filed on August 14, 2002.

(4) Incorporated by reference from the same numbered exhibit to the issuer’s Registration Statement on Form S-4 (File No. 333-75804).

SIGNATURES

In accordance with the requirements of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.



			SOUTH DAKOTA SOYBEAN PROCESSORS, LLC

Dated:	November 8, 2018	By	/s/ Thomas Kersting
			Thomas Kersting, Chief Executive Officer
			(Principal Executive Officer)

Dated:	November 8, 2018	By	/s/ Mark Hyde
			Mark Hyde, Chief Financial Officer
			(Principal Financial Officer)