NORTHERN GROWERS LLC - 10-Q Quarterly Report

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

ý QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2004

o 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. 333-97215

NORTHERN GROWERS, LLC

(Exact name of registrant as specified in its charter)

SOUTH DAKOTA		77-0589881
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

48416 144^th Street, PO Box 356, Big Stone City, SD 57216

(Address of principal executive offices)

605-862-7902

(Issuer’s telephone number)

205 East 22^nd Avenue, Milbank, South Dakota 57252

(Former name, former address and former fiscal year, if changed since last report)

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 ý No o

Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).

Yes o No ý

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 o No o

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 2, 2004, the issuer had 6,328,500 Class A capital units outstanding.

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

NORTHERN GROWERS, LLC

UNAUDITED CONSOLIDATED

FINANCIAL STATEMENTS

SEPTEMBER 30, 2004 AND 2003

NORTHERN GROWERS, LLC

Table of Contents

CONSOLIDATED FINANCIAL STATEMENTS
	Consolidated Balance Sheets (Unaudited)
	Consolidated Statements of Operations (Unaudited)
	Consolidated Statements of Cash Flows (Unaudited)
	Notes to Unaudited Consolidated Financial Statements

NORTHERN GROWERS, LLC

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

	September 30, 2004			December 31, 2003*			September 30, 2004
							Pro Forma
							(See Note 6)
ASSETS

CURRENT ASSETS
Cash	$	2,233		$	2,865,310		$	102,058
Accounts receivable
Trade related party	5,284,662			3,590,952			5,284,662
Trade	572,163			500,885			572,163
Other	342,299			302,546			342,299
Other - related party	77,667			77,667			77,667
Inventory	2,623,500			4,304,080			2,623,500
Prepaid expenses	173,013			99,587			173,013
Investment in commodity contracts	207,851			181,446			207,851
Total current assets	9,283,388			11,844,806			9,383,213

PROPERTY AND EQUIPMENT
Land improvements	3,952,582			3,520,698			3,952,582
Equipment	34,069,778			33,710,785			34,069,778
Buildings	8,117,709			8,124,155			8,117,709
	46,140,069			45,355,638			46,140,069
Less accumulated depreciation	(5,494,544		)	(3,619,905		)	(5,494,544		)
Net property and equipment	40,645,525			41,735,733			40,645,525

OTHER ASSETS
Financing costs	128,525			205,662			128,525
Total other assets	128,525			205,662			128,525

	$	50,057,438		$	53,786,201		$	50,157,263

*Derived from audited financial statements

See Notes to Unaudited Consolidated Financial Statements

NORTHERN GROWERS, LLC

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

	September 30, 2004		December 31, 2003*		September 30, 2004
					Pro Forma
					(See Note 6)
LIABILITIES AND MEMBERS’ EQUITY

CURRENT LIABILITIES
Checks in excess of bank balance	$	324,948	$	—	$	324,948
Accounts payable - trade	1,226,489		1,339,505		1,226,489
Accounts payable - corn	1,807,503		4,179,050		1,807,503
Accounts payable - related party	53,077		204,220		53,077
Accounts payable - construction - related party	—		476,216		—
Other accrued liabilities	425,661		501,574		425,661
Accrued interest	8,259		10,119		8,259
Distribution payable - Northern Growers	—		1,343,224		—
Distributions payable - Minority member	—		456,800		—
Notes payable - due upon demand	5,000		5,000		5,000
Current portion of long-term notes payable	3,330,485		3,134,922		3,330,485
Total current liabilities	7,181,422		11,650,630		7,181,422

LONG-TERM NOTES PAYABLE	17,474,573		20,053,377		20,474,573

COMMITMENTS AND CONTINGENCIES

MINORITY INTEREST	5,805,049		5,014,499		5,119,849

MEMBERS’ EQUITY
Capital units, $2.00 stated value, 12,000,000 units authorized; 6,328,500 units issued and outstanding	12,657,000		12,657,000		12,657,000
Additional paid-in capital	64,900		64,900		64,900
Retained earnings	6,874,494		4,345,795		4,659,519

Total members’ equity	19,596,394		17,067,695		17,381,419

	$	50,057,438	$	53,786,201	$	50,157,263

*Derived from audited financial statements

See Notes to Unaudited Consolidated Financial Statements

NORTHERN GROWERS, LLC

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

	Three Months Ended September 30,			Three Months Ended September 30,			Nine months Ended September 30,			Nine months Ended September 30,
	2004			2003			2004			2003

REVENUES
Sales related party	$	17,904,104		$	12,593,467		$	51,261,770		$	37,453,148
Sales	4,040,907			3,266,259			12,429,473			10,105,595
Incentive	351,894			250,334			1,272,240			4,916,787
Total revenues	22,296,905			16,110,060			64,963,483			52,475,530

COST OF REVENUES	19,969,224			14,287,471			58,616,084			44,640,739

GROSS PROFIT	2,327,681			1,822,589			6,347,399			7,834,791

EXPENSES
General and administrative	657,864			697,333			1,937,661			2,005,739
Total operating expenses	657,864			697,333			1,937,661			2,005,739

INCOME FROM OPERATIONS	1,669,817			1,125,256			4,409,738			5,829,052

OTHER INCOME (EXPENSES)
Interest income	1,595			2,066			5,687			2,066
Interest expense	(376,559		)	(458,278		)	(1,132,037		)	(1,445,763		)
Other	13,040			6,904			35,862			19,472
Total other (expenses)	(361,924		)	(449,308		)	(1,090,488		)	(1,424,225		)

INCOME BEFORE MINORITY INTEREST	1,307,893			675,948			3,319,250			4,404,827

MINORITY INTEREST IN SUBSIDIARY (INCOME)	(305,533		)	(186,367		)	(790,550		)	(1,081,535		)

NET INCOME	$	1,002,360		$	489,581		$	2,528,700		$	3,323,292


BASIC AND DILUTED EARNINGS PER UNIT	$	0.16		$	0.08		$	0.40		$	0.53

BASIC AND DILUTED WEIGHTED AVERAGE UNITS OUTSTANDING	6,328,500			6,328,450			6,328,500			6,328,450

DISTRIBUTIONS PER UNIT DECLARED	$	—		$	0.29		$	—		$	0.58

DISTRIBUTIONS PER UNIT PAID	$	—		$	0.40		$	0.21		$	0.58

See Notes to Unaudited Consolidated Financial Statements

NORTHERN GROWERS, LLC
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2004 AND 2003

	2004			2003
OPERATING ACTIVITIES
Net income	$	2,528,700		$	3,323,292
Changes to net income not affecting cash
Depreciation	1,877,778			1,826,468
Amortization of loan fees	77,137			76,418
Minority interest in subsidiary’s earnings	790,550			1,081,535
Decrease (increase) in current assets
Accounts receivable	(1,882,408		)	2,830,553
Inventory	1,680,580			1,737,966
Prepaid expenses	(73,426		)	(73,019		)
Investment in commodity contracts	(26,405		)	26,218
Increase (decrease) in current liabilities
Accounts payable	(2,635,706		)	(2,539,629		)
Accrued liabilities	(75,913		)	142,699
Accrued interest	(1,860		)	(161,521		)

NET CASH PROVIDED BY OPERATING ACTIVITIES	2,259,027			8,270,980

INVESTING ACTIVITIES
Purchase of property and equipment	(1,263,787		)	(1,037,155		)

NET CASH USED FOR INVESTING ACTIVITIES	(1,263,787		)	(1,037,155		)

FINANCING ACTIVITIES
Notes payable issued	—			1,500,000
Change in short-term notes payable	—			(1,000,000		)
Principal paid on long-term notes payable	(2,383,241		)	(7,253,825		)
Distributions paid - Northern Growers	(1,343,224		)	(3,650,595		)
Distributions paid - Minority member	(456,800		)	(1,199,091		)
Financing costs paid	—			(4,209		)
Checks in excess of bank balances	324,948			—

NET CASH USED FOR FINANCING ACTIVITIES	(3,858,317		)	(11,607,720		)

NET DECREASE IN CASH	(2,863,077		)	(4,373,895		)

CASH AT BEGINNING OF PERIOD	2,865,310			4,577,457

CASH AT END OF PERIOD	$	2,233		$	203,562

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for interest, net of capitalized interest	$	1,056,762		$	1,524,605

See Notes to Unaudited Consolidated Financial Statements

NORTHERN GROWERS, LLC
NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS
SEPTEMBER 30, 2004 AND 2003

NOTE 1 - NATURE OF OPERATIONS

Principal Business Activity

Northern Growers, LLC or the Company, (formerly Northern Growers Cooperative or the Cooperative) is a South Dakota limited liability company located near Big Stone City, South Dakota. The Company was organized to pool investors and provide a portion of the corn supply for a 40 million gallon (annual capacity) ethanol plant owned by Northern Lights Ethanol, LLC (Northern Lights). Northern Lights was formed on February 14, 2001. On June 26, 2002, the plant began grinding corn and on July 5, 2002, the ethanol plant commenced its principal operations.

On April 1, 2002, Whetstone Ethanol, LLC (Whetstone) was formed. The initial member of Whetstone was the Cooperative. Whetstone was formed for the purpose of acquiring the assets and liabilities of the Cooperative. On April 10, 2002, the Board of Directors of the Cooperative approved a plan of reorganization related to an exchange whereby Whetstone would acquire the assets and liabilities of the Cooperative. On March 27, 2003, the members of the Cooperative approved the plan of reorganization. The effective date of the reorganization was April l, 2003. The transaction was an exchange of interests whereby the assets and liabilities of the Cooperative were transferred for capital units of Whetstone. For financial statement purposes, no gain or loss was recorded as a result of the exchange transaction.

As a result of the exchange, the Cooperative was dissolved, with Whetstone’s capital units distributed to the members of the Cooperative at a rate of one Whetstone capital unit for each share of equity common stock and all voting common stock of the Cooperative surrendered and retired. In connection with the reorganization, Whetstone changed its name to Northern Growers, LLC. A minimum of 5,000 capital units is required for ownership of the Company. Such units are subject to certain transfer restrictions, including approval by the Board of Managers of the Company. The Company also retains the right to redeem the capital units at $.20 per unit in the event a member attempts to dispose of the units in a manner not in conformity with the Operating Agreement, if a member becomes a holder of less than 5,000 units, if a member breaches their member agreement or becomes a bankrupt member. The Operating Agreement of the Company also includes provisions whereby cash flow in excess of $200,000 will be distributed to unit holders subject to limitations imposed by a super majority vote of the Board of Managers or restrictions imposed by loan covenants.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The unaudited financial statements contained herein have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all the information and footnotes required by accounting principles generally accepted in the United States of America.

In the opinion of management, all adjustments considered necessary for a fair presentation have been included in the accompanying financial statements. All such adjustments are of a normal, recurring nature. The results of operations for the three and nine month period ended September 30, 2004 and 2003 are not necessarily indicative of the results to be expected for a full year.

These financial statements should be read in conjunction with the financial statements and notes included in the Company’s financial statements for the year ended December 31, 2003.

As a result of the reorganization mentioned above, the financial statements of the prior periods have been restated to reflect the comparative basis of the Company as a limited liability company versus the Cooperative.

NORTHERN GROWERS, LLC
NOTES TO UNAUDITED FINANCIAL STATEMENTS
SEPTEMBER 30, 2004 AND 2003

Principles of Consolidation

The consolidated financial statements include the accounts of the Company and its 77.16% owned subsidiary, Northern Lights. All significant inter-company transactions and balances have been eliminated in consolidation.

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 amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reporting period. Actual results could differ from those estimates.

Reclassifications

Certain amounts on the 2003 financial statements have been reclassified to conform to the current year classification. Such reclassifications had no effect on previously reported net income.

NOTE 3 - INVENTORY

Inventory consisted of the following:

	September 30, 2004		December 31, 2003*
	(Unaudited)

Finished goods	$	1,152,262	$	1,592,046
Raw materials	490,525		1,848,207
Work-in-process	363,715		365,060
Spare parts inventory	616,998		498,767

	$	2,623,500	$	4,304,080

* Derived from audited financial statements.

NOTE 4 - LONG-TERM NOTES PAYABLE

Long-term notes payable with US Bank consisted of the following:

	September 30, 2004			December 31, 2003*
	(Unaudited)

Variable rate, non-revolving loan	$	9,020,214		$	9,947,268
Variable rate, revolving loan	47,496			—
Fixed rate loan	10,882,190			12,175,858
Promissory note	855,158			1,065,173
	20,805,058			23,188,299
Less current portion	(3,330,485		)	(3,134,922		)
	$	17,474,573		$	20,053,377

*Derived from audited financial statements

NORTHERN GROWERS, LLC
NOTES TO UNAUDITED FINANCIAL STATEMENTS
SEPTEMBER 30, 2004 AND 2003

Northern Lights is subject to certain restrictive covenants establishing minimum reporting requirements, ratios, working capital and net worth requirements. Annually, the financing arrangements with US Bank include terms whereby Northern Lights makes an additional principal payment equal to 15% of Northern Lights’ excess cash flow (as defined by the agreement), not to exceed 20% of the outstanding principal balance. In conjunction with Northern Lights’ dividend distributions on February 10, 2004, additional excess cash flow payments of $335,664 were made on the fixed rate loan. In addition, no more than 80% of net income of Northern Lights can be distributed to its owners.

Minimum principal payments for each of the next four years are as follows:

Twelve Months Ending September 30,	Amount

2005	$	3,330,485
2006	3,180,069
2007	3,321,419
2008	10,973,085

	$	20,805,058

Minimum principal payments for the twelve months ending September 30, 2005, include approximately $360,000 related to the calculation of additional principal due based on excess cash flow as required by the financing arrangements.

The availability under the variable rate revolving loan was $4,952,504 at September 30, 2004 and $5,000,000 at December 31, 2003.

NOTE 5 - COMMITMENTS, CONTINGENCIES AND AGREEMENTS

The Company or Northern Lights has entered into contracts and agreements regarding the construction, operation and management of the ethanol plant. The following are items of significance that have been updated through September 30, 2004.

Northern Lights receives an incentive payment from the United States Department of Agriculture (USDA) for the use of corn to produce ethanol. In accordance with the terms of this arrangement, revenue is recorded based on incremental production of ethanol compared to the prior year. The USDA has set the annual maximum not to exceed $7,500,000 for each eligible producer. The incentive is calculated on the USDA fiscal year of October 1 to September 30. Revenue of $816,410, $7,500,000 and $3,224,280 has been earned for the USDA program years ended September 30, 2004, 2003 and 2002, respectively. Incentive revenue of $855,572 and $3,982,018 was recorded for the nine months ended September 30, 2004 and 2003, respectively, for this program.

Northern Lights also receives an incentive payment from the State of South Dakota to produce ethanol. In accordance with the terms of this arrangement, revenue is recorded based on ethanol sold. The State of South Dakota has set a maximum of up to $1,000,000 per year for this program per qualifying producer. Revenue of $333,334, $666,667 and $1,000,000 has been earned for the South Dakota program years ended June 30, 2005, 2004 and 2003, respectively. Incentive revenue of $416,667 and $934,770 was recorded for the nine months ended September 30, 2004 and 2003, respectively, for this program.

NORTHERN GROWERS, LLC
NOTES TO UNAUDITED FINANCIAL STATEMENTS
SEPTEMBER 30, 2004 AND 2003

NOTE 6 - DISTRIBUTIONS

During February 2004, Northern Lights distributed $2,000,000 of cash to its members. The Company received $1,543,200, and the minority member received $456,800. In conjunction with this cash distribution, the Company paid a distribution to its members of $1,343,224. The above distributions were recorded as a liability as of December 31, 2003.

During October 2004, the board of managers of Northern Lights declared a distribution of $3,000,000, pending approval by US Bank. In addition, the board of managers of Northern Growers approved a distribution to its members at a rate of $.35 per unit. During November 2004, US Bank approved the Northern Lights distribution. On November 12, 2004, Northern Growers received $2,314,800, and the minority member received $685,200. On November 12, 2004, Northern Growers distributed $2,214,975 by paying a $.35 per unit distribution. A pro forma balance sheet has been included in the accompanying financial statements to reflect the effects of this distribution as if the distribution had been paid on September 30, 2004. Adjustments applied to the historical September 30, 2004 financial statements included an increase of cash of $99,825, an increase to long-term notes payable of $3,000,000, a decrease to the minority interest of $685,200, and a decrease to retained earnings of $2,214,975. An excess cash flow payment of $590,044 was also made on November 12, 2004, applied to the US Bank fixed rate loan, in conjunction with the Northern Lights distribution.

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

You should read the following discussion along with our financial statements, the notes to our financial statements included elsewhere in this report and our audited financial statements for our most recently completed fiscal year included in our annual report on Form 10-KSB. The following discussion contains forward-looking statements that are subject to risks, uncertainties and assumptions. Our actual results, performance and achievements may differ materially from those expressed in, or implied by, these forward-looking statements. See “Cautionary Statement Regarding Forward-Looking Information.”

Overview

Northern Growers, LLC is a South Dakota limited liability company that owns and manages a 77.16% interest in Northern Lights Ethanol, LLC. Broin Investments I, LLC owns the remaining minority interest. Northern Lights operates an ethanol plant near Big Stone City, South Dakota which produces ethanol and distiller’s dried grains with solubles, or DDGS. The plant has the name-plate capacity to produce 40 million gallons of ethanol and 120,000 tons of DDGS on an annual basis. Northern Growers’ members are primarily local agricultural producers and they supply a significant portion of the plant’s corn requirements.

Northern Lights Ethanol’s operating and financial performance is largely driven by the prices at which it sells ethanol and DDGS and the costs related to production. The

price of ethanol and DDGS is influenced by factors such as supply and demand, prices of unleaded gasoline, soybean meal and other animal feed protein markets, weather, and government policies and programs. Although federal and state government incentive programs have been a significant source of revenue and income since Northern Lights began production, the programs are less significant today because of the means by which the programs structure, fund, and condition the payments. With respect to the various costs in the production process, the two most significant are the costs of corn and natural gas. The cost of natural gas and corn is impacted by factors such as supply and demand, weather, government policies and programs, and the risk management strategy used to protect against the price volatility of these commodities.

In the third quarter of 2004, net income increased from the third quarter of 2003. The increase in net income was primarily caused by an increase in revenues from the sale of ethanol and DDGS. Revenue from the sale of ethanol and DDGS increased primarily because of higher sales prices and increased production, all of which offset the contemporaneous increase in cost of revenues. From the nine months ended September 30, 2003 to the nine months ended September 30, 2004, net income decreased largely because of a substantial decrease in incentive revenue and an increase in cost of revenues, offset by an increase in revenues from the sale of ethanol and DDGS.

RESULTS OF OPERATIONS

Comparison of the three months ended September 30, 2004 and 2003

The following table presents, for the periods indicated, the relative composition of selected income data:

	Quarter Ended September 30,
	2004					2003
	$			% of Revenue		$			% of Revenue
Revenue:
Ethanol	17,904,104			80	%	12,593,467			78	%
DDGS	4,040,907			18	%	3,266,259			20	%
Incentive	351,894			2	%	250,334			2	%
Total	22,296,905			100	%	16,110,060			100	%

Cost of Revenues	19,969,224			90	%	14,287,471			89	%

General and Administrative Expense	657,864			3	%	697,333			4	%

Other Operating Income (Expense)	(361,924		)	(2	)%	(449,308		)	(3	)%

Minority Interest in Subsidiary	(305,533		)	(1	)%	(186,367		)	(1	)%
Net Income	$	1,002,360		4	%	$	489,581		3	%

Revenues- Revenue from the sale of ethanol increased approximately 42% from the three months ended September 30, 2003 to the three months ended September 30, 2004. The increase is due primarily to a 26% increase in the average sales price per gallon of ethanol, along with a 13% increase in the volume of ethanol sold. The price increase is due primarily to the continued trends of higher prices for unleaded gasoline and strong demand for ethanol. The increase in volume sold was facilitated by an increase in production volumes, caused principally by an improvement in plant efficiencies.

Revenue from the sale of DDGS increased approximately 24% from the three months ended September 30, 2003 to the three months ended September 30, 2004. The increase is due primarily to an 18% increase in the volume of DDGS sold, resulting in part from increased production at the plant.

In addition, the total incentive revenues from federal and state government incentive programs increased by 41% from the three months ended September 30, 2003 to the three months ended September 30, 2004. The incentive revenue from the United States Department of Agriculture’s Commodity Credit Corporation Bioenergy Program increased $102,000 or 100% to $102,000 for the quarter ended September 30, 2004 from $0 for the third quarter of 2003. During the second quarter of 2003, Northern Lights reached the maximum payment allowable under the program, which resulted in no revenue being earned during the third quarter of 2003.

Incentive revenue from the state of South Dakota remained constant at $250,000 for the third quarters of 2003 and 2004. Management anticipates, however, that payments under this program are not likely to continue through the entire 2005 program year (through June 30, 2005), as available funding is expected to be depleted in full before the end of the program year.

Management anticipates that the passage of the American Jumpstart Our Business Strength Act (JOBS) on October 22, 2004, will have a positive effect on the ethanol industry overall through 2010. Before passage of this legislation, ethanol plants were able to sell ethanol at prices competitive with less expensive additives and gasoline through an excise tax exemption. Blenders of ethanol were able to claim an exemption of $0.052 per gallon from the excise tax of $0.184 per gallon for a 10% ethanol blend. Smaller exemption amounts were available for lower percentage ethanol blends. This incentive was expected to expire in 2007 until this legislation extended the incentive to 2010. The legislation also changed the exemption to a $0.051 tax credit, basing the credit not on an ethanol blend percentage but on the volume of ethanol used by the blender. It is expected that the credit will continue to encourage use of ethanol in the blending process and even more than before this legislation, all of which should contribute to higher use and demand for ethanol.

Cost of Revenues-Cost of revenues increased $5.7 million or 40% to $20.0 million for the three months ended September 30, 2004 from $14.3 million for the three months ended September 30, 2003. While the cost of revenues as a dollar amount increased 40% between quarters, the cost of revenues as a percentage of total revenue increased by only 1% from the third quarter of 2003 to the third quarter of 2004 as a result of rising sales revenues. The increase in cost of revenues as a dollar amount is due to an increase in the production of ethanol and DDGS and an increase in the overall cost of corn. Energy costs, including the costs of natural gas, remained relatively constant between quarters.

The increase in the cost of corn is primarily attributed to an increase in the market price of corn. The price of corn increased approximately 11% from the third quarter 2003 to the third quarter 2004. This increase is due to the impact of low world corn carryout prior to the 2004 growing season, downcast projections about the quantity of corn to be harvested, increased demand for corn nationally and globally, and inclement weather.

In addition, corn costs increased because of the corn price risk management strategy used in 2004, as losses sustained from hedging contract positions contributed approximately 17% of total corn costs. Losses on hedging contracts increased from approximately $365,000 during the three months ended September 30, 2003 to approximately $2,233,000 during the three months ended September 30, 2004. These losses were principally caused by the impact of significant price volatility of corn on such contracts during 2004.

While we believe that the price of corn will be subject to some volatility in the ensuing months, current industry forecasts predict a record corn crop. This is expected to decrease the price of corn and bring some overall stability in the next few months. Reduced corn costs may be partially offset, however, by the potential for an increase in natural gas costs during the winter months.

General and Administrative Expenses-General and administrative expenses decreased only $39,000 or 6% to $658,000 for the quarter ended September 30, 2004 from $697,000 for the third quarter of 2003.

Interest Expense-Interest expense decreased $81,000 or 18% to $377,000 for the quarter ended September 30, 2004 from $458,000 for the third quarter of 2003. The decrease in interest expense is primarily due to a $4.5 million reduction in outstanding debt from September 30, 2003 to September 30, 2004. Of the $4.5 million reduction, approximately $1.5 million of that reduction was made on the $5 million variable-rate, revolving note.

Net Income-Net income increased $500,000 to a net income of $1.0 million for the third quarter of 2004 from a net income of $500,000 for the third quarter of 2003. This change is caused primarily by an increase in revenue, resulting from an increase in the price of ethanol.

Comparison of the nine months ended September 30, 2004 and 2003

	Nine Months Ended September 30, 2004					Nine Months Ended September 30, 2003
	$			% of Revenue		$			% of Revenue
Revenue:
Ethanol	51,261,770			79	%	37,453,148			71	%
DDGS	12,429,473			19	%	10,105,595			19	%
Incentive	1,272,240			2	%	4,916,787			9	%
Total	64,963,483			100	%	52,475,530			100	%

Cost of Revenues	58,616,084			90	%	44,640,739			85	%

General and Administrative Expense	1,937,661			3	%	2,005,739			4	%

Other Operating Income (Expense)	(1,090,488		)	(2	)%	(1,424,225		)	(3	)%

Minority Interest in Subsidiary	(790,550		)	(1	)%	(1,081,535		)	(2	)%
Net Income	$	2,528,700		4	%	$	3,323,292		6	%

Revenue-Revenue increased $12.5 million or 24% to $65.0 million for the nine months ended September 30, 2004 from $52.5 million for the nine months ended September 30, 2003. The change in revenue is due to an increase in both ethanol and DDGS sales revenue, offset by a decrease in incentive revenue.

Revenue from the sale of ethanol increased 37% from the nine months ended September 30, 2003 to the nine months ended September 30, 2004. This increase is attributed to a 12% increase in volume of ethanol sold, along with a 24% increase in the sales price of ethanol. The increase in volume sold is due to a 12% increase in the volume of ethanol produced, all being facilitated by improvements in plant efficiency and strong demand for ethanol. The 24% increase in price of ethanol is similarly attributed to the strong demand for ethanol and a continuation of higher prices for unleaded gasoline.

Revenue from the sale of DDGS increased 23% from the nine months ended September 30, 2003 to the nine months ended September 30, 2004. This increase is due primarily to a 19% increase in volume sold during the period.

The incentive revenue from the United States Department of Agriculture’s Commodity Credit Corporation Bioenergy Program decreased $3,126,000 or 79% to $856,000 for the nine months ended September 30, 2004 from $3,982,000 for the nine months ended September 30, 2003. This decrease is attributed to payments under the

Bioenergy Program being based in part on a plant’s increase in production from the previous year’s corresponding quarter. Since Northern Lights did not commence production until July 2002, the difference in production between the first nine months of 2002 and the first nine months of 2003 reflected the largest increase in production and, therefore, the largest amount of incentive revenue being earned under the program. Because there was a significantly smaller increase in production from the nine months ended 2003 to the nine months ended 2004, less incentive revenue was earned in 2004.

Incentive revenue from the state of South Dakota decreased $518,000 or 55% to $417,000 for the nine months ended September 30, 2004, from $935,000 for the nine months ended September 30, 2003. The decrease between periods is primarily attributed to a change in payment formula and an earlier than anticipated depletion of funds during the 2004 program year.

Cost of Revenues-Cost of revenues increased $14.0 million or 31% to $58.6 million for the nine months ended September 30, 2004 from $44.6 million for the nine months ended September 30, 2003. While the cost of revenues as a dollar amount increased 31% between periods, the cost of revenues as a percentage of total revenue increased by only 5% because of rising sales revenue. The increase in cost of revenues as a dollar amount is primarily attributed to an increase in the volume of ethanol and DDGS produced and an increase in the overall cost of corn.

The increase in the cost of corn is primarily attributed to an increase in the market price of corn. The price of corn increased approximately 17% from the nine months ended September 30, 2003 to the nine months ended September 30, 2004. In addition, corn costs increased because of the risk management strategy used in 2004, as losses sustained from hedging and forward contract positions on corn contributed approximately 9% of total corn costs. Losses on hedging and forward contracts increased from approximately $280,000 during the nine months ended September 30, 2003 to approximately $4.7 million during the nine months ended September 30, 2004. These losses were principally caused by the impact of the price volatility of corn on such contracts during 2004.

Although natural gas costs remained relatively flat between the nine months ended September 30, 2004 and nine months ended September 30, 2003, total energy costs per gallon of ethanol produced decreased by 8% during the same period. The decrease in energy costs is the result of newly improved efficiencies from the use of steam at the adjacent Big Stone Power Plant. During the first three months of 2003, the transfer and use of steam in the production process from the Big Stone Power Plant was not yet fully operational, resulting in a greater reliance on natural gas in the production process and, therefore, leading to higher energy costs in 2003 compared to 2004.

General and Administrative Expenses-General and administrative expenses decreased only $68,000 or 3% to $1,938,000 for the nine months ended September 30, 2004, from $2,006,000 for the nine months ended September 30, 2003.

Interest Expense-Interest expense decreased $300,000 or 21% to $1.1 million for the nine months ended September 30, 2004 from $1.4 million for the nine months ended September 30, 2003. The decrease in interest expense is primarily due to a $4.5 million reduction in outstanding debt from September 30, 2003 to September 30, 2004. Of the $4.5 million reduction, approximately $1.5 million of that reduction was made on the $5 million variable-rate, revolving note.

Net Income-Net income decreased $800,000 or 24% to $2.5 million for the nine months ended September 30, 2004 from $3.3 million for the nine months ended September 30, 2003. This change is the result of, as discussed above, the decrease in incentive revenue and the increase in overall corn costs.

Liquidity and Capital Resources

The following table shows the cash flows between the nine months ended September 30, 2004 and the nine months ended September 30, 2003:

	Nine Months Ended September 30,
	2004		2003
	$		$
Net cash from operating activities	2,259,027		8,270,980
Net cash (used for) investing activities	(1,263,787	)	(1,037,155	)
Net cash (used for) financing activities	(3,858,317	)	(11,607,720	)

Cash Flow From Operating Activities- The decrease of approximately $6.0 million in net cash flow provided from operating activities between 2003 and 2004 is due to, in addition to a decrease in net income between periods, an increase in accounts receivable being outstanding in 2004 and a decrease in accrued liabilities outstanding in 2003. In 2003, accounts receivable decreased by $3.5 million because of substantial payments received from the incentive programs. In contrast, incentive programs provided less cash in 2004 because of the means by which the programs condition the payments. Accounts receivable also increased in 2004 because of the increase in the market value of ethanol.

Cash Flow From Investing Activities-The increase of approximately $227,000 in net cash flow used for investing activities from September 30, 2003 to September 30, 2004 is attributed to an increase in capital improvement projects at the plant.

Cash Flow From Financing Activities-The decrease of approximately $7.7 million in net cash flow from financing activities from September 30, 2003 to September 30, 2004 is due principally to a $3.5 million payment on the variable-rate, revolving note during the nine months ending September 30, 2003, an excess cash flow payment of $1,695,000 made during 2003 on the fixed-rate note, and the decrease in distributions paid to members of approximately $4.8 million in 2003 compared to $1.8 million in 2004.

On November 12, 2004, Northern Lights distributed $3 million to its members, of which $2,314,800 was distributed to Northern Growers. Northern Growers, after holding back approximately $100,000 for working capital, subsequently distributed to its members $2,214,975, or $0.35 per capital unit.

U.S. Bank National Association, Sioux Falls, South Dakota, is Northern Lights’ primary lender. Northern Lights has four loans outstanding with U.S. Bank National Association: a $15 million fixed rate note, a $11.5 million variable-rate non-revolving note, a $5 million variable-rate, revolving note, and a $1.2 million note.

The $15 million fixed-rate note bears 6.95% interest annually and requires equal quarterly payments of approximately $521,000 with a balloon payment due on December 31, 2007. There is a prepayment penalty if Northern Lights prepays the loan prior to its maturity by any means other than the mandated prepayments calculated based on Northern Lights’ excess cash flow under the Loan Agreement. Under the Loan Agreement, Northern Lights is required to prepay U.S. Bank a portion of the principal of the loan by May 1 of each year in an amount equal to 15% of the excess cash flow but not more than 20% of the outstanding principal balance of the loan. An excess cash flow payment of $335,664 was made for the nine months ended September 30, 2004 compared to a payment of $1,695,000 for the nine months ended September 30, 2003. In addition to the excess cash flow payments, a total of $958,004 in principal payments was made on the fixed rate note during the nine months ended September 30, 2004, compared to principal payments of $827,350 during the nine months ended September 30, 2003. The outstanding principal balance on this note is $10,882,190 as of September 30, 2004. In conjunction with the distribution to members on November 12, 2004, an excess cash flow payment of $590,044 was also made to U.S. Bank.

The $11.1 million variable-rate, non-revolving note bears interest at 1.00% over U.S. Bank’s prime rate. This note requires quarterly payments of interest and amortized principal on the basis of a ten-year term. This note is due on December 31, 2007. As of September 30, 2004, Northern Lights’ variable rate was 5.75%. Principal payments of $927,054 were made on the variable-rate note during the nine months ended September 30, 2004, compared to principal payments of $864,549 made in the nine months ended September 30, 2003. The outstanding principal balance on this note is $9,020,214 as of September 30, 2004.

The $5 million variable-rate, revolving note bears interest at 1.00% over U.S. Bank’s prime rate, requires quarterly interest-only payments, and is due on December 31, 2007. The revolving feature permits Northern Lights to re-borrow in multiples of $100,000 on a revolving basis, the difference between the unpaid principal amount on the note and $5 million. Northern Lights pays an unused commitment fee of 0.5% per year that is assessed quarterly on any funds not borrowed under the note. As of September 30, 2004, the unpaid principal balance on the note was $47,496, and the variable rate was 5.75%.

Northern Lights is required to provide U.S. Bank with audited annual and unaudited quarterly financial statements. In addition, minimum debt service coverage ratios, minimum working capital, minimum tangible net worth, a maximum capital expenditure limitation and other standard negative and affirmative covenants are required. The calculation of minimum working capital includes the amount U.S. Bank is allowed to loan Northern Lights under the $5 million variable rate, revolving loan. Management believes that Northern Lights currently complies with all covenants and restrictions under the Loan Agreement.

Northern Lights makes quarterly principal and interest payments of $84,406 on the $1.2 million promissory note. Northern Lights pays interest on the outstanding balance at a fixed rate of 5.70% and final payment is due on May 1, 2007. The note is secured by the regenerative thermal oxidizers and a lien on all payments that Northern Lights receives or is entitled to receive under the Bioenergy Program. Northern Lights made $210,015 in principal payments for the nine months ended September 30, 2004, compared to $366,926 in principal payments for the nine months ended September 30, 2003. Of the $366,926 in principal payments in 2003, $300,000 was made in conjunction with a refinancing in 2003. The outstanding principal balance on this note is $855,158 as of September 30, 2004.

Management anticipates that the plant will continue to operate at or above name-plate capacity for the next twelve months. Management also expects in the next twelve months to have sufficient cash flow from operations and its variable rate, revolving note to cover operating and administrative costs, capital expenditures and debt service obligations.

The following table provides information regarding the consolidated contractual obligations of Northern Growers as of September 30, 2004:

	Total		Less than One Year		One to Three Years		Four to Five Years		After Five Years

Long-Term Debt Obligations	$	20,805,058	$	3,330,485	$	6,501,488	$	10,973,085	$	0

Land Lease	387,715		2,400		5,010		5,040		375,265

Management Agreements	280,683		280,683		0		0		0

Unconditional Purchase Obligations	1,664,280		217,080		434,160		434,160		578,880

Total Contractual Cash Obligations	$	23,137,736	$	3,830,648	$	6,940,658	$	11,412,285	$	954,145

Off-Balance Sheet Arrangements

We do not use or have any off-balance sheet arrangements.

Recent Accounting Pronouncements

None.

Critical Accounting Policies and Estimates

Preparation of our financial statements require estimates and judgments to be made that affect the amounts of assets, liabilities, revenues and expenses reported. Such decisions include the selection of the appropriate accounting principles to be applied and the assumptions on which to base accounting estimates. Management continually evaluates these estimates based on historical experience and other assumptions we believe to be reasonable under the circumstances.

The difficulty in applying these policies arises from the assumptions, estimates and judgments that have to be made currently about matters that are inherently uncertain, such as future economic conditions, operating results and valuations as well as management intentions. As the difficulty increases, the level of precision decreases, meaning that actual results can and probably will be different from those currently estimated.

Of the significant accounting policies described in the notes to the financial statements, we believe that the following may involve a higher degree of estimates, judgments, and complexity:

Commitments and Contingencies

Contingencies, by their nature relate to uncertainties that require management to exercise judgment both in assessing the likelihood that a liability has been incurred, as well as in estimating the amount of the potential expense. In conformity with accounting principles generally accepted in the United States, expenses are accrued when it is probable that a liability has been incurred and the amount can be reasonably estimated.

Inventory Valuation

Northern Lights accounts for its corn inventory at estimated net realizable market value. Corn is an agricultural commodity that is freely traded, has quoted market prices, may be sold without significant further processing and has predictable and insignificant costs of disposal. Northern Lights derives its estimates from local market prices determined by grain terminals in its area. Changes in the market values of corn inventory are recognized as a component of cost of revenues. Ethanol and DDGS inventories are stated at net realizable value. Work-in-process, supplies, parts and chemical inventory are stated at the lower of cost or market on an average cost method.

Revenue Recognition.

Revenue from the production of ethanol and related products is recorded when title transfers to customers, net of allowances for estimated returns. Generally, ethanol and related products are shipped FOB shipping point. Interest income is recognized when earned.

Revenue from federal and state incentive programs is recorded when we have produced or sold the ethanol and satisfied the reporting requirements under each applicable program. When it is uncertain that we will receive full allocation and payment due under the federal incentive program, we derive an estimate of the incentive revenue for the relevant period based on various factors including the most recently used payment factor applied to the program. The estimate is subject to change as management becomes aware of increases or decreases in the amount of funding available under the federal incentive program or other factors that affect funding or allocation of funds under such programs.

Long-Lived Assets

Depreciation and amortization of Northern Lights’ property, plant and equipment is provided on the straight-line method by charges to operations at rates based upon the expected useful lives of individual or groups of assets. Economic circumstances or other factors may cause management’s estimates of expected useful lives to differ from actual.

Long-lived assets, including property, plant and equipment and investments, are evaluated for impairment on the basis of undiscounted cash flows whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. An impaired asset is written down to its estimated fair market value based on the best information available. Considerable management judgment is necessary to estimate future cash flows and may differ from actual.

Accounting for Derivative Instruments and Hedging Activities

Northern Lights minimizes the effects of changes in the price of agricultural commodities by engaging Broin Management, LLC to use exchange-traded futures and options contracts to minimize its net positions in these inventories and contracts. Northern Lights accounts for changes in market value on exchange-traded futures and option contracts at exchange values. Northern Lights also accounts for changes in value of forward purchase and sales contracts at local market prices determined by grain terminals in its area. Changes in the market value of all these contracts are recognized in earnings as a component of cost of revenues.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Northern Lights is exposed to the impact of market fluctuations associated with commodity prices and interest rates as discussed below. Northern Lights has no exposure to foreign currency risk as all of its business is conducted in U.S. dollars.

Commodity Price Risk

Northern Lights produces ethanol and its co-product, distiller’s dried grains with solubles (DDGS), from corn, and as such is sensitive to changes in the price of corn. The price of corn is subject to fluctuations due to unpredictable factors such as weather, total corn planted and harvested acreage, changes in national and global supply and demand, and government programs and policies. Northern Lights also uses natural gas in the ethanol and DDGS production process, and as such is sensitive to changes in the price of natural gas. The price of natural gas is influenced by such weather factors as extreme heat or cold in the summer and winter, in addition to the threat of hurricanes in the spring, summer and fall. Other natural gas price factors include the U.S. domestic onshore and offshore rig count, and the amount of U.S. natural gas in underground storage during both the injection (April 1st – November 7th) and withdrawal (November 14th – March 31st) seasons.

Northern Lights attempts to reduce the market risk associated with fluctuations in the price of corn and natural gas by employing a variety of risk management strategies. Strategies include the use of derivative financial instruments such as futures and options initiated on the Chicago Board of Trade and/or the New York Mercantile Exchange, as well as the daily cash management of Northern Lights’ total corn and natural gas ownership relative to its monthly demand for each commodity, which may incorporate the use of forward cash contracts or basis contracts.

Corn is hedged with derivative instruments including futures and options contracts offered through the Chicago Board of Trade. Forward cash corn and basis contracts are also utilized to minimize future price risk. Similarly, natural gas is hedged with futures and options contracts offered through the New York Mercantile Exchange. Basis contracts are likewise utilized to minimize future price risk.

Gains and losses on futures and options contracts used as economic hedges of corn inventory, as well as on forward cash corn and basis contracts, are recognized as a component of cost of revenues for financial reporting on a monthly basis using month-end settlement prices for corn futures on the Chicago Board of Trade. Corn inventories are marked to fair value using market based prices so that gains or losses on the derivative contracts, as well as forward cash corn and basis contracts, are offset by gains or losses on inventories during the same accounting period.

Gains and losses on futures and options contracts used as economic hedges of natural gas, as well as basis contracts, are recognized as a component of cost of revenues for financial reporting on a monthly basis using month-end settlement prices for natural gas futures on the New York Mercantile Exchange. The natural gas inventories hedged with these derivatives or basis contracts are valued at the spot price of natural gas, plus or

minus the gain or loss on the futures or options positions relative to the month-end settlement price on the New York Mercantile Exchange.

While Northern Lights’ hedging activities may have a material effect on future operating results or liquidity in a specific quarter of its fiscal year, particularly prior to harvest, management does not believe that such activities will have a material, long-term effect on future operating results or liquidity.

Interest Rate Risk

Northern Lights’ interest rate risk exposure pertains primarily to its variable rate, long-term debt. Specifically, Northern Lights has $9,067,710 outstanding in variable rate, long-term debt as of September 30, 2004. The interest rate on the variable rate, long-term debt is 1.0% over U.S. Bank’s prime rate, which was 5.75% as of September 30, 2004. Northern Lights manages its interest rate risk by monitoring the effects of market changes on the interest rates and using fixed rate debt. Northern Lights has $11,737,348 outstanding in fixed rate, long-term debt as of September 30, 2004, of which $855,158 is subject to an interest rate of 5.70% and $10,822,190 is subject to an interest rate of 6.95%.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Northern Growers’ chief executive officer and chief financial officer, after evaluating the effectiveness of Northern Growers’ “disclosure controls and procedures” (as defined in Rule 13a-14(c) under the Securities Exchange Act of 1934, as amended) as

of the end of the period covered by this quarterly report, has concluded that the disclosure controls and procedures are effective in ensuring that material information required to be disclosed is included in the reports that it files with the Securities and Exchange Commission.

Changes in Internal Controls

There were no significant changes in Northern Growers’ or Northern Lights’ internal controls or, to the knowledge of our management, in other factors that could significantly affect these controls subsequent to the end of the period covered by this report.

CAUTIONARY STATEMENT REGARDING
FORWARD-LOOKING INFORMATION

This report contains forward-looking statements involving future events, future business and other conditions, our future performance, and our expected operations. These statements are based on management’s beliefs and expectations and on information currently available to management. 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. Northern Growers’ and Northern Lights’ actual results or actual business or other conditions may differ materially from those contemplated by any forward-looking statements. While Northern Growers believes that these statements are accurate, its business is dependent upon general economic conditions and various conditions specific to its industry and future trends and these factors could cause actual results to differ materially from the forward looking statements that have been made. In particular,

• While it is expected that the emissions control equipment and technology installed will eliminate any potentially dangerous emissions from the ethanol production process and allow Northern Lights to comply with existing environmental regulations, there is no guarantee that it will.

• The ethanol industry and Northern Lights’ business is sensitive to natural gas prices. When natural gas prices increase, Northern Lights’ operating results may suffer.

• Any lowering of gasoline prices will likely also lead to lower prices for ethanol and adversely affect Northern Lights’ operating results.

• The ethanol industry and Northern Lights’ business is sensitive to corn prices. When corn prices increase, Northern Lights’ operating results may suffer.

• Northern Lights’ cost of revenues could be adversely affected by the risk management strategy used to protect against the price fluctuations of corn and natural gas.

• Northern Lights’ operating income could be adversely affected by a decrease or potential short fall on available governmental subsidy and incentive payments.

• The ethanol industry and Northern Lights may be subject to additional regulation, such as environmental restrictions, or regulatory action, which could include fines, penalties, or injunctive relief as a result of any potential excessive emissions, which could increase costs.

• The ethanol industry is an intensely competitive industry with an increasing number of ethanol plants coming into production. As more plants come into production, the price of ethanol and corn could be adversely affected and, accordingly, so could Northern Lights’ operating results.

• Northern Lights is dependent upon Broin Management, LLC to manage the day-to-day activities of the plant and upon Broin-related entities to market the

ethanol and DDGS produced at the plant. If any of these entities cease providing services to Northern Lights, the plant’s operations may be adversely affected. Northern Lights’ Management Agreement with Broin Management is scheduled to renew for another three year period beginning on July 1, 2005, unless either party provides a 90-day advance notice of termination.

Northern Growers is not under any duty to update the forward-looking statements contained in this report. Northern Growers cannot guarantee future results or performance, or what future business conditions will be like. Northern Growers cautions you not to put undue reliance on any forward-looking statements, which speak only as of the date of this report.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings

On June 16, 2004, Northern Lights Ethanol was a party to a hearing before the South Dakota Board of Minerals and Environment in Pierre, South Dakota. The Board of Minerals and Environment is a nine person citizen board that serves a quasi-judicial and legislative role in matters involving South Dakota’s air quality laws. The Board of Minerals and Environment is authorized to hear petitions regarding the application of South Dakota Department of Environment and Natural Resources’ (DENR) rules governing air quality. The hearing was initiated on December 29, 2003 when Northern Lights, five other ethanol plants from South Dakota, and Broin Management, LLC, filed a petition with the Board of Minerals and Environment requesting that the Board of Minerals and Environment bar the DENR from using and applying a new method for quantifying emissions from ethanol plants known as the Midwest Scaling Method or “multiplier.” The petition alleged that the DENR’s intended use of the multiplier for quantifying emissions was inappropriate and unlawful because South Dakota and federal environmental regulations, and Northern Lights’ Title V Air Quality Operating Permit, do not require or permit the use of the multiplier as a testing method.

The Board of Minerals and Environment ruled on June 16, 2004 that the multiplier is not contained in state or federal emission test methods or regulations. The effect of the ruling is that the DENR cannot use or require use of the multiplier to measure emissions from Northern Lights’ plant. However, a final order by the Board of Minerals and Environment will not be entered until the petitioners, including Northern Lights, submit their proposed findings of fact and conclusions of law and a hearing is held, if necessary, to resolve any objections to those findings and conclusions.

Item 2. Changes in Securities and Use of Proceeds

None.

Item 3. Defaults Upon Senior Securities

None.

Item 4. Submission of Matters to a Vote of Security Holders

None.

Item 5. Other Information

On November 12, 2004, Northern Growers made a cash distribution to all Class A members of record as of September 1, 2004, of $0.35 per Class A capital unit for a total distribution of $2,214,975 based on 6,328,500 Class A capital units issued and outstanding. The distribution was made following Northern Lights’ distribution of $3 million on November 12, 2004 to its two members, Northern Growers and Broin Investments I.

Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits. See Exhibit Index following the signature page to this report.

(b) Reports on Form 8-K. None.

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.

	NORTHERN GROWERS, LLC

Dated: November 15, 2004
	By	/s/ Robert Narem
		Robert Narem
		Chief Executive Officer and Chief Financial Officer

EXHIBIT INDEX
TO
FORM 10-Q
OF
NORTHERN GROWERS, LLC

Exhibit Number		Description
2.1		Plan of Reorganization(1)
3.1		Articles of Organization(2)
3.2		Operating Agreement, as adopted on April 1, 2003(3)
3.3		Amendment and Addendum to Operating Agreement dated July 16, 2003 (4)
3.4		Articles of Amendment to Articles of Organization(3)
4.1		Form of Class A Unit Certificate(5)
31		Rule 13a-14(a)/15d-14(a) Certification
32		Section 1350 Certification

(1) Incorporated by reference from Appendix A to the information statement/prospectus filed as a part of the issuer’s Registration Statement on Form S-4 (File No. 333-97215).

(2) 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. 333-97215).

(3) Incorporated by reference from Appendix B to the issuer’s information statement/prospectus filed as part of the issuer’s Registration Statement on S-4 (File No. 333-97215).

(4) Incorporated by reference from the same numbered exhibit to the issuer’s Form 10-KSB filed on March 30, 2004 (File No. 333-97215).

(5) Incorporated by reference from the same numbered exhibit to the issuer’s information statement/prospectus filed as part of the issuer’s Registration Statement on Form S-4 (File No. 333-97215).