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 June 30, 2009

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. 0-50711

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

(Address of principal executive offices)

605-862-7902

(Registrant’s telephone number)

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 o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of accelerated filer, large accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act.

o Large Accelerated Filer		x Accelerated Filer

o Non-Accelerated Filer		o 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 Exchange Act). o 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 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 August 1, 2009, the issuer had 50,628,000 Class A capital units outstanding.

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PART I - FINANCIAL INFORMATION

Item 1.

Table of Contents

Consolidated Financial Statements

June 30, 2009 and December 31, 2008

Northern Growers, LLC

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NORTHERN GROWERS, LLC

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	Page

CONSOLIDATED FINANCIAL STATEMENTS
Balance Sheets (Unaudited)	3
Statements of Operations and Comprehensive Income (Unaudited)	5
Statements of Changes in Equity (Unaudited)	6
Statements of Cash Flows (Unaudited)	7
Notes to Unaudited Consolidated Financial Statements	8

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NORTHERN GROWERS, LLC

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

	June 30,			December 31,
	2009			2008*

ASSETS

CURRENT ASSETS
Cash and cash equivalents	$	7,053,913		$	12,712,987
Accounts receivable
Trade related party	6,919,446			6,475,987
Trade	500,282			525,851
Other	98,700			316,576
Inventory	10,344,066			9,710,268
Prepaid expenses	203,533			127,236
Margin deposits	—			1,543,287
Commodities contracts	991,898			—

Total current assets	26,111,838			31,412,192

PROPERTY AND EQUIPMENT
Land improvements	7,107,807			7,107,452
Equipment	70,887,852			71,005,748
Buildings	15,379,448			15,379,448
	93,375,107			93,492,648
Less accumulated depreciation	(22,803,704		)	(20,261,459		)

Net property and equipment	70,571,403			73,231,189

OTHER ASSETS
Financing costs, net of amortization of $146,249 and $116,932 as of June 30, 2009 and December 31, 2008	200,259			229,577
Assets held for sale	100,000			100,000

Total other assets	300,259			329,577

	$	96,983,500		$	104,972,958

* Derived from audited financial statements

See Notes to Unaudited Consolidated Financial Statements

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NORTHERN GROWERS, LLC

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

	June 30,			December 31,
	2009			2008*

LIABILITIES AND EQUITY

CURRENT LIABILITIES
Accounts payable - trade	$	1,635,429		$	2,037,590
Accounts payable - corn	3,271,803			6,667,478
Accounts payable - related party	249,557			328,566
Other accrued liabilities	483,334			603,768
Accrued interest	3,750			3,750
Due to broker	1,758,648			—
Accrued liability for commodities contracts	—			2,390,685
Notes payable - due upon demand	5,000			5,000
Current portion of notes payable	5,832,440			5,785,007

Total current liabilities	13,239,961			17,821,844

LONG-TERM LIABILITIES
Derivative financial instruments	1,745,835			2,496,933
Long-term notes payable	37,195,601			40,121,940

Total long-term liabilities	38,941,436			42,618,873

EQUITY
Capital units, $0.25 stated value, 50,628,000 units issued and outstanding	12,657,000			12,657,000
Additional paid-in capital	64,900			64,900
Accumulated other comprehensive (loss)	(1,347,085		)	(1,926,632		)
Retained earnings	23,218,370			23,625,025

Total Northern Growers, LLC equity	34,593,185			34,420,293

Noncontrolling interest	10,208,918			10,111,948

Total equity	44,802,103			44,532,241

	$	96,983,500		$	104,972,958

* Derived from audited financial statements

See Notes to Unaudited Consolidated Financial Statements

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NORTHERN GROWERS, LLC

CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (UNAUDITED)

	Three Months Ended June 30,						Six Months Ended June 30,
	2009			2008			2009			2008

REVENUES
Sales related party	$	26,093,694		$	37,628,517		$	49,125,372		$	72,714,093
Sales	6,965,327			8,064,941			14,064,575			16,291,120
Incentive	83,333			83,333			166,666			145,595
Total revenues	33,142,354			45,776,791			63,356,613			89,150,808

COST OF REVENUES	31,558,105			41,833,837			60,475,478			81,898,688

GROSS PROFIT	1,584,249			3,942,954			2,881,135			7,252,120

EXPENSES
General and administrative	1,076,425			1,014,863			1,974,357			1,918,235
Total operating expenses	1,076,425			1,014,863			1,974,357			1,918,235

INCOME FROM OPERATIONS	507,824			2,928,091			906,778			5,333,885

OTHER INCOME (EXPENSES)
Interest income	4,855			6,252			12,575			28,237
Interest expense	(700,995		)	(885,254		)	(1,416,908		)	(1,860,671		)
Other	14,438			(15,974		)	16,320			(14,099		)
Total other income (expenses)	(681,702		)	(894,976		)	(1,388,013		)	(1,846,533		)

NET INCOME (LOSS)	(173,878		)	2,033,115			(481,235		)	3,487,352

LESS: NET (INCOME) LOSS ATTRIBUTABLE TO THE NONCONTROLLING INTEREST	28,784			(474,053		)	74,580			(825,412		)

NET INCOME (LOSS) ATTRIBUTABLE TO NORTHERN GROWERS, LLC	(145,094		)	1,559,062			(406,655		)	2,661,940

OTHER COMPREHENSIVE INCOME (LOSS)
Cash flow hedge income (loss) attributable to Northern Growers, LLC	438,333			676,802			579,547			46,671

COMPREHENSIVE INCOME (LOSS) ATTRIBUTABLE TO NORTHERN GROWERS, LLC	$	293,239		$	2,235,864		$	172,892		$	2,708,611

BASIC AND DILUTED EARNINGS (LOSS) PER CAPITAL UNIT	$	(0.003	)	$	0.031		$	(0.008	)	$	0.053

BASIC AND DILUTED WEIGHTED AVERAGE CAPITAL UNITS OUTSTANDING	50,628,000			50,628,000			50,628,000			50,628,000

DISTRIBUTIONS PER CAPITAL UNIT DECLARED	$	—		$	—		$	—		$	—

DISTRIBUTIONS PER CAPITAL UNIT PAID	$	—		$	—		$	—		$	0.030

See Notes to Unaudited Consolidated Financial Statements

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NORTHERN GROWERS, LLC

CONSOLIDATED STATEMENTS OF CHANGES IN EQUITY (UNAUDITED)

						Accumulated						Total
				Additional		Other						Northern			Noncontrolling
	Capital			Paid-In		Comprehensive			Retained			Growers, LLC			Interest
	Units	Amount		Capital		Income (Loss)			Earnings			Equity			Equity

BALANCE, JANUARY 1, 2008	50,628,000	$	12,657,000	$	64,900	$	(695,076	)	$	27,777,575		$	39,804,399		$	11,631,148

Net income (loss)	—	—		—		—			(4,152,550		)	(4,152,550		)	(1,154,649		)
Cash flow hedge (loss)	—	—		—		(1,231,556		)	—			(1,231,556		)	(364,551		)
Distributions payable	—	—		—		—			—			—			—
Distributions paid	—	—		—		—			—			—			—

BALANCE, DECEMBER 31, 2008	50,628,000	$	12,657,000	$	64,900	$	(1,926,632	)	$	23,625,025		$	34,420,293		$	10,111,948

Net income (loss)	—	—		—		—			(406,655		)	(406,655		)	(74,580		)
Cash flow hedge income (loss)	—	—		—		579,547			—			579,547			171,550
Distributions payable	—	—		—		—			—			—			—
Distributions paid	—	—		—		—			—			—			—

BALANCE, JUNE 30, 2009	50,628,000	$	12,657,000	$	64,900	$	(1,347,085	)	$	23,218,370		$	34,593,185		$	10,208,918

See Notes to Unaudited Consolidated Financial Statements

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NORTHERN GROWERS, LLC

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

	Six Months			Six Months
	Ended			Ended
	June 30,			June 30,
	2009			2008
OPERATING ACTIVITIES
Net income (loss)	$	(406,655	)	$	2,661,940
Changes to net income (loss) not affecting cash
Depreciation	2,577,771			2,548,718
Amortization of loan fees	29,318			35,729
Noncontrolling interest in subsidiary’s earnings (losses)	(74,580		)	825,412
(Gain)/loss on sale/disposal of assets	83,216			—
Decrease (increase) in current assets
Accounts receivable
Related party	(443,459		)	(4,320,433		)
Trade	25,569			(74,237		)
Other	75,244			82,115
Inventory	(633,798		)	(1,895,407		)
Prepaid expenses	(76,297		)	(82,345		)
Margin deposits	1,543,287			(14,914,619		)
Commodities contracts	(991,898		)	(2,440,538		)
Increase (decrease) in current liabilities
Accounts payable
Trade	(402,161		)	841,607
Corn	(3,395,675		)	491,011
Related party	(79,009		)	44,686
Accrued liabilities	(120,436		)	(3,402		)
Due to broker	1,758,648			—
Accrued liability for commodities contracts	(2,390,685		)	—
Accrued interest	—			5,490

NET CASH (USED FOR) OPERATING ACTIVITIES	(2,921,600		)	(16,194,273		)

INVESTING ACTIVITIES
Purchase of property and equipment	(22,242		)	(301,487		)
Tax refund on construction	163,674			985,470

NET CASH PROVIDED BY INVESTING ACTIVITIES	141,432			683,983

FINANCING ACTIVITIES
Net proceeds on revolving short-term note	—			1,959,551
Long-term notes payable issued	—			8,000,000
Principal paid on long-term notes payable	(2,878,906		)	(2,832,164		)
Distributions paid - Northern Growers	—			(1,518,840		)
Cash paid for financing costs	—			(10,234		)
Checks in excess of bank balances	—			1,116,987

NET CASH PROVIDED BY (USED FOR) FINANCING ACTIVITIES	(2,878,906		)	6,715,300

NET INCREASE (DECREASE) IN CASH	(5,659,074		)	(8,794,990		)

CASH AT BEGINNING OF PERIOD	12,712,987			9,182,533

CASH AT END OF PERIOD	$	7,053,913		$	387,543

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION
Cash paid for interest	$	1,416,908		$	1,854,998

SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING ACTIVITIES
Accounts receivable for tax refund on construction	$	—		$	173,859

See Notes to Unaudited Consolidated Financial Statements

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NORTHERN GROWERS, LLC

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 - NATURE OF OPERATIONS

Principal Business Activity

Northern Growers, LLC or Northern Growers (formerly Northern Growers Cooperative or the “Cooperative”), is a South Dakota limited liability company that was organized to pool investors, provide a portion of the corn supply for an ethanol plant (the “plant”) owned by Northern Lights Ethanol, LLC (d/b/a POET™ Biorefining — Big Stone) (“POET™ Biorefining — Big Stone”), and own a 77.16% interest in POET™ Biorefining — Big Stone. For purposes of the financial statements and notes, the “Company” refers to both Northern Growers and POET™ Biorefining — Big Stone on a consolidated basis. On June 26, 2002, the Company began grinding corn and on July 5, 2002, the Company commenced its principal operations at a 40 million gallon nameplate capacity. On May 14, 2007, the Company completed an expansion to a 75 million gallon nameplate capacity. The Company sells ethanol and related products primarily in the United States.

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 six month periods ended June 30, 2009 and 2008 are not necessarily indicative of the results to be expected for a full year.

These financial statements and notes included in this Form 10-Q report should be read in conjunction with the company’s 2008 Form 10-K report, as certain notes and other pertinent information have been abbreviated or omitted in this report.

Principles of Consolidation

The consolidated financial statements include the accounts of Northern Growers and its 77.16% owned subsidiary, POET™ Biorefining - Big Stone. All significant inter-company transactions and balances have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles 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.

Environmental Liabilities

The Company’s operations are subject to environmental laws and regulations adopted by various governmental authorities in the jurisdiction in which it operates. These laws require the Company to investigate and remediate the effects of the release or disposal of materials at its locations. Accordingly, the Company has adopted policies, practices and procedures in the areas of pollution control, occupational health, and the production, handling, storage and use of hazardous materials to prevent material environmental or other damage, and to limit the

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NORTHERN GROWERS, LLC

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

financial liability which could result from such events. Environmental liabilities are recorded when the liability is probable and the costs can be reasonably estimated.

Cost of Revenues

The primary components of cost of revenues from the production of ethanol and related products are corn expense, energy expense (steam, natural gas and electricity), raw materials expense (chemicals and denaturant), shipping costs on sales, depreciation on process equipment and direct labor costs.

Shipping costs incurred by the Company are recorded as a component of cost of revenues. Shipping costs in cost of revenues includes inbound freight charges on inventory, outbound freight charges on related product and purchasing and receiving costs.

General and Administrative Expenses

The primary components of general and administrative expenses are management fees, administrative salaries and wages, insurance expense, bank charges and professional fees (legal, audit and consulting).

Investment in Commodities Contracts, Derivative Instruments and Hedging Activities

SFAS No. 133 requires a company to evaluate its contracts to determine whether the contracts are derivatives. Certain contracts that literally meet the definition of a derivative may be exempted from SFAS No. 133 as normal purchases or normal sales. Normal purchases and normal sales are contracts that provide for the purchase or sale of something other than a financial instrument or derivative instrument that will be delivered in quantities expected to be used or sold over a reasonable period in the normal course of business. Contracts that meet the requirements of normal are documented as normal and exempted from the accounting and reporting requirements of SFAS No. 133.

The Company enters into short-term cash, options and futures contracts and ethanol swaps as a means of securing corn and natural gas for the ethanol plant and managing exposure to changes in commodity prices. All derivatives are designated as non-hedge derivatives. Although the contracts are effective economic hedges of specified risks, they are not designated as and accounted for as hedging instruments.

As part of its trading activity, the Company uses futures and option contracts and ethanol swaps offered through regulated commodity exchanges to reduce risk. The Company is exposed to risk of loss in the market value of inventories. To reduce that risk, the Company generally takes positions using cash and futures contracts, ethanol swaps and options.

During 2007 and 2006 the Company entered into derivative financial instruments to limit its exposure to changes in interest rates. The Company entered into two interest rate swap agreements as part of its interest rate risk management strategy and to effectively convert a portion of its variable rate debt to fixed rate debt. The swap agreements are accounted for as a cash flow hedge under SFAS No. 133, as amended.

Interest Rate Swap Agreements

During 2007 and 2006 the Company entered into interest rate swap agreements as part of its interest rate risk management strategy and to effectively convert a portion of its variable rate debt to fixed rate debt. The swap agreements, which both expire August 31, 2014, are accounted for as cash flow hedges under SFAS No. 133, as amended. Under the terms of the swap agreements, the Company’s net payment is a fixed interest rate on the notional amount in exchange for receiving a variable rate based on one month LIBOR. The swap transactions

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NORTHERN GROWERS, LLC

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

qualify for the shortcut method of recognition under SFAS No. 133; therefore, no portion of the swap is treated as ineffective.

Other Comprehensive Income (Loss)

The Company has adopted Statement of Financial Accounting Standards No. 130, Reporting Comprehensive Income (“SFAS 130”) that establishes standards for reporting comprehensive income. The Statement defines comprehensive income as the changes in equity of an enterprise except those resulting from stockholder transactions. As of June 30, 2009 and December 31, 2008, accumulated other comprehensive loss consists of an unrealized loss from our interest rate swap agreements designated as a cash flow hedge.

Net Income (Loss) per Unit

Basic net income (loss) per unit is computed by dividing net income (loss) by the weighted average number of members’ units outstanding during the period. Diluted net income per unit is computed by dividing net income by the weighted average number of members’ units and members’ unit equivalents outstanding during the period. There were no member unit equivalents outstanding during the periods presented; accordingly, the Company’s basic and diluted net income (loss) per unit are the same.

Recently Issued Accounting Pronouncements

In May 2009, the FASB issued SFAS No. 165, which establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. SFAS No. 165 requires the Company to disclose the date through which it has evaluated subsequent events and the basis for that date, including a statement that it has not evaluated subsequent events after that date in the set of financial statements being presented. SFAS No. 165 is effective for interim and annual periods ending after June 15, 2009, which is the Company’s second quarter of 2009. This pronouncement was adopted during the current period with no material effect on the Company’s statements of financial condition or results of operations. Applicable disclosures have been provided in Note 11 — Subsequent Events.

In June 2009, the FASB issued SFAS No. 167, “Amendments to FASB Interpretation No. 46 (R)” (“SFAS 167”), which enhances the current guidance on disclosure requirements for companies with financial interest in a variable interest entity. This statement amends Interpretation 46(R) to replace the quantitative-based risks and rewards calculation for determining which enterprise, if any, has a controlling financial interest in a variable interest entity with an approach focused on identifying which enterprise has the power to direct the activities of a variable interest entity that most significantly impact the entity’s economic performance and (a) the obligation to absorb losses of the entity or (b) the right to receive benefits from the entity. This statement requires an additional reconsideration event when determining whether an entity is a variable interest entity when any changes in facts and circumstances occur such that the holders of the equity investment at risk, as a group, lose the power from voting rights or similar rights of those investments to direct the activities of the entity that most significantly impact the entity’s economic performance. It also requires ongoing assessments of whether an enterprise is the primary beneficiary of a variable interest entity. This statement amends Interpretation 46(R) to require additional disclosures about an enterprise’s involvement in variable interest entities. SFAS 167 is effective for fiscal years beginning after November 15, 2009, with early application prohibited. The Company will adopt the provisions of SFAS 167 on January 1, 2010. The Company has not completed its evaluation of the potential impact of the adoption of SFAS 167 on the Company’s results of operations, cash flows or financial position.

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NORTHERN GROWERS, LLC

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

In June 2009, the FASB issued FASB Statement No. 168, The FASB Accounting Standards Codification and the Hierarchy of Generally Accepted Accounting Principles. FASB Statement No. 168 establishes the FASB Accounting Standards Codification as the single authoritative source for GAAP. The Codification is effective for financial statements that cover interim and annual periods ending after September 15, 2009. While not intended to change GAAP, the Codification significantly changes the way in which the accounting literature is organized. Because the Codification completely replaces existing standards, it will affect the way GAAP is referenced by companies in their financial statements and accounting policies. Our adoption of this Statement and our use of the Codification beginning in the third quarter of 2009 will not have an impact on our financial position, results of operations, or cash flows.

Newly Adopted Accounting Pronouncements

In April 2009, the FASB issued FASB Staff Position (FSP) FAS 107-1 and APB 28-1, Interim Disclosures about Fair Value of Financial Instruments. This FSP amends FASB Statement No. 107, Disclosures about Fair Value of Financial Instruments, to require an entity to provide disclosures about fair value of financial instruments in interim financial information. This FSP also requires those disclosures in summarized financial information at interim reporting periods. FSP 107-1 and APB 28-1 are effective for interim periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009. The Company’s adoption of SFAS 107-1 and APB 28-1 did not have an impact on the Company’s consolidated financial position, results of operations or cash flows.

Disclosures about Derivative Instruments and Hedging Activities. The Company has adopted SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities” (“SFAS No. 161”). SFAS No. 161 requires entities that utilize derivative instruments to provide qualitative disclosures about their objectives and strategies for using such instruments, as well as any details of credit-risk-related contingent features contained within derivatives. SFAS No. 161 also requires entities to disclose additional information about the amounts and location of derivatives located within the financial statements, how the provisions of SFAS No. 133 have been applied, and the impact that hedges have on an entity’s operating results, financial position or cash flows. See Note 4 — Derivative Financial Instruments for additional disclosures required by SFAS No. 161.

Noncontrolling Interests in Consolidated Financial Statements. On January 1, 2009 the Company adopted SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements, an amendment of Accounting Research Bulletin No. 51” (“SFAS No. 160”), which improves the relevance, comparability and transparency of the financial information that a reporting entity provides in its consolidated financial statements by establishing accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. The Company’s adoption of SFAS No. 160 did not have an impact on the Company’s consolidated financial position, results of operations or cash flows.

Business Combinations. In December 2007, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 141 (revised 2007), “Business Combinations” (“SFAS No. 141R”), which replaces SFAS No. 141, “Business Combinations” (“SFAS No. 141”). SFAS 141R retains the fundamental requirements in SFAS No. 141 that the acquisition method of accounting (which SFAS No. 141 called the purchase method) be used for all business combinations. SFAS No. 141R also establishes principles and requirements for how the acquirer: (a) recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree; (b) recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase; and (c) determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. The adoption of SFAS 141(R) did not have a material affect on the Company’s reported financial position or results of operations.

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NORTHERN GROWERS, LLC

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

Fair Value Measurements. On January 1, 2009, the Company adopted FASB Staff Position FSP FAS No. 157-2 (“FSP FAS No. 157-2”), which delayed the effective date of SFAS No. 157, “Fair Value Measurements” for nonfinancial assets and liabilities, except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). The adoption of FSP FAS No. 157-2 was immaterial to the Company’s results of operations, cash flows or financial positions.

Reclassifications

Certain reclassifications have been made to the 2008 financial statements to conform to the presentation in 2009. These reclassifications had no change in previously reported net income.

NOTE 3 - FAIR VALUE MEASUREMENTS

Effective January 1, 2008, the Company adopted Statement of Financial Accounting Standard No. 157, “Fair Value Measurements” (SFAS 157), as it applies to the financial instruments, and Statement of Financial Accounting Standard No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities — Including an amendment of FASB Statement No. 115” (SFAS 159). SFAS 157 defines fair value, outlines a framework for measuring fair value, and details the required disclosures about fair value measurements. SFAS 159 permits companies to irrevocably choose to measure certain financial instruments and other items at fair value. SFAS 159 also establishes presentation and disclosure requirements designed to facilitate comparison between entities that choose different measurement attributes for similar types of assets and liabilities.

In February 2008, the FASB issued Staff Position (FSP) No. 157-2, which deferred the effective date of SFAS 157 for one year relative to certain nonfinancial assets and liabilities. On January 1, 2009, we adopted the requirements of SFAS 157 that had been deferred under FSP 157-2. The adoption did not have a material impact on our financial condition, results of operations or cash flows.

Under SFAS 157, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date in the principal or most advantageous market. SFAS 157 establishes a hierarchy in determining the fair value of an asset or liability. The fair value hierarchy has three levels of inputs, both observable and unobservable. SFAS 157 requires the utilization of the lowest possible level of input to determine fair value. Level 1 inputs include quoted market prices in an active market for identical assets or liabilities. Level 2 inputs are market data, other than Level 1, that are observable either directly or indirectly. Level 2 inputs include quoted market prices for similar assets or liabilities, quoted market prices in an inactive market, and other observable information that can be corroborated by market data. Level 3 inputs are unobservable and corroborated by little or no market data.

Except for those assets and liabilities which are required by authoritative accounting guidance to be recorded at fair value in the consolidated balance sheets, the Company has elected not to record any other assets or liabilities at fair value, as permitted by SFAS 159. No events occurred during the six months ended June 30, 2009 which would require adjustment to the recognized balances of assets or liabilities which are recorded at fair value on a nonrecurring basis.

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The following table provides information on those assets and liabilities measured at fair value on a recurring basis.

	Carrying Amount
	In Consolidated
	Balance Sheets			Fair Value			Fair Value Measurement Using
	June 30, 2009			June 30, 2009			Level 1		Level 2			Level 3

Commodities contracts	$	5,528,619		$	5,528,619		$	5,528,619

Corn purchase contracts	$	(4,536,721	)	$	(4,536,721	)			$	(4,536,721	)

Derivative financial instruments	$	(1,745,835	)	$	(1,745,835	)			$	(1,745,835	)

Commodities contracts principally includes corn and natural gas futures and option contracts and ethanol swaps. The fair values for which are obtained from quoted market prices from the CBOT for identical assets or liabilities, and are designated as Level 1 within the valuation hierarchy. The Company’s corn purchase contracts consist of forward purchase commitments and are included in Commodities contracts if positive and in Accrued liability for commodity contracts if negative. The fair value for these agreements was determined using quoted market prices from the Chicago Board of Trade (CBOT) for similar assets, and are designated as Level 2 within the valuation hierarchy. Derivative financial instruments consists of interest rate swaps at fair value using the counterparty’s marked-to-market statement, which can be validated using modeling techniques that include market inputs such as publicly available interest rate yield curves, and are designated as Level 2 within the valuation hierarchy.

The Company considers the carrying amount of significant classes of financial instruments on the balance sheets, including cash, accounts receivable, inventories, other assets, accounts payable, accrued liabilities, and variable rate long-term debt to be reasonable estimates of fair value either due to their length of maturity or the existence of variable interest rates underlying such financial instruments that approximate prevailing market rates at June 30, 2009 and December 31, 2008.

The estimated fair value of total bank debt at June 30, 2009 was $42,853,434, which differs from the carrying amounts of $43,028,041 included in our consolidated balance sheet. The fair value is estimated by discounting the projected cash flows using the rate at which similar amounts of debt could currently be borrowed.

NOTE 4 - DERIVATIVE FINANCIAL INSTRUMENTS

From time to time the Company enters into derivative transactions to hedge its exposures to interest rate and commodity price fluctuations. The Company does not enter into derivative transactions for trading purposes.

During the first quarter of 2008, the FASB issued FASB Statement No. 161 — “Disclosures about Derivative Instruments and Hedging Activities.” This statement requires holders of derivative instruments to provide qualitative disclosures about objectives and strategies for using derivatives, quantitative disclosures about fair value amounts of gains and losses from derivative instruments, and disclosures about credit-risk-related contingent features in derivative agreements. The Company adopted this statement effective with the first quarter of 2009.

As of June 30, 2009, the Company has entered into ethanol, natural gas and corn derivative instruments and interest rate swap agreements. SFAS No. 133 requires that companies record derivative financial instruments as

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either assets or liabilities at fair value in the statement of financial position. Derivatives qualify for treatment as hedges when there is a high correlation between the change in fair value of the derivative instrument and the related change in value of the underlying hedged item. Furthermore, the Company must designate the hedging instruments based upon the exposure being hedged as a fair value hedge, a cash flow hedge or a hedge against foreign currency exposure. The Company formally documents, designates, and assesses the effectiveness of transactions that receive hedge accounting initially and on an on-going basis.

Commodity Contracts

The Company enters into ethanol and corn commodity-based derivatives in order to protect cash flows from fluctuations caused by volatility in commodity prices for periods up to twelve months in order to protect gross profit margins from potentially adverse effects of market and price volatility on ethanol sales and corn purchase commitments where the prices are set at a future date. In addition, the Company hedges anticipated sales of ethanol to minimize its exposure to the potentially adverse effect of price volatility. These derivatives are not designated as effective hedges for accounting purposes. For derivative instruments that are not accounted for as hedges, or for the ineffective portions of qualifying hedges, the change in fair value is recorded through earnings in the period of change. Derivative fair market value gains or losses are included in the results of operations and are included in cost of revenues. All commodity contracts do not qualify for hedge accounting under SFAS 133.

Interest Rate Contracts

The Company manages its floating rate debt using interest rate swaps. The Company will enter into fixed rate swaps to alter its exposure to the impact of changing interest rates on its consolidated results of operations and future cash outflows for interest. Fixed rate swaps are used to reduce the Company’s risk of the possibility of increased interest costs. Interest rate swap contracts are therefore used by the Company to separate interest rate risk management from the debt funding decision.

At June 30, 2009, the Company had $20,418,750 of notional amount outstanding in swap agreements that exchange variable interest rates (one-month LIBOR plus 2.75%) for fixed interest rates over the terms of the agreements and are designated as cash flow hedges of the interest rate risk attributable to forecasted variable interest payments. The effective portion of the fair value gains or losses on these swaps is included as a component of accumulated other comprehensive income (“AOCI”).

All interest rate swaps held by the Company as of June 30, 2009 qualified as cash flow hedges. For these qualifying hedges, the effective portion of the change in fair value is recognized through earnings when the underlying transaction being hedged affects earnings, allowing a derivative’s gains and losses to offset related results from the hedged item on the income statement.

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The following tables provide details regarding the Company’s derivative financial instruments at June 30, 2009:

	Asset Derivatives			Liability Derivatives
	2009			2009
	Balance Sheet	Fair		Balance Sheet	Fair
As of June 30	Location	Value		Location	Value
Derivatives designated as hedging instruments under Statement 133
Interest rate swap		$	—	Long-term liabilities	$	1,745,835
Total derivatives designated as hedging instruments under Statement 133		$	—		$	1,745,835
Derivative not designated as hedging instruments under Statement 133
Commodities contracts	Current assets	$	991,898
Total derivatives not designated as hedging instruments under Statement 133		$	991,898		$	—

Total Derivatives		$	991,898		$	1,745,835

Derivative in Statement 133 Cash Flow Hedging Relationship - Interest rate swaps	Three Months Ended June 30, 2009		Six Months Ended June 30, 2009

Amount of gain (loss) recognized in OCI on derivative	$	438,333	$	579,547

Amount of gain (loss) reclassified from accumulated OCI into income on derivative	$	—	$	—

Location of gain (loss) reclassified from accumulated OCI into income

Amount of gain (loss) recognized in income on derivative	$	245,077	$	492,675

Location of gain (loss) recognized in income	Interest Expense		Interest Expense

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Derivatives not designated as hedging intruments under Statement 133 - Commodities contracts	Three Months Ended June 30, 2009		Six Months Ended June 30, 2009

Amount of gain (loss) recognized in income on derivative	$	1,439,052	$	3,752,654

Location of gain (loss) recognized in income	Cost of revenues		Cost of revenues

NOTE 5 - NOTES PAYABLE

Northern Growers received advances of $5,000 from various entities to help establish the Company. This short-term note payable is due on demand and does not bear interest. The balance of this non-interest bearing note was $5,000 at June 30, 2009 and December 31, 2008.

Northern Growers received a loan advance of $25,000 from First Bank & Trust, Milbank, SD, during the three month period ending March 31, 2008 for short-term cash needs. This short-term note payable bore interest at 5.94% and matured May 1, 2008 and was paid in full. The balance of this note was $0 at June 30, 2009 and December 31, 2008.

On August 28, 2006, POET™ Biorefining - Big Stone and U.S. Bank National Association, Sioux Falls, South Dakota (Bank) entered into an amended and restated loan agreement for the purpose of financing the plant’s expansion and restructuring the $3,000,000 and $5,000,000 revolving notes into one note. On September 21, 2007, an amendment to the loan agreement became effective. The purpose of the amendment was to finance the purchase and construction of additional grain storage bins and equipment ($4,300,000) and obtain a $9,000,000 short-term revolving loan. Under the amended and restated loan agreement and the September 21, 2007 amendment, POET™ Biorefining — Big Stone is subject to six notes: Note #174, a $3,900,000 variable-rate, non-revolving note; Note #158, a $15,800,000 fixed-rate note; Note #91, an $8,000,000 variable-rate, revolving long term note; Note #190, a $33,000,000 construction note; Note #232, a $4,300,000 variable-rate note; and Note #216, a $9,000,000 variable-rate, revolving short-term note.

Note #174, the $3,900,000 variable-rate, non-revolving note, bears interest at the Bank’s prime rate, or 3.25% at June 30, 2009. This note requires quarterly payments of interest and amortized principal on the basis of a ten-year term, the first payment being made on June 30, 2005. The note matures on March 31, 2012.

Note #158, the $15,800,000 million fixed-rate note, bears an interest rate of 6.38%. This note requires quarterly payments of interest and amortized principal on the basis of a ten-year term and is subject to maturity on March 31, 2012. The first payment was made on June 30, 2005.

Note #117, the $1,200,000 fixed rate note, was retired on April 30, 2007.

Note #91, the $8,000,000 variable rate, revolving note, permits POET™ Biorefining - Big Stone to borrow, on a revolving basis, the difference between the unpaid principal balance and $8,000,000. The revolving note bears a variable-interest rate equal to the prime rate announced by the Bank from time to time, adjusted each time the Prime Rate changes (3.25% at June 30, 2009). Quarterly payments of interest on any unpaid balance are due March 31, June 30, September 30, and December 31 of each year. The total unpaid principal balance is due at maturity, or August 31, 2014. The loan is subject to a quarterly unused commitment fee of 0.0375% and

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prepayment is without penalty. The amount available on this note was $8,000,000 at June 30, 2009 and December 31, 2008.

Note #190, the construction note of $33,000,000, was converted to a term note on August 31, 2007. The notional amount ($20,418,750 as of June 30, 2009) is subject to the interest rate swap agreements discussed in Note 2 under “Interest Rate Swap Agreements”. The note is amortized over a ten-year period and is subject to a maturity of August 31, 2014. Payments of principal are due quarterly and began on November 30, 2007. Payments of interest are due monthly, subject to a variable rate of one-month LIBOR plus 2.75%, adjusted monthly (3.060% at June 30, 2009).

Note #232, the $4,300,000 note, is subject to a variable rate of LIBOR plus 3.00% (3.320% at June 30, 2009), adjusted and due monthly. A principal payment of $154,000 is due quarterly, which began on October 31, 2007.

Note #216, the $9,000,000 short-term note, which was issued on September 21, 2007, permits us to borrow, on a revolving basis, the difference of the outstanding principal amount and the lesser of the borrowing base or $9,000,000. The borrowing base is defined as 75% of the total of the fair market value of the outstanding inventory, eligible accounts receivable, and hedging accounts at fair market value. The principal purpose of this revolver is to cover the cost of purchasing corn. It bears a variable-interest rate equal to one-month LIBOR plus 3.00%, payable monthly when there is an outstanding balance (3.375% at June 30, 2009). The loan has been renewed, with revised terms, as of July 28, 2009 and is subject to a quarterly unused commitment fee of 0.500% per year, assessed quarterly in arrears (previously was 0.250%). The variable interest rate has been revised to one-month LIBOR plus 4.00%. The total unpaid principal balance is due at maturity, or July 26, 2010. The amount available on this note was $9,000,000 at June 30, 2009 and December 31, 2008.

POET™ Biorefining - Big Stone is subject to certain restrictive covenants establishing minimum reporting requirements, ratios, working capital and net worth requirements and is in full compliance at June 30, 2009. The bank waived compliance of the fixed charge coverage ratio on May 14, 2009 for the March 31, 2009 compliance date. On May 14, 2009, the bank also adjusted the 2009 requirements of the fixed charge coverage ratio covenant such that the Company believes it will be in compliance with this and all covenants for each of the remaining two quarters of 2009. Collateral for the notes is multiple mortgages and security agreements, multiple UCC filings on all business assets, and assignments of certain agreements related to the construction and operation of the plant.

The balance of the long-term notes payable as of June 30, 2009 and December 31, 2008 is as follows:

	June 30, 2009			December 31, 2008 *
	(Unaudited)

Note #174	$	2,242,500		$	2,437,500
Note #158	10,338,541			11,064,447
Note #190	27,225,000			28,875,000
Note #232	3,222,000			3,530,000

	43,028,041			45,906,947
Less current portion	(5,832,440		)	(5,785,007		)

	$	37,195,601		$	40,121,940

* Derived from audited financial statements.

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At June 30, 2009 and December 31, 2008, there were no outstanding borrowings against the long-term variable rate revolving note and the balance available on this note was $8,000,000.

Minimum principal payments, through the maturity of the notes, are estimated as follows:

Twelve Months Ending June 30,	Amount

2010	$	5,832,440
2011	5,932,181
2012	12,564,420
2013	3,916,000
2014	3,916,000
July 1, 2014 to August 31, 2014	10,867,000

	$	43,028,041

NOTE 6 - INVENTORY

Inventory consisted of the following:

	June 30,		December 31,
	2009		2008 *

Finished goods	$	2,876,491	$	1,875,444
Raw materials	5,491,781		5,620,800
Work-in-process	837,574		1,022,085
Spare parts inventory	1,138,220		1,191,939

	$	10,344,066	$	9,710,268

* Derived from audited financial statements.

NOTE 7 - COMMITMENTS, CONTINGENCIES AND AGREEMENTS

Due to the name change of Broin Companies, LLC (“Broin”) to POET™, LLC in early 2007 and a corresponding change in the name of some Broin-related companies, the Company’s existing contractual arrangements and agreements for plant development, operations and marketing are now with newly named entities containing POET™. All of the newly named POET™-related entities are the same Broin-related entities that existed prior to the Broin to POET™ name change. Broin Investments I, LLC, the minority member of POET™ Biorefining — Big Stone, has not changed its name, yet is still a related party to all POET™-named companies listed here.

The Company has entered into contracts and agreements regarding the construction, operation and management of the ethanol plant. Agreements with the minority member, or parties related to the minority member through common ownership, are as follows:

Ethanol Marketing Agreement – The Company renewed its agreement with Ethanol Products, LLC (d/b/a/ POET™ Ethanol Products) for the sale, marketing, billing and receipt of payment and other administrative services for all ethanol produced by the plant. The new agreement is effective July 1, 2007 and terminates on

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July 1, 2012, automatically renewing for a five-year term unless a notice of termination is provided by either party prior to the end of the term, and increases marketing fees by $0.002 per gallon sold. The Company has sales commitments with POET™ Ethanol Products of approximately 11.8 million gallons over the next six months, all of which are contracted at a variable price. The Company purchases all of its denaturant through POET™ Ethanol Products.

Management Agreement – On April 20, 2005, the Company renewed its agreement with POET™ Plant Management, LLC (formerly known as Broin Management, LLC) for the management and operation of the plant. The new agreement terminates on June 30, 2015. In exchange for management services, POET™ Plant Management receives an annual fee of $450,000, payable in equal monthly installments, plus an incentive bonus based on a percentage of net income, payable quarterly. The annual fee is adjusted each year on March 1st for changes in the consumer price index. The fees and bonus paid to POET™ Plant Management include the salary and benefits of the general manager and technical manager and certain other services related to operation of the plant.

Technology and Patent Rights License Agreement - On October 25, 2005, the Company entered into a Technology and Patent Rights License Agreement with POET™ Research Inc. (formerly known as Broin and Associates, Inc.). Under this agreement, POET™ Research grants the Company a non-exclusive license to use certain technology and patents owned, developed, or obtained by POET™ Research relating to the ethanol and related product production processes. The Company is required to pay an annual licensing fee for the right to use such technology and patents. The agreement terminates on June 30, 2015.

Risk Management Agreement – On April 1, 2007, the Company entered into a new corn and natural gas price risk management agreement with POET™ Risk Management. The new risk management agreement became effective on July 1, 2007 and terminates on July 1, 2012, automatically renewing for a five-year term unless a notice of termination is provided by either party prior to the end of the term. In exchange for providing certain risk management services relating to corn and natural gas prices, including hedging and pooling services, the Company pays POET™ Risk Management an annual fee, payable in quarterly installments, subject to modification in the case of plant expansions or increases in corn usage.

Distillers Grains Marketing Agreement – On March 8, 2002 the Company entered into an agreement with POET™ Nutrition, Inc. (formerly known as Dakota Gold Marketing, Inc.), to provide marketing and administrative services for the sale of distillers grains. The agreement terminates March 8, 2012, but renews for a five year term unless either party provides the other party a 90 day notice of termination prior to the renewal date. The agreement provides for an agency relationship as POET™ Nutrition does not take title to the distillers grains but acts as a broker on behalf of the Company.

Agreements with unrelated parties are as follows:

Property Lease – The Company has a 99 year property lease (an operating lease) with Big Stone-Grant Industrial Development and Transportation, LLC. In 2001, rent was $2,400 annually through May 1, 2006, after which it increased by 5% through 2011. Beginning on May 1, 2006, and every five years thereafter, rent is increased 5% over the immediately preceding five-year period.

Steam – The Company has an agreement with the co-owners of the Big Stone Plant (“Big Stone Plant”), Otter Tail Corporation, Montana-Dakota Utilities Co. and Northwestern Public Service, for the use of steam in the ethanol production process. The rate for a minimum amount is set at a base rate, adjusted annually for changes in the cost of energy, and any amount over the base rate is set at a market rate. The agreement commenced on June 1, 2002 and has a term of ten years, renewable for two five-year periods, after which the

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agreement is renewable from year to year. Either party may terminate the agreement by providing notice one year prior to a renewal or expiration date.

Minimum payments related to the above agreements are summarized in the following table:

					Unconditional
Twelve Months Ending	Lease		Management		Purchase
June 30,	Agreements		Agreements		Agreements		Total

2010	$	2,520	$	567,340	$	217,080	$	786,940
2011	2,541		567,340		217,080		786,961
2012	2,646		548,389		198,990		750,025
2013	2,646		491,536		—		494,182
2014	2,646		491,536		—		494,182
2015-2100	361,715		491,536		—		853,251

	$	374,714	$	3,157,677	$	633,150	$	4,165,541

Corn Delivery – On August 9, 2005, POET™ Biorefining - Big Stone agreed to release Northern Growers and, accordingly, all of its members from delivering corn to the plant starting on January 1, 2006. Prior to January 1, 2006, Northern Growers’ members were obligated to deliver corn to the plant unless the plant released the member from the member’s corn delivery obligation. Effective January 1, 2006, however, Northern Growers’ members are no longer obligated to deliver corn to the plant. Instead, the plant purchases all of its corn from local corn producers and the open market.

Incentive Revenue - The Company 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. The Company has earned $666,667 and $645,596 for the program years ended June 30, 2009 and 2008, respectively. Incentive revenue of $166,666 and $145,595 was recorded for the six months ended June 30, 2009 and 2008, respectively, for this program.

Capital Unit Trading - On March 8, 2004, Northern Growers’ members and non-members began trading Northern Growers capital units on an alternative trading system operated by Alerus Securities Corporation of West Fargo, North Dakota.

Environmental Contingency - The Company’s operations are subject to environmental laws and regulations adopted by various governmental authorities in the jurisdiction in which it operates. These laws require the Company to investigate and remediate the effects of the release or disposal of materials at its locations. Accordingly, the Company has adopted policies, practices and procedures in the areas of pollution control, occupational health, and the production, handling, storage and use of hazardous materials to prevent material environmental or other damage, and to limit the financial liability which could result from such events.

The Company conducts an ongoing compliance program designed to meet these environmental laws and regulations. The Company believes that it is in substantial compliance with applicable environmental laws and regulations. From time to time, however, the Company may be involved in investigations or determinations regarding non-material matters that may arise.

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In January 2003, the U.S. Environmental Protection Agency (U.S. EPA) issued formal information requests to, among others, plants designed, constructed, and/or managed by POET™ Design and Construction and POET™ Plant Management. The Company’s plant was a subject of these requests. The requests required that the plants provide the EPA with certain data regarding emissions.

On January 14, 2009, the Company’s plant received from the U.S. EPA a written Notice of Violation (NOV). The NOV alleges that the Company’s plant violated the Clean Air Act by failing to adequately maintain a regulated level of air pollutants under the plant’s Title V air permit, and by conducting invalid testing for compliance with such limit. Following the receipt of the NOV, the plant had a meeting with the U.S. EPA to discuss the NOV.

A penalty assessment is currently under consideration by the EPA. While it is likely that the Company may be assessed penalties and/or fines related to these occurrences, as of the date of this report, none have been assessed. Any potential penalties and/or fines are not expected to be material to the Company.

The Company has taken corrective action relating to the NOV through planned capital improvements to the plant. On January 22, 2009, a capital improvement project for approximately $1 million was approved. This project, which will involve the construction of improvements to the dryer and thermal oxidizer, is expected to be capitalized and financed with cash from operations. No work has been initiated on this project as of June 30, 2009.

NOTE 8 - DISTRIBUTIONS

During January 2008, Northern Growers approved a distribution which it paid from cash reserves. On January 29, 2008, Northern Growers paid a distribution of $1,518,840 to its members of record as of December 31, 2007.

NOTE 9 - CAPITAL UNITS

On June 20, 2005, Northern Growers approved a four-for-one (4-for-1) capital unit split of its Class A capital units, effective for September 1, 2005. Under the terms of the Class A capital units’ split, members of record as of September 1, 2005 received four capital units for each one capital unit held in Northern Growers.

On June 2, 2006, Northern Growers approved a two-for-one (2-for-1) capital unit split of its Class A capital units, effective for July 1, 2006. Under the terms of the Class A capital units’ split, members of record as of July 1, 2006 received two capital units for each one capital unit held in Northern Growers.

NOTE 10 - UNCERTAINTIES

The Company has certain risks and uncertainties that it experiences during volatile market conditions such as what the Company experienced during the six months ending June 30, 2009. These volatilities can have a severe impact on operations. The Company’s revenues are derived from the sale and distribution of ethanol and distillers grains to customers primarily located in the U.S. Corn for the production process is supplied to our plant primarily from local agricultural producers and from purchases on the open market. Ethanol sales, historically, average 80% of total revenues and corn costs historically average 50% to 60% of cost of revenues.

The Company’s operating and financial performance is largely driven by the prices at which we sell ethanol and the net expense of corn. The price of ethanol is influenced by factors such as prices of supply and demand, weather, government policies and programs, and the price of unleaded gasoline and corn. Excess ethanol supply in the market, in particular, puts downward pressure on the price of ethanol. Our largest cost of production is corn.

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The cost of corn is generally impacted by factors such as supply and demand, weather, government policies and programs, and our risk management program used to protect against the price volatility of these commodities.

The Company had a net loss of $145,000 for the three months ended June 30, 2009 compared to a net income of $1.56 million for the three months ended June 30, 2008. This change is primarily attributed to a decrease of $11.5 million in ethanol revenues, offset by a decrease of $7.4 million in corn costs and a decrease of $2.1 million in energy costs. Ethanol revenues decreased primarily because of a decrease in sales price. Ethanol prices per gallon decreased 29% between periods because of excess supply in the market, which has continued to depress prices since the summer of 2008. Conversely, our corn costs per bushel decreased 26% from 2008 to 2009 primarily due to a decrease in the market price of corn and benefits resulting from hedging strategies. Energy costs decreased 41% from 2008 to 2009 due to a decrease in natural gas cost per unit as well as steam cost per unit.

We anticipate that our results of operations into 2009 will continue to be affected by a surplus of ethanol, low ethanol prices, and volatility in the commodity markets. While the market price of corn has since dropped to $3.48 per bushel on June 30, 2009 as quoted on the CBOT for July 2009 futures from $4.28 per bushel on December 31, 2008 as quoted on the CBOT for July 2009 futures, it still remains relatively volatile. The volatility is due to various factors, including volatility in the demand for grain from global and national markets, speculation in the commodity markets, uncertain demand for corn from the ethanol industry and the severe downturn of the global financial markets. Concurrently, the price of ethanol ($1.61 per gallon as of August 5, 2009 on the CBOT for September 2009 futures) is expected to continue to remain low due to excess supply in the market and sluggish demand growth. Demand growth for ethanol is uncertain as the U.S. Environmental Protection Agency (EPA) has until December 2009 to decide on possibly increasing the ethanol blending cap from its current 10% level to a 15% level. This could provide a needed demand boost. As a result, we expect our margins to be tight or not exist at all, though not on the scale as the third and fourth quarters of 2008. Despite our results and uncertainties, our liquidity position still is positive.

NOTE 11 - SUBSEQUENT EVENTS

On July 28, 2009 the Company executed the renewal of the $9,000,000 short-term, revolving note with the bank. The details of this note can be found in Note 5 – Notes Payable.

The Company has evaluated subsequent events through August 7, 2009, the date which the consolidated financial statements were issued.

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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 three and six months ended June 30, 2009, (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 consolidated financial statements and Annual Report on Form 10-K for the year ended December 31, 2008. 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, 2008.

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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.

Overview

Northern Growers, LLC (“Northern Growers”) owns and manages a 77.16% interest in its subsidiary, POET™ Biorefining - Big Stone (POET™ Biorefining - Big Stone and Northern Growers are also collectively referred to as “we” “us” or “our”), an ethanol and distillers grains plant (the “plant” or “our plant”) located in Big Stone City, South Dakota.

Our revenues are derived from the sale and distribution of ethanol and distillers grains to customers primarily located in the U.S. Corn for the production process is supplied to our plant primarily from local agricultural producers and from purchases on the open market. After processing the corn, ethanol is sold to POET™ Ethanol Products, LLC, which subsequently markets and sells the ethanol to gasoline blenders and refineries located throughout the continental U.S. All of our distillers grains are sold through POET™ Nutrition, Inc., which exclusively markets and sells the product to livestock feeders primarily located in the continental U.S.

Our operating and financial performance is largely driven by the prices at which we sell ethanol and distillers grains and the costs related to production. The price of ethanol is influenced by factors such as supply and demand, weather, government policies and programs, and the price of corn and unleaded gasoline. Excess ethanol supply in the market puts downward pressure on the price of ethanol. The price of distillers grains is influenced by the price of corn, soybean meal and other protein-based feed products, and supply and demand. Excess grain supply in the market puts downward pressure on the price of distiller grains. Our two largest costs of production are corn and natural gas, although our plant’s use of natural gas is offset by the use of steam supplied from an adjacent power plant, Big Stone Plant. The cost of corn and natural gas generally impacted by factors such as supply and demand, weather, government policies and programs, and our risk management program used to protect against the price volatility of these commodities.

Executive Summary

We had a net loss of $145,000 compared to a net income of $1.6 million for the three months ended June 30, 2009 and 2008, respectively, compared to a net loss of $407,000 and a net income of $2.7 million for the six months ended June 30, 2009 and 2008, respectively. The change between periods for the three months ended is primarily attributed to a decrease in ethanol revenues, offset by a decrease in corn and energy costs. Ethanol revenues decreased between periods because of excess supply and decreases in unleaded gasoline prices. As an offset, our corn costs per bushel decreased 26% from the

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three months ended June 2008 to 2009 primarily due to a decrease in the market price of corn. Energy costs decreased 41% primarily due to a decrease in natural gas cost per unit and steam cost per unit.

We continue to expect challenges in the ethanol industry for the remainder of 2009, but probably not to the degree as forecasted earlier this year. These challenges are likely to produce similar results of operations for the next two quarters. While ethanol prices are expected to remain low ($1.61 per gallon as of August 5, 2009 as quoted on the CBOT for September 2009 futures), corn prices should help offset the ethanol price decline. Ethanol prices are likely to remain low due to excess ethanol supply and decreases in corn and unleaded gasoline prices. Excess ethanol supply, which has continued to impact the market since the fall of 2008, is expected to continue to be a drag on prices until there is new growth in demand. But demand growth is subject to uncertainty. If the U.S. Environmental Protection Agency (EPA) agrees to increase the ethanol blending cap from its current 10% level to a 15% level, it should provide a needed demand boost. A formal decision by the EPA, however, is not expected until December 2009 at the earliest. Moreover, while ethanol plant construction has come to a halt and reduced supply capacity in the process, and several existing plants have idled production, it remains uncertain if there will be a rebalancing of supply and demand. In contrast, the price of corn appears favorable through the fall harvest. The price of corn was $3.47 per bushel on August 5, 2009 as quoted on the CBOT for September 2009 futures compared to $4.18 per bushel on December 31, 2008 as quoted on the CBOT for May 2009 futures. The decrease is due to favorable spring planting and weather conditions, decrease in demand from the ethanol industry and a decrease in commodity speculation.

Results of Operations

Comparison of the three months ended June 30, 2009 and 2008

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

	Quarter Ended June 30,
	2009				2008
	$		% of Revenue		$		% of Revenue
Revenues:
Ethanol	26,093,694		79	%	37,628,517		82	%
Distillers Grains	6,965,327		21	%	8,064,941		18	%
Incentive	83,333		0	%	83,333		0	%
Total	33,142,354		100	%	45,776,791		100	%

Cost of Revenues	31,558,105		95	%	41,833,837		91	%

General and Administrative Expenses	1,076,425		3	%	1,014,863		2	%

Other Operating Income (Expense)	(681,702	)	(2	)%	(894,976	)	(2	)%

Non-controlling Interest	28,784		0	%	(474,053	)	(1	)%

Net Income	(145,094	)	(0	)%	1,559,062		3	%

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Revenues - Revenue decreased $12.6 million, or 28%, to $33.1 million for the three months ended June 30, 2009 from $45.7 million for the three months ended June 30, 2008. Revenues decreased due to a decrease in ethanol and distillers grains’ revenue.

Revenue from the sale of ethanol decreased $11.5 million, or 31%, to $26.1 million for the three months ended June 30, 2009 from $37.6 million for the three months ended June 30, 2008. The decrease is primarily due to a 29% decrease in the average sales price per gallon. Ethanol prices decreased between periods due to an oversupply of ethanol in the industry and a decrease in the price of unleaded gasoline and corn.

Revenue from the sale of distillers grains decreased $1.1 million, or 14%, to $7.0 million for the three months ended June 30, 2009 from $8.1 million for the three months ended June 30, 2008. The decrease is primarily due to a 16% decrease in the average price per ton. The price of distillers grains decreased due to a decrease in demand as livestock producers increased their use of corn for feed due to declining corn prices.

Cost of Revenues - Cost of revenues, which includes production expenses, decreased $10.2 million, or 24%, to $31.6 million for the three months June 30, 2009 from $41.8 million for the three months ended June 30, 2008. The primary reasons for the decrease are decreases in corn and energy costs.

Corn costs decrease 26% per bushel between periods. This decrease is primarily due to a 19% decrease in the market price of corn. The market price decreased due to favorable spring planting and weather conditions, decrease in demand from the ethanol industry and a decrease in commodity speculation.

Energy costs decreased 41% between periods due primarily to a decrease in natural gas costs. Natural gas costs per unit decreased 61% between periods due to an increase in natural gas reserves and a decrease in demand nationwide.

General and Administrative Expenses - General and administrative expenses increased $61,000, or 6%, to $1.07 million for the three months ended June 30, 2009 from $1.01 million for the three months ended June 30, 2008. The primary reason for the increase, despite a decrease in management incentive fees and costs, is an increase in bank charges from our lender. Bank charges increased between periods because our lender, U.S. Bank, charged us fees for waiving a violation of our fixed-charge coverage ratio covenant at March 31, 2009 and adjusting our fixed-charge coverage ratio for June 30, 2009 and September 30, 2009 with which we did not comply during the first quarter of 2009. The increase is offset by a decrease in management incentive fees and costs which resulted from a decrease in our net income on which these fees and costs are based.

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Other Income (Expenses) — Interest expense decreased $184,000, or 21%, to $701,000 for the three months ended June 30, 2009 from $885,000 for the three months ended June 30, 2008. Interest expense decreased because we drew down on our revolving loans during the second quarter of 2008, compared to not drawing down on the revolving loans during the second quarter of 2009. Interest rates on our variable loans also decreased between 1.7% to 2.1% between periods.

Net Income (Loss) - Net income decreased $1.70 million, or 109%, to a net loss of $145,000 for the three months ended June 30, 2009 from a net income of $1.56 million for the three months ended June 30, 2008. This change is caused primarily by a decrease in ethanol revenues, offset by a decrease in corn and energy costs.

Comparison of the six months ended June 30, 2009 and 2008

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

	Six Months Ended June 30,
	2009				2008
	$		% of Revenue		$		% of Revenue
Revenues:
Ethanol	49,125,372		78	%	72,714,093		82	%
Distillers Grains	14,064,575		22	%	16,291,120		18	%
Incentive	166,666		0	%	145,595		0	%
Total	63,356,613		100	%	89,150,808		100	%

Cost of Revenues	60,475,478		95	%	81,898,688		92	%

General and Administrative Expenses	1,974,357		3	%	1,918,235		2	%

Other Operating Income (Expense)	(1,388,013	)	(2	)%	(1,846,533	)	(2	)%

Non-controlling Interest	74,580		0	%	(825,412	)	(1	)%

Net Income	(406,655	)	(1	)%	2,661,940		3	%

Revenues - Revenue decreased $25.8 million, or 29%, to $63.4 million for the six months ended June 30, 2009 from $89.2 million for the six months ended June 30, 2008. Revenues decreased due to a decrease in ethanol and distillers grains’ revenues.

Revenue from the sale of ethanol decreased $23.6 million, or 32%, to $49.1 million for the six months ended June 30, 2009 from $72.7 million for the six months ended June 30, 2008. The decrease is primarily due to a 27% decrease in the average sales price per gallon as prices continued to be adversely affected by the oversupply in the industry and a decrease in the price of unleaded gasoline.

Revenue from the sale of distillers grains decreased $2.2 million, or 14%, to $14.1 million for the three months ended June 30, 2009 from $16.3 million for the six months

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ended June 30, 2008. The decrease is due to a 10% decrease in the average price per ton and a 4% decrease in sales volume resulting from different variations of distillers grains’ product sold.

Cost of Revenues - Cost of revenues, which includes production expenses, decreased $21.4 million, or 26%, to $60.5 million for the six months June 30, 2009 from $81.9 million for the six months ended June 30, 2008. The primary reason for the decrease is a decrease in corn and energy costs. Corn costs decreased due to a 15% decrease in the market price of corn which was due to favorable spring planting and weather conditions, a decrease in the demand for corn from the ethanol industry, and a decrease in commodity speculation.

General and Administrative Expenses - General and administrative expenses increased $56,000, or 3%, to $1.97 million for the six months June 30, 2009 from $1.91 million for the six months ended June 30, 2008. The primary reason for the increase, despite a decrease in management incentive fees and costs, is an increase in bank charges from our lender. Bank charges increased between periods because our lender, U.S. Bank, charged us fees for waiving a violation of our fixed-charge coverage ratio covenant at March 31, 2009 and adjusting the fixed-charge coverage ratio covenant for June 30, 2009 and September 30, 2009 with which we did not comply during first quarter of 2009. The increase is offset by a decrease in management incentive fees and costs which resulted from a decrease in net income on which these fees and costs are based.

Other Income (Expenses) — Similar to the quarter ended, interest expense decreased $440,000 or 24%, to $1.42 million for the six months ended June 30, 2009 from $1.86 million for the six months ended June 30, 2008. Interest expense decreased because we drew down on our revolving loans during the first six months of 2008, compared to not drawing down on the revolving loans during the first six months of 2009. Interest rates on our variable loans also decreased between 1.7% to 2.1% between periods.

Net Income (Loss) - Net income decreased $3.07 million, or 115%, to a net loss of $407,000 for the six months ended June 30, 2009 from a net income $2.66 million for the six months ended June 30, 2008. This change is caused primarily by a decrease in ethanol revenues, offset by a decrease in corn costs.

Liquidity and Capital Resources

Our primary sources of liquidity are cash provided by operations and borrowings under our $8.0 million and $9.0 million revolving credit facilities which are discussed below under “Indebtedness.” Net working capital is $12.87 million as of June 30, 2009, compared to $30.93 million as of June 30, 2008. Working capital decreased between periods primarily because the value of inventory decreased between periods, namely the price of corn. Although we experienced a decrease in net income between periods, we continue to believe that cash flows from operations and our revolving debt facilities will be sufficient to meet our expected capital and liquidity requirements and needs through

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the end of 2009. A greater reliance on our revolving debt to fund operations may be required, however, particularly if conditions in the ethanol industry were to worsen.

The following table shows the cash flows between the six months ended June 30, 2009 and six months ended June 30, 2008:

	Six Months Ended June 30,
	2009			2008
	$			$
Net cash provided by (used for) operating activities	$	(2,921,600	)	$	(16,194,273	)
Net cash provided by (used for) investing activities	$	141,432		$	683,983
Net cash provided by (used for) financing activities	$	(2,878,906	)	$	6,715,300

Cash Flow From Operating Activities - Net cash flow used for operating activities increased $13.3 million between periods due to a significant decrease in inventory and cash used for margin deposits, offset by a decrease in net income. Inventory decreased between periods because the value of corn inventory per bushel decreased 56% between June 30, 2008 to June 30, 2009. Due to an increase in corn prices during the six months ended June 30, 2008, we used $14.9 million in cash for margin deposits, compared to receiving $1.5 million during the six months ended June 30, 2009. Net income decreased primarily due to a decrease in revenue from the sale of ethanol and distillers grains.

Cash Flow From Investing Activities - Net cash flow from investing activities decreased $540,000 between periods due to a decrease in purchases of property and equipment and a decrease in refunds from the State of South Dakota for sales and excise tax paid. Since completing construction of our plant’s expansion in May 2007, we have continued to purchase less property and equipment as no material capital improvements have been necessary. In addition, we received more in tax refunds from the State of South Dakota in 2008 than in 2009 as a result of completing the construction of our plant’s expansion in 2007.

Cash Flow From Financing Activities - Net cash from financing activities decreased $9.6 million between periods principally because we had a $1.1 million of checks in excess of our bank balances at June 30, 2008, compared to $0 for June 30, 2009. In addition, we drew down $8 million on our $8 million revolving note and $1.96 million on our $9 million revolving note during the six months ended June 30, 2008, compared to not drawing down any part of the notes during the six months ended June 30, 2009.

Indebtedness

Under a loan agreement with our senior lender, U.S. Bank National Association, we have six notes and loans outstanding through our subsidiary POET™ Biorefining — Big Stone: 1) a $33.0 million term note; 2) a $15.8 million fixed-rate note; 3) a $3.9 million variable-rate, non-revolving note; 4) an $8 million variable rate, revolving note; 5) a $9 million variable rate, revolving note; and 6) a $4.3 million variable rate note.

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The $8 million note permits us to borrow, on a revolving basis, the difference between the unpaid principal balance and $8 million. The principal purpose of this revolver is to cover the cost of any non-corn related items at the plant at any time. The note bears a variable-interest rate equal to the prime rate as announced by U.S. Bank, adjusted each time the prime rate changes. Quarterly payments of interest on any unpaid balance are due quarterly. The total unpaid principal balance is due at maturity on August 31, 2014. The principal balance outstanding is $0 as of June 30, 2009, allowing us to borrow up to $8 million as of June 30, 2009.

The $9 million note permits us to borrow, on a revolving basis, the difference of the outstanding principal amount and the lesser of the borrowing base or $9.0 million. The borrowing base is defined as 75% of the total of the fair market value of the outstanding inventory, eligible accounts receivable, and hedging accounts at fair market value. The principal purpose of this revolver is to cover the cost of purchasing corn during a period of tight margins. The interest rate is LIBOR plus 4.0%, adjusted and due monthly, and the unpaid principal balance outstanding is due at maturity on June 26, 2010. The principal balance outstanding is $0 as of June 30, 2009, allowing us to borrow up to $9 million as of June 30, 2009 as the defined borrowing base was higher than $9 million as of June 30, 2009.

The $33 million term note, which had been converted from a construction note on August 31, 2007, is subject to two interest rate swap arrangements. The notional amounts ($13.61 million and $6.81 million as of June 30, 2009) are subject to an interest rate swap agreement with U.S. Bank. (see also Item 7A below-”Quantitative and Qualitative Disclosures About Market Risk”). Under the agreement, the notional amounts are subject to a fixed rate of 7.98% and 7.52% respectively, which is payable monthly until maturity on August 30, 2014. The remaining portion of the note is subject to a variable rate of one-month LIBOR plus 2.75%, adjusted and due monthly (3.06% at June 30, 2009). A principal payment of $825,000 is due quarterly on the note.

The principal balance outstanding on the $15.8 million fixed-rate note (6.38%) is $10.3 million as of June 30, 2009. Principal payments of $364,883 and $725,905 were made for the three and six months ended June 30, 2009.

The principal balance outstanding on the $3.9 million variable rate (3.25% as of June 30, 2009) non-revolving loan is $2.24 million as of June 30, 2009. Principal payments of $97,500 and $195,000 were made for the three and six months ended June 30, 2009.

The principal balance outstanding on the $4.3 million variable rate loan (3.32% at June 30, 2009) is $3.22 million. Principal payments of $154,000 and $308,000 were made for the three and six months ended June 30, 2009.

All of loans and notes outstanding are secured by our tangible and intangible property, including a leasehold interest, easement rights, improvements, equipment,

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personal property, accounts receivable, inventory and contracts. In addition to standard covenants and conditions in the amended and restated loan agreement, we are subject to the following material conditions and covenants: 1) a capital expenditure limitation not exceeding $1 million in any calendar year; 2) a cash distribution limitation to members not exceeding 80% of net income annually; 3) a minimum working capital of $10 million; and 4) a fixed-charge coverage ratio of 0.75:1 for June 30, 2009, 0.95:1 for September 30, 2009, and 1.15:1 every quarter thereafter. As of June 30, 2009 and the date of this filing, we were in full compliance with our covenants.

We anticipate that we will continue to comply with our fixed-charge coverage ratio, despite a violation of the ratio on March 31, 2009 and the last two quarters of 2008. At March 31, 2009, we violated our fixed-charge coverage ratio under our loan agreement with U.S. Bank as our coverage ratio was 0.73:1 compared to the then required ratio of 1.15:1 at March 31, 2009. On May 14, 2009, U.S. Bank agreed to waive a violation of the fixed-charge coverage ratio and amend our loan agreement, agreeing to reduce the required ratio from 1.15:1 to 0.75:1 for June 30, 2009 but increase it to 0.95:1 for September 30, 2009 and back to 1.15:1 for December 31, 2009 and every quarter thereafter. The ratio is measured on a year-to-date financial information basis but tested quarterly.

Off-Balance Sheet Arrangements

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

Recent Accounting Pronouncements

In May 2009, the FASB issued SFAS No. 165, which establishes general standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. SFAS No. 165 requires the Company to disclose the date through which it has evaluated subsequent events and the basis for that date, including a statement that it has not evaluated subsequent events after that date in the set of financial statements being presented. SFAS No. 165 is effective for interim and annual periods ending after June 15, 2009, which is our second quarter of 2009. This pronouncement was adopted during the current period with no material effect on our statements of financial condition or results of operations. Applicable disclosures have been provided in Note 11 — Subsequent Events.

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enterprise has the power to direct the activities of a variable interest entity that most significantly impact the entity’s economic performance and (a) the obligation to absorb losses of the entity or (b) the right to receive benefits from the entity. This statement requires an additional reconsideration event when determining whether an entity is a variable interest entity when any changes in facts and circumstances occur such that the holders of the equity investment at risk, as a group, lose the power from voting rights or similar rights of those investments to direct the activities of the entity that most significantly impact the entity’s economic performance. It also requires ongoing assessments of whether an enterprise is the primary beneficiary of a variable interest entity. This statement amends Interpretation 46(R) to require additional disclosures about an enterprise’s involvement in variable interest entities. SFAS 167 is effective for fiscal years beginning after November 15, 2009, with early application prohibited. We will adopt the provisions of SFAS 167 on January 1, 2010. We have not completed an evaluation of the potential impact of the adoption of SFAS 167 on our results of operations, cash flows or financial position.

In April 2009, the FASB issued FASB Staff Position (FSP) FAS 107-1 and APB 28-1, Interim Disclosures about Fair Value of Financial Instruments. This FSP amends FASB Statement No. 107, Disclosures about Fair Value of Financial Instruments, to require an entity to provide disclosures about fair value of financial instruments in interim financial information. This FSP also requires those disclosures in summarized financial information at interim reporting periods. FSP 107-1 and APB 28-1 are effective for interim periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009. Our adoption of SFAS 107-1 and APB 28-1 did not have an impact on our consolidated financial position, results of operations or cash flows.

Disclosures about Derivative Instruments and Hedging Activities. We have adopted SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities” (“SFAS No. 161”). SFAS No. 161 requires entities that utilize derivative instruments to provide qualitative disclosures about their objectives and strategies for using such instruments, as well as any details of credit-risk-related contingent features

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contained within derivatives. SFAS No. 161 also requires entities to disclose additional information about the amounts and location of derivatives located within the financial statements, how the provisions of SFAS No. 133 have been applied, and the impact that hedges have on an entity’s operating results, financial position or cash flows. See Note 4 — Derivative Financial Instruments for additional disclosures required by SFAS No. 161.

Noncontrolling Interests in Consolidated Financial Statements. On January 1, 2009 the Company adopted SFAS No. 160, “Noncontrolling Interests in Consolidated Financial Statements, an amendment of Accounting Research Bulletin No. 51” (“SFAS No. 160”), which improves the relevance, comparability and transparency of the financial information that a reporting entity provides in its consolidated financial statements by establishing accounting and reporting standards for the noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. Our adoption of SFAS No. 160 did not have an impact on our consolidated financial position, results of operations or cash flows.

Business Combinations. In December 2007, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 141 (revised 2007), “Business Combinations” (“SFAS No. 141R”), which replaces SFAS No. 141, “Business Combinations” (“SFAS No. 141”). SFAS 141R retains the fundamental requirements in SFAS No. 141 that the acquisition method of accounting (which SFAS No. 141 called the purchase method) be used for all business combinations. SFAS No. 141R also establishes principles and requirements for how the acquirer: (a) recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any noncontrolling interest in the acquiree; (b) recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase; and (c) determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. The adoption of SFAS 141(R) did not have a material affect on our reported financial position or results of operations.

Fair Value Measurements. On January 1, 2009, we adopted FASB Staff Position FSP FAS No. 157-2 (“FSP FAS No. 157-2”), which delayed the effective date of SFAS No. 157, “Fair Value Measurements” for nonfinancial assets and liabilities, except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). The adoption of FSP FAS No. 157-2 was immaterial to our results of operations, cash flows or financial positions.

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. We continually evaluate these estimates based on historical experience and other assumptions we believe to be reasonable under the circumstances.

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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, we accrue an expense when it is probable that a liability has been incurred and the amount can be reasonably estimated.

Inventory Valuation. We account for 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. We derive our estimates from local market prices determined by grain terminals in our area. Changes in the market value of corn inventory are recognized as a component of cost of revenues. Ethanol and distillers grains are stated at net realizable value. Work-in-process, chemical and parts inventory are stated at 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. Interest income is recognized when earned.

Revenue from state incentive programs is recorded when we have produced or sold the ethanol and satisfied the reporting requirements under the program.

Long-Lived Assets. Depreciation and amortization of our 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 our estimated fair market value based on the best information available. Considerable management judgment is necessary to estimate discounted future cash flows and may differ from actual cash flows.

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Accounting for Derivative Instruments and Hedging Activities. We enter into derivative instruments to hedge our exposure to price risk related to forecasted corn and natural gas purchases, forward corn purchase contracts and forecasted ethanol sales. We do not typically enter into derivative instruments other than for hedging purposes. All derivative contracts are recognized on the June 30, 2009 and December 31, 2008 balance sheets at their fair market value. Currently, none of the derivative instruments are classified as cash-flow hedges for accounting purposes.

On the date the derivative instrument is entered into, we designate the derivative as either (1) a hedge of the fair value of a recognized asset or liability or of an unrecognized firm commitment (fair value hedge), (2) a hedge of a forecasted transaction or of the variability of cash flows to be received or paid related to a recognized asset or liability (cash flow hedge) or (3) will not designate the derivative as a hedge. Changes in the fair value of a derivative that is designated as and meets all the required criteria for a fair value hedge, along with the gain or loss on the hedged asset or liability that is attributable to the hedged risk, are recorded in current period earnings. Changes in the fair value of a derivative that is designated as and meets all the required criteria for a cash flow hedge are recorded in accumulated other comprehensive income and reclassified into earnings as the underlying hedged item affects earnings. Changes in the fair value of a derivative that is not designated as a hedge are recorded in current period earnings.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

We are exposed to the impact of market fluctuations associated with commodity prices and interest rates as discussed below. We have no exposure to foreign currency risk as all of our business is conducted in U.S. Dollars. We use derivative financial instruments as part of an overall strategy to manage market risk. Specifically, we use forward, futures and option contracts to hedge changes to the commodity prices of corn and natural gas, as well as interest rate swaps to hedge against changes in interest rates. However, we do not enter into these derivative financial instruments for trading or speculative purposes, nor do we designate these contracts as hedges for accounting purposes pursuant to the requirements of SFAS 133, Accounting for Derivative Instruments and Hedging Activities.

Commodity Price Risk

We produce ethanol and its co-product, distillers grains, from corn, and, as such, we are 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. We also use natural gas in the production process, and as such are sensitive to changes in the price of natural gas. The price of natural gas is influenced by such weather factors as 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 domestic onshore and offshore rig count, and the amount of natural gas in underground storage during both the injection (April 1st — November 7th) and withdrawal

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(November 14th — June 30th) seasons. The price of distillers grains is principally influenced by the price of corn and soybean meal, competing protein feed products.

We attempt 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 our total corn and natural gas ownership relative to our 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. Likewise, natural gas is hedged with futures and options contracts offered through the New York Mercantile Exchange. Basis contracts are also 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 net realizable 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.

A sensitivity analysis has been prepared to estimate our exposure to commodity price risk. The table presents the fair value of corn inventory, forward purchase contracts and open futures and option positions for corn and natural gas as of June 30, 2009 and June 30, 2008 and the potential loss in fair value resulting from a hypothetical 10% adverse change in corn and natural gas prices. The fair value of the positions is a summation of the fair values calculated by valuing each net position at quoted market prices as of the applicable date. The results of this analysis, which may differ from actual results, are as follows:

Year Ended	Fair Value		Effect of Hypothetical Adverse Change— Market Risk
June 30, 2009	$	2,219,631	$	221,963
June 30, 2008	$	9,086,997	$	908,700

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Interest Rate Risk

Our interest rate risk exposure pertains primarily to our variable rate, long-term debt. Specifically, we had $12.27 million in variable rate, long-term debt outstanding as of June 30, 2009, or approximately 29% of our total long-term indebtedness. The interest rate on $2.24 million of the variable rate, long-term debt is U.S. Bank’s prime rate, which was 3.25% as of June 30, 2009. $3.22 million of the variable rate debt is subject to an interest rate of 3.320% at June 30, 2009. The variable rate on the $6.81 million portion of the term note is 3.060% (One-Month LIBOR plus 2.75%) as of June 30, 2009. We manage our interest rate risk by monitoring the effects of market changes on the interest rates and using fixed-rate debt whenever possible and using the interest rate swap agreement on the term note.

In order to achieve a fixed interest rate on a portion of our $33.0 million term note, we have an interest rate swap agreement with U.S. Bank. The swap agreement covers a seven-year term financing period through August 30, 2014. This agreement assists us in protecting against exposure to increases in interest rates and fixes the interest rate at 7.98% and 7.52% on the notional amounts ($13.61 million and $6.81 million, respectively as of June 30, 2009). The remaining amount, $6.81 million, is subject to a variable rate of One-Month LIBOR plus 2.75%. While our exposure is now reduced, there is no assurance that the interest rate swap will provide us with protection in all scenarios. For example, under the swap agreement, when One-Month LIBOR plus 2.75% exceeds 7.98% or 7.52%, we receive payments from U.S. Bank for the difference between the market rate and the swap rate. Conversely, when the One-Month LIBOR plus 2.75% falls below 7.98% or 7.52%, we make payments to U.S. Bank for the difference. The interest rate on the variable portion of our $33.0 million term note decreased 2.172% from June 30, 2008 to June 30, 2009, which required us to pay more interest to U.S. Bank under the swap transactions during 2009 than 2008.

Item 4. Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

Our chief executive officer and chief financial officer and management, after evaluating the effectiveness of our “disclosure controls and procedures” (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) as of the end of the period covered by this quarterly report, have 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.

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Changes in Internal Controls

There have been no changes in our internal controls over financial reporting that occurred during the three months ended June 30, 2009 that have materially affected, or are reasonably likely to materially affect, the internal controls over financial reporting.

PART II – OTHER INFORMATION

Item 1. Legal Proceedings.

From time to time in the ordinary course of 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 disputes. We are not currently involved in any material legal proceedings, directly or indirectly, except for the following.

In 2003, the U.S. Environmental Protection Agency issued formal information requests to, among others, plants designed, constructed, and/or managed by POET™ Design and Construction and POET™ Plant Management, of which our plant was subject. These requests required that the subject plants provide the Environmental Protection Agency with certain data regarding air emissions. On January 14, 2009, our plant received from the Environmental Protection Agency a written Notice of Violation (NOV). The NOV alleges that our plant violated the Clean Air Act by failing to adequately maintain a required level of air pollutants as established under the plant’s Title V air permit, and by conducting invalid testing for compliance with such permit. Following the receipt of the NOV, the plant had a meeting with the Environmental Protection Agency to discuss the NOV, and another meeting with the EPA is expected in late August 2009. A penalty assessment is currently under consideration by the Environmental Protection Agency. While it is expected that we will be assessed a penalty and/or fine related to these occurrences, no penalty or fine has been assessed nor is any expected to be material. We are currently taking corrective actions to address the cause of the NOV, including a $1 million capital improvement project on our plant’s dryer and thermal oxidizer.

Item 1A. Risk Factors.

Set forth below are material changes to our risk factors as previously described in our Form 10-K for the year ended December 31, 2008:

Our debt financing agreements through our subsidiary, POET™ Biorefining — Big Stone, contain, and our future debt financing agreements may contain, restrictive covenants that impose significant restrictions on the operation of our business. The terms of our existing loan financing agreements with U.S. Bank National Association, our subsidiary’s primary lender, contain, and any future debt financing agreement it enters into may contain, financial, maintenance, cash distribution, operational and other restrictive covenants. During the last two quarters of 2008 and the first quarter of 2009, we violated a fixed-charge coverage ratio for which we have subsequently received from U.S. Bank a waiver. As part of the waiver for the quarter ended March 31, 2009, U.S. Bank agreed to amend the loan agreement by lowering the fixed-charge coverage ratio, making it less difficult with which to comply through the end of the third quarter 2009. There are no assurances, however, that we will be able to comply with the fixed-charge

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ratio and other covenants in the future, or receive waivers like in the past, particularly if market conditions in the ethanol industry were to worsen. If we are unable to comply with these covenants or service our debt, or obtain waivers of covenants in the future, we may lose control of our business and be forced to reduce or delay planned capital expenditures, sell assets, restructure our indebtedness or submit to foreclosure proceedings, all of which could result in a material adverse effect upon our business and on those persons who have invested in our business.

Valero, a large gasoline blending company, recently purchased 8 ethanol plants from the VeraSun bankruptcy which may signal further involvement in the ethanol industry by large oil companies which may influence the ethanol industry in ways that harms our business. Valero Renewable Fuels recently purchased 8 ethanol plants from the VeraSun Energy bankruptcy auction. These ethanol plants have a total nameplate production capacity of 780 million gallons of ethanol. Valero paid $477 million for the VeraSun facilities, excluding working capital and inventory which is currently estimated at $75 million. Valero is involved in the gasoline blending and retail gasoline sales industries. Now, Valero owns ethanol production capacity that would allow Valero to produce a portion of the ethanol that it is required to blend with gasoline. This may allow Valero to realize economies in the production and sale of ethanol that we are not able to realize. Further, this may signal increased involvement by large oil companies in the ethanol industry. Many of these oil companies have significantly greater resources than we have. We may not be able to compete effectively with Valero or other large oil companies which may result in our inability to operate the plant profitably.

Demand for ethanol may not grow unless ethanol can be blended into gasoline in higher percentage blends for conventional automobiles which could impact our ability to operate profitably. Currently, ethanol is blended with conventional gasoline for use in standard (non-flex fuel) vehicles to create a blend which is 10% ethanol and 90% conventional gasoline. Estimates indicate that approximately 135 billion gallons of gasoline are sold in the United States each year. Assuming that all gasoline in the United States is blended at a rate of 10% ethanol and 90% gasoline, the maximum demand for ethanol is 13.5 billion gallons. This is commonly referred to as the “blending wall”, which represents a theoretical limit where more ethanol cannot be blended into the national gasoline pool. However, the renewable fuels standard provides for 36 billion gallons of renewable fuels being blended by 2022. Many in the ethanol industry believe that the ethanol industry will reach this blending wall in 2009 or 2010. In order to meet the RFS and expand demand for ethanol, higher blends of ethanol must be utilized in conventional automobiles. Such higher blends of ethanol have recently become a contentious issue. Automobile manufacturers and environmental groups have fought against higher ethanol blends. Currently, state and federal regulations prohibit the use of higher ethanol blends in conventional automobiles and automobile manufacturers have stated that using higher percentage blends of ethanol in conventional automobiles would void the manufacturer’s warranty. Without increases in the allowable percentage blends of ethanol, demand for ethanol may not continue to increase which could decrease the selling price of ethanol and could result in our inability to operate the plant profitably. The U.S. Environmental Agency is expected to announce its decision on whether the current blending cap restriction on automobiles can be raised from 10% to 15% by December 2009 at the earliest

Carbon dioxide may be regulated in the future by the U.S. Environmental Protection Agency as an air pollutant which may require us to obtain additional permits and install additional environmental mitigation equipment, which could adversely affect our financial performance. On April 17, 2009, the U.S. Environmental Protection Agency

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issued a finding that carbon dioxide and other greenhouse gases constitute a danger to public health and are subject to regulations under the Clean Air Act. The ruling triggers a 60-day comment period before any proposed regulations governing emissions of greenhouse gases are published. The ruling was directed by the U.S. Supreme Court which decided a case in 2007 in which it ruled that carbon dioxide is an air pollutant under the Clean Air Act for the purposes of motor vehicle emissions. The Supreme Court directed the Environmental Protection Agency to regulate carbon dioxide from vehicle emissions as a pollutant under the Clean Air Act. Our plant produces a significant amount of carbon dioxide that we currently emit into the atmosphere. While it is uncertain whether regulations will be promulgated, or the content thereof, if the Environmental Protection Agency or the State of South Dakota were to issue regulations that control the emission of carbon dioxide emissions by ethanol plants, we may have to apply for additional permits or we may be required to install carbon dioxide mitigation equipment or take other as yet unknown steps to comply with these potential regulations. Compliance with any future regulation of carbon dioxide, if it occurs, could be costly and may prevent us from operating profitably and harm our business.

Item 2. Unregistered Sale of Equity 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.

None.

Item 6. Exhibits.

See Exhibit Index following the signature page to this report.

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: August 10, 2009
	By	/s/ Robert Narem
		Robert Narem
		Chief Executive Officer and Chief Financial Officer

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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		Fifth Amended and Restated Operating Agreement dated July 31, 2009 (3)
4.1		Form of Class A Unit Certificate(4)
10.1		$9 Million Revolving Loan Promissory Note
31		Rule 13a-14(a)/15d-14(a) Certification
32		Section 1350 Certification

(1)		Appendix A to registrant’s prospectus filed with the Commission on March 17, 2003.
(2)		Appendix B to registrant’s prospectus filed with the Commission on March 17, 2003.
(3)		Exhibit 3(ii)(a) to the registrant’s Form 8-K filed with the Commission on August 6, 2009.
(4)		Exhibit 4.1 to the registrant’s Form S-4 filed with the Commission on July 26, 2002.

NORTHERN GROWERS LLC 10-Q