**UNITEDSTATESSECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

**FORM 10-QSB**
| **T**      | ** ** | **Quarterly report under Section 13 or 15(d) of  the Securities Exchange Act of 1934.** |
|------------|------------|-----------------------------------------------------------------------------------------|
|       |       |                                                                                    |
| ** ** |       | **For the  quarter ended September 30, 2006**                                           |
|       |       |                                                                                    |
| ** ** |       | **OR**                                                                                  |
|       |       |                                                                                    |
| **£** | ** ** | **Transition report under Section 13 or 15(d) of  the Exchange Act.**                   |

**For the transition period from                    to                   **

**Commission file number000-50733**

** **

**UNITED WISCONSIN GRAIN PRODUCERS,LLC**

(Exact name ofsmall business issuer as specified in its charter)

| **Wisconsin**                                                        |   | **39-2032455**                            |
|----------------------------------------------------------------------|--------|-------------------------------------------|
| **(State  or other jurisdiction of  incorporation or organization)** |   | **(I.R.S.  Employer Identification No.)** |

 

**W1231 Tessmann Drive, Friesland, Wisconsin53935-0247**

(Address of principal executive offices)

 

**(920) 348-5016**

(Issuer’s telephone number)

 

Checkwhether the issuer: (1) filed all reports required to be filed by Section 13 or15(d) of the Exchange Act during the past 12 months (or for such shorter periodthat the registrant was required to file such reports), and (2) has beensubject to such filing requirements for the past 90 days.  x Yes        o No

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

oYes        xNo

Statethe number of shares outstanding for each of the issuer’s classes of commonequity as of the latest practicable date: As of November 6, 2006 therewere 28,780 membership units outstanding.

Transitional Small Business Disclosure Format (Check one):  oYes        xNo

 

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**INDEX**
|                                                                                                    | ** ** | ** ** |
|----------------------------------------------------------------------------------------------------|------------|------------|
| PART  I.     FINANCIAL  INFORMATION                                       | ** ** | ** ** |
|                                                                                               | ** ** | ** ** |
| Item  1. Financial Statements                                                                      | ** ** | ** ** |
| Item 2. Management’s Discussion and Analysis of Financial  Condition and Results of Operation | ** ** | ** ** |
| Item 3. Controls and Procedures                                                                    | ** ** | ** ** |
|                                                                                               | ** ** | ** ** |
| PART  II.    OTHER  INFORMATION                                                     | ** ** | ** ** |
|                                                                                               | ** ** | ** ** |
| Item  1. Legal Proceedings                                                                         | ** ** | ** ** |
| Item 2. Unregistered Sales of Equity Securities and Use of  Proceeds                               | ** ** | ** ** |
| Item 3. Defaults Upon Senior Securities                                                            | ** ** | ** ** |
| Item 4.Submission of Matters to a Vote of Security Holders                                         | ** ** | ** ** |
| Item  5. Other Information                                                                         | ** ** | ** ** |
| Item 6. Exhibits                                                                                   | ** ** | ** ** |
|                                                                                               | ** ** | ** ** |
| SIGNATURES                                                                                         | ** ** | ** ** |

** **

2

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**PART I.     FINANCIALINFORMATION**

**Item 1. Financial Statements.**

**UNITED WISCONSINGRAIN PRODUCERS, LLC**

**Condensed Balance Sheet**
| ** **                           | ** ** | **September 30,** | ** ** |
|--------------------------------------|------------|------------------------|------------|
| **ASSETS**                           | ** ** | **2006**               | ** ** |
|                                 |       | (Unaudited)            |       |
| **Current Assets**                   |       |                   |       |
| Cash and cash  equivalents           |       | $                      | 16,070,446 |   |
| Restricted cash                      |       | 462,900                |       |
| Derivative  Instruments              |       | 562,900                |       |
| Trade account  receivable            |       | 4,774,551              |       |
| Prepaid expenses  and other assets   |       | 559,158                |       |
| Inventory                            |       | 1,587,034              |       |
| Total current  assets                |       | 24,016,989             |       |
| ** **                           |       |                   |       |
| **Property, Plant and Equipment**    |       |                   |       |
| Land and land  improvements          |       | 5,806,181              |       |
| Office equipment                     |       | 429,734                |       |
| Administration  building             |       | 487,598                |       |
| Plant and  process equipment         |       | 47,065,473             |       |
| Construction in  Process             |       | 334,253                |       |
| Total property,  plant and equipment |       | 54,123,239             |       |
| Less accumulated  depreciation       |       | 6,576,872              |       |
| Net property, plant  and equipment   |       | 47,546,367             |       |
|                                 |       |                   |       |
| **Other Assets**                     |       |                   |       |
| Investment                           |       | 100,000                |       |
| Total other  assets                  |       | 100,000                |       |
|                                 |       |                   |       |
| **Total Assets**                     |       | $                      | 71,663,356 |   |

 

Notesto Condensed Financial Statements are an integral part of this Statement.

3

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**UNITED WISCONSIN GRAIN PRODUCERS, LLC**

Condensed Balance Sheet
| ** **                                                                                     | ** ** | **September 30,** | ** ** |
|------------------------------------------------------------------------------------------------|------------|------------------------|------------|
| **LIABILITIES AND MEMBERS' EQUITY**                                             | ** ** | **2006**               | ** ** |
|                                                                                           |       | (Unaudited)            |       |
| **Current  Liabilities**                                                                       |       |                   |       |
| Current maturities of long-term debt                                                           |       | $                      | 1,143,183  |   |
| Accounts payable                                                                               |       | 1,759,161              |       |
| Accrued liabilities                                                                            |       | 909,535                |       |
| Total current liabilities                                                                      |       | 3,811,879              |       |
|                                                                                           |       |                   |       |
| **Long-Term  Debt, less current maturities**                                                   |       | 14,649,978             |       |
| ** **                                                                                     |       |                   |       |
| **Commitments  and Contingencies**                                                             |       |                   |       |
| ** **                                                                                     |       |                   |       |
| **Members’  Equity**                                                                      |       |                   |       |
| Member contributions, net of costs related to  capital contributions, 28,780 units outstanding |       | 53,201,499             |       |
|                                                                                           |       |                   |       |
| **Total  Liabilities and Members’ Equity**                                                |       | $                      | 71,663,356 |   |

 

Notes to Condensed Financial Statements are anintegral part of this Statement.

4

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**UNITED WISCONSIN GRAIN PRODUCERS, LLC**

Condensed Statement of Operations
| ** **                                         | ** ** | **Quarter Ended** | ** ** | **Quarter Ended** | ** ** |
|----------------------------------------------------|------------|------------------------|------------|------------------------|------------|
| ** **                                         | ** ** | **September 30,** | ** ** | **September 30,** | ** ** |
| ** **                                         | ** ** | **2006**               | ** ** | **2005**               | ** ** |
| ** **                                         | ** ** | **(Unaudited)**        | ** ** | **(Unaudited)**        | ** ** |
| **Revenues**                                       |       | $                      | 29,933,748 |                   | $          | 21,893,544 |   |
| **Cost of Goods Sold**                             |       | 17,418,804             |       | 16,890,315             |       |
| **Gross Profit**                                   |       | 12,514,944             |       | 5,003,229              |       |
| **Operating Expenses**                             |       | 606,529                |       | 547,208                |       |
| **Operating Income**                               |       | 11,908,415             |       | 4,456,021              |       |
| **Other Income (Expense)**                         |       |                   |       |                   |       |
| Interest income                                    |       | 169,203                |       | 10,416                 |       |
| CCC Bio-Energy  income                             |       | 21,244                 |       | 1,367,862              |       |
| State of  Wisconsin incentive program income       |       | —                 |       | 475,000                |       |
| Interest expense                                   |       | (297,093               | )          | (550,305               | )          |
| Miscellaneous  income                              |       | 2,385                  |       | 9,492                  |       |
| Total other  income (expense), net                 |       | (104,261               | )          | 1,312,465              |       |
| **Net  Income**                                    |       | $                      | 11,804,154 |                   | $          | 5,768,486 |   |
| **Net  Income Per Unit**(28,780 units outstanding) |       | $                      | 410.15     |                   | $          | 200.43 |   |
| **Distributions Per Unit**                         |       | $                      | 200.00     |                   | $          | — |   |

 

Notesto Condensed Financial Statements are an integral part of this Statement

5

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**UNITED WISCONSIN GRAIN PRODUCERS, LLC**

Condensed Statement of Operations
| ** **                                         | ** ** | **Nine Months Ended** | ** ** | **Nine Months Ended** | ** ** |
|----------------------------------------------------|------------|---------------------------------|------------|---------------------------------|------------|
| ** **                                         | ** ** | **September 30,**          | ** ** | **September 30,**          | ** ** |
| ** **                                         | ** ** | **2006**                        | ** ** | **2005**                        | ** ** |
| ** **                                         | ** ** | **(Unaudited)**                 | ** ** | **(Unaudited)**                 | ** ** |
| **Revenues**                                       |       | $                               | 83,143,657 |                            | $          | 32,003,216 |   |
| **Cost of Goods Sold**                             |       | 52,528,226                      |       | 26,270,343                      |       |
| **Gross Profit**                                   |       | 30,615,431                      |       | 5,732,873                       |       |
| **Operating Expenses**                             |       | 1,772,666                       |       | 1,363,825                       |       |
| **Operating Income**                               |       | 28,842,765                      |       | 4,369,048                       |       |
| **Other Income (Expense)**                         |       |                            |       |                            |       |
| Grant income                                       |       | —                          |       | 187,852                         |       |
| Interest income                                    |       | 267,220                         |       | 10,416                          |       |
| CCC Bio-Energy  income                             |       | 393,336                         |       | 2,168,184                       |       |
| State of  Wisconsin incentive program income       |       | —                          |       | 475,000                         |       |
| Interest expense                                   |       | (1,213,948                      | )          | (833,701                        | )          |
| Miscellaneous  income (expense)                    |       | (483,537                        | )          | 16,788                          |       |
| Total other  income (expense), net                 |       | (1,036,929                      | )          | 2,024,539                       |       |
| **Net Income**                                     |       | $                               | 27,805,836 |                            | $          | 6,393,587 |   |
| **Net  Income Per Unit**(28,780 units outstanding) |       | $                               | 966.15     |                            | $          | 222.15 |   |
| **Distributions Per Unit**                         |       | $                               | 400.00     |                            | $          | — |   |

 

Notesto Condensed Financial Statements are an integral part of this Statement

6

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**UNITED WISCONSIN GRAIN PRODUCERS, LLC**

Condensed Statements of Cash Flows

 
| ** **                                                               | ** ** | **Nine Months Ended** | ** ** | **Nine Months Ended** | ** ** |
|--------------------------------------------------------------------------|------------|---------------------------------|------------|---------------------------------|------------|
| ** **                                                               | ** ** | **September 30,**          | ** ** | **September 30,**          | ** ** |
| ** **                                                               | ** ** | **2006**                        | ** ** | **2005**                        | ** ** |
| ** **                                                               | ** ** | **(Unaudited)**                 | ** ** | **(Unaudited)**                 | ** ** |
| **Cash  Flows from Operating Activities**                                | ** ** | ** **                      | ** ** | ** **                      | ** ** |
| Net Income                                                               |       | $                               | 27,805,836 |                            | $          | 6,393,587 |   |
| Adjustments to reconcile net income to net cash  provided by operations: |       |                            |       |                            |       |
| Depreciation and amortization                                            |       | 3,629,478                       |       | 1,850,212                       |       |
| Write-off of debt issuance costs                                         |       | 519,406                         |       | —                          |       |
| (Gain)/loss on derivative instruments                                    |       | 348,674                         |       | (62,010                         | )          |
| Grant income                                                             |       | —                          |       | (187,852                        | )          |
| Changes in assets and liabilities:                                       |       |                            |       |                            |       |
| Restricted Cash                                                          |       | (382,620                        | )          | (79,214                         | )          |
| Derivative instruments                                                   |       | (1,000,380                      | )          | 433,111                         |       |
| Accounts receivable                                                      |       | (1,170,031                      | )          | (5,304,381                      | )          |
| Inventory                                                                |       | (176,287                        | )          | (1,420,752                      | )          |
| Prepaid expenses                                                         |       | 34,962                          |       | (316,361                        | )          |
| Accounts payable                                                         |       | (1,034,067                      | )          | 2,301,722                       |       |
| Accrued liabilities                                                      |       | 262,997                         |       | 493,713                         |       |
| Net cash provided by operating activities                                |       | 28,837,968                      |       | 4,101,775                       |       |
| ** **                                                               | ** ** | ** **                      |       |                            |       |
| **Cash  Flows from Investing Activities**                                | ** ** | ** **                      |       |                            |       |
| Capital expenditures                                                     |       | (921,250                        | )          | (1,066,738                      | )          |
| Payments for construction in process                                     |       | (334,253                        | )          | —                          |       |
| Payments for Investments                                                 |       | (100,000                        | )          | —                          |       |
| Net cash used in investing activities                                    |       | (1,355,503                      | )          | (1,066,738                      | )          |
| ** **                                                               |       |                            |       |                            |       |
| **Cash  Flows from Financing Activities**                                |       |                            |       |                            |       |
| Proceeds from grants for operating expenses                              |       | —                          |       | 218,637                         |       |
| Proceeds from grants for capital expenditures                            |       | —                          |       | 443,905                         |       |
| Proceeds from construction loan                                          |       | —                          |       | 2,542,012                       |       |
| Payments for long term debt                                              |       | (8,686,496                      | )          | (1,099,443                      | )          |
| Payments for debt issuance costs                                         |       | —                          |       | (59,119                         | )          |
| Payment of member distribution                                           |       | (11,512,000                     | )          | —                          |       |
| Net cash  provided by (used in) financing activities                     |       | (20,198,496                     | )          | 2,045,992                       |       |
|                                                                          |            |                                 |            |                                 |            |  |  |

 

Notesto Condensed Financial Statements are an integral part of this Statement

7

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**UNITEDWISCONSIN GRAIN PRODUCERS, LLC**

Condensed Statements of Cash Flows (continued)
| ** **                                                                    | ** ** | **Nine Months Ended** | ** ** | **Nine Months Ended** | ** ** |
|-------------------------------------------------------------------------------|------------|---------------------------------|------------|---------------------------------|------------|
| ** **                                                                    | ** ** | **September 30,**          | ** ** | **September 30,**          | ** ** |
| ** **                                                                    | ** ** | **2006**                        | ** ** | **2005**                        | ** ** |
| ** **                                                                    | ** ** | **(Unaudited)**                 | ** ** | **(Unaudited)**                 | ** ** |
| **Net  Increase in Cash and Cash Equivalents**                                |       | 7,283,969                       |       | 5,081,029                       |       |
| **Cash  and Cash Equivalents— Beginning of Period**                      |       | 8,786,477                       |       | 9,068                           |       |
| **Cash  and Cash Equivalents— End of Period**                            |       | $                               | 16,070,446 |                            | $          | 5,090,097 |   |
| **Supplemental  Cash Flow Information**                                       |       |                            | ** ** | ** **                      | ** ** |
| Cash paid during the period for:                                              |       |                            | ** ** | ** **                      | ** ** |
| Interest                                                                      |       | $                               | 1,213,949  |                            | $          | 662,582 |   |
| **Noncash  Investing and Financing Activities**                               | ** ** | ** **                      | ** ** | ** **                      | ** ** |
| Refinancing of  long-term debt                                                |       | $                               | 16,040,376 |                            | $          | — |   |
| Capital  expenditures and construction in process funded by construction loan |       | $                               | —     |                            | $          | 8,368,571 |   |
| Operating expenses  funded by construction loan                               |       | $                               | —     |                            | $          | 3,000 |   |
| Capital Expenditures in  Grants Receivable                                    |       | $                               | —     |                            | $          | 40,750 |   |

 

Notes to CondensedFinancial Statements are an integral part of this Statement

 

8

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**UNITED WISCONSIN GRAIN PRODUCERS, LLC**

Condensed Notes toUnaudited Financial Statements

September 30, 2006 and2005

**1.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES**

The accompanying unaudited condensed financialstatements have been prepared pursuant to the rules and regulations of theSecurities and Exchange Commission.  Certain information and footnotedisclosures normally included in annual financial statements prepared inaccordance with accounting principles generally accepted in the United Statesof America have been condensed or omitted as permitted by such rules andregulations.  These financial statements and related notes should be readin conjunction with the financial statements and notes thereto included in theCompany’s audited financial statements for the year ended December 31, 2005,contained in the Company’s annual report on Form 10-KSB for 2005.

In the opinion of management, the interim condensedfinancial statements reflect all adjustments considered necessary for fairpresentation.  The adjustments made to these statements consist only ofnormal recurring adjustments.

*Nature ofBusiness*

United Wisconsin Grain Producers LLC (a Wisconsinlimited liability company) is a 40 million gallon ethanol plant located nearthe town of Friesland in the township of Randolph, Wisconsin.  The company sells its production of ethanoland distillers grains, a co-product of ethanol production, within the UnitedStates, and in the case of distillers grains, overseas.

The Company was organized in November of 2001 to poolinvestors, some of whom provide a corn supply on a commercial basis.  The Company was a developmental stage entityprior to commencing operations on May 5, 2005.

*AccountingEstimates*

Management uses estimates and assumptions in preparingthese financial statements in accordance with generally accepted accountingprinciples.  Those estimates and assumptions affect the reported amountsof assets and liabilities, the disclosure of contingent assets and liabilities,and the reported revenues and expenses. Actual results could differ from those estimates.

*Revenue Recognition*

The Company recognizes revenue at the time title tothe goods and all risks of ownership transfer to the customer, which generallyoccurs upon shipment to the customer or when the customer picks up thegoods.  The Company records revenue fromfederal and state incentive programs related to the production of ethanol whenthe Company has sold the ethanol and completed all the known requirements ofthe applicable incentive program.

*Restricted Cash*

The Company is required to deposit cash into arestricted cash account by the Company’s broker as discussed below.

*DerivativeInstruments*

The Company enters into derivative contracts to hedgethe Company’s exposure to price risk related to forecasted corn and natural gaspurchases and forward corn purchase contracts.  The Company does nottypically enter into derivative instruments other than for hedgingpurposes.  All derivative contracts are recognized as of September 30,2006 at their fair market value. Although the Company believes its derivative positions are economichedges, none have been designated as a hedge for accounting purposes.

9

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The Company has recorded an asset of $562,900 as ofSeptember 30, 2006.  The Company has alsorecorded a combined realized and unrealized loss on derivative instruments of$348,674 related to its derivative contracts for the nine months endedSeptember 30, 2006 which includes a gain of $506,853 for the three month periodending September 30, 2006.  The Companyrecorded a combined realized and unrealized gain on derivative instruments of$62,010 related to its derivative contracts for the nine months ended September30, 2005 which includes a loss of $185,919 for the three month period endingSeptember 30, 2005.  The Companyrecognizes the gains or losses that result from the changes in the value of itsderivative instruments in cost of goods sold as the changes occur.  The Company is required to maintain cashbalances at its broker related to derivative instrument positions.  At September 30, 2006, restricted cashtotaled $462,900 and is not included in the cash and cash equivalents on thebalance sheet or the statements of cash flows.

*Government Incentive Payments*

For the quarter and nine month period ended September30, 2006 the Company recorded as other income $21,244 and $393,336,respectively, from the Commodity Credit Corporation Bioenergy Program, adepartment of the United States Department of Agriculture.  For thequarter and nine month period ended September 30, 2005 the Company recorded asother income $1,367,862 and $2,168,184, respectively, from the Commodity CreditCorporation Bioenergy Program.  TheCompany was not eligible for Bioenergy Program payments prior to commencementof production in May 2005.  The CommodityCredit Corporation Bioenergy Program was terminated on June 30, 2006.

*Fair Value of Financial Instruments*

The carrying value of cash and cash equivalents andrestricted cash approximates their fair value.

The Company believes the carrying amount of derivativeinstruments approximates fair value based on current market prices.

It is not currently practicable to estimate fair valueof the notes payable to the lending institution.  Because these agreements contain certainunique terms, covenants, and restrictions, as discussed in Note 3, there are noreadily determinable similar instruments on which to base an estimate of fairvalue.

*Income Taxes*

The Company is treated as a partnership for federaland state income tax purposes, and generally does not incur income taxes.  Instead its earnings and losses are includedin the income tax returns of its members. Therefore, no provision or liability for federal or state income taxeshas been included in these financial statements.

**2. INVENTORY**

Inventory consists of the following at September 30,2006:

| Raw materials   |   | $       | 745,539   |   |
|-----------------|--------|---------|-----------|--------|
| Work in process |   | 282,676 |      |
| Finished Goods  |   | 558,819 |      |
| Total           |   | $       | 1,587,034 |   |

 **3.  BANKFINANCING**

On May 25, 2006 the Company closed on a mortgage in theamount of $21,040,376, which included a revolving credit agreement in theamount of $5,000,000, and a term credit agreement in the amount of $16,040,376with Farmers & Merchants Union Bank to refinance the existing debt withAgStar Financial Services, PCA.  The termdebt consists of a five-year business note in the amount of $16,040,376 at afixed interest rate of 7.4% and requires monthly payments based on a ten-yearamortization beginning July 1, 2006.  As of September 30, 2006, the Company had outstanding debt of$15,793,161 on the term debt and did not have any borrowings on the revolvingcredit commitment.

10

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There is an annual service fee of $10,000 for therevolving credit agreement and an annual facility fee of $20,000 for the termloan beginning on the closing date, May 25, 2006, and upon each anniversaryuntil its maturity.  If the revolvingline of credit is terminated prior to its maturity, the $10,000 annual servicefee will no longer be incurred.  Noprepayment fees exist on either loan.

These loans are subject to protective covenantsrequiring the Company to maintain various financial ratios.  The Companyhas not violated any financial debt covenants during the nine months endingSeptember 30, 2006 or in the year 2005 and the Company believes the likelihoodof default of the financial debt covenants in the next quarter to beremote.  The loan is secured bysubstantially all the Company’s assets.

Long term debt consists of the following:

|                                    | ** ** | **September 30, 2006** | ** ** |
|------------------------------------|------------|----------------------------------|------------|
| Bank Financing                     |       | $                                | 15,793,161 |   |
| Less: amounts  due within one year |       | 1,143,183                        |       |
| Totals                             |       | $                                | 14,649,978 |   |

 

The estimated maturitiesof long term debt at September 30, 2006 are as follows:

| 2006  |   | $          | 1,143,183  |   |
|-------|--------|------------|------------|--------|
| 2007  |   | 1,228,872  |       |
| 2008  |   | 1,327,329  |       |
| 2009  |   | 1,430,412  |       |
| 2010  |   | 10,663,365 |       |
| Total |   | $          | 15,793,161 |   |

**4.  MEMBERS’ EQUITY**

As specified in the Company’s operating agreement, theCompany has one class of membership units. The Company is authorized to issue up to 28,000 membership units inaddition to the 1,280 seed capital units issued prior to the Company’s initialregistered offering.

As ofSeptember 30, 2006 and September 30, 2005 the Company had 28,780 unitsoutstanding.

**5.  COMMITMENTS AND CONTINGENCIES**

*Corn and Natural Gas Contracts*

At September 30, 2006, the Company had forward cornpurchase contracts totaling approximately 12,000,000 bushels for variousdelivery periods from October 2006 to December 2008 of which approximately 40%are with members.  The prices on thesecontracts range from $2.00 to $3.13 per bushel or have a basis levelestablished by the CBOT futures between $-0.16 and $-0.36.  At September 30, 2006, the Company hadforward contracts to purchase approximately 293,500 million British thermalunits (MMBTU) of natural gas during the months of October through December 2006at an average price of approximately $7.32 per MMBTU.

*Plant Expansion*

The Company has engaged an engineering firm to designthe plant expansion to double the name-plate capacity of the plant.  The required air permit application has beensubmitted by the Company to the regulatory agency.  Project costs through September 30, 2006 wereapproximately $334,000 and are expected to total approximately $43.1 million,which includes a fractionation system.

11

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**Item 2.    Management’sDiscussion and Analysis of Financial Condition and Results of Operation.**

**ForwardLooking Statements**

This report contains historical information, as wellas forward-looking statements that involve known and unknown risks and relateto future events, our future financial performance, or our expected futureoperations and actions.  In some cases,you can identify forward-looking statements by terminology such as “may,” “will,”“should,” “expect,” “plan,” “anticipate,” “believe,” “estimate,” “future,” “intend,”“could,” “hope,” “predict,” “target,” “potential,” or “continue” or thenegative of these terms or other similar expressions.  These forward-looking statements are only ourpredictions based upon current information and involve numerous assumptions,risks and uncertainties.  Our actualresults or actions may differ materially from these forward-looking statementsfor many reasons, including the reasons described in this report.  While it is impossible to identify all suchfactors, factors that could cause actual results to differ materially fromthose estimated by us include:
| · |   | Overcapacity within the ethanol industry;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
|--------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| · |   | Actual ethanol and distillers grains production  varying from expectations;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |
| · |   | Availability and costs of products and raw  materials, particularly corn and natural gas;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |
| · |   | Changes in the price and market for ethanol and  distillers grains;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| · |   | Our ability to market and our reliance on third  parties to market our products;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |
| · |   | Changes in or  elimination of governmental laws, tariffs, trade or other controls or  enforcement practices such as:

-   national, state or local energy policy; 

-   federal ethanol tax incentives; 

-   legislation establishing a renewable fuel  standard or other legislation mandating the use of ethanol or other oxygenate  additives; 

-   state and federal regulation restricting or  banning the use of MTBE; or 

-   environmental laws and regulations that  apply to our plant operations and their enforcement; |
| · |   | Changes in the weather or general economic  conditions impacting the availability and price of corn and natural gas;                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| · |   | Total U.S. consumption of gasoline;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |
| · |   | Fluctuations in petroleum prices;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |
| · |   | Changes in plant production capacity or technical  difficulties in operating the plant;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| · |   | Costs of construction and equipment;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |
| · |   | Changes in our business strategy, capital  improvements or development plans;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |
| · |   | Results of our hedging strategies;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      |
| · |   | Our ability to generate free cash flow to invest in  our business and service our debt;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| · |   | Changes and advances in ethanol production  technology;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| · |   | Competition from alternative fuels and alternative  fuel additives; and                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 |
| · |   | Other factors described elsewhere in this report.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |

 

The cautionary statements referred to in this sectionalso should be considered in connection with any subsequent written or oralforward-looking statements that may be issued by us or persons acting on ourbehalf.  We undertake no duty to updatethese forward-looking statements, even though our situation may change in thefuture. Furthermore, we cannot guarantee future results, events, levels ofactivity, performance, or achievements. We caution you not to put undue reliance on any forward-lookingstatements, which speak only as of the date of this report.  You shouldread this report and the documents that we reference in this report and havefiled as exhibits, completely and with the understanding that our actual futureresults may be materially different from what we currently expect.  Wequalify all of our forward-looking statements by these cautionary statements.

**Overview**

UnitedWisconsin Grain Producers, LLC was formed as a Wisconsin limited liabilitycompany on November 2, 2001, for the initial purpose of constructing andoperating a 40 million gallon per year ethanol plant near Friesland,Wisconsin.   Since May 2005, we have beenengaged in the production of ethanol and distillers grains. Our revenues arederived from the sale and distribution of our ethanol and distillers grainsthroughout the continental United States and in the case of distillers grains,shipments overseas.

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Weexpect to fund our operations during the next 12 months using cash flow fromcontinuing operations and our credit facilities.

Weare subject to industry-wide factors that affect our operating and financialperformance.  Our operating results arelargely driven by the prices at which we sell ethanol and distillers grains andthe costs related to their production. Historically, the price of ethanol tends to fluctuate in the samedirection as the price of unleaded gasoline and other petroleum products.  Surplus ethanol supplies also tend to putdownward price pressure on ethanol.  Inaddition, the price of ethanol is generally influenced by factors such asgeneral economic conditions, the weather, the season, and government policiesand programs.  The price of distillersgrains is generally influenced by supply and demand, seasonal fluctuations, theprice of substitute livestock feed, such as corn and soybean meal and otheranimal feed proteins.  Surplus grainsupplies tend to put downward price pressure on distillers grains.  In addition, our revenues are also impactedby such factors as our dependence on one or a few major customers who purchaseand distribute our products; the intensely competitive nature of our industry;possible legislative changes at the federal, state and/or local level; changesin federal ethanol tax incentives; and the rapid growth in ethanol productioncapacity.

Ourtwo largest costs of production are corn and natural gas.  Both of these costs are affected by factorslargely out of our control.  The cost ofcorn is affected primarily by supply and demand factors such as cropproduction, carryout, exports, government policies and programs, riskmanagement and weather.  The growth ofthe ethanol industry itself is expected to increase the average price of cornas demand for corn continues to rise. Natural gas prices fluctuate with the energy complex in general, butalso have independent cost factors such as weather in the source areas andpipeline capacity.  Over the last fewyears, natural gas prices have trended higher than average and it appearsprices will continue to trend higher or remain above previous averages due tothe high price of alternative fuels such as fuel oil.  Our costs of production are affected by thecost of complying with the extensive environmental laws that regulate ourindustry.

**Results of Operations**

***Financial Summary and Analysis ofthe three month period ended September 30, 2006 and 2005***

The following table shows the results of ouroperations and the percentage of revenues, cost of goods sold, operatingexpenses and other items to total revenues in our statement of operations forthe three months ended September 30, 2006 and 2005:

|                                     | ** ** | **Quarter  Ended**     | ** ** | **Quarter  Ended**     | ** ** |
|-------------------------------------|------------|------------------------|------------|------------------------|------------|
| ** **                          | ** ** | **September  30,**2006 | ** ** | **September  30,**2005 | ** ** |
| ** **                          | ** ** | **(Unaudited)**        | ** ** | **(Unaudited)**        | ** ** |
| **Income Statement Data** | ** ** | **Amount**             | ** ** | **%**                  | ** ** | **Amount** | ** ** | **%** | ** ** |
| Revenues                            |       | $                      | 29,933,748 |                   | 100.0      |   | $ | 21,893,544 |   | 100.0 |   |
| Cost of Goods  Sold                 |       | $                      | 17,418,804 |                   | 58.2       |   | $ | 16,890,315 |   | 77.1 |   |
| Gross Profit                        |       | $                      | 12,514,944 |                   | 41.8       |   | $ | 5,003,229 |   | 22.9 |   |
| Operating  Expenses                 |       | $                      | 606,529    |                   | 2.0        |   | $ | 547,208 |   | 2.5 |   |
| Operating Income                    |       | $                      | 11,908,415 |                   | 39.8       |   | $ | 4,456,021 |   | 20.4 |   |
| Other Income  (Expense)             |       | $                      | (104,261   | )                      | (0.3       | ) | $ | 1,312,465 |   | 6.0 |   |
| **Net Income**                      |       | $                      | 11,804,154 |                   | 39.5       |   | $ | 5,768,486 |   | 26.3 |   |

 

*Revenues*.  Revenues from operations for the three monthperiod ended September 30, 2006 totaled $29,933,748.  In the three month period ended September 30,2006 ethanol comprised 91% of our sales and DDGS comprised 9% of oursales.  Revenues from operations for thethree month period ended September 30, 2005 totaled 

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$21,893,544 ofwhich ethanol comprised 87% of our sales and DDGS comprised 13%.  The increase in revenues from operations forthe three month period ended September 30, 2006 compared to the three monthperiod ended September 30, 2005 is substantially a result of a 39% increase inthe price per gallon of ethanol.

Althoughethanol prices have continued higher than historical averages the prices havetrended lower throughout this quarter since their peak in July.  Management currently expects short-termethanol prices to remain higher than historical averages.  However, management believes the industrywill need to continue to grow demand in order to sustain these higher pricelevels.  According to the Renewable FuelsAssociation, as of October 26, 2006 there were 106 ethanol plants in operationnationwide with the capacity to produce more than 5.0 billion gallons annually,with an additional 46 new plants and seven expansions under constructionexpected to add an additional estimated 3.5 billion gallons of annualproduction capacity in the next 12 to 18 months.  Unless the new supply is equally met withincreased demand, downward pressure on ethanol prices could occur.  If ethanol prices start to decline, ourearnings will decline in the process, especially if corn costs rise.  Areas where demand for ethanol may increaseare new markets in New Jersey, Pennsylvania, Massachusetts, North Carolina,South Carolina, Michigan, Tennessee, Louisiana and Texas.

Ourrevenues and profits are impacted by federal ethanol supports and taxincentives.  Changes to these supports orincentives could significantly impact demand for ethanol.  The passage of the Volumetric Ethanol ExciseTax Credit (“VEETC”) is expected to provide the flexibility necessary to expandethanol blending into higher blends of ethanol such as E85, E diesel and fuelcell markets.  In addition, the EnergyPolicy Act of 2005 creates a Renewable Fuels Standard (“RFS”) which is expectedto favorably impact the ethanol industry by enhancing both the production anduse of ethanol, at least up to the 7.5 billion gallon mandate required by2012.  The RFS allows refiners to userenewable fuel blends in those areas where it is most cost-effective.  The RFS requires refiners to use 4 billiongallons of renewable fuels in 2006, increasing to 7.5 billion gallons by 2012.

On September 7, 2006, theEPA proposed rules to govern the implementation of the 2006 RFSrequirement.  The new regulation proposesthat 3.71% of all gasoline sold or dispensed to U.S. motorists in 2007 berenewable fuel.  In December 2005, theEPA issued a rule implementing the Energy Policy Act’s default standard of2.78% for 2006, which will continue to apply through calendar year 2006.  The RFS program is designed to cut petroleumuse by approximately 3.9 billion gallons per year by 2012 and reduce greenhousegas emissions by up to 14 million tons annually.  In addition to preliminary analyses of theeconomic and environmental impacts, the proposed regulation explains howindustry is likely to comply with the RFS for 2007 and beyond.  The rule contains compliance tools and acredit trading system that is integral to the overall program.  The system allows renewable fuels to be usedwhere they are most economical, while providing a flexible means for industryto comply with the standard.  Variousrenewable fuels can be used to meet the requirements of the RFS program,including ethanol and biodiesel.  Whilethe RFS program provides certainty that a minimum amount of renewable fuel willbe consumed in the United States, an even greater quantity can be consumed iffuel producers and blenders choose to do so. In 2006, there will be approximately 4.5 billion gallons of renewablefuel consumed as motor vehicle fuel in the United States.  The RFS program requires that this volumeincrease to at least 7.5 billion gallons by 2012.

Sincethe current national ethanol production capacity exceeds the 2006 RFSrequirement, it is management’s belief that other market factors are primarilyresponsible for current ethanol prices.  Accordingly, it is possible thatthe RFS requirements may not significantly impact ethanol prices in theshort-term.  The majority of the ethanol produced is blended with gasolineat 10% or less, and is utilized as an oxygenate to make the fuel burn cleanerfor the environment.  This fuel isrequired in many areas throughout the United States, where air qualitystandards are difficult to maintain. Methyl Tertiary Butyl Ether (M.T.B.E.) has been a more economicaloxygenate source in the past; however, many M.T.B.E. producers and blendershave chosen to discontinue production or use of the product due to recentelimination of liability protection in the recent RFS legislation.  The rapid phase-out of M.T.B.E. as anoxygenate has caused a sharp increase in demand for ethanol to supply the muchlarger oxygenate market.  For thisreason, we saw ethanol trading at a large premium to gasoline, when ethanol wassold as blending stock.   At this time,approximately 75% of the M.T.B.E. market volume has been replaced with ethanol,with the balance expected to be replaced in the near future.  A large portion of the rapid increase in thesupply of ethanol is presently being absorbed into this oxygenate market;however, when we have met the demand of this market, the price of ethanol maybe dictated by traditional fuel prices.  If the supply of ethanol continues to increase due to the addition ofplants and capacity, and demand is not able to maintain the same pace, theremay be a negative impact on the price of ethanol and our earnings.

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Demandfor ethanol may be enhanced as a result of increased consumption of E85 fuel.E85 fuel is a blend of 70% to 85% ethanol and gasoline. According to the EnergyInformation Administration, E85 consumption is projected to increase from anational total of 11 million gallons in 2003 to 47 million gallons in 2025. E85can be used as an aviation fuel, as reported by the National Corn GrowersAssociation, and as a hydrogen source for fuel cells. According to theRenewable Fuels Association, there are currently more than 5 million flexiblefuel vehicles capable of operating on E85 in the United States and automakerssuch as Ford and General Motors have indicated plans to produce several millionmore flexible fuel vehicles per year. The American Coalition for Ethanol reports that there are currentlyapproximately 1,000 retail gasoline stations supplying E85.  However, this remains a relatively smallpercentage of the total number of U.S. retail gasoline stations, which isapproximately 170,000.

OnOctober 5, 2006, Underwriters Laboratories suspended authorization formanufacturers to use UL Markings on components for fuel-dispensing devices thatspecifically reference compatibility with alcohol-blended fuels that containgreater than 15% ethanol.  Published studieson ethanol indicate that, in high concentrations, it may have significantlyenhanced corrosive effects versus traditional gasoline.  While there have been no documented reportsof corrosion for UL Listed or Recognized components used with E85, UnderwritersLaboratories is suspending authorization to use the UL Mark on components usedin dispensing devices that will dispense any alcohol-blended fuels containingover 15% alcohol until updated certification requirements are established andthe effected components have been found to comply with them.  The lack of a UL seal for filling stationpumps carrying E85 means that some of these stations may be violating firecodes, and that new stations intending to install E85 systems may need waiversfrom local or state fire marshals.  It isthe decision of each authority having jurisdiction as to whether existing E85dispensing equipment is allowed to remain in service or is taken out of serviceuntil additional supporting information is received.  Underwriters Laboratories has not set adeadline for creating standards that could lead to certification, which couldresult in the closure of some existing E85 fueling stations and delay inopening others.

Thesales price for our distillers grains has remained relatively unchanged in thethree month period ended September 30, 2006 compared to the same quarter in2005.  Distillers grains prices areexpected to remain stable for the foreseeable future unless the price of cornor soybean meal changes significantly.

*Cost of Goods Sold*.  Our cost of goods sold from the production ofethanol and distillers grains is primarily made up of raw grains expenses(corn) and energy expenses (natural gas and electricity).  Cost of goods sold for the three month periodended September 30, 2006 totaled $17,418,804 as compared to $16,890,315 for thethree month period ended September 30, 2005.

While our corn costs remained stable to the samequarter a year ago, increased emphasis on alternative fuel sources and use ofcorn in the production of ethanol may put upward pressure on corn prices.   An increase in corn exports as well assustained domestic usage may increase total demand for corn and result inupward pressure on corn prices.  RecentUSDA crop forecast anticipates a 2006 national corn crop of approximately 10.8billion bushels compared to a 2005 national corn crop of 11.11 billion bushels. Although the carryout supplies for 2006 marketing year appear adequate,any production shortfall during the 2006 growing season will create volatilityand may increase our cost of corn. Should supplies of corn tighten or be perceived to be tightening, themarket will react with higher prices to encourage producers to plant more acresto corn. These higher prices will have a negative impact to our costs of goodssold.

Natural gas is also an important input to ourmanufacturing process.  We estimate that our natural gas usage isapproximately 122,000 million British thermal units (“MMBTU”) per month. We use natural gas to dry a majority of our distillers grains products tomoisture contents at which they can be stored for long periods and transportedgreater distances, so that we can market them to broader livestock markets,including poultry and swine markets in the continental United States and to markets in Asia. Natural gas has recently been available only at prices exceeding historicalaverages. The prices are increasing our costs of production.  Althoughnatural gas prices trended lower in the three month period ended September 30,2006, we expect natural gas prices to remain high or increase given theunpredictable market situation.  This could increase our gas costssubstantially, which will adversely impact our cost of goods sold.  We have secured a marketing firm and energyconsultant for our natural gas and will continue to work with them on anon-going basis to mitigate our exposure to volatile gas prices.

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Costof goods sold includes a gain of $506,853 for the three month period endingSeptember 30, 2006 related to our corn derivative instruments compared to aloss of $185,919 for the three month period ended September 30, 2005.  Werecognize the gains or losses that result from the changes in the value of ourderivative instruments in cost of goods sold as the changes occur.  Ascorn prices fluctuate, the value of our derivative instruments are impacted,which affects our financial performance.  We anticipate continuedvolatility in our cost of goods sold due to the timing of the changes in valueof the derivative instruments relative to the cost and use of the commoditybeing hedged.

*Operating Expenses*.  Operating expenses for the three month periodended September 30, 2006 totaled approximately $606,529, an increase ofapproximately 11% over the $547,208 for the same period in 2005.   The increase in operating expenses from the three month period ended September30, 2006 to the three month period ended September 30, 2005 was primarily dueto the accrual of the profit sharing expense which was a result of theimplementation of a profit sharing program designed to retain employees.

*Operating Income*. Operating income for the three month period ended September 30, 2006totaled approximately $11,908,415. Operating income for the three month period ended September 30, 2005 totaledapproximately $4,456,021.  Theincrease in operating income for the three month period ended September 30,2006 compared to the three month period ended September 30, 2005 issubstantially a result of a 39% increase in the price per gallon of ethanol.

*Other Income (Expense)*.  Ourother income and expense for the three month period ended September 30, 2006was an expense of $104,261.  Other incomeand expense for the three month period ended September 30, 2005 was income of$1,312,465.  Our other income and expenseitems consist primarily of USDA Commodity Credit Corporation (CCC) Bioenergyprogram payments and interest expense. The primary reason for the decline of other income and expense items inthis third quarter of 2006 as compared to the same quarter in 2005 is thereduction in CCC Bioenergy program payments.

Our USDA Commodity Credit Corporation BioenergyProgram revenue was $21,244 for the three month period ended September 30, 2006compared to $1,367,862 for the three month period ended September 30,2005.  Payments under the Bioenergy Program are based upon increases inethanol production relative to the previous year.  Since we began operations in May of 2005,the increase in gallons as we begin our second year of operations issignificantly less than our first year of operations, thus reducing the numberof gallons eligible for payment. Furthermore the CCC announced that its funds would be exhaustedin the third quarter of the government fiscal year and that the program wouldterminate as of June 30, 2006.    See***“Bioenergy Program Payments”***below.

***Financial Summary and Analysis ofthe nine month period ended September 30, 2006 and 2005***

The following table shows the results of ouroperations and the percentage of revenues, cost of goods sold, operatingexpenses and other items to total revenues in our statement of operations forthe nine months ended September 30, 2006 and 2005 (It is important to note whencomparing these two periods that the nine month period ending September 30,2005 represents only 5 months of production since the plant only becameoperational in May of 2005):

|                                     | ** ** | **Nine  Months Ended**  | ** ** | **Nine  Months Ended** | ** ** |
|-------------------------------------|------------|-------------------------|------------|------------------------|------------|
| ** **                          | ** ** | **September  30, 2006** | ** ** | **September  30,**2005 | ** ** |
| ** **                          | ** ** | **(Unaudited)**         | ** ** | **(Unaudited)**        | ** ** |
| **Income Statement Data** | ** ** | **Amount**              | ** ** | **%**                  | ** ** | **Amount** | ** ** | **%** | ** ** |
| Revenues                            |       | $                       | 83,143,657 |                   | 100.0      |   | $ | 32,003,216 |   | 100.0 |   |
| Cost of Goods  Sold                 |       | $                       | 52,528,226 |                   | 63.2       |   | $ | 26,270,343 |   | 82.1 |   |
| Gross Profit                        |       | $                       | 30,615,431 |                   | 36.8       |   | $ | 5,732,873 |   | 17.9 |   |
| Operating  Expenses                 |       | $                       | 1,772,666  |                   | 2.1        |   | $ | 1,363,825 |   | 4.3 |   |
| Operating Income                    |       | $                       | 28,842,765 |                   | 34.7       |   | $ | 4,369,048 |   | 13.7 |   |
| Other Income  (Expense)             |       | $                       | (1,036,929 | )                      | (1.2       | ) | $ | 2,024,539 |   | 6.3 |   |
| **Net Income**                      |       | $                       | 27,805,836 |                   | 33.5       |   | $ | 6,393,587 |   | 20.0 |   |

 

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*Revenues*.  Revenues from operations for the nine monthperiod ended September 30, 2006 and 2005 totaled $83,143,657 and $32,003,216,respectively.  The increase in revenuesfrom the nine months ended September 30, 2006 compared to the nine months endedSeptember 30, 2005 was primarily due to a strengthening in ethanol prices coupledwith increased production levels. Production level in the nine months ended September 30, 2006 was 87.7%over the same period in 2005 which only represented five months of productionbecause plant operations began in May 2005.

*Cost of Goods Sold*.  Our cost of goods sold as a percentage ofrevenues were 63.2% and 82.1% for the nine months ended September 30, 2006 and2005, respectively.  The decrease in ourcost of goods sold percentage is directly correlated to the increase inrevenues.

*Operating Expenses*.  Our operating expenses as a percentage ofrevenues decreased to 2.1% from 4.3% for the nine months ended September 30,2006 and 2005.  Because the majority ofour operating expenses are fixed, the percentage decrease is caused by theincrease in total revenues from 2005 to 2006.

*Operating Income*.  Ourincome from operations increased from 13.7% to 34.7% for the nine months endedSeptember 30, 2006 compared to the nine months ended September 30, 2005.  Strong ethanol prices combined with increasedproduction (longer production period) caused our operating income to representa larger percentage of revenues.

*Other Income (Expense)*. Our other income (expense) as a percentage of revenues was (1.2%) and6.3% for the nine months ended September 30, 2006 and 2005, respectively.  The change from income to expense is due inlarge part to the reduction in Bioenergy program payments we received in 2006compared to 2005 as well as the write-off of debt issuance costs during thesecond quarter of 2006.  See***“Bioenergy Program Payments”*** below.

**Changesin Financial Condition for the Nine Months Ended September 30, 2006.**

Assets totaled $71,663,356 on September 30, 2006.  Current assets totaled $24,016,989 onSeptember 30, 2006.  Current liabilitiestotaled $3,811,879 on September 30, 2006. Long term debt, net of current maturities, totaled $14,649,978 onSeptember 30, 2006.

**Liquidityand Capital Resources**

The following table showscash flows for the nine months ended September 30, 2006 and 2005:

|                                                      | ** ** | **Nine Months Ended** | ** ** |
|------------------------------------------------------|------------|-----------------------|------------|
| ** **                                           | ** ** | **September 30**      | ** ** |
| ** **                                           | ** ** | **2006**              | ** ** | **2005** | ** ** |
| Net cash  provided by operating activities           |       | $                     | 28,837,968 |   | $ | 4,101,775 |   |
| Net cash used in  investing activities               |       | $                     | (1,355,503 | ) | ($1,066,738 | ) |
| Net cash provided by  (used in) financing activities |       | ($20,198,496          | )          | $ | 2,045,992 |   |

 

*CashFlow From Operations*

The increase in net cashflow provided from operating activities for the nine months ended September 30,2006 compared to nine months ended September 30, 2005 was primarily due to ourplant being operational for the entire nine months in 2006 as compared to onlyfive of the nine months in 2005 and the increased revenues from higher ethanolprices.  Our capital needs are being adequately met through cash from ouroperating activities and our current credit facilities.

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*CashFlow Used In Investing Activities*

The increase in our cash flow used in investingactivities for the nine months ended September 30, 2006 compared to same periodin 2005 is primarily due to construction in process payments of $334,253 fordesign engineering for the plant expansion.

Management estimates that approximately $2,000,000 incapital expenditures will be made in the next twelve months for generaloperational improvements, and an additional $41,100,000 for the fractionationsystem and plant expansion project (see ***“PlantExpansion and Fractionation Project”*** below) all of which areexpected to be financed from a portion of cash flows from operations andadditional debt financing.

On June 19, 2006, the Board of Directors approved $6.7million to proceed with Phase I of the plant expansion.  On July 10, 2006, the Board of Directorsapproved $11.4 million for the fractionation project and additional grain andDDGS storage as well as loading capacity. Both projects will be funded using cashgenerated from operations and additional debt financing.  Utilizing cashgenerated from operations may impact the ability to distribute future memberdistributions.  Our projections are basedupon our historical operating costs and historical revenues and there is noguarantee or assurance that our past financial performance can accuratelypredict future results.  We currently estimate the plant expansion and thefractionation projects to be complete by December, 2007; however, there is noassurance or guarantee that construction will stay on schedule or that we willbe able to operate at the expanded production levels by the end of 2007.

We continue to investigate investment opportunities inother renewable fuels plants.

*Cash Flow Used In Financing Activities.*

We used cash to pay down our debt by $8,686,496 duringthe nine months ended September 30, 2006 compared to $1,099,443 debt paymentfor the same period in 2005.  During thenine months ended September 30, 2006 we made cash distributions to our membersin the aggregate amount of $11,512,000, compared to no cash distributions forthe same period in 2005.

### *Short-Term and Long-Term Debt Sources*

On May 25, 2006, wesigned credit agreements with Farmers & Merchants Union Bank of Friesland,Wisconsin and refinanced our existing term debt and revolving loancommitment.  The credit facility issecured by substantially all of our assets.  The term loan of $16,040,376 is for five years with a ten-yearamortization.  Payments on the term loanare paid in monthly installments including principal and interest.  The interest rate is fixed at 7.4% for theboth the term and revolving loan for 5 years. Interest is due monthly on the revolving loan commitment.

As of September 30, 2006,we had outstanding debt of $15,793,161 on the term debt and did not have anyborrowings on the revolving loan.

There is an annualfacility fee of $20,000 on the term loan beginning on the closing date, May 25,2006, and upon each anniversary until its maturity.  There is an additional $10,000 annual servicefee for the revolving credit agreement which can be terminated prior to itsmaturity and discontinue the service fee. No prepayment fees exist on either loan.

These loans are subjectto protective covenants requiring us to maintain various financial ratios. Weare required to maintain a minimum tangible net worth of $24,000,000 and toincrease our tangible net worth annually by the lesser of $500,000 or an amountequal to retained earnings.  Our owners’equity is to be at least 45% and we must maintain a working capital position ofat least $4,000,000.  We must receivewritten approval from our lender to exceed $1,000,000 in annual capitalexpenditures and we must obtain consent prior to making membershipdistributions in excess of 65% of the previous year’s net income, excludingstate and federal incentive payments.  On June 25, 2006, Farmers & Merchants Union Bank approved our August2006 membership distribution totaling $5,756,000.  We have not violated any financial debtcovenants during the nine-month period ended September 30, 2006.  The loan is secured by substantially all ofthe Company’s assets.

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*Bioenergy Program Payments*

We were enrolled in theUSDA Commodity Credit Corporation’s Bioenergy program.  Under the USDA CCC Bioenergy program, theCommodity Credit Corporation reimbursed eligible ethanol producers of less than65 million gallons of bioenergy in the amount of one bushel of corn for everytwo and one-half bushels of corn used for the increased production ofethanol.  No eligible producer was ableto receive more than $7.5 million under the program. Because we qualified as aneligible producer and annually utilize at least 15 million bushels of corn inthe increased production of ethanol, we could potentially receive the maximumaward of $7.5 million.  However, theCommodity Credit Corporation was able to award only $100 million annually forfiscal years 2005 through 2006, and any award we received was reduced basedupon the volume of applications from other eligible producers.  Furthermore, the CCC announced that its fundswould be exhausted in the third quarter of the government fiscal year and thatthe program would terminate as of June 30, 2006; therefore we do not anticipateany more revenue from the program.

For the three months ended September 30, 2006, werecorded Bioenergy Program income of $21,244 and we do not anticipate any morerevenue from the Bioenergy Program since it was terminated on June 30,2006.  For the three months endedSeptember 30, 2005, we recorded Bioenergy Program income of $1,367,862.

*Plant Expansion and Fractionation Project*

Wehave engaged an engineering firm to develop a plan to increase the designcapacity to 80 million gallons of production annually from our currentname-plate capacity of 40 million gallons per year.  Our current production rate is approximately50 million gallons per year.  The scopeof the project being studied will include shipping and receiving capacityincreases, plant processing capacity increases, additional product storage, andlogistics improvements.  If thefeasibility study and engineering study come back positive, we plan to expandproduction capacity to 60 million gallons per year by June of 2007, and 80million gallons by the end of 2007. However, there is no assurance or guarantee that construction will stayon schedule or that we will be able to operate at expanded production levels bythese dates.

OnJune 19, 2006, the board approved $6,700,000 for Phase I of the expansion.  Phase I entails increasing the cook andfermentation systems by 8 to 10 million gallon per year capacity.  Phase II involves down stream capacityexpansion and will increase production capacity by 20 million gallons.  The estimated cost of Phase II is approximately$25,000,000, of which no commitments have been made to date.  We are in the process of applying with theWisconsin Department of Natural Resources (DNR) for our construction permit forPhase I which must be issued before we begin construction.  There is no guarantee the Wisconsin DNR willissue our construction permit.

OnJuly 10, 2006 the board approved $11,400,000 for the Fractionation project andthe grains area expansion.  Fractionationis a process that separates the corn kernel into separate components prior tofermentation, allowing a purer stream of starch for fermentation, requiringless water and energy, and producing a higher throughput of ethanol.  This specific process of fractionation usesnew technology and there is no guarantee we will be able to increase ourthroughput or reduce our energy costs as a result of this investment.

Weexpect to finance the plant expansion and fractionation through a combinationof earnings from operations and additional debt financing.  This could change our ability to make memberdistributions as they have occurred in the past.  There is no assurance or guarantee that wewill be able to finance the projects as anticipated.

**Distribution to Unit Holders**

OnJuly 10, 2006, our directors declared a cash distribution of $200 permembership unit of record at the close of business on June 30, 2006.  The distribution totaled $5,756,000 and wasdistributed to our members on August 15, 2006. On February 10, 2006, ourdirectors declared a cash distribution of $200 per membership unit of record atthe close of business on February 10, 2006. The distribution totaled $5,756,000and was distributed to our members in March, 2006.

**Off Balance Sheet Arrangements.**

We currently donot have any off-balance sheet arrangements.

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**Item 3.    Controls and Procedures**

Ourmanagement, including our Chief Executive Officer (the principal executiveofficer), J.F. Robertson, along with our Chief Financial Officer, (theprincipal financial officer), Barb Bontrager, have reviewed and evaluated theeffectiveness of our disclosure controls and procedures as of September 30,2006.  Based upon this review andevaluation, these officers believe that our disclosure controls and proceduresare effective in ensuring that material information related to us is recorded,processed, summarized and reported within the time periods required by theforms and rules of the Securities and Exchange Commission.

Ourmanagement, consisting of our principal executive officer and principalfinancial officer, have reviewed and evaluated any changes in our internalcontrol over financial reporting that occurred as of September 30, 2006 andthere has been no change that has materially affected or is reasonably likelyto materially affect our internal control over financial reporting.

**PART II.    OTHER INFORMATION**

**Item 1.    Legal Proceedings**

None.

**Item 2.    Unregistered Sales of Equity Securities andUse of Proceeds**

None.

**Item 3.    Defaults Upon Senior Securities**

None.

**Item 4.    Submissionof Matters to a Vote of Security Holders**

None

**Item 5.    Other Information**

None.

**Item 6.    Exhibits**

(a)                                  Thefollowing exhibits are filed as part of this report:

| Exhibit No. | ** ** | **Exhibit**                                     |
|-------------|------------|-------------------------------------------------|
| 31.1        |       | Certificate pursuant to 17 CFR 240.13a-14(a).   |
| 31.2        |       | Certificate pursuant to 17 CFR 240.13a-14(a).   |
| 32.1        |       | Certificate pursuant to 18 U.S.C. Section 1350. |
| 32.2        |       | Certificate pursuant to 18 U.S.C. Section 1350. |

 

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**SIGNATURES**

In accordance withthe requirements of the Exchange Act, the registrant caused this report to besigned on its behalf by the undersigned, thereunto duly authorized.
|            | ** **         | **UNITED WISCONSIN GRAIN PRODUCERS, LLC**                              |
|------------|--------------------|------------------------------------------------------------------------|
| ** ** | ** **         | ** **                                                             |
| Date:      | November 14,  2006 |                                                                   | /s/ J.F. Robertson |
|       |               |                                                                   | J.F. Robertson |
|       |               | Chief Executive Officer   (Principal Executive Officer)                |
|       |               |                                                                   |
| Date:      | November 14,  2006 |                                                                   | /s/ Barb Bontrager |
|       |               |                                                                   | Barb Bontrager |
|       |               | Chief Financial Officer   (Principal Financial and Accounting Officer) |

 

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