1163609--3/31/2006--SOUTH_DAKOTA_SOYBEAN_PROCESSORS

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{cost, regulation, environmental}

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{cost, contract, operation}

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Higher than anticipated operating costs, including but not limited to increased prices for soybeans that are not accompanied by increased prices for soybean meal or soybean oil, could reduce profitability. We may not be able to continue making cash distributions to our members at the levels that we have paid in the past or even make cash distributions at all. We have recently encountered some cash flow constraints and may not be able to make cash distributions to our members at the levels that we have paid in the past or even make cash distributions at all. We have made a significant investment in Urethane Soy Systems Company, which is a development stage company with historical operating losses. The success of our ownership in USSC is dependent upon market acceptance of Soyol The producers of petroleum-based polyols have economic resources superior to USSC, which may make it difficult for USSC to compete with them. USSC is reliant on its patents and other proprietary rights related to Soyol Hedging transactions involve risks that could harm our profitability. We are reliant on one customer to purchase the refined and bleached oil that we produce. There is a limited market for the refined and bleached oil that we produce. We may not be able to manage the expansion of the scope of our operations into soybean oil refining, polyol production and management of a second soybean processing plant. We are dependent on our management and other key personnel, and loss of their services may adversely affect our business. We operate in an intensely competitive industry and we may not be able to continue to compete effectively. To produce soybean oil and meal, we must purchase significant amounts of soybeans, which are subject to disease and other agricultural risks. The detection and spread of the Avian Flu virus into the United States could adversely affect our sales of soybean meal. Our profitability is also influenced by the protein and moisture content of the soybeans in the local growing area. Interruptions in energy supplies could have a material adverse impact on our business. Because soybean processing and refining is energy intensive, our business will be materially harmed if natural gas and electricity prices increase substantially. Transportation costs are a factor in the price of soybean oil and meal and increased transportation costs could adversely affect our profitability. Increases in the production of soybean meal or refined and bleached soybean oil could result in lower prices for soybean meal or refined and bleached soybean oil and have other adverse effects. Legal, Regulatory, Tax, and Debt Risks We could be subject to potential claims from investors in the future as a result of our public offering in 2005 and based on the requirements of federal securities laws. Legislative, legal or regulatory developments could adversely affect our profitability. We could face increased operating costs if we were required to segregate genetically modified soybeans and the products generated from these soybeans. We are subject to ongoing state and federal environmental regulations and could be subject to fines and penalties and increased operating costs. If we are treated as a corporation for federal income tax purposes, our members capital units could decline in value. There are significant restrictions on transferring the capital units. Our third party debt financing may reduce profitability and increase the risk of the loss to our members.

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1163609--3/31/2006--SOUTH_DAKOTA_SOYBEAN_PROCESSORS_LLC