Exhibit 10.3

FIFTH AMENDMENT TO

FORBEARANCE AGREEMENT

THIS FIFTH AMENDMENT TO FORBEARANCE AGREEMENT (this “ Amendment ”) is made as of August 1, 2011 (the “ Effective Date ”), between HERON LAKE BIOENERGY, LLC, a Minnesota limited liability company (“ Borrower ”), and AGSTAR FINANCIAL SERVICES, PCA, a United States instrumentality (“ Lender ”).

RECITALS

A.             The Borrower and the Lender have previously entered into a Forbearance Agreement dated as of July 2, 2010, a First Amendment to Forbearance Agreement dated December 31, 2010, a Second Amendment to Forbearance Agreement dated March 1, 2011, a Third Amendment to Forbearance Agreement dated April 27, 2011, and a Fourth Amendment to Forbearance Agreement dated June 30, 2011 (collectively, the “ Forbearance Agreement ”), which provided for a forbearance period which expires on or before August 1, 2011.

B.             The Borrower has requested an extension of the Forbearance Period (as defined in the Forbearance Agreement), and the Lender is willing to grant such an extension upon the terms and conditions set forth in this Amendment.

C.             Unless otherwise expressly defined herein, capitalized terms used herein shall have the same meaning ascribed to them in the Forbearance Agreement.

AGREEMENT

NOW, THEREFORE, in consideration of the facts set forth in the foregoing Recitals, which the parties agree are true and correct, and in consideration for entering into this Amendment, the parties hereto agree as follows:

1.              Amendments to Forbearance Agreement .

a.              Section 3 of the Forbearance Agreement is amended, restated and replaced in its entirety by the following:

3.              Forbearance Period . Provided that the Conditions Precedent set forth below have first been satisfied and Borrower complies with the terms of this Agreement, the Lender agrees it will not declare a default under the Loan Documents or enforce any remedies available to it under the Loan Documents or applicable law on account of the Borrower’s default beginning on the Effective Date, and ending on the earlier of (i) September 1, 2011 and (ii) the date of any Event of Default (as defined below) hereunder (the “ Forbearance Period ”).