<PAGE>

<PAGE> 1     



                SECURITIES AND EXCHANGE COMMISSION
                      Washington, D.C. 20549



                            FORM 10-Q



            QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
              OF THE SECURITIES EXCHANGE ACT OF 1934



For the three months ended September 30, 1997     Commission file number 1-7894



                               ERLY INDUSTRIES INC.                        
             (Exact name of registrant as specified in its charter)



           California                                      95-2312900         
(State or other jurisdiction of                          (IRS Employer 
 incorporation or organization)                        Identification No.)



   10990 Wilshire Boulevard, Los Angeles, California        90024-3955      
        (Address of principal executive offices)            (Zip Code)
  

Registrant's telephone number, including area code         (213) 879-1480   


     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         
                                                -------      ------

     As of October 31, 1996 there were 5,221,337 shares of the Registrant's
common stock outstanding.



<PAGE>
              

<PAGE> 2

                    ERLY INDUSTRIES INC. AND SUBSIDIARIES
                        CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
                                          September 30,       March 31,
                                              1997              1997   
                                          -------------     ------------
                                                    (Unaudited)   
<S>                                       <C>              <C>
Assets                                    
Current Assets:
  Cash and cash equivalents                $  4,640,000     $  5,584,000 
  Notes and accounts receivable, less
    allowance for doubtful accounts of 
    $1,551,000 (September 30) and 
    $1,326,000 (March 31)                    82,509,000       85,789,000 
  Inventories:
    Raw materials                            50,013,000       49,745,000 
    Finished goods                           72,383,000       79,950,000 
                                             ----------       ----------
                                            122,396,000      129,695,000 
  Prepaid expenses and other 
    current assets                            4,723,000        3,354,000 
                                            -----------      -----------
      Total current assets                  214,268,000      224,422,000 


Long-term notes receivable, net               1,503,000        1,503,000 
Property, plant and equipment, net           72,275,000       71,571,000 
Other assets                                 23,662,000       23,222,000 
                                           ------------     ------------
                                           $311,708,000     $320,718,000 
                                           ============     ============

Liabilities and Stockholders' Equity
Current Liabilities:
  Notes payable, collateralized            $ 85,078,000     $ 87,740,000 
  Accounts payable                           59,464,000       64,069,000 
  Accrued payroll and other 
    current liabilities                      23,948,000       23,307,000 
  Income taxes payable                        1,345,000        1,936,000 
  Current portion of long-term
    and subordinated debt                     2,518,000        1,502,000 
                                             ----------       ----------
      Total current liabilities             172,353,000      178,554,000 

Long-term debt                              107,411,000      100,584,000 
Subordinated debt                             4,665,000        4,665,000 
Deferred income taxes payable                   315,000        1,501,000
Minority interest                             6,511,000       10,634,000 
Commitments and contingencies                     

Stockholders' equity:
  Common stock, par value $.01 a share:
    Authorized: 15,000,000 shares
    Issued and outstanding:
    5,221,337 shares (September 30) 
    and 4,740,415 shares (March 31)              52,000           47,000 
  Additional paid-in capital                 28,934,000       27,533,000 
  Retained earnings (deficit)                (6,963,000)      (1,249,000)
  Cumulative foreign currency                                            
    adjustments                              (1,570,000)      (1,551,000)
                                           ------------     ------------
      Total stockholders' equity             20,453,000       24,780,000 
                                           ------------     ------------
                                           $311,708,000     $320,718,000 
                                           ============     ============

</TABLE>

See accompanying Notes to Consolidated Financial Statements and Management's
Discussion and Analysis of Financial Condition and Results of Operations.


<PAGE>
                    
<PAGE> 3 

                         ERLY INDUSTRIES INC. AND SUBSIDIARIES
                         CONSOLIDATED STATEMENTS OF OPERATIONS
             For the three and six months ended September 30, 1997 and 1996

<TABLE>                            
<CAPTION>

                                 Three months ended              Six months ended
                                    September 30,                  September 30, 
                              ---------------------------   --------------------------- 
                                   1997          1996           1997           1996     
                              ------------   ------------   ------------   ------------
                                      (Unaudited)                   (Unaudited)

<S>                          <C>            <C>           <C>            <C>
Net sales                     $116,302,000   $155,966,000   $246,813,000   $280,557,000 
Cost of sales                   96,915,000    131,616,000    212,119,000    242,893,000 
                              ------------   ------------   ------------   ------------
    Gross profit                19,387,000     24,350,000     34,694,000     37,664,000 

Selling, general and 
  administrative expenses       15,161,000     13,625,000     30,584,000     25,285,000
Interest expense                 7,233,000      6,094,000     13,757,000     11,258,000 
Interest income                   (155,000)      (146,000)      (323,000)      (232,000)
Other (income) expense             163,000        (54,000)       420,000        265,000 
                                ----------     ----------     ----------     ----------
                                22,402,000     19,519,000     44,438,000     36,576,000

Income (loss) before taxes 
  on income and 
  minority interest             (3,015,000)     4,831,000     (9,744,000)     1,088,000 

Taxes on income                      7,000        225,000          7,000        318,000 
                                 ---------      ---------      ---------      ---------
Income (loss) before 
  minority interest             (3,022,000)     4,606,000     (9,751,000)       770,000 

Minority interest*               2,001,000        157,000      4,037,000      2,743,000
                               -----------     ----------     ----------     ----------
Net income (loss)             ($ 1,021,000)    $4,763,000    ($5,714,000)    $3,513,000 
                               ===========     ==========     ==========     ==========

Net income (loss) per share 
  of common and common
  stock equivalents:
    Primary                         ($ .20)         $ .94         ($1.16)         $ .67 
                                     =====          =====          =====          =====
   
    Fully diluted                   ($ .20)         $ .89         ($1.16)         $ .64 
                                     =====          =====          =====          =====

Weighted average common and 
  common stock equivalents:
    Primary                      5,088,000      5,041,000      4,921,000      5,225,000 
    
    Fully diluted                5,088,000      5,378,000      4,921,000      5,562,000 

</TABLE>

*  Represents minority interest in net earnings or loss of American Rice, Inc.
   applicable to common stock, after preferred stock dividend requirements (see
   Note 1).




See accompanying Notes to Consolidated Financial Statements and Management's 
Discussion and Analysis of Financial Condition and Results of Operations.


<PAGE>
                    
<PAGE> 4
                    ERLY INDUSTRIES INC. AND SUBSIDIARIES
                    CONSOLIDATED STATEMENTS OF CASH FLOWS
             For the six months ended September 30, 1997 and 1996
<TABLE>                      
<CAPTION>
                                                   Six months ended       
                                                     September 30,        
                                             ---------------------------     
                                                  1997           1996    
                                             ------------     ----------   
                                                     (Unaudited)     
<S>                                           <C>            <C>
OPERATING ACTIVITIES:
Net income (loss)                             ($5,714,000)    $3,513,000 
Adjustments to reconcile net
 income to net cash provided by 
 (used in) operating activities:
   Minority interest in ARI                    (4,037,000)    (2,743,000)
   Depreciation and amortization                4,729,000      4,107,000 
   Provision for loss on receivables              225,000        174,000
   Gain on redemption of warrant
    repurchase obligation                                       (387,000)    
   Change in assets and liabilities,                      
    excluding effect from acquisition
    of olive business:
    (Increase) decrease in receivables          3,055,000    (15,136,000)
    (Increase) decrease in inventories          7,299,000      8,863,000 
    (Increase) decrease in prepaid
      expenses and other current assets        (1,369,000)       231,000 
    Increase (decrease) in accounts 
      payable, other current 
      liabilities and taxes payable            (5,741,000)       748,000 
    Other, net                                 (1,131,000)    (1,000,000)
                                                ---------     ----------
NET CASH (USED IN) 
  OPERATING ACTIVITIES                         (2,684,000)    (1,630,000)     

INVESTING ACTIVITIES:
  Purchases of property, plant, and equipment  (4,557,000)    (2,552,000)
  Disposition of property, plant and equipment                    71,000
  Acquisition of olive business                              (33,952,000)
  Disposition of property held for sale                        2,255,000 
                                                ---------      ---------
NET CASH (USED IN)
  INVESTING ACTIVITIES                         (4,557,000)   (34,178,000)

FINANCING ACTIVITIES:                                     
  Increase (decrease) in notes payable         (2,662,0000)   38,884,000 
  Increase (decrease) in long-term                 
    and subordinated debt                        8,843,000       380,000 
  Redemption of redeemable          
    common stock warrants                                     (2,125,000)
  Proceeds from sale of stock                     116,000        100,000 
  Mortgage notes issuance cost                                    (3,000)
                                               ----------     ----------
NET CASH PROVIDED BY (USED IN)
  FINANCING ACTIVITIES                          6,297,000     37,236,000
                                               ----------     ----------
INCREASE (DECREASE) IN CASH 
  DURING THE PERIOD                              (944,000)     1,428,000 

CASH, BEGINNING OF PERIOD                       5,584,000      3,819,000 
                                              -----------    -----------
CASH, END OF PERIOD                           $ 4,640,000    $ 5,247,000 
                                              ===========    ===========

Supplemental cash flow information:
 Net cash paid during the period for:
      Interest expense                        $11,829,000    $10,289,000 
      Income taxes                            $   582,000    $   719,000 
      
</TABLE>

See accompanying Notes to Consolidated Financial Statements and Management's 
Discussion and Analysis of Financial Condition and Results of Operations.


<PAGE>
                   
<PAGE> 5



                          ERLY INDUSTRIES INC. AND SUBSIDIARIES
                     CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
                       For the six months ended September 30, 1997
                                       (Unaudited)

<TABLE>                                
<CAPTION>

                                                                   Cumulative
                     Common Stock        Additional   Retained       Foreign         Total
                  -------------------     Paid-in     Earnings      Currency     Stockholders'
                   Shares     Dollars     Capital     (Deficit)    Adjustments      Equity    
                  ---------  --------   -----------   ----------  ------------   -----------
<S>              <C>         <C>       <C>           <C>           <C>          <C>
Balance
April 1, 1997     4,740,415   $47,000   $27,533,000 ($ 1,249,000) ($1,551,000)   $24,780,000 
                                                                                    
Net income (loss)
 for the period                                       (5,714,000)                 (5,714,000)

Common stock
 issued             129,149     1,000      405,000                                   406,000     

Conversion of
 note payable
  to stock          351,773     4,000      996,000                                 1,000,000     

Foreign currency  
adjustments                                                           (19,000)       (19,000)
                  ---------  --------   -----------    ----------  -----------  ------------
Balance
September 30, 
 1997
(unaudited)       5,221,337   $52,000   $28,934,000  ($6,963,000)  ($1,570,000)  $20,453,000 
                  =========   =======   ===========   ===========  ===========  ============


</TABLE>

See accompanying Notes to Consolidated Financial Statements and Management's 
Discussion and Analysis of Financial Condition and Results of Operations.




<PAGE>
              
<PAGE> 6              

              
              ERLY INDUSTRIES INC. AND SUBSIDIARIES
            NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
  For the three and six months ended September 30, 1997 and 1996

Basis of Presentation:

The information furnished is unaudited but reflects all adjustments which are,
in the opinion of management, necessary for a fair statement of results for 
the interim periods.  Results for interim periods are not necessarily 
indicative of results to be expected for the entire year.  Quarterly results 
are affected by certain seasonal factors.  Olive sales increase during 
holiday periods, most notably in the third fiscal quarter.  Forest fire 
retardant products are applied during forest fire seasons, principally the 
second fiscal quarter.

Reference should be made to the Notes To Consolidated Financial Statements in 
the Company's 1997 Form 10-K for a discussion of accounting policies and 
other significant matters.

The accompanying consolidated financial statements include the accounts of ERLY
Industries Inc. and its subsidiaries (the "Company" or "ERLY").  All 
significant intercompany accounts, intercompany profits and intercompany 
transactions are eliminated. 

Deferred income tax assets and liabilities are computed annually for 
differences between the financial statement basis and tax basis of assets and
liabilities that will result in taxable or deductible amounts in the future.
Such deferred income tax asset and liability computations are based on 
enacted tax laws and rates applicable to periods in which the differences are
expected to affect taxable income.  Valuation allowances are established when 
necessary to reduce deferred tax assets to the amount expected to be realized.
At March 31, 1997, the Company had net operating loss carryforwards for 
federal tax reporting purposes of approximately $34 million, which expire at 
various dates, primarily in years 2002 through 2011.  Tax expense reflected 
in the consolidated statements of operations represents estimated federal, 
state and foreign tax expense on pre-tax earnings reduced by the utilization 
of deferred tax assets relating to net operating loss carryforwards that had 
previously been reserved.

Primary earnings per share are based on the weighted average number of:  (1)
common shares, and (2) dilutive common share equivalents (consisting of stock
options and warrants) outstanding during each period presented.  Fully diluted
earnings per share assumes conversion of a $1 million convertible note 
payable, unless conversion would be anti-dilutive.

In February 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 128, "Earnings Per Share" 
("SFAS 128") which is effective for periods ending after December 15, 1997 
and specifies the computation, presentation and disclosure requirements of 
earnings per share ("EPS").  SFAS 128 requires a dual presentation of basic 
and diluted EPS.  Basic EPS, which excludes the impact of common stock 
equivalents, replaces primary EPS.  Diluted EPS, which utilizes the average 
market price per share as opposed to the greater of the average market price 
per share or ending market price per share when applying the treasury stock 
method in determining common stock equivalents, replaces fully diluted EPS.  

<PAGE>
<PAGE> 7

Pro forma basic and diluted EPS for all historical periods presented, 
assuming SFAS No. 128 was effective at the beginning of each such historical 
period, would not be materially different from the primary and fully diluted 
EPS presented. 

In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income," 
and SFAS No. 131, "Disclosures About Segments of an Enterprise and Related
Information."  SFAS No. 130 establishes standards for reporting and displaying
of comprehensive income and its components.  SFAS No. 131 establishes standards
for the way that public business enterprises report information about operating
segments and related information in interim and annual financial statements. 
SFAS No. 130 and 131 are effective for periods beginning after December 15, 
1997.  These three statements will not have any effect on the Company's 1997 
financial statements, however, management is evaluating what, if any, 
additional disclosure may be required when these statements are implemented.


Note 1 - Minority Interest

In May 1993, substantially all of the assets and liabilities of ERLY's wholly
owned subsidiary, Comet Rice, Inc. ("Comet"), were acquired by American Rice,
Inc. ("ARI"), in a transaction accounted for as a reverse acquisition by its
subsidiary, Comet.  Prior to the transaction, ERLY owned 48% of the voting 
rights of ARI, and its investment in ARI was accounted for using the equity 
method.  As a result of the transaction, ERLY's ownership increased to 81% 
of the voting rights of ARI.

ERLY's 81% voting interest in ARI consists of the following securities of ARI:

  * 777,777 shares of ARI common stock which represent 32% of ARI's total
    outstanding common stock and 9% of ARI's common shares on a fully
    converted basis.

  * 777,777 shares of ARI Series A Preferred Stock, which is convertible one
    for one, has voting rights, liquidation preferences of $25.70 per share,
    but has no stated dividend.  These shares represent 9% of ARI's common
    shares on a fully converted basis.

  * 2,800,000 shares of ARI Series B Preferred Stock, which is convertible
    into 5,600,000 common shares, has voting rights, liquidation preferences
    of $5.00 per share and an annual cumulative dividend of approximately
    $5.2 million.  These shares represent 63% of ARI's common shares on a
    fully converted basis.

ARI also issued a Series C Preferred Stock to third parties which does not have
voting or conversion rights but does have an annual cumulative dividend of
$750,000.  The Series A, Series B and Series C Preferred Stocks are unique
securities with preferential rights which are superior to common stock rights.

The Minority Interest of ARI in ERLY's consolidated financial statements
represents the 68% of the common stock of ARI which ERLY does not own and the
Series C Preferred Stock, for a total of 19% of the voting interest in ARI on a
fully converted basis.

<PAGE>
<PAGE> 8

ARI's earnings or losses are allocated between ERLY and the Minority Interest 
in accordance with the underlying terms of the various securities, rather 
than allocation based on voting ownership of the subsidiary.  No conversion 
is assumed in the case of convertible preferred stocks for purposes of this 
calculation, even though conversion may occur at any time at the option of 
ERLY.

ARI's cumulative annual dividends of $5.2 million related to the Series B
Preferred Stock and $750,000 related to the Series C Preferred Stock are 
deducted from ARI earnings or loss to yield earnings or loss to be allocated 
to common stock.  The Series B Preferred Stock dividend is allocated entirely 
to ERLY, while the Series C Preferred Stock dividend is allocated entirely 
to Minority Interest.  The current ARI loan agreements prohibit the payment 
of any dividends.  These dividends are allocated even if not declared as the 
dividends are cumulative.  The remaining earnings or losses to be allocated 
to common stock after deduction of the preferred stock dividends is allocated 
in accordance with the relative common stock ownership of ERLY (32%) and the 
Minority Interest (68%).  ERLY's share of ARI's net earnings (loss) applicable
to common stock after preferred dividend requirements was ($1,030,000) and 
($2,076,000) for the three and six months ended September 30, 1997 and 1996, 
respectively.  ERLY also earned Series B preferred dividends of $1,295,000 
for each of the three month periods ended September 30, 1997 and 1996, and 
$2,590,000 for each of the six month periods ended September 30, 1997 and 
1996.  As of September 30, 1997, ARI Series B Preferred Stock dividends 
accumulated, but not declared, total $22.4 million.


Note 2 - Olive Business Acquisition

On July 5, 1996, the Company's subsidiary, ARI, acquired the domestic and 
foreign olive business of Campbell Soup Company ("CSC Olives") for 
approximately $36 million (the "Acquisition").  Assets acquired include 
domestic inventories and fixed assets, all of the outstanding common stock 
of a Spanish company which comprises the foreign olive business, and 51% of 
the stock of Sadrym California, a manufacturer of olive processing machinery.  
The purchase was funded primarily from ARI's credit facilities.  The 
Acquisition was accounted for as a purchase and the results of operations of 
the acquired business have been included in the Company's consolidated 
financial statements after July 5, 1996.  The olive business is operated as 
the Early California Foods division of ARI.

Operating results reflected in the accompanying financial statements do not
include CSC Olives' operating activities before July 5, 1996.  The following
summarized pro forma information assumes the Acquisition occurred on the first
day of the prior fiscal year (in thousands, except per share data):

                               Three months ended      Six months ended
                               September 30, 1996     September 30, 1996
                               ------------------     ------------------

Net sales                         $ 156,767              $ 299,580  

Net income                        $   4,737              $   1,688

Earnings per share:
  Primary                         $     .94              $     .32
  Fully diluted                   $     .89              $     .31

<PAGE>
<PAGE> 9

Note 3 - Long-term and Subordinated Debt

Certain of the Company's and subsidiaries' long-term debt agreements require
maintenance of minimum amounts or ratios related to working capital, long-term
debt and net worth, in addition to the observance of other covenants.  These
restrictions also preclude the payment of cash dividends. 

Note 4 - Commitments and Contingencies

In July 1997, The Powell Group, a diversified holding company based in Baton
Rouge, Louisiana, through its wholly owned subsidiary, Farmers Rice Milling 
Company, a Louisiana corporation, filed a shareholder derivative complaint 
purportedly on behalf of ERLY and ARI, against Gerald D. Murphy, Douglas A. 
Murphy, the Company and ARI in the U.S. District Court, Central District of 
California.  Farmers Rice subsequently amended the complaint to add all of 
the other directors of ERLY and ARI as defendants.  

In the complaint, Farmers Rice alleges (1) breach of fiduciary duty, (2) waste 
of corporate assets, and (3) illegal corporate loan.  The derivative complaint
further requests injunctive relief prohibiting the Company and ARI from making
allegedly ongoing litigation defense payments on behalf of Gerald D. Murphy 
and Douglas A. Murphy and requiring ongoing indemnification by such 
individuals to the Company and ARI.  Both the Company and ARI are nominal 
defendants with the lawsuit being brought on behalf of the Company and ARI 
against Gerald D. Murphy and Douglas A. Murphy.  The complaint principally 
challenges certain litigation expenditures incurred by the Company in 
connection with litigation to which the Company, ARI, Gerald D. Murphy and 
Douglas A. Murphy are parties, which is described below.  While the complaint 
alleges that such expenditures were improperly incurred, in fact, all 
expenditures and the involvement of the Company in the underlying litigation 
were fully authorized by the Companys' Boards of Directors.

The Company filed a motion to dismiss the lawsuit due to The Powell Group's 
failure to either make a demand on the boards of directors to take action with
respect to the wrongs alleged or to very specifically allege the facts which
demonstrate why a demand on the boards would be futile.  The Company also
argued that the issues in the derivative action were issues which the 
disinterested directors in pre-litigation resolutions had taken steps to 
resolve, such that these issues were properly dealt with in the first
instance by the boards themselves.  The Court agreed and dismissed the
complaint without prejudice in November 1997.  The Company does not expect 
The Powell Group to re-file the lawsuit.

In April 1995, a lawsuit was filed in the District Court of Harris County, 
Texas, by Kingwood Lakes South, L.P. and Tenzer Company, Inc., as plaintiffs, 
against G.D. Murphy and D.A. Murphy, Chairman and President of the Company 
and ARI, respectively.  ERLY and ARI were named as codefendants in the 
lawsuit by an amendment to the original petition in September 1995.  This is 
a dispute between the general partner of a proposed real estate development 
and G.D. Murphy and D.A. Murphy, over their contractual obligations, if any,
to the partnership.  The Company and ARI were named as codefendants in the 
lawsuit allegedly because of their efforts to obtain restraining orders to 
prevent threatened foreclosures on ERLY common stock pledged as collateral by 
G.D. Murphy and to stop interference by the plaintiff in the lawsuit, with 
ARI's mortgage note financing, as well as certain other alleged activities, 
including knowing participation in breaches of fiduciary duties, fraud, civil 
conspiracy with the Murphys and conversion.  The plaintiff subsequently added 
a claim that ERLY and ARI were alter egos of the Murphys. 

<PAGE>
<PAGE> 10

In order to minimize legal expenses, ERLY, ARI and the Murphys are utilizing 
common legal counsel in this matter.  Gerald D. Murphy has agreed to pay up 
to 50% of such expenses after any insurance recoveries as determined by the 
members of the board of directors not a party to the lawsuit.  On September 9,
1997 the jury in this litigation returned two alternative verdicts in favor 
of the plaintiffs and the plaintiffs were required to elect between those 
verdicts.  The plaintiffs elected the jury's tort claim verdict in the amount 
of $9,657,000 rendered jointly and severally against Gerald D. Murphy, 
Douglas A. Murphy, ERLY and ARI, along with separate awards of punitive 
damages against Gerald D. Murphy of $3,000,000, Douglas A. Murphy of $500,000,
ERLY of $100,000, and ARI of $100,000.  The defendants have filed motions 
before the trial court for judgment in defendants' favor notwithstanding the 
verdict and for a reduction of the amounts awarded by the jury based, in 
part, on the absence of evidence to support those amounts.  In the event any 
judgment is entered against the Company or ARI, the Company and ARI intend 
to appeal that judgment.  At this time, prior to the trial court's rulings 
on the defendants' expected motions to set aside or reduce the verdicts, the 
Company cannot state whether or not the outcome of this litigation may have 
a material impact on its or ARI's financial condition.  It may be some time 
before an actual final judgment is entered.


ARI was named as a codefendant with Messrs. John M. Howland and 
George E. Prchal in a lawsuit filed in February 1997 in U.S. District Court 
in Houston, Texas by Rice Milling & Trading Investments, LTD., an Isle of 
Man Company ("RMTI").  In 1994, ARI entered into an agreement with RMTI for 
processing the Company's rice through RMTI's facility in Jeddah, Saudi 
Arabia.  Messrs. Howland and Prchal were officers of RMTI through January 
1997, and prior to October 1993 they were officers of ARI.  Messrs. 
Howland and Prchal were directors of ARI from October 1993 to October 1997.
In January 1997, RMTI ceased shipping ARI's rice through its Jeddah facility 
and terminated the employment of Messrs. Howland and Prchal.  The lawsuit 
alleges among other things ARI failed to perform under the terms of the 
agreement and Messrs. Howland and Prchal breached their fiduciary duties to 
RMTI.  In April 1997, ARI obtained a preliminary injunction from the U.S. 
District Court of the Southern District of Texas ordering RMTI to desist and 
refrain from purchasing rice of U.S. or Vietnam origin from any supplier 
other than ARI and from introducing and/or marketing rice of U.S. and Vietnam
origin in Saudi Arabia targeted against ARI's U.S. origin and Vietnam origin 
rice.  In October 1997, ARI voluntarily terminated this injunction.  RMTI 
has added claims of fraud, participation in breach of duty, and tortuous 
interference against ARI.  The date for the trial has not been set.  The 
Company believes that this litigation will not have a material effect on 
the Company's financial condition; however, as with any litigation, the 
ultimate outcome is unknown.



Note 5 - Stockholders' Equity

In October 1997, the Company declared a 10% stock dividend to shareholders of
record at the close of business on October 31, 1997. 


<PAGE>
<PAGE> 11




Item 2.           ERLY INDUSTRIES INC. AND SUBSIDIARIES 
                 MANAGEMENT'S DISCUSSION AND ANALYSIS OF 
              FINANCIAL CONDITION AND RESULTS OF OPERATIONS
    FOR THE THREE AND SIX MONTHS ENDED SEPTEMBER 30, 1997 AND 1996

RESULTS OF OPERATIONS - THREE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996


Consolidated Results

For the quarter ended September 30, 1997, the Company reported a net loss of 
$1.0 million on sales of $116 million, as compared to net income of $4.8 
million on sales of $156 million for the second quarter of the prior fiscal 
year.  Sales for the second quarter of fiscal 1998 reflect a $28.3 million 
decrease in sales by American Rice from the second quarter of last year, plus
a $9.0 million decrease in sales by Chemonics Fire-Trol, and a $2.4 million 
decrease in revenues by Chemonics International. 

Gross profit for the quarter ended September 30, 1997 was $19.4 million, a
decrease of $5.0 million from the quarter ended September 30, 1996 as a result
of decreases by Chemonics Fire-Trol of $3.2 million and American Rice of $2.5
million, partially offset by an increase by Chemonics International of 
$722,000.

American Rice 

Sales for the quarter ended September 30, 1997 decreased $28.3 million, or 23%,
from $121.5 million in fiscal 1997 to $93.2 million in fiscal 1998.  The sales
decrease for the quarter reflects a $33.3 million decline in export sales and a
$3.1 million decrease in U.S. rice sales, partially offset by an $8.1 million
increase in sales by the olive business acquired in July 1996.  Export sales 
declines were experienced primarily in four Middle East markets and Africa.

Gross profit was 13.6% of sales for the quarter ended September 30, 1997 
compared to 12.5% last year.  Gross profit decreased $2.5 million, or 16%, 
from $15.2 million in the second quarter last year to $12.7 million in the 
second quarter of this year, due primarily to lower sales for the quarter.

ARI's selling, general and administrative expenses of $9.4 million increased
$988,000 or 12%, from $8.4 million last year.  The increase is due primarily to
higher advertising and promotional expenses associated with the olive business
acquired in fiscal 1997.  Selling, general and administrative expenses as a
percentage of net sales were 10.1% in the second quarter of the current year
compared to 6.9% last year.  

<PAGE>
<PAGE> 12

Chemonics International - Consulting 

For the quarter ended September 30, 1997, revenues for International were $18.8
million, a decrease of $2.4 million, or 11%, from revenues of $21.1 million for
the comparable period last year.  The decrease in revenues from last year is
primarily attributed to the wind down of some projects in the current year, 
with new and follow-on projects not yet completely started.  Gross profit was 
$5.8 million (31% of revenues) for the quarter compared to gross profit of 
$5.1 million (24% of revenues) for the second quarter of last year.  This 
increase reflects a reduced level of subcontracted work and a greater
utilization of Chemonics' staff as a percentage of the cost input.

Chemonics Industries - Fire-Trol
     
Fire-Trol reported sales of $4.3 million for the quarter compared to sales of
$13.3 million reported last year, a decrease of $9.0 million or 68%.  Due to a
very slow forest fire season this year, Fire-Trol's sales were the lowest in 
the last 10 years.  The current year follows last year's near record level of 
forest fire activity, which therefore results in a significant swing when 
comparing to last year's results.  Gross profit for the quarter was $881,000, 
down from $4.1 million last year due to the significantly lower sales.  

Corporate 

Consolidated interest expense totaled $7.2 million for the quarter ended
September 30, 1997, compared to $6.1 million for the same quarter of last year.
This increase reflects increased average borrowings from a year ago due to the
acquisition of the olive business in July 1996.  Interest expense in both 
periods includes amortization of capitalized debt issuance costs.


RESULTS OF OPERATIONS - SIX MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
                                
Consolidated Results

For the six months ended September 30, 1997, the Company reported a net loss of
$5.7 million on sales of $247 million, as compared to net income of $3.5 
million on sales of $281 million for the first six months of the prior fiscal 
year.  Sales for the current year were down $34 million from last year, 
primarily due to a $13.3 million decrease by Chemonics Fire-Trol, a $12.3 
million decrease in sales by American Rice and an $8.3 million decrease by 
Chemonics International.

Gross profit for the six months ended September 30, 1997 was $34.7 million
compared to $37.7 million for the comparable period of last year.

American Rice

Sales for the six months ended September 30, 1997 decreased $12.3 million, or
5.6%, from $218.9 million in fiscal 1997 to $206.6 million in fiscal 1998.  The
decrease in sales was composed of a $32.6 million decline in export sales and a
$4.0 million decrease in U.S. rice sales, partially offset by a $24.3 million
increase in sales by the olive business acquired in July 1996.  Export sales
declines were experienced primarily in Middle East markets and Africa.

<PAGE>
<PAGE> 13

Gross profit was 11.7% of sales for the six month period ended September 30, 
1997, compared to 9.9% in fiscal 1997.  Gross profit increased $2.4 million, 
or 11%, from $21.7 million in the first six months of last year to $24.1 
million in the first six months of this year, due primarily to the Early 
California Foods acquisition.  

ARI's selling, general and administrative expenses of $18.3 million increased
$3.4 million, or 23%, from $14.9 million last year.  The increase is primarily
due to higher advertising and promotional expenses associated with the olive
business acquired in July 1996.  Selling, general and administrative expenses
as a percentage of net sales increased from 6.8% in the first six months
of last year to 8.9% this year.

Chemonics International - Consulting

For the six months ended September 30, 1997, revenues for International were
$34.1 million, a decrease of $8.3 million, or 20%, from revenues of $42.4 
million for the comparable period last year.  The decrease in revenues
from last year is primarily attributed to the wind down of some projects
in the current year, with new and follow-on projects not yet completely
started.  Gross profit was $9.7 million (29% of revenues) for the period 
compared to gross profit of $10.3 million (24% of revenues) for the 
comparable period last year.

Chemonics Industries - Fire-Trol

Fire-Trol reported net sales of only $5.9 million for the six months ended
September 30, 1997, compared to sales of $19.2 million reported last year, a
decrease of $13.3 million, or 69%.  The current year experienced an extremely 
low level of forest fire activity resulting in the lowest sales in the past 
10 years for Fire-Trol.  Due to the significantly lower sales, gross profit 
for the six months was only $598,000 or 10% of sales, compared to $5.6 
million, or 29% of sales last year.

Corporate

Consolidated interest expense totaled $13.8 million for the six months ended
September 30, 1997, compared to $11.3 million for the same period of last year.
This increase reflects increased average borrowings due to the acquisition of 
the olive business in July 1996.  Interest expense in both periods includes
amortization of capitalized debt issuance costs.

Liquidity And Capital Resources

At September 30, 1997, consolidated working capital was $41.9 million, 
compared to $45.9 million at March 31, 1997, a decrease of $4.0 million.  
Stockholders' equity was $20.5 million at September 30, 1997, compared to 
$24.8 million at March 31, 1997, a decrease of $4.3 million, primarily as 
a result of the net loss for the six months.

<PAGE>
<PAGE> 14

For the six months ended September 30, 1997, cash used in operations was $2.7
million, primarily related to the loss for the period.  Expenditures for 
capital equipment were $4.6 million for the period.  Financing activities 
provided a $6.3 million increase in cash for the period, primarily through 
an $8.9 million capitalized lease relating to the sale and leaseback 
transaction discussed below, partially offset by a $2.7 million decrease 
in borrowings under the Company's lines of credit.

ARI has an $85 million revolving credit loan with interest at ARI's option at
either the prime rate or the London Interbank Offered Rate plus an applicable
margin based upon ARI's adjusted funded debt ratio.  The loan provides 
financing for ARI's rice and olive operations.  At September 30, 1997, the 
outstanding balance on this loan was $69.1 million.  The Company has 
requested a $10 million increase in the line of credit.  This loan facility 
contains restrictive covenants which, among other things, require the 
attainment of certain financial ratios and provide limitations on capital 
expenditures, lease obligations, and prohibit payment of dividends.  As of 
September 30, 1997, ARI was not in compliance with certain of the covenants 
related to interest coverage, adjusted funded debt and adjusted tangible net 
worth.  Although no assurances can be given, management expects to obtain
waivers from its banks related to these covenants in the near future.

Chemonics Industries, Inc. has lines of credit totaling $20 million which 
provide financing for both Consulting and Fire-Trol.

In July 1997, ARI completed a sale and leaseback transaction for substantially
all of its olive processing machinery and equipment located in Visalia,
California.  ARI realized proceeds from the sale of approximately $8.9 million
which were used for operating purposes.  These assets were leased for a seven
year term with a two year extension option.  The transaction is being accounted
for as a capital lease with the proceeds recorded as a liability that is 
reduced by lease payments over the lease term.  

ARI's liquidity in the quarter ended June 30, 1997 and currently, has been
impaired primarily as a result of the loss of financing associated with the 
RMTI agreement (See Note 4 to the Consolidated Financial Statements and Part 
II - Legal Proceedings).  Without the RMTI agreement, the general corporate
financing required for ARI's sales and marketing in Saudi Arabia is
significantly greater.  ARI has had to utilize its credit lines to maintain
the inventory position for its Saudi Arabia sales and this has reduced
the availability for its domestic activities.  In addition to increasing
the use of ARI's credit lines, ARI has also experienced an increase
in its accounts payable.  In addition to the sale and leaseback transaction 
discussed above, the Company is exploring several other opportunities to 
improve liquidity.  However, no assurances can be given that the Company 
can conclude the other arrangements being considered.  

In August 1997, ARI reached an agreement with Aqaba Packaging Company ("APC")
whereby APC will purchase, receive, store, process and bag rice shipped in
bulk to APC's rice terminal at Aqaba, Jordan.  Additionally, the agreement 
provides that ARI can purchase rice from this facility for delivery to ARI's 
customers in the Middle East, primarily Saudi Arabia.  ARI is currently 
discussing various financing arrangements to insure that sufficient levels 
of inventories are maintained by APC to meet ARI's and APC's sales 
requirements in Middle East markets.


<PAGE>
<PAGE> 15                             


                             PART II
                       OTHER INFORMATION
                                

Item 1.  Legal Proceedings

In July 1997, The Powell Group, a diversified holding company based in Baton
Rouge, Louisiana, through its wholly owned subsidiary, Farmers Rice Milling 
Company, a Louisiana corporation, filed a shareholder derivative complaint 
purportedly on behalf of ERLY and ARI, against Gerald D. Murphy, Douglas A. 
Murphy, the Company and ARI in the U.S. District Court, Central District of 
California.  Farmers Rice subsequently amended the complaint to add all of 
the other directors of ERLY and ARI as defendants.  

In the complaint, Farmers Rice alleges (1) breach of fiduciary duty, 
(2) waste of corporate assets, and (3) illegal corporate loan.  The
derivative complaint further requests injunctive relief prohibiting the
Company and ARI from making allegedly ongoing litigation defense payments
on behalf of Gerald D. Murphy and Douglas A. Murphy and requiring ongoing
indemnification by such individuals to the Company and ARI.  Both the  
Company and ARI are nominal defendants with the lawsuit being brought on
behalf of the Company and ARI against Gerald D. Murphy and Douglas A.
Murphy.  The complaint principally challenges certain litigation expenditures 
incurred by the Company in connection with litigation to which the Company, 
ARI, Gerald D. Murphy and Douglas A. Murphy are parties, which is described 
below.  While the complaint alleges that such expenditures were improperly 
incurred, in fact, all expenditures and the involvement of the Company in 
the underlying litigation were fully authorized by the Companys' Boards of 
Directors.

The Company filed a motion to dismiss the lawsuit due to The Powell Group's 
failure to either make a demand on the boards of directors to take action with
respect to the wrongs alleged or to very specifically allege the facts which
demonstrate why a demand on the boards would be futile.  The Company also
argued that the issues in the derivative action were issues which the 
disinterested directors in pre-litigation resolutions had taken steps to 
resolve, such that these issues were properly dealt with in the first
instance by the boards themselves.  The Court agreed and dismissed the
complaint without prejudice in November 1997.  The Company does not expect 
The Powell Group to re-file the lawsuit.

In April 1995, a lawsuit was filed in the District Court of Harris County, 
Texas, by Kingwood Lakes South, L.P. and Tenzer Company, Inc., as plaintiffs, 
against G.D. Murphy and D.A. Murphy, Chairman and President of the Company 
and ARI, respectively.  ERLY and ARI were named as codefendants in the 
lawsuit by an amendment to the original petition in September 1995.  This is 
a dispute between the general partner of a proposed real estate development 
and G.D. Murphy and D.A. Murphy, over their contractual obligations, if any,
to the partnership.  The Company and ARI were named as codefendants in the 
lawsuit allegedly because of their efforts to obtain restraining orders to 
prevent threatened foreclosures on ERLY common stock pledged as collateral by 
G.D. Murphy and to stop interference by the plaintiff in the lawsuit, with 
ARI's mortgage note financing, as well as certain other alleged activities, 
including knowing participation in breaches of fiduciary duties, fraud, civil 
conspiracy with the Murphys and conversion.  The plaintiff subsequently added 
a claim that ERLY and ARI were alter egos of the Murphys.  

<PAGE>
<PAGE> 16                             


In order to minimize legal expenses, ERLY, ARI and the Murphys are utilizing 
common legal counsel in this matter.  Gerald D. Murphy has agreed to pay up 
to 50% of such expenses after any insurance recoveries as determined by the 
members of the board of directors not a party to the lawsuit.  On September 9,
1997 the jury in this litigation returned two alternative verdicts in favor 
of the plaintiffs and the plaintiffs were required to elect between those 
verdicts.  The plaintiffs elected the jury's tort claim verdict in the amount 
of $9,657,000 rendered jointly and severally against Gerald D. Murphy, 
Douglas A. Murphy, ERLY and ARI, along with separate awards of punitive 
damages against Gerald D. Murphy of $3,000,000, Douglas A. Murphy of $500,000,
ERLY of $100,000, and ARI of $100,000.  The defendants have filed motions 
before the trial court for judgment in defendants' favor notwithstanding the 
verdict and for a reduction of the amounts awarded by the jury based, in 
part, on the absence of evidence to support those amounts.  In the event any 
judgment is entered against the Company or ARI, the Company and ARI intend to 
appeal that judgment.  At this time, prior to the trial court's rulings on 
the defendants' expected motions to set aside or reduce the verdicts, the 
Company cannot state whether or not the outcome of this litigation may have 
a material impact on its or ARI's financial condition.  It may be some time 
before an actual final judgment is entered.

ARI was named as a codefendant with Messrs. John M. Howland and 
George E. Prchal in a lawsuit filed in February 1997 in U.S. District Court 
in Houston, Texas by Rice Milling & Trading Investments, LTD., an Isle of 
Man Company ("RMTI").  In 1994, ARI entered into an agreement with RMTI for 
processing the Company's rice through RMTI's facility in Jeddah, Saudi 
Arabia.  Messrs. Howland and Prchal were officers of RMTI through January 
1997, and prior to October 1993 they were officers of ARI.  Messrs. Howland 
and Prchal were directors of ARI from October 1993 through October 1997.
In January 1997, RMTI ceased shipping ARI's rice through its Jeddah facility 
and terminated the employment of Messrs. Howland and Prchal.  The lawsuit 
alleges among other things ARI failed to perform under the terms of the 
agreement and Messrs. Howland and Prchal breached their fiduciary duties to 
RMTI.  In April 1997, ARI obtained a preliminary injunction from the U.S. 
District Court of the Southern District of Texas ordering RMTI to desist and 
refrain from purchasing rice of U.S. or Vietnam origin from any supplier 
other than ARI and from introducing and/or marketing rice of U.S. and 
Vietnam origin in Saudi Arabia targeted against ARI's U.S. origin and 
Vietnam origin rice.  In October 1997, ARI voluntarily terminated this 
injunction.  RMTI has added claims of fraud, participation in breach of 
duty, and tortuous interference against ARI.  The date for the trial has 
not been set.  The Company believes that this litigation will not have a 
material effect on the Company's financial condition; however, as with 
any litigation, the ultimate outcome is unknown.

<PAGE>
<PAGE> 17

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

(a)  The Annual Meeting of Shareholders was held on October 17, 1997.


Item 6.  Exhibits and Reports on Form 8-K

(a) Exhibits

    11.1  Calculation of Primary Income Per Share

    11.2  Calculation of Fully Diluted Income Per Share

    27    Financial Data Schedule (electronic filing)                


(b) No reports on Form 8-K were filed during the quarter ended September 30,
    1997.


<PAGE>
<PAGE> 18


                            SIGNATURE

Pursuant to the requirements of the Securities and Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

    
                                       ERLY INDUSTRIES INC.
                                          (Registrant)



Date:    November 19, 1997            By /s/ Thomas A. Whitlock 
                                         ----------------------
                                         Thomas A. Whitlock
                                         Vice President and
                                         Corporate Controller         





<PAGE>
<PAGE> 19


                                         EXHIBIT 11.1
                            ERLY INDUSTRIES INC. AND SUBSIDIARIES
                           CALCULATION OF PRIMARY INCOME PER SHARE
                            (In thousands, except per share data)


<TABLE>                      
<CAPTION>

                                            Three months ended                 Six months ended
                                               September 30,                     September 30,              
                                      -----------------------------      ----------------------------
                                         1997                1996          1997                1996  
                                      --------             --------      --------            --------
                                               (Unaudited)                        (Unaudited)

<S>                                  <C>                   <C>           <C>                 <C>
Income (loss) before
  minority interest                  ($ 3,022)              $ 4,606      ($ 9,751)            $   770 
Minority interest                       2,001                   157         4,037               2,743 
                                      -------               -------       -------             -------
  Net income (loss)                  ($ 1,021)              $ 4,763      ($ 5,714)            $ 3,513 
                                      =======               =======       =======             =======


Average number of shares of
  common stock and common
  stock equivalents outstanding:
   Average number of shares of
    common stock outstanding            5,088                 4,733         4,921               4,723 

   Common stock equivalents: 
    Dilutive effect of stock
     options and warrants based 
     on application of treasury
     stock method                         (a)                   308           (a)                 502 
                                        -----                 -----         -----               -----
    Total                               5,088                 5,041         4,921               5,225 
                                        =====                 =====         =====               =====

  Primary income (loss) per 
    common share                      ($  .20)               $  .94      ($  1.16)            $   .67 
                                       ======                ======       =======             =======

</TABLE>


<PAGE>
<PAGE> 20



                                         EXHIBIT 11.2
                            ERLY INDUSTRIES INC. AND SUBSIDIARIES
                        CALCULATION OF FULLY DILUTED INCOME PER SHARE
                            (In thousands, except per share data)


<TABLE>
<CAPTION>

                                            Three months ended               Six months ended
                                               September 30,                   September 30,    
                                      -----------------------------    ------------------------------
                                         1997                1996         1997                1996  
                                      --------            ---------    ----------           ---------
                                               (Unaudited)                      (Unaudited)
<S>                                   <C>                  <C>           <C>                 <C>
Income (loss) before
  minority interest                  ($ 3,022)             $  4,606     ($  9,751)           $    770
Interest adjustment - convertible
  note payable                           (a)                     25          (a)                   51 
Income (loss) before minority         -------               -------       -------             -------
  interest, as adjusted              (  3,022)                4,631     (   9,751)                821 

Minority interest                       2,001                   157         4,037               2,743 
                                      -------               -------       -------             -------
  Net income (loss), as adjusted     ($ 1,021)              $ 4,788      ($ 5,714)            $ 3,564 
                                      =======               =======       =======             =======


Average number of shares of
  common stock and common 
  stock equivalents outstanding         5,088                 5,041         4,921               5,225 
Other potentially
  dilutive securities:
  Common stock issuable upon
    conversion of note payable            (a)                   337           (a)                 337 
                                        -----                 -----         -----               -----
      Total                             5,088                 5,378         4,921               5,562 
                                        =====                 =====         =====              ======
  Fully diluted income (loss)
    per common share                 ($   .20)              $   .89      ($  1.16)            $   .64 
                                      =======               =======       =======             =======



</TABLE>