# UNITED STATESSECURITIES
AND EXCHANGE COMMISSION

# Washington,
D.C. 20549

FORM 10-Q

`OF THE SECURITIES EXCHANGE ACT OF 1934

                      For the quarterly period ended November 30, 2001

                                             or

                [  ]        TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d)
                           OF THE SECURITIES EXCHANGE ACT OF 1934


               For the transition period from _____________ to _____________.

                              Commission File Number: 001-11629


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



           Kansas                                                                         44-0209330
(State of incorporation)                                          (I.R.S. Employer Identification No.)

12200 North Ambassador Drive
Kansas City, Missouri                                                                64163-1244
(Address of principal executive offices)                                       (Zip Code)`

Registrants
telephone number, including area code: 816-713-7000

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 [ ]

PART I - FINANCIAL INFORMATION

`FARMLAND INDUSTRIES, INC. AND SUBSIDIARIES

                                       CONDENSED CONSOLIDATED BALANCE SHEETS
                                                    (UNAUDITED)
                                                      ASSETS


                                                                 August 31              November 30
                                                                   2001                    2001
                                                              ----------------      --------------------
                                                                       (Amounts in Thousands)
  Accounts receivable - trade................................ $         550,291       $      530,413
  Inventories (Note 2).......................................           588,807              507,375
  Other current assets.......................................           213,746              204,353
                                                              -------------------     ------------------

        Total Current Assets................................. $       1,352,844       $    1,242,141
                                                              -------------------     ------------------


Investments and Long-Term Receivables (Note 3)............... $         373,119       $      365,369
                                                              -------------------     ------------------


Property, Plant and Equipment:
  Property, plant and equipment, at cost..................... $       1,708,382       $    1,697,533
     Less accumulated depreciation and
     amortization............................................           952,753              956,680
                                                                -----------------       ----------------

  Net Property, Plant and Equipment.......................... $         755,629       $      740,853
                                                              -------------------     ------------------


Other Assets                                                  $         245,952       $      271,055
                                                              -------------------     ------------------

Total Assets                                                  $       2,727,544       $    2,619,418
                                                              ===================     ==================






    See accompanying Notes to Consolidated Financial Statements


                                     FARMLAND INDUSTRIES, INC. AND SUBSIDIARIES

                                       CONDENSED CONSOLIDATED BALANCE SHEETS
                                                    (UNAUDITED)
                                             LIABILITIES AND EQUITIES

                                                                                        August 31          November 30
                                                                                           2001                2001
                                                                                  --------------------- ------------------
                                                                                             (Amounts in Thousands)
            Current Liabilities:
                Short-term notes payable ........................................ $        341,559       $       325,811
                Current maturities of long-term debt ............................           48,054                65,608
                Accounts payable - trade.........................................          342,312               293,862
                Other current liabilities........................................          383,200               337,376
                                                                                  ------------------     ------------------

                     Total Current Liabilities................................... $      1,115,125       $     1,022,657
                                                                                  ------------------     ------------------

            Long-Term Liabilities:
                Long-term borrowings (excluding current maturities).............. $        710,976       $       677,082
                Other long-term liabilities......................................           38,702                39,493
                                                                                  ------------------     ------------------

                     Total Long-Term Liabilities................................. $        749,678       $       716,575
                                                                                  ------------------     ------------------

            Deferred Income Taxes................................................ $         70,906       $        70,906
                                                                                  ------------------     ------------------

            Minority Owners' Equity in Subsidiaries.............................. $         29,311       $        34,047
                                                                                  ------------------     ------------------

            Net Income (Note 1).................................................. $             -0-      $         3,249
                                                                                  ------------------     ------------------

            Capital Shares and Equities:
                Preferred Shares, Authorized 8,000,000 Shares, 8% Series A
                 cumulative redeemable preferred shares, stated
                 at redemption value, $50 per share.............................. $        100,000       $       100,000
                Common shares, $25 par value--Authorized
                  50,000,000 shares..............................................          527,563               527,365
                Accumulated Other Comprehensive Income (net of
                deferred tax benefit of $3,806 at August 31, 2001 and
                $2,215 at November 30, 2001) (Notes 4 and 5).....................          (21,342)              (12,380)
                Earned surplus and other equities................................          156,303               156,999
                                                                                  ------------------     ------------------

                     Total Capital Shares and Equities........................... $        762,524       $       771,984
                                                                                  ------------------     ------------------


Contingent Liabilities and Commitments (Note 6)



            Total Liabilities and Equities....................................... $      2,727,544       $     2,619,418
                                                                                  ==================     ==================


    See accompanying Notes to Consolidated Financial Statements


FARMLAND INDUSTRIES, INC. AND SUBSIDIARIES

                                  CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS


                                                                       Three Months Ended
                                                            -----------------------------------------
                                                               November 30           November 30
                                                                  2000                  2001
                                                            ------------------   --------------------
                    (Amounts in Thousands)

       Sales......................................................$     2,983,189       $     2,252,483
       Cost of sales...............................................     2,867,440             2,161,181
                                                                  --------------------  -------------------

       Gross income...............................................$       115,749       $        91,302
                                                                  --------------------  -------------------

       Selling, general and administrative expenses...............$       101,885       $        86,161
                                                                  --------------------  -------------------

       Restructuring and other charges (credits) (Note 7).........$            -0-      $        (6,340)
                                                                  --------------------  -------------------

       Other income (expense):
           Interest expense.......................................$       (34,335)              (24,761)
           Interest income.........................................         3,942                 1,317
           Other, net (Notes 5 and 9)..............................         2,641                18,760
                                                                  -------------------- --------------------
      Total other income (expense)................................$       (27,752)     $         (4,684)
                                                                  -------------------  --------------------

      Income (loss) before equity in net income of investees,
             minority owners' interest in net (income) of
             subsidiaries, income tax (expense) benefit and
             cumulative effect of changes in accounting
             principles............................................$      (13,888)    $          6,797

      Equity in net income of investees (Note 3) ..................         5,293               1,957

      Minority owners' interest in net (income)
              of subsidiaries.......................................       (6,214)             (4,737)
                                                                     --------------------  -------------------

      Income (loss) before income tax (expense) benefit
              and cumulative effect of changes in
              accounting principles..................................$    (14,809)              4,017

      Income tax (expense) benefit...................................       1,746                (768)
                                                                     --------------------  -------------------

      Income (loss) before cumulative effect of changes
              in accounting principles...............................$    (13,063)              3,249

      Cumulative effect of changes in accounting for
              derivative financial instruments and planned major
              maintenance costs, net of $3,333 income tax
              expense (Notes 5 and 8)................................      19,776                   -0-
                                                                     --------------------  -------------------

      Net income                                                 $           6,713               3,249
                                                                     ====================  ===================



    See accompanying Notes to Consolidated Financial Statements


FARMLAND INDUSTRIES, INC. AND SUBSIDIARIES

                                   CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                    (UNAUDITED)
                                                                                                Three Months Ended
                                                                                   ---------------------------------------------
                                                                                     November 30                November 30
                                                                                         2000                       2001
                                                                                  ------------------         ------------------
                                                                                               (Amounts in Thousands)
    CASH FLOWS FROM OPERATING ACTIVITIES:
    Net income................................................................... $        6,713             $         3,249
    Adjustments to reconcile net income to net cash provided by
      (used in) operating activities:
          Depreciation and amortization..........................................         24,028                      29,059
          Equity in net (income) of investees....................................         (5,293)                     (1,957)
          Other..................................................................        (18,428)                    (16,733)
          Changes in assets and liabilities:
           Accounts receivable...................................................         59,980                      20,013
           Inventories...........................................................        (73,734)                     81,432
           Other assets..........................................................        (25,075)                     (5,778)
           Accounts payable......................................................         54,725                     (48,450)
           Other liabilities.....................................................        (45,951)                     20,649
                                                                                  ------------------         ------------------
    Net cash provided by (used in) operating activities.......................... $      (23,035)            $        81,484
                                                                                  ------------------         ------------------

    CASH FLOWS FROM INVESTING ACTIVITIES:
    Capital expenditures......................................................... $      (23,750)            $       (10,629)
    Distributions from joint ventures............................................          4,911                       2,062
    Additions to investments and notes receivable................................         (7,183)                     (5,397)
    Acquisition of other long-term assets........................................         (5,535)                     (2,724)
    Proceeds from disposal of investments and
      collection of notes receivable.............................................            895                      30,450
    Proceeds from sale of fixed assets...........................................          1,875                       7,010
                                                                                  ------------------         ------------------
    Net cash provided by (used in) investing activities.......................... $      (28,787)            $        20,772
                                                                                  ------------------         ------------------

    CASH FLOWS FROM FINANCING ACTIVITIES:
    Payments of dividends........................................................ $       (2,000)            $        (2,000)
    Proceeds from bank loans and notes payable...................................      1,348,541                     846,272
    Payments on bank loans and notes payable.....................................     (1,285,949)                   (864,987)
    Proceeds from issuance of subordinated debt certificates.....................         15,328                          -0-
    Payments for redemption of subordinated debt certificates....................        (14,374)                    (12,732)
    Net decrease in checks and drafts outstanding................................         (3,953)                    (68,896)
    Net decrease in demand loan certificates.....................................         (2,845)                       (175)
    Other increase (decrease)....................................................         (2,926)                        262
                                                                                  ------------------         ------------------
    Net cash provided by (used in) financing activities.......................... $       51,822             $      (102,256)
                                                                                  ------------------         ------------------

    Net decrease in cash and cash equivalents.................................... $           -0-            $            -0-
    Cash and cash equivalents at beginning of period.............................             -0-                         -0-
                                                                                  ------------------         ------------------
    Cash and cash equivalents at end of period................................... $           -0-            $            -0-
                                                                                  ==================         ==================`

| | On
October 1, 2000, we contributed property, plant and equipment and investments
with a carrying value of approximately $43.8 million in return for an equity
interest in Land OLakes Farmland Feed, LLC.
| | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
                                                    (UNAUDITED)

Unless the context requires
otherwise, (i) Farmland, we, us and
our refer to Farmland Industries, Inc. and its consolidated
subsidiaries, (ii) all references to year or years are
to fiscal years ended August 31, and (iii) the term member means (a)
any voting member, (b) any associate member, or (c) any other person with which
Farmland is a party to a currently effective patronage refund agreement (a
patron). Patronage refund is the term we use to refer to the
distribution of income from transactions done on a cooperative basis with or for
our patrons.

In view of the seasonality
of Farmlands businesses, it must be emphasized that the results of
operations for the periods presented are not necessarily indicative of the
results for a full fiscal year.

The information included in
these unaudited Condensed Consolidated Financial Statements of Farmland reflects
all adjustments (consisting only of normal recurring accruals) which, in the
opinion of management, are necessary for a fair statement of the results for the
interim periods presented.

Our sales, margins and net
income or loss depend, to a large extent, on conditions in agriculture and may
be volatile due to factors beyond our control, such as weather, crop failures,
federal agricultural programs, production efficiencies, currency fluctuations,
tariffs and other factors affecting United States imports and exports. In
addition, various federal and state regulations intended to protect the
environment encourage farmers to reduce the use of fertilizers and other
chemicals. Global variables which affect supply, demand and price of crude oil,
refined fuels, natural gas, livestock, grain and other commodities may impact
Farmlands operations. Also, recent terrorist attacks have disrupted the
financial and credit markets and have negatively impacted the United States
economy and other economies. Historically, changes in the costs of raw materials
used in the manufacture of Farmlands finished products have not
necessarily resulted in corresponding changes in the prices at which such
products have been sold. Management cannot determine the extent to which these
factors may impact our future operations. Farmlands cash flow and net
income or loss may be volatile as conditions affecting agriculture and markets
for our products change.

In accordance with the
bylaws of Farmland, we determine annually the members portion of income or
loss before income taxes. From this amount, patronage refunds are distributed or
losses are allocated to our members.

Farmland does not provide
for patronage refunds in our interim financial statements as:

- we determine the amount of members' income and the amount of members' loss only after the end of the
     fiscal year;
- after consideration of member losses (if any), the Board of Directors, in its
sole discretion, then determines the amount of patronage refund to be paid in
cash and the portion to be paid in Farmland equity (common shares, associate
member common shares and capital credits); and
- the amount of income appropriated to earned surplus is dependent on the amount
of patronage refunds and the handling of members losses (if any).

`Major components of inventories are as follows:
                                                     August 31               November 30

                                                        2001                    2001
                                               -------------------     --------------------
                                                         (Amounts in Thousands)

  Finished and in-process products.............. $         431,739      $           379,470
  Materials.....................................            98,167                   77,382
  Supplies......................................            58,901                   50,523
                                                 ------------------     --------------------
                                                 $         588,807      $           507,375
                                                 ==================     ====================`

At November 30, 2001, the
carrying value of crude oil and refined petroleum inventories, stated at LIFO
cost, was $140.8 million, which exceeded the market value of such inventory by
approximately $27.7 million. Management recognized a $6.7 million lower of cost
or market charge related to certain inventories sold during December which are
unlikely to be replenished prior to year-end. Management reasonably expects that
the remaining market value decline will be recovered during the remainder of
fiscal year 2002 and, accordingly this market value decline has not been
recognized in our interim results of operations. However, given the volatility
of the crude oil and refined fuels markets, no assurance can be provided that
the market value of petroleum inventories will exceed their carrying value at
our year-end.

Summarized financial
information of investees accounted for by the equity method is as follows:

`Three Months Ended
                                        ----------------------------------------
                                           November 30          November 30
                                              2000                 2001
                                        ------------------  --------------------
                                                (Amounts in Thousands)

Net sales...............................$    1,694,257     $    1,391,816
                                        ==================  ====================
Net income (loss).......................$         (516)     $      39,445
                                        ==================  ====================
Farmland's equity in net income.........$        5,293      $       1,957
                                        ==================  ====================`

- 50% equity interests in three manufacturers of crop nutrient products, Farmland Hydro, L.P.,
     SF Phosphates Limited Company and Farmland MissChem Limited;
- an approximate 50% equity interest in UCB LLC, which in turn holds a 50% equity interest in Agriliance
     LLC, an agronomy distribution and marketing venture;
- from September 1, 1999 through December 31, 2000, an equity interest in Cooperative Refining, LLC, which
     operated two refineries; and
- beginning October 1, 2000, an equity interest in Land O'Lakes Farmland Feed, LLC, a manufacturer and
     marketer of feed products.

`Cash Flow             Foreign Currency              Total
                                                           Hedges                Translation                 AOCI
                                                       ---------------      -----------------------     ----------------
                                                                            (Amounts in Thousands)

Balance at August 31, 2001......................       $     (21,436)       $               94         $       (21,342)
Foreign currency translation adjustment.........                  -0-                        6                       6
Net (loss) on cash flow hedges, net of tax......                (202)                       -0-                   (202)
Less reclassification adjustments, net of tax...               9,158                        -0-                  9,158
                                                       -- ------------      ----- -----------------    ---- ------------
Balance at November 30, 2001....................       $     (12,480)       $              100         $       (12,380)
                                                       == ============      ===== =================    ==== ============


Comprehensive income for the three months ended November 30, 2000 and 2001 is as follows:

                                                                              Three Months Ended
                                                                  -------------------------------------------
                                                                     November 30               November 30
                                                                         2000                     2001
                                                                  -------------------        ----------------
                                                                           (Amounts in Thousands)

Net income......................................................   $        6,713            $      3,249
                                                                  --- ---------------        -- -------------
Net gains (losses) arising during the period
    Cash flow hedges:
         Net derivative transition gain.........................   $       30,208                      -0-              $
         Net derivative gains(losses) during period.............           23,002                    (239)
         Reclassification adjustment............................           (1,652)                 10,785
    Foreign currency translation adjustment.....................              (11)                      6
                                                                  --- ---------------        -- -------------
Other comprehensive income before tax...........................   $       51,547            $     10,552
Income tax (expense) related to items of
    other comprehensive income..................................   $       (7,770)           $     (1,590)
                                                                  --- ---------------        -- -------------
Other comprehensive income......................................   $       43,777            $      8,962
                                                                  --- ---------------        -- -------------
Comprehensive income............................................   $       50,490            $     12,211
                                                                  === ===============        == =============`

Effective September 1,
2000, we adopted Statement of Financial Accounting Standard No. 133,
Accounting for Derivative Instruments and Hedging Activities, as
amended. This standard imposes extensive recordkeeping requirements in order to
designate a derivative financial instrument as a hedge. As a result, certain of
our segments hold derivative instruments, such as exchange traded grain, crude
oil and live hog futures, certain natural gas contracts and foreign currency
forward positions that we believe provide an economic hedge of future
transactions, but have not been designated as a hedge. Gains or losses related
to these derivative instruments are classified as a component of other income.
All derivative instruments are recorded in our balance sheet at fair value.

Farmland also uses
derivative financial instruments to manage our commodity price risk in the
procurement of natural gas, the primary input necessary for the production of
the various nitrogen-based crop production products we manufacture. Our
objective is to fix the price of a portion of our forecasted purchases of
natural gas used to manufacture crop production products.

To meet this objective, we
enter into various types of derivative instruments to manage fluctuations in
cash flows resulting from commodity price risk. These instruments may include
exchange traded futures contracts, over the counter (OTC) swap contracts and OTC
option or exchange traded option contracts. The changes in the market value of
such contracts have historically been, and are expected to continue to be,
highly effective at offsetting changes in price movements of the hedged item.
The amount of hedge ineffectiveness, which is recognized as a component of other
income, was immaterial for the three months ended November 30, 2001 and 2000.

As of November 30, 2001,
the maximum length of time over which we are hedging our exposure to the
variability in future cash flows associated with natural gas forecasted
transactions is approximately one year. Gains and losses recorded in accumulated
other comprehensive income (AOCI) are reclassified, on a first-in,
first-out basis, as a component of cost of sales when the related crop
production product is sold. As a result, we anticipate that substantially all
gains and losses in AOCI as of November 30, 2001 will be reclassified into
earnings within the next twelve months. Gains and losses in AOCI may fluctuate
until the related contract is closed. During the three months ended November 30,
2001, after tax net gains of approximately $1.4 million related to derivative
instruments included in AOCI as a result of the September 1, 2000 transition
adjustment were reclassified into net income. During the three month periods
ended November 30, 2000 and 2001, approximately $4.3 million and $0.0 million,
respectively, was reclassified into earnings as a result of the discontinuance
of cash flow hedges because it became probable that the original forecasted
purchases of natural gas would not occur.

Farmland is aware of
probable obligations under state and federal environmental laws at a number of
properties. At November 30, 2001 and at August 31, 2001, we had an environmental
accrual in our Condensed Consolidated Balance Sheet for probable and reasonably
estimated costs for remediation of contaminated properties of $16.7 million and
$17.2 million, respectively. We periodically review and, as appropriate, revise
our environmental accruals. Based on current information and regulatory
requirements, we believe that the accruals established for environmental
expenditures are adequate.

The ultimate costs of
resolving certain environmental matters are not quantifiable because many such
matters are in preliminary stages and the timing and extent of actions which
governmental authorities may ultimately require are unknown. It is possible that
the costs of such resolution may be greater than the liabilities which, in the
opinion of management, are probable and reasonably estimatable at November 30,
2001. In the opinion of management, it is reasonably possible for such costs to
approximate an additional $14.7 million.

Under the Resource
Conservation Recovery Act of 1976 (RCRA), Farmland has three
closure and four post-closure plans in place for five locations. Closure and
post-closure plans also are in place for three landfills and two injection wells
as required by state regulations. Such closure and post-closure costs are
estimated to be $5.2 million at November 30, 2001 (and are in addition to the
$16.7 million accrual and the $14.7 million discussed in the prior paragraphs).
These liabilities are accrued when plans for termination of plant operations are
made. Operations are being conducted at these locations, and we do not plan to
terminate these operations in the foreseeable future. Therefore, these
environmental exit costs have not been accrued.

The Environmental
Protection Agency has issued new rules limiting sulfur in gasoline to 30 parts
per million and has published a proposed rule limiting sulfur in diesel fuel to
15 parts per million. The rules affecting gasoline were effective December 1,
1999 with a January 1, 2004 compliance date. The proposed rules for diesel fuel
have a June 1, 2006 compliance date. Based on information currently available,
we anticipate that material expenditures, possibly in excess of $100 million,
will be required to achieve compliance with these new and pending rules.
Farmland has applied for, but has not received, regulatory extension of the
deadlines until 2008.

During fiscal year 2001,
Farmland recognized a reserve as a result of restructuring activities. As of
August 31, 2001, the balance in the restructuring reserve was $7.9 million.
During the three months ended November 30, 2001, adjustments to the reserve
reduced the balance by $2.8 million. The major component of this adjustment
resulted from the sale, during October 2001, of the assets of Heartland Wheat
Growers, our wheat gluten plant located in Russell, Kansas. This sale releases
us from future plant maintenance, property taxes, and all other obligations
associated with maintaining idle plant and property. Deductions to the reserve
in the amount of $0.4 million represent severance payments and ongoing
maintenance costs associated with the closure of the wheat gluten plant and our
Mexico City office.

As part of the
restructuring costs incurred in fiscal year 2001, we recorded an asset
impairment related to the closure of our wheat gluten plant to its estimated net
realizable value. During October 2001, the assets of the plant were sold and a
gain on the sale of assets was recorded in the amount of $3.5 million,
representing the excess of the net proceeds over the plants estimated net
realizable value.

`Aug 31, 2001                                                            Nov 30, 2001
       Type of Cost            Balance         Additions       Adjustments        Deductions           Balance
------------------------   ----------------    -----------    ---------------    --------------  ----------------

                                                           (Amounts in Thousands)

Employee separations       $         1,602   $         16   $         (228)   $         (324)    $         1,066
Facility closings                    3,830             -0-          (2,598)             (114)              1,118
Other                                2,500             -0-              -0-               -0-              2,500
                           ----------------    -----------    ---------------    --------------  ----------------

Total                      $         7,932   $         16   $       (2,826)    $        (438)    $         4,684
                           ================    ===========    ===============    ==============  ================`

Effective September 1,
2000, Farmland changed its method of accounting for certain costs expected to be
incurred in the next planned major maintenance of its manufacturing and
processing facilities from the accrue-in-advance method to the direct expense
method. Under the new accounting method, maintenance costs are recognized as
expense as maintenance services are performed. We believe the new method is
preferable in the circumstances because, prior to the performance of the
maintenance services, we do not have a present unavoidable duty or
responsibility to perform such services. The effect of this change at September
1, 2000 was a $6.3 million benefit (net of income taxes of $1.1 million) and has
been presented as a cumulative effect of an accounting change in the
accompanying Condensed Consolidated Statements of Operations for the three
months ended November 30, 2000.

Effective September 1,
2001, Truck Operations and Transportation and Warehousing Services are presented
in the operating results of the segment they primarily serve rather than as a
component of Other Operating Units and Unallocated Corporate Expenses. Segment
results for the three months ended November 30, 2000 were reclassified to
conform to our current operational structure.

`CONSOLIDATED SEGMENTS
                                          ---------------------------------------------------------------------------
                                                                             Unallocated
                                                     Combined             Corporate Expenses
                                                     Segments                                           Consolidated
                                               ------------------      ----------------------     -----------------------
           Sales & transfers                    $     3,794,070         $                          $        3,794,070
           Transfers between segments                  (810,881)                                             (810,881)
                                               ------------------      ----------------------     -----------------------
           Net sales                           $      2,983,189         $                          $        2,983,189
                                               ==================      ======================     =======================

           Net income (loss)                   $         23,404         $         (16,691)         $            6,713
                                               ==================      ======================     =======================


           Total assets                        $      3,163,664         $         243,192          $        3,406,856
                                               ==================      ======================     =======================




Three months ended
November 30, 2001  (Page 1 of 3)
(Amounts in Thousands)
                                                            CONSOLIDATED SEGMENTS
                                   -------------------------------------------------------------------------
                                                                           Unallocated
                                                    Combined                Corporate
                                                    Segments                 Expenses                  Consolidated
                                               ----------------       --------------------       ---------------------
           Sales & transfers                    $   3,024,512          $                           $       3,024,512
           Transfers between segments                (772,029)                                              (772,029)
                                               ----------------       --------------------       ---------------------
           Net sales                            $   2,252,483          $                           $       2,252,483
                                               ================       ====================       =====================

           Net income (loss)                    $      18,191          $        (14,942)           $           3,249
                                               ================       ====================       =====================


           Total assets                         $   2,330,908          $        288,510            $       2,619,418
                                               ================       ====================       =====================



Three months ended
November 30, 2000 (Page 2 of 3)
(Amounts in Thousands)
                                                                       INPUT AND OTHER SEGMENTS
                                    ------------------------------------------------------------------------------------------------
                                                                                                                    Other            Total Input
                                                         Crop                                                     Operating           and Other
                                                      Production           Petroleum             Feed               Units             Segments
                                                  -- -------------    -- ---------------    -- ----------    --- ------------    -- --------------
              Sales & transfers                   $      165,154      $       422,122       $    50,264      $      496,189      $    1,133,729
              Transfers between segments                  (7,978)              (5,068)           (5,191)           (464,751)           (482,988)
                                                  -- ------------     -- --------------     -- ----------    --- ------------    -- --------------
              Net sales                           $      157,176      $       417,054       $    45,073      $       31,438      $      650,741
                                                  == ============     == ==============     == ==========    === ============    == ==============

              Net income (loss)                   $        1,093      $         3,651       $     1,444      $       (1,571)     $        4,617
                                                  == ============     == ==============     == ==========    === ============    == ==============


              Total assets                        $      749,144      $       403,802       $    77,963      $       77,816      $    1,308,725
                                                  == ============     == ==============     == ==========    === ============    == ==============




Three months ended
November 30, 2001 (Page 2 of 3)
(Amounts in Thousands)
                                                                    INPUT AND OTHER SEGMENTS
                                  ----------------------------------------------------------------------------------------------
                                                                                                                       Other                Total
                                                              Crop                                                   Operating            Input and
                                                           Production           Petroleum            Feed              Units                Other
                                                                                                                                          Segments
                                                       -- -------------     -- ------------    -- -----------     - -------------     -- ------------
                     Sales & transfers                 $      169,623       $    387,591       $        -0-       $     531,949       $    1,089,163
                     Transfers between segments                (2,822)            (5,251)               -0-            (512,702)            (520,775)
                                                          ------------         ------------       -----------       -------------        ------------
                     Net sales                         $      166,801      $     382,340       $        -0-      $       19,247       $      568,388
                                                       == ============     === ============    == ===========    == =============     == ============

                     Net income (loss)                 $      (42,061)      $     35,237       $       614        $       7,227       $        1,017
                                                       == =============     == ============    == ===========     = =============     == ============


                     Total assets                      $      670,025       $    399,064       $    57,066        $      40,187       $    1,166,342
                                                       == =============     == ============    == ===========     = =============     == ============








Three months ended
November 30, 2000 (Page 3 of 3)
(Amounts in Thousands)
                                                          OUTPUT SEGMENTS
                                    ------------------------------------------------------------
                                                                                   Total
                                     Refrigerated          World                  Output
                                        Foods              Grain                 Segments
                                    ---------------    ---------------      --------------------
   Sales & transfers                $   1,395,850       $   1,264,491        $      2,660,341
   Transfers between segments            (227,603)           (100,290)               (327,893)
                                    ---------------    ---------------      --------------------
   Net sales                        $   1,168,247       $   1,164,201        $      2,332,448
                                    ===============    ===============      ====================

   Net income (loss)                $      15,214       $       3,573        $         18,787
                                    ===============    ===============      ====================


   Total assets                     $     809,572       $   1,045,367        $      1,854,939
                                    ===============    ===============      ====================




  Three months ended
  November 30, 2001 (Page 3 of 3)
  (Amounts in Thousands)
                                                         OUTPUT SEGMENTS
                                      -------------------------------------------------------
                                                                                Total
                                  Refrigerated           World                  Output
                                      Foods              Grain                 Segments
                                  --------------     ---------------      -------------------
Sales & transfers                 $  1,528,474       $     406,875        $      1,935,349
Transfers between segments            (251,254)                 -0-               (251,254)
                                  --------------     ---------------      -------------------
Net sales                         $  1,277,220       $     406,875        $      1,684,095
                                  ==============     ===============      ===================

Net income (loss)                 $     21,504       $      (4,330)       $         17,174
                                  ==============     ===============      ===================


Total assets                      $    833,563       $     331,003        $      1,164,566
                                  ==============     ===============      ===================`

The information contained
in this discussion and in the unaudited Condensed Consolidated Financial
Statements and Accompanying Notes presented in this Form 10-Q should be read in
conjunction with information set forth in Part II, Items 7 and 8, in
Farmlands Annual Report on Form 10-K for the year ended August 31, 2001.

Farmlands debt
securities issued under the continuous debt program generally are offered on a
best-efforts basis through our wholly owned broker-dealer subsidiary, Farmland
Securities Company, and also may be offered by selected unaffiliated
broker-dealers. The types of debt securities offered in the continuous debt
program include certificates payable on demand and subordinated debenture bonds.
The total amount of debt securities outstanding and the flow of funds to, or
from, Farmland as a result of the continuous debt program are influenced by the
rate of interest which we establish for each type or series of debt security
offered, by the option of Farmland to call for redemption certain of its
outstanding debt securities, and by the option of holders, under certain
circumstances, to request the early redemption of outstanding debt securities.
On October 31, 2000, management determined that, given the short term nature of
the Credit Facility (as defined below), it was appropriate to suspend sales
under our debt program until the Credit Facility had been refinanced on a long
term basis. In November, 2001 we filed a registration statement with the
Securities and Exchange Commission to offer additional debt securities under our
debt program. This registration statement has not yet become effective. This
report on Form 10-Q does not constitute an offer of securities; such an offering
will only be made through a prospectus. During the three months ended November
30, 2001, the outstanding balance of demand certificates decreased by $0.2
million, and the outstanding balance of subordinated debenture bonds decreased
by $12.8 million.

In May 2000, Farmland
established a 364 day revolving credit facility (the Credit
Facility) with a syndicate of banks. During April 2001, Farmland and a
syndicate of banks reached an agreement to amend our Credit Facility and extend
the term to November 9, 2001, in an amount of $500 million. During November
2001, Farmland and the syndicate of banks reached an agreement to extend the
Credit Facility through February 8, 2002, in an amount of $418 million. Also
during October 2001, Farmland received a commitment from another syndicate of
banks, including Bankers Trust Company, Rabobank, and CoBank, to establish a new
five year revolving credit of $350 million and a two year credit of $150 million
that will replace the present Credit Facility. The commitment letter contains
certain conditions to closing that include, among other things, a clause
allowing the banks to terminate the commitment if a certain material adverse
change occurs. The material adverse change clause refers to a material adverse
change in the business, operations, properties, assets, liabilities, conditions
or prospects of Farmland and our subsidiaries, taken as a whole. Although
management cannot predict with certainty the outcome of future events, we
anticipate the conditions to closing will be met and the financing will be
accomplished prior to February 8, 2002 as, through January 14, 2001, we do not
believe there has been a material adverse change in our business or results of
operations. Concurrent with establishing the new bank facility, we intend to
refinance, for approximately $195 million, the nitrogen facility at Coffeyville,
Kansas that we currently operate under an operating lease. We anticipate that
the new credit facility will be collateralized by a substantial portion of
Farmlands accounts receivable, inventories and property, plant and
equipment. The new credit facility will also contain various financial
covenants.

At November 30, 2001,
Farmland had $230.7 million of short-term borrowings under the Credit Facility.
Additionally, $44.4 million of the Credit Facility was utilized to support
letters of credit. Farmland currently pays commitment fees equal to 75 basis
points under the Credit Facility based on the unused portion of the credit line.
Borrowings under the Credit Facility are secured by a substantial portion of our
accounts receivable, inventories, fixed assets, and certain investments.
Interest rates under the Credit Facility are based on a spread over the base
rate (as defined in the related agreement) or a spread over LIBOR (the London
Interbank Offering Rate). The Credit Facility contains covenants related to
Farmlands ratio of earnings before interest, taxes, depreciation and
amortization to net interest expense, our ratio of total debt to total
capitalization, and our ratio of senior debt to total capitalization, all as
defined in the related agreement. We are currently in compliance with all
covenants under the Credit Facility. In addition to these financial covenants,
our ability to borrow under the Credit Facility may be restricted based on our
level of receivables and inventories. As calculated at November 30, 2001,
availability under the Credit Facility was approximately $151.1 million.

In August 2001, Farmland
National Beef Packing Company, L.P. (FNBPC) established a five year,
$225 million credit facility with a syndicate of banks. This facility provides
for a line of credit for up to $100 million, and a term loan of $125 million,
both of which are nonrecourse to Farmland. Borrowings under the credit facility
are collateralized by substantially all the assets of FNBPC and are subject to
certain financial covenants and restrictions. At November 30, 2001 FNBPC had
borrowings of $136.4 million, and $17.2 million of the facility was being
utilized to support letters of credit. At November 30, 2001, availability under
the line of credit was approximately $82.8 million.

At November 30, 2001,
Tradigrain had $439.5 million in credit facilities with various international
banks. Tradigrain primarily uses these facilities to provide financing and
letters of credit to support international grain trading transactions.
Obligations of Tradigrain under these facilities are nonrecourse to Farmland and
Farmlands other affiliates. Borrowings under the credit facilities are
subject to certain financial covenants and restrictions. At November 30, 2001,
Tradigrain had borrowings under the credit facilities of $89.0 million, and
$16.9 million of the facilities were being utilized to support letters of
credit. Additionally, $42.6 million of checks and drafts outstanding at November
30, 2001 were committed against the credit facilities.

Farmland maintains other
borrowing arrangements with banks and financial institutions. Under such
arrangements, at November 30, 2001, $5.0 million was borrowed and an additional
$1.4 million were being utilized to support letters of credit, which are
nonrecourse to Farmland.

Leveraged leasing has been
utilized to finance railcars, a significant portion of our crop production
equipment, and certain crop production manufacturing facilities.

Farmland has issued and
outstanding 2 million shares of 8% Series A Cumulative Redeemable Preferred
Shares (the Preferred Shares) with an aggregate liquidation
preference of $100 million ($50 liquidation preference per share). The Preferred
Shares are not redeemable prior to December 15, 2022. On and after December 15,
2022, the Preferred Shares may be redeemed for cash at our option, in whole or
in part, at specified redemption prices declining to $50 per share on and after
December 15, 2027, plus accumulated and unpaid dividends. The Preferred Shares
do not have any stated maturity, are not subject to any sinking fund or
mandatory redemption provisions and are not convertible into any other security.

Although our net income for
the three months ended November 30, 2001 decreased slightly from the previous
year, cash provided by operating activities increased $104.5 million compared to
the same period last year primarily as a result of our continuing efforts to
reduce working capital employed by our operating segments. The major use of cash
was a decrease in notes and loans payable, debt certificates and drafts and
checks outstanding.

In view of the seasonality
of Farmlands businesses, it must be emphasized that the results of
operations for the periods presented are not necessarily indicative of the
results for a full fiscal year.

Farmlands sales,
gross margins and net income depend, to a large extent, on conditions in
agriculture and may be volatile due to factors beyond our control, such as
weather, crop failures, federal agricultural programs, production efficiencies,
currency fluctuations, tariffs and other factors affecting United States imports
and exports. In addition, various federal and state regulations intended to
protect the environment encourage farmers to reduce the use of fertilizers and
other chemicals. Global variables which affect supply, demand and price of crude
oil, refined fuels, natural gas, livestock, grain and other commodities may
impact Farmlands operations. Also, recent terrorist attacks have disrupted
the financial and credit markets and have negatively impacted the United States
economy and other economies. Historically, changes in the costs of raw materials
used in the manufacture of Farmlands finished products have not
necessarily resulted in corresponding changes in the prices at which such
products have been sold. Management cannot determine the extent to which these
factors may impact our future operations. Farmlands cash flow and net
income or loss may be volatile as conditions affecting agriculture and markets
for our products change.

The level of operating
income in the crop production, petroleum, and refrigerated foods businesses is,
to a significant degree, attributable to the spread between selling prices and
raw material costs (natural gas in the case of nitrogen-based crop nutrients,
crude oil in the case of petroleum products, and live hogs, cattle and catfish
in the case of refrigerated foods). We cannot determine the direction or
magnitude to which these factors will affect our cash flow and net income or
loss.

Results of Operations for
Three Months Ended November 30, 2001 compared to Three Months Ended November 30,
2000.

Effective October 1, 2000
Farmland and Land OLakes each contributed substantially all their feed
business assets to a newly formed venture (Land OLakes Farmland Feed).
Effective May 4, 2001 we formed a grain marketing relationship with Archer
Daniels Midland Company (ADM). ADM/Farmland, Inc., a wholly-owned subsidiary of
ADM, purchased our United States grain inventories and Farmland Atwood, our
wholly-owned grain commission subsidiary. ADM/Farmland leases and operates our
grain elevators throughout the United States. These leases are in an amount
adequate to reimburse us for our depreciation and other ownership expenses. We
are also entitled to receive, once a year, variable rent equal to a 50% share of
the fiscal year earnings or losses of ADM/Farmland as determined by ADM/Farmland
at the end of their fiscal year, which is June 30th. As a result, effective from
the date of formation, sales, cost of sales, SG&A expenses and other income
generated by these ventures are no longer recorded in our Condensed Consolidated
Statements of Operations. During the three months ended November 30, 2000, we
recognized sales of $568.5 million, cost of sales of $547.0 million, SG&A
expenses of $12.3 million and other expenses and interest of $7.8 million for
these operations. During the three months ended November 30, 2001 we recognized
pre-tax income of investees for these ventures of $2.9 million.

Sales for the three months
ended November 30, 2001 decreased approximately $730.7 million, or 24%, compared
with the same period last year. This decrease is primarily due to a decrease in
sales recorded in Farmlands financial statements due to the formation our
Land OLakes Farmland Feed and ADM/Farmland ventures, as well as a decrease
in our international grain sales. These decreases are partially offset by
increased sales of refrigerated foods products.

For the three months ended
November 30, 2001, we had net income of $3.2 million compared with a net income
of $6.7 million for the same period last year. This decrease is primarily due to
lower margins for our nitrogen-based crop nutrients, partially offset by
increased margins for refined fuels and propane. Also, income for the three
months ended November 30, 2000 included pre-tax income of $23.1 million from the
cumulative effect of changes in accounting for derivative financial instruments
and planned major maintenance costs while income for the three months ended
November 30, 2001 included a pre-tax gain of $18.0 million from the sale of our
interest in Country Energy.

Unit sales volume for the
crop production segment increased 21% for the three months ended November 30,
2001 as compared to the same period last year. Unit selling prices for the
period decreased by 14%. The net impact was an increase in crop production sales
to $166.8 million for the three months ended November 30, 2001 compared with
sales of $157.2 million for the same period last year. The price of natural gas,
which represents a major cost in the production of nitrogen-based crop
nutrients, has fallen during the summer and fall months. The average price of
natural gas for the first quarter of fiscal year 2002 was $2.87 per mmbtu as
compared to $4.82 per mmbtu for the same period last year, which translates to a
decreased cost of producing anhydrous ammonia of approximately $66 per ton.

As a result of high
inventory levels during the summer months, Farmland and other crop nutrient
companies attempted to lower their inventories through temporary shutdowns of
certain plants. Farmland has temporarily curtailed production at two plants
during the first quarter of 2002. As the spring season progresses and inventory
levels and product demand become more clear, we will assess the need to operate
these plants in order to provide an adequate volume of product to Agriliance,
which is a crop nutrients and crop protection marketing joint venture in which
we own a 25% indirect interest.

Income of the crop
production segment decreased $43.2 million for the three months ended November
30, 2001 as compared with the prior year. Margins decreased by $21.0 million
primarily as a result of decreasing per unit selling prices for products that
were produced when natural gas costs were at higher levels. A one-time gain of
$14.6 million was recognized in the prior year as a result of the change in
accounting methods for derivative instruments. Derivative income recognized in
the first quarter of this fiscal year was a loss of $0.9 million as compared to
a gain of $5.8 million in the prior year.

Sales of the petroleum
segment in the three months ended November 30, 2001 decreased $34.7 million, or
approximately 8%, compared with the same period last year, primarily due to
rapidly declining gasoline and distillate prices. The decreased unit prices for
refined fuels, especially gasoline, was primarily the result of excess supplies
across the country. Excess supplies were, in part, a result of a decrease in
travel, especially air travel, subsequent to the September 11, 2001 terrorist
attacks.

Income for the petroleum
segment for the three month period ended November 30, 2001 increased $31.6
million compared to the same period last year. This increase is partly due to a
significant increase in the spread between crude oil costs and refined fuel
selling prices in the month of September. These spreads have fallen sharply
since the middle of September due to the over supply of refined products that
exists in the global market today. Income from the Petroleum segment also
reflects an $18.0 million gain on the sale of our equity interest in Country
Energy to Cenex Harvest States. This was partly offset by recognition of a $6.7
million lower of cost or market charge related to certain inventories sold
during December. See Notes to Condensed Consolidated Financial Statements
 Footnote (2) Inventories.

Cooperative Refining, LLC,
which was 42% owned by Farmland, was dissolved effective December 31, 2000. As a
result, income previously recognized as equity in income of investees is now
recognized as sales, cost of sales, SG&A expenses and other income in the
Condensed Consolidated Statements of Operations.

As a result of forming Land
OLakes Farmland Feed (LOLFF), we did not record any sales for our feed
business during the three months ended November 30, 2001. During October 2001,
LOLFF purchased Purina Mills which resulted in Farmlands ownership
interest being reduced to approximately 8%; however, Farmlands governance
in LOLFF has not been diluted. Income for the feed segment decreased $0.8
million as a result of reduced equity in earnings from LOLFF and writeoffs
related to uncollectible receivables.

During the three months
ended November 30, 2001, sales in the refrigerated foods segment increased
$109.0 million, or approximately 9%, compared with the same period last year.
This increase is primarily due to a 6% increase in unit sales volume and to a 3%
increase in unit selling price. The increase in unit sales volume was primarily
due to increased slaughter levels resulting from favorable market conditions.
The increase in unit selling price is, in part, the result of our continued
emphasis on enhancing our customer base, eliminating low-value added products,
and providing value added products, such as case ready meats. Case ready refers
to meat products which are prepared to the specifications of retailers and which
do not require additional preparation work prior to sale by retailer.

Income in the refrigerated
foods segment increased $6.3 million, or approximately 41%, during the three
months ended November 30, 2001 compared to the same period last year. This
increase is partly attributable to increased unit volume of slaughter, partially
offset by increased cost of sales resulting from having other packers produce
certain products for us as a result of the fire at our Albert Lea, Minnesota
facility in July, 2001. We have also temporarily reopened our Carroll, Iowa
facility to handle some of the production lost due to the fire. Refrigerated
foods selling, general and administrative expenses are approximately the
same for the three months ended November 30, 2001 compared to the same period
last year. Other income increased by $5.4 million in the three months ended
November 30, 2001 as compared to the same period last year. This increase is
primarily the result of last years recognition of $2.0 million in costs
related to spoiled product and a plant shut-down, and a loss of $2.3 million
related to the change in accounting methods for derivatives. Our case ready
operations continue to improve by lowering cost as we continue to improve plant
efficiencies and develop the business segment.

Sales of the world grain
segment decreased $757 million, or approximately 65%, for the three months ended
November 30, 2001 compared with the same period last year. The decrease was
primarily a result of the formation of a contractual grain marketing
relationship between Farmland and Archer Daniels Midland Company (ADM),
effective May 4, 2001. As a result, we no longer record sales, cost of sales or
operating expenses in our Condensed Consolidated Statements of Operations. With
this agreement substantially all domestic grain sales are now recognized by the
new entity, ADM/Farmland, Inc. Sales also decreased due to lower international
grain sales volume.

World grain income for the
three months ended November 30, 2001 declined $7.9 million compared with the
same period last year. The decrease is partly due to the formation of
ADM/Farmland as described above. ADM/Farmland leases our grain elevators
throughout the United States. These leases are in an amount adequate to
reimburse us for our depreciation and other ownership expenses. ADM/Farmland
obtains its grain from third party sources. Farmland is also entitled to
receive, once a year, variable rent equal to a 50% share of the fiscal year
earnings or losses of ADM/Farmland as determined by ADM/Farmland at the end of
their fiscal year, which is June 30th. Income has decreased in international
marketing due to lower gross margins on barley, sugar and freight and an
increase in bad debt expense, offset by improved margins in soya complex
products.

Segment income for other
operating units increased $8.8 million for the three months ended November 30,
2001 compared with the prior year. The increase is primarily attributable to
Heartland Wheat Growers, our subsidiary which produced wheat gluten at a
facility in Russell, Kansas. During May 2001, we closed this facility in
anticipation of prolonged depressed wheat gluten prices and recorded an asset
impairment and an accrual for shutdown costs. Subsequent to the plant closure,
we had an opportunity to sell the assets of the plant. As a result of the sale
in October 2001, we recognized a gain on the sale of assets of $3.5 million and
reversed part of the shutdown accrual in the amount of $2.7 million.

For the three months ended
November 30, 2001, selling, general and administrative (SG&A)
expenses decreased $15.7 million, or approximately 15%, from the same period
last year. SG&A expenses directly associated with business segments
decreased approximately $11.9 million, primarily related to formation of our
Land OLakes Farmland Feed and ADM/Farmland joint ventures as well as
decisions by the Board of Directors to close certain facilities and exit
non-strategic businesses during last fiscal year. We reduced SG&A expenses
not identified to business segments by $3.8 million, primarily as a result of
reduced outside services and personnel costs.

For the three months ended
November 30, 2001, other income increased $16.1 million from the same period
last year. The increase is primarily related to the $18.0 million gain
recognized on the sale of our equity interest in Country Energy to Cenex Harvest
States, partly offset by a reduction of $1.4 million in the amount of income
recognized from derivative instruments.

Interest expense for the
three months decreased $9.6 million compared with the same period last year due
primarily to a decrease in outstanding borrowings and a decrease in our average
borrowing rate.

SFAS No. 141 Business
Combinations is effective for business combinations with non-cooperative
enterprises initiated after June 30, 2001. A business combination occurs when an
enterprise acquires net assets that constitute a business or equity interests of
one or more other enterprises and obtains control over that enterprise or
enterprises. For purposes of the final Statement, the formation of a joint
venture is not a business combination. Business combinations involving a
non-cooperative enterprise which are initiated after June 30, 2001 must use the
purchase method of accounting, and the pooling of interest method of accounting
is prohibited. Business combinations involving cooperative enterprises are
excluded from the scope of SFAS No. 141 pending issuance of interpretative
guidance from the FASB. We do not anticipate that adoption of this statement
will have a material effect on Farmlands financial position or our results
of operations.

SFAS No. 142 Goodwill
and Other Intangible Assets was issued during June 2001 by the FASB. On
adoption of this standard, goodwill and other intangible assets with an
indefinite life will no longer be amortized; however, both goodwill and other
intangible assets will need to be tested annually for impairment. For goodwill
and intangible assets arising out of business combinations with non-cooperative
enterprises, SFAS No. 142, will be effective for fiscal years beginning after
December 15, 2001 (our fiscal year 2003). For goodwill and other intangible
assets arising out of business combinations with cooperatives, implementation of
SFAS No. 142 is delayed pending additional interpretive guidance from the FASB.
For the three month period ended November 30, 2001 Farmland recognized goodwill
amortization of $0.3 million arising from business combinations with
non-cooperatives and $0.6 million from business combinations with cooperatives.
Management is currently reviewing what, if any, other impact that the provisions
of this statement will have on our financial statements and results of
operations.

SFAS No. 143
Accounting for Asset Retirement Obligations was issued during June
2001, by the FASB. This statement addresses financial accounting and reporting
for obligations associated with the retirement of tangible long-lived assets and
the associated retirement costs. The standard applies to legal obligations
associated with the retirement of long-lived assets that result from the
acquisition, construction, development and (or) normal use of the asset.

Statement No. 143 requires
that the fair value of a liability for an asset retirement obligation be
recognized in the period in which it is incurred if a reasonable estimate of
fair value can be made. The fair value of the liability is added to the carrying
amount of the associated asset and this additional carrying amount is
depreciated over the life of the asset. The liability is accreted at the end of
each period through charges to operating expense. If the obligation is settled
for other than the carrying amount of the liability, a gain or loss would be
recognized on settlement.

Farmland is required and
plans to adopt the provisions of Statement No. 143 for the quarter ending
November 30, 2002 (our fiscal year 2003). To accomplish this, Farmland must
identify all legal obligations for asset retirement obligations, if any, and
determine the fair value of these obligations on the date of adoption. The
determination of fair value is complex and will require Farmland to gather
market information and develop cash flow models. Additionally, Farmland will be
required to develop processes to track and monitor these obligations. Because of
the effort necessary to comply with the adoption of Statement No. 143, it is not
practicable for management to estimate the impact of adopting this Statement at
the date of this report.

SFAS No. 144
Accounting for the Impairment or Disposal of Long-Lived Assets was
issued during October 2001, by the FASB. This statement addresses financial
accounting and reporting for the impairment or disposal of long-lived assets.
While this statement supersedes SFAS No. 121, Accounting for Impairment of
Long-Lived Assets and Long-Lived Assets to be Disposed of it retains many
of the fundamental provisions of that statement.

This statement also
supersedes the accounting and reporting provisions of APB Opinion No. 30,
Reporting the Results of Operations  Reporting the Effects of
Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently
Occurring Events and Transactions, for the disposal of a segment of a
business. However, it retains the requirement in Opinion No. 30 to report
separately discontinued operations and extends that reporting to a component of
an entity that either has been disposed of (by sale, abandonment, or in a
distribution to owners) or is classified as held for sale.

This statement is effective
for fiscal years beginning after December 15, 2001 (our fiscal year 2003).
Management is currently reviewing the impact that the provisions of this
statement will have on our financial statements and results of operations.

Farmlands market
exposure to derivative transactions, entered into for the purpose of managing
commodity price risk, foreign currency risk and interest rate risk, has not
materially changed since August 31, 2001. Quantitative and qualitative
disclosures about market risk are contained in Item 7A of our Annual Report on
Form 10-K for the year ended August 31, 2001.

Farmland is including the
following cautionary statement in this Form to make applicable and take
advantage of the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995 for any forward-looking statement made by, or on
behalf of, Farmland. The factors identified in this cautionary statement are
important factors (but are not necessarily all of the potentially important
factors) that could cause actual results to differ materially from those
expressed in any forward-looking statement made by, or on behalf of, Farmland.
Where any such forward-looking statement includes a statement of the assumptions
or basis underlying such forward-looking statement, Farmland cautions that,
while it believes such assumptions or basis to be reasonable and makes them in
good faith, assumed facts or basis almost always vary from actual results and
the differences between the assumed facts or basis and actual results can be
material, depending upon the circumstances. Where, in any forward-looking
statement, Farmland, or its management, expresses an expectation or belief as to
future results, such expectation or belief is expressed in good faith and
believed to have a reasonable basis, but there can be no assurance that the
statement of expectation or belief will result or be achieved or accomplished.
Such forward looking statements include, without limitation, statements
regarding the seasonal effects upon the business, the anticipated expenditures
for environmental remediation, the potential capital expenditures required to
comply with recently enacted and proposed regulations related to low sulfur
gasoline and diesel fuel, our ability to qualify for a delay in implementation
of enacted and proposed low sulfur rules, the status of nitrogen plants which
have been temporarily closed, and our ability to obtain a new, long-term credit
facility. Discussion containing such forward-looking statements is found in the
material set forth under Managements Discussion and Analysis of
Financial Condition and Results of Operations and Notes to Condensed
Consolidated Financial Statements.

1. Weather patterns (flood, drought, frost, etc.) or crop failure.
2. Federal or state regulations regarding agricultural programs and production efficiencies.
3. Federal or state regulations regarding the amounts of fertilizer and other chemical applications used by
     farmers.
4. Factors affecting the export of United States agricultural produce (including
foreign trade and monetary policies, laws and regulations, political and
governmental changes, inflation and exchange rates, taxes, operating conditions
and world demand).
5. Factors affecting supply, demand and price of crude oil, refined fuels, natural gas and other
     commodities.
6. Regulatory delays and other unforeseeable obstacles beyond our control that may
affect growth strategies through unification, acquisitions and investments in
ventures.
7. Competitors in various segments which may be larger than Farmland, offer more varied products or possess
     greater resources.
8. Technological changes that are more difficult or expensive to implement than anticipated.
9. Unusual or unexpected events such as, among other things, litigation
settlements, adverse rulings or judgments and environmental remediation costs in
excess of amounts accrued.
10. Material adverse changes in financial, banking or capital markets.
11. Federal or state regulations regarding environmental matters.
12. Terrorist attacks which have disrupted the financial and credit markets and have
negatively impacted the United States economy and other economies.
13. The factors identified in Business and Properties - Business - Business
Risk Factors included in our Annual Report on Form 10-K for the year ended
August 31, 2001.

The exhibit listed below is
filed as part of Form 10-Q for quarter ended November 30, 2001.

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

`FARMLAND INDUSTRIES, INC.
                                                              (Registrant)


                                By:                        /s/  JOHN BERARDI
                                                             John Berardi
                                                       Executive Vice President
                                                      and Chief Financial Officer`

EXHIBIT INDEX