# UNITED STATES

# SECURITIES
AND EXCHANGE COMMISSION

# Washington,
D.C. 20549

FORM 10-Q

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

For the quarterly period ended May 31, 2001

or

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

# 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
       (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 [ ]

### Item 1.           FINANCIAL STATEMENTS

`FARMLAND INDUSTRIES, INC. AND SUBSIDIARIES

                                       CONDENSED CONSOLIDATED BALANCE SHEETS
                                                    (UNAUDITED)
                                                      ASSETS


                                                                        August 31                 May 31
                                                                          2000                     2001
                                                                     ----------------         ----------------
                                                                              (Amounts in Thousands)
  Accounts receivable - trade................................ $      740,026          $        720,096
  Inventories (Note 2).......................................        832,687                   690,645
  Other current assets.......................................      252,716                     198,063
                                                              -----------------       ------------------

        Total Current Assets................................. $    1,825,429          $      1,608,804
                                                              -----------------       ------------------


Investments and Long-Term Receivables (Note 3)............... $      399,889          $        373,755
                                                              -----------------       ------------------


Property, Plant and Equipment:
  Property, plant and equipment, at cost..................... $    1,787,614          $      1,699,741
     Less accumulated depreciation and
     amortization............................................        960,652                   939,511
                                                                ---------------         ----------------

  Net Property, Plant and Equipment.......................... $      826,962          $        760,230
                                                              -----------------       ------------------


Other Assets                                                  $      229,907          $        234,505
                                                              -----------------       ------------------

Total Assets                                                  $    3,282,187          $      2,977,294
                                                              =================       ==================






    See accompanying Notes to Consolidated Financial Statements





                                     FARMLAND INDUSTRIES, INC. AND SUBSIDIARIES

                                       CONDENSED CONSOLIDATED BALANCE SHEETS
                                                    (UNAUDITED)
                                             LIABILITIES AND EQUITIES

                                                                             August 31             May 31
                                                                                2000                2001
                                                                       --------------------- -------------------
                                                                                (Amounts in Thousands)
Current Liabilities:
    Short-term notes payable ........................................  $        689,477       $         484,772
    Current maturities of long-term debt ............................            32,222                  46,315
    Accounts payable - trade.........................................           345,286                 338,929
    Customer advances on product purchases...........................           120,731                  76,722
    Other current liabilities........................................           422,811                 435,167
                                                                       ------------------     ------------------

         Total Current Liabilities...................................  $      1,610,527       $       1,381,905
                                                                       ------------------     ------------------

Long-Term Liabilities:
    Long-term borrowings (excluding current maturities)..............  $        646,160       $         622,002
    Other long-term liabilities......................................            40,134                  37,931
                                                                       ------------------     ------------------

         Total Long-Term Liabilities.................................  $        686,294       $         659,933
                                                                       ------------------     ------------------

Deferred Income Taxes................................................  $         54,676       $          51,401
                                                                       ------------------     ------------------

Minority Owners' Equity in Subsidiaries..............................  $         49,459       $          57,939
                                                                       ------------------     ------------------

Net Income (loss) (Note 1)...........................................  $             -0-      $         (37,063)
                                                                       ------------------     ------------------

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..............................................           522,876                 530,074
    Accumulated Other Comprehensive Income (net of
    deferred tax benefit of $2,745 at May 31, 2001) (Notes 4
 ........and 5)                                                                      111                 (15,364)
    Earned surplus and other equities................................           258,244                 248,469
                                                                       ------------------     ------------------

         Total Capital Shares and Equities...........................  $        881,231       $         863,179
                                                                       ------------------     ------------------


Contingent Liabilities and Commitments (Note 6)



Total Liabilities and Equities.......................................  $      3,282,187       $       2,977,294
                                                                       ==================     ==================

    See accompanying Notes to Consolidated Financial Statements





                                    FARMLAND INDUSTRIES, INC. AND SUBSIDIARIES

                                  CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS


                                                                        Nine Months Ended
                                                              ---------------------------------------
                                                                    May 31              May 31
                                                                     2000                2001
                                                              ------------------- -------------------
                   (Amounts in Thousands)
 Sales.........................................................$     8,840,331    $        9,176,444
 Cost of sales.................................................      8,473,560            8,815,601
                                                               -----------------  --------------------

 Gross income..................................................$       366,771    $         360,843
                                                               -----------------  --------------------

 Selling, general and administrative expenses..................$       360,446    $         300,111
                                                               -----------------  --------------------

 Restructuring and other charges (Note 7)......................$             0    $          79,788
                                                               -----------------  --------------------

 Other income (deductions):
     Interest expense, net.....................................$      (72,121)    $         (85,102)
                       Other, net (Note 5).......................................         33,466               21,906
                                                                                 -----------------  --------------------
 Total other income (deductions)..............................$       (38,655)   $         (63,196)
                                                              ------------------ --------------------

  Loss before equity in net income of investees, minority
       owners' interest in net (income) of subsidiaries, income
       tax benefit, and cumulative effect of changes
       in accounting principles, net of income tax expense......$       (32,330)   $         (82,252)

    Equity in net income of investees (Note 3) ...................         33,668               22,265

    Minority owners' interest in net (income)
         of subsidiaries...........................................       (15,737)             (15,807)
                                                                  -----------------  --------------------

    Loss before income tax benefit and cumulative
        effect of changes in accounting principles,
        net of income tax expense.................................$       (14,399)   $         (75,794)

    Income tax benefit............................................          2,815               18,955
                                                                  -----------------  --------------------

    Loss before cumulative effect of changes in
        accounting principles.....................................$       (11,584)             (56,839)

    Cumulative effect of changes in accounting for
        derivative financial instruments and planned major
        maintenance costs, net of $3,313 income
        tax expense (Notes 5 and 8)...............................          -0-                 19,776
                                                                  -----------------  --------------------

    Net loss                                                      $    (11,584)      $         (37,063)
                                                                  =================  ====================


    Pro forma net loss assuming use of the direct expense
        method of accounting for planned major
        maintenance costs (Note 8)................................       (13,508)    $         (43,333)                                                                             $
                                                                  =================  ====================


    See accompanying Notes to Consolidated Financial Statements





                                    FARMLAND INDUSTRIES, INC. AND SUBSIDIARIES

                                  CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS


                                                                    Three Months Ended
                                                      -----------------------------------------------
                                                             May 31                  May 31
                                                              2000                    2001
                                                      ---------------------- ------------------------
                      (Amounts in Thousands)

   Sales.......................................................$.    2,991,668      $        3,223,720
   Cost of sales.................................................    2,860,349               3,085,509
                                                               -----------------    --------------------

   Gross income................................................$.      131,319      $          138,211
                                                               -----------------    --------------------

   Selling, general and administrative expenses................$.      122,934      $          106,611
                                                               -----------------    --------------------

   Restructuring and other charges (Note 7)....................$.           -0-     $          79,788
                                                               -----------------    --------------------

   Other income (deductions):
       Interest expense, net...................................$.     (23,314)      $         (24,237)
                         Other, net (Note 5).......................................      38,424                  (1,303)
                                                                                 -----------------    --------------------
   Total other income (deductions)............................$..       15,110     $         (25,540)
                                                              ------------------   --------------------

    Income (loss) before equity in net income (loss) of
         investees, minority owners' interest in net (income)
         of subsidiaries and income tax (expense)               $        23,495      $         (73,728)
         benefit.........

      Equity in net income of investees (Note 3) ...................        28,609                 21,121

      Minority owners' interest in net (income)
          of subsidiaries...........................................        (6,352)                (6,717)
                                                                  ------------------   --------------------

      Income (loss) before income tax benefit.....................$.        45,752     $         (59,324)

      Income tax (expense) benefit..................................       (8,698)                  16,892
                                                                  -----------------    --------------------

      Net income (loss)...........................................$.        37,054     $         (42,432)
                                                                  ==================   ====================


      Pro forma net income (loss) assuming use of the direct
      expense method of accounting for planned major
      maintenance costs (Note 8)..................................$.       38,959      $         (42,432)
                                                                  ==================   ====================










    See accompanying Notes to Consolidated Financial Statements





                                    FARMLAND INDUSTRIES, INC. AND SUBSIDIARIES

                                   CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                    (UNAUDITED)
                                                                                           Nine Months Ended
                                                                              ---------------------------------------------
                                                                                   May 31                     May 31
                                                                                    2000                       2001
                                                                              ------------------         ------------------
                                                                                         (Amounts in Thousands)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss.....................................................................   $    (11,584)              $       (37,063)
Adjustments to reconcile net loss to net cash provided by
  operating activities:
      Depreciation and amortization..........................................         79,337                        82,266
      Equity in net (income) of investees....................................        (33,668)                      (22,265)
      Asset impairment.......................................................             -0-                       67,567
      Other..................................................................        (35,443)                       21,271
    Changes in assets and liabilities:
       Accounts receivable...................................................        119,057                        17,482
       Inventories...........................................................        (99,830)                      195,581
       Other assets..........................................................         59,091                        (5,373)
       Accounts payable......................................................        (94,891)                       (6,357)
       Other liabilities.....................................................         34,035                       (27,021)
                                                                              ------------------         ------------------
Net cash provided by operating activities....................................   $     16,104               $       286,088
                                                                              ------------------         ------------------

CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures.........................................................   $    (73,625)              $       (79,667)
Distributions from joint ventures............................................         17,793                        21,429
Additions to investments and notes receivable................................        (39,410)                      (14,242)
Acquisition of other long-term assets........................................        (27,622)                      (12,782)
Proceeds from disposal of investments and notes receivable...................         67,761                        24,099
Proceeds from sale of fixed assets...........................................          5,407                         7,977
                                                                              ------------------         ------------------
Net cash used in investing activities....................................     $      (49,696)            $         (53,186)
                                                                              ------------------         ------------------

CASH FLOWS FROM FINANCING ACTIVITIES:
Payments of patronage refunds................................................ $       (6,054)            $              -0-
Payments of dividends........................................................         (6,004)                       (6,000)
Proceeds from bank loans and notes payable...................................      1,055,978                     2,798,262
Payments on bank loans and notes payable.....................................     (1,053,593)                   (2,982,175)
Proceeds from issuance of subordinated debt certificates.....................         51,400                        15,328
Payments for redemption of subordinated debt certificates....................        (28,830)                      (37,962)
Increase (decrease) of checks and drafts outstanding.........................         23,039                        (5,672)
Net decrease in demand loan certificates.....................................         (1,048)                       (7,382)
Other                                                                                 (1,296)                       (7,301)
                                                                              ------------------         ------------------
Net cash provided by financing activities.................................... $       33,592             $        (232,902)
                                                                              ------------------         ------------------

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.

    On December 31, 2000, Cooperative Refining LLC was dissolved.   We received inventory with a value of $54.4
    million in exchange for our equity interest in Cooperative Refining.

    See accompanying Notes to Consolidated Financial Statements`

# NOTES TO
CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

# (UNAUDITED)

## (1) Interim
Financial Statements

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) all references to members
are to persons eligible to receive patronage refunds from Farmland including
voting members, associate members and other patrons with which Farmland has a
currently effective patronage refund agreement.

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 and U.S. 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. Historically, changes in the costs of raw materials
used in the manufacture of our finished products have not necessarily resulted
in corresponding changes in the prices at which we have sold such products. We
cannot determine the extent to which these factors may impact our future
operations. Our 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).

Therefore, the amount of
net loss for the interim period presented is reflected as a separate item in the
accompanying unaudited Condensed Consolidated Balance Sheet as of May 31, 2001.

## (2) Inventories

`August 31                 May 31

                                                      2000                    2001
                                               -------------------     --------------------
                                                         (Amounts in Thousands)
Finished and in-process products..............  $        750,057       $           544,883
Materials.....................................            16,939                    81,510
Supplies......................................            65,691                    64,252
                                                ------------------     --------------------
                                                $        832,687       $           690,645
                                                ==================     ====================`

On December 31, 2000,
Cooperative Refining, LLC was dissolved and our equity investment of $54.4
million was returned to us in the form of crude oil and in-process petroleum
inventories. On May 4, 2001 Farmland formed a grain marketing relationship with
Archer Daniels Midland Co. (ADM). ADM/Farmland Inc., a wholly-owned subsidiary
of ADM, purchased substantially all of Farmlands United States grain
inventories, totaling approximately $120 million. ADM/Farmland will lease and
operate Farmlands grain elevators throughout the United States. The leases
are structured to cover all of Farmlands costs related to the elevators,
and Farmland has a 50% interest in the earnings and losses of ADM/Farmland.

At May 31, 2001, the
carrying value of our crude oil and refined petroleum inventories stated under
the lower of LIFO cost or market was $143.3 million which was approximately
$72.9 million less than the market value of these inventories.

`Nine Months Ended                      Three Months Ended
                                        ------------------------------------   --------------------------------------
                                             May 31             May 31               May 31              May 31
                                              2000               2001                 2000                2001
                                        -----------------   ----------------    -----------------   -----------------
                                                                   (Amounts in Thousands)
Net sales...............................  $  2,909,416      $  5,582,556       $   1,283,564        $    2,415,646
                                        =================  =================   =================    =================
Net income (loss).......................  $    107,720      $       44,805     $      100,167       $       74,993
                                        =================  =================   =================    =================
Farmland's equity in net income.........  $     33,668      $       22,265     $       28,609       $       21,121
                                        =================  =================   =================    =================`

- 50%  equity  interests  in  three   manufacturers  of  crop  nutrient  products,   Farmland  Hydro,  L.P.,
     SF Phosphates Limited Company and Farmland MissChem Limited;
- beginning  January 1, 2000,  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;
- through  December 31, 2000,  an  approximate  42% equity  interest in  Cooperative  Refining,  LLC,  which
     operated two refineries; and
- beginning  October 1, 2000, an approximate  28% equity  interest  (adjusted to an  approximate  26% equity
     interest as of January 1, 2001) in Land  O'Lakes  Farmland  Feed,  LLC, a  manufacturer  and  marketer of feed
     products.

At May 31, 2001, our share
of the undistributed earnings of all ventures accounted for by the equity method
totaled $61.3 million.

## (4)
Comprehensive Income

`Cash Flow            Foreign Currency             Total
                                                         Hedges                Translation                 AOCI
                                                     ----------------     -----------------------    -----------------
Balance at August 31, 2000......................     $          -0-       $               111        $           111
Foreign currency translation adjustment.........                -0-                       (18)                   (18)
Transition adjustment, net of tax...............            25,653                         -0-                25,653
Net gain on cash flow hedges, net of tax........            17,138                         -0-                17,138
Less reclassification adjustments, net of tax...           (58,248)                        -0-               (58,248)
                                                     -- -------------     ------ ----------------    ---- ------------
Balance at May 31, 2001.........................     $     (15,457)       $                93        $       (15,364)
                                                     == =============     ====== ================    ==== ============


Comprehensive income for the nine and three months ended May 31, 2001 is as follows:

                                                                        Nine Months             Three Months Ended
                                                                           Ended
                                                                        May 31, 2001               May 31, 2001
                                                                      -----------------         -------------------
Net loss.........................................................      $     (37,063)           $      (42,432)
                                                                      --- -------------         -- ----------------
Net gains (losses) arising during the period
    Cash flow hedges:
         Net derivative transition gain..........................      $      30,208                        -0-            $
         Net derivative gains(losses) during period..............             20,181                   (21,319)
         Reclassification adjustment.............................            (68,591)                  (33,031)
    Foreign currency translation adjustment......................                (18)                        2
                                                                      --- -------------         -- ----------------
Other comprehensive income before tax............................      $     (18,220)           $      (54,348)
Income tax benefit related to items of
    other comprehensive income...................................      $       2,745            $        8,195
                                                                      --- -------------         -- ----------------
Other comprehensive income (loss)................................      $     (15,475)           $      (46,153)
                                                                      --- -------------         -- ----------------
Comprehensive income (loss)......................................      $     (52,538)           $      (88,585)
                                                                      === =============         == ================`

## (5) Derivative
Financial Instruments

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, 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. The cumulative effect of this
change in accounting principle at September 1, 2000 was to increase income by
$13.5 million. (Net of an income tax expense of $2.2 million).

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 was immaterial for the three and nine months
ended May 31, 2001.

As of May 31, 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 May 31, 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 nine months ended May 31, 2001, after tax net gains
of approximately $69.0 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 nine months ended May 31, 2001,
approximately $18.8 million 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.

## (6)
Contingencies

Farmland is aware of
probable obligations under state and federal environmental laws at a number of
properties. At May 31, 2001 and at August 31, 2000, we had an environmental
accrual in our Condensed Consolidated Balance Sheet for probable and reasonably
estimated costs for remediation of contaminated properties of $18.0 million and
$12.9 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.

Some environmental matters
are in preliminary stages and the timing, extent and costs of actions which
governmental authorities may require are currently unknown. As a result, certain
costs of addressing these environmental matters are either not probable or not
reasonably estimable and, therefore, have not been accrued. In managements
opinion, it is reasonably possible that, in addition to the $18.0 million which
has been accrued at May 31, 2001, Farmland may incur $14.4 million of costs for
these matters.

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 $5.1 million at May 31, 2001 (and are in addition to the $18.0
million accrual and the $14.4 million discussed in the prior paragraphs). These
liabilities are accrued when plans for termination of plant operations have been
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.

## (7)
Restructuring and Other Charges

During May 2001, the Board
of Directors approved a plan to close certain facilities and exit nonstrategic
businesses. Accordingly, we recorded a charge to operations of approximately $79
million. Our wheat gluten plant located in Russell, Kansas was closed during May
2001 due to low market prices. To improve our refrigerated foods cost structure,
we are closing unprofitable meat facilities. During the third quarter, we also sold our
wholly-owned subsidiary, Farmland-Atwood, to ADM and we sold substantially all
of our U.S. grain inventories to ADM/Farmland Inc., which is a wholly-owned
subsidiary of ADM. ADM/Farmland will lease and operate Farmlands grain
elevators throughout the United States, and Farmland will receive a 50% share of
the earnings or losses of ADM/Farmland. As a part of our transactions with ADM,
we leased or sold assets which generated sales of $1.9 billion during the year
ended August 31, 2000 and $1.6 billion during the nine months ended May 31,
2001.

As a result of the facility
closings discussed above, we recognized approximately $28 million of impairment
charges on the related long-lived assets. Assets which can be readily sold
were revalued at their used market value. Assets which cannot be used or sold
were valued at their salvage value, if any. Carrying value of these assets as of
May 31, 2001, after recognition of impairment charges, was approximately $5
million. Goodwill associated with facilities closed or businesses sold was
written-off from our balance sheet, resulting in an approximate $13 million
charge to expense. Over the past few years, we implemented enterprise-wide
software for operational and financial reporting. The software was configured to
support nearly all of our domestic operations. In accordance with generally
accepted accounting principles, certain software development and implementation
costs were capitalized. During the third quarter of 2001, we charged to expense
approximately $26 million of capitalized software costs related to operations
which have been closed, sold or contributed to ventures.

As a result of
restructuring and other charges recognized during our third quarter, for the
three and nine months ended May 31, 2001, world grains income decreased
approximately $12 million, refrigerated foods income decreased
approximately $17 million, petroleums income decreased approximately $3
million, other operating units income decreased approximately $21 million,
and unallocated corporate expenses increased approximately $26 million.

Included in the
restructuring and other charges is an approximate $4 million accrual of
termination benefits associated with the separation of approximately 450
employees. The charge includes approximately $2 million for administrative
employees, and approximately $2 million for production  employees.
Through June 2001, approximately 60 of the planned employee separations were
completed, and employees received cash severance payments totaling approximately
$1.5 million. This cash outlay was funded through cash from operations. Also
included in the restructuring and other charges is $8 million of other costs,
including the costs to  terminate certain long term contracts, to
recognize certain environmental expenses, and to reduce supply inventories to
net realizable value. As of May 31, 2001, included in other current
liabilities were approximately $11 million of accruals related to these
restructuring and other charges.

## (8) Planned
Major Maintenance Costs

Effective September 1,
2000, based on a proposed Statement of Position issued by the Accounting
Standards Executive Committee of the AICPA during September, 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 nine months ended May
31, 2001. Had this new accounting method been applied in the three months ended
May 31, 2000, the effect would have been to increase our net income by $1.9
million (net of an income tax expense of $0.3 million). For the nine months
ended May 31, 2000, the effect would have been to increase net loss by $1.9
million (net of an income tax benefit of $0.3 million).

## (9) Industry
Segment Information

Beginning September 1,
2000, Farmland began allocating certain interest expense based on net assets
employed by each segment and allocating certain corporate service expenses based
on estimated use of the service by each segment. Segment results for the nine
months and three months ended May 31, 2000 were restated to conform to our
current operational structure and our current method of allocation.

## Nine months endedMay 31, 2000 (Page 1 of 3)(Amounts in Thousands)

`CONSOLIDATED SEGMENTS
                                   --------------------------------------------------------------------------
                                                                  Unallocated
                                          Combined             Corporate Expenses
                                          Segments                                           Consolidated
                                     ------------------     ----------------------      ---------------------
Sales & transfers                    $     11,188,551        $                           $        11,188,551
Transfers between segments                 (2,348,220)                                            (2,348,220)
                                     ------------------     ----------------------      ---------------------
Net sales                            $      8,840,331        $                           $         8,840,331
                                     ==================     ======================      =====================

Net income (loss)                    $         42,555        $           (54,139)        $           (11,584)
                                     ==================     ======================      =====================


Total assets                         $      2,976,619        $           307,026         $         3,283,645
                                     ==================     ======================      =====================`

## Nine months endedMay 31, 2001 (Page 1 of 3)(Amounts in Thousands)

`CONSOLIDATED SEGMENTS
                                   ------------------------------------------------------------------------
                                                                 Unallocated
                                         Combined                 Corporate
                                         Segments                 Expenses                  Consolidated
                                     ---------------       ---------------------       --------------------
Sales &transfers                    $  11,622,445          $                           $      11,622,445
Transfers between segments             (2,446,001)                                             (2,446,001)
                                     ---------------       ---------------------       --------------------
Net sales                            $   9,176,444          $                           $       9,176,444
                                     ===============       =====================       ====================

Net income (loss)                    $         503          $          (37,566)         $         (37,063)
                                     ===============       =====================       ====================


Total assets                         $ 2,701,576            $          275,718          $       2,977,294
                                     ===============       =====================       ====================`

## Nine months endedMay 31, 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                  $      768,533       $      1,034,346     $   503,307      $    1,624,276        $    3,930,462
Transfers between segments                 (4,252)              (15,659)         (41,735)        (1,372,538)           (1,434,184)
                                                        --                   --               --                    --
                                   -- --------------       --------------       ----------       ---------------       ---------------
Net sales                          $      764,281       $      1,018,687     $   461,572      $      251,738        $    2,496,278
                                   == ==============    == ==============    == ==========    == ===============    == ===============

Net income (loss)                  $        5,617       $         (1,108)    $     8,346      $          348        $       13,203
                                   == ==============    == ==============    == ==========    == ===============    == ===============


Total assets                       $      679,054       $        422,203     $   119,872      $      117,622        $    1,338,751
                                   == ==============    == ==============    == ==========    == ===============    == ===============`

## Nine months endedMay 31, 2001 (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                $      596,949      $   1,313,635       $    50,262      $    1,734,350       $     3,695,196
                 Transfers between segments               (1,391)             (15,366)         (5,191)         (1,536,260)           (1,558,208)
                                                  --                  ---                 --               --                   --
                                                     -------------        ------------       ----------       -------------        ---------------
                 Net sales                        $      595,558      $   1,298,269       $    45,071      $      198,090       $     2,136,988
                                                  == =============    === ============    == ==========    == =============     -- ===============

                 Net income (loss)                $       (3,432)     $        54,708     $    (1,836)     $      (27,246)      $        22,194
                                                  == =============    === ============    == ==========    == ==============    == ===============


                 Total assets                     $      748,694      $       442,387     $    55,191      $      101,795       $     1,348,067
                                                  == =============    === ============    == ==========    == ==============    == ===============`

## Nine months endedMay 31, 2000 (Page 3 of 3)(Amounts in Thousands)

`OUTPUT SEGMENTS
                                  ----------------------------------------------------------
                                                                                Total
                                  Refrigerated           World                 Output
                                      Foods              Grain                Segments
                                  --------------     --------------       ------------------
Sales & transfers                 $ 3,945,106        $   3,312,983        $      7,258,089
Transfers between segments            (684,459)          (229,577)                (914,036)
                                  --------------     --------------       ------------------
Net sales                         $ 3,260,647        $   3,083,406        $      6,344,053
                                  ==============     ==============       ==================

Net income (loss)                 $     33,003       $      (3,651)       $         29,352
                                  ==============     ==============       ==================


Total assets                      $    746,202       $     891,666        $      1,637,868
                                  ==============     ==============       ==================`

## Nine months endedMay 31, 2001 (Page 3 of 3)(Amounts in Thousands)

`OUTPUT SEGMENTS
                                    -------------------------------------------------------
                                                                                Total
                                     Refrigerated            World             Output
                                        Foods                Grain            Segments
                                    ---------------     ----------------   ----------------
Sales & transfers                   $   4,091,635        $   3,835,614      $    7,927,249
Transfers between segments               (655,731)            (232,062)           (887,793)
                                    ---------------     ----------------   ----------------
Net sales                           $   3,435,904        $   3,603,552      $    7,039,456
                                    ===============     ================   ================

Net income (loss)                   $       4,937        $     (26,628)     $      (21,691)
                                    ===============     ================   ================


Total assets                        $     772,482        $     581,027      $    1,353,509
                                    ===============     ================   ================`

## Three months endedMay 31, 2000 (Page 1 of 3)(Amounts in Thousands)

`CONSOLIDATED SEGMENTS
                                   ---------------------------------------------------------------------------
                                                                  Unallocated
                                          Combined             Corporate Expenses
                                          Segments                                            Consolidated
                                     ------------------     ----------------------      -----------------------
Sales & transfers                    $      3,814,881        $                           $        3,814,881
Transfers between segments                   (823,213)                                             (823,213)
                                     ------------------     ----------------------      -----------------------
Net sales                            $      2,991,668        $                           $        2,991,668
                                     ==================     ======================      =======================

Net income (loss)                    $         66,123        $           (29,069)        $           37,054
                                     ==================     ======================      =======================


Total assets                         $      2,976,619        $           307,026         $        3,283,645
                                     ==================     ======================      =======================`

## Three months endedMay 31, 2001 (Page 1 of 3)(Amounts in Thousands)

`CONSOLIDATED SEGMENTS
                                   -------------------------------------------------------------------------
                                                                 Unallocated
                                         Combined                 Corporate
                                         Segments                 Expenses                  Consolidated
                                     ---------------       ---------------------       ---------------------
Sales & transfers                    $    3,969,330         $                           $        3,969,330
Transfers between segments               (745,610)                                                (745,610)
                                     ---------------       ---------------------       ---------------------
Net sales                            $   3,223,720          $                           $        3,223,720
                                     ===============       =====================       =====================

Net income (loss)                    $     (24,932)         $          (17,500)         $          (42,432)
                                     ===============       =====================       =====================


Total assets                         $   2,701,576          $          275,718          $        2,977,294
                                     ===============       =====================       =====================`

## Three months endedMay 31, 2000 (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                   $      332,659      $         347,930     $     163,211     $     585,551       $  1,429,351
Transfers between segments                  (2,483)               (6,013)           (14,222)         (483,350)           (506,068)
                                    -- -------------    -- ---------------    --- ---------     -- ------------     -- ------------
Net sales                           $      330,176      $         341,917     $     148,989     $     102,201       $     923,283
                                    == =============    == ===============    === =========     == ============     == ============

Net income (loss)                   $       50,076      $            9,270    $       2,417     $         552       $      62,315
                                    == =============    == ===============    === =========     == ============     == ============


Total assets                        $      679,054      $         422,203     $     119,872     $     117,622       $  1,338,751
                                    == =============    == ===============    === =========     == ============     == ============`

## Three months endedMay 31, 2001 (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                $      280,417       $      449,889     $                  $      568,991      $  1,299,297
                 Transfers between segments                   (1)              (4,908)                             (493,297)           (498,206)
                                                  --                   --                 --                 --                  --
                                                     -------------        ------------       -----------        -------------       -------------
                 Net sales                        $      280,416       $      444,981     $                  $       75,694      $      801,091
                                                  == =============     == ============    == ===========     == =============    == =============

                 Net income (loss)                $       (3,572)      $       39,575     $       570        $      (22,515)     $       14,058
                                                  == =============     == ============    == ===========     == =============    == =============


                 Total assets                     $      748,694       $      442,387     $    55,191        $      101,795      $    1,348,067
                                                  == =============     == ============    == ===========     == =============    == =============`

## Three months endedMay 31, 2000 (Page 3 of 3)(Amounts in Thousands)

`OUTPUT SEGMENTS
                                  -----------------------------------------------------------
                                                                                Total
                                  Refrigerated           World                  Output
                                      Foods              Grain                 Segments
                                  --------------     --------------       -------------------
Sales & transfers                 $ 1,384,491        $   1,001,039        $      2,385,530
Transfers between segments            (245,205)           (71,940)                (317,145)
                                  --------------     --------------       -------------------
Net sales                         $ 1,139,286        $     929,099        $      2,068,385
                                  ==============     ==============       ===================

Net income (loss)                 $     11,543       $      (7,735)       $          3,808
                                  ==============     ==============       ===================


Total assets                      $    746,202       $     891,666        $      1,637,868
                                  ==============     ==============       ===================`

## Three months endedMay 31, 2001 (Page 3 of 3)(Amounts in Thousands)

`OUTPUT SEGMENTS
                                    -------------------------------------------------------
                                                                                Total
                                     Refrigerated           World              Output
                                        Foods               Grain             Segments
                                    ---------------     ---------------    ----------------
Sales &ransfers                   $   1,408,540        $   1,261,493      $ 2,670,033
Transfers between segments               (233,626)             (13,778)         (247,404)
                                    ---------------     ---------------    ----------------
Net sales                           $   1,174,914        $   1,247,715      $ 2,422,629
                                    ===============     ===============    ================

Net income (loss)                   $      (9,091)       $     (29,899)     $    (38,990)
                                    ===============     ===============    ================


Total assets                        $     772,482        $     581,027      $ 1,353,509
                                    ===============     ===============    ================`

### Item 2.           MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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, 2000.

## Financial
Condition, Liquidity and Capital Resources

Farmland has historically
maintained two primary sources for debt capital: a substantially continuous
public offering of its subordinated debt and demand loan securities (the
continuous debt program) and bank lines of credit.

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, we suspended sales under our debt program. To sell debt
under our program, we will need to register additional securities with the
Securities and Exchange Commission. Although we have not filed to register
additional securities, management plans to file a registration statement in the
near future.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 nine months ended May 31, 2001, the outstanding balance of demand
certificates decreased by $7.4 million, and the outstanding balance of
subordinated debenture bonds decreased by $22.6 million.

In May 2000, Farmland
established a 364 day, $750 million, 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 agreement.
The Credit Facilitys term was extended to November 9, 2001. Subject to
debt covenant restrictions, the amended Credit Facility provides a $650 million
credit, reduced to a $500 million credit effective August 9, 2001. As specified
in the agreement, the available credit will be reduced by proceeds from sales of
assets and working capital (other than in the ordinary course of business). As
of May 31, 2001, our Credit Facility had been reduced to an approximate $550
million credit. Regardless of asset and working capital sales, we will retain a
minimum available credit of $400 million through November 9, 2001. Farmland is working to replace, prior
to November 9, 2001, the current credit facility with a long-term
credit facility. However, no assurance of completion can be given. At May 31,
2001, Farmland had $319.3 million of short-term borrowings under the Credit
Facility. Additionally, $49.9 million of the Credit Facility was utilized to
support letters of credit. Farmland pays commitment fees under the Credit
Facility based on the unused portion of
the credit. 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.
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 May 31, 2001, availability under the Credit Facility was
approximately $132 million.

Farmland National Beef
Packing Company, L.P. (FNBPC) has a $130.0 million credit facility
which expires March 31, 2003. This facility is provided by various participating
banks, and borrowings are nonrecourse to Farmland or Farmlands other
affiliates. At May 31, 2001, FNBPC had borrowings under this facility of $34.9
million, and $16.9 million of the facility was utilized to support letters of
credit. Assets with a carrying value of $263.5 million at May 31, 2001 have been
pledged by FNBPC to support its borrowings under the facility.

At May 31, 2001, Tradigrain
had $377 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. At May 31, 2001, the related borrowings and
other commitments totaled $294.8 million.

Farmland maintains other
borrowing arrangements with banks and financial institutions. Under such
arrangements, at May 31, 2001, $5.7 million was borrowed, 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 loss through
the nine months ended May 31, 2001 increased to $37.1 million from $11.6 million
through the nine months ended May 31, 2000, cash provided by operating
activities increased $270 million during the nine months ended May 31, 2001
compared with the same period last year. This increase in cash is primarily due
to our decreased level of U.S. grain inventories and that the 2001 net loss included
$67 million of non-cash restructuring charges. This cash provided from
operations was used to pay down our debt levels ($213.9 million) and to pay for
$79.7 million of capital expenditures, primarily related to our refrigerated
foods business.

## Results of
Operations

#### General

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,
and currency fluctuations, tariffs and other factors affecting U.S. imports and
exports. In addition, various federal and state regulations 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 and other commodities may impact our operations.
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 and cattle 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 Nine Months Ended May 31, 2001 compared to Nine Months Ended May 31,
2000.

Effective January 1, 2000
and October 1, 2000 we formed a crop production marketing venture (Agriliance)
and a feed venture (Land OLakes Farmland Feed). We record income (loss)
from ventures as equity in net income (loss) of investees in our Condensed
Consolidated Statements of Operations. As a result, effective from the date of
formation, sales, costs of sales, selling, general and administrative (SG&A)
expenses and other income generated by these ventures are not recorded in our
Condensed Consolidated Statements of Operations. Therefore, sales, expenses and
other income items related to feed and crop production marketing decreased for
the nine months ended May 31, 2001 compared with the prior year.

Effective  May 4,  2001,  we  formed  a grain  marketing  relationship  with  Archer  Daniels  Midland  Co.  (ADM).
ADM/Farmland  Inc., a wholly-owned  subsidiary of ADM,  purchased our U.S. grain  inventories and Farmland  Atwood,
our  wholly-owned  grain  commission  subsidiary.  ADM/Farmland  Inc.  will lease and operate  our grain  elevators
throughout  the United  States,  and we will  receive a 50% share of the earnings or losses of  ADM/Farmland.  As a
result,  effective  from the date of  formation,  sales,  cost of  sales,  SG&A,  and  other  income  generated  by
ADM/Farmland Inc. are not recorded in our Condensed Consolidated Statements of Operations.

Sales for the nine months
ended May 31, 2001 increased approximately $336 million, or 4%, compared with
the same period last year. This increase is primarily the result of increased
sales in our petroleum and world grain businesses, partially offset by a
decrease in sales recorded in Farmlands financial statements due to the
formation of our Land OLakes Farmland Feed and Agriliance ventures.

Our management recognizes
that reversing the negative financial trends of the recent past requires action.
Accordingly, our Board and senior management have jointly reviewed and revised
our strategic plan in our initiative Navigating Tomorrow. Based upon
this revision, we are actively:

- reviewing our organizational structure;
- assessing our portfolio of businesses;
- considering the disposition, by sale or venture, of businesses which are not central to our revised
     strategic plan;
- considering whether to enter into new business areas;
- developing new strategies to take greater advantage of the value of our brands;
- examining strategies for expanding our alliances with other cooperatives; and
- assigning responsibility to our current joint ventures with the objective of increasing returns on these
     investments.

- reduce our debt level and our Credit Facility need for debt financing; and
- achieve an investment grade rating on senior debt securities from a nationally recognized statistical
     rating organization.

In May 2001, the costs
associated with Navigating Tomorrow were recorded to close certain
facilities and exit nonstrategic businesses. The facilities affected include our
wheat gluten plant and unprofitable refrigerated foods plants. Additionally, as
previously discussed, substantially all of our U.S. grain inventories were sold
as well as our wholly-owned grain commission subsidiary. As a result of these
actions, we recorded $79 million of restructuring and other charges in the third
quarter 2001, consisting primarily of asset impairments and termination
benefits. See Note 7 to the Condensed Consolidated Financial Statements.

For the nine months ended
May 31, 2001, we had a net loss of $37.1 million compared with a net loss of
$11.6 million for the same period last year. This decrease is primarily
attributable to the pre-tax charges of pre-tax $79 million discussed in the previous
paragraph. Also, in fiscal year 2000, we had a pre-tax gain of $49.6 million on
the sale of our direct equity investment in the Agriliance venture. Excluding
these unusual expenses and gains, pre-tax income for the nine months ended May
31, 2001 increased approximately $91 million from the same period last year.
This increase is primarily attributable to increased margins for refined fuels
and propane combined with our successful effort to reduce selling, general and
administrative expenses.

#### Crop Production

In order to enhance
the efficiency in marketing crop production  products to our members, on January
1, 2000,  Farmland,  Land OLakes,  and Cenex Harvest States combined their
crop production marketing functions into a new venture, Agriliance. Farmland now
sells 100% of our  manufactured  product to  Agriliance.  In part as a result of
lower Agriliance sales volumes, which reduced our sales volume to Agriliance, our
unit sales  volume for the nine months  ended May 31,  2001,  was reduced by 51%
compared to the same period last year.  Unit selling  prices for the nine months
ended May 31, 2001  increased by 53% compared to the same period last year.  The
net impact was a reduction in crop production sales to $596 million for the nine
months ended May 31, 2001  compared with crop  production  sales of $764 million
for the same  period  last  year.  Both  the  average  unit  selling  prices  of
nitrogen-based  plant foods and the average unit cost to produce  nitrogen-based
plant foods have increased from last year.  Average unit selling price increased
as a result  of the  temporary  closing  by  various  manufacturers  of  certain
nitrogen production facilities,  presumably in response to increased natural gas
prices and excess  nitrogen-based  product inventories.  Average unit production
cost increased,  primarily due to the increase in the price of natural gas which
represents a major cost in the  production of nitrogen  based  fertilizer  since
this same period last year.  The average price of natural gas for the first nine
months of fiscal  year 2001 was $4.95 per mmbtu  compared to $2.52 per mmbtu for
the same period last year,  which  translates to an increased  cost of producing
anhydrous  ammonia of  approximately  $82 per ton.  Also,  lower  crop  nutrient
application  rates combined with a continued strong supply of ammonia,  urea and
UAN from  foreign  sources  has  resulted  in  higher  levels  of crop  nutrient
inventories.  As a result of the higher  inventory  levels,  Farmland  and other
fertilizer  companies  are  attempting  to lower their  inventories  through the
temporary  shutdown of certain plants.  To better manage our inventory costs, we
temporarily  stopped  production at three locations.  Plans to reopen the plants
will  develop as the fall  season  progresses  and  inventory  levels and demand
become known.  Increased foreign  production  capacity of phosphates has had the
effect of reducing export levels and lowering demand for  domestically  produced
phosphate, resulting in lower unit selling prices.

Income of the crop
     production segment decreased $9.0 million for the nine months ended May 31,
     2001 compared  with the prior year.  Gains related to management of natural
     gas  positions  of $38.2  million  in the  current  period  are offset by a
     decrease  in other  income of $49.6  million  due to the  fiscal  year 2000
     pre-tax gain on the sale of a portion of our direct  equity  investment  in
     the Agriliance  venture.  The fixed costs related to plants which have been
     temporarily  shutdown  and wet weather  throughout  the Midwest  during the
     spring fertilizer  season also contributed to a lower overall income.  With
     the  formation,  effective  January 1, 2000, of the Agriliance  venture,  a
     portion of our nitrogen-based plant food income is now recognized as equity
     in  income  of  investees,  rather  than as gross  income.  Agriliance  has
     generated  less  income  than in the  prior  year a result  of lower  sales
     volumes and reduced  income from the  southern  marketing  retail  outlets.
     Also,   some  of  crop   productions   selling, general   and
     administrative  expenses were  transferred to Agriliance.  Income from crop
     productions ventures, including Agriliance,  decreased $15.9 million,
     which  was  partially  offset  by a  decrease  of  $14.5  million  in  crop
     productions  direct  selling,  general and  administrative  expenses,
     which were transferred to Agriliance.

#### Petroleum

Sales of the petroleum
segment during the nine months ended May 31, 2001 increased $280 million, or
approximately 27%, compared with the same period last year. This result is
primarily due to an approximate 22% increase in unit prices for refined fuels
and a 4% increase in refined fuels unit sales compared with the same period last
year. Propane unit price increased approximately 6% with a 55% increase in unit
sales. The refined fuels and propane unit price increases resulted primarily
from a colder than normal winter throughout much of the United States, combined
with low inventory levels of refined fuels, especially gasoline, across the
country.

Income for the petroleum
segment increased $55.8 million for the nine months ended May 31, 2001 compared
with the prior period. This increase is primarily due to an unusually large
spread between crude oil costs and refined fuel selling prices. Lower than
normal springtime inventory levels of refined fuels and propane led directly to
the increased selling prices.

Cooperative Refining, 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 gross income.

#### Feed

In order to enhance the
size, scale and market position of our feed operations, effective October 1,
2000, Farmland and Land OLakes combined feed businesses to form a new
venture, Land OLakes Farmland Feed (LOLFF). Starting October 1, 2000, we
no longer record our feed businesss sales, cost of sales, SG&A
expenses and other income in our Condensed Consolidated Statements. Instead, we
record only our share of net income (loss) of the venture as equity in net
income of investees in our Condensed Consolidated Statements. As a result of
forming the venture, the sales of the feed segment as recorded in
Farmlands financial statements decreased $417 million, or approximately
90%, in the nine months ended May 31, 2001 compared with the prior year. Income
for the feed segment decreased $10.2 million for the nine months ended May 31,
2001 compared with the same period last year primarily due to our share of
non-recurring costs associated with LOLFFs rationalization of its
manufacturing facilities. Additionally, sales and operating income of LOLFF
decreased due to declining commodity prices in the first part of 2001. Poultry
formula feed, Farm and Ranch, and Animal Protein sales and margins have declined
from the same period last year. Manufacturing expenses also increased in part
due to increased natural gas costs.

During June 2001, LOLFF
announced the acquisition by LOLFF of an independent feed company, Purina Mills.
We believe that this acquisition will not have a significant impact on our total
earnings from the LOLFF venture.

#### Refrigerated Foods

Sales in the refrigerated
foods segment increased $175 million, or approximately 5%, for the nine months
ended May 31, 2001 compared with the same period last year. This increase is
primarily due to a 9% increase in unit selling price partially offset by a 3%
reduction in unit sales volume. The reduction in unit sales volume is primarily
due to decreased slaughter levels resulting from the sale of an inefficient
plant located in Dubuque, Iowa during June 2000.

Income in the refrigerated
foods segment for the nine months ended May 31, 2001 decreased $28.1 million
compared to the prior period. This decrease is primarily the result of a
management decision, based on a review of our refrigerated foods business, to
close unprofitable meat facilities. As a result of these closings, we have
recorded a $17 million charge during the third quarter, reflecting the reduction
of the net book value of fixed assets to net realizable value, accrued severance
costs, and the elimination of associated goodwill. The additional decrease is a
result of increased promotional costs and continued advertising costs to enhance
our brand recognition and start up costs related to our case ready program. 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
the retailer.

#### World Grain

Effective May 4, 2001,
Farmland and Archer Daniels Midland Co. (ADM) consummated the formation of a
grain marketing relationship. ADM/Farmland Inc., a wholly-owned subsidiary of
ADM, purchased substantially all of our U.S. grain inventories and also
purchased Farmland-Atwood, our wholly-owned grain commission subsidiary.
ADM/Farmland will lease and operate Farmlands grain elevators throughout
the United States. The leases are structured to cover all of Farmlands
costs related to the elevator, and Farmland has a 50% interest in the earnings
and losses of ADM/Farmland.

Sales of the world grain
segment increased $520 million, or approximately 17%, for the nine month period
ended May 31, 2001 compared with the same period last year primarily as a result
of higher selling prices, particularly for wheat and milo.

World grain income
decreased $23 million during the nine months ended May 31, 2001 compared with
the same period last year. As discussed above, during the third quarter,
Farmland entered into a grain marketing relationship with ADM and sold our grain
commission company, Farmland-Atwood, to ADM. These transactions resulted in a
one time charge of $12 million dollars during the third quarter, consisting
primarily of elimination of associated goodwill and accrued severance for the affected employees.
World grain income also declined due to higher interest costs associated with
carrying domestic grain inventories.

#### Other Operating Units

Segment income for other
operating units decreased $27.6 million for the nine months ended May 31, 2001
compared with the prior year. This decrease is primarily attributable to asset
impairment at Heartland Wheat Growers, our subsidiary which produced wheat
gluten at a facility in Russell, Kansas. In response to government subsidies of
European wheat gluten production, the United States government had in place a
trade protection order which limited the volume of European wheat gluten which
could be imported into the United States. This trade order expired June 1, 2001
and was not renewed. Primarily as a result of the anticipated increase in wheat
gluten availability, wheat gluten prices declined significantly during the third
quarter. Since we believe wheat gluten prices will remain depressed for an
extended time, we closed our wheat gluten facility during May 2001. As a result,
during the third quarter we have recorded a $20 million charge related to this
closing, primarily to reduce the net book value of fixed assets to net
realizable values.

#### Selling, General and Administrative Expenses

Selling, general and
administrative (SG&A) expenses decreased $60.3 million, or
approximately 17%, from the same period last year. SG&A expenses directly
connected to segments decreased approximately $43.7 million (primarily related
to the formation of Agriliance and Land OLakes Farmland Feed joint
ventures and the sale of our Dubuque, Iowa meat processing plant) and are
included in the determination of business segment income. During the nine months
ended May 31, 2001 compared with the same period last year, we successfully
reduced SG&A expenses not identified to business segments by $16.6 million,
primarily as a result of reduced personnel costs and a reduction in bad debt
expense.

#### Restructuring and Other Charges

In connection with our
Navigating Tomorrow initiatives, we recorded $79.8 million of
restructuring and other charges. In addition to the significant charges included
in the above segment discussion, we recorded a $26 million charge to writeoff a
portion of our enterprise-wide integrated software system associated with
businesses which have been sold or are being operated through joint ventures.

#### Other Income

Other income decreased
$11.6 million for the nine months ended May 31, 2001 compared with the same
period last year. Other income directly connected to the segments decreased
$16.8 million. During the nine months ended May 31, 2000, we recognized a $49.6
million gain on the sale of our direct equity interest in Agriliance and a loss
of $7.0 million on the sale of our Dubuque, Iowa meat facility. During the nine
months ended May 31, 2001, we recognized $14.2 million of gains related to
derivative instruments included in other income. Other income not directly
connected to the segments increased $5.2 million mainly due to the gain on the
sale of our 50% ownership interest in One System Group, a provider of
information services.

#### Interest Expense

Net interest expense for
nine months ended May 31, 2001 increased $13 million compared with the same
period last year due primarily to an increase in the average interest rate.

#### Tax Benefit

The income tax benefit
increased $16.1 million due to our loss before income taxes and an increase in
the effective tax rate. The loss is due to restructuring and other charges
booked during third quarter 2001. (See Note 7 of the Condensed Consolidated
Financial Statements.) The increase in the effective tax rate is a result of our
current estimate of annual income(loss) which will be patronage-sourced in 2001
compared to 2000.

Results of Operations
for Three Months Ended May 31, 2001 compared to Three Months Ended May 31, 2000.

On October 1, 2000,
Farmland and Land OLakes engaged in a venture (Land OLakes Farmland
Feed) that combines all aspects of each investors feed business. We record
income (loss) from ventures as equity in net income of investees in our
Condensed Consolidated Statements of Operations. As a result, sales, costs of
sales, SG&A expenses and other income generated by ventures are not recorded
in our Condensed Consolidated Statements of Operations. Therefore, sales,
expenses and other income related to the feed segment decreased for the three
months ended May 31, 2001 compared with the prior year.

Effective  May 4,  2001,  we  formed  a grain  marketing  relationship  with  Archer  Daniels  Midland  Co.  (ADM).
ADM/Farmland  Inc., a wholly-owned  subsidiary of ADM,  purchased our U.S. grain  inventories and Farmland  Atwood,
our  wholly-owned  grain  commission  subsidiary.  ADM/Farmland  Inc.  will  lease and  operate  our  grain  elevators
throughout  the United  States,  and we will  receive a 50% share of the  earnings  of  ADM/Farmland.  As a result,
effective from the date of formation,  sales, cost of sales,  SG&A, and other income generated by ADM/Farmland Inc.
are not recorded in our Condensed Consolidated Statements of Operations.

Consolidated sales for the
three months ended May 31, 2001 increased $232 million, or 8%, compared to the
same period in the prior year. This increase is primarily the result of
increased sales in our petroleum and world grain businesses, partially offset by
a decrease in sales recorded in Farmlands financial statements due to the
formation of our Land OLakes Farmland Feed and Agriliance ventures.

In May 2001, the costs
associated with Navigating Tomorrow were recorded to close certain
facilities and exit nonstrategic businesses. The facilities affected include our
wheat gluten plant and unprofitable refrigerated foods plants. Additionally, as
previously discussed, substantially all of our U.S. grain inventories were sold
as well as our wholly-owned grain commission subsidiary. As a result of these
actions, we recorded $79 million of restructuring and other charges in the third
quarter 2001, consisting primarily of asset impairments and termination
benefits. See Note 7 to the Condensed Consolidated Financial Statements.

For the three months ended
May 31, 2001, we had a net loss of $42.4 million compared with net income of
$37.1 million for the same period last year. This decrease is primarily
attributable to the special charges of $79 million discussed in the
previous paragraph. Also, in fiscal year 2000, we had a pre-tax gain of $49.6
million on the sale of our direct equity investment in the Agriliance venture.
Excluding these expenses and gains, pre-tax income for the three
months ended May 31, 2001 increased approximately $25 million from the same
period last year. This increase is primarily attributable to increased margins
for refined fuels and propane combined with our successful effort to reduce
selling, general and administrative expenses.

#### Crop Production

In part as a result of lower
Agriliance sales volumes, which reduced our sales volume to Agriliance, our unit sales volume for the period was reduced compared to the
same period last year. This unit volume decrease was partially offset by a 53%
increase in unit selling prices for the three months ended May 31, 2001 compared
to the same period last year. The net impact was a reduction in crop production
sales to $280 million for the three months ended May 31, 2001 compared with crop
production sales of $330 million for the same period last year. Both the average
unit selling prices of nitrogen-based plant foods and the average unit cost to
produce nitrogen-based plant foods have increased from last year. Average unit
selling price increased as a result of the temporary closing by various
manufacturers of certain nitrogen production facilities, presumably in response
to increased natural gas prices and high inventory levels. Average unit
production cost increased as the price of natural gas, which represents a major
cost in the production of nitrogen-based fertilizer, has risen substantially
since this same period last year. The average price of natural gas for the third
quarter of fiscal year 2001 was $5.11 per mmbtu compared to $2.68 per mmbtu for
the same period last year. This translates to an increased cost of producing
anhydrous ammonia of approximately $82 per ton.

Lower crop nutrient
application rates combined with a continued strong supply of ammonia, urea and
UAN from foreign sources has resulted in higher levels of crop nutrient
inventories. As a result of the higher inventory levels, Farmland and other
fertilizer companies are attempting to lower their inventories through the
temporary shutdown of certain plants. To better manage our inventory costs, we
temporarily stopped production at three locations. Plans to reopen the plants
will develop as the fall season progresses and inventory levels and demand
become known. Increased foreign production capacity of phosphates has resulted
in reduced export levels and lower demand for domestically produced phosphate.

Income of the crop
production segment decreased $53.6 million for the three months ended May 31,
2001 compared with the prior year. Margins decreased by $3.8 million and other
income decreased by $49.6 million due to the fiscal year 2000 pre-tax gain on
the sale of a portion of our direct equity investment in the Agriliance venture. The
fixed costs related to plants which have been temporarily shutdown and wet
weather throughout the Midwest during the spring fertilizer season also
contributed to a lower overall income. With the formation, effective January 1,
2000, of the Agriliance venture, a portion of our nitrogen-based plant food
income is now recognized as equity in income of investees, rather than as gross
income. Agriliance has generated less income than in the prior year as a result of lower sales volumes and reduced income from the southern market retail outlets.

#### Petroleum

Sales of the petroleum
segment in the three months ended May 31, 2001 increased $103 million, or
approximately 30%, compared with the same period last year, primarily due to an
approximate 7% increase in unit prices for refined fuels and an increase in unit
sales of approximately 16%. The increased unit prices for refined fuels,
especially gasoline, was primarily the result of low supplies across the
country.

Income for the petroleum
segment for the three month period ended May 31, 2001 increased $30.3 million
compared to the same period last year. This increase is primarily due to a
significant increase in the spread between crude oil costs and refined fuel
selling prices. Lower than normal springtime inventory levels of refined fuels
and propane led directly to the increased selling prices.

Cooperative Refining, 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 gross income.

#### Feed

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 May 31, 2001.  With the formation of LOLFF, our feed income (loss) is now recognized as
equity in income of investees, rather than gross income. Also, feeds
selling, general and administrative expenses have been transferred to our
venture. Income for the feed segment decreased $1.8 million for the three months
ended May 31, 2001 compared with the same period last year. This decline is
primarily due to reduced poultry feed margins realized by LOLFF.

#### Refrigerated Foods

Sales in the refrigerated
foods segment during the three months ended May 31, 2001 increased $35.6
million, or approximately 3% compared with the same period last year. This
increase is primarily due to a 10% increase in unit sales price partially offset
by a 7% reduction in unit sales volume. The reduction in unit sales volume is
primarily due to decreased slaughter levels resulting from the sale of an
inefficient plant located in Dubuque, Iowa during June 2000.

Income in the Refrigerated
Foods segment decreased $20.6 million during the three months ended May 31, 2001
compared to the same period last year. This decrease is primarily the result of
a management decision, based on a review of our refrigerated foods business, to
close unprofitable meat facilities. As a result of these closings, we have
recorded a $17 million charge during the third quarter, reflecting the reduction
of the net book value of fixed assets to net realizable value, accrued severance
costs, and the elimination of associated goodwill. The additional decrease is a
result of increased distribution costs combined with increased advertising and
promotional costs to support our national brand.

#### World Grain

Effective May 4, 2001,
Farmland and Archer Daniels Midland Co. (ADM) consummated the formation of a
grain marketing relationship. ___ ADM/Farmland Inc., a wholly-owned subsidiary
of ADM, purchased our U.S. grain inventories and Farmland-Atwood, our
wholly-owned grain commission subsidiary. ADM/Farmland will lease and operate
Farmlands grain elevators throughout the United States. The leases are
structured to cover all of Farmlands costs related to the elevator, and
Farmland has a 50% interest in the earnings and losses of ADM/Farmland.

Sales of the world grain
segment increased $319 million, or approximately 34%, for the three month period
ended May 31, 2001 compared with the same period last year primarily as a result
of higher grain selling prices.

World grain income
decreased $22.2 million during the three months ended May 31, 2001 compared with
the same period last year. As discussed above, during the third quarter,
Farmland entered into a grain marketing relationship with ADM and sold our grain
commission company, Farmland-Atwood, to ADM. These transactions resulted in a
one time charge of $12 million dollars during the third quarter, consisting of
elimination of associated goodwill and accrued severance for the affected employees. World grain
income also declined due to higher interest costs associated with carrying
domestic grain inventories, decreased international sales volume and lower
margins in soyacomplex and barley businesses.

#### Other Operating Units

Segment income for other
operating units decreased $23.1 million for the three months ended May 31, 2001
compared with the same period in the prior year. This decrease is primarily
attributable to asset impairment at Heartland Wheat Growers, our subsidiary
which produced wheat gluten at a facility in Russell, Kansas. In response to
government subsidies of European wheat gluten production, the United States
government had in place a trade protection order which limited the volume of
European wheat gluten which could be imported into the United States. This trade
order expired June 1, 2001 and was not renewed. Primarily as a result of the
anticipated increase in wheat gluten availability, wheat gluten prices declined
significantly during the third quarter. Since we believe wheat gluten prices
will remain depressed for an extended time, we closed our wheat
gluten facility during May 2001. As a result, during the third quarter we have
recorded a $20 million charge related to this closing, primarily to reduce the
net book value of fixed assets to net realizable values.

#### Selling, General and Administrative Expenses

For the three months ended
May 31, 2001, SG&A expenses decreased $16.3 million, or approximately 13%,
from the same period last year. SG&A expenses directly connected to segments
decreased approximately $9.8 million (primarily related to the formation of Land
OLakes Farmland Feed joint venture and the sale of our Dubuque, Iowa pork
processing plant) and are included in the determination of business segment
income. During the three months ended May 31, 2001 compared with the same period
last year, we successfully reduced SG&A expenses not identified to business
segments by $6.5 million, primarily as a result of reduced personnel costs.

#### Restructuring and Other Charges

In connection with our
Navigating Tomorrow initiatives, we recorded $79.8 million of
restructuring and other charges. In addition to the significant charges included
in the above segment discussion, we recorded a $26 million charge to writeoff a
portion of our enterprise-wide integrated software system associated with
businesses which have been sold or are being operated through joint ventures.

#### Other  Income

Other income decreased
$39.7 million for the three months ended May 31, 2001 compared with the same
period last year primarily due to a decrease in other income directly connected
to the segments of $40.2 million. This decrease in other income directly
connected to the segments is mainly due to recognition of, during the three
months ended May 31, 2000, the $49.6 million gain on the sale of our direct
equity interest in Agriliance, partly offset by a $7.0 million loss on the sale
of our Dubuque, Iowa meat facility

#### Interest Expense

Net interest expense for
the three months increased $1 million compared with the same period last year
due primarily to an increase in the average interest rate.

#### Tax Benefit

The income tax benefit
increased $25.6 million due to our loss before income taxes and an increase in
the effective tax rate. The loss is due to restructuring and other charges
booked during the third quarter 2001. (See Note 7 of the Condensed Consolidated
Financial Statements.) The increase in the effective tax rate is a result of our
current estimate of annual income(loss) which will be patronage-sourced in 2001
compared to 2000.

## Recent
Accounting Pronouncements

Statement of Financial
Accounting Standards (SFAS) No. 140 Accounting for Transfers
and Servicing of Financial Assets and Extinguishments of Liabilities  was
issued by the FASB and is effective for transfers occurring after March 31, 2001
and for disclosures relating to securitization transactions and collateral and
for recognition and reclassification of collateral for fiscal years ending after
December 15, 2000 (our fiscal year 2001). We are currently evaluating the
impact, if any, that adoption of these provisions would have on our financial
statements.

Statement of Financial
Accounting Standards (SFAS) No. 141 Business
Combinations has been issued by the FASB and will become effective for
business combinations 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. Also, for purposes of the final statement, the
formation of a joint venture is not a business combination. We are currently
evaluating the impact, if any, that adoption of this provision will have on our
financial statements.

Statement of Financial
Accounting Standards (SFAS) No. 142 Goodwill and Other
Intangible Assets has been issued by the FASB. Goodwill with an indefinite
life will no longer be amortized; however, both goodwill and other intangible
assets will need to be tested annually for impairment. The goodwill and
intangible assets statement will be effective for fiscal years beginning after
December 15, 2001. Early adoption will be permitted for companies with a fiscal
year beginning after March 15, 2001 provided that the first quarter financial
statements have not been previously issued. In all cases, the statement must be
adopted at the beginning of a fiscal year. We are currently evaluating the
impact, if any, that adoption of these provisions will have on our financial
statements.

Staff Accounting Bulletin
No. 101, Revenue Recognition in Financial Statements was issued in
December 1999 by the staff of the SEC and is effective no later than the fourth
fiscal quarter of fiscal years beginning after December 15, 1999. We anticipate
that the adoption of SAB 101 will not have a significant effect on our financial
statements.

## Item 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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, 2000. 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, 2000.

We are including the
following cautionary statement in this Form 10-Q 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 include important factors (but not necessarily all 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,  we  caution  that,  while we
     believe such  assumptions or basis to be reasonable and made in good faith,
     the 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  our  business,   the
     anticipated  expenditures  for  environmental  remediation,  our ability to
     complete,  in the near term, a filing to register  additional  subordinated
     debt securities,  the impact, if any, of the fire at our meats' facility on
     our  refrigerated  foods  business,  our ability to  negotiate a new Credit
     Facility,  the impact of pending EPA regulations  related to sulfur content
     in refined  fuels and the  sufficiency  of our  arrangements  for  capital.
     Discussion  containing  such  forward-looking  statements  is  found in the
     material  set forth  herein under  Managements  Discussion  and
     Analysis  of  Financial  Condition  and  Results  of  Operations  and
     Notes   to   Condensed   Consolidated   Financial   Statements.

Taking into account the
foregoing, the following are identified as 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:

`1.       Weather patterns 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 U.S.  agricultural  produce  (including  foreign  trade  and  monetary
         policies,  laws and regulations,  political and  governmental  changes,  inflation and exchange rates,  taxes,
         operating conditions and world production and demand).

5.       Factors  affecting supply,  demand and price of crude oil, refined fuels,  natural gas,  livestock,  grain
         and other commodities.

6.       Regulatory delays and other unforeseeable obstacles beyond our control
         that may affect growth strategies through unification, acquisitions, investments
         in joint ventures and operational alliances.

7.       Competitors  in various  segments  may be larger,  may offer more varied  products or may possess  greater
         financial and other resources than Farmland.

8.       Unusual or unexpected events such as, among other things, adverse
         rulings or judgments in litigation, and environmental remediation costs in
         excess of amounts accrued.

9.       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, 2000.`

# PART II -
OTHER INFORMATION

## Item 5. Other
Information.

On July 8, 2001, our meat processing
facility located in Albert Lea, Minnesota suffered extensive fire damage. To
compensate for our lost production, we will shift production from this facility
to other facilities and we may contract with other meat processors to provide us
with finished products. We are evaluating what, if any, impact these events will
have on our financial results for the year ending August 31, 2001.

## Item 6.
Exhibits and Reports on Form 8-K.

There are no exhibits
required to be filed as part of Form 10-Q for quarter ended May 31, 2001.

## (b) Reports on
Form 8-K

On April 27, 2001 Farmland filed
a report on Form 8-K Item 5, Other Events. The report described our
agreement with Archer Daniels Midland Co. (ADM) to enter into a grain marketing
relationship.

On May 21, 2001 Farmland
filed a report on Form 8-K, Item 2, Acquisition or Disposition of
Assets and Item 7, Financial Statements and Exhibits. The
report described our agreement with ADM to enter into a grain marketing
relationship, our agreement with ADM to sell to ADM our wholly-owned subsidiary,
Farmland-Atwood, and the pro forma effect of these transactions on certain of
our previously filed financial statements.

# SIGNATURES

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.

`(Registrant)


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