Tableof Contents

 

 

 

**UNITEDSTATES**

**SECURITIESAND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

** **

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**FORM 10-Q**

 

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**x****  Quarterly report pursuant to Section 13 or 15(d) ofthe Securities Exchange Act of 1934**

** **

# **For the quarterly periodended November 30, 2008**

 

## **Commission file number:  33-83868**

## ** **

**AMERICANCRYSTAL SUGAR COMPANY**

(Exact name ofregistrant as specified in its charter)

 

| **Minnesota**                                                   | ** ** | **84-0004720**                        |
|-----------------------------------------------------------------|------------|---------------------------------------|
| (State or other  jurisdiction of incorporation or organization) |       | (I.R.S. Employer  Identification No.) |

 

**101 NorthThird Street**

**Moorhead,Minnesota  56560**

(Address ofprincipal executive offices)

 

**TelephoneNumber (218) 236-4400**

(Registrant’stelephone number, including area code)

 

Indicate by check markwhether the registrant (1) has filed all reports required to be filed by Section 13or 15(d) of the Securities Exchange Act of 1934 during the preceding 12months, and (2) has been subject to such filing requirements for the past90 days.

 

| YES   x |   | NO  o |
|------------------------|--------|-----------------|

 

Indicate by check markwhether the registrant is a large accelerated filer, an accelerated filer, anon-accelerated filer, or a smaller reporting company.  See definitions of “large accelerated filer,”“accelerated filer” and “smaller reporting company” in Rule 12b-2 of theExchange Act.

 

| Large accelerated filer o |   | Accelerated filer o |   | Non-accelerated filer x     |   | Smaller reporting  company o |
|--------------------------------|--------|---------------------|--------|-----------------------------|--------|------------------------------|
|                           |   |                |   | (Do not check if a  smaller |   |                         |
|                           |   |                |   | reporting company)          |   |                         |

 

Indicate by check markwhether the registrant is a shell company (as defined in rule 12b-2 of theAct).

 

| YES   o |   | NO  x |
|------------------------|--------|-----------------|

 

Indicate the number ofshares outstanding of each of the issuer’s classes of common stock, as of thelatest practicable date.

 

| ** **                               | ** ** | **Outstanding at** |
|------------------------------------------|------------|-------------------------|
| **Class of Common Stock** | ** ** | **January 7, 2009**     |
| **$10 Par  Value**                       | ** ** | **2,839**               |

 

 

 

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**AMERICANCRYSTAL SUGAR COMPANY**

 

**FORM 10-Q**

 

**INDEX**

 
| ** **       | ** **                                                                                      | **PAGE NO.** |
|------------------|-------------------------------------------------------------------------------------------------|--------------|
| ** **       | ** **                                                                                      | ** **   |
| **PART I**  | **FINANCIAL INFORMATION**                                                                       | ** **   |
|             |                                                                                            | ** **   |
| **ITEM 1.**      | **CONSOLIDATED FINANCIAL STATEMENTS**                                                           | ** **   |
|             |                                                                                            | ** **   |
| ** **       | **CONSOLIDATED  BALANCE SHEETS**                                                                | **1**        |
|             |                                                                                            | ** **   |
| ** **       | **CONSOLIDATED  STATEMENTS OF OPERATIONS**                                                      | **3**        |
|             |                                                                                            | ** **   |
| ** **       | **CONSOLIDATED  STATEMENTS OF CASH FLOWS**                                                      | **4**        |
|             |                                                                                            | ** **   |
| ** **       | **NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS**                                              | **5**        |
|             |                                                                                            | ** **   |
| **ITEM 2.**      | **MANAGEMENT’S  DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION** | **12**       |
|             |                                                                                            | ** **   |
| **ITEM 3.**      | **QUANTITATIVE AND QUALITATIVE  DISCLOSURES ABOUT MARKET RISK**                                 | **17**       |
|             |                                                                                            | ** **   |
| **ITEM 4.**      | **CONTROLS AND  PROCEDURES**                                                                    | **18**       |
|             |                                                                                            | ** **   |
| **PART II** | **OTHER INFORMATION**                                                                           | ** **   |
|             |                                                                                            | ** **   |
| **ITEM 1.**      | **LEGAL PROCEEDINGS**                                                                           | **18**       |
|             |                                                                                            | ** **   |
| **ITEM 1A.**     | **RISK FACTORS**                                                                                | **18**       |
|             |                                                                                            | ** **   |
| **ITEM 2.**      | **UNREGISTERED  SALES OF EQUITY SECURITIES AND USE OF PROCEEDS**                                | **18**       |
|             |                                                                                            | ** **   |
| **ITEM 3.**      | **DEFAULTS  UPON SENIOR SECURITIES**                                                            | **18**       |
|             |                                                                                            | ** **   |
| **ITEM 4.**      | **SUBMISSION  OF MATTERS TO A VOTEOF SECURITY  HOLDERS**                                        | **19**       |
|             |                                                                                            | ** **   |
| **ITEM 5.**      | **OTHER INFORMATION**                                                                           | **19**       |
|             |                                                                                            | ** **   |
| **ITEM  6.**     | **EXHIBITS**                                                                                    | **20**       |
|             |                                                                                            | ** **   |
| **SIGNATURES**   | **23**                                                                                          |

 

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**American Crystal Sugar Company**

**ConsolidatedBalance Sheets**

**(Unaudited)**

**(In Thousands)**

 

**Assets**

 
| ** **                                     | ** ** | **November 30** | ** ** | **August 31** | ** ** |
|------------------------------------------------|------------|----------------------|------------|--------------------|------------|
| ** **                                     | ** ** | **2008**             | ** ** | **2007**           | ** ** | **2008*** | ** ** |
| **Current  Assets:**                           |       |                 |       |               |       |   |   |
| Cash and Cash  Equivalents                     |       | $                    | 121        |               | $          | 254 |   | $ | 128 |   |
| Receivables:                                   |       |                 |       |               |       |   |   |
| Trade                                          |       | 66,740               |       | 58,290             |       | 66,149 |   |
| Members                                        |       | 3,917                |       | 3,199              |       | 2,535 |   |
| Other                                          |       | 2,471                |       | 9,704              |       | 2,767 |   |
| Advances to  Related Parties                   |       | 8,538                |       | 2,582              |       | 20,391 |   |
| Inventories                                    |       | 556,775              |       | 587,973            |       | 188,328 |   |
| Prepaid Expenses                               |       | 1,875                |       | 2,306              |       | 1,163 |   |
|                                           |       |                 |       |               |       |   |   |
| **Total  Current Assets**                      |       | 640,437              |       | 664,308            |       | 281,461 |   |
|                                           |       |                 |       |               |       |   |   |
| **Property  and Equipment:**                   |       |                 |       |               |       |   |   |
| Land and Land  Improvements                    |       | 60,099               |       | 58,137             |       | 60,110 |   |
| Buildings                                      |       | 113,913              |       | 110,457            |       | 112,170 |   |
| Equipment                                      |       | 878,555              |       | 851,085            |       | 877,113 |   |
| Construction in  Progress                      |       | 5,798                |       | 26,182             |       | 5,322 |   |
| Less Accumulated  Depreciation                 |       | (716,749             | )          | (687,317           | )          | (703,134 | ) |
|                                           |       |                 |       |               |       |   |   |
| **Net  Property and Equipment**                |       | 341,616              |       | 358,544            |       | 351,581 |   |
|                                           |       |                 |       |               |       |   |   |
| **Net  Property and Equipment Held for Lease** |       | 117,957              |       | 127,666            |       | 120,001 |   |
|                                           |       |                 |       |               |       |   |   |
| **Other  Assets:**                             |       |                 |       |               |       |   |   |
| Investments in  CoBank, ACB                    |       | 9,946                |       | 11,627             |       | 9,946 |   |
| Investments in  Marketing Cooperatives         |       | 4,184                |       | 5,722              |       | 4,152 |   |
| Pension Asset                                  |       | 34,758               |       | 37,428             |       | 35,101 |   |
| Other Assets                                   |       | 10,664               |       | 16,996             |       | 11,057 |   |
|                                           |       |                 |       |               |       |   |   |
| **Total  Other Assets**                        |       | 59,552               |       | 71,773             |       | 60,256 |   |
|                                           |       |                 |       |               |       |   |   |
| **Total  Assets**                              |       | $                    | 1,159,562  |               | $          | 1,222,291 |   | $ | 813,299 |   |

 

The Accompanying Notes are an Integral Part of These ConsolidatedFinancial Statements.

 

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* Derived from audited financial statements

 

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**American Crystal Sugar Company**

**Consolidated Balance Sheets**

**(Unaudited)**

**(In Thousands)**

** **

**Liabilities and Members’ Investments**

 
| ** **                                                  | ** ** | **November 30** | ** ** | **August 31** | ** ** |
|-------------------------------------------------------------|------------|----------------------|------------|--------------------|------------|
| ** **                                                  | ** ** | **2008**             | ** ** | **2007**           | ** ** | **2008*** | ** ** |
| **Current  Liabilities:**                                   |       |                 |       |               |       |   |   |
| Short-Term Debt                                             |       | $                    | 225,516    |               | $          | 250,612 |   | $ | 15,297 |   |
| Current  Maturities of Long-Term Debt                       |       | 20,991               |       | 25,627             |       | 20,991 |   |
| Accounts Payable                                            |       | 27,692               |       | 26,358             |       | 35,836 |   |
| Advances Due to  Related Parties                            |       | 2,784                |       | 3,741              |       | 3,343 |   |
| Accrued  Continuing Costs                                   |       | 42,366               |       | 42,094             |       | — |   |
| Other Current  Liabilities                                  |       | 26,966               |       | 26,575             |       | 27,286 |   |
| Amounts Due  Growers                                        |       | 225,241              |       | 237,576            |       | 120,933 |   |
|                                                        |       |                 |       |               |       |   |   |
| **Total  Current Liabilities**                              |       | 571,556              |       | 612,583            |       | 223,686 |   |
|                                                        |       |                 |       |               |       |   |   |
| **Long-Term  Debt, Net of Current Maturities**              |       | 157,087              |       | 160,321            |       | 157,801 |   |
|                                                        |       |                 |       |               |       |   |   |
| **Accrued  Employee Benefits**                              |       | 33,550               |       | 41,896             |       | 33,805 |   |
|                                                        |       |                 |       |               |       |   |   |
| **Other  Liabilities**                                      |       | 7,769                |       | 7,673              |       | 6,892 |   |
|                                                        |       |                 |       |               |       |   |   |
| **Total  Liabilities**                                      |       | 769,962              |       | 822,473            |       | 422,184 |   |
|                                                        |       |                 |       |               |       |   |   |
| **Commitments  and Contingencies**                          |       |                 |       |               |       |   |   |
|                                                        |       |                 |       |               |       |   |   |
| **Minority Interest in ProGold Limited Liability  Company** |       | 58,389               |       | 64,235             |       | 59,839 |   |
|                                                        |       |                 |       |               |       |   |   |
| **Members’  Investments:**                             |       |                 |       |               |       |   |   |
| Preferred Stock                                             |       | 38,275               |       | 38,275             |       | 38,275 |   |
| Common Stock                                                |       | 28                   |       | 29                 |       | 28 |   |
| Additional  Paid-In Capital                                 |       | 152,261              |       | 152,261            |       | 152,261 |   |
| Unit Retains                                                |       | 174,416              |       | 170,363            |       | 174,506 |   |
| Equity Retention                                            |       | 1,153                |       | 2,687              |       | 1,155 |   |
| Accumulated  Other Comprehensive Income (Loss)              |       | (9,010               | )          | (8,539             | )          | (8,984 | ) |
| Retained  Earnings (Accumulated Deficit)                    |       | (25,912              | )          | (19,493            | )          | (25,965 | ) |
|                                                        |       |                 |       |               |       |   |   |
| **Total  Members’ Investments**                        |       | 331,211              |       | 335,583            |       | 331,276 |   |
|                                                        |       |                 |       |               |       |   |   |
| **Total  Liabilities and Members’ Investments**        |       | $                    | 1,159,562  |               | $          | 1,222,291 |   | $ | 813,299 |   |

 

The Accompanying Notes are an Integral Part of These ConsolidatedFinancial Statements.

 

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* Derived from audited financial statements

 

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**American Crystal Sugar Company**

**ConsolidatedStatements of Operations**

**(Unaudited)**

**(In Thousands)**

 
| ** **                                                      | ** ** | **For the Three Months Ended  November 30** | ** ** |
|-----------------------------------------------------------------|------------|----------------------------------------------------------------------|------------|
| ** **                                                      | ** ** | **2008**                                                             | ** ** | **2007** | ** ** |
| **Net  Revenue**                                                |       | $                                                                    | 323,088    |   | $ | 304,334 |   |
|                                                            |       |                                                                 |       |   |   |
| **Cost of  Sales**                                              |       | 61,012                                                               |       | 8,826 |   |
|                                                            |       |                                                                 |       |   |   |
| **Gross  Proceeds**                                             |       | 262,076                                                              |       | 295,508 |   |
|                                                            |       |                                                                 |       |   |   |
| **Selling,  General and Administrative Expenses**               |       | 68,406                                                               |       | 63,032 |   |
| **Accrued  Continuing Costs**                                   |       | 42,366                                                               |       | 42,094 |   |
|                                                            |       |                                                                 |       |   |   |
| **Operating  Proceeds**                                         |       | 151,304                                                              |       | 190,382 |   |
|                                                            |       |                                                                 |       |   |   |
| **Other  Income (Expense):**                                    |       |                                                                 |       |   |   |
| Interest Income                                                 |       | 99                                                                   |       | 314 |   |
| Interest  Expense, Net                                          |       | (2,417                                                               | )          | (2,653 | ) |
| Other, Net                                                      |       | 4,807                                                                |       | 513 |   |
|                                                            |       |                                                                 |       |   |   |
| **Total  Other Income (Expense)**                               |       | 2,489                                                                |       | (1,826 | ) |
|                                                            |       |                                                                 |       |   |   |
| **Proceeds  Before Minority Interest and Income Tax Expense**   |       | 153,793                                                              |       | 188,556 |   |
|                                                            |       |                                                                 |       |   |   |
| **Minority  Interest**                                          |       | (1,671                                                               | )          | (2,500 | ) |
|                                                            |       |                                                                 |       |   |   |
| **Income  Tax Expense**                                         |       | (194                                                                 | )          | (1,171 | ) |
|                                                            |       |                                                                 |       |   |   |
| **Net  Proceeds Resulting from Member and Non-Member Business** |       | $                                                                    | 151,928    |   | $ | 184,885 |   |
|                                                            |       |                                                                 |       |   |   |
| **Distributions  of Net Proceeds:**                             |       |                                                                 |       |   |   |
| Credited/(Charged)  to Members’ Investments:               |       |                                                                 |       |   |   |
| Non-Member  Business Income                                     |       | $                                                                    | 279        |   | $ | 1,685 |   |
| Unit Retains  Declared to Members                               |       | —                                                               |       | — |   |
| Net Credit to  Members’ Investments                        |       | 279                                                                  |       | 1,685 |   |
| Payments To/Due  Members for Sugarbeets,                        |       |                                                                 |       |   |   |
| Net of Unit  Retains Declared                                   |       | 151,649                                                              |       | 183,200 |   |
| **Total**                                                       |       | $                                                                    | 151,928    |   | $ | 184,885 |   |

 

The Accompanying Notes are an Integral Part ofThese Consolidated Financial Statements.

 

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**American Crystal Sugar Company**

**ConsolidatedStatements of Cash Flows**

**(Unaudited)**

**(In Thousands)**

 
| ** **                                                            | ** ** | **For the Three Months Ended  November 30** | ** ** |
|-----------------------------------------------------------------------|------------|----------------------------------------------------------------------|------------|
| ** **                                                            | ** ** | **2008**                                                             | ** ** | **2007** | ** ** |
| **Cash  Provided By (Used In) Operating Activities:**                 | ** ** | ** **                                                           | ** ** | ** ** | ** ** |
| Net Proceeds  Resulting from Member and Non-Member Business           |       | $                                                                    | 151,928    |   | $ | 184,885 |   |
| Payments To/Due  Members for Sugarbeets, Net of Unit Retains Declared |       | (151,649                                                             | )          | (183,200 | ) |
| Add (Deduct)  Non-Cash Items:                                         |       |                                                                 |       |   |   |
| Depreciation and  Amortization                                        |       | 17,752                                                               |       | 17,958 |   |
| Income from  Equity Method Investees                                  |       | (5                                                                   | )          | (14 | ) |
| (Gain)/Loss on  the Disposition of Property and Equipment             |       | 267                                                                  |       | (6 | ) |
| Deferred Gain  Recognition                                            |       | (27                                                                  | )          | (49 | ) |
| Minority  Interest Gain                                               |       | 1,671                                                                |       | 2,500 |   |
| Changes in  Assets and Liabilities:                                   |       |                                                                 |       |   |   |
| Receivables                                                           |       | (1,677                                                               | )          | 14,095 |   |
| Inventories                                                           |       | (368,447                                                             | )          | (371,410 | ) |
| Prepaid Expenses                                                      |       | (712                                                                 | )          | (1,089 | ) |
| Non Current  Pension Asset                                            |       | 185                                                                  |       | (28 | ) |
| Advances To/Due  to Related Parties                                   |       | 11,294                                                               |       | 6,081 |   |
| Accounts Payable                                                      |       | (8,144                                                               | )          | (12,640 | ) |
| Accrued  Continuing Costs                                             |       | 42,366                                                               |       | 42,094 |   |
| Other Liabilities                                                     |       | 210                                                                  |       | (4,238 | ) |
| Amounts Due  Growers                                                  |       | 104,308                                                              |       | 94,316 |   |
| **Net  Cash Used In Operating Activities**                            |       | (200,680                                                             | )          | (210,745 | ) |
|                                                                  |       |                                                                 |       |   |   |
| **Cash  Provided By (Used In) Investing Activities:**                 |       |                                                                 |       |   |   |
| Purchases of  Property and Equipment                                  |       | (4,869                                                               | )          | (9,110 | ) |
| Purchases of  Property and Equipment Held for Lease                   |       | (750                                                                 | )          | (650 | ) |
| Proceeds from  the Sale of Property and Equipment                     |       | 3                                                                    |       | 16 |   |
| Changes in Other  Assets                                              |       | (3                                                                   | )          | (1,858 | ) |
| **Net  Cash Used In Investing Activities**                            |       | (5,619                                                               | )          | (11,602 | ) |
|                                                                  |       |                                                                 |       |   |   |
| **Cash  Provided By (Used In) Financing Activities:**                 |       |                                                                 |       |   |   |
| Net Proceeds  from Short-Term Debt                                    |       | 210,219                                                              |       | 225,632 |   |
| Proceeds from  Issuance of Long-Term Debt                             |       | —                                                               |       | 3,061 |   |
| Long-Term Debt  Repayment                                             |       | (714                                                                 | )          | (6,314 | ) |
| Distributions to  Minority Interest                                   |       | (3,121                                                               | )          | — |   |
| Payment of Unit  Retains and Equity Retention                         |       | (92                                                                  | )          | — |   |
| **Net  Cash Provided By Financing Activities**                        |       | 206,292                                                              |       | 222,379 |   |
| **Increase/(Decrease)  In Cash and Cash Equivalents**                 |       | (7                                                                   | )          | 32 |   |
| **Cash  and Cash Equivalents, Beginning of Year**                     |       | 128                                                                  |       | 222 |   |
|                                                                  |       |                                                                 |       |   |   |
| **Cash  and Cash Equivalents, End of Period**                         |       | $                                                                    | 121        |   | $ | 254 |   |

 

The Accompanying Notes are an Integral Part of These ConsolidatedFinancial Statements.

 

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# **AMERICAN CRYSTAL SUGARCOMPANY**

**NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS**

**FOR THETHREE MONTHS ENDED**

**November 30,2008 and 2007**

**(Unaudited)**

 

**Note 1: Basis of Presentation**

 

Theunaudited consolidated financial statements of American Crystal Sugar Company(the Company) contained herein have been prepared pursuant to the rules andregulations of the Securities and Exchange Commission.  Accordingly, they do not include all theinformation and footnotes required by accounting principles generally acceptedin the United States of America. However, in the opinion of management, all adjustments, consisting ofnormal recurring accruals, considered necessary for a fair presentation havebeen included.  These financialstatements should be read in conjunction with the consolidated financialstatements and notes included in the Company’s Annual Report on Form 10-Kfor the year ended August 31, 2008.

 

TheCompany’s consolidated financial statements are comprised of: American CrystalSugar Company; its wholly-owned subsidiaries Sidney Sugars Incorporated (SidneySugars) and Crab Creek Sugar Company (Crab Creek); and ProGold LimitedLiability Company (ProGold), a limited liability company in which the Companyholds a 51 percent ownership interest. All material inter-company transactions have been eliminated.

 

Theoperating results for the three months ended November 30, 2008, are notnecessarily indicative of the results that may be expected for the year ended August 31,2009.  The amount paid to shareholdersfor sugarbeets (member beet payment) depends on the future selling prices ofsugar and agri-products as well as processing and other costs incurred duringthe remainder of the fiscal year associated with the 2008 Red River Valleysugarbeet crop (RRV crop).  The amountpaid to non-member growers for sugarbeets (non-member beet payment) depends onthe future selling prices of sugar and the related selling expenses associatedwith the 2008 Sidney Sugars sugarbeet crop (Sidney crop).  For the purposes of this report, the amountof the beet payments, future revenues and costs have been estimated.  Therefore, adjustments with respect to theseestimates may be necessary in the future, as additional information becomesavailable.

 

**Note 2: Recently IssuedAccounting Pronouncements**

 

TheFinancial Accounting Standards Board (FASB) has issued Statement No. 157, *Fair Value Measurements*(SFAS 157).  This statement defines fair value, establishesa framework for measuring fair value in accordance with generally acceptedaccounting principles (GAAP), and expands disclosures about fair valuemeasurements.  This statement becameeffective for the Company in the first quarter of fiscal 2009.  Relative to SFAS 157, the FASB issued FASBStaff Positions (FSP) 157-1, 157-2 and 157-3. FSP 157-1 amends SFAS 157 toexclude SFAS No. 13, *Accounting for Leases*,and its related interpretive accounting pronouncements that address leasingtransactions, while FSP 157-2 delays the effective date of the application ofSFAS 157 for the Company to the first quarter of fiscal 2010 for allnon-financial assets and non-financial liabilities that are recognized ordisclosed at fair value in the financial statements on a nonrecurringbasis.  FSP 157-3 became effective October 10,2008 for determining the fair value of a financial asset when the market forthat asset is not active.  The Companydoes not expect that the adoption of this statement will have a material effecton the Company’s financial statements.

 

TheFASB has issued Statement No. 158, *Employers’ Accounting forDefined Benefit Pension and Other Postretirement Plans—an amendment of FASBStatements No. 87, 88, 106, and 132(R)*.  This statement requires the Company torecognize the over-funded or under-funded status of a defined benefitpostretirement plan as an asset or liability in its statement of financialposition and to recognize changes in that funded status in the year in whichthe changes occur through comprehensive income. This requirement became effective and was adopted by the Company as of August 31,2007.  This statement 

 

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alsorequires the Company in this fiscal year to change the annual measurement dateof the funded status of the plans from May 31 to August 31, the dateof its year-end statement of financial position.

 

TheFASB has issued Statement No. 160, *Noncontrolling Interestsin Consolidated Financial Statements — an amendment of ARB  No. 51*.  This statement requires all entities toreport noncontrolling (minority) interests in subsidiaries as equity in theconsolidated financial statements*.*  Itsintention is to eliminate the diversity in practice regarding the accountingfor transactions between an entity and noncontrolling interests.  This statement becomes effective forthe Company in the first quarter of fiscal 2010.  At that time, the Company will be required toreport the minority interest in ProGold as a component of equity.

 

TheFASB has issued Statement No. 161, *Disclosures aboutDerivative Instruments and Hedging Activities—an amendment of FASB Statement No. 133*.  This statement enhances the disclosurerequirements for derivatives and hedging activities.  This statement becomes effective for theCompany in the second quarter of fiscal 2009. The Company does not expect that the adoption of this statement willhave a material effect on the Company’s financial statements.

 

TheFASB has issued statement No. 162, *The Hierarchy of GenerallyAccepted Accounting Principles*. This statement identifies the sources of accounting principles and theframework for selecting the principles to be used in the preparation offinancial statements of nongovernmental entities that are presented inconformity with generally accepted accounting principles (GAAP) in the UnitedStates (the GAAP hierarchy).  Thisstatement became effective and was adopted by the Company on November 15,2008.

 

TheFASB has issued statement No. 141R, *Business Combinations.*  This statement replaces FASB Statement No. 141,*Business Combinations. *This Statement retains thefundamental requirements in Statement 141 that the acquisition method ofaccounting (which Statement 141 called the *purchasemethod*) be used for all business combinations and for an acquirer tobe identified for each business combination. This Statement defines the acquirer as the entity that obtains controlof one or more businesses in the business combination and establishes theacquisition date as the date that the acquirer achieves control.  This statement becomes effective for theCompany in fiscal 2010.  The Company doesnot expect that the adoption of this statement will have a material effect onthe Company’s financial statements.

 

TheFASB has issued FASB Staff Position (FSP) FAS 133-1 and FIN 45-4, *Disclosures about Credit Derivatives and Certain Guarantees: AnAmendment of FASB Statement No. 133 and FASB Interpretation No. 45;and Clarification of the Effective Date of FASB Statement No. 161.*  This FSP amends FASB Statement No. 133, *Accounting for Derivative Instruments and HedgingActivities,*to require disclosures by sellers of credit derivatives,including credit derivatives embedded in a hybrid instrument.  This FSP also amends FASB Interpretation No. 45,*Guarantor’s Accounting and DisclosureRequirements for Guarantees, Including Indirect Guarantees of Indebtedness ofOthers,*to require an additional disclosure about the current statusof the payment/performance risk of a guarantee. Further, this FSP clarifies the Board’s intent about the effective dateof FASB Statement No. 161, *Disclosuresabout Derivative Instruments and Hedging Activities*.  This FSP became effective and was adopted bythe Company on November 30, 2008.

 

TheFASB has issued FSP FAS 142-3, *Determination of theUseful Life of Intangible Assets. *ThisFSP amends the factors that should be considered in developing renewal orextension assumptions used to determine the useful life of a recognizedintangible asset under FASB Statement No. 142, *Goodwill and Other Intangible Assets*.  The intent of this FSP is to improve theconsistency between the useful life of a recognized intangible asset under Statement142 and the period of expected cash flows used to measure the fair value of theasset under FASB Statement No. 141 (revised 2007), *Business Combinations,*and other U.S.generally accepted accounting principles (GAAP).  This FSP becomes effective for the Company inFiscal 2010.  The Company does not expectthat the adoption of this FSP will have a material effect on the Company’sfinancial statements.

 

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TheFASB has issued FSP FAS 140-4 and FIN 46(R)-8 *Disclosuresby Public Entities (Enterprises) about Transfers of Financial Assets andInterests in Variable Interest Entities.*  This FSP amends FASB Statement No. 140, *Accounting for Transfers and Servicing of Financial Assets andExtinguishments of Liabilities,* to require public entities toprovide additional disclosures about transfers of financial assets.  It also amends FASB Interpretation No. 46(revised December 2003),*****Consolidation of Variable Interest Entities,* to requirepublic enterprises, including sponsors that have a variable interest in avariable interest entity, to provide additional disclosures about theirinvolvement with variable interest entities. * *This FSP becomes effective for theCompany in the second quarter of Fiscal 2009. The Company does not expect that the adoption of this FSP will have amaterial effect on the Company’s financial statements.

 

TheFASB has issued FSP FAS 132(R)-1 *Employers’ Disclosuresabout Postretirement Benefit Plan Assets.*  This FSP amends FASB Statement No. 132(revised 2003), *Employers’ Disclosures about Pensions andOther Postretirement Benefits,* to provide guidance on an employer’sdisclosure about plan assets of a defined benefit pension plan or otherpostretirement plan.  This FSP becomeseffective for the Company in Fiscal 2010. The Company does not expect that the adoption of this FSP will have amaterial effect on the Company’s financial statements.

 

**Note 3: Inventories**

 

Themajor components of inventories are as follows (In Thousands):

 
| ** **                                                             | ** ** | **November 30  2008** | ** ** | **November 30  2007** | ** ** | **August 31  2008** | ** ** |
|------------------------------------------------------------------------|------------|----------------------------|------------|----------------------------|------------|--------------------------|------------|
| Refined Sugar,  Pulp, Molasses, Other Agri-Products and Sugarbeet Seed |       | $                          | 211,344    |                       | $          | 247,284                  |       | $ | 151,741 |   |
| Unprocessed  Sugarbeets                                                |       | 308,823                    |       | 312,221                    |       | —                   |       |
| Maintenance  Parts and Supplies                                        |       | 36,608                     |       | 28,468                     |       | 36,587                   |       |
|                                                                   |       |                       |       |                       |       |                     |       |
| Total  Inventories                                                     |       | $                          | 556,775    |                       | $          | 587,973                  |       | $ | 188,328 |   |

 

Sugar,pulp, molasses and other agri-products inventories are valued at estimated net realizablevalue.  Unprocessed sugarbeets are valuedat the estimated gross beet payment. Maintenance parts and supplies and sugarbeet seed inventories are valuedat the lower of average cost or market.

 

# **Note4: Net Property and Equipment**

# ** **

Infiscal 2008, an impairment loss of $11.9 million related to property andequipment at the Sidney, Montana facility was recognized.  Based on further analysis as of November 30,2008, which indicates better than previously expected operating results forfiscal 2009 and 2010 due to increased sugar production and sugar prices infiscal 2009 and increased contracted sugarbeet acreage for fiscal 2010, noadditional impairment was indicated.

 

# **Note5: Short-Term Debt**

# ** **

TheCompany has a seasonal line of credit with a consortium of lenders led byCoBank, ACB of $345.0 million and a line of credit with Wells Fargo Bankfor $1 million.  The Company’scommercial paper program provides short-term borrowings of up to $325million.  Any borrowings under the commercial paper program along withoutstanding short-term letters of credit will act to reduce the availablecredit under the CoBank, ACB seasonal line of credit by a commensurateamount.  The Company also utilizes theCommodity Credit Corporation (CCC) to meet its short-term borrowing needs.

 

As of November 30,2008, the Company had outstanding commercial paper of $30.5****millionat an average interest rate of 3.35% and maturity dates between December 1,2008 and December 5, 2008.  Inaddition, the Company had an outstanding non-recourse loan with the CCC of$51.0 million, against which 2.2 million hundredweight of sugar was pledged ascollateral.  The CCC loan carried aninterest rate of 2.5% and a maturity date of August 31, 2009.  The Company also had outstanding short-termdebt with CoBank, ACB as of November 30, 2008 of $144.0 million at anaverage interest rate of 2.88% and 

 

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maturity dates between December 24,2008 and February 19, 2009.  TheCompany had $2.1 million of short-term letters of credit outstanding as of November 30,2008.  The unused seasonal line of creditas of November 30, 2008 was $169.4 million.

 

As of November 30,2007, the Company had outstanding commercial paper of $200.6****million at an average interest rate of 5.98% and maturitydates between December 1, 2007 and February 29, 2008.  The Company also had $50.0 million ofoutstanding short-term debt with CoBank, ACB as of November 30, 2007, atan interest rate of 5.75% and a maturity date of January 22, 2008.  The Company had no outstanding short-termdebt with the CCC as of November 30, 2007. The Company had $2.1 million of short-term letters of credit outstandingas of November 30, 2007.  The unusedseasonal line of credit as of November 30, 2007 was $138.3 million.

 

**Note 6: Long-Term Debt**

 

Asof November 30, 2008, the Company had long-term debt availability withCoBank, ACB of****$184.8 million, of which$53.3 million in loans and $70.3 million in long-term letters of credit wereoutstanding.  The unused long-term lineof credit as of November 30, 2008, was $61.2 million.  In addition, the Company had long-term debtoutstanding, as of November 30, 2008, of $50 million from a privateplacement of Senior Notes that occurred in September of 1998; $3.6 millionfrom a private placement of Senior Notes that occurred in January of 2003;$70.4 million from seven separate issuances of Pollution Control andIndustrial Development Revenue Bonds; and a term loan with Bank of North Dakotaof $ .8 million.

 

Asof November 30, 2007, the Company had $76.9 million in loans outstandingwith CoBank, ACB and $69.3 million in long-term letters of creditoutstanding.  In addition, the Companyhad long-term debt outstanding, as of November 30, 2007, of$50 million from a private placement of Senior Notes that occurred in September of1998; $6.4 million from a private placement of Senior Notes that occurred in January of2003; $51.0 million from ten separate issuances of Pollution Control andIndustrial Development Revenue Bonds; and a term loan with Bank of North Dakotaof $1.6 million.

 

**Note 7: Interest Paid andInterest Capitalized**

 

Interestpaid, net of amounts capitalized, was $1.1 million and $1.0 million for thethree months ended November 30, 2008 and 2007, respectively.  Interest capitalized was $ .2 million and $..4 million for the three months ended November 30, 2008 and 2007,respectively.

 

**Note 8: Accrued ContinuingCosts**

 

For interim reporting,the net proceeds from member business is based on the forecasted gross beetpayment and the percentage of the tons of sugarbeets processed to the totalestimated tons of sugarbeets to process for a given crop year.  The net proceeds from the operations ofSidney Sugars is based on the forecasted net income for the fiscal year and thepercentage of the tons of non-member sugarbeets processed to the totalestimated tons of non-member sugarbeets to process for a given fiscal year.

 

Accrued continuing costsrepresent the difference between the net proceeds as determined above andactual member business crop year and Sidney Sugars fiscal year revenuesrealized and expenses incurred through the end of the reporting period.  Accrued continuing costs are reflected in theConsolidated Financial Statements as a cost on the Consolidated Statements ofOperations and as a current liability on the Consolidated Balance Sheets.

 

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**Note 9: ****NetPeriodic Pension and Post-Retirement Costs**

 

The following schedules provide the components of theNet Periodic Pension and Post-Retirement Costs for the three months ended November 30, 2008 and 2007:

 

***Components of Net Periodic PensionCost***

(In Thousands)

 
| ** **                           | ** ** | **For the Three Months Ended  November 30** | ** ** |
|--------------------------------------|------------|----------------------------------------------------------------------|------------|
| ** **                           | ** ** | **2008**                                                             | ** ** | **2007** | ** ** |
| Service Cost                         |       | $                                                                    | 1,049      |   | $ | 941 |   |
| Interest Cost                        |       | 2,668                                                                |       | 2,038 |   |
| Expected Return  on Plan Assets      |       | (3,864                                                               | )          | (3,241 | ) |
| Amortization of  Prior Service Costs |       | 411                                                                  |       | 329 |   |
| Amortization of  Net Actuarial Loss  |       | 18                                                                   |       | 15 |   |
| FAS 158  Measurement Date Adjustment |       | (56                                                                  | )          | — |   |
| Net Periodic  Pension Cost           |       | $                                                                    | 226        |   | $ | 82 |   |

 

***Components of Net Periodic Post-RetirementCost***

(InThousands)

 
| ** **                          | ** ** | **For the Three Months Ended  November 30** | ** ** |
|-------------------------------------|------------|----------------------------------------------------------------------|------------|
| ** **                          | ** ** | **2008**                                                             | ** ** | **2007** | ** ** |
| Service Cost                        |       | $                                                                    | 242        |   | $ | 269 |   |
| Interest Cost                       |       | 472                                                                  |       | 466 |   |
| Amortization of  Net Actuarial Gain |       | (169                                                                 | )          | (56 | ) |
| Net Periodic  Post-Retirement Cost  |       | $                                                                    | 545        |   | $ | 679 |   |

 

Inaccordance with Statement No. 158, *Employers’ Accounting forDefined Benefit Pension and Other Postretirement Plans—an amendment of FASBStatements No. 87, 88, 106, and 132(R) *which requires theCompany in fiscal 2009 to change the annual measurement date of the fundedstatus of the pension plans from May 31 to August 31, the Company hasrecorded a direct charge of approximately $225,000 to retained earningsrepresenting a measurement date adjustment of 3/15ths of the pension cost forthe period of June 1, 2008 to August 31, 2009.  The remaining 12/15ths of this pension costwill be expensed and recognized during fiscal 2009.

 

TheCompany does not believe it will be required to make contributions to thepension plans during this fiscal year. The Company has contributed and made benefit payments of approximately$17,000 related to the Supplemental Executive Retirement Plans during the threemonths ended November 30, 2008.  TheCompany expects to contribute and make benefit payments of approximately$77,000 this fiscal year related to the Supplemental Executive RetirementPlans.

 

TheCompany has contributed and made benefit payments of approximately $200,000 related to the post-retirement plans duringthe three months ended November 30, 2008. The Company expects to contributeand make benefit payments of approximately $1.0 million related to thepost-retirement plans during the current fiscal year.

 

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**Note 10: Members’ Investments**

 
| ** **              | ** ** | ** **         | ** ** | **Shares**     | ** ** | **Shares Issued**     | ** ** |
|-------------------------|------------|--------------------|------------|----------------|------------|----------------------------|------------|
| ** **              | ** ** | **Par Value** | ** ** | **Authorized** | ** ** | **& Outstanding** | ** ** |
| Preferred Stock:        |       |               |       |           |       |                       |       |
| January 7,  2009   |       | $                  | 76.77      |           | 600,000    |                       | 498,570    |   |
| November 30,  2008 |       | $                  | 76.77      |           | 600,000    |                       | 498,570    |   |
| August 31,  2008   |       | $                  | 76.77      |           | 600,000    |                       | 498,570    |   |
| November 30,  2007 |       | $                  | 76.77      |           | 600,000    |                       | 498,570    |   |
|                    |       |               |       |           |       |                       |       |
| Common Stock:           |       |               |       |           |       |                       |       |
| January 7,  2009   |       | $                  | 10.00      |           | 4,000      |                       | 2,839      |   |
| November 30,  2008 |       | $                  | 10.00      |           | 4,000      |                       | 2,839      |   |
| August 31,  2008   |       | $                  | 10.00      |           | 4,000      |                       | 2,839      |   |
| November 30,  2007 |       | $                  | 10.00      |           | 4,000      |                       | 2,878      |   |

 

**Note 11: Shipping and HandlingCosts**

 

Thecosts incurred for the shipping and handling of products sold are classified inthe financial statements as a selling expense on the Statements ofOperations.  Shipping and handling costswere $47.5 million and $43.3 million for the three months ended November 30,2008 and 2007, respectively.

 

**Note 12: Segment Reporting**

 

The Company hasidentified two reportable segments: Sugar and Leasing.  The sugar segment is engaged primarily in theproduction and marketing of sugar from sugarbeets.  It also sells agri-products and sugarbeetseed.  The leasing segment is engaged inthe leasing of a corn wet-milling plant used in the production of high-fructosecorn syrup sweetener.  The segments aremanaged separately.  There are nointer-segment sales.  The leasing segmenthas a major customer that accounts for all of that segment’s revenue.

 

Summarized financialinformation concerning the Company’s reportable segments for the three months ended November 30,2008 and 2007, is shown below:

 
| ** **                           | ** ** | **For the Three Months Ended November 30, 2008** | ** ** |
|--------------------------------------|------------|-------------------------------------------------------------------------------------|------------|
| ** **                           | ** ** | **(Dollars In Thousands)**                                                | ** ** |
| ** **                           | ** ** | **Sugar**                                                                           | ** ** | **Leasing** | ** ** | **Consolidated** | ** ** |
| Net Revenue from  External Customers |       | $                                                                                   | 316,863    |   | $ | 6,225 |   | $ | 323,088 |   |
| Gross Proceeds                       |       | $                                                                                   | 258,645    |   | $ | 3,431 |   | $ | 262,076 |   |
| Depreciation and  Amortization       |       | $                                                                                   | 14,958     |   | $ | 2,794 |   | $ | 17,752 |   |
| Interest Income                      |       | $                                                                                   | 98         |   | $ | 1 |   | $ | 99 |   |
| Interest Expense                     |       | $                                                                                   | 2,417      |   | $ | — |   | $ | 2,417 |   |
| Income from  Equity Method Investees |       | $                                                                                   | 5          |   | $ | — |   | $ | 5 |   |
| Other Income,  Net                   |       | $                                                                                   | 4,802      |   | $ | — |   | $ | 4,802 |   |
| Net Proceeds                         |       | $                                                                                   | 150,189    |   | $ | 1,739 |   | $ | 151,928 |   |
|                                 |       |                                                                                |       |   |   |   |   |
| Capital  Expenditures                |       | $                                                                                   | 4,869      |   | $ | 750 |   | $ | 5,619 |   |

 

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| ** **                           | ** ** | **For the Three Months Ended November 30, 2007** | ** ** |
|--------------------------------------|------------|-------------------------------------------------------------------------------------|------------|
| ** **                           | ** ** | **(Dollars In Thousands)**                                                | ** ** |
| ** **                           | ** ** | **Sugar**                                                                           | ** ** | **Leasing** | ** ** | **Consolidated** | ** ** |
| Net Revenue from  External Customers |       | $                                                                                   | 297,505    |   | $ | 6,829 |   | $ | 304,334 |   |
| Gross Proceeds                       |       | $                                                                                   | 290,196    |   | $ | 5,312 |   | $ | 295,508 |   |
| Depreciation and  Amortization       |       | $                                                                                   | 15,179     |   | $ | 2,779 |   | $ | 17,958 |   |
| Interest Income                      |       | $                                                                                   | 308        |   | $ | 6 |   | $ | 314 |   |
| Interest Expense                     |       | $                                                                                   | 2,479      |   | $ | 174 |   | $ | 2,653 |   |
| Income from  Equity Method Investees |       | $                                                                                   | 14         |   | $ | — |   | $ | 14 |   |
| Other Income,  Net                   |       | $                                                                                   | 499        |   | $ | — |   | $ | 499 |   |
| Net Proceeds                         |       | $                                                                                   | 182,283    |   | $ | 2,602 |   | $ | 184,885 |   |
|                                 |       |                                                                                |       |   |   |   |   |
| Capital  Expenditures                |       | $                                                                                   | 9,110      |   | $ | 650 |   | $ | 9,760 |   |

** **
| ** **                   | ** ** | **As of November 30, 2008** | ** ** |
|------------------------------|------------|-------------------------------------------------|------------|
| ** **                   | ** ** | **(Dollars In Thousands)**            | ** ** |
| ** **                   | ** ** | **Sugar**                                       | ** ** | **Leasing** | ** ** | **Consolidated** | ** ** |
| Property and  Equipment, Net |       | $                                               | 341,616    |   | $ | — |   | $ | 341,616 |   |
| Assets Held for  Lease, Net  |       | $                                               | —     |   | $ | 117,957 |   | $ | 117,957 |   |
| Segment Assets               |       | $                                               | 1,037,101  |   | $ | 122,461 |   | $ | 1,159,562 |   |

 
| ** **                   | ** ** | **As of November 30, 2007** | ** ** |
|------------------------------|------------|-------------------------------------------------|------------|
| ** **                   | ** ** | **(Dollars In Thousands)**            | ** ** |
| ** **                   | ** ** | **Sugar**                                       | ** ** | **Leasing** | ** ** | **Consolidated** | ** ** |
| Property and  Equipment, Net |       | $                                               | 358,544    |   | $ | — |   | $ | 358,544 |   |
| Assets Held for  Lease, Net  |       | $                                               | —     |   | $ | 127,666 |   | $ | 127,666 |   |
| Segment Assets               |       | $                                               | 1,086,500  |   | $ | 135,791 |   | $ | 1,222,291 |   |

 

**Note 13: Environmental Matters**

 

TheCompany is subject to extensive federal and state environmental laws andregulations with respect to water and air quality, solid waste disposal andodor and noise control.  The Companyconducts an ongoing compliance program designed to meet these environmentallaws and regulations.  The Company believesthat it is in substantial compliance with applicable environmental laws andregulations.  From time to time, however,the Company may be involved in investigations or determinations regardingnon-material matters that may arise.

 

OnNovember 25, 2008, the Company entered into a stipulation agreement withthe Minnesota Pollution Control Agency (MPCA) related to hydrogen sulfideemissions from its Crookston, East Grand Forks and Moorhead, Minnesotafactories.  This agreement requires theCompany, among other conditions, to pay a penalty of $185,000 and to developand implement Hydrogen Sulfide Management Strategies at each of the Minnesotafactories.  As part of the HydrogenSulfide Management Strategies, the Company has agreed to make certain capitalexpenditures over the next three years and implement specified changes inoperating procedures to contain hydrogen sulfide emissions at the Minnesotafactories.  The required capitalexpenditures are currently estimated to be approximately $12 million.  The costs associated with operational changesare not currently known.

 

TheCompany works closely with all affected government agencies to resolveenvironmental issues that arise and believes they will be resolved without anyadverse effect on the Company.

 

TheCompany has identified capital expenditures for environmental related projectsat the Company’s factory locations of $29.0 million.

 

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**Note 14: Legal Matters**

 

Anothersugar company has appealed to the Ninth Circuit Court of Appeals a decision ofthe United States District Court relative to the determination and transfer ofsugar marketing allocations made by the USDA. If this case is overturned, it could result in the Company experiencinga reduction in marketing allocations equal to the loss of approximately 15,000acres in future crop years assuming no other related factors were to change.

 

**Item 2. Management’s Discussion and Analysis of Resultsof Operations and Financial Condition for the Three Months Ended November 30,2008 and 2007**

** **

This report containsforward-looking statements that involve risks and uncertainties.  Such forward-looking statements include,among others, those statements including the words “expect”, “anticipate”, “believe”,“may” and similar expressions.  TheCompany’s actual results could differ materially from those indicated.  Risk factors that could cause or contributeto such differences include, without limitation, market factors, weather andgeneral economic conditions, farm and trade policy, and available quantity andquality of sugarbeets.  For a morecomplete discussion of “Risk Factors”, please refer to the Company’s 2008 Form 10-K.

 

**Overview**

 

Theharvest of the Red River Valley and Sidney sugarbeet crops grown during 2008and to be processed during fiscal 2009 produced a total of 10.7 milliontons of sugarbeets, or approximately 25.4 tons of sugarbeets per acre fromapproximately 422,000 acres.  Thisrepresents a decrease in total tons harvested of approximately 14.1 percentcompared to the 2007 crop.  The sugarcontent of the 2008 crop is 17.6 percent as compared to the 18.1 percent sugarcontent of the 2007 crop.  The Companyexpects to produce a total of approximately 31.3 million hundredweight ofsugar from the 2008 crop, a decrease of approximately 14.5 percent compared tothe 2007 crop.

 

NetProceeds from Member and Non-Member Business for fiscal 2009 are expected to beapproximately 13 percent lower than in fiscal 2008.  This decrease is primarily due to fewer tonsharvested and a decline in the sugar content of the sugarbeets resulting in thedecreased production of sugar and agri-products. This decrease is partiallyoffset by anticipated higher net selling prices for sugar and agri-products.

 

**Comparisonof the Three Months Ended November 30, 2008 and 2007**

 

Revenuefor the three months ended November 30, 2008, was $323.1 million, anincrease of $18.8 million from the three months ended November 30,2007.  The table below reflects thepercentage changes in product revenues, prices and volumes for the three monthsended November 30, 2008, as compared to the three months ended November 30,2007.

 
| **Product** | ** ** | **Revenue** | ** ** | **Selling Price** | ** ** | **Volume** | ** ** |
|-------------|------------|-------------|------------|------------------------|------------|------------|------------|
| Sugar       |       | 10.5        | %          | 7.5                    | %          | 2.8        | %          |
| Pulp        |       | -12.8       | %          | 40.5                   | %          | -37.9      | %          |
| Molasses    |       | -40.8       | %          | 6.7                    | %          | -44.5      | %          |
| CSB         |       | 26.2        | %          | 26.1                   | %          | 0.1        | %          |
| Betaine     |       | 4.5         | %          | 16.1                   | %          | -10.0      | %          |

 

Theincreases in selling prices for our products reflect strong markets due tosupply and demand factors. The decreases in the volumes of pulp and molassessold were due in part to lower product availability resulting from a 22.6%decrease in pulp produced and a 12.8 % decrease in molasses produced in thefirst three months of this fiscal year as compared to same time period lastfiscal year. Lower beginning inventory levels for both pulp and molasses thisyear as compared to last year also contributed to the reduction in theavailability of products for sale.

 

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Rentalrevenue on the ProGold operating lease was $6.2 million and $6.8 million forthe three months ended November 30, 2008 and 2007, respectively.

 

Costof sales for the three months ended November 30, 2008, exclusive ofpayments to members for sugarbeets, increased $52.2 million as compared to thethree months ended November 30, 2007. This increase was primarily related to the following:

 

·                  At the end of each reporting period, productinventories are recorded at their net realizable value.  The change in the net realizable value of theproduct inventories from the beginning of the reporting period is recorded onthe balance sheet as either an increase or decrease to inventories with acorresponding dollar for dollar adjustment to cost of sales on the statement ofoperations.  The increase in the netrealizable value of product inventories for the three months ended November 30,2008 was $58.0 million as compared to an increase of $88.9 million for theprevious year’s three month period ended November 30, 2007 resulting in a$30.9 million unfavorable change in the cost of sales between the two years asshown in the table below:

 

**Change in the Net Realizable Value of Product Inventories**

 
| ** **                                                   | ** ** | **For the Three Months Ended November 30** | ** ** |
|--------------------------------------------------------------|------------|---------------------------------------------------------------------|------------|
| **(In Millions)**                                       | ** ** | **2008**                                                            | ** ** | **2007** | ** ** | **Change** | ** ** |
| Beginning  Product Inventories at Net Realizable Value       |       | $                                                                   | (150.6     | ) | $ | (156.4 | ) | $ | 5.8 | (1) |
| Ending Product  Inventories at Net Realizable Value          |       | 208.6                                                               |       | 245.3 |   | (36.7 | )(2) |
| Increase in the  Net Realizable Value of Product Inventories |       | $                                                                   | 58.0       |   | $ | 88.9 |   | $ | (30.9 | ) |

 

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(1) The change isprimarily due to lower quantities of products as of August 31, 2008 ascompared to August 31, 2007.

(2) The change isprimarily due to a 27.8 percent decrease in the hundredweight of sugarinventory as of November 30, 2008 as compared to November 30, 2007partially offset by an 11.5 percent increase in the per hundredweight netrealizable value of sugar inventory along with higher quantities and per tonnet realizable value of pulp inventory as of November 30, 2008 as comparedto November 30, 2007.

 

·                  Due to lower than anticipated sugarproduction and inventory levels during the first quarter of this year, theCompany’s sugar marketing agent, United Sugars Corporation, purchased and soldadditional sugar to meet our customers’ needs. As a result, the costs associated with purchased sugar increased $16.4million for the three months ended November 30, 2008, as compared to thethree months ended November 30, 2007.

·                  Factory operating costs increased $3.8million for the three months ended November 30, 2008, as compared to thethree months ended November 30, 2007, primarily due to higher costsassociated with coke, limerock and chemicals.

 

Selling,general and administrative expenses increased $5.4 million for the three monthsended November 30, 2008, as compared to the three months ended November 30,2007.  Selling expenses increased $6.3million primarily due to the increased freight and packaging costs for sugarpartially offset by lower freight costs for pulp and molasses resulting fromlower sales volumes.  General andadministrative expenses decreased $ .9 million due to general cost decreases.

 

TotalOther Income increased $4.3 million for the three months ended November 30,2008, as compared to the three months ended November 30, 2007.  This was due primarily to the receipt of $4.8million in November 2008 related to a legal settlement.

 

Non-memberbusiness activities resulted in a gain of $ .3 million for the three monthsended November 30, 2008 as compared to a gain of $1.7 million for thethree months ended November 30, 2007. The decrease was primarily related to the reduced earnings of SidneySugars and reduced income from the activities of ProGold.

 

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**Food,Conservation and Energy Act of 2008**

 

TheFood, Conservation and Energy Act of 2008 (the Farm Bill) enacted in May, 2008,contains several provisions related to the domestic sugar industry, aimed atachieving balance and stability in the U.S. sugar market while minimizing thecost to the Federal government.  The FarmBill applies to the 2008 through 2012 crop years.  Generally, the Farm Bill:

 

·                  maintains a non-recourse loan program,

·                  sets a minimum overall allotment quantity forU.S. producers at no less than 85% of domestic consumption,

·                  maintains a system of marketing allocationsfor sugarbeet and sugar cane producers,

·                  restricts imports of foreign sugar and

·                  provides a new market balancing mechanism todivert any oversupply of sugar from sugar producers to ethanol producers.

 

Underthe Farm Bill, sugar processors can borrow funds on a non-recourse basis fromthe Commodity Credit Corporation (CCC), with repayment of such funds secured bysugar.  If the price of sugar drops belowthe forfeiture price, the processors can forfeit the sugar securing the loansto the CCC in lieu of repayment. Processors may also obtain CCC loans for “in-process” sugar or syrups at80 percent of the loan rate.

 

TheFarm Bill incorporates gradual loan rate increases for raw and refinedsugar.  For raw sugar, the loan rate willincrease three-quarters of a cent per pound, raw value, phased-in inquarter-cent increments over crop years 2009-2011.  Raw cane loan rates will remain at 18.00cents/lb in 2008 then rise gradually to 18.75 cents by 2011, and they willremain at 18.75 cents/lb for the 2012 crop year.  Refined beet sugar loan rates are set at22.90 cents/lb for the 2008 crop and thereafter are set at a rate equal to 128.5percent of the loan rate per pound for raw cane sugar for each of the 2009through 2012 crop years.

 

TheUnited States Department of Agriculture (USDA) has historically maintained rawand refined sugar prices above the forfeiture price without cost to the U.S.Treasury by regulating the supply of sugar in the U.S. market throughmanagement of a tariff rate quota system. Currently, forty exporting countries retain guaranteed preferentialaccess to the U.S. market under World Trade Organization (WTO) and Free TradeAgreement (FTA) rules.  Mexico’s accesshas been unlimited since January 1, 2008. This Farm Bill sets a minimum overall allotment quantity for U.S.producers at no less than 85% of domestic consumption and provides a marketbalancing mechanism if there is an oversupply in the domestic sugarmarket.  If the Secretary of Agriculturedetermines there is an oversupply of sugar, the new market balancing mechanismrequires the Secretary to divert the excess sugar from sugar producers toethanol producers while minimizing the cost to the U.S Treasury.  Although the market balancing mechanism willprovide sustainability to the sugar industry in the short term, there is noassurance that the sugar-to-ethanol program will be in place after the FarmBill expires.

 

Themarketing allotments and allocations set forth under the Farm Bill affect thesugar produced from the 2008 crop through the 2012 crop.  On an annual basis, the marketing allotmentsand the corresponding allocation to the Company will dictate the amount ofsugar the Company can sell into the domestic market.  The Company’s marketing allocation for the2008 crop is currently set at approximately 35 million hundredweight.  The Company’s allocation may reduce orincrease the amount of sugar the Company can market for a given year, thusaffecting the number of acres of sugarbeets required for processing to producethat amount of sugar.

 

**NorthAmerican Free Trade Agreement**

 

TheNorth American Free Trade Agreement (NAFTA) governs sweetener trade between theUnited States and Mexico.  Under the NAFTA, tariffs on over-quota importsof sugar from and exports of sugar to Mexico expired on January 1,2008.  Imports of Mexican sugar could cause material harm to theUnited States sugar market.  The Company has no way to predict the extentto which Mexico will take advantage of its export opportunities**.**

 

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**Regionaland Bilateral Free Trade Agreements**

 

Underthe current administration, the United States government is pursuing anaggressive agenda on international trade. It is seeking to negotiate new free trade agreements with a number ofcountries and regions that are major producers of sugar.  The primary agreements affecting sugar that arecompleted or are being negotiated, to the Company’s knowledge, include the PeruFree Trade Agreement, Colombian Free Trade Agreement, Panama Free TradeAgreement, as well as, agreements with the Free Trade Area of the Americas, theAssociation of Southeast Asian Nations, South Africa, Thailand, and others.  The Company believes these agreements, ifthey reach fruition, could negatively impact the Company’s profitability.  If increases in guaranteed access orreductions in sugar tariffs are included in these agreements, excess sugar fromthese regions could enter the U.S. market and put pressure on domestic sugarprices.

 

ThePeru Free Trade Agreement has been ratified by the U.S. Congress.  Negotiations have been completed on theU.S.-Colombian Free Trade Agreement and the U.S.-Panama Free Trade Agreementbut they have not been ratified by the U.S. Congress.  The Company does not know when these tradeagreements will be brought before Congress for a vote.

 

TheDoha Round negotiations of the WTO continue to be pursued by the U.S.Administration and some of its international counterparts.  It is unclear at this time whethernegotiations will be completed.  If thenegotiations are completed, the outcome of any negotiated arrangement couldhave significant adverse consequences for the Company.

 

TheU.S. sugar industry and the Company, as an influential member of such industry,recognize the potential negative impact that could result if these agreementsare entered into by the United States and are taking steps to attempt topositively influence the outcome.  TheCompany and the sugar industry intend to continue to focus significantattention on trade issues in the future.

 

Theimpact of the various trade agreements on the Company cannot be assessed atthis time due to the uncertainty concerning the terms of the agreements andwhether they will ultimately be implemented. It is possible, however, that the passage of various trade agreementscould have a material adverse effect on the Company through a reduction inacreage that can be planted by the Company’s shareholders and by the growers forSidney Sugars Incorporated, and/or a reduction in sugar selling prices, and acorresponding reduction in the beet payment to the shareholders and the Companyearnings.

 

**Environmental**

 

TheCompany is subject to extensive federal and state environmental laws andregulations with respect to water and air quality, solid waste disposal andodor and noise control.  The Companyconducts an ongoing compliance program designed to meet these environmentallaws and regulations.  The Companybelieves that it is in substantial compliance with applicable environmentallaws and regulations.  From time to time,however, the Company may be involved in investigations or determinationsregarding non-material matters that may arise.

 

OnNovember 25, 2008, the Company entered into a stipulation agreement withthe Minnesota Pollution Control Agency (MPCA) related to hydrogen sulfideemissions from its Crookston, East Grand Forks and Moorhead, Minnesotafactories.  This agreement requires theCompany, among other conditions, to pay a penalty of $185,000 and to developand implement Hydrogen Sulfide Management Strategies at each of the Minnesotafactories.  As part of the HydrogenSulfide Management Strategies, the Company has agreed to make certain capitalexpenditures over the next three years and implement specified changes inoperating procedures to contain hydrogen sulfide emissions at the Minnesotafactories.  The required capitalexpenditures are currently estimated to be approximately $12 million.  The costs associated with operational changesare not currently known.

 

TheCompany works closely with all affected government agencies to resolveenvironmental issues that arise and believes they will be resolved without anyadverse effect on the Company.

 

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TheCompany has identified capital expenditures for environmental related projectsat the Company’s factory locations of $29.0 million.

 

**Liquidityand Capital Resources**

 

Underthe Company’s Bylaws and Member Grower Contracts, payments for member-deliveredsugarbeets, the principal raw material used in producing the sugar andagri-products it sells, are subordinated to all member business expenses.  In addition, the beet payments made to membergrowers and non-member growers are paid in three payments over the course of ayear, and the member payments are made net of any anticipated unit retain forthe crop.  These procedures have theeffect of providing the Company with an additional source of short-termfinancing.  This financing arrangementmay result in an additional source of liquidity and reduced need for outsidefinancing in comparison to a similar business operated on a non-cooperativebasis.

 

Becausesugar is sold throughout the year (while sugarbeets are processed primarily inthe fall, winter and spring) and because substantial amounts of equipment arerequired for its operations, the Company has utilized substantial outside financingon both a seasonal and long-term basis to fund its operations.  The majority of such financing has beenprovided by a consortium of lenders led by CoBank, ACB.

 

TheCompany has long-term debt availability with CoBank, ACB of****$184.8 million,of which $53.3 million in loans and $70.3 million in long-term letters ofcredit were outstanding as of November 30, 2008.  The unused long-term line of credit as of November 30,2008, was $61.2 million.  In addition,the Company had long-term debt outstanding, as of November 30, 2008, of$50 million from a private placement of Senior Notes that occurred in September of1998; $3.6 million from a private placement of Senior Notes that occurred in January of2003; $70.4 million from seven separate issuances of Pollution Control andIndustrial Development Revenue Bonds; and a term loan with Bank of North Dakotaof $ .8 million.

 

TheCompany also has a seasonal line of credit with a consortium of lenders led byCoBank, ACB of $345.0 million, against which there was a $144.0 millionoutstanding balance as of November 30, 2008 and a line of credit withWells Fargo Bank for $1 million, against which there was no outstandingbalance as of November 30, 2008. The Company’s commercial paper program provides short-term borrowings ofup to $325 million of which approximately $30.5 million was outstanding as of November 30,2008.  The Company had $2.1 million ofshort-term letters of credit outstanding as of November 30, 2008.  Any borrowings under the commercial paperprogram along with outstanding short-term letters of credit will act to reducethe available credit under the CoBank, ACB seasonal line of credit by acommensurate amount.  The unusedshort-term line of credit as of November 30, 2008, was $169.4million.  In addition, the Company had anoutstanding non-recourse loan with the CCC, as of November 30, 2008, ofapproximately $51.0 million, against which 2.2 million hundredweight of sugarwas pledged as collateral.

 

TheCompany had outstanding purchase commitments totaling $3.3 million as of November 30,2008, for equipment and construction contracts related to various capital andmaintenance projects.

 

Theliquidity changes that have occurred in the Company’s financial statements fromAugust 31, 2008, to November 30, 2008, were primarily due to normalbusiness seasonality.  The first threemonths of the Company’s fiscal year includes: the completion of the sugarbeetharvest; the startup of the processing campaign; the final payments to growersfor sugarbeets delivered from the previous year’s crop; and the initialpayments to growers for sugarbeets delivered from the current year’s crop.

 

Thenet cash used by operations was $200.7 million for the three months ended November 30,2008, as compared to $210.7 million for the three months ended November 30,2007.  This decrease in the use of cashof $10.0 million was primarily the result of the following:

 

·                  Changesin the Amount Due Growers of $10.0 million were due to a higher final totalgrower payment last year and a higher estimated per ton member grower paymentthis year as compared 

 

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to last year at this time. These were partially offset by a reductionin the current year’s total estimated grower payment due to a reduction in tonsharvested.

·                  Changesin Advances to Related Parties of $5.2 million were due primarily to the timingof the cash requirements of our marketing agents.

·                  Changesin Accounts Payable of $4.5 million and changes in Other Liabilities of $4.4million were due to a higher beginning of the year balance last year resultingfrom an early campaign start-up in August.

·                  Changesin inventories of $3.0 million were primarily due to a smaller increase infinished products of $9.6 million partially offset by an increased value ofunprocessed sugarbeets of $5.9 million along with an increase of $ .7 millionof supplies and parts inventory.

·                  Changesin Other liabilities of $4.0 million were due primarily to normal accruals andthe timing of payments against those accruals.

·                  Theabove changes were partially offset by the change in Accounts Receivable of$15.8 million due to increased collections last year on a larger beginning ofthe year receivable balance resulting from increased sales.

 

Thenet cash used in investing activities was $5.6 million for the three monthsended November 30, 2008, as compared to $11.6 million for the three monthsended November 30, 2007.  Thedecrease of $6.0 million was primarily related to decreased purchases ofproperty and equipment of $4.2 million.

 

Thenet cash provided by financing activities was $206.3 million for the threemonths ended November 30, 2008, as compared to $222.4 million for thethree months ended November 30, 2007. This decrease of $16.1 million was primarily due to decreased proceedsfrom short-term debt of $15.4 million, decreased proceeds from long-term debtof $3.1 million, distributions to Minority Interest of $3.1 million partiallyoffset by decreased payments on long term debt of $5.6 million.

 

TheCompany anticipates that the funds necessary for working capital requirementsand future capital expenditures will be derived from operations and unitretains along with short-term and long-term borrowings.

 

**Item 3. Quantitative and Qualitative Disclosures about Market Risk**

 

Marketrisk is the risk of loss to future earnings, to fair values or to future cashflows that may result from changes in the price of a financial instrument.  The value of a financial instrument maychange as a result of changes in the interest rates, exchange rates, commodityprices, equity prices and other market changes. Market risk is attributed to all market-risk sensitive financialinstruments, including long term debt.

 

TheCompany does not believe that there is any material market risk exposure withrespect to interest rates, exchange rates, commodity prices, equity prices andother market changes that would require disclosure under this item.

 

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**Item 4.  Controls and Procedures**

 

TheCompany’s chief executive officer and chief financial officer have reviewed andevaluated the effectiveness of the Company’s disclosure controls and procedures(as defined in Rules 240.13a-15(e) and 15d-15(e) promulgatedunder the Securities Exchange Act of 1934) as of November 30, 2008.  Based on that review and evaluation, whichincluded inquiries made to certain other employees of the Company, the chiefexecutive officer and chief financial officer have concluded that the Company’scurrent disclosure controls and procedures, as designed and implemented, areeffective in ensuring that information relating to the Company required to bedisclosed in the reports the Company files or submits under the SecuritiesExchange Act of 1934 is recorded, processed, summarized and reported within thetime periods specified in the Securities and Exchange Commission’s rules andforms, including ensuring that such information is accumulated and communicatedto the Company’s management, including the chief executive officer and thechief financial officer, as appropriate to allow timely decisions regardingrequired disclosure.  There were nochanges in the Company’s internal controls over financial reporting thatoccurred during the Company’s most recent fiscal quarter that may havematerially affected, or are reasonably likely to materially affect, the Company’sinternal control over financial reporting.

 

## **PART II. OTHER INFORMATION**

## ** **

#### **Item 1. Legal Proceedings**

#### ** **

Fromtime to time and in the ordinary course of its business, the Company is namedas a defendant in legal proceedings related to various issues, including worker’scompensation claims, tort claims and contractual disputes.  The Company is currently involved in certainlegal proceedings, which have arisen in the ordinary course of the Company’sbusiness.  The Company is also aware ofcertain other potential claims, which could result in the commencement of legalproceedings.  The Company carriesinsurance, which provides protection against certain types of claims.  With respect to current litigation andpotential claims of which the Company is aware, the Company’s managementbelieves that (i) the Company has insurance protection to cover all or aportion of any judgments which may be rendered against the Company with respectto certain claims or actions and (ii) any judgments which may be enteredagainst the Company and which may exceed such insurance coverage or which mayarise in actions involving potential liabilities not covered by insurancepolicies are not likely to have a material adverse effect upon the Company, orits assets or operations.

 

Anothersugar company has appealed to the Ninth Circuit Court of Appeals a decision ofthe United States District Court relative to the determination and transfer ofsugar marketing allocations made by the USDA. If this case is overturned, it could result in the Company experiencinga reduction in marketing allocations equal to the loss of approximately 15,000acres in future crop years assuming no other related factors were to change.

 

**Item1A.  Risk Factors.**

 

Fora detailed discussion of certain risk factors that could affect the Company’soperations, financial condition or results for future periods, see Item 1A,Risk factors, in the Company’s 2008 Annual Report on Form 10-K.

 

**Item2.  Unregistered Sales of EquitySecurities and Use of Proceeds.**

 

None

 

**Item3.  Defaults Upon Senior Securities**

 

None

 

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**Item 4.  Submission of Matters toa Vote of Security Holders**

 

The Company held meetingsin November 2008 with its shareholders from the five geographicaldistricts where the Company’s Red River Valley factories are located.

 

Atthe Drayton Factory District Meeting held on November 10, 2008, theshareholders re-elected Robert M. Green as a director. He received 106 of the107 votes cast.  His new three-year termbegins on December 5, 2008 and expires in December 2011.  William Baldwin and Neil C. Widner willcontinue as directors for the Drayton Factory District.

 

At the East Grand ForksFactory District Meeting held on November 11, 2008, the shareholders re-elected Brian R.Erickson as a director. He received all of the 100 votes cast with oneabstention and one spoiled ballot.  His new three-year term begins on December 5,2008 and expires in December 2011.  JohnF. Gudajtes and Curtis E. Haugen will continue as directors for the East GrandForks Factory District.

 

At the Hillsboro FactoryDistrict Meeting held on November 12, 2008, the shareholders re-elected JohnBrainard as a director. He received all of the 44 votes cast.  Hisnew three-year term begins on December 5, 2008 and expires in December 2011.  Francis L. Kritzberger and Jeff D. McInneswill continue as directors for the Hillsboro Factory District.

 

At the Crookston FactoryDistrict Meeting held on November 12, 2008, the shareholders elected DonaldAndringa as a director. He received 50 of the 69 votes cast.  His three-year term begins December 5,2008 and expires in December 2011.  Mr. Andringa is 54 years old and has been a sugarbeetfarmer for 35 years with his farming operations near Crookston, Minnesota.  Mr. Andringa currently serves onthe Board of Directors of the Red River Valley Farmers Insurance Pool and theAdvisory Board for the University of Minnesota-Crookston Northwest Research andOutreach Center.  Mr. Andringa previously served on Board of Directors of theCrookston Factory District Grower Association, the Red River Valley SugarbeetGrowers Association’s Executive Committee and the American Sugarbeet GrowersAssociation Board of Directors.  Mr. Andringa replaces Ronald E. Reitmeier who was unable to stand for re-election dueto the provisions of the Company Bylaws which prohibit a person from servingmore than four consecutive terms as a director.  Curtis Knutson and Steve Williams willcontinue as directors for the Crookston Factory District.

 

At the Moorhead Factory DistrictMeeting held on November 13, 2008, the shareholders elected Dale Kuehl as a director. He received56 of the 58 votes cast.  His three-yearterm begins December 5, 2008 and expires in December 2011.  Mr. Kuehlis 51 years old and has been a sugarbeet farmer for 33 years with his farmingoperations near Glydon, Minnesota.  Mr. Kuehlcurrently serves on the American Sugarbeet Growers Association’s Board ofDirectors.  Mr. Kuehl previouslyserved on the Boards of Directors of the Moorhead Factory District GrowerAssociation, the Red River Valley Sugarbeet Growers Association, theInternational Sugarbeet Institute and the Red River Valley Coop PowerAssociation.  Mr. Kuehl replaces MichaelA. Astrup who was unable to stand forre-election due to the provisions of the Company Bylaws which prohibit a personfrom serving more than four consecutive terms as a director.  Richard Borgen and William A. Hejl willcontinue as directors for the Moorhead Factory District.

 

**Item5.  Other Information.**

 

None.

 

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### **Item6. Exhibits**

 
| **Item No.** | ** ** | ** **                                                                                                                     | ** ** | **Method  of Filing**                                                                                                                                                                         |
|--------------|------------|--------------------------------------------------------------------------------------------------------------------------------|------------|-----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|
| ** **   | ** ** | ** **                                                                                                                     | ** ** | ** **                                                                                                                                                                                    |
| 3.1          |       | Restated Articles of  Incorporation of American Crystal Sugar Company                                                          |       | Incorporated by  reference to Exhibit 3(i) from the Company’s Registration Statement  on Form S-1 (File No. 33-83868), declared effective  November 23, 1994.   |
|         |       |                                                                                                                           |       |                                                                                                                                                                                          |
| 3.2          |       | Restated By-laws of  American Crystal Sugar Company                                                                            |       | Incorporated by  reference to Exhibit 3(ii) from the Company’s Registration  Statement on Form S-1 (File No. 333-11693), declared effective  November 13, 1996. |
|         |       |                                                                                                                           |       |                                                                                                                                                                                          |
| 4.1          |       | Restated Articles of  Incorporation of American Crystal Sugar Company                                                          |       | See Exhibit 3.1                                                                                                                                                                          |
|         |       |                                                                                                                           |       |                                                                                                                                                                                          |
| 4.2          |       | Restated By-laws of  American Crystal Sugar Company                                                                            |       | See Exhibit 3.2                                                                                                                                                                          |
|         |       |                                                                                                                           |       |                                                                                                                                                                                          |
| 10.1         |       | Form of Operating  Agreement between Registrant and ProGold Limited Liability Company                                     |       | Incorporated by  reference to Exhibit 10(u) from the Company’s Registration  Statement on Form S-1 (File No. 33-83868), declared effective  November 23, 1994.  |
|         |       |                                                                                                                           |       |                                                                                                                                                                                          |
| 10.2         |       | Form of Member  Control Agreement between Registrant and ProGold Limited Liability Company                                |       | Incorporated by  reference to Exhibit 10(v) from the Company’s Registration  Statement on Form S-1 (File No. 33-83868), declared effective  November 23, 1994.  |
|         |       |                                                                                                                           |       |                                                                                                                                                                                          |
| 10.3         |       | Registrant’s  Senior Note Purchase Agreement                                                                              |       | Incorporated by  reference to Exhibit 10.24 from the Company’s Annual Report on  Form 10-K for the year ended August 31, 1999                                             |
|         |       |                                                                                                                           |       |                                                                                                                                                                                          |
| 10.4         |       | Registrant’s  Senior Note Inter-creditor and Collateral Agency Agreement                                                  |       | Incorporated by  reference to Exhibit 10.25 from the Company’s Annual Report on  Form 10-K for the year ended August 31, 1999                                             |
|         |       |                                                                                                                           |       |                                                                                                                                                                                          |
| 10.5         |       | Registrant’s  Senior Note Restated Mortgage and Security Agreement                                                        |       | Incorporated by  reference to Exhibit 10.26 from the Company’s Annual Report on  Form 10-K for the year ended August 31, 1999                                             |
|         |       |                                                                                                                           |       |                                                                                                                                                                                          |
| ++10.6       |       | Long Term Incentive  Plan, dated June 23, 1999                                                                            |       | Incorporated by  reference to Exhibit 10.31 from the Company’s Annual Report on  Form 10-K for the year ended August 31, 2000                                             |
|         |       |                                                                                                                           |       |                                                                                                                                                                                          |
| 10.7         |       | Uniform Member  Marketing Agreement between the Registrant and Midwest Agri-Commodities  Company dated September 1, 2001. |       | Incorporated by  reference to Exhibit 10.28 from the Company’s Form 10-Q for the  quarter ended November 30, 2001                                                         |

 

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| 10.8    |   | Registrant’s  Senior Note Purchase Agreement dated January 15, 2003                                                                       |   | Incorporated by  reference to Exhibit 10.29 from the Company’s Form 10-Q for the  quarter ended February 28, 2003             |
|---------|--------|-----------------------------------------------------------------------------------------------------------------------------------------------------|--------|---------------------------------------------------------------------------------------------------------------------------------------------------|
|    |   |                                                                                                                                                |   |                                                                                                                                              |
| ++10.9  |   | Long Term Incentive  Plan, dated August 24, 2005                                                                                               |   | Incorporated by  reference to Exhibit 10.25 from the Company’s Annual Report on  Form 10-K for the year ended August 31, 2005 |
|    |   |                                                                                                                                                |   |                                                                                                                                              |
| 10.10   |   | Term and Seasonal Loan  Agreements between the Registrant and CoBank, ACB dated July 31, 2006                                                  |   | Incorporated by  reference to Exhibit 10.24 from the Company’s Annual Report on Form 10-K  for the year ended August 31, 2006 |
|    |   |                                                                                                                                                |   |                                                                                                                                              |
| 10.11   |   | Second Amendment to Amended and Restated Loan Agreement between the  Registrant and CoBank, ACB dated November 3, 2006.                        |   | Incorporated by  reference to Exhibit 10.25 from the Company’s Form 10-Q for the  quarter ended November 30, 2006.            |
|    |   |                                                                                                                                                |   |                                                                                                                                              |
| ++10.12 |   | Employment Agreement dated March 21, 2007 between the Registrant  and David A. Berg.                                                           |   | Incorporated by  reference to Exhibit 10.26 from the Company’s Form 10-Q for the  quarter ended February 28, 2007.            |
|    |   |                                                                                                                                                |   |                                                                                                                                              |
| 10.13   |   | Third Amendment to Amended and Restated Loan Agreement between the  Registrant and CoBank, ACB dated April 2, 2007.                            |   | Incorporated by  reference to Exhibit 10.22 from the Company’s Form 10-Q for the  quarter ended May 31, 2007                  |
|    |   |                                                                                                                                                |   |                                                                                                                                              |
| 10.14   |   | Fourth Amendment to Amended and Restated Loan Agreement between the  Registrant and CoBank, ACB dated July 25, 2007.                           |   | Incorporated by  reference to Exhibit 10.23 from the Company’s Annual Report on  Form 10-K for the year ended August 31, 2007 |
|    |   |                                                                                                                                                |   |                                                                                                                                              |
| 10.15   |   | Growers’ Contract  (5-year Agreement) for the crop years 2008 through 2012                                                                     |   | Incorporated by  reference to Exhibit 10.24 from the Company’s Annual Report on  Form 10-K for the year ended August 31, 2007 |
|    |   |                                                                                                                                                |   |                                                                                                                                              |
| 10.16   |   | Commitment and  Acceptance Agreement between the Registrant and CoBank, ACB dated  November 6, 2007                                            |   | Incorporated by  reference to Exhibit 10.24 from the Company’s Form 10-Q for the  quarter ended November 30, 2007             |
|    |   |                                                                                                                                                |   |                                                                                                                                              |
| 10.17   |   | Amended and Restated  Uniform Member Sugar Marketing Agreement between the Registrant and United  Sugars Corporation dated September 20, 2007. |   | Incorporated by  reference to Exhibit 10.22 from the Company’s Annual Report on  Form 10-K for the year ended August 31, 2008 |
|    |   |                                                                                                                                                |   |                                                                                                                                              |
| 10.18   |   | Fifth Amendment to Amended and Restated Loan Agreement between the  Registrant and CoBank, ACB dated July 23, 2008.                            |   | Incorporated by  reference to Exhibit 10.23 from the Company’s Annual Report on  Form 10-K for the year ended August 31, 2008 |
|    |   |                                                                                                                                                |   |                                                                                                                                              |
| 10.19   |   | Stipulation Agreement  between Registrant and State of Minnesota Pollution Control Agency, dated  November 25, 2008                            |   | Filed herewith  electronically                                                                                                                    |
|    |   |                                                                                                                                                |   |                                                                                                                                              |
| ++10.20 |   | Restated Supplemental  Executive Retirement Plan, dated December 5, 2008                                                                       |   | Filed herewith  electronically                                                                                                                    |
|    |   |                                                                                                                                                |   |                                                                                                                                              |
| ++10.21 |   | Restated Board of  Directors Deferred Compensation Plan, dated December 8, 2008                                                                |   | Filed herewith  electronically                                                                                                                    |

 

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| 21.1   |   | List of Subsidiaries of  the Registrant                                            |   | Incorporated by  reference to Exhibit 21.1 from the Company’s Annual Report on  Form 10-K for the year ended August 31, 2008 |
|--------|--------|------------------------------------------------------------------------------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------------|
|   |   |                                                                               |   |                                                                                                                                             |
| 31.1   |   | Rule 13a-14(a)/15(d)-14(a) Certification  of the Chief Executive Officer |   | Accompanying herewith  electronically                                                                                                            |
|   |   |                                                                               |   |                                                                                                                                             |
| 31.2   |   | Rule 13a-14(a)/15(d)-14(a) Certification  of the Chief Financial Officer |   | Accompanying herewith  electronically                                                                                                            |
|   |   |                                                                               |   |                                                                                                                                             |
| 32.1   |   | Section 1350  Certification of the Chief Executive Officer                    |   | Accompanying herewith  electronically                                                                                                            |
|   |   |                                                                               |   |                                                                                                                                             |
| 32.2   |   | Section 1350  Certification of the Chief Financial Officer                    |   | Accompanying herewith  electronically                                                                                                            |

 

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+              Confidential treatment under Rule 24b-2 of theSecurities and Exchange Act of 1934, as amended, has been granted with respectto designated portions of this document.

 

++           A management contract or compensatory plan required to befiled with this report.

 

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SIGNATURES

 

**Pursuantto the requirement of the Securities Exchange Act of 1934, the registrant hasduly caused this report to be signed on its behalf by the undersigned thereuntoduly authorized.**

 

 

|       |                      | **AMERICAN CRYSTAL SUGAR COMPANY** |                 |
|------------|---------------------------|------------------------------------|----------------------|
|       |                      | **(Registrant)**                   |                 |
| ** ** | ** **                | ** **                         |
| ** ** | ** **                | ** **                         |
| **Date:**  | **January 14, 2009** | ** **                         | **/s/ Teresa Warne** |
|       |                      | **Teresa Warne**                   |
|       |                      | **Corporate Controller,**          |
|       |                      | **Chief Accounting Officer**       |
|       |                      | **Duly  Authorized Officer**       |
|            |                           |                                    |                      |  |

 

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