|                                  
|----------------------------------
|UNITED STATES                     
|SECURITIES AND EXCHANGE COMMISSION
|WASHINGTON, D. C. 20549           
|                                  
|                                  
|                                  
|FORM 10-Q                         
|                                  
|                                  

|                                                        |                                                                                            
|------------------------------------------------------- | -------------------------------------------------------------------------------------------
|x                                                       | QUARTERLY
 REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE 
 SECURITIES EXCHANGE ACT OF 1934 
|                                                       
|For
 the quarterly period ended: February 28, 2010     
|                                                       
|OR                                                     
|                                                        |                                                                                            
|o                                                       | TRANSITION
 REPORT PURSUANT TO SECTION 13 AND 15(d) OF THE 
 SECURITES EXCHANGE ACT OF 1934
|                                                        |                                                                                            
|Commission file: No.
 33-94644                         
|                                                       
|                                                       
|                                                       
|MINN-DAK FARMERS COOPERATIVE                           
|(Exact named of Registrant as specified in its charter)

|                                |  |                    
|------------------------------- |  | -------------------
|North
 Dakota                   |  | 23-7222188         
|(State or other jurisdiction of |  | (I.R.S. Employer   
|Incorporation or organization)  |  | Identification No.)
|                                |  |                    
|7525
 Red River Road            |  |                    
|Wahpeton,
 North Dakota         |  | 58075              
|(Address of principal           |  | (Zip Code)         
|executive offices)              |  |                    

|                                                                                    
|------------------------------------------------------------------------------------
|(701)
 642-8411                                                                     
|(Registrants telephone number, including area code)                                
|                                                                                    
|Not
 Applicable                                                                     
|(Former name, former address and former fiscal year, 
 if changed since last report)
|                                                                                    
|                                                                                    

Indicate by
check mark whether the Registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months, and (2) has been subject to such filing requirements for
the past 90 days.

|     |    
|---- | ---
|YESx | NOo

Indicate by
check mark whether the Registrant has submitted electronically and posted on
its corporate Web site, if any, every Interactive Data File required to be
submitted and posted pursuant to Rule 405 of Regulation S-T during the
preceding 12 months.

|     |    
|---- | ---
|YESo | NOx

Indicate by
check mark whether the Registrant is a large accelerated filer, an accelerated
filer, a non-accelerated filer, or a smaller reporting company. See the
definitions of large accelerated filer, accelerated filer and smaller
reporting company in Rule 12b-2 of the Exchange Act.

---



Large
Accelerated Filer o     
Accelerated Filer o     
Non-Accelerated Filer x     
Smaller Reporting Co o

Indicate by
check mark whether the Registrant is a shell company (as defined in Rule 12b-2
of the Exchange Act).

|     |    
|---- | ---
|YESo | NOx

Indicate the
number of shares outstanding of each of the issuers classes of common stock,
as of the latest practicable date.

|               |                       |                |  |                | 
|-------------- | --------------------- | -------------- |  | -------------- | 
|               |                       | Outstanding at | 
|               | Class of Common Stock |                |  | March 24, 2010 | 
|               |                       |                |  |                | 
|$250 Par Value | 474                  

Minn-Dak
Farmers Cooperative (The Company or the Registrant) has previously
registered securities for offer and sale pursuant to the Securities Act of
1933, as amended (the Securities Act). As a result of that previous
registration under the Securities Act, under Sections 15(d) and 13 of the
Securities Exchange Act of 1934, as amended (the Exchange Act), the Company
is obligated to file quarterly reports on form 10-Q, annual reports on Form
10-K and supplemental reports on Form 8-K. However, the Company has not
registered any of its securities under Section 12(g) of the Exchange Act. The
Company is exempt from any obligation to register its securities under the
Exchange Act due to the provisions of Section 12(g)(2)(E), which exempts from
Exchange Act registration any security of an issuer, such as the Company, which
is a cooperative association as defined in the Agricultural Marketing Act of
1929. As a result, those provisions of the Exchange Act, which are applicable
only to securities registered under Section 12 of that act, do not apply to
shares issued by the Company. The provisions, which do not apply to the
Companys shares, include the regulation of proxies under Section 14 of the
Exchange Act and the reporting and other obligations of directors, officers and
principal stockholders under Section 16 of the Exchange Act.

This report
contains forward-looking statements and information based upon assumptions by
the Companys management, including assumptions about risks and uncertainties
faced by the Company. Any statements regarding future market prices,
anticipated costs, agricultural results, operating results and other statements
that are not historical facts contained in this annual report are considered
forward-looking statements. The words expect, project, estimate,
believe, anticipate, plan, intend, could, may, predict, and
similar expressions are also intended to be identified as forward-looking
terminology. Such statements involve risks, uncertainties and assumptions,
including, without limitation, market factors, the effect of weather and
economic conditions, farm and trade policy, the available supply of sugar,
available quantity and quality of sugarbeets and other factors detailed
elsewhere in this and other Company filings with the Securities and Exchange
Commission. Should one or more of these risks or uncertainties materialize, or
should underlying assumptions prove incorrect, actual outcomes may vary
materially from those indicated.







PART I.
FINANCIAL INFORMATION

ITEM 1.
FINANCIAL STATEMENTS

|                             
|-----------------------------
|MINN-DAK
 FARMERS COOPERATIVE
|CONSOLIDATED BALANCE SHEETS  
|ASSETS                       
|(In Thousands)               

|                                                                                                |  |              |             |              |           |          |   | 
|----------------------------------------------------------------------------------------------- |  | ------------ | ----------- | ------------ | --------- | -------- | - | 
|                                                                                                |  | Feb 28, 2010 |             | Aug 31, 2009 |          
|ASSETS                                                                                          |  |              | (Unaudited) |              | (Audited) |         
|                                                                                               
|CURRENT ASSETS                                                                                  |  |              |             |              |           |          |  
|Cash                                                                                            |  | $            | 308         |              | $         | 94       |  
|                                                                                               
|Receivables                                                                                     |  |              |             |              |           |          |  
|Trade accounts                                                                                  |  |              | 18,810      |              |           | 14,300   |  
|Growers                                                                                         |  |              |            |              |           | 10,196   |  
|Receivable from affiliates                                                                      |  |              | 70          |              |           | 1,106    |  
|Other receivables                                                                               |  |              | 3           |              |           | 3        |  
|Total Receivables                                                                               |  |              | 18,883      |              |           | 25,605   |  
|                                                                                               
|Inventories                                                                                     |  |              |             |              |           |          |  
|Refined sugar, in-process sugar, pulp and
 molasses to be sold on a pooled basis                |  |              | 52,968      |              |           | 27,046   |  
|Non-member refined sugar                                                                        |  |              | 13          |              |           | 1,452    |  
|Sugarbeet inventory                                                                             |  |              | 26,208      |              |           |         |  
|Yeast                                                                                           |  |              | 195         |              |           | 200      |  
|Materials and supplies                                                                          |  |              | 11,056      |              |           | 11,296   |  
|Total Inventories                                                                               |  |              | 90,440      |              |           | 39,994   |  
|                                                                                                |  |              |             |              |           |          |  
|                                                                                               
|Deferred charges                                                                                |  |              | 411         |              |           | 1,324    |  
|Prepaid expenses                                                                                |  |              | 2,490       |              |           | 3,109    |  
|Prepaid beet seed                                                                               |  |              | 8,414       |              |           | 30       |  
|Other current assets                                                                            |  |              | 136         |              |           |         |  
|Current deferred income tax asset                                                               |  |              | 123         |              |           | 26       |  
|                                                                                                |  |              |             |              |           |          |  
|Total Current Assets                                                                            |  |              | 121,205     |              |           | 70,182   |  
|                                                                                               
|PROPERTY, PLANT AND EQUIPMENT                                                                   |  |              |             |              |           |          |  
|Land and land improvements                                                                      |  |              | 27,919      |              |           | 27,130   |  
|Buildings                                                                                       |  |              | 37,758      |              |           | 37,758   |  
|Factory/Agricultural equipment                                                                  |  |              | 150,197     |              |           | 147,419  |  
|Other equipment                                                                                 |  |              | 5,268       |              |           | 4,675    |  
|Capitalized leases                                                                              |  |              | 3,353       |              |           | 2,961    |  
|Construction in progress                                                                        |  |              | 2,383       |              |           | 4,691    |  
|Total Property, Plant and Equipment                                                             |  |              | 226,878     |              |           | 224,634  |  
|Less accumulated depreciation                                                                   |  |              | (131,693    | )            |           | (127,336 | )
|Net Property, Plant and Equipment                                                               |  |              | 95,185      |              |           | 97,298   |  
|                                                                                               
|OTHER ASSETS                                                                                    |  |              |             |              |           |          |  
|Investment in other cooperatives,
 unconsolidated marketing subsidiaries and other corporations |  |              | 10,438      |              |           | 11,344   |  
|Restricted investments                                                                          |  |              | 6,864       |              |           |         |  
|Other long-term assets                                                                          |  |              | 5,330       |              |           | 1,090    |  
|Total Other Assets                                                                              |  |              | 22,632      |              |           | 12,434   |  
|                                                                                                |  |              |             |              |           |          |  
|TOTAL ASSETS                                                                                    |  | $            | 239,022     |              | $         | 179,914  |  
|                                                                                                |  |              |             |              |           |          |  
|See Notes to Consolidated Financial
 Statements.                                                |  |              |             |              |           |          |  

1

---



|                                   
|-----------------------------------
|MINN-DAK
 FARMERS COOPERATIVE      
|CONSOLIDATED BALANCE SHEETS        
|LIABILITIES AND MEMBERS INVESTMENT
|(In Thousands)                     

|                                                                                                                                                 |  |              |         |              |   |         |  
|------------------------------------------------------------------------------------------------------------------------------------------------ |  | ------------ | ------- | ------------ | - | ------- | -
|                                                                                                                                                 |  | Feb 28, 2010 |         | Aug 31, 2009 |  
|                                                                                                                                                 |  | (Unaudited)  |         | (Audited)    |  
|LIABILITIES AND MEMBERS INVESTMENT                                                                                                              |  |              |         |              |   |         |  
|                                                                                                                                                 |  |              |         |              |   |         |  
|CURRENT
 LIABILITIES                                                                                                                             |  |              |         |              |   |         |  
|Short-term notes payable                                                                                                                         |  | $            | 48,908  |              | $ | 18,978  |  
|                                                                                                                                                
|Current portion of long-term debt, capital
 leases and bonds payable                                                                             |  |              | 2,965   |              |   | 5,026   |  
|                                                                                                                                                
|Accounts payable:                                                                                                                                |  |              |         |              |   |         |  
|Trade                                                                                                                                            |  |              | 4,358   |              |   | 11,596  |  
|Checks outstanding                                                                                                                               |  |              | 844     |              |   | 546     |  
|Growers                                                                                                                                          |  |              | 27,895  |              |   | 17,704  |  
|Total Accounts Payable                                                                                                                           |  |              | 33,097  |              |   | 29,846  |  
|                                                                                                                                                 |  |              |         |              |   |         |  
|Income tax                                                                                                                                       |  |              | 193     |              |   |        |  
|                                                                                                                                                
|Accrued liabilities                                                                                                                              |  |              | 6,791   |              |   | 2,946   |  
|                                                                                                                                                
|Total Current Liabilities                                                                                                                        |  |              | 91,954  |              |   | 56,796  |  
|LONG-TERM DEBT, CAPITAL LEASES, AND BONDS
 PAYABLE, NET OF CURRENT PORTION                                                                       |  |              | 39,838  |              |   | 33,519  |  
|                                                                                                                                                 |  |              |         |              |   |         |  
|LONG-TERM DEFERRED INCOME TAX LIABILITY                                                                                                          |  |              | 310     |              |   | 354     |  
|                                                                                                                                                 |  |              |         |              |   |         |  
|LONG-TERM UNRECOGNIZED TAX LIABILITY                                                                                                             |  |              | 283     |              |   | 274     |  
|                                                                                                                                                 |  |              |         |              |   |         |  
|LONG-TERM PENSION LIABILITY                                                                                                                      |  |              | 13,667  |              |   | 12,827  |  
|                                                                                                                                                 |  |              |         |              |   |         |  
|COMMITMENTS AND CONTINGENCIES                                                                                                                    |  |              |         |              |   |         |  
|                                                                                                                                                
|Total Liabilities                                                                                                                                |  |              | 146,052 |              |   | 103,770 |  
|MEMBERS INVESTMENT                                                                                                                              |  |              |         |              |   |         |  
|Preferred stock:                                                                                                                                 |  |              |         |              |   |         |  
|Class A - 100,000 shares authorized, $105
 par value; 72,200 shares issued and outstanding                                                       |  |              | 7,581   |              |   | 7,581   |  
|Class B - 100,000 shares authorized, $75
 par value; 72,200 shares issued and outstanding                                                        |  |              | 5,415   |              |   | 5,415   |  
|Class C - 100,000 shares authorized, $76
 par value; 72,200 shares issued and outstanding                                                        |  |              | 5,487   |              |   | 5,487   |  
|Total Preferred stock                                                                                                                            |  |              | 18,483  |              |   | 18,483  |  
|Common stock, 600 shares authorized, $250
 par value; issued and outstanding, 472 shares at February 28, 2010 and 474
 shares at August 31, 2009 |  |              | 118     |              |   | 119     |  
|Paid in capital in excess of par value                                                                                                           |  |              | 32,094  |              |   | 32,094  |  
|Nonqualified allocated patronage                                                                                                                 |  |              | 44,845  |              |   | 28,299  |  
|Accumulated other comprehensive loss                                                                                                             |  |              | (12,774 | )            |   | (12,811 | )
|Retained earnings                                                                                                                                |  |              | 10,204  |              |   | 9,960   |  
|Total Members Investment                                                                                                                        |  |              | 92,970  |              |   | 76,144  |  
|                                                                                                                                                
|TOTAL LIABILITIES AND MEMBERS INVESTMENT                                                                                                        |  | $            | 239,022 |              | $ | 179,914 |  
|                                                                                                                                                 |  |              |         |              |   |         |  
|See Notes to Consolidated Financial Statements.                                                                                                  |  |              |         |              |   |         |  

2

---



|                                     
|-------------------------------------
|MINN-DAK
 FARMERS COOPERATIVE        
|CONSOLIDATED STATEMENTS OF OPERATIONS
|(In Thousands)                       
|(Unaudited)                          

|                                                                                 |  |                    |        |                  |   |               |  |               |         |   |   |         | 
|-------------------------------------------------------------------------------- |  | ------------------ | ------ | ---------------- | - | ------------- |  | ------------- | ------- | - | - | ------- | 
|                                                                                 |  | Three-Months Ended |        | Six-Months Ended |  
|                                                                                 |  | Feb 28,
 2010      |        | Feb 28,
 2009    |   | Feb 28,
 2010 |  | Feb 28,
 2009 |        
|REVENUE:                                                                         |  |                    |        |                  |   |               |  |               |         |   |   |         | 
|Sales of sugar, co-products and yeast, net
 of discounts                         |  | $                  | 55,970 |                  | $ | 50,821        |  | $             | 112,468 |   | $ | 109,504 | 
|Changes in finished goods inventory and
 in-process sugar at NRV                 |  |                    | 9,759  |                  |   | 33,468        |  |               | 25,922  |   |   | 46,874  | 
|Total Revenue                                                                    |  |                    | 65,729 |                  |   | 84,289        |  |               | 138,390 |   |   | 156,378 | 
|                                                                                 |  |                    |        |                  |   |               |  |               |         |   |   |         | 
|EXPENSES:                                                                        |  |                    |        |                  |   |               |  |               |         |   |   |         | 
|Production costs of sugar, in-process
 sugar, co-products and yeast sold         |  |                    | 19,655 |                  |   | 26,636        |  |               | 42,433  |   |   | 49,866  | 
|Sales and distribution costs                                                     |  |                    | 10,210 |                  |   | 8,839         |  |               | 21,906  |   |   | 23,319  | 
|General and administrative                                                       |  |                    | 1,893  |                  |   | 1,849         |  |               | 3,415   |   |   | 3,461   | 
|Interest                                                                         |  |                    | 609    |                  |   | 572           |  |               | 1,016   |   |   | 1,273   | 
|(Gain) Loss on disposition of property and
 equipment                            |  |                    |       |                  |   |              |  |               | (122    | ) |   |        | 
|Total Expenses                                                                   |  |                    | 32,367 |                  |   | 37,896        |  |               | 68,648  |   |   | 77,919  | 
|                                                                                 |  |                    |        |                  |   |               |  |               |         |   |   |         | 
|TOLLING & OTHER REVENUE                                                          |  |                    | 7,056  |                  |   | 946           |  |               | 7,087   |   |   | 1,816   | 
|                                                                                 |  |                    |        |                  |   |               |  |               |         |   |   |         | 
|NET PROCEEDS RESULTING FROM MEMBER AND
 NON-MEMBER BUSINESS BEFORE INCOME TAXES  |  | $                  | 40,418 |                  | $ | 47,339        |  | $             | 76,829  |   | $ | 80,275  | 
|                                                                                 |  |                    |        |                  |   |               |  |               |         |   |   |         | 
|INCOME TAX BENEFIT (EXPENSE)                                                     |  | $                  | (150   | )                | $ | 14            |  | $             | (128    | ) | $ | 32      | 
|                                                                                 |  |                    |        |                  |   |               |  |               |         |   |   |         | 
|NET PROCEEDS RESULTING FROM MEMBER AND
 NON-MEMBER BUSINESS                      |  | $                  | 40,268 |                  | $ | 47,353        |  | $             | 76,701  |   | $ | 80,307  | 
|                                                                                 |  |                    |        |                  |   |               |  |               |         |   |   |         | 
|DISTRIBUTION OF NET PROCEEDS                                                     |  |                    |        |                  |   |               |  |               |         |   |   |         | 
|Credited to members investment                                                  |  |                    |        |                  |   |               |  |               |         |   |   |         | 
|Components of net income                                                         |  |                    |        |                  |   |               |  |               |         |   |   |         | 
|Income from non-member business                                                  |  | $                  | 222    |                  | $ | 1             |  | $             | 244     |   | $ | 2       | 
|Patronage income                                                                 |  |                    | 11,286 |                  |   | 16,151        |  |               | 16,546  |   |   | 20,261  | 
|Net income credited to members investment                                       |  |                    | 11,508 |                  |   | 16,152        |  |               | 16,790  |   |   | 20,263  | 
|                                                                                 |  |                    |        |                  |   |               |  |               |         |   |   |         | 
|Allocated costs of sugarbeets paid or
 payable to growers for production to date |  | $                  | 28,760 |                  | $ | 31,201        |  | $             | 59,911  |   | $ | 60,044  | 
|                                                                                 |  |                    |        |                  |   |               |  |               |         |   |   |         | 
|NET PROCEEDS RESULTING FROM MEMBER AND
 NON-MEMBER BUSINESS                      |  | $                  | 40,268 |                  | $ | 47,353        |  | $             | 76,701  |   | $ | 80,307  | 
|                                                                                 |  |                    |        |                  |   |               |  |               |         |   |   |         | 
|See Notes to Consolidated Financial
 Statements.                                 |  |                    |        |                  |   |               |  |               |         |   |   |         | 

3

---



|                                     
|-------------------------------------
|MINN-DAK FARMERS COOPERATIVE         
|CONSOLIDATED STATEMENTS OF CASH FLOWS
|(In Thousands)                       
|(Unaudited)                          

|                                                                         |  |                  |         |               |   |         |  
|------------------------------------------------------------------------ |  | ---------------- | ------- | ------------- | - | ------- | -
|                                                                         |  | Six-Months Ended |        
|                                                                         |  | Feb 28,
 2010    |         | Feb 28,
 2009 |  
|OPERATING ACTIVITIES                                                     |  |                  |         |               |   |         |  
|Net income credited to members investment                               |  | $                | 16,790  |               | $ | 20,263  |  
|Add (deduct) noncash items:                                              |  |                  |         |               |   |         |  
|Depreciation                                                             |  |                  | 4,426   |               |   | 4,260   |  
|Amortization                                                             |  |                  | 138     |               |   | 120     |  
|(Gain) Loss on property and equipment
 disposals                         |  |                  | (122    | )             |   |        |  
|(Gain) Loss allocated from unconsolidated
 marketing subsidiaries        |  |                  | 0       |               |   | (2      | )
|Noncash portion of patronage capital
 credits                            |  |                  | (183    | )             |   | (164    | )
|Deferred income taxes                                                    |  |                  | (141    | )             |   |        |  
|Changes in operating assets and liabilities                              |  |                  |         |               |   |         |  
|Accounts receivable and advances                                         |  |                  | 6,722   |               |   | 9,084   |  
|Inventory and prepaid expenses                                           |  |                  | (58,345 | )             |   | (63,294 | )
|Deferred charges and other assets                                        |  |                  | 1,805   |               |   | 1,318   |  
|Accounts payable, accrued liabilities and
 other liabilities             |  |                  | 11,464  |               |   | 8,027   |  
|Net cash used (in)/from operating
 activities                            |  |                  | (17,446 | )             |   | (20,388 | )
|                                                                         |  |                  |         |               |   |         |  
|INVESTING ACTIVITIES                                                     |  |                  |         |               |   |         |  
|Proceeds from disposition of property,
 plant and equipment              |  |                  | 123     |               |   |        |  
|Change in other assets                                                   |  |                  | (4,400  | )             |   |        |  
|Capital expenditures                                                     |  |                  | (1,922  | )             |   | (3,628  | )
|Patronage received from other coops                                      |  |                  | 1,135   |               |   | 418     |  
|Net cash used in investing activities                                    |  |                  | (5,064  | )             |   | (3,210  | )
|                                                                         |  |                  |         |               |   |         |  
|FINANCING ACTIVITIES                                                     |  |                  |         |               |   |         |  
|Net proceeds from issuance of short-term
 debt                           |  |                  | 29,930  |               |   | 19,445  |  
|Checks outstanding                                                       |  |                  | 298     |               |   |        |  
|Net proceeds from issuance of long-term
 debt                            |  |                  |        |               |   | 11,715  |  
|Payment of long-term debt and capital
 leases                            |  |                  | (3,135  | )             |   | (3,037  | )
|Payment of financing fees                                                |  |                  | (743    | )             |   | (207    | )
|Payment of allocated patronage                                           |  |                  | (3,626  | )             |   | (4,417  | )
|Net cash provided by financing activities                                |  |                  | 22,724  |               |   | 23,499  |  
|                                                                         |  |                  |         |               |   |         |  
|NET INCREASE/(DECREASE) IN CASH                                          |  |                  | 214     |               |   | (99     | )
|                                                                         |  |                  |         |               |   |         |  
|CASH, BEGINNING OF YEAR                                                  |  |                  | 94      |               |   | 159     |  
|                                                                         |  |                  |         |               |   |         |  
|CASH, END OF QUARTER                                                     |  | $                | 308     |               | $ | 60      |  
|                                                                         |  |                  |         |               |   |         |  
|SUPPLEMENTAL DISCLOSURES OF CASH FLOW
 INFORMATION                       |  |                  |         |               |   |         |  
|Cash payments for (Receipts from)                                        |  |                  |         |               |   |         |  
|Interest                                                                 |  | $                | 880     |               | $ | 1,201   |  
|                                                                         |  |                  |         |               |   |         |  
|Income taxes, net of refunds                                             |  | $                | 12      |               | $ | (869    | )
|                                                                         |  |                  |         |               |   |         |  
|SUPPLEMENTAL DISCLOSURES OF NON-CASH
 INVESTING AND FINANCING ACTIVITIES |  |                  |         |               |   |         |  
|                                                                         |  |                  |         |               |   |         |  
|Proceeds for bond issuance transferred to
 restricted investment         |  | $                | 7,000   |               | $ |        |  
|                                                                         |  |                  |         |               |   |         |  
|Equipment purchased by issuance of capital
 lease                        |  | $                | 392     |               | $ | 1,715   |  
|                                                                         |  |                  |         |               |   |         |  
|See Notes to Consolidated Financial
 Statements.                         |  |                  |         |               |   |         |  

4

---



MINN-DAK FARMERS COOPERATIVE 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|1. | The
 consolidated financial statements of the Company and that of its wholly owned
 subsidiary companies Minn-Dak Yeast Company (Minn-Dak Yeast) and Link
 Acquisition Company LLC (Link) for the three-month and six-month periods
 ended February 28, 2010 and 2009 are unaudited and reflect all adjustments
 consisting of normal recurring adjustments which are, in the opinion of
 management, necessary for a fair presentation of the financial position and
 operating results for the interim period. The condensed consolidated
 financial statements should be read in conjunction with the consolidated
 financial statements and notes thereto, contained in the Companys Annual
 Report on Form 10-K for the fiscal year ended August 31, 2009. The results of
 operations for the three-month and six-month periods ended February 28, 2010
 are not necessarily indicative of the results for the entire fiscal year
 ending August 31, 2010.                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|2. | Inventories
 of refined sugar, in-process sugar, pulp and molasses to be sold on a pooled
 basis are valued at net realizable value, while third-party purchased refined
 sugar to be sold on a pooled basis is valued at the lower of cost or market.
 Third-party sugar costs include product, delivery, poll adjustment, and
 refining fee costs. Inventory of yeast is valued at the lower of average cost
 or market. Materials and supplies are valued at most recent purchase price
 that approximates cost. During the periods when sugarbeets are purchased from
 growers and/or non-members, but not yet converted into refined sugar or
 in-process sugar, that inventory is valued at grower and/or non-members
 payment cost. In valuing inventories at Net Realizable Value (NRV), the
 Company, in effect sells the remaining inventory to the subsequent periods
 sugar and co-product pool. Pooled product inventories will normally increase
 to a peak valuation at the end of the processing campaign and decrease to a
 low point of valuation at or near fiscal year end.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|3. | In September
 2009, and effective as of August 31, 2009, the Company declared a revolvement
 of the remaining 46 percent of the allocated patronage for the 2002-crop
 totaling $2.2 million and 33 percent of the allocated patronage for the
 2003-crop totaling $1.4 million. These amounts were accrued as of August 31,
 2009 and paid to the stockholders on September 18, 2009.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|4. | In November
 2009, the Company allocated to members $3.7 million of patronage from the
 2008-crop in the form of non-qualified allocated patronage credits.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|5. | As of
 February 28, 2010 the Company had $64.0 million of short-term credit
 capacity, $45.0 million with CoBank (the Bank) and $19.0 million with USDA
 Commodity Credit Corporation (CCC). Short term credit utilized as of
 February 28, 2010 consisted of $48.9 million, $32.5 million from the Bank and
 $16.4 million from CCC, leaving a remaining short-term credit capacity of
 $15.1 million. The increase in seasonal debt from August 31, 2009 to February
 28, 2010 is due to normal seasonal operations.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|6. | On December
 15, 2009 the Company renewed the Revolving Credit Supplement through December
 31, 2010. The Revolving Credit Supplement was renewed at $45.0 million. The
 bid loan supplement was not renewed.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|7. | On December
 7, 2009, the Company applied for and received approval from Richland County
 to re-finance its tax-exempt long-term bonds. All variable rate bonds
 outstanding as of January 15, 2010 were called and new variable rate bonds
 were issued with a single maturity date of February 1, 2023 with no
 associated gains or losses. In addition, $7.0 million in new tax-exempt
 bonds, which are exempt from alternative minimum taxes, were approved by
 Richland County to finance future capital expenditures. These variable rate bonds
 were issued on February 18, 2010 with a single maturity date of February 1,
 2025. The letters of credit from the Bank associated with these bonds were
 also renewed as of the date of the issuance of the bonds. The new tax-exempt
 bonds, initially $7.0 million, are held as a restricted investment in a bond
 trust until qualified expenditures related to the bonds have been expended by
 the Company.                                                                                                                         
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|8. | Fair value
 is defined as the price that would be received for an asset or paid to
 transfer a liability (an exit price) in the principal or most advantageous
 market for the asset or liability in an orderly transaction between market
 participants on the measurement date. Quoted market prices are generally not
 available for the Companys financial instruments. Fair values are based on
 judgments regarding anticipated cash flows, future expected loss experience,
 current economic conditions, risk characteristics of various financial
 instruments and other factors. These estimates involve
 uncertainties and matters of judgment, and therefore, cannot be determined
 with precision. Changes in assumptions could significantly affect the
 estimates.                                                                                                                                                                                                                                                                                                               

5

---



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                      |                                                                                                                                                                                                                                                                                                                                                                                                                      
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                     | Long-Term Debt, Inclusive of Current Maturities
 - Based upon current borrowing rates with similar maturities, the book value
 of the long-term debt as of February 28, 2010, was approximately $20.7
 million of Bank debt in comparison to the fair value of $20.8 million. Also
 included in the Companys long-term debt is $19.2 million in tax-exempt
 bonds, in comparison to the fair value of $19.2 million.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                      |                                                                                                                                                                                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                     | Proceeds for Bond Issuance Transferred to Restricted Investment included
 in the Companys Restricted Investments was $7.0 million in comparison to the
 fair value of $7.0 million.                                                                                                                                                                                                                                
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                      |                                                                                                                                                                                                                                                                                                                                                                                                                      
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                     | Investments in CoBank, and Investments in Marketing Cooperatives
 - The Company believes it is not practical to estimate the fair value of
 these investments without incurring excessive costs because there is no
 established market for these securities and equity interests, and it is
 inappropriate to estimate future cash flows which are largely dependent on
 future earnings of these organizations.    
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|9.  | The
 Companys shareholders harvested 2,010,071 tons of sugarbeets from the
 2009-crop, which created an estimated payment liability of $85.9 million.
 This estimate was based upon an estimate of $42.76 per average ton payment.                                                                                                                                                                                                                 
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|10. | The sugar
 beet industry is currently involved in litigation concerning the approval of
 Roundup Ready® sugarbeets. Results of this litigation may impact the future
 costs associated with the sugar beet industry and the production of sugar
 from sugar beets.                                                                                                                                                                                  
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|11. | The
 Financial Accounting Standards Board has issued FASB ASC 715 (formerly SFAS
 No. 158), Employers Disclosure about Pensions and Other Post-Retirement
 Benefits. This standard requires disclosures to interim and annual financial
 statements, which are effective for the interim period financial statements
 ending November 30, 2008, but does not change the recognition requirements
 related to pensions and post-retirement benefits.

Components
of Net Periodic Benefit Cost for the Six-Months Ended, February 28, 2010 and
February 28, 2009

|                                    |  |              |      |                         |   |      |   |      |   |  |   |   | 
|----------------------------------- |  | ------------ | ---- | ----------------------- | - | ---- | - | ---- | - |  | - | - | 
|(In 000s)                          |  | Pension Plan |      | Other Than Pension Plan |  
|                                    |  | 2010         |      | 2009                    |   | 2010 |   | 2009 |  
|Service Cost                        |  | $            | 502  |                         | $ | 530  |   | $    | 0 |  | $ | 0 | 
|Interest
 Cost                      |  |              | 922  |                         |   | 879  |   |      | 0 |  |   | 0 | 
|Expected
 return on plan assets     |  |              | (746 | )                       |   | (815 | ) |      | 0 |  |   | 0 | 
|Amortization
 of prior service cost |  |              | 16   |                         |   | 17   |   |      | 0 |  |   | 0 | 
|Amortization
 of transition cost    |  |              | 0    |                         |   | 0    |   |      | 0 |  |   | 0 | 
|Amortization
 of net (gain) loss    |  |              | 305  |                         |   | 126  |   |      | 0 |  |   | 0 | 
|Net periodic
 benefit cost          |  | $            | 999  |                         | $ | 737  |   | $    | 0 |  | $ | 0 | 

|    |                                                                                                                                                                                                                                                                                                                                                                   
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    | Through the
 six-months ended February 28, 2010, the Company has made $0.4 million
 contributions as compared to $0.5 million through the six-months ended
 February 28, 2009. The Company anticipates contributing $1.1 million in
 additional funds to its pension plan in FY 2010, for a total of $1.5 million.
 Contributions in FY 2009 totaled $1.8 million.
|    |                                                                                                                                                                                                                                                                                                                                                                   
|12. | Recently
 Issued Accounting Pronouncements                                                                                                                                                                                                                                                                                                                        
|    |                                                                                                                                                                                                                                                                                                                                                                   
|    | In February
 2010, the FASB amended its guidance on subsequent events to remove the
 requirement to disclose the date through which an entity has evaluated
 subsequent events, alleviating conflicts with current SEC guidance. This
 amendment was effective upon issuance.                                                                                     
|    |                                                                                                                                                                                                                                                                                                                                                                   

6

---



|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    | In January
 2010, the FASB issued new standards in the ASC 820, Fair Value Measurements and Disclosures.
 These standards require new disclosures on the amount and reason for
 transfers in and out of Level 1 and 2 fair value measurements. The standards
 also require disclosure of activities, including purchases, sales, issuances,
 and settlements within the Level 3 fair value measurements. The standard also
 clarifies existing disclosure requirements on levels of
 disaggregation and disclosures about inputs and valuation techniques. The new
 disclosures regarding Level 1 and 2 fair value measurements and clarification
 of existing disclosures are effective for the Company beginning with its
 interim filing for February 2010. The disclosures about the rollforward of
 information in Level 3 are required for the Company with its interim filing
 in February 2011. This update will not have a material effect on the
 Companys results of operations, financial position or cash flows.
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|13. | Change in
 Accounting Standards:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|    | In June
 2009, the FASB issued Accounting Standards Update 2009-01 Generally Accepted
 Accounting Principles  The Company adopted this ASU on September 1, 2009.
 This standard did not have an impact on the Companys results of operations
 or financial condition. However, throughout the notes to the financial
 statements references that were previously made to various former US GAAP
 pronouncements have been changed to coincide with the appropriate section of
 the ASC.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     

|        |                                                                                       
|------- | --------------------------------------------------------------------------------------
|ITEM 2. | MANAGEMENTS DISCUSSION AND
 ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

This
Discussion should be read in conjunction with information contained in the
Consolidated Financial Statements and Notes thereto and in the Companys Annual
Report on Form 10K for fiscal year ended August 31, 2009.

OVERVIEW

The following
discussion and analysis relates to the financial condition and results of
operations of Minn-Dak Farmers Cooperative (the Company or the Registrant)
for the three-month and six-month periods ended February 28, 2010 (the second
quarter of the Companys 2010 fiscal year). The Companys fiscal year runs from
September 1 to August 31.

Any statements
regarding future market prices, anticipated costs, agricultural results,
operating results and other statements that are not historical facts contained
in this Quarterly Report on Form 10-Q are forward-looking statements. The words
expect, project, estimate, believe, anticipate, plan, intend,
could, may, predict and similar expressions are also intended to identify
forward-looking statements. Such statements involve risks, uncertainties and
assumptions, including, without limitation, market factors, the effect of
weather and economic conditions, farm and trade policy, the available supply of
sugar, available quantity and quality of sugarbeets and other risks, including
those set forth in the Companys reports filed with the Securities and Exchange
Commission, including Item 1A of Part I of the Companys Annual Report on Form
10-K for the year ended August 31, 2009. Should one or more of these risks or
uncertainties materialize, or should underlying assumptions prove incorrect,
actual outcomes may vary materially from those indicated. These forward-looking
statements are made as of the date of this report and the Company assumes no
obligation to update such forward-looking statements, or to update the reasons
why actual results could differ materially from those anticipated in such
forward-looking statements.

Critical Accounting Policies and Estimates

Preparation of the Companys consolidated financial statements requires
estimates and judgments to be made that affect the amounts of assets,
liabilities, revenues and expenses reported. Such decisions include the
selection of the appropriate accounting principles to be applied and the
assumptions on which to base accounting estimates. Management continually
evaluates these estimates based on its professional judgment and other criteria
it believes to be reasonable under the circumstances.

The difficulty
in applying these policies arises from the assumptions, estimates and judgments
that have to be made currently about matters that are inherently uncertain,
such as future economic conditions, operating results and valuations as well as
management intentions. As the difficulty increases, the level of precision
decreases, meaning that actual results may be different from those currently
estimated.

7

---



Estimates are
considered to be critical if they meet both of the following criteria: (1) the
estimate requires assumptions about material matters that are uncertain at the
time the accounting estimates are made, and (2) other materially different
estimates could have been reasonably made or changed from period to period.

There have
been no material changes to the Companys critical accounting policies since
the filing of its Annual Report on form 10-K for the year ended August 31,
2009. The Companys critical accounting estimates include the following:

SubsidiariesSubsidiaries that are controlled by the Company are
consolidated in the Companys financial statements. The Companys wholly owned
subsidiary, Link Acquisition Company LLC (Link) was formed to advance
possible strategic business activities by the Company. On December 3, 2009 the
USDA approved the transfer of 1.3709286 percent of the Domestic Beet Sugar
Allotment from another processor to the Company through its subsidiary Link. On
February 1, 2010, the USDA approved the transfer of 0.8373168 percent of the
Domestic Beet Sugar Allotment from the Company to another beet sugar processor,
Wyoming Sugar Growers LLC. The net result of these two transactions is an
increase in the Companys beet sugar allocation for 2009 and later crop years.
The Companys allocation will be increased by approximately 26,750 short tons
raw value for 2009. The transfers were made by the USDA in accordance with its
regulations regarding the transfer of beet sugar allocations. Costs associated
with the acquisition of these allocation rights will be amortized over the
remaining life of the farm program, currently estimated at four crop years.

Inventory ValuationFinished goods inventories of sugar, in process sugar,
pulp and molasses are valued at estimated net realizable value. The Company
derives its estimates from sales contracts, recent sales and evaluations of
market conditions and trends. Changes in market conditions may cause
managements estimates to differ from actual results.

Derivative and Hedging Activities

FASB ASC 815 (formerly SFAS No. 133, Accounting for Derivative Instruments and
Hedging Activities) requires the Company to recognize all derivatives, as
defined, on the balance sheet at fair value.

The Company
periodically enters into fixed asset purchase contracts with foreign
manufacturers and these contracts require portions of the total contract price
to be paid in Euros. If the financial exposure is significant, the Company may
enter into derivative contracts to reduce its exposure to variability in
foreign currency markets associated with a fixed asset purchase. As of February
28, 2010, the Company held no foreign currency derivatives or hedges.

Property and Equipment, Leased Property and
Equipment and DepreciationProperty and equipment as well as leased property and
equipment are depreciated for financial reporting purposes principally using
straight-line methods with estimated useful lives ranging from 3 to 40 years.
Economic circumstances or other factors may cause managements estimates of
expected useful lives to differ from actual.

The Company
reviews its property and equipment and leased property and equipment for
impairment whenever events indicate that the carrying amount of the asset may
not be recoverable. An impairment loss is recorded when the sum of the future
cash flows is less than the carrying amount of the asset. An impairment loss is
measured as the amount by which the carrying amount of the asset exceeds its
fair value. There were no impairment losses incurred during the six-month period
covered by this report. However, considerable management judgment is necessary
to estimate future cash flows and therefore these management estimates may
differ from actual results.

Defined Benefit Pension PlanThe Company maintains and administers a defined
benefit pension plan. The annual cost of this plan can be significantly
affected by changes in assumptions and differences between expected and actual
experience. The Company utilizes actuarial methods required by FASB ASC 715
(formerly SFAS No. 158, Employers Accounting for Defined Benefit Pension Plans
and Other Post Retirement Plans) to account for its defined benefit pension
plan. The actuarial methods require numerous assumptions to calculate the net
periodic pension benefit expense and the related projected benefit obligations
for the Companys defined benefit pension plan. Three of the most significant
assumptions are the discount rates, expected long-term rate of return on plan
assets, and rate of total compensation increase. In making these assumptions,
the Company is required to consider current market conditions, including
changes in interest assumptions.

8

---



Key
assumptions used to determine annual pension expense are as follows:

|                                     |       |  |       | 
|------------------------------------ | ----- |  | ----- | 
|                                     | 2010  |  | 2009  | 
|Discount
 rate                       | 6.19% |  | 6.50% | 
|Expected
 return on plan assets      | 8.00% |  | 8.00% | 
|Rate of
 total compensation increase | 4.25% |  | 4.25% | 

Discount Rate:
An assumed discount rate is required to be used in the pension plan actuarial
valuation. The discount rate is a significant assumption. The company uses the
Mercer Pension Index for the discount rate to be applied with the plan year
2010 and forward. Prior to the use of this Index, the plan sought guidance from
outside pension experts for the appropriate rate.

Expected
Return on Plan Assets: The expected long-term rate of return on plan assets
should, over time; approximate the actual long-term returns on pension plan
assets. The Companys methodology for selecting the Expected Return on Plan
Assets is to seek guidance from outside pension experts for an appropriate
rate.

The expected
return on total Plan assets is developed by combining the Plans long-term
asset class allocation targets with the long-term return expectations for each
of these asset classes. Expected asset class returns are developed by the
Plans investment consultant. The final assumption is chosen by the Company as
their best estimate among a range of possible alternatives, and reviewed for
reasonableness by the Plan actuary.

Rate of total
Compensation Increase: An assumption as to the rate of growth of an employees
salary. This is the expected long-term rate for compensation increases used to
cover all forms of increases from entry level to retirement. This rate
incorporates expected steps in pay scale, promotions, and any other form of pay
increases. The Companys methodology for selecting the rate is to seek guidance
from outside pension experts for the appropriate rate.

Periodically,
the compensation increase assumption is compared against actual Plan experience
by the Company or the actuary. They will also compare the assumption to current
expectations of factors that influence compensation rates such as cost of
living increases and wage inflation. The final compensation increase assumption
is chosen by the Company as their best estimate among a range of possible
alternatives, and reviewed for reasonableness by the Plan actuary.

Income Taxes 
FASB ASC Topic 740-10 (formerly FASB Interpretation (FIN) No. 48, Accounting for Uncertainty in Income Taxes  An
Interpretation of FASB Statement No. 109). FASB ASC Topic 740-10
prescribes a threshold for the financial statement recognition and measurement
of a tax position taken or is expected to be taken in an income tax return.
FASB ASC Topic 740-10 requires that the Company determine whether the benefits
of tax positions are more likely than not of being sustained upon audit based
upon the technical merits of the tax position. For tax positions that are more
likely than not of being sustained upon audit, the Company recognizes the largest
amount of the benefit that is more likely than not of being sustained in its
financial statements. For tax positions that are not more likely than not of
being sustained upon audit, the Company does not recognize any portion of the
benefit in its financial statements.

The total
amount of unrecognized tax benefits as of February 28, 2009 and February 28,
2010, respectively, are $0.3 million and $0.3 million. These amounts at
February 28, 2009 and February 28, 2010, respectively, include accrued interest
and penalties of $0.1 million and $0.1 million.

For purposes
of FASB ASC Topic 740-10, the Company recognizes interest accrued related to
unrecognized tax benefits in tax expense.

The State of
North Dakota and the Company as of February 28, 2010 were in the process of
auditing the tax issues related to the Companys FASB ASC Topic 740-10
liabilities.

9

---



RESULTS OF
OPERATIONS

Comparison of the three-months ended February
28, 2010 and February 28, 2009

In the
Consolidated Statements of Operations, Distribution of Net Proceeds, allocated
costs of sugarbeets paid or payable to growers for production to date, net of
unit retention capital, totaled $28.8 million, a decrease of $2.4 million or
7.8 percent from the prior year. As of February 28, 2010, Management has
estimated the Fiscal 2010 payment to growers for sugarbeets at $85.9 million,
which is $6.1 million or 6.6 percent less than the prior year. The decrease in
payments to members is primarily due to an increase of 0.1 million harvested
tons, an increase of 0.2 million tons of tolled sugarbeets and a decrease of
0.2 million tons of non-patronage sugarbeets for a combined tonnage of slightly
more delivered tons of sugarbeets, but of a lower quality.

The decrease
in payments to members is based upon (i) an average delivered sugar content of
15.5 percent, a 6.4 percent decrease from the 2008-crop, (ii) a total member
sugarbeet crop to process of 2.0 million tons and (iii) the Companys projected
selling price for its sugar, molasses and yeast being higher, offset by lower
pulp prices when compared to the previous year.

Revenues for
the quarter ended February 28, 2010 were comprised of Sugar 81 percent, Pulp 8
percent, Molasses 5 percent and Yeast 6 percent.

Revenue and
inventory changes for the three-months ended February 28, 2010 decreased $18.6
million from the 2009 period. Revenue from the sale of finished goods increased
$5.1 million and the change in the value of inventories decreased $23.7
million.

Revenue from
the sale of sugar increased $2.5 million, or 6.3 percent reflecting a 5.3
percent decrease in volume and an 11.6 percent increase in the sales price for
sugar. The volume decrease is due to less projected sugar being produced from
the 2009 vs. 2008 crop. The price increase reflects a market wide response to a
tighter supply of sugar.

During the
three-month period ended February 28, 2010, the Company tolled approximately
0.2 million tons of sugarbeets for another sugar processor. For financial
statement purposes this activity resulted in tolling revenue vs. sugar revenue
on these tons processed.

Revenue from
pulp sales decreased $0.1 million, or 1.0 percent reflecting a 59.9 percent
increase in sales volume and a 60.9 percent decrease in the average gross
selling price. The increase in volume is primarily the result of timing of
shipments to customers vs. the prior year. The decrease in gross selling price
was due to lower demand for pulp and lower prices for corn and other
commodities used in feed rations during the primary marketing time frame.

Revenue from
molasses sales increased $1.7 million or 79.6 percent reflecting a 77.6 percent
increase in sales volume and a 2.0 percent increase in the average gross
selling price. The increase in sales volume is primarily the result of higher
production to the marketing pool this year and the timing of shipments to
customers vs. the prior year. The selling price increase reflects slightly
higher market demand from the prior period.

Revenues from
yeast sales increased $0.9 million, or 29.0 percent reflecting a 7.0 percent
increase in the average selling price and a 22.0 percent increase in the sales
volume. Marketplace prices are higher, a reflection of much higher factory
input and freight costs experienced by the yeast industry, necessitating some pass-through
of these costs to customers. Volume increases resulted from increased demand
from existing customers.

The other
contributing factor to the change in revenues results from the change in
finished goods inventories. The increase in the value of finished goods
inventories for the three-months ended February 28, 2010 amounted to $9.8
million or $23.7 million less of an increase in the value of finished goods
inventories for the three-months ended February 28, 2009. The primary factor
for the decreased change in inventories was due to lower levels of sugar
inventory produced during the period, due primarily to the tolling of another
processors sugarbeets.

10

---



In the
consolidated Statement of Operations, Expenses section, production costs of
sugar, in-process sugar, co-products and yeast totaled $19.7 million, $7.0
million or 26.2 percent less than the prior year. This reduction was directly
related to the reduced amount of purchased sugarbeets from another processor
during the three-month period ended February 28, 2010 compared to the three-month period ended February 28,
2009. Marketing costs totaled $10.2 million, $1.4 million or 15.5 percent more
than the quarter ended February 28, 2009. The increase in marketing costs is
primarily due to higher levels of pulp and molasses sales.

Comparison of the six-months ended February
28, 2010 and February 28, 2009In the Consolidated Statements of Operations,
Distribution of Net Proceeds, allocated costs of sugarbeets paid or payable to
growers for production to date, net of unit retention capital, totaled $59.9
million, a decrease of $0.1 million or 0.2 percent from the prior year. As of
February 28, 2010, Management has estimated the Fiscal 2010 payment to growers
for sugarbeets at $85.9 million, which is $6.1 million or 6.6 percent less than
the prior year. The decrease in payments to members is primarily due to an
increase of 0.1 million harvested tons, an increase of 0.2 million tons of
tolled sugarbeets and a decrease of 0.2 million tons of non-patronage
sugarbeets for a combined tonnage of slightly more delivered tons of
sugarbeets, but of a lower quality.

The decrease
in payments to members is based upon (i) an average delivered sugar content of
15.5 percent, a 6.4 percent decrease from the 2008-crop, (ii) a total member
sugarbeet crop to process of 2.0 million tons and (iii) the Companys projected
selling price for its sugar, molasses and yeast being higher, offset by lower
pulp prices when compared to the previous year.

Revenues for
the six-months ended February 28, 2010 were comprised of Sugar 86 percent, Pulp
5 percent, Molasses 3 percent and Yeast 6 percent.

Revenue and
inventory changes for the six-months ended February 28, 2010 decreased $18.0
million from the 2009 period. Revenue from the sale of finished goods increased
$3.0 million and the change in the value of inventories decreased $21.0
million.

During the
six-month period ended February 28, 2010, the Company tolled approximately 0.2
million tons of sugarbeets for another processor. For financial statement
purchases this activity resulted in tolling revenue vs. sugar revenue on these
tons processed.

Revenue from
the sale of sugar decreased $0.1 million, or 0.2 percent reflecting a 9.1
percent decrease in volume and an 8.9 percent increase in the sales price for
sugar. The volume decrease was due to a smaller crop. The price increase
reflects a market wide response to a tighter supply of sugar available for
sale.

Revenue from
pulp sales increased $0.1 million, or 1.1 percent reflecting a 40.6 percent
increase in sales volume and a 39.5 percent decrease in the average gross
selling price. The increase in volume is primarily the result of carry-over
sales from the prior fiscal year and timing of shipments to customers vs. the
prior year. The decrease in gross selling price was due to lower demand for
pulp and lower prices for corn and other commodities used in feed rations
during the primary marketing time frame.

Revenue from
molasses sales increased $1.8 million, or 37.5 percent reflecting a 21.5
percent increase in sales volume and a 16.0 percent increase in the average
gross selling price. The increase in sales volume is primarily the result of
higher production to the marketing pool this year and the timing of shipments
to customers vs. the prior year. The selling price increase reflects the value
of carry-over sales from August 31, 2008 into the first quarter ended November
30, 2008, which were significantly lower than the carry-over sales prices from
August 31, 2009 into the first quarter ended November 30, 2009. As future
period sales reflect the current crop marketing efforts, the overall price
increase from market demand is expected to be less dramatic.

Revenues from
yeast sales increased $1.2 million, or 19.2 percent reflecting a 9.3 percent
increase in the average selling price and a 9.9 percent increase in the sales
volume. Marketplace prices are higher, a reflection of much higher factory
input and freight costs experienced by the industry, necessitating some
pass-through of these costs to customers. Volume increases resulted from
increased demand from existing customers.

11

---



The other
contributing factor to the change in revenues results from the change in
finished goods inventories. The increase in the value of finished goods inventories
for the six-months ended February 28, 2010 amounted to $25.9 million or
$20.9 million less of an increase in the value of finished goods inventories
for the six-months ended February 28, 2010. The primary change in inventories
resulted from less sugar inventory in the form of juice being on hand as of
February 28, 2010 vs. February 28, 2009.

In the
consolidated Statement of Operations, Expenses section, production costs of
sugar, in-process sugar, co-products and yeast totaled $42.4 million, $7.4
million or 14.9 percent less than the prior year. The cost of outside purchased
beets decreased by $7.2 million from the six-month period ended February 28,
2009.

Marketing
costs totaled $21.9 million, $1.4 million or 6.0 percent less than the
six-months ended February 28, 2009. The decrease in marketing costs is
primarily due to less non-member sugar purchases and less prior year inventory
distribution costs.

LIQUIDITY AND
CAPITAL RESOURCES

Because the
Company operates as a cooperative, payment for member-delivered sugarbeets, the
principal raw material used in producing the sugar and agri-products it sells,
are subordinated to all member business expenses. In addition, actual cash
payments to members are spread over a period of approximately one year following
delivery of sugarbeet crops to the Company and are net of unit retains and
patronage allocated to them, all three of which remain available to meet the
Companys capital requirements. This member financing arrangement may result in
an additional source of liquidity and reduced outside financing requirements in
comparison to a similar business operated on a non-cooperative basis. However,
because sugar is sold throughout the year (while sugarbeets are processed
primarily between September and April) and because substantial amounts of
equipment are required for its operations, the Company has utilized substantial
outside financing on both a seasonal and long-term basis to fund such
operations. The short and long-term financing has been primarily provided by
CoBank (the Bank). The Company has a short-term line of credit with the Bank
totaling $45.0 million through December 31, 2010. The Company also had $19.0
million of seasonal financing capacity for the period ending February 28, 2010
through the USDA Commodity Credit Corporation under the USDA Sugar Loan
Provisions contained in the 2008 Farm Bill, of which $2.6 million was available
on February 28, 2010.

In the event
the Companys Primary lender was not to renew the Seasonal Debt Capacity, the
Company would consider the following options or combinations thereof:

| |   |                                                                                                       
| | - | ------------------------------------------------------------------------------------------------------
| |  | Obtain
 Seasonal Financing from an alternative agricultural or other commercial
 lender.              
| |   |                                                                                                       
| |  | Rely more
 heavily upon the USDA Commodity Credit Corporation Sugar Loan Provisions.                  
| |   |                                                                                                       
| |  | Reduce the
 current cash portion of the grower payment until cash was available to make
 the payments.

On December
15, 2009, the Company renewed, through December 31, 2010, the revolving Credit
Supplement with the Bank. The loan agreements included the following:

The revolving
Credit Supplement was renewed at $45.0 million, $5.0 million less than the
prior agreement. The $5.0 million reduction will reduce un-advanced loan fees
for the Company.

The loan
agreements between the Bank and the Company obligate the Company to maintain
the following financial covenants, and financial statements in accordance with
GAAP:

| |   |                                                                                                                                            
| | - | -------------------------------------------------------------------------------------------------------------------------------------------
| |  | Maintain a
 current ratio of no less than 1.10 for the first quarter of a fiscal year and
 1.15 for all other quarter and fiscal year ends;
| |   |                                                                                                                                            
| |  | Maintain a
 long-term debt and capitalized leases to equity ratio of not greater than
 .8:1;                                               
| |   |                                                                                                                                            
| |  | Maintain
 available cash flow to current long-term debt ratio as defined in the
 agreement of not less than 1.25:1.                        

As of February
28, 2010 the Company was in compliance with its loan agreement covenants with
the Bank.

On December 7,
2009, the Company applied for and received approval from Richland County to
re-finance its tax-exempt long-term bonds. All variable rate bonds outstanding
as of January 15, 2010 were called and new variable rate bonds were issued with
a single maturity date of February 1, 2023 with no associated gains or losses.
In addition, $7.0 million in new tax-exempt bonds, which are exempt from
alternative minimum taxes, were approved by Richland County to finance future
capital expenditures. These variable rate bonds were issued on February 18, 2010 with a
single maturity date of February 1, 2025. These variable rate bonds are traded
at approximately 70 percent of 7-day LIBOR, and are secured by a letter of
credit from the Bank.

12

---



Working
Capital as of February 28, 2010 totals $29.3 million compared to $13.4 million
at August 31, 2009, an increase of $15.9 million for the period. Increased
working capital is a result of the normal operational and capital expenditure
activities of the Company. The Companys normal working capital position
pattern is to increase during the first, second and third quarters of its
fiscal year and decline during the fourth quarter. The fourth quarter decline
is normally attributed to inter-campaign maintenance costs, a higher level of
capital spending during the non-operating period, and the recording of
shareholder equity revolvements. The Companys estimate of working capital for
August 31, 2010 is approximately $14.5 million.

The Company
has approximately five years of Bank long-term debt remaining and it has two
tax-exempt bond issues, with single maturity dates of February 1, 2023 and
February 1, 2025.

Capital
expenditures for fiscal year 2010 have been approved at $5.8 million. The
Company is funding these capital expenditures through a combination of
depreciation, as an element of working capital, and additional long-term debt
in the form of tax-exempt bonds.

Cash used in
operations totaled $17.4 million versus $20.4 million for the six-month period
ended February 28, 2010 and 2009, respectively. The decrease of $3.0 million
was the result of lower net income, lower accounts receivable, lower inventory
and prepaid expenses, and higher accrued liabilities.

The Net Cash
used for Investing Activities was $5.1 million versus $3.2 million for the
six-month periods ended February 28, 2010 and 2009, respectively. This increase
was primarily the result of an increase in other assets.

The Net Cash
Provided by financing activities was $22.7 million versus $23.5 million for the
six-month periods ended February 28, 2010 and 2009, respectively. The change in
seasonal debt was $29.9 million versus $19.4 million for the six-month periods
ended February 28, 2010 and 2009, respectively. Proceeds of long-term debt were
$0.0 million versus $11.7 million for the six-month periods ended February 28,
2010 and 2009, respectively.

Cash increased
$0.2 million for the six-month period ended February 28, 2010.

During the
six-month period ended February 28, 2010, the Company issued $7.0 million of
new tax exempt bonds resulting from the Federal Governments economic stimulus
legislation. The proceeds of these bonds are required to be placed in a trust
account until the Company makes qualifying investments that allow for the use
of the proceeds of these bonds. The Company intends to use all of the proceeds
from the bond issuance on qualifying capital expenditures within the time
period required in the bond indenture.

ESTIMATED
FISCAL YEAR 2010/ CROP YEAR 2009 INFORMATION

This
discussion contains a summary of the Companys current estimates of the
financial results to be obtained from the Companys processing of the 2009
sugarbeet crop. Given the nature of the estimates required in connection with
the payments to members for their sugarbeets, this discussion includes
forward-looking statements regarding the quantity of sugar to be produced from
the 2009 sugarbeet crop, the net selling price for the sugar and co-products
produced by the Company and the Companys operating costs. These
forward-looking statements are based largely upon the Companys expectations
and estimates of future events; as a result, they are subject to a variety of
risks and uncertainties. Some of those estimates, such as the selling price for
the Companys products, the quantity of sugar produced from the sugarbeet crop,
changes in plant production efficiencies and sugarbeet storage conditions are
beyond the Companys control. The actual results experienced by the Company
could differ materially from the forward-looking statements contained herein.

The Companys
members harvested 2.0 million tons of sugarbeets from the 2009-crop,
approximately 10.0 percent less than the most recent 5-year average, due to
extremely wet harvest conditions in a significant part of its growing area.
Sugar content of the 2009-crop at harvest was 8.2 percent below the average for
the five most recent crop years, due to late planting dates and cooler than
average growing season, resulting in harvesting of immature beets.

13

---



Because of the
lower harvested tons and lower sugar percent, the Companys production of sugar
from the 2009-crop sugarbeets from member and non-member purchased sugarbeets is expected to be 18.3
percent less than the average of the five most recent years of sugar
production.

The Companys
initial sugarbeet payment estimate used for the preparation of the November 30,
2009 financials totaled $40.00 per ton or $0.15546174 per harvested/bonus
extractable pound of sugar, with the final sugarbeet payment determined in
October of 2010. The Company increased the projected payment to $41.26 per ton
or $0.16059681 per pound of sugar at the December 18, 2009 Board of Directors
meeting. The Company increased the projected payment to $42.76 per ton or
$0.16643534 per pound of sugar at the March 23, 2010 Board of Directors
meeting. The $42.76 sugarbeet payment has a $1.00 per ton of sugarbeets budget
contingency hold back until such time as the Company has an accurate assessment
of what the final payment for the 2009 sugarbeet crop will be. The final
sugarbeet payment will be determined and paid in October of 2010. The February
28, 2010 financial statements are based upon the $42.76 per ton estimate. The
estimated sugarbeet payment may be changed, modified or amended as additional
information becomes available during the Companys fiscal year. The lower
projected 2009-crop payment per ton results from fewer total tons of beets
processed, lower sugar content in the sugarbeets, lower pulp prices and
increased operating and fixed costs per ton; and offset somewhat by higher
sugar prices versus the prior year.

As of the date
of this report, the Company has all non-ventilated beets and all ventilated
beets that have not been covered in plastic processed. The Company expects the
balance of the harvested tons to be processed without having to discard any of
the remaining beets.

It is the
Companys policy to update its estimate of yearly crop payments only when a
material change is sufficiently certain and the amount of such change is
reasonably calculable.

ESTIMATED
FISCAL YEAR 2011 INFORMATION

On September
22, 2009, the Companys Board of Directors determined that the planting level
for the 2010-crop will be 150 percent of member preferred shares plus a 10
percent measuring tolerance for a total maximum planting of 160 percent and a
total minimum planting of 140 percent of member preferred shares. A substantial
portion of the projected 2010-crop sugar sales have been contracted at levels
slightly higher than the 2009-crop.

OTHER
INFORMATION

Food, Conservation and Energy Act of 2008

The Food,
Conservation and Energy Act of 2008 (the Farm Bill) enacted in June 2008,
contains several provisions related to the domestic sugar industry aimed at
achieving balance and stability in the U.S. sugar market while minimizing the
cost to the Federal government. The Farm Bill applies to the 2008 through 2012
crop years. Generally, the Farm Bill:

| |   |                                                                                                                             
| | - | ----------------------------------------------------------------------------------------------------------------------------
| |  | maintains a
 non-recourse loan program,                                                                                     
| |  | sets a
 minimum overall allotment quantity for U.S. producers at no less than 85
 percent of domestic consumption,          
| |  | maintains a
 system of marketing allocations for sugarbeet and sugar cane producers,
 restricts imports of foreign sugar and
| |  | provides a
 new market balancing mechanism to divert any oversupply of sugar from sugar
 producers to ethanol producers.    

Under the Farm
Bill, sugar processors can borrow funds on a non-recourse basis from the
Commodity Credit Corporation (CCC), with repayment of such funds secured by
sugar. If the price of sugar drops below the forfeiture price, the processors
can forfeit the sugar securing the loans to the CCC in lieu of repayment.
Processors may also obtain CCC loans for in-process sugar or syrups at 80
percent of the loan rate.

14

---



The Farm Bill
incorporates gradual loan rate increases for raw and refined sugar. For raw
sugar, the loan rate will increase three-quarters of a cent per pound, raw
value, phased-in in quarter-cent increments over crop years 2009-2011. Raw cane
loan rates will remain at 18.00 cents/lb in 2008 then rise gradually to 18.75
cents by 2011, and they will remain at 18.75 cents/lb for the 2012 crop year.
Refined beet sugar loan rates are set at 23.45 cents/lb for 17 the 2009 crop
and thereafter are set at a rate equal to 128.5 percent of the loan rate per
pound for raw cane sugar for each of the 2010 through 2012 crop years.

The United
States Department of Agriculture (USDA) has historically maintained raw and
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 through
management of a tariff rate quota system. Currently, forty exporting countries
retain guaranteed preferential access to the U.S. market under World Trade
Organization (WTO) and Free Trade Agreement (FTA) rules. Mexicos access has
been unlimited since January 1, 2008. This Farm Bill sets a minimum overall
allotment quantity for U.S. producers at no less than 85 percent of domestic consumption
and provides a market balancing mechanism if there is an oversupply in the
domestic sugar market. If the Secretary of Agriculture determines there is an
oversupply of sugar, the new market balancing mechanism requires the Secretary
to divert the excess sugar from sugar producers to ethanol producers while
minimizing the cost to the U.S Treasury. Although the market balancing
mechanism will provide sustainability to the sugar industry in the short term,
there is no assurance that the sugar-to-ethanol program will be in place after
the Farm Bill expires.

The marketing
allotments and allocations set forth under the Farm Bill affect the sugar
produced from the 2008 crop through the 2012 crop. On an annual basis, the
marketing allotments and the corresponding allocation to the Company will
dictate the amount of sugar the Company can sell into the domestic market. The
Companys marketing allocation for the 2009 crop is currently set at
approximately 6.5 million hundredweight. The Companys allocation may reduce or
increase the amount of sugar the Company can market for a given year, thus
affecting the number of acres of sugarbeets required for processing to produce
that amount of sugar.

North American Free Trade Agreement

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

Regional and Bilateral Free Trade Agreements

The United
States government may continue to pursue international trade agreements. The
Company monitors the U.S. governments international trade policy because it
may lead to additional commitments to import sugar into the U.S. market. The
primary agreements under consideration that affect sugar, to the Companys
knowledge, are the Columbia Free Trade Agreement; the Thailand Free Trade
Agreement; the Panama Free Trade Agreement; the Free Trade Area of the
Americas; the South African Customs Union Free Trade Agreement, the Trans
Pacific Partnership Trade Agreement and others. The Columbia Free Trade
Agreement and the Panama Free Trade Agreement have been completed, signed, but
as yet not been ratified by the U.S. Congress. The Company is uncertain when
these two trade agreements will be brought before Congress for a vote. Many of
the countries included in these agreements are major sugar producers and
exporters.

The impact of
the various trade agreements on the Company can not be assessed at this time
due to the uncertainty concerning the terms of the agreements and whether they
will ultimately be implemented. It is possible, however, that the passage of
various trade agreements could have a material adverse effect on the Company
through a reduction in acreage that can be planted by the Companys shareholders,
and/or a reduction in sugar selling prices, and a corresponding reduction in
the sugarbeet payment to the shareholders and to the Company earnings.

The Doha Round
negotiations of the World Trade Organization have resumed but it is unclear at
this time whether these negotiations will result in an agreement any time soon.
If formal negotiations are successful, the outcome of any negotiated
arrangement could have adverse consequences for the Company.

15

---



Environmental

The Company is
subject to extensive federal and state environmental laws and regulations with
respect to water and air quality, solid waste disposal and odor and noise
control. The Company conducts an ongoing compliance program designed to meet
these environmental laws and regulations. The Company believes that it is in
substantial compliance with applicable environmental laws and regulations. From
time to time, however, the Company may be involved in investigations or
determinations regarding matters that may arise in the normal course of
business. The Company works closely with all affected government agencies to
resolve environmental issues that arise and believes they will be resolved
without any adverse effect on the Company.

The Companys
sugar manufacturing process is energy intensive and generates carbon dioxide
and other Greenhouse Gases (GHGs). Several bills have been introduced in the
United States Senate and House of Representatives that would regulate GHGs and
carbon dioxide emissions in order to reduce the impact of global climate
change. In June 2009 the United States House of Representatives passed H.R.
2454, the American Clean Energy and Security Act (ACES). This bill creates a
system for regulating emissions of GHGs and also creates a market for emission
allowances or credits. Similar legislation is being considered in the U.S.
Senate. It is uncertain whether the steps necessary to move this bill or
similar bills through the legislative process will be completed this fiscal
year.

The Company
believes it is likely that industries generating GHGs, including the Company,
will be subject to either federal or state regulation relating to climate
change policies sometime in the future. These policies, if adopted, will
increase the Companys energy and other operating costs. Depending on how these
policies address imports, the domestic sugar market may have a competitive
disadvantage with imported sugar. These policies could have a significant
negative impact on the Companys beet payment to shareholders if it is unable
to pass the increased costs on to the Companys customers.

Separately,
the Environmental Protection Agency (EPA) finalized findings that GHG
emissions endanger public health and welfare through their impact on climate
change, and that motor vehicles cause or contribute to dangerous GHG
pollution. The findings, which respond to the Supreme Courts 2007 decision in Massachusetts v. EPA, legally obligates
the EPA to issue GHG standards for motor vehicles under the Clean Air Act and
supports the EPAs effort to use existing legal authority to regulate GHGs. In
March 2009 the EPA proposed regulations mandating reporting of greenhouse gas
emissions from all sectors of the economy. The proposed regulation would apply
to downstream facilities with greenhouse gas emissions equal to or greater than
25,000 tons per year and to upstream suppliers of fossil fuels and industrial
greenhouse gases as well as to manufacturers of vehicles and engines. Those
subject to the regulations would be required to submit annual reports of
emissions of carbon dioxide (CO2 and other types of gasses. The EPA subsequently issued final rules,
which became effective on December 29, 2009, that will require companies
subject to the rule to begin collecting emissions data on January 1, 2010 and
file their first self-certified reports in March 2011. As an emitter of GHGs
the Company is watching legislative and regulatory developments carefully and
their potential impact to the Company, including working with key political
contacts to try to get relief, where necessary, from onerous legislative and
agency rules. Yet, the Company cannot predict what financial and business
impact any new proposed laws or agency rules will have on the Company.

Also, the Occupational
Safety and Health Administration (OSHA) has issued an advance notice of
proposed rulemaking (ANPR), whereby OSHA is requesting comments, including data
and other information, on issues related to the hazards of combustible dust in
the workplace. OSHA plans to use the information received in response to this
notice in developing a proposed broad standard for combustible dust. The
Company believes that sugar dust will be included in the definition of
combustible dust and therefore subject to the new proposed standard. The
Company and the Sugar Industry are working together to provide the necessary
information to OSHA regarding sugar dust, and to monitor and provide input to
OSHA on the proposed combustible dust standard going forward. The Company
cannot determine at this time if any final rule on combustible dust will have a
material negative impact on its future earnings or on its beet payments to
growers.

Beet Seed

On September
21, 2009 the U.S. District Court (the Court) ruled against the defendant,
U.S. Department of Agriculture (USDA), in the Roundup Ready® sugarbeet case
finding that the USDA violated federal law by failing to prepare an
Environmental Impact Statement before deregulating Roundup Ready® sugarbeets.
The Court, in its decision, determined that the USDA was now required to
prepare a full Environmental Impact Statement. It initially set October
30, 2009 as the date to address the remedy phase of the case. It is during
this remedy phase that the actual impact of the decision on sugarbeet producers
and the Company would become more defined.

16

---



On December 4,
2009 the Court decided how it would proceed with the next phase of litigation
concerning the approval of Roundup Ready® sugarbeets. The Court has scheduled a
hearing regarding remedies for July of 2010. It is at this hearing that the
actual direct impact of the decision on sugarbeet producers and the Company
will become more defined. There is no way to predict how the Court will rule in
the remedy phase. The Court took no action on December 4th that would restrict
growers choice or ability to plant Roundup Ready® sugarbeets in 2010.

Subsequent to
the December 4th Court hearing, the Plaintiffs for this case filed a
preliminary injunction with the Court. The Plaintiffs moved to preclude all
further planting, cultivation, processing, or other use of genetically
engineered Roundup Ready® sugarbeets or sugar beet seeds, including but not
limited to permitting any Roundup Ready® sugar beet seed crop to flower.
Plaintiffs proposed preliminary injunction also included requiring the sugar
beet seed crop that has already been planted to be pulled up. On March 16, 2010
the judge denied the preliminary injunction. While the Company believes that it
is unlikely that there will be any legal interference with the planting and
harvesting of the 2010 commercial root crop it cannot determine going forward
what legal decisions there may be, if any, that would prevent the planting of
Roundup Ready® sugar beet seed in 2011 and beyond by its shareholders.

|        |                                                            
|------- | -----------------------------------------------------------
|ITEM 3. | QUANTITATIVE AND QUALITATIVE
 DISCLOSURES ABOUT MARKET RISK

There have
been no material changes to the Companys Quantitative and Qualitative
Disclosures About Market Risk since the filing of the Companys Annual Report
on Form 10-K for the year ended August 31, 2009.

|         |                        
|-------- | -----------------------
|ITEM 4T. | CONTROLS AND PROCEDURES

Evaluation of
Disclosure Controls and Procedures 
As required by Rule 13a-15(b) under the Exchange Act, the Company conducted
an evaluation, under the supervision and with the participation of the
Companys management, including its Chief Executive Officer and Chief Financial
Officer (together the Certifying Officers), of the effectiveness of the
design and operation of the Companys disclosure controls and procedures as of February
28, 2010, the end of the period covered by this report. Based upon that
evaluation, the Certifying Officers concluded that the Companys disclosure
controls and procedures were effective.

Inherent Limitations
on Effectiveness of Controls 
Management is responsible for establishing and maintaining adequate
internal control over financial reporting to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of
financial statements for external purposes in accordance with U.S. generally
accepted accounting principles. Internal control over financial reporting
includes those policies and procedures that (i) pertain to the maintenance of
records that, in reasonable detail, accurately and fairly reflect the transactions
and dispositions of assets; (ii) provide reasonable assurance that transactions
are recorded as necessary to permit preparation of financial statements in
accordance with U.S. generally accepted accounting principles, and that
receipts and expenditures are being made only in accordance with authorizations
of the management and the Board; and (iii) provide reasonable assurance
regarding prevention or timely detection of unauthorized acquisition, use or
disposition of Company assets that could have a material effect on the
financial statements.

Management
personnel, including the Certifying Officers, recognize that the Companys
internal control over financial reporting cannot prevent or detect all error
and all fraud. A control system, no matter how well designed and operated, can
provide only reasonable, not absolute, assurance that the control systems
objectives will be met. The design of a control system must reflect the fact
that there are resource constraints, and the benefits of controls must be considered
relative to their costs. Further, because of the inherent limitations in all
control systems, no evaluation of controls can provide absolute assurance that
misstatements due to error or fraud will not occur or that all control issues
and instances of fraud, if any, have been detected. The design of any system of
controls is based in part on certain assumptions about the likelihood of future
events, and there can be no assurance that any design will succeed in achieving
its stated goals under all potential future conditions.

17

---



Changes in Internal
Control over Financial Reporting 
There was no change in the Companys internal control over financial
reporting during the three-months ended February 28, 2010 that has materially
affected, or is reasonably likely to materially affect, its internal control
over financial reporting.

18

---



|         |                  
|-------- | -----------------
|PART II. | OTHER INFORMATION

|        |                  
|------- | -----------------
|Item 1. | Legal Proceedings
|None    |                  

|                                         |              
|---------------------------------------- | -------------
|Item 1A.                                 | Risk Factors.
|See the
 Companys 8-31-09 10-k, Item 1A

|        |                                                             
|------- | ------------------------------------------------------------
|Item 2. | Unregistered Sales of Equity
 Securities and Use of Proceeds
|None    |                                                             

|        |                                
|------- | -------------------------------
|Item 3. | Defaults upon Senior Securities
|None    |                                

|        |                                                     
|------- | ----------------------------------------------------
|Item 4. | Submission of Matters to a Vote of
 Security Holders
|None    |                                                     

|        |                  
|------- | -----------------
|Item 5. | Other Information
|None    |                  

|                 |                                                                                                   
|---------------- | --------------------------------------------------------------------------------------------------
|Item 6. Exhibits
|a) Exhibits     
|                 | Item #31.1
 Section 302 Certification of the President and Chief Executive Officer                
|                 | Item #31.2
 Section 302 Certification of the Executive Vice President and Chief Financial
 Officer
|                 | Item #31.3
 Section 302 Certification of the Controller and Chief Accounting Officer              
|                 | Item #32.1
 Section 906 Certification of the Chief Executive Officer and Chief Financial
 Officer 

19

---



SIGNATURES

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

|      |                 |  |                                                       | 
|----- | --------------- |  | ----------------------------------------------------- | 
|      |                 |  | MINN-DAK
 FARMERS COOPERATIVE                         | 
|      |                 |  | (Registrant)                                          | 
|      |                 |  |                                                       | 
|      |                 |  |                                                       | 
|Date: | April 14,
 2010 |  | /s/ DAVID H.
 ROCHE                                   | 
|      |                 |  | David H.
 Roche                                       | 
|      |                 |  | President
 and Chief Executive Officer                | 
|      |                 |  |                                                       | 
|      |                 |  |                                                       | 
|Date: | April 14,
 2010 |  | /s/ STEVEN
 M. CASPERS                                | 
|      |                 |  | Steven M.
 Caspers                                    | 
|      |                 |  | Executive
 Vice President and Chief Financial Officer | 

20

---