# UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549

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FORM 10-Q

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|x |  | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
|- |  | ---------------------------------------------------------------------------------------

# For the quarterly period ended: February 28, 2006

OR

|o |  | TRANSITION REPORT PURSUANT TO SECTION 13 AND 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
|- |  | -----------------------------------------------------------------------------------------

Commission file: No. 33-94644

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MINN-DAK FARMERS COOPERATIVE
(Exact name of registrant as specified in its charter)

|North Dakota                                                  | 23-7222188                         
|------------------------------------------------------------- | -----------------------------------
|(State or other jurisdiction ofIncorporation or organization) | (I.R.S. EmployerIdentification No.)

|7525 Red River RoadWahpeton, North Dakota | 58075     
|----------------------------------------- | ----------
|(Address of principalexecutive offices)   | (Zip Code)

(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)

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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.

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

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Exchange Act).

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

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

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

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

|Class of Common Stock |  | Outstanding atApril 11, 2006
|--------------------- |  | ----------------------------
|$250 Par Value        |  | 473                         

Minn-Dak Farmers Cooperative
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.





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

|                                                              | Feb 28, 2006(Unaudited) |  | Aug 31, 2005(Audited)
|------------------------------------------------------------- | ----------------------- |  | ---------------------
|ASSETS                                                        |                         |  |                      
|                                                             
|CURRENT ASSETS:                                              
|Cash                                                          |                         |  | $                    
|                                                              |                         |  |                      
|                                                             
|Receivables:                                                  |                         | 
|Trade accounts                                                |                         |  |                      
|Growers                                                       |                         |  |                      
|Other                                                         |                         |  |                      
|                                                              |                         |  |                      
|                                                              |                         |  |                      
|                                                              |                         |  |                      
|                                                             
|Inventories:                                                 
|Refined sugar, pulp and molasses to be sold on a pooled basis |                         |  |                      
|Nonmember refined sugar                                       |                         |  |                      
|Yeast                                                         |                         |  |                      
|Materials and supplies                                        |                         |  |                      
|Beet and Juice Inventory                                      |                         |  |                      
|Other Inventory                                               |                         |  |                      
|                                                              |                         |  |                      
|                                                              |                         |  |                      
|                                                              |                         |  |                      
|Deferred charges                                              |                         |  |                      
|                                                              |                         |  |                      
|Prepaid expenses                                              |                         |  |                      
|                                                              |                         |  |                      
|Other                                                         |                         |  |                      
|                                                              |                         |  |                      
|Current deferred income tax asset                             |                         |  |                      
|                                                              |                         |  |                      
|                                                             
|Total current assets                                          |                         |  |                      
|                                                              |                         |  |                      
|                                                             
|PROPERTY, PLANT AND EQUIPMENT:                                |                         | 
|Land and land improvements                                    |                         |  |                      
|Buildings                                                     |                         |  |                      
|Factory equipment                                             |                         |  |                      
|Other equipment                                               |                         |  |                      
|Construction in progress                                      |                         |  |                      
|                                                              |                         |  |                      
|                                                              |                         |  |                      
|Less accumulated depreciation                                 |                         |  |                      
|                                                              |                         |  |                      
|                                                              |                         |  |                      
|                                                              |                         |  |                      
|                                                             
|OTHER ASSETS:                                                
|Investments restricted for bonds payable                      |                         |  |                      
|Investment in stock of other corporations, unconsolidated    
|marketing subsidiaries and other cooperatives                 |                         |  |                      
|Other                                                         |                         |  |                      
|                                                              |                         |  |                      
|                                                              |                         |  |                      
|                                                              |                         |  |                      
|                                                             
|                                                              |                         |  | $                    
|                                                              |                         |  |                      

See Notes to Consolidated Financial Statements.

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# MINN-DAK FARMERS COOPERATIVE
CONSOLIDATED BALANCE SHEETS
LIABILITIES AND STOCKHOLDERS EQUITY
(In Thousands)

|                                                     | Feb 28, 2006(Unaudited) |  | Aug 31, 2005(Audited)
|---------------------------------------------------- | ----------------------- |  | ---------------------
|LIABILITIES AND MEMBERS INVESTMENT                  |                         |  |                      
|                                                    
|CURRENT LIABILITIES:                                 |                         | 
|Short-term notes payable                             |                         |  | $                    
|                                                     |                         |  |                      
|                                                    
|Current portion of long-term debt                    |                         |  |                      
|Current portion of bonds payable                     |                         |  |                      
|                                                     |                         |  |                      
|                                                     |                         |  |                      
|                                                    
|Accounts payable:                                   
|Trade                                                |                         |  |                      
|Growers                                              |                         |  |                      
|                                                     |                         |  |                      
|                                                     |                         |  |                      
|                                                     |                         |  |                      
|                                                    
|Advances to affiliate                                |                         |  |                      
|                                                     |                         |  |                      
|                                                    
|Accrued liabilities                                  |                         |  |                      
|                                                     |                         |  |                      
|                                                    
|Total current liabilities                            |                         |  |                      
|                                                    
|LONG-TERM DEBT, NET OF CURRENT PORTION               |                         |  |                      
|                                                    
|BONDS PAYABLE                                        |                         |  |                      
|                                                    
|LONG TERM DEFERRED TAX LIABILITY                     |                         |  |                      
|                                                    
|OTHER                                                |                         |  |                      
|                                                    
|COMMITTMENTS AND CONTINGENCIES                       |                         |  |                      
|                                                     |                         |  |                      
|Total liabilities                                    |                         |  |                      
|                                                     |                         |  |                      
|MINORITY INTEREST IN EQUITY OF SUBSIDIARY            |                         |  |                      
|                                                     |                         |  |                      
|                                                    
|MEMBERS INVESTMENT:                                
|Preferred stock:                                     |                         | 
|Class A  100,000 shares authorized, $105 par value;
|72,200 shares issued and outstanding                 |                         |  |                      
|Class B  100,000 shares authorized, $75 par value;  |                         | 
|72,200 shares issued and outstanding                 |                         |  |                      
|Class C  100,000 shares authorized, $76 par value; 
|72,200 shares issued and outstanding                 |                         |  |                      
|                                                     |                         |  |                      
|                                                     |                         |  |                      
|Common stock, 600 shares authorized, $250 par value;
|issued and outstanding, 475 shares at February 28,  
|2006 and 477 shares at August 31, 2005               |                         |  |                      
|Paid in capital in excess of par value               |                         |  |                      
|Unit retention capital                               |                         |  |                      
|Qualified allocated patronage                        |                         |  |                      
|Nonqualified allocated patronage                     |                         |  |                      
|Retained earnings                                    |                         |  |                      
|                                                     |                         |  |                      
|                                                     |                         |  |                      
|                                                     |                         |  |                      
|                                                    
|                                                     |                         |  | $                    
|                                                     |                         |  |                      

See Notes to Consolidated Financial Statements

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

|                                                              | Three Months EndedFebruary 28, |  | Six Months EndedFebruary 28,
|------------------------------------------------------------- | ------------------------------ |  | ----------------------------
|
|REVENUE:                                                      |                                |  |                             
|From sales of sugar, co-products, and yeast, net of discounts |                                |  | $                           
|Other income (expense)                                        |                                |  |                             
|                                                              |                                |  |                             
|                                                              |                                |  |                             
|                                                              |                                |  |                             
|                                                             
|EXPENSES:                                                    
|Production costs of sugar, co-products,                       |                                | 
|and yeast sold                                                |                                |  |                             
|Sales and distribution costs                                  |                                |  |                             
|General and administrative                                    |                                |  |                             
|Interest                                                      |                                |  |                             
|Loss on disposition of property and equipment                 |                                |  |                             
|                                                              |                                |  |                             
|                                                              |                                |  |                             
|                                                              |                                |  |                             
|                                                             
|NET PROCEEDS RESULTING FROM MEMBER AND                        |                                | 
|NON-MEMBER BUSINESS BEFORE MINORITY INTEREST                  |                                |  | $                           
|                                                              |                                |  |                             
|                                                             
|MINORITY INTEREST IN INCOME OF SUBSIDIARIES                   |                                |  |                             
|                                                              |                                |  |                             
|                                                             
|NET PROCEEDS RESULTING FROM MEMBER                            |                                | 
|AND NON-MEMBER BUSINESS                                       |                                |  | $                           
|                                                              |                                |  |                             
|                                                             
|DISTRIBUTION OF NET PROCEEDS:                                
|Credited to members investment:                              |                                | 
|Components of net income:                                    
|Income from non-member business                               |                                |  | $                           
|Patronage income                                              |                                |  |                             
|                                                              |                                |  |                             
|Net income credited to members investment                    |                                |  |                             
|                                                             
|Payments to members for sugarbeets, net of unit              
|retention capital                                             |                                |  |                             
|                                                              |                                |  |                             
|NET PROCEEDS RESULTING FROM MEMBER AND                        |                                | 
|NON-MEMBER BUSINESS                                           |                                |  | $                           
|                                                              |                                |  |                             

See Notes to Consolidated Financial Statements.

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

|                                                                | Six Months EndedFebruary 28,
|--------------------------------------------------------------- | ----------------------------
|
|CASH FLOWS FROM OPERATING ACTIVITIES:                           |                             
|Income allocated to members investment                         |                             
|Add (deduct) noncash items:                                    
|Depreciation and amortization                                   |                             
|Equipment disposals  loss                                      |                             
|Net income allocated from unconsolidated marketing subsidiaries |                             
|Minority interest in equity of subsidiaries                     |                             
|Changes in operating assets and liabilities:                    |                             
|Accounts receivable and advances                                |                             
|Inventory and prepaid expenses                                  |                             
|Deferred charges and other assets                               |                             
|Accounts payable, accrued liabilities and other liabilities     |                             
|                                                                |                             
|Net cash used in operating activities                           |                             
|                                                               
|CASH FLOWS FROM INVESTING ACTIVITIES:                          
|Proceeds from disposition of property, plant and equipment      |                             
|Capital expenditures                                            |                             
|Net proceeds from patronage refunds and equity revolvements     |                             
|Issuance of notes receivable                                    |                             
|Restricted bond fund investment                                 |                             
|                                                                |                             
|Net cash used in investing activities                           |                             
|                                                                |                             
|                                                               
|CASH FLOWS FROM FINANCING ACTIVITIES:                           |                             
|Net proceeds from issuance of short-term debt                   |                             
|Payment of long-term debt                                       |                             
|Payment of financing fees                                       |                             
|Payment of unit retains and allocated patronage                 |                             
|Dividends paid to minority shareholder                          |                             
|Sale and repurchase of common stock, net                        |                             
|                                                                |                             
|Net cash provided by financing activities                       |                             
|                                                                |                             
|                                                               
|NET INCREASE (DECREASE) IN CASH                                 |                             
|                                                               
|CASH, BEGINNING OF YEAR                                         |                             
|                                                                |                             
|                                                               
|CASH, END OF QUARTER                                            |                             
|                                                                |                             
|                                                               
|SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:             
|Cash payments for:                                              |                             
|Interest                                                        |                             
|                                                                |                             
|Income taxes, net of refunds                                    |                             
|                                                                |                             

See Notes to Consolidated Financial Statements.

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MINN-DAK FARMERS COOPERATIVE

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

|1. |  | The consolidated financial statements for the three-month and
six-month periods ended February 28, 2006 and 2005 are unaudited and reflect all adjustments (consisting only 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 to Stockholders previously
submitted in the Companys Annual 10-K for the fiscal year ended August 31, 2005. The results of operations for the six
months ended February 28, 2006 are not necessarily indicative of the results for the entire fiscal year ending August 31, 2006.
|-- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|2. |  | Inventories of refined 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. Inventory of yeast is valued at the lower of average cost or market. Materials and supplies are
valued at most recent purchase that approximates cost. During the periods when sugarbeets are purchased from growers, but not yet
converted into bin sugar, that inventory is valued at grower payment cost. In valuing inventories at net realizable value, 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 a campaign and decrease to a low point of valuation at or near fiscal
year end.
|-- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|3. |  | In September 2005, the company declared a revolvement of the
remaining 92% of the unit retains and allocated patronage for the 1995 crop totaling $2,533,591 and approximately 45% of the 1996
crop unit retains and allocated patronage totaling $2,008,115 effective August 31, 2005. These amounts were accrued as of August
31, 2005 and paid to the stockholders on September 30, 2005.
|-- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|4. |  | In October 2005, the company allocated to members $5,191,808 of
patronage from the 2004 crop in the form of non-qualified allocated patronage credits.
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------

|5. |  | As of February 28, 2006, the Company had $98.0 million of seasonal
credit capacity, with $41.5 million being utilized for a remaining seasonal credit capacity of $56.5 million. As of August 31,
2005, the Company had $45.0 million of seasonal credit capacity, with $9.8 million being utilized, for a remaining seasonal credit
capacity of $35.2 million. The increase in seasonal debt from August 31, 2005 to February 28, 2006 is due to normal seasonal
operations. Co-Bank extended to the Company an additional $15.0 million line of temporary seasonal debt capacity through May 31,
2006. The Company has not used the line and does not expect to.
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|6. |  | The Financial Accounting Standards Board has issued an amendment
to Financial Accounting Standards No. 132, Employers Disclosure about Pensions and Other Post-Retirement Benefits. Such
amendment requires additional disclosures to interim and annual financial statements, which are effective for the interim period
ending February 28, 2006, but does not change the recognition requirements related to pensions and post-retirement benefits.
|-- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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| | Components of Net Periodic Benefit Cost for the Six Months Ended
February 28, 2006
| | ----------------------------------------------------------------------------------

|000s                              | Pension Benefits |  | Other Benefits
|---------------------------------- | ---------------- |  | --------------
|
|Service Cost                       |                  |  | $             
|Interest Cost                      |                  |  |               
|Expected return on plan assets     |                  |  |               
|Amortization of prior service cost |                  |  |               
|Amortization of transition cost    |                  |  |               
|Amortization of net (gain) loss    |                  |  |               
|Net periodic benefit cost          |                  |  | $             

| | As of the six months ended February 28, 2006, the Company has made
$.56 million of contributions vs. $.50 million through the six months ended February 28, 2005. The Company anticipates
contributing an additional $.56 million to fund its pension plan in FY 2006 for a total of $1.12 million. Contributions in FY 2005
totaled $1.21 million.
| | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|7. |  | The FASB issued SFAS No. 151, Inventory Costs, an amendment
of ARB 43, Chapter 4 in November 2004. SFAS No. 151 amends the guidance in ARB No. 43, Chapter 4, Inventory 
Pricing, to clarify the accounting for abnormal amounts of idle facility expense, freight, handling costs, and wasted
material (spoilage) so as to require such costs to be treated as current period charges. Further, this statement requires that the
allocation of fixed overhead costs to inventoriable production costs be based on the normal capacity of the production
facilities.  The provisions of this Statement are effective for inventory costs incurred during fiscal years beginning after
June 15, 2005. The Company adopted SFAS No. 151 in the quarter ended October 31, 2005. The adoption of this statement did not have
a material impact on the Companys financial statements. However, future changes in the Companys production or
logistics could have a material impact on the Companys financial statements as a result of SFAS No. 151.
|-- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

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MANAGEMENTS DISCUSSION AND ANALYSIS

OF THE RESULTS OF OPERATIONS AND FINANCIAL CONDITION

FOR THE THREE MONTHS ENDED AND SIX MONTHS ENDED FEBRUARY 28, 2006 AND FEBRUARY 28, 2005

The following discussion and analysis relates to the financial condition and
results of operations of Minn-Dak Farmers Cooperative (the Company) for the three months and six months ended February
28, 2006 (the second quarter of the Companys 2005-2006 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 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.

# Critical Accounting Policies

The accompanying discussion and analysis of our results of operations and
financial condition are based upon our consolidated financial statements, which have been prepared in accordance with accounting
principles generally accepted in the United States. The preparation of these financial statements requires management to make
estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of
contingent assets and liabilities. These estimates form the basis for making judgments about the carrying values of assets and
liabilities that are not readily apparent from other sources. We base our estimates and judgments on historical experience and on
various other assumptions that we believe are reasonable under the circumstances. However, future events are subject to change and
the best estimates and judgments may require adjustment. For a complete description of the Companys significant accounting
policies, please see Note 1 to the consolidated financial statements included in the Companys Form 10-K for the year ended
August 31, 2005. Our critical accounting policies are those that have meaningful impact on the reporting of our financial
condition and results, and that require significant management judgment and estimates. These policies include our accounting for
(a)  inventory valuation, and (b) income taxes.

Inventory Valuation

Inventories of refined 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. Inventory of yeast is valued at the lower of average cost or market. Materials and supplies are valued at most
recent purchase that approximates cost. During the periods when sugarbeets are purchased from growers, but not yet converted into
bin sugar, that inventory is valued at grower payment cost. In valuing inventories at net realizable value, 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 a campaign and decrease to a low point of valuation at or near fiscal year end.

Income Taxes

The Company is a nonexempt cooperative as described under Section 1381(a)(2)
of the Internal Revenue Code of 1986. Accordingly, net margins from business done with member patrons, which are allocated and
paid as prescribed in Section 1392 of the Code, will be taxable to the members and not to the Company. To the extent that net
margins are not allocated and paid as stated above or arise from business done with non-members, the Company shall have taxable
income subject to corporate income taxes.

---

RESULTS FROM OPERATIONS

# Comparison of the three months ended February 28, 2006 and
February 28, 2005

Revenue for the three months ended February 28, 2006 decreased $8.2 million
from the 2005 period, a decrease of 13.1%. Revenue from the sale of finished goods decreased $6.0 million and the change in the
value of inventories decreased $2.2 million.

Revenue from the sales of sugar decreased $6.6 million, or 16.6% reflecting a
24.4% decrease in volume and a 7.8% increase in the sales price for sugar. The decrease in volume is primarily the result of a
smaller crop. Sugar prices have been substantially higher on a spot market basis vs. prior years due primarily to crop damage to
the United States cane sugar industry from the 2005 hurricane season, and a strengthening of consumption in the U.S.

Revenue from dried pulp sales decreased less than $.1 million or 1.4%,
reflecting a 4.3% decrease in sales volume and a 2.9% increase in the average gross selling price.

Revenue from molasses sales increased $.3 million or 18.3%, reflecting a 2.4%
increase in sales volume and a 15.9% increase in the average gross selling price. Beet molasses prices increased in the second
quarter due to continued reduced beet and cane molasses supplies worldwide. The tightening supply situation has resulted in higher
prices in the market.

Revenues from pressed pulp and tailing sales decreased $.1 million,
reflecting a 43.6% decrease in sales volume. The reduced sales volume is primarily due to the pulp steam dryer operating on an
even more consistent basis in 2006 resulting in no excess pressed pulp to be marketed. Continued consistent operation of the pulp
steam dryer is expected to result in little future pressed pulp sales for the Company.

Revenues from yeast sales increased $0.4 million or 24.7%, reflecting a 10.7%
increase in sales volume and a 14.0% increase in the average selling price. The average selling price is based upon a formula
between Minn-Dak Yeast Company and Sensient whereby average selling prices to customers along with average costs of production are
taken into account in establishing the price Sensient pays Minn-Dak Yeast for product. As sales volumes increase or decrease, the
efficiencies of production costs will cause the formula to decrease or increase the selling price. Also, marketplace prices are
somewhat higher, a reflection of much higher factory input and freight costs experienced by yeast suppliers, necessitating some
pass-through of these costs to customers.

The other contributing factor to the change in revenues results from the
increase in finished goods inventories. The increase in the value of finished goods inventories for the three months ended
February 28, 2006 amounted to $13.8 million or $2.2 million less than the increase in the value of finished goods inventories for
February 28, 2005.

In the consolidated Statement of Operations, Expenses section, production
costs of sugar, co-products and yeast totaled $19.7 million, $1.1 million or 6.1% more than the prior year. The increase is mainly
attributable to higher energy costs resulting from price increases and higher operations and maintenance costs associated with the
crop quality when comparing the three-month period ending February 28, 2006 to the three-month period ending February 28, 2005.
Marketing costs totaled $7.0 million, $.7 million or 8.9% less than the prior year. In the section Distribution of Net Proceeds,
payments to members for sugarbeets, net of unit retention capital, totaled $25.0 million, a decreased of $3.6 million or 12.5%.
For fiscal year 2006 the Company is projecting a payment to growers for sugarbeets totaling $65.2 million, which is $17.4 million
or 21.0% less than the prior fiscal year. The decrease in payments to members is due to: (1) the result of a 21.2% decrease in
tons of beets delivered by members versus the prior year, (2) 1.3% projected decrease in sugar per ton of the beets delivered
versus the prior year, and (3) offset somewhat by a 9.1% projected increase in sales prices for sugar sold. The payment is based
upon (i) an average delivered sugar content of 16.29%, (ii) a total sugarbeet crop to process of 1.8 million tons and (iii) the
Companys projected selling price for its sugar, which is currently estimated to be higher than the previous year.

---

# Comparison of the six months ended February 28, 2006 and February
28, 2005

Revenue for the six months ended February 28, 2006 decreased $20.3 million
from the 2005 period, a decrease of 16.3%. Revenue from the sale of finished goods decreased $10.8 million and the change in the
value of inventories decreased $9.5 million.

Revenue from the sales of sugar decreased $11.2 million, or 13.9% reflecting
an 18.3% decrease in volume and a 4.4% increase in the sales price for sugar. The decrease in volume is primarily the result of a
smaller crop. Sugar prices have been substantially higher on a spot market basis vs. prior years due primarily crop damage to the
United States cane sugar industry from the 2005 hurricane season, and a strengthening of consumption in the U.S.

Revenue from dried pulp sales increased $.3 million or 4.4%, reflecting a
1.2% decrease in sales volume and a 5.6% increase in the average gross selling price. . Prices increased due to the continued
relative strength of both the European Euro and the Japanese Yen against the U.S. dollar at the time sales were
contracted, and a lower ocean freight rate market, making dried pulp more attractive in the overseas markets.

Revenue from molasses sales decreased $.4 million or 10.8%, reflecting a
24.6% decrease in sales volume and a 13.8% increase in the average gross selling price. Beet molasses prices increased in the
second quarter due to continued reduced beet and cane molasses supplies worldwide. The tightening supply situation has resulted in
higher prices in the market. Volume decreased significantly versus the prior year due to low carryover inventories and a late
start up for new crop production. These factors combined to limit the amount of molasses available to ship during the period.

Revenues from pressed pulp and tailing sales decreased $.1 million,
reflecting a 45.7% decrease in sales volume. The reduced sales volume is primarily due to the pulp steam dryer operating on an
even more consistent basis in 2006 vs. 2005, resulting in no excess pressed pulp to be marketed. Continued consistent operation of
the pulp steam dryer is expected to result in little future pressed pulp sales for the Company.

Revenues from yeast sales increased $0.6 million or 18.3%, reflecting a 9.7%
increase in sales volume and an 8.5% increase in the average selling price. The average selling price is based upon a formula
between Minn-Dak Yeast Company and Sensient whereby average selling prices to customers along with average costs of production are
taken into account in establishing the price Sensient pays Minn-Dak Yeast for product. As sales volumes increase or decrease, the
efficiencies of production costs will cause the formula to decrease or increase the selling price. Also, marketplace prices are
somewhat higher, a reflection of much higher factory input and freight costs experienced by yeast suppliers, necessitating some
pass-through of these costs to customers.

The other contributing factor to the change in revenues results from the
increase in finished goods inventories. The increase in the value of finished goods inventories for the six months ended February
28, 2006 amounted to $21.4 million or $9.5 million less than the increase in the value of finished goods inventories for February
28, 2005.

In the consolidated Statement of Operations, Expenses section, production
costs of sugar, co-products and yeast totaled $34.2 million, $.1 million or 0.3% less than the prior year. The increase is mainly
attributable to lower volume, but higher energy costs resulting from price increases and higher operations and maintenance costs
associated with the crop quality when comparing the six-month period ending February 28, 2006 to the six-month period ending
February 28, 2005. Marketing costs totaled $15.3 million, $4.6 million or 22.9% less than the prior year. The marketing costs were
lower, as a result of a decrease in the cost of purchased sugar of approximately $2.5 million and due to less activity as it
relates to the purchase of additional sugar sales allocations. In the section Distribution of Net Proceeds, payments to members
for sugarbeets, net of unit retention capital, totaled $25.0 million, a decreased of $3.6 million or 12.5%. For fiscal year 2006
the Company is projecting a payment to growers for sugarbeets totaling $52.0 million, which is $13.6 million or 20.7% less than
the prior fiscal year. The decrease in payments to members is due to: (1) the result of a 21.2% decrease in tons of beets
delivered by members versus the prior year, (2) 1.3% projected decrease in sugar per ton of the beets delivered versus the prior
year, and (3) offset somewhat by a 9.1% projected increase in sales prices for sugar sold. The payment is based upon (i) an
average delivered sugar content of 16.29%, (ii) a total sugarbeet crop to process of 1.8 million tons and (iii) the Companys
projected selling price for its sugar, which is currently estimated to be higher than the previous year.

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ESTIMATED FISCAL YEAR 2006 INFORMATION

The agreements between the Company and its members regarding the delivery of
sugarbeets to the Company require payment for members sugarbeets in several installments throughout the year. As only the
final payment is made after the close of the fiscal year, the first payments to members for their sugarbeets are based upon the
Companys then-current estimates of the financial results to be obtained from processing the crop and the sale of finished
products. 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 2005 sugar beet crop. Given the nature of the estimates required in connection with the
payments to members for their sugarbeets, this discussion includes forward-looking statements. 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 and the quantity of
sugar produced from the sugar beet crop are beyond the Companys control. The actual results experienced by the Company may
differ materially from the forward-looking statements contained herein.

The Companys members harvested 1.8 million tons of sugarbeets from the
2005 crop, the smallest harvested crop since the completion of the Companys expansion completion in 1998. Sugar content of
the 2005 crop at harvest was 7% below the average of the five most recent years and lower than any individual year during that
period. The Company is projecting the sugar production from the 2005 crop at the lowest levels since the completion of the
expansion in 1998. Unusually high levels of rainfall from May through July caused significant tonnage and quality reductions.
Because of the below average yields from the 2005 crop, the Company has purchased approximately 156,000 tons of sugarbeets from a
neighboring sugarbeet cooperative that had experienced a record harvest, and was interested in reducing its processing season
risks associated with the large crop. The purchase of additional tons of sugarbeets is expected to have a positive impact to the
operations of the Company. Due to a number of beet storage and operational factors that are subject to change when a processing
season is extended, the exact amount of the positive impact is not known at this time. This forward-looking material is based on
the Companys expectations regarding the processing of the 2005 sugar beet crop (excluding the impact of the purchase of
additional tons of sugarbeets by the Company); the actual production results obtained by processing those sugarbeets could differ
materially from the Companys current estimate as a result of factors such as changes in production efficiencies and storage
conditions for the Companys sugarbeets. The Companys initial beet payment estimate totals $36.00 per ton or $.13050932
per harvested/bonus pound of sugar, with the final beet payment determined in October of 2006.

If production continues with the current fiscal year trends, the Company
anticipates that actual production of sugar and co-products, at best, will meet forecasted numbers; and if the forecasted
production numbers are not met, then there is a potential for a decrease in beet payment to growers for the 2005 crop sugarbeets.
The Company was adversely impacted by unseasonably warm weather in January and by a shortage of beet re-haul drivers in October
and November, both contributing to a reduced storage quality condition and less sugar being extracted from the sugarbeets. The
Company has taken action to correct the shortage of beet re-haul drivers for future crops.

The spot price for sugar has reached levels not seen for over 20 years during
the 2005-crop marketing year. The Companys marketing subsidiary, United Sugar, has a marketing strategy; which includes a
certain portion of each crop being sold in advance of the production of sugar. Because a large portion of the 2005-crop sugar was
contracted prior to the rise in sugar prices, the Company did not gain the full benefit of the sugar price increases for the
2005-crop. However, marketing activity for the 2006-crop sugar has been positively impacted by the current market conditions.

The 2002 Farm Bill contains marketing allocations for sugar that could
potentially restrict the companys ability to market all the sugar it produces. The Company believes it has obtained the
allocations necessary for the marketing of its entire 2005 crop. However, there are no assurances that the Company will be able to
secure enough marketing allocations for crop years 2006 and 2007 (the crop years covered by the current Farm Bill) to market all
of the production from the those crops. For each crop year left under the Farm Bill, the Companys Board of Directors and
Management team will be assessing the level of anticipated allocations that the Company will be receiving from the United States
Department of Agriculture (USDA). Based upon that estimated level of assessment, the measurement of the risk involved
in trying to secure additional allocation from other sugar processors, if needed, and the value of selling non-allocation sugar
into other markets, will ultimately determine the level of planted acreage that the Company decides upon. The Company has
announced to its shareholder/growers that it intends to authorize the planting of 117,000 acres of beets for the 2006 crop vs. the
108,300 acres authorized for the 2005 crop.

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OTHER INFORMATION

# Federal programs, regulations and trade agreements

Provisions of the current Farm Bill and existing trade agreements between the
United States (U.S.) and various foreign countries regulate domestic and imported sugar sales in the U.S. Currently,
imports provide about 20% of the total domestic consumption of sugar in the U.S., and it is the opinion of the Company and the
sugar industry as a whole that any significant increase in the amount of imported sugar to the U.S. marketplace will result in
serious adverse sugar pricing consequences. The United States government is pursuing an aggressive agenda on international
trade.  It is seeking to negotiate new free trade agreements with a number of countries and regions that are major producers
of sugar.  The Company believes these agreements, if they are realized, could negatively impact the Companys
profitability.  The primary agreements under consideration, to the Companys knowledge, are the Free Trade Area of the
Americas, the Andean Free Trade Agreement, the Thailand Free Trade Agreement, the U.S.-Panama Free Trade Agreement and the South
African Customs Union Free Trade Agreement. Many of the countries included in these agreements are major sugar producers and
exporters.  If increases in guaranteed access or reductions in sugar tariffs are included in these agreements, excess sugar
from these regions could enter the U.S. market and put pressure on domestic sugar prices.

The Company and the U.S. sugar industry recognize the potential negative
impact that would result if these agreements are entered into by the United States and are taking steps to actively oppose any
agreement that calls for unneeded additional sugar access to domestic market place. The Company and the sugar industry intend to
continue to focus significant attention on trade issues in the future.

The current Farm Bill provides price support provisions for sugar. However,
if that price support program, including the Tariff Rate Quota system for imported sugar, were eliminated in its entirety, or if
the protection the United States price support program provides from foreign competitors were materially reduced, the
Company could be materially and adversely affected. In such a situation, if the Company were not able to adopt strategies that
would allow it to compete effectively in a greatly changed domestic market for sugar, the adverse affects could impact the
Companys continued viability and the desirability of grower sugarbeets for delivery to the Company.

# Audit Committee, Sarbanes-Oxley regulations

The Companys Audit Committee and management are working toward meeting
all required SEC documentation, certification and best business practices as required in recently passed federal legislation (the
Sarbanes-Oxley law). As the SEC adopts new rules and proposes future rules, the Company is positioning itself to continue being in
compliance. The Companys Audit Committee and management have been seeking guidance from the SEC and experts in the
appropriate areas as needed.

The Company considers its Chief Executive Officer, Chief Financial Officer
and Chief Accounting Officer to be its disclosure committee, responsible to the Audit Committee for presenting material facts
relative to the financial statements and how they are to be disclosed in the SEC filings prior to those filings.

The Company has carried out an evaluation, under the supervision and with the
participation of the Companys management, including the Companys Chief Executive Officer and Chief Financial Officer,
of the effectiveness of the design and operation of the Companys disclosure controls and procedures pursuant to Exchange Act
Rule 13a-14. Based upon that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Companys
disclosure controls and procedures are effective in timely alerting them to material information required to be included in the
Companys periodic SEC filings relating to the Company (including its consolidated subsidiary).

There were no significant changes in the Companys internal controls or
in other factors that could significantly affect these internal controls subsequent to the date of our most recent evaluation.

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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 financing has been provided by Co-Bank (the Bank).
The Company has a short-term line of credit with the Bank for calendar years 2005 and 2006 of $45.0 million, of which $1.0 million
is currently available for a letter of credit. The seasonal line of credit is scheduled for renewal in May 2006. Co-Bank extended
to the Company an additional $15.0 million line of temporary seasonal debt capacity through May 31, 2006. The Company has not used
the line and does not expect to.

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

- Maintain working capital of not less than $9.0 million as of August 31, 2006.
- 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, 2006 the Company was in compliance with its loan agreement
covenants with the Bank.

Working Capital as of February 28,
2006 totals $16.7 million compared to $12.4 million at August 31, 2005, an increase of
$4.3 million for the period. Increased working capital is a result of normal financing,
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 targeted working capital for
August 31, 2006 is approximately $10.4 million dollars and, in the Companys
opinion, will be attained. The Company funds its capital expenditure and debt retirement
needs primarily from operating activities. The Company has approximately 5-years of
Co-Bank long-term debt remaining and it has two tax exempt bond issues, one with $5.9
million remaining and one with $13.3 million remaining. During the year ended August 31,
2005, the Company began reclassifying certain of the bonds from long-term to short-term
liabilities to reflect the bond amortization schedule. With a combined bank long-term
debt payment and two long-term bond payments, the Companys working capital position
has been decreasing, and as a result, the Company has anticipated re-structuring its
remaining $17.5 million long term debt package with Co-Bank when working capital
requirements show a need for doing so. The Company has held preliminary discussions with
Co-Bank regarding the future restructuring of its long-term debt package and it does not
anticipate difficulty in achieving debt restructuring with Co-Bank in the future.

The primary factor for the changes in the Companys financial condition
for the six months ended February 28, 2006 was due to the seasonal needs of the 2005/2006 sugarbeet-processing season. The cash
used to provide for operations of $26.5 million and investing activities of $1.8 million was funded through financing activities
of $27.8 million. The net cash provided through financing activities of $27.8 million was primarily provided through proceeds from
the issuance of short-term debt of $31.7 million; offset by payment of long-term debt of $3.4 million.

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|Contractual Obligations            | Total |  | Less Than1 Year |        | 1  3Years |   | 4  5Years |  | After 5Years
|---------------------------------- | ----- |  | --------------- | ------ | ---------- | - | ---------- |  | ------------
|Long-Term Debt                     |       |  | $               | 21.1MM |            | $ | 3.6MM      |  | $           
|Bonds Payable                      |       |  | $               | 19.2MM |            | $ | 1.8MM      |  | $           
|Operating Leases                   |       |  | $               | 2.2MM  |            | $ | .8MM       |  | $           
|Unconditional Purchase Obligations |       |  |                 | 0      |            |   | 0          |  |             
|Other Long-Term Obligations        |       |  |                 | 0      |            |   | 0          |  |             
|Total Contractual Cash Obligations |       |  | $               | 43.2MM |            | $ | 6.2MM      |  | $           

Capital expenditures for the six months ended February 28, 2006 totaled $3.5
million. Capital expenditures for fiscal year 2006 are currently estimated at $4.1 million, which is less than the amount spent on
average in the prior four years.

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# PART II.   OTHER INFORMATION

Item 1.   Legal Proceedings

None

Item 2.   Changes in Securities

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 and Reports on Form 8-K

|a) |  | Exhibits
|-- |  | --------

| | Item #31.1 |  | Section 302 Certification of the President & Chief Executive Officer
| | ---------- |  | --------------------------------------------------------------------

| | Item #31.2 |  | Section 302 Certification of the Executive Vice President &
Chief Financial Officer
| | ---------- |  | -----------------------------------------------------------------------------------

| | Item #31.3 |  | Section 302 Certification of the Controller & Chief Accounting Officer
| | ---------- |  | ----------------------------------------------------------------------

| | Item #32.1 |  | Section 906 Certification of the Chief Executive Officer and Chief
Financial Officer
| | ---------- |  | ------------------------------------------------------------------------------------

|b) |  | Reports on Form 8-K
|-- |  | -------------------

The Company did not file any
reports on Form 8-K during this quarter.

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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.

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