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|                                                       
|-------------------------------------------------------
|UNITED STATES                                          
|SECURITIES AND EXCHANGE
 COMMISSION                    
|WASHINGTON, D.C. 20549                                 
|                                                       
|                                                       
|FORM 10-K                                              
|                                                       
|                                                       
|x Annual Report Pursuant to Section 13 or 15(d) of     
|The Securities Exchange
 Act of 1934                   
|For the fiscal year
 ended                             
|AUGUST 31, 2010                                        
|Or                                                     
|o Transition Report Pursuant to Section 13 or 15(d) of 
|The Securities Exchange
 Act of 1934                   
|                                                       
|Commission File                                        
|No. 33-94644                                           
|                                                       
|                                                       
|                                                       
|MINN-DAK
 FARMERS COOPERATIVE                          
|(Exact name of
 Registrant as specified in its charter)

|                                                             |                                         
|------------------------------------------------------------ | ----------------------------------------
|North
 Dakota                                                | 23-7222188                              
|(State of
 incorporation)                                    | (I.R.S. Employer
 Identification Number)
|                                                             |                                         
|7525
 Red River Road                                         |                                         
|Wahpeton,
 North Dakota 58075                                | (701)
 642-8411                         
|(Address of principal
 executive offices)                    | (Registrants telephone
 number)        
|                                                            
|SECURITIES REGISTERED
 PURSUANT TO SECTION 12(b) OF THE ACT:
|NONE                                                        
|SECURITIES REGISTERED
 PURSUANT TO SECTION 12(g) OF THE ACT:
|NONE                                                        

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Indicate
by check mark if the Registrant is a well-known seasoned issuer, as defined in
Rule 405 of the Securities Acto
YES x NO

Indicate
by check mark if the Registrant is not required to file reports pursuant to
Section 13 or 15(d) of the Act.o
YES x NO

Indicate
by check mark whether the Registrant (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. x YES o NO

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. o YES o NO

Indicate
by check mark if disclosure of delinquent filers pursuant to Item 405 of
Regulation S-K is not contained herein, and will not be contained, to the best
of Registrants knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to
this Form 10-K. x

Indicate
by check mark if 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. (Check one):

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). YES o NO x

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Minn-Dak Farmers Cooperative
is a cooperative. Its voting and non-voting common equity can only be held by
its members. No public market for voting and non-voting common equity of
Minn-Dak Farmers Cooperative is established and it is unlikely, in the
foreseeable future that a public market for its voting and non-voting common
equity will develop.

As
of November 24, 2010, 477 shares of the Companys Common Stock and 72,200
units of the Registrants Preferred Stock, each consisting of 1 share of
Class A Preferred Stock, 1 share of Class B Preferred Stock and 1 share of
Class C Preferred Stock, were outstanding.

DOCUMENTS
INCORPORATED BY REFERENCE

None

PART
I

|         |         
|-------- | --------
|ITEM
 1. | BUSINESS

PUBLIC COMPANY REPORTING

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.

WARNING REGARDING FORWARD-LOOKING
STATEMENTS

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.

2

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GENERAL

The
Company is a North Dakota agricultural cooperative that was formed in 1972 and
currently has 477 members. Membership in the Company is limited to sugarbeet
growers located in those areas of North Dakota and Minnesota within an
approximate fifty (50) mile radius of the Companys offices and sugarbeet
processing facilities in Wahpeton, North Dakota. The Companys facilities allow
the members to process their sugarbeets into sugar and other products. The
products are pooled and then marketed through the services of marketing agents
under contract with the Company. The sugar-marketing agent, United Sugars
Corporation, is a cooperative association owned by its members, the Company,
American Crystal Sugar Company and United States Sugar Corporation. The
Companys sugarbeet molasses and sugarbeet pulp are also marketed through a
marketing agent, Midwest Agri-Commodities Company. Midwest Agri-Commodities
Company is a cooperative association owned by its members, the Company,
American Crystal Sugar Company, Southern Minnesota Beet Sugar Cooperative and
Michigan Sugar Company. The Company owns a 100 percent interest in Minn-Dak
Yeast Company, Inc. (Minn-Dak Yeast), which has facilities located adjacent
to the Companys sugar production facilities, and which produces fresh bakers
yeast.

The
Companys corporate headquarters are located at 7525 Red River Road, Wahpeton,
North Dakota 58075, telephone number (701) 642-8411. Its fiscal year ends
August 31. The Companys website is www.mdf.coop. The Company files annual,
quarterly and periodic reports with the United States Securities and Exchange
Commission (SEC). The SEC maintains an Internet site at http:/www.sec.gov that
contains reports and other information filed electronically about the Company.

PRODUCTS AND PRODUCTION

The Company is engaged primarily in the production and marketing of sugar from
sugarbeets. The Company also produces and markets certain co-products,
sugarbeet molasses and sugarbeet pulp pellets. The Companys subsidiary
Minn-Dak Yeast uses a portion of the Companys sugarbeet molasses as the growth
medium in the production of fresh bakers yeast. Minn-Dak Yeast provided
revenues totaling approximately 7 percent of the Companys total revenues for
the fiscal year ended August 31, 2010.

The
Company processes sugarbeets grown by its members at its sugarbeet processing
facility located in Wahpeton, North Dakota. The processing period generally
occurs from September to April or May of the following year, depending on the
size of the crop. The 2010-crop was anticipated to be the largest crop on
record and as a result, harvest was started on August 18, 2010 and factory
processing began on August 20, 2010.

Because
the Companys harvest period is much shorter than its processing period,
sugarbeet long-term storage is very important to maximize the earnings from
each crop year. Each harvest is unique and critical judgments are made by the
agricultural staff regarding each crop. Judgments are impacted by the weather
conditions at the time of harvest. If the weather is too warm or too cold when
the sugarbeets are harvested they will not store well.

The
Company uses what it considers to be the best industry practices to preserve
and extend the quality of sugarbeets it has in storage. The methods utilized by
the Company include, but are not limited to: minimizing pile height, leveling
the tops of piles, infrared scanning, timely hauling, splitting piles, passive
ventilation, active ventilation, covering active ventilation piles with
plastic, storage sheds, and insulating sugarbeets in storage sheds. Each method
is evaluated for its anticipated economic impact for each crop year.

The
period during which the Companys processing facility is in operation to
process sugarbeets into sugar and co-products is referred to as the campaign.
The campaign typically begins in September of each year and continues until the
available supply of sugarbeets has been depleted. Once the sugarbeets arrive at
the processing facility, the basic steps in producing sugar from them include:
washing; slicing into thin strips called cossettes; extracting the sugar from
the cossettes in a diffuser; purifying the resulting raw juice and boiling
it, first in an evaporator to thicken it and then in vacuum pans to crystallize
the sugar; separating the sugar crystals in a centrifuge; drying the sugar; and
storing sugar in bulk form for bulk and bag shipping.

3

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The
Companys sugarbeet co-products include sugarbeet molasses, sugarbeet pulp
pellets and sugarbeet pressed pulp. After the extraction of raw juice from the
cossettes, the remaining sugarbeet pulp is dried, processed into pellets and
sold as animal feed or not dried and sold as wet animal feed to the local
market. Sugarbeet molasses is the process materials left after all economical
means have been taken to extract the sugar from the process. The sugarbeet
molasses is sold primarily to yeast and pharmaceutical manufacturers and for use
in animal feeds.

RECENT
CROPS

The
Companys members harvested 3.1 million tons of sugarbeets from the 2010-crop,
approximately 42 percent more than the most recent 5-year average. Sugar
content of the 2010-crop was 1 percent above the average of the five most
recent years. Due to the higher harvested tons and sugar content, the Companys
production of sugar from the 2010-crop sugarbeets is expected to be 31 percent
more than the average of the five most recent years of sugar production.

The
Companys initial sugarbeet payment estimate totals $56.86 per ton or
$0.19369042 per harvested /bonus extractible pound of sugar, with the final
sugarbeet payment determined in October of 2011. This projected payment is 20
percent more than the final 2009-crop payment per ton and 5 percent more per
pound of extractible sugar. The higher projected 2010-crop payment per ton
results from more total tons of beets processed, higher sugar content in the
sugarbeets, decreased operating and fixed costs per ton and improved sugar
prices versus the prior year. The price per pound of extractible sugar was
diluted by 6.5% due to bonus sugar for the 2010-crop vs. 2.3% for the
2009-crop. Bonus sugar is an incentive to growers to deliver sugarbeets prior
to main harvest. Harvest for the 2010-crop began on August 18, 2010 vs.
September 8, 2009 for the 2009-crop.

For
a discussion of the calendar 2009, 2008 and 2007 crops and results of
operations for fiscal years 2010, 2009 and 2008, see MANAGEMENTS DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

GROWERS
AGREEMENTS

The
Company purchases virtually all of its sugarbeets from members under contract
with the Company. All members have automatically renewing contracts with the
Company covering each growing season (the Growers Agreements). At the end of
each year, the Growers Agreement automatically extends for an additional year,
so that such agreements always have a remaining term of one year, unless the
Company, prior to the automatic renewal, has given notice of termination. In
that situation, the agreement will not renew, but will continue in effect for
the then remaining year under the agreement. Each Unit of Preferred Stock
currently entitles a member to grow the maximum number of acres per share
authorized by the Board of Directors for each farming year. The Companys Board
of Directors has the discretion to adjust the acreage that may be planted for
each Unit of Preferred Stock held by the members. For the 2010-crop year the
Companys Board of Directors authorized its members to plant up to 1.60 acres
per unit but no less than 1.40 acres per unit. For the 2011-crop year, the
Companys Board of Directors has authorized members a planting level of up to
1.60 acres but no less than 1.40 acres per unit; however, this authorization is
subject to change by the board before the planting of the 2011-crop. The level
authorized acres for planting are due to a desire to more fully utilize the
Companys plant capacity and the anticipated sugar marketing allocations that
will be available for the 2011-crop production. (For a discussion of the
current farm bill sugar allocations, see Managements Discussion on Government
Programs and Regulations.)

4

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Under
the terms of the Growers Agreement, each member receives payment for his or her
sugarbeets based on a price per pound of extractable and bonus sugar. The price
per pound of extractable and bonus sugar is determined by dividing the total
grower distribution of net proceeds (less the amount credited to members
investment from member patronage and credited to retained earnings from
non-member patronage) by the total of members pounds of extractable and bonus
sugar. Extractable pounds of sugar are calculated by the processing of
sugarbeet samples taken from members sugarbeets during harvest. Bonus sugar is
a formula driven program premium for delivery of sugarbeets during the period
prior to main harvest. Each members grower payment is obtained by multiplying
that members total pounds of extractable and bonus sugar times the price per
pound of extractable and bonus sugar as determined above.

Under
the Growers Agreement, each member receives an initial installment of the
payment for his or her sugarbeets on or about November 15, soon after delivery
of his or her crop to the Company. That initial installment is subject to
adjustment by the Companys Board of Directors and Management, but will not
exceed 65 percent of the estimated price per pound of extractable and bonus
sugar. A second installment is paid in early February; that installment, in
combination with the first installment, will not exceed 70 percent of the
estimated price per pound of extractable and bonus sugar. A third installment
is paid in early April, with the aggregate of all installments paid to that
date not to exceed 80 percent of the estimated price per pound of extractable
and bonus sugar. A fourth installment payment is paid in early July, with the
total of installment payments to that date not to exceed 95 percent of the
estimated price per pound of extractable and bonus sugar. The final payment is
determined after the end of the Companys fiscal year, ending on August 31, and
is an amount necessary to bring the total of all payments to the price to be
paid per pound of extractable and bonus sugar to all growers during the
applicable fiscal year. In addition, the Companys annual patronage net income,
if any, which is equal to the Companys sales less all expenditures and member
sugarbeet payments, is distributed to the members on the basis of the pounds of
extractable sugar obtained from each of the members sugarbeets; such amounts
are distributed in either cash payments or allocated in the form of patronage
credits to the members patronage account on the books of the Company.

COMPANY DISTRICTS

The
Companys by-laws provide that the Companys members are to be divided into
districts for the purposes of voting and the election of members of the Board
of Directors. Those districts do not have specific geographic boundaries but,
instead, contain a loosely defined area representing the area served by a
particular piling station to which members deliver their sugarbeets for storage
until the sugarbeets are to be processed. When a member joins the Company, he
or she is assigned to a particular district based upon criteria including: (i)
the physical location of the shareholders sugarbeet growing acres relative to
a piling site; (ii) if the previous criteria do not clearly indicate the
district to which the shareholder should be assigned, then the physical
location of the shareholders base of farming operations relative to a piling
site (some members deliver sugarbeets to more than one piling site due to the
locations of their various fields, even though they are assigned to membership
in only one district); and (iii) if the first two criteria do not provide a
clear indication of the district to which the shareholder should be assigned,
then the shareholder is given the option of being assigned to the district
which would best serve the needs of that shareholder.

Given
that shareholders are assigned to districts based upon ease of delivery of
harvested sugarbeets and because shareholders own different numbers of Units of
Preferred Stock, each district includes a different number of acres of
sugarbeet production and, therefore, a different quantity of sugarbeets
delivered to the Company. However, none of the districts provides the Company
with a materially disproportionate quantity of the sugarbeets produced by the
Companys members. While the allocation of members to the various districts has
a significant impact on the election of directors, the Company does not believe
that the districts represent a significant factor in the day-to-day business
operations of the Company.

RESEARCH AND DEVELOPMENT

The
Company conducts a modest amount of research and development activity, but does
participate in some sugar industry research and development activities. Any
research findings are then shared by the entire sugar industry. Participatory
research and development is accomplished through such organizations as the Beet
Sugar Development Foundation and North Dakota/Minnesota Research and Education
Board. The Company participates in the organizations listed above through the
efforts of its representatives to the boards of directors of those entities.
The Companys representatives, either a member of the Companys Board of
Directors or a Management employee of the Company, allow the Company to participate
in and help direct agricultural and factory operations research and development
activities carried out by the listed organizations. Those organizations also
have established various committees on which the Company has placed certain of
its employees. That practice is designed to provide the company with direct
access to any research and development information available from the
applicable committees. None of the Companys employees or directors devotes a
significant portion of their time and energies to the activities described in
this section.

5

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During
the fiscal year ended on August 31, 2010, the Company contributed approximately
$0.1 million to the North Dakota/Minnesota Research and Education Board to fund
that entitys research and development activities and the Company spent $0.3
million for research aimed at process improvements.

The
Company also has established a sugarbeet seed committee, whose membership
includes shareholders, directors and Company employees, which reviews the
performance of new and existing sugarbeet seed varieties. The committee then
advises the Board of Directors with regard to those sugarbeet seed varieties
that should be approved by the Board of Directors for use by the Companys
shareholders.

ENVIRONMENTAL
MATTERS

The
Company is subject to a broad range of evolving environmental laws and
regulations. These laws and regulations include the Food Quality Protection Act
of 1996, the Clean Air Act, the Clean Water Act, the Resource Conservation and
Recovery Act, the Federal Insecticide, Fungicide and Rodenticide Act and the
Comprehensive Environmental Response, Compensation and Liability Act. Other
than what is provided herein, the Company is not aware of any areas of
non-compliance.

The
Company has $0.6 million of environmental capital improvements budgeted for the
fiscal year ending August 31, 2011, slightly less than was expended for the
fiscal year ending August 31, 2010.

Compliance
with these laws and related regulations is an ongoing process that, at the
current levels of spending, is not expected to have a material effect on the
Companys capital expenditures, earnings or competitive position. Environmental
concerns are, however, inherent in most major agricultural operations,
including those conducted by the Company, and there can be no assurance that
the cost of compliance with environmental laws and regulations will not be
material. Moreover, it is possible that future developments, such as
increasingly strict environmental laws and enforcement policies there under,
and further restrictions on the use of agricultural chemicals, could result in
increased compliance costs.

On
March 10, 2009, the United States Environmental Protection Agency (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), methane (CH4), nitrous oxide (N2O),
sulfur hexafluoride (SF6), hydro fluorocarbons (HFCs), per
fluorocarbons (PFCs), and other fluorinated gasses. The Company is monitoring
this and similar proposed regulation changes and their potential impact to the
Company.

In
March 2005, the U.S. Department of Agriculture (the USDA) made a
determination that the Roundup Ready® sugarbeets should be deregulated. On
January 23, 2008, a coalition group including the Center for Food Safety, the
Sierra Club and two organic seed groups filed a lawsuit challenging the USDAs
determination. On September 21, 2009, the U.S. District Court for the
Northern District of California (the District Court) ruled that the USDA
violated the National Environmental Policy Act by failing to prepare an
Environmental Impact Statement (EIS) before deregulating Roundup Ready
sugarbeets. The District Court also ordered the USDA to complete an EIS.

6

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On
January 19, 2010, the coalition group filed a motion seeking a preliminary
injunction to halt the planting and processing of Roundup Ready sugarbeets for
both the seed and root crops until the EIS is completed. On March 16,
2010, the District Court denied the plaintiffs request for the preliminary
injunction. On August 13, 2010, the District Court issued an order allowing
harvesting and processing of Roundup Ready sugarbeets planted before August 13,
2010. In that order, the District Court also vacated the USDAs decision to
deregulate Roundup Ready sugarbeets. As a result, the planting of Roundup
Ready® sugarbeet seed after August 13, 2010 is prohibited until further
action is taken by the USDA, in accordance with applicable environmental laws,
to allow planting of Roundup Ready sugarbeet seed.

In
September 2010, the USDA, under existing regulatory authority, issued permits
to commercial sugarbeet seed companies to plant root crop seed, or stecklings,
for the purpose of possible commercial seed availability for the 2012 crop and
beyond. That move was immediately challenged in court by the Center for Food
Safety along with other groups. An evidentiary hearing took place November 2-4,
2010 to hear arguments by the plaintiffs and the defendant
(USDA) regarding the U.S. District Courts finding that the sugarbeet seed
stecklings likely should not have been planted. Following the evidentiary
hearing the District Court will decide what will become of the stecklings.

On
November 2, 2010 the USDA announced that it has prepared a draft environmental
assessment (EA) to address a request from interested chemical and seed
companies to partially deregulate or provide for some similar administrative
action to allow the continued use of Roundup Ready® sugarbeet seed for
sugarbeet crops in the US. The proposed EA evaluates three options, including
the USDAs preferred alternative, which would authorize production of Roundup
Ready® sugarbeets under strict USDA permit conditions for the 2011 and future
sugarbeet crops. The draft EA is available for public comment for 30 days
following the announcement, with the USDA intending to analyze all comments
received by December 6, 2010, and then deciding whether to grant the
supplemental request for partial deregulation.

According
to the USDA, Roundup Ready varieties accounted for about 95% of the planted
acres in the 2009/10 crop year. The Companys
Board of Directors authorized the planting of Roundup Ready® sugarbeets
beginning with the 2008 crop. Of the sugarbeet crop processed by the Company in
2010, the Company estimates that 100% was grown with Roundup Ready seed.

Given
these actions by the District Court and the uncertain timing or course of USDA
action, the Companys shareholders may not be able to plant Roundup Ready
sugarbeets in 2011. The ability of shareholders to plant Roundup Ready
sugarbeets in subsequent years will be based upon actions by the USDA, which
may be subject to further challenge in the future by the coalition group that
filed suit in January 2008 or other groups. Environmental law restrictions on
the use of Roundup Ready sugarbeet seeds or other restriction relating to
sugarbeet seeds or herbicides could have a significant, negative financial
impact on the Company and its shareholders.

MARKET
AND COMPETITION

Current
U.S. Government statistics estimated total United States (U.S.) sugar
deliveries for domestic food and beverage consumption at 200.0 million cwt
refined for its fiscal year beginning October 1, 2009 and ending September 30,
2010 (fiscal year 2010). For the same period ending in 2009 (fiscal year 2009),
total deliveries were 194.7 million cwt refined. Comparing the two years shows
demand increased by 2.7 percent for U.S. sugar sellers. The U.S. Government
estimates that fiscal year 2011 deliveries will total 201.4 million cwt
refined, less than a 1 percent increase versus fiscal year 2010.

Given
the size of the domestic market, the Companys sugar production and sales
represent less than 2 percent of the total domestic market for refined sugar in
fiscal year 2010. United Sugars Corporation, which sells the Companys
production through a sugar marketing pool, represented approximately 25 percent
share of the fiscal year 2010 U.S. sugar market.

7

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The
U.S. refined sugar market is a mature market and has grown over the past ten
years at a rate of slightly less than 1 percent per year. Its growth is
affected by the substitution of high fructose corn syrups, artificial and other
non-sucrose sweeteners for sugar in beverages and certain food products and
imported sugar-containing products. The substitution of non-sugar sweeteners
for sugar not only reduced demand for sugar in the United States, but has also
resulted in a high degree of sugar industry contraction. Also, sugar companies
have been consolidating or closing as a result of marketplace conditions. Since
1996, 13 of the 35 sugarbeet refineries owned by sugar companies have closed.
Similar results in that time period can be shown for cane sugar companies, cane
raw mills and cane refineries. Today there are seven sugar sellers, with
approximately 90 percent of U.S. sugar market share concentrated in the top
five sellers, most of which are integrated sugarbeet and sugarcane suppliers.
The Companys main competitors in the domestic market are Imperial Sugar
Company, American Sugar Refining Company, Amalgamated Sugar Company and
Cargill. Competition in the U.S. sugar industry, because sugar is a fungible
commodity, is primarily based upon price, customer service and reliability as a
supplier.

GOVERNMENT PROGRAMS AND REGULATION

Domestic
sugar prices are supported under a program administered by the United States
Department of Agriculture (USDA). Under the current program, which was
initiated in 1981 and extended under the Food Security Act of 1985, the Food,
Agriculture, Conservation and Trade Act of 1990, the Federal Agriculture
Improvement and Reform Act of 1996, the Farm Security and Rural Investment Act
of 2002 and now the Food, Conservation, and Energy Act of 2008 (the Farm
Bill), the price of sugar is required to be maintained above the price at
which producers could forfeit sugar to repay non-recourse loans obtained
through the Commodity Credit Corporation (CCC). The USDA maintains sugar
prices without cost to the U.S. Treasury by regulating the quantity of sugar
imports. The U.S. currently imports approximately 25 percent of its total
domestic needs.

Food,
Conservation, and Energy Act of 2008

The
Farm Bill was enacted in June 2008. It contains several provisions related to
the domestic sugar industry, with the ultimate goal of such provisions to
achieve 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 restricts imports of foreign sugar,
maintains a non-recourse loan program, and establishes a system of marketing
allocations for sugarbeet and sugarcane producers in an attempt to balance the
supply and demand for sugar in the U.S. domestic sugar market.

Under
the Farm Bill, sugar processors can borrow funds on a non-recourse basis from
the CCC, with repayment of such funds secured by sugar. When 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.

The
USDA has historically maintained sugar prices above the forfeiture price level,
without cost to the U.S. Treasury, by regulating the supply of sugar in the
U.S. market through the regulation of the quantity of sugar imports and the
establishment of an overall allotment quantity for the domestic sugar
producers. Under the Tariff Rate Quota (TRQ) implemented October 1,
1990, sugar-producing countries are allowed to export a fixed quantity of sugar
into the United States duty-free or subject to minimal duties. The amount of
the TRQ established by USDA for fiscal year 2011 is 1,231,497 short tons raw
value (STRV), or the minimum access commitment level under World Trade
Organization (WTO). In addition, the USDA also set the fiscal year 2011
refined TRQ at 109,251 STRV. Together the initial raw and refined TRQ was set
at 80 percent of fiscal year 2011 estimated TRQ entries. In addition, sugar is
imported under free trade agreements with other countries, including the North
American Free Trade Agreement (NAFTA), which includes trade with Canada and
Mexico. Mexico is projected by the USDA to export 1,025,000 STRV of sugar to
the U.S. in FY 2011. In total, imports from other countries are expected to
total 2,058,000 STRV for FY 2011by USDA.

8

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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 load 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 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.

In
order to reduce the risk of sugar forfeitures to the CCC and to provide balance
in the marketplace, the Farm Bill establishes annual flexible marketing
allotments for both cane and sugarbeet sugar processors. The Farm Bill requires
the USDA to set the overall allotment quantity (OAQ) for the U.S. domestic
sugar market for each crop year at no less than 85 percent of the estimated
quantity of sugar for domestic consumption. Once the USDA has determined the
OAQ for a crop year, it then determines each allotment for sugarbeet and sugarcane
sugar by multiplying the OAQ by 54.35 percent for beet and 45.65 percent for
cane. An individual processors allocation of the allotment for a crop year is
determined by formula set forth in the Farm Bill. Each domestic processor
of sugar, which includes the Company, is provided an allocation whenever
allotments are in effect, based upon that formula. Sugarbeet processor
allocations are based on each sugar processors sugar production history, while
sugar cane processor allocations are based on past marketings, ability to
market and past processings. The USDA annually establishes individual
processors allocations.

Under
the Farm Bill, a processor may market sugar in excess of its allocation if such
sales (i) enable another processor to meet its allocation,
(ii) facilitate the export of sugar or (iii) are made for nonhuman
consumption. Or, any sugar in excess of a processors allocation may be
held until such time that allotments are lifted or additional allocations
become available. The USDA can assess a penalty equal to three times the U.S.
market value of any quantity of sugar marketed in excess of a processors
allocation. The Farm Bill and its related regulations do not allow marketing
allocations to be traded among processors. The Farm Bill does, however, provide
for the transfer of allocations associated with a particular processing
facility in the event ownership of the facility is transferred.

The
marketing allotments and allocations set forth under the Farm Bill affect the
sugar processed from the 2008 crop through the 2012 crop. On an annual basis,
the marketing allotments, and the corresponding allocation to the Company, will
determine the amount of sugar the Company can sell into the domestic market.
The Companys allocation may reduce the amount of sugar the Company can market
for a given year, thus reducing the number of acres of sugarbeets required for
processing. The Company anticipates that it may have to increase or reduce its
authorized planted acres each year to more closely match its anticipated
allocation of sugar sales. The Company also manages its allocation needs by
selling non-allocation sugar to other sugar producers and for non-human
consumption needs, which are not counted against allocation sales.

North
American Free Trade Agreement

The
North American Free Trade Agreement (NAFTA) governs sweetener trade between
the U.S. and Mexico. Under the terms of the NAFTA text the agreement
established a common market between the United States and Mexico in sugar in
2008. Effective January 1, 2008, under NAFTA, there are no duties or
quantitative restraints between the two countries on all sugar and HFCS trade.
Sugar from Mexico may enter and be sold in the U.S. in any quantity without the
added cost of tariffs.

The
U.S. Government forecasts that Mexico will export 807,000 short tons raw value
to the U.S. in 2009-2010, which would represent approximately 7.3 percent of
domestic sugar consumption for food and other; and 1,025,000 short tons raw
value in 2010-2011, representing approximately 9.3 percent of domestic sugar
consumption for food and other. Key variables that ultimately will determine
the amount of imports from Mexico include: (1) Mexican production; (2) Mexican
high fructose corn syrup use; (3) Mexican third-country imports and possible
substitution; (4) Mexican government policy decisions, such as a proposed
ethanol program and others that could mitigate or increase exports to the U.S.;
(5) domestic U.S. production of beet and cane sugar; and (6) possible U.S. and
Mexico government agreement on a rational sugar trade policy, other than what
currently exists in the NAFTA. Excessive imports of Mexican sugar could cause
material harm to the U.S. sugar market; however, the Company is unable to determine
what the level of imports would need to be in order to trigger material harm.

9

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The
Company believes the NAFTA may present a potential serious public policy
challenge to itself and the domestic sugar industry. Should there be low world
raw sugar prices it would be economically viable for Mexican sugar to enter the
United States in any year, if the Mexican interests so choose. Since January 1,
2008 there has not been a sugar market disruption due to NAFTA in the U.S. for
a variety of reasons; mostly those reasons have to do with the market
conditions that currently exist in the U.S. and Mexico, including supply /
demand reasons. It is possible that the NAFTA could, in the future, 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 magnitude of the impact cannot be
determined at this time.

World
Trade Organization

Under
the General Agreement on Tariffs and Trade Act of 1990 (GATT), tariff rate
quotas were implemented for certain sugar producing countries that provided for
a fixed quantity of sugar imports duty-free or subject to minimal duties.
Further, imports of sugar under the tariff rate quota are based upon the
difference between domestic sugar consumption and domestic sugar production,
with one exception. Under the terms of the GATT the minimum imports of sugar
are established at 1,257,000 short tons, raw value. Therefore, even if the
difference between domestic sugar consumption and production are less than
1,257,000 short tons, raw value, GATT will require that 1,257,000 short tons be
imported into the U.S. from the quota holding foreign countries.

Unlimited
additional quantities may be imported upon payment of a tariff of 15.36 cents
per pound of refined sugar prior to shipment. In recent months the price spread
between imported and domestic sugar prices has narrowed, resulting in greater
high-tier sugar imports. Through July of 2010 fiscal year 2010 high-tier sugar
imports totaled 115,700 STRV compared to just 2,204 STRV in the prior year.

The
World Trade Organization (WTO) met in November, 2001 in Doha, Qatar where
members launched new multilateral trade negotiations aimed at improving market
access, reducing and eventually phasing out all forms of export subsidies and
substantial reductions in trade-distorting domestic support. Any agreements
reached during the Doha Round could present a threat to the domestic sugar
industry because sugar is one of the most highly protected sectors within world
agricultural trade and is thus a target for reform.

The
147 members of the WTO reached an agreement July 31, 2004, on a framework for
the final phase of the Doha Development Agenda of global trade talks. The
original deadline to complete talks by January 1, 2005, has been postponed a
number of times. Talks have stalled repeatedly and currently there appears to
be little chance of WTO countries completing the Doha in the short term. The
effect of any final WTO agreement on United States farm programs and the sugar
program in particular and the Company will depend largely on the details of the
agreement, which have not yet been fully negotiated.

Dominican
Republic - Central American Free Trade Agreement

The
Dominican Republic - Central American Free Trade Agreement (DR-CAFTA) was
signed into law in 2005 and was substantially implemented starting on
January 1, 2006. As a result, the Company has seen an increase in the
amount of sugar that will be imported into the United States as a result of
this agreement. The impact of this trade agreement on the Company will continue
to be assessed by taking into consideration this and all of the other
agreements that require certain amounts of raw or refined sugar to be imported
to the U.S., and the resultant amount of sugar that becomes available for sale
in the domestic sugar marketplace. It is possible that the trade agreement
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 the Company earnings. The magnitude of the impact
cannot be determined at this time.

10

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Regional
and Bilateral Free Trade Agreements

The
United States government is pursuing additional international trade agreements.
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 reach fruition, could negatively impact the Companys
profitability.

The
primary negotiated or currently being negotiated free trade agreements with
countries and regions that are major producers of sugar include, to the
Companys knowledge, 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, 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. The Company believes these agreements, should they reach
fruition, could negatively impact the Companys profitability. 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.

The
U.S. sugar industry and the Company recognize the potential negative impact
that would result if these agreements were entered into by the United States.

The
impact of the various trade agreements on the Company cannot 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 magnitude of the impact cannot be determined at this time.

The
Farm Bill provides price support provisions for sugar. However, if the price
support program including the Tariff Rate Quota system described above were
eliminated in its entirety, or if the effectiveness that 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.

EMPLOYEES

As
of October 29, 2010, the Company had 313 full time employees, of whom 277 were
hourly and 36 were salaried. It also employs approximately 411 additional
hourly seasonal workers during the sugarbeet harvest and processing campaign.
The Company has a collective bargaining agreement with the Bakery,
Confectionery, Tobacco Workers and Grain Millers International Union (AFL-CIO,
CLC) for its factory group. The contract became effective June 1, 2005 and
continues through May 31, 2011. Office, clerical, Management, truck drivers and
harvest employees are not unionized. Full time employees are provided with
health, dental and vision insurance, a defined benefit or defined contribution
retirement plan, a 401(k) retirement savings plan, a long term disability plan,
sick leave plan, term life insurance, vacation plan and holiday pay. Seasonal
workers are also provided some of these same employee benefits. The Company
considers its employee relations to be excellent.

ABOUT THE COOPERATIVE

The
Company is typically referred to as a Closed Cooperative. In a Closed
Cooperative, members must purchase equity (represented by classes of preferred
shares) in a cooperative to acquire the rights to participate in the
cooperatives business, and membership must be approved by the Cooperatives Board
of Directors. The Company requires shareholders to own a Unit of Preferred
Stock, which currently entitles a member to grow and deliver a maximum number
of acres of sugarbeets per unit as authorized by the Board of Directors for
each farming year. See Part II Item 5 for a more detailed explanation.

11

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|          |              
|--------- | -------------
|ITEM
 1A. | RISK
 FACTORS

If
any of the following risks actually occur, the Companys results of operations,
cash flows and the trading price of its common stock could be negatively
impacted. Although the Company believes that it has identified and discussed
below the key, significant risk factors affecting its business, there may be
additional risks and uncertainties that are not presently known or that are not
currently believed to be significant that may adversely affect its performance
or financial condition.

Regional and Bilateral Trade Agreements

In
the event that the United States government enters into bilateral trade
agreements with sugar producing countries, the amount of sugar in the domestic
sugar market could be impacted. A change in the supply of sugar could put
pressure on the price of sugar, which would impact the Companys profitability.

Government
Programs and Regulations; Legislation

The
nature and scope of future legislation and regulation affecting the sugar
market cannot be predicted and there can be no assurance that price supports
and market protections will continue in their present forms. If the price
support programs were eliminated in their entirety, or if certain protections
the United States government 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 effects could negatively impact the desirability of growing sugarbeets
for delivery to the Company, the Companys financial results, and the Companys
continued viability.

Legislation
that would significantly increase energy costs, health care costs, or other
employee benefit costs could have severe adverse impacts on the financial
returns of the Company.

Unregulated
Foreign Competition

Under
the current terms of the NAFTA and other government regulations, imports of
sugar from Mexico may enter the U.S. market. These imports could oversupply the
U.S. market and negatively affect the price of sugar. The Company, along with
the domestic sugar industry, closely monitors the level of imported sugar
coming from Mexico and is consulting with the U.S. government to encourage
improved data reporting and continued consultation with the Mexican government
relating to sugar trade.

The Farm
Bill

The
impact of the Farm Bill on the operations of the Company cannot be completely
predicted. The long-term ramifications of the marketing allotment and
allocation program depend on the Companys base allocation received on an
annual basis and its ability to obtain access, if necessary, to additional
allocations at a reasonable price.

Operating
Expenses and Sugar Prices

The
Company has an ongoing strategy of maximizing profitability by controlling
operating expenses and maximizing production of sugar. This strategy is
necessary because the price of sugar has historically remained within a fairly
narrow government program controlled price range. The strategy includes
ongoing activities that include constant review of costs and a capital
expenditure program that emphasizes efficiencies through cost reduction or
production increases. The Company cannot be assured that its continued efforts
in this area will result in its continued or increased profitability.

12

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The
Company consumes large quantities of energy in its operations. The Company
annually consumes coal, electricity, metallurgical coke, diesel fuel, and
natural gas; therefore significant changes in energy prices would have a
significant effect on the operating costs of the Company. The Company also consumes
operating supplies whose costs are impacted by the price of energy, and
therefore the price to the Company. The Company has a strategy to purchase its
energy needs and operating supplies as cheaply as possible through long-term
contracts, volume purchases and competitive bidding.

Inability to compete in the sweetener market, could affect
operating results.

Sugar
is a fungible commodity with competition for sales volume based primarily upon
price, customer service and reliability. The sweetener market, in addition to
sugar, includes corn-based sweeteners, such as regular and high fructose corn
syrups, and non-nutritive, high-intensity sweeteners such as aspartame.
Differences in functional properties and prices have tended to define the use
of these various sweeteners. Although the various sweeteners are not
interchangeable in all applications, the
substitution of other sweeteners for sugar has occurred in certain products,
such as soft drinks. The Company cannot predict the availability, development
or potential use of these and other alternative sweeteners and their possible impact on it or its members. The Company believes
that it possesses the ability to compete successfully with other producers of
sugar in the United States. In spite of that, substitute products could
reduce the demand for sugar which could lower the price of sugar, resulting in
reduced profitability in the future.

The
Companys Board of Directors authorized the planting of Roundup Ready®
sugarbeets beginning with the 2008 crop. Sugar and co-products produced from Roundup Ready® sugarbeets have
received regulatory approval in most of the countries in which the Company has
direct or indirect sales of our products. While the sale of sugar and
co-products from Roundup Ready® sugarbeet seed has been approved in most
markets, marketing risks still exist. United Sugars Corporation and Midwest
Agri-Commodities, its sugar and co-product marketing agents, respectively, feel
they can successfully sell and distribute products from Roundup Ready® sugarbeets with minimal affect on the
Companys revenue. However, customers views on the use of products from
biotechnology derived crops such as Roundup Ready® sugarbeets may change over
time which could negatively impact the Companys profitability.

Beet
Seed Availability

On
January 24, 2008, the Center for Food Safety along with other groups filed
a lawsuit against the USDA indicating that, a full environmental impact study
(EIS) should have been completed before it made the decision to deregulate
Roundup Ready® sugarbeets. On September 21, 2009 the U.S. District Court
(Court) ruled against the USDA finding that the USDA violated federal law by
not preparing an Environmental Impact Statement before deregulating Roundup Ready® sugarbeets. The Court has
determined that the USDA now needs to prepare a full Environmental Impact
Statement.

A
District Court hearing on interim remedies for the September 21, 2009 decision
was held on August 13, 2010, and following the hearing issued a ruling
confirming the ability of the shareholders to harvest the 2010 root crop even
though it was produced primarily from Roundup Ready® sugarbeet seed. In
addition, the District Court immediately vacated the original decision by USDA
to deregulate the use of Roundup Ready® sugarbeet seed. As a result, the
planting of Roundup Ready® sugarbeet seed after August 13, 2010 is
prohibited until further action is taken by USDA, in accordance with applicable
law, to allow planting of Roundup Ready® sugarbeet seed.

In
September 2010 USDA, under existing regulatory authority, issued permits to
commercial sugarbeet seed companies to plant root crop seed, or stecklings, for
the purpose of possible commercial seed availability for the 2012 crop and
beyond. That move was immediately challenged in court by the Center for
Food Safety along with other groups. An evidentiary hearing took place November
2-4, 2010 to hear arguments by the plaintiffs and defendant (USDA) regarding
the U.S. District Courts finding that the sugarbeet seed stecklings likely
should not have been planted. Following the evidentiary hearing The Court will
decide what will become of the stecklings.

13

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On
November 2, 2010 the USDA announced that it has prepared a draft environmental
assessment (EA) to address a request from interested chemical and seed
companies to partially deregulate or provide for some similar administrative
action to allow the continued use of Roundup Ready® sugarbeet seed for sugarbeet crops in the US. The
proposed EA evaluates three options, including the USDAs preferred
alternative, which would authorize production of Roundup Ready® sugarbeets
under strict USDA permit conditions for the 2011 and future sugarbeet crops.
The draft EA is available for public comment for 30 days following the
announcement, with the USDA intending to analyze all comments received by
December 6, 2010, and then deciding whether to grant the supplemental request
for partial deregulation. A lawyer for the Center for Food Safety has been
quoted recently as saying that as soon as the USDA issues any new approvals for
genetically modified sugar beet planting in 2011 her group will challenge it in
court.

Given
the recent Court rulings, and the uncertain timing of USDA action, if any, and
continued litigation attempts by certain groups that oppose the growing of
sugarbeets using Roundup Ready® sugarbeet seed, it is possible that the
Companys shareholders may not be able to plant Roundup Ready® sugarbeets in
2011. The ability of shareholders to plant Roundup Ready® sugarbeets in
subsequent years will be determined as a final matter based on the outcome of
the EIS and further decision by USDA. The USDA is currently developing the EIS,
which it says is expected to be completed by the end of May 2012.

If
the Court restricts planting in 2011 of Roundup Ready® sugarbeet seed, conventional varieties would need
to be utilized, which could have a negative impact on the sugarbeet producers
crop yields. Chemical manufacturers have significantly reduced planned
production of conventional herbicides due to the rapid increase in planting of
Roundup Ready® sugarbeets. Weed control for conventional varieties could be
difficult if there is an inadequate supply of conventional herbicides.
Therefore, the risk of Roundup Ready® sugarbeet restrictions could have a
significant, negative financial impact to the Company and to its members.

Weather
and Other Factors

The
sugarbeet, as with most other crops, is affected by weather conditions during
the growing and harvesting seasons. Additionally, weather conditions during the
processing season affect the Companys ability to store sugarbeets held for
processing. Growing and storage conditions different from the Companys expectations
may change the quantity and quality of sugarbeets available for processing and
therefore may affect the quantity of sugar produced by the Company. A
significant reduction in the quantity or quality of sugarbeets harvested
resulting from adverse weather conditions, disease (such as rhizomania) or
other factors could result in increased per unit processing costs and decreased
production, with adverse financial consequences to the Company and its members.

Increased profitability of alternative crops could adversely
affect the desirability of growing sugarbeets.

The
prices growers receive from crops other than sugarbeets could impact their
decisions as to which crop to plant and how much to plant. Higher prices and
increased profitability for alternative crops could negatively impact the
desirability of growing sugarbeets for delivery to the Company for processing,
its financial results and its continued viability.

|         |                          
|-------- | -------------------------
|ITEM 1B. | UNRESOLVED STAFF COMMENTS

None.

14

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|        |           
|------- | ----------
|ITEM 2. | PROPERTIES

The
Company operates a single sugarbeet processing factory at Wahpeton, North
Dakota that is located in the Red River Valley area of Minnesota-North Dakota.
The Company owns the factory, receiving sites, and the land on which they are
located. The Corporate office is located at the factory site at Wahpeton, ND.

The
properties are adequate to process normal and above normal crop sizes, and for
the last three years have averaged a slice rate of 9,183 tons per day. The
2010-crop is the largest tonnage in the history of the Company, amounting to
approximately 3,108,000 tons of sugarbeets. If the Company encounters normal
weather patterns, which will in turn provide normal long-term sugarbeet storage
conditions and if the beets harvested are of good quality, healthy and low in
tare, then it does not anticipate having material difficulties in processing
crops equal in size to the 2010-crop. Achievement of the levels of slice and
sugar production in the factory is due mostly to the quality of the crop and
the Companys effort to maximize the potential production from a crop.

Minn-Dak
Yeast Company (MDYC), of which the Company is a 100 percent owner, operates a
single factory yeast manufacturing business at Wahpeton, North Dakota. MDYC
owns the factory and the land on which it is located. During fiscal 2010, fresh
yeast was produced and sold into the domestic yeast marketplace.

All
properties are held subject to a mortgage by the Companys primary lender.

|        |                  
|------- | -----------------
|ITEM 3. | LEGAL PROCEEDINGS

From
time to time and in the ordinary course of its business, the Company is named
as a defendant in legal proceedings related to various issues, including
workers compensation claims, tort claims and contractual disputes. Other than
as provided herein, the Company is not currently involved in legal proceedings
that have arisen in the ordinary course of its business, and the Company is
also unaware of certain other potential claims that could result in the
commencement of legal proceedings. The Company carries insurance that provides
protection against certain types of claims.

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 and expanding control
program designed to meet these environmental laws and regulations. As disclosed
under ENVIRONMENTAL MATTERS above, there currently are no pending regulatory
enforcement actions and the Company believes that it is in substantial
compliance with applicable environmental laws and regulations.

|        |                       
|------- | ----------------------
|ITEM 4. | [REMOVED AND RESERVED]

PART
II

|         |                                                                                                               
|-------- | --------------------------------------------------------------------------------------------------------------
|ITEM
 5. | MARKET
 FOR REGISTRANTS COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER
 PURCHASES OF EQUITY SECURITIES

SHAREHOLDER
STOCK VALUE

The
Company is typically referred to as a closed cooperative. In a closed
cooperative, members must purchase equity (represented by classes of preferred
shares) in a cooperative to acquire the rights to participate in the
cooperatives business, and membership must be approved by the Companys Board
of Directors.

15

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The
Companys equity consists of common stock and preferred stock. The Companys
preferred stock consists of Class A preferred stock, Class B preferred stock
and Class C preferred stock, with one share of each class of preferred stock
constituting a unit of preferred stock.

There
is no established public market for the Companys common equity and it
is unlikely that a public market for the Companys equity will develop in the
foreseeable future. Transfer
of shares, if any, is subject to significant restriction, including the
approval of the Companys Board of Directors and the requirement that preferred
stock must be transferred together.

Holders
of the Companys common stock are entitled to share in the Companys profits
and losses based upon sugar delivered, to receive distributions of the
Companys net cash flow when declared by the Board of Directors, to participate
in the distribution of the Companys assets if it dissolves or liquidates, and,
to vote on matters submitted to a vote of the Companys members. Under state
law and the Companys Bylaws, each member of the Company is entitled to one
vote, regardless of the number of shares the member holds. Holders of the
Companys common stock are committed under Uniform Delivery and Marketing
Agreements to grow and deliver a minimum and maximum number of acres of
sugarbeets per unit of preferred stock as authorized by the Board of Directors
for each farming year. The Companys common stock and preferred stock may be
held only by farmer-producers who are eligible for membership in the Company
and may only be transferred with the consent of the Board of Directors of the
Company.

The
Company has never declared a dividend. The Company distributes its patronage
based upon net margins in the form of qualified or non-qualified allocated
patronage using the sugar delivered for the crop year as the distribution factor.

As
of November 24, 2010, 477 shares of the Companys Common Stock and 72,200
units of the Companys Preferred Stock, each consisting of 1 share of Class A
Preferred Stock, 1 share of Class B Preferred Stock and 1 share of Class C
Preferred Stock, were outstanding.

The Company
has not made any repurchases of its securities in the fourth quarter of the
fiscal year covered by this Annual Report on Form 10-K.

16

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|        |                        
|------- | -----------------------
|ITEM 6. | SELECTED FINANCIAL DATA

The following
table summarizes selected financial data for each of the last five fiscal
years. The selected financial data of the Company should be read in conjunction
with the financial statements and related notes included elsewhere in this
report.

|                                                                                                   |  |                              |           |      |   |           |  |      |           |      |   |           |  |   |           | 
|-------------------------------------------------------------------------------------------------- |  | ---------------------------- | --------- | ---- | - | --------- |  | ---- | --------- | ---- | - | --------- |  | - | --------- | 
|                                                                                                   |  | Fiscal Year Ended August 31, |          
|FINANCIAL DATA                                                                                     |  | 2010                         |           | 2009 |   | 2008      |  | 2007 |           | 2006 |  
|                                                                                                   |  |                              |           |      |   |           |  |      |           |      |  
|(in thousands)                                                                                     |  |                              |           |      |   |           |  |      |           |      |  
|Revenues                                                                                           |  | $                            | 214,312   |      | $ | 225,034   |  | $    | 243,573   |      | $ | 278,571   |  | $ | 176,967   | 
|Distribution of net proceeds (1)                                                                   |  |                              | 100,233   |      |   | 96,053    |  |      | 110,863   |      |   | 148,415   |  |   | 76,096    | 
|Total assets                                                                                       |  |                              | 197,065   |      |   | 179,884   |  |      | 177,063   |      |   | 177,666   |  |   | 163,129   | 
|Long-term debt, including current
 maturities                                                      |  |                              | 40,907    |      |   | 38,545    |  |      | 31,872    |      |   | 36,931    |  |   | 42,008    | 
|Members investment (2)                                                                            |  |                              | 71,274    |      |   | 76,143    |  |      | 84,016    |      |   | 83,373    |  |   | 83,951    | 
|Property and equipment additions, net of
 retirements                                              |  |                              | 8,283     |      |   | 9,246     |  |      | 8,560     |      |   | 4,947     |  |   | 4,426     | 
|Working capital                                                                                    |  |                              | 13,688    |      |   | 13,387    |  |      | 10,163    |      |   | 13,265    |  |   | 14,025    | 
|                                                                                                   |  |                              |           |      |   |           |  |      |           |      |   |           |  |   |           | 
|RATIOS                                                                                             |  |                              |           |      |   |           |  |      |           |      |   |           |  |   |           | 
|Ratio of long-term debt to equity (3)                                                              |  |                              | .53       |      |   | .44       |  |      | .32       |      |   | .39       |  |   | .45       | 
|Ratio of net proceeds to fixed charges (4)                                                         |  |                              | 51.82     |      |   | 48.64     |  |      | 35.36     |      |   | 35.56     |  |   | 22.50     | 
|Current ratio                                                                                      |  |                              | 1.20      |      |   | 1.24      |  |      | 1.17      |      |   | 1.23      |  |   | 1.36      | 
|                                                                                                   |  |                              |           |      |   |           |  |      |           |      |   |           |  |   |           | 
|PRODUCTION DATA (5)                                                                                |  |                              |           |      |   |           |  |      |           |      |   |           |  |   |           | 
|Acres harvested (members)                                                                          |  |                              | 97,247    |      |   | 75,097    |  |      | 107,649   |      |   | 116,646   |  |   | 102,121   | 
|Tons of sugarbeets purchased (members)                                                             |  |                              | 2,010,071 |      |   | 1,863,920 |  |      | 2,208,622 |      |   | 3,019,475 |  |   | 1,810,269 | 
|Tons purchased per acre harvested                                                                  |  |                              | 20.66     |      |   | 24.82     |  |      | 20.52     |      |   | 25.89     |  |   | 17.73     | 
|Payment to members per ton of sugarbeets
 delivered, plus allocated patronage and unit retains (6) |  | $                            | 49.29     |      | $ | 51.35     |  | $    | 48.96     |      | $ | 49.06     |  | $ | 41.89     | 
|                                                                                                   |  |                              |           |      |   |           |  |      |           |      |   |           |  |   |           | 
|Sugar (cwts):                                                                                      |  |                              |           |      |   |           |  |      |           |      |   |           |  |   |           | 
|Produced (from member, tolled and purchased
 sugarbeets)                                           |  |                              | 5,218,993 |      |   | 5,427,888 |  |      | 6,914,346 |      |   | 7,822,687 |  |   | 4,848,804 | 
|Sold (includes purchased sugar)                                                                    |  |                              | 5,032,891 |      |   | 5,834,662 |  |      | 7,060,619 |      |   | 7,301,360 |  |   | 4,844,315 | 
|                                                                                                   |  |                              |           |      |   |           |  |      |           |      |   |           |  |   |           | 
|Beet pulp pellets (tons):                                                                          |  |                              |           |      |   |           |  |      |           |      |   |           |  |   |           | 
|Produced                                                                                           |  |                              | 112,048   |      |   | 102,073   |  |      | 107,600   |      |   | 147,888   |  |   | 101,328   | 
|Sold                                                                                               |  |                              | 115,529   |      |   | 90,715    |  |      | 106,006   |      |   | 151,791   |  |   | 105,138   | 
|                                                                                                   |  |                              |           |      |   |           |  |      |           |      |   |           |  |   |           | 
|Beet molasses (tons):                                                                              |  |                              |           |      |   |           |  |      |           |      |   |           |  |   |           | 
|Produced                                                                                           |  |                              | 95,572    |      |   | 87,647    |  |      | 99,349    |      |   | 130,878   |  |   | 79,599    | 
|Sold                                                                                               |  |                              | 70,739    |      |   | 61,240    |  |      | 87,803    |      |   | 88,652    |  |   | 47,007    | 
|Used for Yeast Subsidiary Production                                                               |  |                              | 28,494    |      |   | 23,531    |  |      | 25,307    |      |   | 31,513    |  |   | 21,821    | 
|                                                                                                   |  |                              |           |      |   |           |  |      |           |      |   |           |  |   |           | 
|Yeast (pounds, in thousands):                                                                      |  |                              |           |      |   |           |  |      |           |      |   |           |  |   |           | 
|Produced                                                                                           |  |                              | 38,774    |      |   | 35,975    |  |      | 37,436    |      |   | 39,248    |  |   | 34,787    | 
|Sold                                                                                               |  |                              | 38,805    |      |   | 36,071    |  |      | 37,436    |      |   | 39,152    |  |   | 34,670    | 

17

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(1)     Net
Proceeds are the Companys gross revenues, less the costs and expenses of
producing, purchasing and marketing sugar, sugar co-products, and yeast, but
before payments to members for sugarbeets. (For a more complete description of
the calculation of Net Proceeds, see Description of Business-Growers
Agreements.)

(2)     Members
investment includes preferred and common stock, unit retention capital,
allocated patronage and retained earnings.

(3)     Calculated
by dividing the Companys long-term debt, exclusive of the current maturities
of such debt, by equity.

(4)     Computed
by dividing (i) the sum of Net Proceeds plus fixed charges, plus amortization
of capitalized interest by (ii) the sum of interest expense and interest
capitalized. The Company does lease certain items, such as some office
equipment. Due to the proportionately small amounts involved, an interest
factor on lease payments has not been included in the total of the Companys
fixed charges or the calculation of this ratio. See Exhibit 12.

(5)     Information
for a fiscal year relates to the crop planted and harvested in the preceding
calendar year (e.g., information for the fiscal year ended August 31, 2010,
relates to the 2009 crop).

(6)     Reflects
the total amount paid in cash and allocated to individual grower equity
accounts for each ton of sugarbeets delivered.

|        |                                                                                       
|------- | --------------------------------------------------------------------------------------
|ITEM 7. | MANAGEMENTS DISCUSSION AND
 ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The
following discussion of the financial condition and results of operations of
the Company should be read in conjunction with the Companys financial
statements and notes included elsewhere in this Report. This discussion
contains forward-looking statements that involve risks and uncertainties. The
Companys actual future results may differ materially from those anticipated in
the forward-looking statements contained in this section; such differences
could arise as a result of a variety of factors including, but not limited to,
the market and regulatory factors described elsewhere in this Report.

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
historical experience and other assumptions 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 of the assumptions,
estimates and judgments increases, the level of precision decreases, meaning
that actual results could be different from those currently estimated.

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 material changes in the estimates
are reasonably likely to occur from period to period. The Companys critical
accounting estimates include the following:

18

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Subsidiaries

Subsidiaries
that are controlled by the Company are consolidated in the Companys financial
statements. The Company has created and capitalized a wholly owned subsidiary
called Link Acquisition Company LLC on December 18, 2008, which was formed to
advance possible strategic business activities by the Company.

Inventory Valuation

Inventories
of refined sugar, sugar thick juice and 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 price that
approximates cost. During the periods when sugarbeets are purchased from
growers, but not yet converted into granulated sugar or sugar thick juice, 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. The Company derives its estimates
from sales contracts, recent sales and evaluations of market conditions and
trends. Changes in market conditions may cause estimates to differ from actual
results.

Property and Equipment, Property and
Equipment Held for Lease, and Depreciation

Property
and equipment, and property and equipment held for lease 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 property and equipment held for
lease 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 fiscal years covered by this report. However, considerable management
judgment is necessary to estimate future cash flows, which may differ from
actual results.

Defined Benefit Pension Plan

The
Company maintains and administers a non-contributory 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, Employers Accounting for
Pensions, 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 our 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.

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 distributed as prescribed in Section
1382 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 non-patronage business, the Company shall have taxable income subject to
corporate income tax rates.

Determining
the consolidated provision for income tax expense, income tax liabilities and
deferred tax assets and liabilities involves judgment. The Company calculates
income taxes in each of the tax jurisdictions in which it operates. This
involves estimating current tax liability in each jurisdiction as well as
making judgments regarding the valuation of deferred tax assets. Tax
liabilities can involve complex issues and may require an extended period to
resolve.

19

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On
September 1, 2007 The Company adopted the provisions of FASB ASC 740-10, Accounting for Uncertainty in Income Taxes  An
Interpretation of FASB Statement No. 109. FASB ASC 740-10
prescribes a threshold for the financial statement recognition and measurement
of a tax position taken or expected to be taken in an income tax return. FASB
ASC 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 our
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
Company has no outstanding uncertain income tax positions as of November 24,
2010.

Fair Value Measurements

Investments
- The investments in CoBank, Dakota Valley Electric Cooperative, Inc. and all
other cooperatives are stated at cost, plus the cooperatives share of
allocated patronage and capital credits. The investments in United Sugars
Corporation and Midwest Agri-Commodities are accounted for using the equity
method, wherein the investments are recorded at the amount of the underlying
equity in the net assets of the investments and adjusted to recognize the
cooperatives share of the undistributed earnings or losses. The Company
believes it is not practicable to estimate the fair value without incurring
excessive costs because there is no established market for this stock and it is
inappropriate to estimate future cash flows, which are largely dependent on
future patronage earnings of the investment.

Long-term
debt and bonds payable- The fair value of obligations
under long-term debt and bonds payable are estimated based on the quoted market
prices for similar issues or on the current rates offered for debt of similar
maturities. The carrying amount on the financial statements approximates fair
market value.

Pension
assets The fair value of pension assets involve all
Level 1 inputs.

Accumulated Other Comprehensive Income (Loss)

The
Company accounts for Other Comprehensive Income(Loss) using activities from the
Company as well as its pro-rata share of activity from its marketing
subsidiaries.

Deferred Costs and Product Values

The
Company defers the economic costs and benefits to the following fiscal year if
they are associated with the crop accounted for in that fiscal year. This
matching principle is consistently applied from year to year.

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 co-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, both 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). As of August 31, 2010, the Company had a seasonal line
of credit totaling $45.0 million through December 31, 2010, of which $17.4
million was available as of August 31, 2010. The Company also has available the
USDA Sugar Loan Provisions contained in the 2008 Farm Bill to provide an
additional source of seasonal financing for the current and future crops. On
November 15, 2010, the Company and its Bank agreed to a new seasonal line of
credit totaling $85.0 million through May 31, 2011, then reduced to $45.0
million through December 31, 2011. The significant increase in the seasonal
line of credit was directly related to the increased anticipated grower
payments for the 2010-crop.

20

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


|  |                                                                                                                                            
|- | -------------------------------------------------------------------------------------------------------------------------------------------
| | 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 August 31, 2010 the Company was in compliance with its loan agreement
covenants with the Bank.

Net Cash provided by operations totaled $8.2
million for the year ended August 31, 2010, compared to $12.3 million for the
previous year. This decrease of $4.1 million was primarily due to the following
changes:

|                                       |  |   |      |        
|-------------------------------------- |  | - | ---- | -------
|Income
 allocated to member investment |  | $ | 1.1  | million
|Accumulated
 other comprehensive loss  |  |   | 1.9  |        
|Depreciation
 and Amortization         |  |   | 0.8  |        
|Non-cash
 portion of capital credits   |  |   | 1.0  |        
|Inventory
 and Prepaid Expenses        |  |   | (6.4 | )      
|Deferred
 charges                      |  |   | (3.0 | )      
|All other
 factors                     |  |   | 0.5  |        
|                                       |  |   |      |        
|Total                                  |  | $ | 4.1  |        

The
net cash used in investing activities totaled $7.7 million for the year ended
August 31, 2010, compared to $7.2 million for the previous year. The increase
of $0.5 million was primarily due to a $1.1 million increase in capital
adjustments to unconsolidated marketing cooperatives, caused by FASB ASC 220
activities, offset by $0.8 million in reduced capital expenditures and $0.2
million from other factors.

The
net cash used in financing activities totaled $0.5 million for the year ended
August 31, 2010 compared to $5.2 million for the previous year. This decrease
of $4.7 million was primarily due to a $14.0 million increase in short term
debt obligations offset by a $10.0 million difference in additional long-term
debt, all other factors totaling $0.7 million.

The
Company anticipates that the funds necessary for working capital requirements
and future capital expenditures will be derived from operations, short-term
borrowings, depreciation, patronage and long-term borrowings. On November 15,
2010, the Company obtained a new seasonal line of credit necessary for the
large 2010 crop.

Working
capital increased $0.3 million for fiscal year 2010. The Company funds its
capital expenditure and debt retirement needs primarily from operating activities.
As of August 31, 2010 the Company had approximately 6 years of long-term debt
remaining with the Bank and it has two tax exempt bond issues with single
payment requirements, one for $12.4 million due February 1, 2023 and one for
$7.0 million due February 1, 2025.

Capital
expenditures for the years ended August 31, 2010, 2009 and 2008 totaled $8.0
million, $8.8 million, and $8.0 million respectively. The Companys purchase of
equipment by issuance of capital lease debt for the years ended August 31,
2010, 2009, and 2008 totaled $0.4 million $2.4 million and $0.7 million
respectively.

21

---



Capital
expenditures for fiscal year 2011 have been approved at $19.2 million. The
Company has secured the right, but not the obligation to obtain $8.8 million of
additional tax exempt bonds to finance additional capital expenditures. The
capital expenditures are for normal efficiency, improved beet storage, improved
rail facilities, safety and replacement activities. Failure by the Company to make
capital expenditures over a period of years would result in the Company being
less competitive due to its failure to reduce costs, increase operating
efficiencies or increase revenues.

The
Bonds are secured by a letter of Credit from the Bank. The letter of credit is
ultimately secured by the plant and property of the Companys facility at
Wahpeton, ND.

Payments Due by Period

|                                      |  |   |       |  |                  |     |             |   |            |  |               |      |  |   |      |  | 
|------------------------------------- |  | - | ----- |  | ---------------- | --- | ----------- | - | ---------- |  | ------------- | ---- |  | - | ---- |  | 
|Contractual Obligations (in millions) |  |   | Total |  | Less Than
1
Year |     | 1  3 Years |   | 4 5 Years |  | After 5
Years |     
|Long-Term Debt                        |  | $ | 19.1  |  | $                | 2.5 |             | $ | 10.0       |  | $             | 6.6  |  | $ | 0.0  | 
|Bonds Payable                         |  |   | 19.2  |  |                  | 0.0 |             |   | 0.0        |  |               | 0.0  |  |   | 19.2 | 
|Capital Leases                        |  |   | 2.6   |  |                  | 0.5 |             |   | 1.4        |  |               | 0.7  |  |   | 0.0  | 
|Unconditional Purchase Obligations    |  |   | 4.8   |  |                  | 1.6 |             |   | 3.2        |  |               | 0.0  |  |   | 0.0  | 
|Other Long-Term Obligations - Pension |  |   | 19.6  |  |                  | 1.8 |             |   | 5.4        |  |               | 3.6  |  |   | 8.8  | 
|Total Long Term Obligations           |  | $ | 65.3  |  | $                | 6.4 |             | $ | 20.0       |  | $             | 10.9 |  | $ | 28.0 | 
|Interest on Long Term Debt & Bond     |  |   | 10.9  |  |                  | 1.1 |             |   | 2.8        |  |               | 1.6  |  |   | 5.4  | 
|Operating Leases                      |  |   | 0.2   |  |                  | 0.1 |             |   | 0.1        |  |               | 0.0  |  |   | 0.0  | 
|Total Contractual Obligations         |  | $ | 76.4  |  | $                | 7.6 |             | $ | 22.9       |  | $             | 12.5 |  | $ | 33.4 | 

The
Company is not aware of any known trends, demands, commitments, events or
uncertainties that will likely result in the Companys liquidity increasing or
decreasing materially.

Other than those items described above, the Company is
not aware of any known material trends, either favorable or unfavorable, that
would cause the mix of equity to debt or the cost of debt to materially change.

RESULTS OF OPERATIONS

Comparison of the years ended August 31, 2010
and 2009

Net
payments to members for sugarbeets delivered by the shareholder/growers,
increased by $3.1 million or 3 percent in fiscal year 2010 and totaled $95.1
million. As of August 31, 2010, the Board of Directors authorized the payment
of prior years member patronage and per unit retains (including equity
payments to estates of deceased shareholders) totaling $4.0 million to
shareholders compared to $3.7 million in the previous year. The payment of $4.0
million will leave approximately 4.7 years of prior years patronage and per
unit retains withheld, the same as the prior year.

Revenues
for the year ended August 31, 2010 were comprised of Sugar 81 percent, Pulp 7
percent, Yeast 7 percent and Molasses 5 percent.

22

---



Consolidated
revenue for the year ended August 31, 2010, decreased $10.7 million or 4.8
percent from 2009. Revenue from total sugar sales decreased $7.3 million or 4.0
percent reflecting a 13.9 percent decrease in cwt. sold, and a 9.9 percent increase
in the average net selling price per cwt. Revenue from pulp decreased $2.1
million or 10.6 percent reflecting a 36.5 percent decrease in the average net
selling price per ton and a 25.9 percent increase in tons sold. Revenue from
molasses sales increased $2.2 million or 21.8 percent reflecting a 6.3 percent
increase in the average net selling price per ton and a 15.5 percent increase
in tons sold. The decrease in volume of sugar sold is attributable a slightly
larger 2009 crop, offset by fewer outside purchased sugarbeets and the addition
of tolling of sugarbeets (rather than purchase) for another processor, when
compared to the 2008 crop of sugarbeets delivered by shareholder/growers. The
increase in volume of co-products sold is attributable to a slightly larger
2009 crop and the addition of tolling of sugarbeets for another processor
(co-products were included in the pricing structure of the transaction), offset
some by fewer outside purchased sugarbeets.

Revenues
from yeast sales increased $1.6 million or 11.4 percent reflecting an increase
in volume of 7.6 percent, and an increase in the average net selling price of
3.8 percent. Sales volume increased due to existing customers increased demand
for yeast. Selling prices increased due to general market conditions.

The
value of finished product inventories in fiscal year 2010 decreased $6.5
million from fiscal year 2009, $5.1 million more than the prior year decrease, mostly the
result of a decrease in the volume of ending sugar inventory. Sugar inventory
was lower due to a high demand of available sugar in the domestic marketplace.

Expenses
decreased $10.5 million; $10.2 million due to a decrease in the cost of
purchased sugarbeets, $2.9 million due to reduced Sales and Distribution Costs,
offset by $2.5 million in increased costs of operations. Higher than normal
harvest tare (mostly dirt) was a significant contributor to the higher costs of
operations. Overall consolidated expenses, exclusive of grower payments for sugarbeets
and cost of non-member purchased sugarbeets, decreased $0.3 million or less
than one percent. Minn-Dak Farmers Cooperative (MDFC) expenses decreased $0.4
million, while Minn-Dak Yeast Company (MDYC) expenses, after eliminations,
increased $0.1 million.

The
production cost per cwt. of sugar produced increased 8 percent versus the prior
year due to a combination of a 4 percent decrease in sugar produced with less
than a 1 percent decrease in total costs.

Sales
and Distribution costs decreased $2.9 million or 7 percent. Decreases are
mainly the result of the reduction in the production and sale of finished goods
from purchased and tolled sugarbeets. General and Administrative expenses
increased less than $0.1 million or less than 1 percent. Interest expense
decreased less than $0.1 million or 2 percent, reflecting a decreased rate of
interest and a lower level of term bank debt; offset some by higher levels of
seasonal debt and tax exempt bond debt financing.

Other
business income before income taxes increased $5.3 million in fiscal year 2010
due primarily to revenue generated for tolling another sugar processors
sugarbeets. Income taxes in fiscal year 2010 were a direct result of the
tolling business activity.

Comparison of the years ended August 31, 2009
and 2008

Net
payments to members for sugarbeets delivered by the shareholder/growers,
decreased by $11.0 million or 11 percent in fiscal year 2009 and totaled $92.0
million. As of August 31, 2009, the Board of Directors authorized the payment
of prior years member patronage and per unit retains (including equity
payments to estates of deceased shareholders) totaling $3.7 million to
shareholders compared to $4.4 million in the previous year. The payment of $3.7
million will leave approximately 4.7 years of prior years patronage and per
unit retains withheld versus the prior year of 4.5 years withheld.

Revenues
for the year ended August 31, 2009 were comprised of Sugar 79 percent, Pulp 10
percent, Yeast 6 percent and Molasses 5 percent.

Consolidated
revenue for the year ended August 31, 2009, decreased $18.5 million or 7.6
percent from 2008. Revenue from total sugar sales decreased $23.0 million or
11.1 percent reflecting a 17.6 percent decrease in cwt. sold, and a 6.5 percent
increase in the average net selling price per cwt. Revenue from pulp increased
$2.5 million or 14.5 percent reflecting a 38.1 percent increase in the average
net selling price per ton and a 23.6 percent decrease in tons. Revenue from
molasses sales decreased $1.6 million or 13.9 percent reflecting a 16.3 percent
increase in the average net selling price per ton and a 30.2 percent decrease
in tons sold. The decrease in volume of sugar and co-products sold from the 2008-crop
is attributable to the smaller crop size, including purchased beets from a
neighboring sugarbeet cooperative, and quality when compared to the 2007 crop
of beets delivered by shareholder/growers.

23

---



Revenues
from yeast sales increased 4.0 percent reflecting a decrease in volume of 3.6
percent, and an increase in the average net selling price of 7.6 percent.
Selling prices increased due to a reflection of higher costs in the industry,
which was passed on to the customers.

The
value of finished product inventories in fiscal year 2009 decreased $1.4
million from fiscal year 2008, mostly the result of a decrease in the volume of
ending sugar inventory. Sugar inventory was lower due to a high demand of
available sugar in the domestic marketplace.

Of
the $5.4 million decrease in the MDFC expenses, the cost of operations
increased $1.2 million, or 2 percent due to a smaller volume of sugarbeets
processed in a higher cost environment vs. the 2007-crop.

Expenses,
exclusive of grower payments for sugarbeets and cost of non-member purchased
beets, decreased $5.4 million or 2 percent. Minn-Dak Farmers Cooperative (MDFC)
expenses decreased $5.5 million, while Minn-Dak Yeast Company expenses, after
eliminations, increased $0.1 million.

The
production cost per cwt. of sugar produced increased 30 percent versus the
prior year due to a combination of a 22 percent decrease in sugar produced with
only a corresponding 4 percent decrease in total costs.

Sales
and Distribution costs decreased $5.4 million or 11 percent. Decreases are
mainly the result of the reduction in the production and sale of finished goods
from the smaller sugarbeet crop. General and Administrative expenses decreased
$0.2 million or 3 percent. Employee costs were the primary reasons for the
decrease. Interest expense decreased $1.2 million or 37 percent, reflecting a
lower level of seasonal debt and a decreased rate of interest, offset some by a
higher level of term debt.

Other
business income before income taxes increased $1.1 million in fiscal year 2009
due primarily to a combination of the settlement of a lawsuit and the gain on
sale of equipment. Income taxes decreased by $1.7 million in fiscal year 2009
vs. fiscal year 2008. Income taxes in fiscal year 2008 were a direct result of
the purchase of non-member sugarbeets from a neighboring sugarbeet processor.

Comparison of the years ended August 31, 2008
and 2007

Net
payments to members for sugarbeets delivered by the shareholder/growers,
decreased by $37.6 million or 27 percent in fiscal year 2008 and totaled $103.0
million. As of August 31, 2008, the board of directors authorized payment to
shareholders for prior years member patronage and per unit retains (including
equity payments to estates of deceased shareholders) totaling $4.4 million
compared to $6.0 million in the previous year. The payment of $4.4 million will
leave approximately 4.5 years of prior years patronage and per unit retains
still outstanding  the same as the prior year.

Revenues
for the year ended August 31, 2008 were comprised of Sugar 83 percent, Pulp 7
percent, Yeast 6 percent and Molasses 4 percent.

Consolidated
revenue for the year ended August 31, 2008, decreased 12.6 percent or $35.0
million from 2007. Revenue from total sugar sales decreased $16.0 million or
7.2 percent, reflecting a 2.8 percent decrease in cwt. sold and a 4.4 percent
decrease in the average net selling price per cwt. Revenue from co-products
decreased 7.8 percent, reflecting a decrease of 19.4 percent in volume and an
11.6 percent increase in the average selling price per ton. The decrease in
volume of sugar and co-products sold from the 2007-crop is attributable to the
smaller crop size, including the non-member purchased beets; with reduced
production of sugar being offset slightly by higher quality sugarbeets
processed.

24

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Revenues
from yeast sales increased 2 percent reflecting a decrease in volume of 4.4
percent, and an increase in the average net selling price of 6.4 percent.
Increased selling prices were necessary to help defray a portion of substantial
increases in operating materials and shipping costs experienced in the
production and sale of yeast.

The
value of finished product inventories in fiscal year 2008 decreased $4.4
million from fiscal year 2007, mostly the result of a decrease in the volume of
ending sugar inventory. Sugar inventory was lower due to the timing of contract
off-take from customers.

All
expenses, exclusive of grower payments for sugarbeets and cost of non-member
purchased beets, decreased $4.9 million or 4 percent. Minn-Dak Farmers
Cooperative (MDFC) expenses decreased $5.4 million, while Minn-Dak Yeast
Company expenses, after eliminations, increased $0.5 million.

The
cost per cwt. of sugar produced increased 9 percent versus the prior year due
to factory maintenance costs being higher than normal in the areas of solid
waste disposal and the lime kiln, and fixed costs on a per unit basis exceeding
that of the prior year due to the record crop processed in fiscal year 2007.

Of
the $5.4 million decrease in the MDFC expenses, the cost of operations
decreased $2.5 million, or 4 percent due to the smaller volume of sugarbeets
processed versus the record 2006-crop, including the record length of the
2006-crop processing period.

Sales
and Distribution costs decreased $1.8 million or 4 percent. Decreases are
mainly the result of the reduction in the production and sale of finished goods
from the smaller sugarbeet crop and reduced cost of sugar marketing
allocations. Sugar marketing allocation costs decreased $3.4 million, or 54
percent due to the smaller amount of allocation needed for the marketing of the
2007 crop versus the record volume 2006 crop. General and Administrative
expenses increased $0.2 million or 2 percent. Employee costs and professional
fees were the primary reasons for the increase. Interest expense decreased $1.1
million reflecting a lower average level of seasonal and term debt and a
decreased rate of interest.

Other
business income before income taxes increased $0.1 million due primarily to a
combination of prior period activities, offset by higher losses on the disposal
of equipment. Income taxes increased $1.5 million due mainly to increased
non-member income.

Estimated Fiscal Year 2011 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 2010
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 2010 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 3.1 million tons of sugarbeets from the 2010-crop,
approximately 42 percent more than the most recent 5-year average. Sugar
content of the 2010-crop was 1 percent above the average of the five most
recent years. Due to the higher harvested tons and sugar content, the Companys
production of sugar from the 2010-crop sugarbeets is expected to be 31 percent
more than the average of the five most recent years of sugar production.

25

---



The
Companys initial sugarbeet payment estimate totals $56.86 per ton or
$0.19369042 per harvested /bonus extractible pound of sugar, with the final
sugarbeet payment determined in October of 2011. This projected payment is 20
percent more than the final 2009-crop payment per ton and 5 percent more per
pound of extractible sugar. The higher projected 2010-crop payment per ton
results from more total tons of beets processed, higher sugar content in the
sugarbeets, decreased operating and fixed costs per ton and improved sugar
prices versus the prior year. The price per pound of extractible sugar was
diluted by 6.5% due to bonus sugar for the 2010-crop vs. 2.3% for the
2009-crop. Bonus sugar is an incentive to growers to deliver sugarbeets prior
to main harvest. Harvest for the 2010-crop began on August 18, 2010 vs.
September 8, 2009 for the 2009-crop.

For
a discussion of the calendar 2009, 2008 and 2007 crops and results of
operations for fiscal years 2010, 2009 and 2008, see MANAGEMENTS DISCUSSION
AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

|         |                                                            
|-------- | -----------------------------------------------------------
|ITEM 7A. | QUANTITATIVE AND QUALITATIVE
 DISCLOSURES ABOUT MARKET RISK

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

The
Company does not believe that it is subject to any material market risk
exposure with respect to interest rates, exchange rates, commodity prices,
equity prices and other market changes that would require disclosure under this
item

|        |                                             
|------- | --------------------------------------------
|ITEM 8. | FINANCIAL STATEMENTS AND SUPPLEMENTARY
 DATA

The
consolidated financial statements of the Company for the fiscal years ended
August 31, 2010, 2009 and 2008 have been audited by Eide Bailly LLP,
independent registered public accounting firm. Such consolidated financial
statements have been included herein in reliance upon the report of Eide Bailly
LLP. The consolidated financial statements of the Company are included in
Appendix A to this annual report.

|        |                                                                                      
|------- | -------------------------------------------------------------------------------------
|ITEM 9. | CHANGES IN AND DISAGREEMENTS WITH
 ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

There
have been no changes in or disagreements with accountants on accounting and
financial disclosure.

|         |                        
|-------- | -----------------------
|ITEM 9A. | CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and
Procedures

The
Companys Chief Executive Officer, David H. Roche, and the Companys Chief
Financial Officer, Steven M. Caspers, have evaluated the Companys disclosure
controls and procedures as of August 31, 2010. Based upon such evaluation, they
have concluded that these disclosure controls and procedures are effective. The
Companys Chief Executive Officer and Chief Financial Officer used the
definition of disclosure controls and procedures as set forth in Rule
15d-15(e) under the Exchange Act in making their conclusion as to the effectiveness
of such controls and procedures.

Managements Annual Report on Internal
Control over Financial Reporting.

| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| | --- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (a) | Managements Annual Report on Internal
 Control over Financial Reporting.The Companys
 management is responsible for establishing and maintaining adequate internal
 control over financial reporting; as such term is defined in Rules 13a-15(f)
 and 15d  15(f) of the Exchange Act. The Companys internal control over
 financial reporting is a process designed to provide reasonable assurance
 regarding the reliability of financial reporting and the preparation of
 financial statements for external purposes in accordance with generally
 accepted accounting principles and includes those policies and procedures
 that:

26

---



| |   |                                                                                                                                                                                                                                                                                                                                     
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Pertain to
 the maintenance of records that in reasonable detail accurately and fairly
 reflect the transactions and dispositions of our assets;                                                                                                                                                                                    
| |   |                                                                                                                                                                                                                                                                                                                                     
| |  | Provide
 reasonable assurance that transactions are recorded as necessary to permit
 preparation of financial statements in accordance with generally accepted
 accounting principles, and that its receipts and expenditures are being made
 only in accordance with authorizations of Management and the Companys
 directors; and
| |   |                                                                                                                                                                                                                                                                                                                                     
| |  | Provide
 reasonable assurance regarding prevention and timely detection of
 unauthorized acquisition, use or disposition of the Companys assets that
 could have a material effect on its financial statements.                                                                                                                    

| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |     | Internal
 control systems, no matter how well designed, have inherent limitations. Therefore,
 even those systems that are deemed to be effective provide only reasonable
 assurance with respect to financial statement preparation and presentation.
 Also, projections of any evaluation of effectiveness to future periods are
 subject to the risk that controls may become inadequate because of changes in
 conditions, or that the degree of compliance with the policies or procedures
 may deteriorate.                                               
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |     | Under the
 supervision and with the participation of its Management, including the Chief
 Executive Officer and Chief Financial Officer, the Company conducted an
 evaluation of the effectiveness of our internal control over financial
 reporting based upon the framework in Internal
 Control  Integrated Framework issued by the Committee of
 Sponsoring Organizations of the Treadway Commission. Based on that
 evaluation, the Companys management concluded that its internal control over
 financial reporting is effective as of August 31, 2010.
| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| | (b) | Attestation. Managements report is not subject to
attestation by the Companys registered public accounting firm pursuant to
rules of the Securities and Exchange Commission that permit the Company to
provide only Managements report in this annual report.                                                                                                                                                                                                                                                                                                

Changes in Internal Control over Financial
Reporting.

There
was no change in the Companys internal control over financial reporting during
the fiscal quarter ended August 31, 2010 that has materially affected, or is
reasonably likely to materially affect, its internal control over financial
reporting.

|         |                  
|-------- | -----------------
|ITEM 9B. | OTHER INFORMATION

None

27

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PART
III

|         |                                             
|-------- | --------------------------------------------
|ITEM 10. | DIRECTORS,
 EXECUTIVE OFFICERS AND CORPORATE

GOVERNANCE

BOARD OF DIRECTORS

The
table below lists the current directors of Minn-Dak Farmers Cooperative. The
board of directors consists of one director from each district. Directors must
be common shareholders or representatives of common shareholders belonging to
the district they represent and are elected by the members of that district. In
the case of a common shareholder who is other than a natural person, a duly
appointed or elected representative of such common shareholder may serve as a
director. The directors have been elected to serve three-year terms expiring in
December of the years indicated in the table below. One director is elected
each year from three selected districts. Brief biographies for each of the
directors are included after the table. Each persons experience,
qualifications, attributes or skills to serve as a director are evaluated by
the Nominating Committee for each district. The Nominating Committee members
are selected by the shareholders of each district. Minn-Dak provides each
Nominating Committee with written guidelines relating to the legal requirements
relating to service on the Board, but does not evaluate or otherwise consider
the experience, qualifications, attributes or skills of any nominee and does
not otherwise have a role in the Nominating Committees processes for selecting
nominees.

|                   |  |     |  |                             |  |                 |  |                           
|------------------ |  | --- |  | --------------------------- |  | --------------- |  | --------------------------
|Name               |  | Age |  | District                    |  | Director
 Since |  | Term
 Expires
 in December
|Dale Blume         |  | 60  |  | District #7
  Lehman       |  | 2005            |  | 2011                      
|                   |  |     |  |                             |  |                 |  |                           
|Dennis
 Butenhoff  |  | 64  |  | District #9
  Peet         |  | 2004            |  | 2010 (1)                  
|                   |  |     |  |                             |  |                 |  |                           
|Brent
 Davison     |  | 59  |  | District #5
  Hawes        |  | 2003            |  | 2011                      
|                   |  |     |  |                             |  |                 |  |                           
|Douglas
 Etten     |  | 59  |  | District #8
  Lyngaas      |  | 1997            |  | 2012                      
|                   |  |     |  |                             |  |                 |  |                           
|Patrick
 Freese    |  | 51  |  | District #4
  Factory East |  | 2008            |  | 2011                      
|                   |  |     |  |                             |  |                 |  |                           
|Dennis
 Klosterman |  | 50  |  | District #3
  Gorder       |  | 2004            |  | 2010 (2)                  
|                   |  |     |  |                             |  |                 |  |                           
|Kevin Kutzer       |  | 57  |  | District #1
  Tyler        |  | 2009            |  | 2012                      
|                   |  |     |  |                             |  |                 |  |                           
|Russell
 Mauch     |  | 55  |  | District #2
  Factory West |  | 1998            |  | 2010 (3)                  
|                   |  |     |  |                             |  |                 |  |                           
|Chuck
 Steiner     |  | 60  |  | District #6
  Yaggie       |  | 2000            |  | 2012                      

28

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|   |                                                                                                          
|-- | ---------------------------------------------------------------------------------------------------------
|1) | Mr. Butenhoffs term as a director of the Company from District
 #9-Peet expires on December 7, 2010.    
|2) | Mr. Klostermans term as a director of the Company from District
 #3-Gorder expires on December 7, 2010. 
|3) | Mr. Mauchs term as a director of the Company from District
 #2-Factory West expires on December 7, 2010.

Dale Blume has been a director since 2005
and also serves on the board of directors for Minn-Dak Yeast Company. He
graduated from the NDSU with a degree in Ag Economics in 1973. He began farming
in 1971 and continues to be actively farming today. Mr. Blume is one of
Minn-Dak Farmers Cooperatives original stockholders. Mr. Blume is a member of
the Delaware Township Board, and is a director at the First State Bank in
Kensington, MN. He is also the co-chairman of the administrative council and on
the financial committee of the United Methodist Church in Herman. He also
serves on the board of directors of Minn-Dak Yeast Company.

Dennis Butenhoff has been a director since
2004 and serves on the board of directors of Minn-Dak Yeast Company and Midwest
Agri-Commodities. Mr. Butenhoff graduated from Barnesville High School,
Barnesville, MN in 1965. Prior to serving his country in the military, Mr.
Butenhoff attended North Dakota State University for 4 years, focusing on ag
economics. He has been farming in the Baker/Barnesville area since 1967. Mr.
Butenhoff has served Trinity Lutheran Church as a Sunday school teacher and
church elder.

Brent Davison has been a director since
2003 and currently serves as the board vice chairman. Mr. Davison earned his
B.S. degree in Education at Concordia University, Moorhead, MN, graduating in
1972. Mr. Davison taught school in Warren, MN from 1972 until coming home to
farm near Tintah, Minnesota area in 1974. He is currently serving on the Tintah
Township Board and is a former volunteer fireman and first responder. Mr.
Davison is also one of Minn-Daks representatives to the American Sugarbeet
Growers Association in Washington, DC and serves on the board of directors for
United Sugars Corporation.

Douglas Etten has been a director since
1997 and currently serves as the board chairman. Mr. Etten has been farming
near Foxhome, MN since graduating from Concordia College in Business and Math
in 1974. He is also one of Minn-Daks representatives to the American Sugarbeet
Growers Association in Washington, DC. He also serves on the board of directors
of Minn-Dak Yeast Company, United Sugars Corporation, and Midwest
Agri-Commodities Company.

Patrick Freese graduated Breckenridge High
School in 1977 and North Dakota College of Science in 1979. From 1979 to 1985
Mr. Freese worked as a sales coordinator for Chief Industries in Grand Island,
NE. Mr. Freese has been farming near Kent, MN since 1985. Mr. Freese has, and
continues to, serve his community and church in several areas. He was a member
and chairman of the Minn-Dak Farmers Cooperative Political Action Committee.
Mr. Freese is a member of various farm and commodity organizations.

Dennis Klosterman has been a director since
2004. Mr. Klosterman graduated from Wahpeton High School in Wahpeton, ND in
1978. He began farming with his father and brother in the Mooreton, ND area in
1979 while attending North Dakota State College of Science and North Dakota
State University. Mr. Klosterman has, and continues to, serve his community and
church in several areas. He was a member and chairman of the Minn-Dak Farmers
Cooperative Political Action Committee. Mr. Klosterman is a member of various
farm and commodity organizations. He also serves on the board of directors for
Minn-Dak Yeast Company.

29

---



Kevin Kutzer grew up in a family farming
operation and continues that tradition in a family joint venture operation with
brother Kyle and son Corey raising wheat, soybeans, sugarbeets, and corn in the
Fairmount, ND. Mr. Kutzer received an Associate Degree in Pre Engineering at
the North Dakota State College of Science in Wahpeton, ND and a B.S. in
Mechanized Agriculture at North Dakota State University in Fargo, ND. Mr.
Kutzer has served on the boards of the Lamars Co-op Elevator and AgCountry Farm
Credit Services. He has served on the St. Anthonys Church Council and Cemetery
Board.

Russell Mauch has been a director since
1998 and currently serves as board treasurer. Mr. Mauch graduated from North
Dakota State University in 1977 with a BS in agriculture. From 1979 to 1981 Mr.
Mauch was a commercial and agriculture loan officer for First Bank Corporation
in Valley City, ND. Mr. Mauch has been farming near Barney, ND since 1981. Mr.
Mauch also serves on the board of directors for United Sugars Corporation and
as one of Minn-Daks representatives to the American Sugarbeet Growers
Association in Washington, DC.

Charles Steiner has been a director since
2000 and currently serves as the board secretary. Mr. Steiner has been farming
near Foxhome, MN since 1969. Mr. Steiner graduated from the Northwest School of
Agriculture, University of Minnesota at Crookston, MN. Mr. Steiner serves as
the ex-officio member on the board of directors for United Sugars Company.

The Board
of Directors meets monthly. The Company provides its directors with minimal
compensation, consisting of (i) a payment of $290 per meeting for regular and
special board meetings, (ii) the greater (a) $145 for any day in which
directors partake in activities on the Companys behalf that take less than
five hours or (b) $290 for any day in which directors partake in activities on
the Companys behalf that take five hours or more. The Chairman of the Board of
Directors also receives a flat $500 per month to compensate for the extra
duties associated with that position. The Board of Directors has adjusted
compensation effective October 1, 2010. Effective on that date the board will
receive reimbursement in the amount of $290/day for any amount of time spent on
board business, effectively doing away with a half day per diem. In addition
the board added a conference call compensation rate in the amount of $145 and
increased the Chairmans monthly stipend to $750/month. Effective Jan. 1, 2011,
the directors monthly per diem rate will be increase to $300/day and $150 for
conference calls. Effective Jan. 1, 2012 and each year thereafter, the
directors monthly per diem will increase by $25 and the conference call rate
will continue to be paid at half of the daily per diem amount.

Information about Committees of the Board of
Directors

The Board of
Directors has established a Compensation Committee, an Audit Committee and a
Nominating Committee. The composition and function of these committees are set
forth below

Compensation Committee.The
Compensation Committee operates under a written charter and discharges the
Boards responsibilities relating to the fair and competitive compensation for
the Chief Executive Officer, including reviewing and approving goals and
objectives relating to the compensation of the Chief Executive Officer and the
performance of the Chief Executive Officer. Based on its review, the
Compensation Committee makes recommendations to the Board of Directors
regarding the elements of the Chief Executive Officers compensation and the
Compensation Committee, along with the Board of Directors, approves the
compensation and other benefits of the Chief Executive Officer. A copy of the
current charter of the Compensation Committee is available by following the
link to Corporate Governance on the Companys website at www.mdf.coop During
2010, the members of the Compensation Committee are Messrs. Charles Steiner
(Chair), Dale Blume, Dennis Klosterman, Brent Davison and Dennis Butenhoff.

Nominating Committee.Shareholders
from each district select two shareholders to serve as a Nominating Committee
for that district. The Nominating Committee for each district is responsible
for facilitating nominations for the position of director by shareholders of
that district and evaluating whether shareholder proposed nominees are qualified
candidates. Each Nominating Committee operates under a series of written
guidelines relating to the legal requirements for the Companys directors,
qualifications of nominees, and process for soliciting shareholder nominees.
During 2010, the members of the Nominating Committee were Messrs. Bradley
Nelson (Chair), Blaine Benedict, Andy Mauch, Luke Mauch, Jeff Erbes and Jeff
Olson. In fiscal 2010, there have not been any material changes to the
procedures by which shareholders may recommend nominees to the Companys Board
of Directors.

30

---



Audit Committee.The
Audit Committee assists the Board in fulfilling its responsibility relating to
corporate accounting and reporting practices of the Company, the quality and
integrity of financial reports, the financial reporting processes, the system
of internal controls; the qualifications, independence and performance of the
independent auditors; and compliance by the Company with certain legal and
regulatory requirements. The Audit Committee has the authority to retain,
compensate, oversee and terminate the independent auditors. The Audit Committee
reviews the Company annual audited financial statements, quarterly financial
statements and filings with the Securities and Exchange Commission. The Audit
Committee also pre-approves all audit and non-audit services performed by the
independent auditor. The Audit Committee operates under a written charter that
is available by following the link to Corporate Governance on the Companys
website at www.mdf.coop. During 2010, the Audit Committee consisted of Messrs.
Russ Mauch (Chair), Dale Blume, Dennis Butenhoff, Dennis Klosterman and Kevin
Kutzer.

The
Board of Directors has reviewed the education, experience and other
qualifications of each of the members of its Audit Committee. After review, the
Board of Directors has determined that none of the members of the Audit
Committee meet the Securities and Exchange Commission definition of an audit
committee financial expert. However, the Company believes that, taken as a
whole, the members of the Audit Committee have sufficient education, experience
and qualifications to carry out their duties.

Executive Officers

The table
below lists the executive officers (Messrs. Roche, Caspers, Knudsen, Haugen and
Larson) and other senior management employees of the Company, none of whom owns
any common or preferred shares. Brief biographies for each of the officers are
included after the table.

|                   |  |    |     |                                                       |          | 
|------------------ |  | -- | --- | ----------------------------------------------------- | -------- | 
|Name               |  |    | Age |                                                       | Position | 
|David H.
 Roche    |  | 63 |     | President
 and Chief Executive Officer               
|                   |  |    |     |                                                      
|Steven M.
 Caspers |  | 60 |     | Executive
 Vice President and Chief Financial Officer
|                   |  |    |     |                                                      
|Thomas D.
 Knudsen |  | 56 |     | Vice
 President Agriculture                          
|                   |  |    |     |                                                      
|Parker
 Thilmony   |  | 40 |     | Director of
 Operations                              
|                   |  |    |     |                                                      
|John Haugen        |  | 58 |     | Vice President
 Engineering                          
|                   |  |    |     |                                                      
|Allen Larson       |  | 55 |     | Controller
 and Chief Accounting Officer             
|                   |  |    |     |                                                      
|Greg Schmalz       |  | 59 |     | Director
 Human Resources                            

David H. Roche is Minn-Dak Farmers
Cooperatives third president and CEO. He joined the Wahpeton, ND based sugar cooperative
on March 1, 2001. He serves on the boards of United Sugars Corporation and
Midwest Agri-Commodities. Mr. Roche is chairman of the board for Minn-Dak Yeast
Company. In addition, he is a trustee of the United States Beet Sugar
Association, and a member of the board of directors of The Sugar Association,
Washington, D.C. Mr. Roche began his sugar industry career as a controller for
Michigan Sugar Company in 1976. He progressed through the ranks until he was
named president in 1994. In 1996 he became president of Savannah Foods
Industrial and was appointed senior vice president of Savannah Foods &
Industries. Imperial Sugar Company acquired controlling interest in Savannah in
1998. He was named as a managing director and senior vice president. Mr. Roche
holds an MBA in Accounting from Michigan State University and became a
Certified Public Accountant in 1974.

Steven M. Caspers is a graduate of the
University of North Dakota with a Bachelor of Science in Business
Administration and a major in Accounting. He has been employed with the Company
since May 5, 1974. Mr. Caspers is president of Minn-Dak Yeast Company. He is
active in national industry related boards and committees.

31

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Thomas D. Knudsen is a graduate of North
Dakota State University with a Bachelor of Science in horticulture and has
attended the Beet Sugar Institute at Fort Collins, Colorado. He began
employment with the Company on May 24, 1977.

Parker Thilmony is a graduate of the
University of North Dakota, with a BS in
Mechanical Engineering. He started his career with the Company on February 5th,
1995 as an Assistant Engineer. Mr. Thilmony was promoted to the position of
Director of Operations on May 12th, 2010. Prior to this promotion he
held the position of Senior Engineer.

John R. Haugen was promoted to the position
of Director of Engineering on November 2, 2001 and to Vice President
Engineering on August 1, 2002. He started his career with Minn-Dak Farmers
Cooperative in 1976 as an Assistant Engineer and prior to this promotion held
the position of Senior Engineer. Mr. Haugen is a graduate of the University of
North Dakota and holds a BS in Mechanical Engineering.

Allen E. Larson is a graduate of Moorhead
State University with a Bachelor of Science in Business Administration and a
major in Accounting. He has been employed with the Company since October 26,
1981.

Greg J. Schmalz is a graduate of the
University of North Dakota, Grand Forks, with a Bachelor of Arts Degree in
Sociology and a Masters Degree in Guidance and Counseling. Mr. Schmalz is a
member of the Society of Human Resources Management and the Agassiz Valley
Human Resources Association. He began his career in human resources in 1979. He
has been employed with the Company since August 30, 2004.

Code of Ethics for Executive Officers

The
Company has adopted a code of ethics that applies to all directors, officers
and employees, including its principal executive officer, principal financial
officer and controller. This code of ethics is included in its Standards of
Business Conduct which is publicly available by following the link to
Corporate Governance at its website at www.mdf.coop.

The
Company intends to satisfy the disclosure requirements of the Securities and
Exchange Commission regarding certain amendments to, or waivers from,
provisions of its code of ethics that apply to the Companys principal
executive officer, principal financial officer and principal accounting officer
or controller by posting such information on the Companys website at www.mdf.coop.

|         |                       
|-------- | ----------------------
|ITEM 11. | EXECUTIVE COMPENSATION

Compensation Discussion and Analysis

The
following discussion and analysis describes the Companys compensation
objectives and policies as applied to the following executive officers who are
referred to in this Annual Report on Form 10-K as the Named Executive Officers:

| |   |                                                                                                     
| | - | ----------------------------------------------------------------------------------------------------
| |  | David H. Roche, President and Chief Executive Officer;                                              
| |  | Steven M. Caspers, Executive Vice President and Chief Financial
 Officer;                           
| |  | Tom Knudsen, Vice President Agriculture                                                             
| |  | Allen Larson, Controller; and                                                                       
| |  | Jeffrey L. Carlson, Vice President Operations for a portion of fiscal
 year 2010 until May 12, 2010.

This
section is intended to provide a framework within which to understand the
actual compensation awarded to or earned by the Named Executive Officers during
the year ended August 31, 2010, as reported in the compensation tables and
accompanying narrative sections appearing on pages 35 to 41 of this Annual
Report on Form 10-K.

32

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Role of the Compensation Committee in
Determining Executive Compensation

The primary
responsibility of the Compensation Committee is to discharge the Boards
responsibilities relating to the fair and competitive compensation of the
Companys Chief Executive Officer. This responsibility includes reviewing and
recommending to the Board the compensation and other terms of employment of the
Chief Executive Officer, overseeing significant aspects of compensation and
benefit programs in which the Chief Executive Officer participates, and
approving performance-based goals and compensation. The Compensation Committee
also annually reviews the Chief Executive Officers compensation and evaluates
the Chief Executive Officers performance.

Under its
charter, the Committee has the authority to engage the services of outside
advisors, experts and others to assist it in performing its duties. While the
Compensation Committee has used the services of a compensation consultant in
the past, it did not do so in determining fiscal year 2010 compensation for the
Chief Executive Officer. The Compensation Committee may choose to use the
services of a compensation consultant in the future.

Role of Management in Compensation Process

The
Compensation Committee does not oversee or design compensation programs for any
of the Named Executive Officers other than the Chief Executive Officer. The
Compensation Committee believes that it is the responsibility of the Chief
Executive Officer, as the highest-ranking executive, to implement the business
goals of the Company established by the Board of Directors and to manage the
Companys business against an annual budget established by the Board of
Directors. In this regard, the Chief Executive Officer is responsible for
determining a strategy for achieving these goals, including the allocation of
personnel, time and financial resources consistent with the budget that is
approved by the Board. The Compensation Committee believes it is the
responsibility of the Chief Executive Officer to manage and compensate the
other Named Executive Officers in a manner that provides sufficient incentives
for these employees to meet the business goals of the Company and to control
compensation and benefits expense for all employees, including the Named
Executive Officers. In reviewing the performance of the Chief Executive Officer
each year, the Compensation Committee takes into consideration the extent to
which the Chief Executive Officer has successfully fulfilled these
responsibilities and holds the Chief Executive Officer accountable for the
performance of each executive officer reporting to him.

In
determining compensation for the Chief Executive Officer, the Compensation
Committee solicits input from the Director of Human Resources and the Chief
Financial Officer, primarily relating to the cost of the Companys compensation
programs and the financial performance of the Company. None of the Named
Executive Officers, other than the Chief Executive Officer, has a role in
establishing executive compensation. From time to time, some of the Named
Executive Officers are invited to attend meetings of the Compensation
Committee. However, no Named Executive Officer attends any executive session of
the Compensation Committee or is present during deliberations or determination
of that Named Executive Officers compensation.

While the
Chief Executive Officer does not seek approval from the Compensation Committee
for the compensation of the other Named Executive Officers, the Chief Executive
Officer does discuss their compensation with the Compensation Committee and with
the Board of Directors from time to time to solicit input and advice.

Compensation Philosophy and Design of
Compensation Programs

The
Compensation Committees philosophy is to provide competitive levels of
compensation that are consistent with the Companys annual and long-term
performance goals. The Compensation Committee attempts to balance the financial
interests of the Chief Executive Officer against the Companys goal of
maximizing its return to its shareholders. In determining the competitiveness
of its programs, the Compensation Committee reviews the compensation offered by
other local employers, as well as other sugar production cooperatives, such as
American Crystal Sugar Company and Southern Minnesota Beet Sugar Cooperative.
When determining compensation for the Chief Executive Officer, the Compensation
Committee considers whether the form and amount of compensation is consistent
with its philosophy.

33

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The
Compensation Committee has set the Chief Executive Officers base salary at or
below base salaries of similar positions in the region and in the Companys
industry. The Compensation Committee adjusts base salary comparables for the
size of the Companys operations, both in terms of tons of sugarbeets processed
and the quantity of sugar produced. The Compensation Committee has set base
salary lower than comparable salaries believing that variable cash
compensation, tied to specific performance measures, should constitute a
significant portion of the Chief Executive Officers overall cash compensation.
For the Named Executive Officers other than the Chief Executive Officer, the
Chief Executive Officer sets base salaries annually based, in part, on base
salaries of similar positions as reported by surveys, data and other market
information. The Chief Executive Officer also reviews the executives personal
performance, the need for the salary to remain competitive with other
organizations in the industry and the general budgetary guidelines established
by the Chief Executive Officer. The Chief Executive Officer has typically set
the base salaries of the other Named Executive Officers near the median
reported for that position.

The
variable cash compensation for the Chief Executive Officer is provided through
two bonus programs, one based on return per acre (referred to as the Profit
Sharing Bonus) and one recommended by the Compensation Committee for Board of
Directors approval based upon the results of an annual performance review (the
Performance Bonus). The Compensation Committee intends the Profit Sharing
Bonus to be fairly challenging and that average financial performance measured
by return per acre will result in a relatively low level of Profit Sharing
Bonus, while above average or exceptional financial performance would be
required before a higher level Profit Sharing Bonus is earned by the Chief
Executive Officer. Because financial return per acre is the measure that best
quantifies the Companys return to its shareholders, the Compensation Committee
believes that this measure is appropriate to align the Chief Executive
Officers interests with those of the shareholders. Additionally, in
determining the Performance Bonus for Mr. Roche in 2010, the Compensation
Committee also considered the aggregate return to shareholders and the
financial performance of the Company and shareholders for the fiscal year 2010,
which was significantly impacted by delays in harvest due to weather.

Beginning
with fiscal year 2009, the Profit Sharing Bonus criteria were adjusted to make
this bonus more challenging with the goals of ensuring that bonuses will be
paid only when shareholders/growers receive a meaningful return and providing
greater incentives for superior performance. For example, the new formula for
2009, increased the minimum return per acre that must be achieved to result in
any bonus, which the Compensation Committee designed to be a reflection of the
increased expenses experienced by shareholder/growers since the Profit Sharing
Bonus formula was adopted in 2001. As another example, the return per acre to
growers that resulted in the maximum bonus to the Chief Executive Officer in
prior years is significantly less under the new formula.

For fiscal
year 2010, the Compensation Committee continued this more challenging formula
for determining the Profit Sharing Bonus, which was set out in the amended and
restated employment agreement dated August 27, 2009. The Compensation Committee
believes that the more challenging Profit Sharing Bonus formula continues to be
consistent with the goals that prompted the adjustment of the formula for 2009.
The Compensation Committee will review the Profit Sharing Bonus formula every
two years to ensure it continues to provide appropriate incentives consistent
with the Compensation Committees philosophy. See Employment and
Post-Employment Arrangements for a description of Mr. Roches employment
agreement as in effect for fiscal year 2010.

In
determining the total compensation for the other Named Executive Officers, the
Chief Executive Officer ascribes to much the same philosophy as the
Compensation Committee but the Chief Executive Officer also considers internal
pay equity, external competitiveness and the contribution of each executive to
the Companys overall performance when determining base salary and eligibility
for a discretionary performance-based bonus.

34

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Elements of In-Service Compensation

The
Compensation Committee followed the guiding principles outlined above in the
development and administration of the compensation of the Chief Executive
Officer while employed by the Company. The elements of in-service compensation
of the Chief Executive Officer consist of base salary, a Profit Sharing Bonus
based on return to shareholders and a discretionary Performance Bonus based on
the Chief Executive Officers individual performance.

The Named
Executive Officers, other than the Chief Executive Officer, receive
compensation while employed with the Company consisting of a base salary and a
discretionary performance bonus determined by the Chief Executive Officer based
upon the Companys overall performance and the individual performance of the
Named Executive Officer.

The Company
does not believe that personal benefits or perquisites (i.e. perks) are
appropriate as a significant element of compensation, in particular because
perks are not conditioned upon performance and are not based upon contribution
to the Companys business. None of the Named Executive Officers received perks
that were a significant compensation element in fiscal 2010.

Base Salaries

Mr. Roche
and the Company entered into an employment agreement in 2001 and since that
time, the Company has annually reviewed Mr. Roches performance to determine
whether to retain Mr. Roches services, to establish a salary for Mr. Roche
and, if necessary, to revise other terms of Mr. Roches employment and
compensation. The Compensation Committee set Mr. Roches base salary for fiscal
year 2010 at the time the Company entered into the amended and restated
employment agreement dated August 27, 2009 that had a term of September 1, 2009
to August 21, 2010. Mr. Roches annual base salary for 2010 was set at
$352,300, an increase of 2.5% from the annual base salary of $343,700 for 2009.
The Compensation Committee increased Mr. Roches base salary primarily to
recognize an increase in the cost of living over the prior year.

Mr. Roche
determined salaries for the other Named Executive Officers in July 2009, with
adjustments to annual base salaries effective at the beginning of fiscal year
2010. These salary adjustments were considered moderate and were reflective of
the challenges facing the Company due to less than optimum volumes of
sugarbeets to process. The following table sets forth the annual base salaries
for 2010 and 2009 for each of the other Named Executive Officers, as well as
the percentage increase in 2010 as compared to 2009:

|                         |  |                          |  |                          |  |                           
|------------------------ |  | ------------------------ |  | ------------------------ |  | --------------------------
|Named
 Executive Officer |  | 2010 Annual
 Base Salary |  | 2009 Annual
 Base Salary |  | % Increase
 2010 Over 2009
|Steven M.
 Caspers       |  | $182,100                 |  | $177,100                 |  | 2.8%                      
|Tom Knudsen              |  | $133,600                 |  | $130,000                 |  | 2.8%                      
|Allen Larson             |  | $130,800                 |  | $127,300                 |  | 2.8%                      
|Jeffrey L.
 Carlson      |  | $149,000                 |  | $145,000                 |  | 2.8%                      

Cash Bonus Programs

The cash
bonus element of total compensation is available to the Named Executive
Officers through a discretionary individual performance bonus, which for the
Chief Executive Officer is referred to as the Performance Bonus. The Chief
Executive Officer is also eligible for the Profit Sharing Bonus, which is a
cash bonus based upon the return per acre to growers in the fiscal year.

35

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In July
2010, the Compensation Committee and the Board of Directors conducted a
performance review of Mr. Roche for fiscal 2010, in part to determine whether
Mr. Roche would receive a Performance Bonus. Consistent with its process in
prior years, this performance review solicited a rating from the Board of
Directors of Mr. Roches performance in areas such as leadership, communication,
budget and time management, as well as overall performance. This information
was compiled anonymously and discussed among the Board members. The Board of
Directors reviewed various aspects of Mr. Roches achievements and performance
in 2010, prior year compensation information (including salary, Performance
Bonus and Profit Sharing Bonus amounts) and estimated financial returns to the
shareholders for fiscal year 2010 in determining whether to award a Performance
Bonus and the amount of the Performance Bonus. In view of the variety of the
factors and the amount of information considered as well as the complexity and
subjectivity of these matters, the Compensation Committee did not find it
practical to, and did not attempt to, make specific assessments of, quantify,
rank or otherwise assign relative weights to the specific factors considered by
the Board or by the Compensation Committee. While individual members of the
Compensation Committee may have given different weight to different factors, the
predominate factors considered by the Compensation Committee for fiscal year
2010 were the Companys financial results despite the significant challenges of
processing the sugarbeet crop and the positive evaluations of Mr. Roches
performance by the Board. The Compensation Committee determined Mr. Roches
Performance Bonus for fiscal year 2010 to be $70,000.

Mr. Roche
determined the discretionary performance bonus amounts to be paid to the other
Named Executive Officers in August 2010. In establishing the performance bonus
awards for the other Named Executive Officers, Mr. Roche considered their
individual contribution toward achieving the Company goals in fiscal year 2010,
and the level of return to shareholders measured through dollars paid per acre
of sugarbeets grown. Consistent with past practice, he also received feedback
from various members of the Compensation Committee and the Board of Directors
on proposed bonus amounts. The Company and Mr. Roche continue to consider and
attempt to develop a more formal program for executive officers (other than the
Chief Executive Officer) for determining performance bonus awards. The
following table shows the individual performance bonus earned by each of the
Named Executive Officers for 2010 and also shows the performance bonus as a
percentage of 2010 salary:

|                         |  |                        |   |                                |  |  |      |   | 
|------------------------ |  | ---------------------- | - | ------------------------------ |  |  | ---- | - | 
|Named
 Executive Officer |  | 2010 Performance Bonus |   | % of 2010 Annual 
 Base Salary | 
|Steven M.
 Caspers       |  |                        | $ | 36,000                         |  |  | 19.8 | % | 
|Tom Knudsen              |  |                        | $ | 12,500                         |  |  | 9.4  | % | 
|Allen Larson             |  |                        | $ | 12,000                         |  |  | 9.2  | % | 

In
determining performance bonus amounts to the other Named Executive Officers,
Mr. Roche considered the severe impact of weather conditions during the harvest
period in both fiscal years 2010 and 2009, which reduced the volume of sugarbeets
harvested and processed in those years. Accordingly, aggregate performance
bonus levels for all employees in both fiscal years 2010 and 2009 were reduced
significantly from prior years. Individual bonus levels are reflective of
individual performance and contributions toward the achievement of company
goals.

Mr.
Carlson, who ceased serving as the Companys Vice President, Operations on May
12, 2010, was not eligible for a performance bonus as he was not employed at
the end of the fiscal year.

Mr. Roche
is also eligible for the Profit Sharing Bonus. This consists of a cash bonus
based upon the return per acre to growers, with a matrix determining the amount
of Profit Sharing Bonus at various levels of return per acre. The matrix applicable
to 2010 was approved as part of the amended and restated employment agreement
entered into between the Company and the Chief Executive Officer on August 27,
2009 and it sets forth the Profit Sharing Bonus that would be earned by him at
various levels of return per acre to the growers as follows:

|                            |  |                             
|--------------------------- |  | ----------------------------
|Return Per
 Acre to Growers |  | Profit
 Sharing Bonus Amount
|$825 - $900                 |  | $15,000                     
|$901 - $975                 |  | $25,000                     
|$976 -
 $1,050              |  | $35,000                     
|$1,051 -
 $1,125            |  | $45,000                     
|$1,126 -
 $1,200            |  | $55,000                     
|$1,201 and
 over            |  | $65,000                     

36

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For the
purposes of the Profit Sharing Bonus, return per acre is the amount received by
the shareholders/growers as a grower payment for sugarbeets and does not
include patronage, retains or trucking payments. However, no Profit Sharing Bonus
will be paid if 30% or more of the crop, based on planted acres, is lost or
unharvested. For 2010, the return per acre to growers was $849 per acre,
resulting in a Profit Sharing Bonus to Mr. Roche of $15,000.

Elements of Post-Termination Compensation

In 2001,
the Company entered into an employment agreement with Mr. Roche relating to his
service as the President and Chief Executive Officer. Since 2001, the term of
the employment agreement has been renewed for successive fiscal years. For the
fiscal year 2010 term of September 1, 2009 to August 31, 2010, Mr. Roche and
the Company entered into an amended and restated employment agreement on August
27, 2009. Under this amended and restated employment agreement, Mr. Roche will
be paid his then-current base salary for a period of twelve months in the event
of termination of Mr. Roches employment without cause, upon receipt of a
general release and compliance with provisions of the agreement relating to
confidential information. Mr. Roche is not entitled to post-employment payments
in the event of termination of Mr. Roches employment by Mr. Roche, by the
Company for cause, or by reason of death or disability.

If Mr.
Roches employment were terminated without cause on August 31, 2010, he would
receive $352,300 in post-termination benefits, payable over a twelve month
period.

Former Vice
President Operations, Mr. Carlsons employment with the Company ended on May
12, 2010. Following his separation from employment, the Company and Mr. Carlson
entered into a separation agreement and release that became binding and
enforceable May 25, 2010. Under that separation agreement and release, the
Company paid Mr. Carlson $40,116 in separation payments in fiscal year 2010.
The Company also continued insurance coverage for Mr. Carlson following
termination of employment. Please see Employment and Post-Employment
Arrangements  Agreement with Jeffrey L. Carlson of this Item 11 for a
description of the separation agreement and release with Mr. Carlson.

Other than
with respect to Messrs. Roche and Carlson, the Company does not have employment
agreements or arrangements with any of the other Named Executive Officers.
Other than with respect to the post-termination benefits to Messrs. Roche and
Carlson as described above, the Company does not provide for severance or any
other post-termination benefits to the Named Executive Officers, except through
plans in which executive officers participate generally. See Executive
Compensation  Employment and Post-Employment Arrangements in this Annual
Report on Form 10-K for a discussion of the terms of the employment agreement
with Mr. Roche as in effect for fiscal year 2010.

Impact of Regulatory Requirements

In
determining the compensation policies, programs and actions to be taken by the
Company with respect to executive compensation, the Compensation Committee
considers the impact of accounting rules, securities rules and tax rules. The
Compensation Committee also regularly reviews changes in these regulatory
requirements to determine their applicability and impact on the Company.

Summary Compensation Table

The
following table shows information concerning compensation earned for services
in all capacities during the last three fiscal years for: (i) David H. Roche,
who served as the Companys Chief Executive Officer in fiscal year 2010; (ii)
Steven M. Caspers, who served as the Companys Chief Financial Officer in
fiscal year 2010; and (iii) the three other most highly compensated executive
officers of the Company in fiscal year 2010 whose total compensation was at
least $100,000, less the amount representing the change in pension value and
nonqualified deferred compensation earnings (together referred to as the Named
Executive Officers).

37

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|                    |  |      |  |            |         |           |   |                                                                                   |  |                              |         |       |   |        |  |   |         | 
|------------------- |  | ---- |  | ---------- | ------- | --------- | - | --------------------------------------------------------------------------------- |  | ---------------------------- | ------- | ----- | - | ------ |  | - | ------- | 
|Name and Position   |  | Year |  | Salary (1) |         | Bonus (2) |   | Change in
 Pension Value
 and
 Nonqualified
 Deferred
 Compensation
 Earnings (3) |  | All Other
 Compensation
 (4) |         | Total |  
|David H. Roche,     |  | 2010 |  | $          | 352,102 |           | $ | 85,000                                                                            |  | $                            | 210,002 |       | $ | 27,025 |  | $ | 674,129 | 
|President & CEO     |  | 2009 |  | $          | 343,509 |           | $ | 55,000                                                                            |  | $                            | 97,277  |       | $ | 22,133 |  | $ | 517,919 | 
|                    |  | 2008 |  | $          | 333,483 |           | $ | 81,000                                                                            |  | $                            | 54,772  |       | $ | 21,887 |  | $ | 491,142 | 
|Steven M. Caspers,  |  | 2010 |  | $          | 182,388 |           | $ | 36,000                                                                            |  | $                            | 251,919 |       | $ | 33,270 |  | $ | 503,577 | 
|Executive VP & CFO  |  | 2009 |  | $          | 177,390 |           | $ | 30,000                                                                            |  | $                            | 147,663 |       | $ | 12,020 |  | $ | 367,073 | 
|                    |  | 2008 |  | $          | 171,470 |           | $ | 45,000                                                                            |  | $                            | 72,623  |       | $ | 9,156  |  | $ | 298,249 | 
|Tom Knudsen,        |  | 2010 |  | $          | 134,063 |           | $ | 12,500                                                                            |  | $                            | 140,887 |       | $ | 35,321 |  | $ | 322,771 | 
|V.P. Agriculture    |  | 2009 |  | $          | 130,474 |           | $ | 10,000                                                                            |  | $                            | 54,092  |       | $ | 8,745  |  | $ | 203,311 | 
|                    |  | 2008 |  | $          | 126,011 |           | $ | 27,000                                                                            |  | $                            | 34,373  |       | $ | 8,346  |  | $ | 195,730 | 
|Allen Larson,       |  | 2010 |  | $          | 130,991 |           | $ | 12,000                                                                            |  | $                            | 96,580  |       | $ | 18,581 |  | $ | 258,152 | 
|Controller          |  | 2009 |  | $          | 127,502 |           | $ | 8,000                                                                             |  | $                            | 34,516  |       | $ | 13,786 |  | $ | 183,804 | 
|                    |  | 2008 |  | $          | 123,265 |           | $ | 0                                                                                 |  | $                            | 29,676  |       | $ | 14,487 |  | $ | 167,428 | 
|Jeffrey L. Carlson, |  | 2010 |  | $          | 108,312 |           | $ | 0                                                                                 |  | $                            | 81,755  |       | $ | 67,808 |  | $ | 257,875 | 
|V.P. Operations (5) |  | 2009 |  | $          | 145,232 |           | $ | 10,000                                                                            |  | $                            | 40,094  |       | $ | 8,264  |  | $ | 203,590 | 
|                    |  | 2008 |  | $          | 133,740 |           | $ | 27,000                                                                            |  | $                            | 24,477  |       | $ | 7,957  |  | $ | 193,174 | 

| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) | A portion of the salary of each of Messrs. Roche and
 Caspers was deferred into the Companys Nonqualified Deferred Compensation
 Plan. Amounts shown are not reduced to reflect the deferral elections of any
 of the Named Elective Officers.                                                                                                                                                                                                                                                                                                                                                                                                                   
| | (2) | This column reflects bonuses earned in the year
 indicated, including both a discretionary and profit sharing bonus, where
 applicable. See Compensation Discussion and Analysis  Elements of
 In-Service Compensation  Cash Bonus Programs for a description of bonuses
 that may be earned by the Named Executive Officers.                                                                                                                                                                                                                                                                                                                                 
| | (3) | Amounts in this column reflect the aggregate
 increase in actuarial present value of the benefits under the pension plan as
 applicable. A portion of the change in pension benefits value is attributable
 to the additional year of service, any annual salary increase and bonus
 received. The 2010 change in Pension Value was also affected by a change in
 the discount rate of 6.19% in 2009 to 5.19% in 2010. An additional portion of
 the change is due to a change in the mortality values used for demographic
 assumptions. This table changed from the 1983 Group Annuity Mortality Table
 in 2009 to the RP-2000 Combined Mortality Table in 2010.
| | (4) | Amounts in this column include:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

|                   |  |                                                             |        |                         |   |           |  |   |        | 
|------------------ |  | ----------------------------------------------------------- | ------ | ----------------------- | - | --------- |  | - | ------ | 
|                   |  | FY 2010                                                     |       
|Name               |  | Company
 Contributions
 to Defined
 Contribution
 Plans (a) |        | Insurance
 Premiums (b) |   | Other (c) | 
|David H. Roche     |  | $                                                           | 14,184 |                         | $ | 12,841    |  |   |       | 
|Steven M. Caspers  |  | $                                                           | 8,495  |                         | $ | 3,763     |  | $ | 21,012 | 
|Tom Knudsen        |  | $                                                           | 5,763  |                         | $ | 1,781     |  | $ | 27,777 | 
|Allen Larson       |  | $                                                           | 5,560  |                         | $ | 1,702     |  | $ | 11,319 | 
|Jeffrey L. Carlson |  | $                                                           | 4,732  |                         | $ | 1,473     |  | $ | 61,603 | 

38

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|                   |  |                                                             |       |                         |   |           |  |   |       | 
|------------------ |  | ----------------------------------------------------------- | ----- | ----------------------- | - | --------- |  | - | ----- | 
|                   |  | FY 2009                                                     |      
|Name               |  | Company
 Contributions
 to Defined
 Contribution
 Plans (a) |       | Insurance
 Premiums (b) |   | Other (c) | 
|David H. Roche     |  | $                                                           | 9,477 |                         | $ | 12,656    |  |   |      | 
|Steven M. Caspers  |  | $                                                           | 8,896 |                         | $ | 3,124     |  |   |      | 
|Tom Knudsen        |  | $                                                           | 6,299 |                         | $ | 1,573     |  | $ | 873   | 
|Allen Larson       |  | $                                                           | 5,100 |                         | $ | 1,342     |  | $ | 7,344 | 
|Jeffrey L. Carlson |  | $                                                           | 6,889 |                         | $ | 1,375     |  |   |      | 

|                   |  |                                                             |       |                         |   |           |  |   |       | 
|------------------ |  | ----------------------------------------------------------- | ----- | ----------------------- | - | --------- |  | - | ----- | 
|                   |  | FY 2008                                                     |      
|Name               |  | Company
 Contributions
 to Defined
 Contribution
 Plans (a) |       | Insurance
 Premiums (b) |   | Other (c) | 
|David H. Roche     |  | $                                                           | 9,313 |                         | $ | 12,574    |  |   |      | 
|Steven M. Caspers  |  | $                                                           | 6,296 |                         | $ | 2,860     |  |   |      | 
|Tom Knudsen        |  | $                                                           | 6,480 |                         | $ | 1,130     |  | $ | 736   | 
|Allen Larson       |  | $                                                           | 6,171 |                         | $ | 1,220     |  | $ | 7,096 | 
|Jeffrey L. Carlson |  | $                                                           | 6,790 |                         | $ | 1,167     |  |   |      | 

|    |                                                                                                                    |                                                                                                                                                                                                                                                                                                                   
|--- | ------------------------------------------------------------------------------------------------------------------ | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|    | (a)                                                                                                                | Reflects the Companys contribution to the 401(k)
 plan for each Named Executive Officer. For Mr. Roche, also includes $4,650 in
 Companys contributions to the Deferred Compensation Plan for 2010.                                                                                                             
|    | (b)                                                                                                                | Includes premiums paid by the Company for life
 insurance coverage in excess of $50,000 and supplemental long-term disability
 coverage.                                                                                                                                                                          
|    | (c)                                                                                                                | Reflects amounts paid in cash to Named Executive
 Officers for vacation hours; except that (i) amounts for Mr. Carlson for 2010
 reflect only severance paid and (ii) for Mr. Knudsen amounts for 2010 also
 include $800 for company vehicle use and amounts for 2009 and 2008 reflect
 only company vehicle use.
|    |                                                                                                                   
|(5) | Mr. Carlson ceased serving as the Companys Vice
 President Operations and as its employee effective May 12, 2010.

2010
Pension Benefits

The
table below sets forth information on the pension benefits for the Named
Executive Officers under each of the following:

| |   |                                                                      
| | - | ---------------------------------------------------------------------
| |  | Minn-Dak Farmers
 Cooperative Pension Plan; and                      
| |   |                                                                      
| |  | Minn-Dak Farmers
 Cooperative Supplemental Executive Retirement Plan.

39

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Both
the Pension Plan and the SERP are described in more detail in Item 11. Executive
Compensation of this Annual Report on Form 10-K under the section entitled
Employment and Post-Employment Arrangements  Post-Employment Arrangements for Named Executive Officers.

No
pension benefits were paid to any of the Named Executive Officers in fiscal
year 2010. The Company does not have a policy permitting granting of additional
years of pension service. Further information on these pension plans is
included within this section of this Item of Form 10-K entitled Compensation
Discussion and Analysis.

The
amounts reported in the table below equal the present value of the accumulated
benefit at August 31, 2010, for the Named Executive Officers under each plan
based upon the assumptions described in footnote 2.

|                   |  |  |              |  |  |                                       |  |                                           |   |         |  | 
|------------------ |  |  | ------------ |  |  | ------------------------------------- |  | ----------------------------------------- | - | ------- |  | 
|Name               |  |  | Plan Name    |  |  | Number of
 Years Credited Service (1) |  | Present
 Value of Accumulated Benefit (2) |  
|David H. Roche     |  |  | Pension Plan |  |  | 10                                    |  |                                           | $ | 340,528 |  | 
|                   |  |  | SERP         |  |  | 10                                    |  |                                           | $ | 325,695 |  | 
|Steven M. Caspers  |  |  | Pension Plan |  |  | 35                                    |  |                                           | $ | 984,266 |  | 
|                   |  |  | SERP         |  |  | 35                                    |  |                                           | $ | 20,331  |  | 
|Tom Knudsen        |  |  | Pension Plan |  |  | 34                                    |  |                                           | $ | 467,690 |  | 
|Allen Larson       |  |  | Pension Plan |  |  | 29                                    |  |                                           | $ | 338,927 |  | 
|Jeffrey L. Carlson |  |  | Pension Plan |  |  | 20                                    |  |                                           | $ | 276,536 |  | 

| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) | An employee earns a full year of credited service in
 the pension plan with 1,000 or more hours of service during the year.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| | (2) | The accumulated benefit is based on service and
 earnings (base salary and bonus, as described above) considered by the plans
 for the period through August 31, 2010. It includes the value of
 contributions made by the Named Executive Officers throughout their careers.
 For the Pension Plan and SERP, the present value has been calculated assuming
 the Named Executive Officers will remain in service until age 65, the age at
 which retirement may occur without any reduction in benefits, and that the
 benefit is payable under the available forms of annuity consistent with the
 assumptions as described in Note 13 to the financial statements contained
 elsewhere in this Annual Report on Form 10-K. As described in such note, the
 discount rate is 6.19% for fiscal year 2009. As described in such note, the
 discount rate is 5.19% for fiscal year 2010. The post-retirement mortality
 assumption is based on the RP-2000 Combined Mortality Table.

Nonqualified
Deferred Compensation

The
table below provides information on the non-qualified deferred compensation of
the Named Executive Officers in fiscal year 2010 under the Companys
Nonqualified Deferred Compensation Plan (the Deferred Compensation Plan).
Under the terms of the Deferred Compensation Plan, participants may elect to
defer receipt of their compensation and the Deferred Compensation Plan provides
a means for deferrals of compensation. All of the Named Executive Officer
except Mr. Carlson participated in the
Deferred Compensation Plan in fiscal year 2010.

The
Deferred Compensation Plan is
described in more detail in Item 11. Executive Compensation of this
Annual Report on Form 10-K under the section entitled Employment and
Post-Employment Arrangements  Post-Employment
Arrangements for Named Executive Officers.

40

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|                  |  |                                                    |   |                                             |  |                                                |  |                                                       |       |                                         |  |  |   |        |  |  |   |  |  |   |         |  | 
|----------------- |  | -------------------------------------------------- | - | ------------------------------------------- |  | ---------------------------------------------- |  | ----------------------------------------------------- | ----- | --------------------------------------- |  |  | - | ------ |  |  | - |  |  | - | ------- |  | 
|Name              |  | Executive
 Contributions
 in Fiscal Year
 2010 (1) |   | Company
 Contribution
 in Fiscal Year
 2010 |  | Aggregate
 Earnings in
 Fiscal Year 
 2010 (2) |  | Distribution
 and
 Withdrawals
 in Fiscal Year 
 2010 |       | Aggregate
 Balance at
 August 31,
 2010 | 
|David H. Roche    |  |                                                    | $ | 52,500                                      |  |                                                |  | $                                                     | 4,650 |                                         |  |  | $ | 16,498 |  |  |  |  |  | $ | 286,014 |  | 
|Steven M. Caspers |  |                                                    |   |                                            |  |                                                |  |                                                       |      |                                         |  |  | $ | 5,401  |  |  |  |  |  | $ | 45,076  |  | 
|Tom Knudsen       |  |                                                    |   |                                            |  |                                                |  |                                                       |      |                                         |  |  | $ | 1,234  |  |  |  |  |  | $ | 17,467  |  | 
|Allen Larson      |  |                                                    |   |                                            |  |                                                |  |                                                       |      |                                         |  |  | $ | 951    |  |  |  |  |  | $ | 9,831   |  | 

| |     |                                                                                                                                                                                                                                                            
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) | The annual salary deferrals included in this column
 are reflected in the salary column of the Summary Compensation Table. The
 deferrals of the bonus awards reflected in this column are reported in the
 bonus column of the Summary Compensation Table.
| | (2) | Amounts in this column include gains and losses on
 deferred compensation invested through the Deferred Compensation Plan. None
 of the earnings or losses in this column are included in the Summary
 Compensation Table.                                 

Employment and Post-Employment Arrangements

Agreement
with David H. Roche

On
March 1, 2001, the Company entered into an employment agreement with David H.
Roche to serve as its President and Chief Executive Officer with an initial
term through August 31, 2002. This initial term has been renewed for 12 month
periods running from September 1 to August 31 of the following year. The
employment agreement was amended and restated on August 27, 2009 for the fiscal
year 2010 term of September 1, 2009 to August 31, 2010. Below is a description
of the amended and restated employment agreement in effect for fiscal year
2010.

Under
the employment agreement, Mr. Roche will receive an annual base salary of
$352,300 per year and is eligible for an increase in this base salary based
upon an annual performance review. Mr. Roche is also eligible for a profit
sharing bonus based upon return per acre. See Compensation Discussion and
Analysis  Elements of In-Service Compensation  Cash Bonus Programs for the
matrix associated with the return per acre bonus. A review of the matrix
associated with the return per acre bonus will be conducted every two years
with the first review August 31, 2010. The Board of Directors also has the
discretion to grant Mr. Roche a performance bonus regardless of whether the
return per acre bonus is awarded. Mr. Roche is also eligible for health, dental
and vision insurance on the same terms as other non-union employees, as well as
other group benefits such as term life insurance, accidental death and
dismemberment insurance, long-term disability insurance. Mr. Roche must also
submit to an annual physical examination at the Companys expense.

If
Mr. Roche retires as Chief Executive Officer on or after his 62nd birthday, the
Company will provide him with medical insurance until he reaches age 65. Mr.
Roche will also be included in the Companys non-qualified deferred
compensation plan, the pension plan, supplemental executive retirement plan and
401(k) plan.

During
any term of the employment agreement, the agreement may be terminated by either
party upon written notice to the other at least ninety days prior to the end of
the term, by the Company for material breach or just cause by Mr. Roche,
upon Mr. Roches death, or his total and permanent disability. For the purposes
of the employment agreement, material breach and just cause mean willful
misconduct in following legitimate directions of the Board of Directors; breach
of loyalty to the cooperative; conviction of a felony; habitual drunkenness;
excessive absenteeism not related to illness, sick leave or vacations, but only
after notice from the Board of Directors followed by a repetition of such
excessive absenteeism; dishonesty; or continuous conflicts of interest after
notice in writing from the Board of Directors.

41

---



If
the Company terminates Mr. Roches employment without cause, the Company will
pay Mr. Roches then-current base salary for a period of 12 months, conditioned
upon receipt of a general release and compliance with provisions of the renewal
agreement relating to confidential information. This post-employment
payment does not apply to termination of Mr. Roches employment by Mr. Roche,
by the Company for cause, or by reason of death or disability. The employment
agreement also contains provisions relating to the confidentiality of
certain Company information.

Under
the employment agreement, Mr. Roche is entitled to 5 weeks of vacation, seven
paid holidays and four days of floating holiday. The Company will also
reimburse Mr. Roche for travel and other business expenses. Further, Mr. Roche
will be provided with a laptop computer and cell phone for company business.

Agreement
with Jeffrey L. Carlson

The
Company and Mr. Carlson, the Companys former Vice President Operations,
entered into a separation agreement and release that became binding and
enforceable May 25, 2010 relating to Mr. Carlsons separation from employment.
The separation and release agreement provided that in exchange for a full
release of all claims, the Company would pay Mr. Carlson a separation
payment equal to six months base pay, in thirteen bi-weekly
installments. The Company will also pay the employers portion of COBRA
coverage until the earlier of six months following the separation date of May
12, 2010 or until Mr. Carlson becomes eligible for alternative coverage. The
agreement also contains provisions relating to payout of accrued vacation and
confidentiality of Company information.

Post-Employment
Arrangements for Named Executive Officers

The
Companys employment agreement with Mr. Roche does not provide for severance
(unless terminated without cause) or any other post-termination payments for
2010, except through plans in which the Named Executive Officers participate
generally. The separation and release agreement with Mr. Carlson relates
exclusively to post-employment payments and benefits and is described above.

The
Company also provides post-employment compensation for the Named Executive
Officers, David H. Roche, Steven M. Caspers, Jeffrey L. Carlson, Tom Knudsen,
and Allen Larson, through the following plans:

| |   |                                                                                           
| | - | ------------------------------------------------------------------------------------------
| |  | Defined benefit retirement plan (which is the
 Minn-Dak Farmers Cooperative Pension Plan);
| |  | Supplemental executive retirement plan;                                                   
| |  | Non-qualified deferred compensation plan; and                                             
| |  | 401(k) retirement savings plan.                                                           

The
Company has established the Minn-Dak Farmers Cooperative Pension Plan. The
Pension Plan is a noncontributory, defined benefit retirement plan, which is
available to all of its eligible employees. For 2010, there were approximately
320 eligible current employees participating in the Pension Plan, including the
Named Executive Officers. The benefits of the Pension Plan are funded by
periodic contributions by the Company to a retirement trust that invests the
contributions and earnings from such contributions to pay benefits to
employees. The Pension Plan provides for the payment of a monthly retirement
benefit determined under a formula based on years of service and each
employees compensation level. Benefits are paid to the employees upon reaching
early (age 55 or older) or normal (age 65) retirement age. The plan also
provides for the payment of certain disability and death benefits. See the
table entitled Pension Benefits under this Item 11 of this Annual Report on
Form 10-K for information on the benefits for 2010 to each of the Named
Executive Officers under the Pension Plan.

42

---



The
Board of Directors adopted a Supplemental Executive Retirement Plan on January
21, 1997. Subject to the discretion of the Board of Directors, the Company
credits to the account of each executive eligible to participate in the
Supplemental Plan amounts equal to the difference between the benefits actually
payable to the executive under the provisions of the defined benefit retirement
plan and the amounts which would have been payable under the defined benefit
retirement plan if certain provisions of the Internal Revenue Code did not prohibit
the payment of such benefits. Of the Named Executive Officers, Messrs. Roche
and Caspers were eligible to participate in the Supplemental Executive
Retirement Plan in 2010. In fiscal 2010, only Mr. Roche was credited amounts to
his account in the Supplemental Executive Retirement Plan, representing his
defined benefit plan benefits in excess of the maximums established by the
Internal Revenue Code. See the table entitled Pension Benefits under this
Item 11 of this Annual Report on Form 10-K for information on the benefits for
2010 the Named Executive Officers under the Supplemental Executive Retirement
Plan. Unlike the Companys Pension Plan, the Supplementary Executive Retirement
Plan is an unfunded, unsecured obligation of the Company and is not qualified
for tax purposes.

On
August 1, 1978 the Company executed an adoption agreement establishing an
unfunded Nonqualified Deferred Compensation Plan (the Deferred Compensation
Plan) for a select group of management or highly compensated employees. Under
the terms of the Deferred Compensation Plan, certain employees may elect to
defer receipt of their compensation and the Deferred Compensation Plan provides
a means for deferrals of compensation into various investment options. The
participants may change their election among these options no more than one
time per quarter. The income earned does not constitute an above-market
interest rate as defined by the Securities and Exchange Commission.

Under
the Deferred Compensation Plan, participants may elect to defer any amount of
their current salary and bonus as of the end of the prior year for the first
payroll period beginning in the next year of the Deferred Compensation Plan. If
the Company makes matching contributions under its 401(k) retirement savings
plan, amounts in excess of the current 401(k) plan compensation limit may also
be matched, but the matching contributions will be applied to the Deferred
Compensation Plan. For fiscal year 2010, no Named Executive Officer deferred any
amount of salary or and no Named Executive Officer other than Mr. Roche
deferred any bonus under the Deferred Compensation Plan. For fiscal year 2010,
Mr. Roche was eligible to receive a Company match on compensation in excess of
the current 401(k) Plan limit and these excess matching contribution amounts
were contributed to Mr. Roches account in the Deferred Compensation Plan.
Income will be gained or lost on a daily basis as a result of the participants
directed investment of his/her account. The participant is vested in those
earnings immediately. Participants are eligible for payouts from the Deferred
Compensation Plan at retirement, termination, death or disability. With respect
to distributions, participants may only elect to receive payments in the form
of cash over no more than ten annual installments. Participants have no right,
either directly or indirectly, to anticipate, sell, assign or otherwise
transfer any benefit accrued under the Deferred Compensation Plan. In addition,
no participant has any interest in any Company assets set aside as a source of
funds to satisfy its benefit obligations under the Deferred Compensation Plan,
including the establishment of any trust. Participants have the status of
general unsecured creditors of the Company and the Deferred Compensation Plan
constitutes an unsecured promise by the Company to make benefit payments in the
future. See the table entitled Nonqualified Deferred Compensation under this
Item 11 in this Annual Report on Form 10-K for information on the benefits for
2010 for each of the Named Executive Officers under the Deferred Compensation
Plan.

43

---



The
Company maintains a Section 401(k) retirement savings plan that permits
employees, including the Named Executive Officers, to elect to set aside a
portion of their gross compensation on a pre-tax basis in a trust to pay future
retirement benefits. The Company provides a matching contribution of 100% of
each employees first 4% of compensation that is set aside under the plan. The
amounts set aside by each employee and the Company vests immediately. Benefits
under the 401(k) plan begin to be paid to the employee: (i) upon the attainment
of normal retirement at age 65, or if the employee chooses, any time after
early retirement at or after age 55; (ii) the date the employee terminates
employment with the Company; or (iii) a pre-retirement distribution equal to
the value of the employees 401(k) account, provided the employee has attained
age 59 1/2 and provided a written consent of the spouse (if married). Federal
law limits employee pre-tax income contributions. For calendar year 2010,
employee pre-tax income contributions were limited to $16,500 for each
participating employee age 49 and under and $22,000 for each participating
employee age 50 and older. See the table entitled Summary Compensation Table
for information on the benefits for 2010 to each of the Named Executive
Officers under the Companys 401(k) plan.

In
fiscal year 2010, the Company also maintained a defined contribution pension
plan for all newly-hired employees who are not part of a collective bargaining
arrangement. None of the Named Executive Officers participate in this defined
contribution pension plan.

44

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DIRECTOR
COMPENSATION

Directors
of the Company received the following amounts for Board and committee service
in fiscal year 2010: $290 per regular Board meeting, special Board meeting and
committee meeting. In addition, from time to time the Company requests that
directors represent the Companys interests at various industry meetings and
conferences, meetings with government or regulators, meetings with shareholders
and growers, and other meetings with stakeholders. For attendance at each
meeting requested by the Company, each director receives $145 per day for
service of less than five hours and $290 per day for service of more than five
hours. The Chairman of the Board of Directors also receives an additional
retainer of $500 per month to compensate for the extra duties associated with
that position. Mr. Doug Etten served as the Chairman of
the Board of Directors in fiscal year 2010.

The
following table shows for fiscal year 2010 the amounts earned by each of the
Companys directors. Other than cash retainer and meeting fees as described
above, none of the Companys directors earned any other cash or any other
compensation in fiscal year 2010.

|                  |  |                                 |   |        |  |  |  |   |        |  | 
|----------------- |  | ------------------------------- | - | ------ |  |  |  | - | ------ |  | 
|Name of Director  |  | Fees
 Earned orPaid in Cash (1) |   | Total  | 
|Dale Blume        |  |                                 | $ | 12,040 |  |  |  | $ | 12,040 |  | 
|Dennis Butenhoff  |  |                                 | $ | 15,780 |  |  |  | $ | 15,780 |  | 
|Brent Davison     |  |                                 | $ | 12,950 |  |  |  | $ | 12,950 |  | 
|Doug Etten        |  |                                 | $ | 28,240 |  |  |  | $ | 28,240 |  | 
|Patrick Freese    |  |                                 | $ | 10,140 |  |  |  | $ | 10,140 |  | 
|Dennis Klosterman |  |                                 | $ | 14,230 |  |  |  | $ | 14,230 |  | 
|Russell Mauch     |  |                                 | $ | 17,810 |  |  |  | $ | 17,810 |  | 
|Charles Steiner   |  |                                 | $ | 12,305 |  |  |  | $ | 12,305 |  | 
|Kevin Kutzer (2)  |  |                                 | $ | 6,050  |  |  |  | $ | 6,050  |  | 
|Alton Theede (2)  |  |                                 | $ | 1,680  |  |  |  | $ | 1,680  |  | 

| |     |                                                                                                                                                                                                           
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) | Includes the amount of cash compensation earned or
 paid in fiscal year 2010 for Board and committee service, as well as for
 attendance at meetings requested by the Company.                            
| | (2) | Mr. Theede served on the Board until his term ended
 on December 9, 2009. Mr. Kutzer was elected as his replacement. Accordingly,
 amounts for Messrs. Theede and Kutzer reflect partial years of service.

45

---



REPORT
OF THE COMPENSATION COMMITTEE

The
following report of the Compensation Committee shall not be deemed to be
filed with the Securities and Exchange Commission, nor shall such information
be incorporated by reference into any future filing under the Securities Act of
1933, as amended, or the 1934 Securities Exchange Act, as amended, except to
the extent that the Company specifically incorporates it by reference in such
filing.

The
Compensation Committee has reviewed and discussed the section of this Annual
Report on Form 10-K for the year ended August 31, 2010 entitled Compensation
Discussion and Analysis (the CD&A) with Management. In reliance on this
review and discussion, the Compensation Committee recommended to the Board of
Directors that the CD&A be included in this Annual Report on Form 10-K for
the year ended August 31, 2010 for filing with the Securities and Exchange
Commission.

By the
Compensation Committee of the Board of Directors

Charles Steiner
(Chair) 
Dale Blume
Dennis Klosterman
Brent Davison
Dennis Butenhoff

46

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|         |                                                                                                
|-------- | -----------------------------------------------------------------------------------------------
|ITEM 12. | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
 MANAGEMENT AND RELATED STOCKHOLDER MATTERS

Under
state law and the Companys Bylaws, each member of the cooperative is entitled
to one vote, regardless of the number of shares the member holds. The Common
Stock of the Company is voting stock and each member of the Company holds one
share of Common Stock. The Preferred Stock of the Company is non-voting stock.
The Companys stock can only be held by individuals who are sugarbeet growers.
To the Companys knowledge, as of November 24, 2010, no person owned
beneficially more than 5 percent of the Companys outstanding shares and none
of the principal officers listed above owned any such shares. As members of the
cooperative, each director owns one share of Common Stock and is entitled to
one vote. As a group, the directors own 4.46 percent of the outstanding
Preferred Stock.

|         |                                                                           
|-------- | --------------------------------------------------------------------------
|ITEM 13. | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND
 DIRECTOR INDEPENDENCE

Each
of the Companys directors is also a sugarbeet grower or a shareholder member
or representative of a shareholder member. By virtue of their status as such
members of the Company, each director or the member he represents sells
sugarbeets to the Company and receives payments for those sugarbeets; also,
each director could potentially receive grower trucking payments. Such payments
for sugarbeets and trucking payments, either separately or together, can often
exceed $120,000. However, such payments that are received by the directors, or
the entities they represent, are on the same basis as payments received by
other members of the Company for the delivery and payment of their sugarbeets.
Except for the sugarbeet sales and receipt of grower trucking payments
described in the preceding sentences, since the beginning of fiscal year 2010,
the Company has not entered into any transaction and there are no currently
proposed transactions, in which the Company was or is to be a participant and
the amount involved exceeds $120,000 and in which any related person had or
will have a direct or indirect material interest.

The
charter of the Audit Committee provides that the Audit Committee is responsible
for reviewing and approving the terms and conditions of all of transactions the
Company enters into in which an officer, director or 5 percent or greater
shareholder or any affiliate of these persons has a direct or indirect material
interest. The Standards of Business Conduct, which is applicable to all of the Companys
employees and directors, also prohibits the Companys employees, including
executive officers, and the Companys directors from engaging in conflict of
interest transactions. Requests for waivers by the Companys executive officers
and directors from the provisions of, or requests for consents by the Companys
executive officers and directors under, the Standards of Business Conduct must
be made to the Audit Committee.

In
addition, the Company has a formal related person transaction approval
policy, which sets forth the Companys policies and procedures for the review,
approval or ratification of any transaction required to be reported in its
filings with the Securities and Exchange Commission. The Companys policy
applies to any financial transaction, arrangement or relationship or any series
of similar transactions, arrangements or relationships in which the Company is
a participant and in which a related person has a direct or indirect interest.
Through the policy, the Audit Committee has also identified and pre-approved
certain transactions with related persons, including:

| |   |                                                                                                                                             
| | - | --------------------------------------------------------------------------------------------------------------------------------------------
| |  | employment of executive officers, director
 compensation to be reported in the Companys Annual Report on Form 10-K,                        
| |  | payment of ordinary expenses and business
 reimbursements;                                                                                  
| |  | transactions with related companies in which the
 dollar amount does not exceed $60,000 or 2 percent of the other companys
 total revenues;
| |  | charitable contributions in which the dollar amount
 does not exceed $25,000 or 2 percent of the charitable organizations
 receipts;       
| |  | payments made under our articles of incorporation,
 bylaws, insurance policies or other agreements relating to indemnification;             

47

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| |   |                                                                                                                                                                                                                                                                     
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | transactions in which our shareholders receive
 proportional benefits, specifically including payments to shareholders for
 sugarbeets of a similar quality and quantity and grower trucking payments to
 shareholders based upon generally applicable formulas; and
| |  | transactions that involve competitive bid, banking
 transactions and transactions where the terms of which are regulated by
 law or governmental authority.                                                                                                         

The Audit Committee
must approve any related person transaction subject to this policy before
commencement of the related party transaction. If pre-approval is not feasible,
the Audit Committee may ratify, amend or terminate the related person
transaction. The Audit Committee will analyze the following factors, in
addition to any other factors the Audit Committee deems appropriate, in
determining whether to approve a related party transaction:

| |   |                                                                                                                                                                                  
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | whether the terms are fair to the Company;                                                                                                                                       
| |  | whether the terms of the related party transaction
 are no less favorable than terms generally available to an unaffiliated
 third-party under the same or similar circumstances;
| |  | whether the related party transaction is material to
 the Company;                                                                                                               
| |  | the role the related party has played in arranging
 the transaction;                                                                                                             
| |  | the structure of the related party transaction;                                                                                                                                  
| |  | the interests of all related parties in the transaction;                                                                                                                         
| |  | the extent of the related partys interest in the
 transaction; and                                                                                                              
| |  | whether the transaction would require a waiver of
 the Standards of Business Conduct.                                                                                            

The Audit Committee may, in its sole discretion,
approve or deny any related person transaction. Approval of a related person
transaction may be conditioned upon the Company and the related person taking
such precautionary actions, as the Audit Committees deems appropriate.

Independence
of Directors and Committee Members

The
Board of Directors undertook a review of director independence in November 2010
as to all nine directors then serving. As part of that process, the Board
reviewed all transactions and relationships between each director (or any
member of his immediate family) and the Company, its executive officers and its
auditors, and other matters bearing on the independence of directors. Although
none of the Companys securities are listed on any stock exchange, the Board of
Directors is required to select and apply the independence standards of a stock
exchange. For the purposes of determining the independence of the Companys
directors and committee members, the Board of Directors selected the NASDAQ
Marketplace Rules. As a result of its review, directors Dale N. Blume, Dennis Butenhoff, Brent
Davison, Douglas Etten, Patrick Freese, Dennis Klosterman, Russell Mauch,
Charles Steiner and Kevin Kutzer meet the criteria for independence
under the NASDAQ Marketplace Rules. All members of the Audit Committee meet the
independence requirements of Section 10A-3.

The
Company has also established separate criteria for eligibility to serve as a
member of the Companys Compensation Committee and Audit Committee.

The
charter of the Compensation Committee requires that this committee consist of
no fewer than three Board members and that no director shall be a member if the
director currently is, or at any time during the past two fiscal years has been
employed by the Company or in the judgment of the Executive Committee, has a
relationship that would interfere with the exercise of independent judgment in
carrying out responsibilities as a director or member of the Compensation
Committee. Each member of our Compensation Committee meets these requirements.

48

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The
charter of the Audit Committee requires that the Audit Committee be comprised
of at least three members, all of who must be independent from Management and
the Company. The members of the Audit Committee should also include directors
with financial or accounting backgrounds if available. The Board of Directors
has reviewed the education, experience and other qualifications of each of the
members of its Audit Committee. After review, the Board of Directors has
determined that none of the members of the Audit Committee meet the Securities
and Exchange Commission definition of an audit committee financial expert.
However, the Company believes that, taken as a whole, the members of Audit
Committee have sufficient education, experience and qualifications to carry out
their duties.

|         |                                        
|-------- | ---------------------------------------
|ITEM 14. | PRINCIPAL
 ACCOUNTING FEES AND SERVICES

| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | -- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 1. | Audit Fees - paid to the Companys principal
 accountant for the audit of annual financial statements and review of
 financial statements included in Forms 10-Q during the fiscal year ended
 August 31, 2010 totaled $94,140 (Including a $20,000 progress billing for the
 2010 audit) and for the year ended August 31, 2009 $96,550 (including a
 $16,000 progress billing for the 2009 audit).                                                                                                         
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | 2. | Audit Related Fees - paid to the Companys principal
 accountant for the audit of employee benefit plans during the fiscal year
 ended August 31, 2010 totaled $14,500 and for the year ended August 31, 2009
 totaled $14,500.                                                                                                                                                                                                                                                                              
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | 3. | Tax Fees - paid to the Companys principal accountant
 for professional services rendered for tax compliance, tax advice, and tax
 planning totaled $27,010 for the year ended August 31, 2010 and $20,700 for
 fiscal year ended August 31, 2009.                                                                                                                                                                                                                                                           
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | 4. | All Other Fees  paid to the Companys principal
 accountant for USDA agreed upon procedures during the fiscal year ended
 August 31, 2010 totaled $5,000 and for the year ended August 31, 2009 totaled
 $5,000.                                                                                                                                                                                                                                                                                            
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | 5. | It is part of the audit committees duties to
 appoint, compensate, and oversee the engagement of, retention, or replacement
 of, the independent auditors who audit the financial statements of the
 Company and its subsidiaries. The audit committee approves all audit services
 to be performed by the independent auditor. The committee ensures that the
 independent auditor is not engaged to perform any non-audit services that are
 considered prohibited activities by the Sarbanes-Oxley law.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |    | The audit committee approves 100 percent of the
 services described in items 1 thru 4 above.                                                                                                                                                                                                                                                                                                                                                                                                                 
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| | 6. | The percentage of hours expended on the principal
 accountants engagement to audit the Companys financial statements for the
 most recent fiscal year that were attributed to work performed by persons
 other than the principal accountants full-time, permanent employees is zero.                                                                                                                                                                                                                     

49

---



PART
IV.

|         |                                            
|-------- | -------------------------------------------
|ITEM 15. | EXHIBITS
 AND FINANCIAL STATEMENT SCHEDULES

| |                                          |                                                                                                                
| | ---------------------------------------- | ---------------------------------------------------------------------------------------------------------------
| | Documents filed as part of
 this report:
| |                                          |                                                                                                                
| | a.                                       | Consolidated
 Financial Statements                                                                             
| |                                          | -Report of Independent Registered Public Accounting
 Firm                                                      
| |                                          | -Consolidated Balance Sheets as of August 31, 2010,
 2009 and 2008                                             
| |                                          | -Consolidated Statements of Operations for the Years
 Ended August 31, 2010, 2009 and 2008                     
| |                                          | -Consolidated Statements of Changes in Members
 Investments for the years ended August 31, 2010, 2009 and 2008
| |                                          | -Consolidated Statements of Cashflows for the Years
 Ended August 31, 2010, 2009 and 2008                      
| |                                          | -Notes to the Consolidated Financial Statements                                                                
| |                                          |                                                                                                                
| | b.                                       | Financial Statement Schedules  None                                                                           
| |                                          |                                                                                                                
| | c.                                       | The exhibits to this Annual Report on Form 10-K are listed in the
 Exhibit Index, Item 15c.                    

50

---



|          |                                                         
|--------- | --------------------------------------------------------
|Item 15a. | Report of
 Independent Registered Public Accounting Firm

The Audit Committee Minn-Dak Farmers CooperativeWahpeton, North Dakota

We have audited the
accompanying consolidated balance sheets of Minn-Dak
Farmers Cooperative (a North Dakota cooperative association) as of
August 31, 2010, 2009, and 2008, and the related consolidated statements of
operations, change in members investments and comprehensive income and cash
flows for the years then ended. These financial statements are the
responsibility of the Companys management. Our responsibility is to express an
opinion on these financial statements based on our audits.

We conducted our audits in
accordance with the standards of the Public Company Accounting Oversight Board
(United States). Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes consideration of internal control over
financial reporting as a basis for designing audit procedures that are
appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Companys internal control over financial
reporting. Accordingly, we do not express such an opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by Management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion the
consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Minn-Dak
Farmers Cooperative as of August 31, 2010, 2009, and 2008, and the
results of its operations and its cash flows for the years then ended in
conformity with accounting principles generally accepted in the United States
of America.

/S/ Eide Bailly LLP

Fargo, North Dakota
November 24, 2010

51

---



MINN-DAK FARMERS COOPERATIVE
CONSOLIDATED BALANCE SHEETS
AUGUST 31, 2010, 2009, AND 2008

|                                                                                     |  |      |             |      |   |             |  |   |             | 
|------------------------------------------------------------------------------------ |  | ---- | ----------- | ---- | - | ----------- |  | - | ----------- | 
|                                                                                     |  | 2010 |             | 2009 |   | 2008        | 
|ASSETS                                                                               |  |      |             |      |   |             |  |   |             | 
|                                                                                     |  |      |             |      |   |             |  |   |             | 
|CURRENT ASSETS                                                                       |  |      |             |      |   |             |  |   |             | 
|Cash                                                                                 |  | $    | 128,611     |      | $ | 93,949      |  | $ | 159,175     | 
|                                                                                     |  |      |             |      |   |             |  |   |             | 
|Current bond trust                                                                   |  |      | 4,731,005   |      |   |            |  |   |            | 
|                                                                                     |  |      |             |      |   |             |  |   |             | 
|Receivables                                                                          |  |      |             |      |   |             |  |   |             | 
|Trade accounts                                                                       |  |      | 12,730,660  |      |   | 14,299,830  |  |   | 16,376,068  | 
|Growers                                                                              |  |      | 13,763,089  |      |   | 10,196,312  |  |   | 7,313,090   | 
|Income tax                                                                           |  |      |            |      |   |            |  |   | 234,461     | 
|Other                                                                                |  |      | 2,551       |      |   | 2,551       |  |   | 2,551       | 
|                                                                                     |  |      | 26,496,300  |      |   | 24,498,693  |  |   | 23,926,170  | 
|                                                                                     |  |      |             |      |   |             |  |   |             | 
|Advances to affiliates - Midwest Agri-Commodities Co. and United
 Sugars Corporation |  |      |            |      |   | 1,105,797   |  |   | 1,492,451   | 
|                                                                                    
|Inventories                                                                          |  |      |             |      |   |             |  |   |             | 
|Refined sugar, pulp, molasses and thick juice to be sold on a pooled
 basis          |  |      | 29,770,313  |      |   | 27,046,374  |  |   | 28,452,755  | 
|Sugarbeets                                                                           |  |      | 3,121,298   |      |   |            |  |   |            | 
|Nonmember refined sugar                                                              |  |      | 1,717,395   |      |   | 1,451,972   |  |   | 1,357,893   | 
|Yeast                                                                                |  |      | 237,105     |      |   | 200,317     |  |   | 167,799     | 
|Materials and supplies                                                               |  |      | 13,403,175  |      |   | 11,296,034  |  |   | 10,159,944  | 
|                                                                                     |  |      | 48,249,286  |      |   | 39,994,697  |  |   | 40,138,391  | 
|                                                                                     |  |      |             |      |   |             |  |   |             | 
|Deferred charges                                                                     |  |      |            |      |   | 1,324,353   |  |   | 1,436,316   | 
|                                                                                     |  |      |             |      |   |             |  |   |             | 
|Prepaid expenses and other assets                                                    |  |      | 2,047,411   |      |   | 3,109,313   |  |   | 2,149,816   | 
|                                                                                     |  |      |             |      |   |             |  |   |             | 
|Current deferred income tax asset                                                    |  |      |            |      |   | 25,600      |  |   | 145,000     | 
|                                                                                     |  |      |             |      |   |             |  |   |             | 
|Total current assets                                                                 |  |      | 76,792,997  |      |   | 70,058,453  |  |   | 69,288,144  | 
|                                                                                     |  |      |             |      |   |             |  |   |             | 
|PROPERTY, PLANT AND EQUIPMENT                                                        |  |      |             |      |   |             |  |   |             | 
|Land and land improvements                                                           |  |      | 28,164,267  |      |   | 27,130,273  |  |   | 26,476,273  | 
|Buildings                                                                            |  |      | 37,882,719  |      |   | 37,757,659  |  |   | 37,592,109  | 
|Factory equipment                                                                    |  |      | 152,493,105 |      |   | 147,419,262 |  |   | 141,263,455 | 
|Other equipment                                                                      |  |      | 5,300,600   |      |   | 4,675,425   |  |   | 3,766,400   | 
|Capitalized leases                                                                   |  |      | 3,352,917   |      |   | 2,960,658   |  |   | 746,210     | 
|Construction in progress                                                             |  |      | 5,213,973   |      |   | 4,690,526   |  |   | 4,500,912   | 
|                                                                                     |  |      | 232,407,581 |      |   | 224,633,803 |  |   | 214,345,359 | 
|Less accumulated depreciation and amortization                                       |  |      | 135,638,384 |      |   | 127,336,389 |  |   | 119,566,871 | 
|                                                                                     |  |      | 96,769,197  |      |   | 97,297,414  |  |   | 94,778,488  | 
|                                                                                     |  |      |             |      |   |             |  |   |             | 
|OTHER ASSETS                                                                         |  |      |             |      |   |             |  |   |             | 
|Investment in other cooperatives and unconsolidated marketing
 cooperatives          |  |      | 11,115,672  |      |   | 11,343,602  |  |   | 11,523,024  | 
|Bond trust and financing costs                                                       |  |      | 2,492,735   |      |   | 98,302      |  |   | 126,663     | 
|Other                                                                                |  |      | 5,034,845   |      |   | 992,175     |  |   | 1,187,408   | 
|                                                                                     |  |      | 18,643,252  |      |   | 12,434,079  |  |   | 12,837,095  | 
|                                                                                     |  |      |             |      |   |             |  |   |             | 
|                                                                                     |  | $    | 192,205,445 |      | $ | 179,789,946 |  | $ | 176,903,727 | 

See Notes to Consolidated
Financial Statements.

52

---



|                                                                                          |  |      |             |      |   |             |   |   |             |  
|----------------------------------------------------------------------------------------- |  | ---- | ----------- | ---- | - | ----------- | - | - | ----------- | -
|                                                                                          |  | 2010 |             | 2009 |   | 2008        |  
|LIABILITIES
 AND MEMBERS INVESTMENT                                                      |  |      |             |      |   |             |   |   |             |  
|                                                                                          |  |      |             |      |   |             |   |   |             |  
|CURRENT LIABILITIES                                                                       |  |      |             |      |   |             |   |   |             |  
|Short-term notes payable                                                                  |  | $    | 27,557,680  |      | $ | 18,977,978  |   | $ | 24,440,000  |  
|                                                                                          |  |      |             |      |   |             |   |   |             |  
|Current portion of long-term debt and capital leases                                      |  |      | 2,977,034   |      |   | 2,905,841   |   |   | 2,594,188   |  
|Current portion of bonds payable                                                          |  |      |            |      |   | 2,120,000   |   |   | 2,010,000   |  
|                                                                                          |  |      | 2,977,034   |      |   | 5,025,841   |   |   | 4,604,188   |  
|Accounts payable                                                                          |  |      |             |      |   |             |   |   |             |  
|Trade                                                                                     |  |      | 10,143,993  |      |   | 11,566,445  |   |   | 9,511,224   |  
|Checks Outstanding                                                                        |  |      | 1,007,863   |      |   | 545,766     |   |   |            |  
|Deferred liabilities                                                                      |  |      | 8,825,180   |      |   |            |   |   |            |  
|Growers                                                                                   |  |      | 13,874,124  |      |   | 17,704,288  |   |   | 17,429,879  |  
|Income tax                                                                                |  |      | 194,745     |      |   |            |   |   |            |  
|                                                                                          |  |      | 34,045,905  |      |   | 29,816,499  |   |   | 26,941,103  |  
|Payable to affiliates - Midwest Agri-Commodities Co. and United Sugars
 Corporation       |  |      | 283,460     |      |   |            |   |   |            |  
|Accrued liabilities                                                                       |  |      | 3,100,968   |      |   | 2,945,383   |   |   | 3,299,010   |  
|                                                                                          |  |      |             |      |   |             |   |   |             |  
|Total current liabilities                                                                 |  |      | 67,965,047  |      |   | 56,765,701  |   |   | 59,284,301  |  
|                                                                                         
|LONG-TERM DEBT AND CAPITAL LEASES, NET OF CURRENT PORTION                                 |  |      | 18,690,023  |      |   | 22,148,959  |   |   | 13,778,143  |  
|                                                                                         
|BONDS PAYABLE                                                                             |  |      | 19,240,000  |      |   | 11,370,000  |   |   | 13,490,000  |  
|                                                                                         
|LONG-TERM DEFERRED INCOME TAX LIABILITY                                                   |  |      | 265,800     |      |   | 354,400     |   |   | 443,000     |  
|                                                                                         
|LONG-TERM UNRECOGNIZED TAX BENEFITS LIABILITY                                             |  |      |            |      |   | 274,075     |   |   | 256,075     |  
|                                                                                         
|LONG-TERM PENSION LIABILITY                                                               |  |      | 19,629,704  |      |   | 12,827,360  |   |   | 5,795,189   |  
|                                                                                         
|COMMITMENTS AND CONTINGENCIES (NOTE 10)                                                   |  |      |             |      |   |             |   |   |             |  
|                                                                                          |  |      |             |      |   |             |   |   |             |  
|Total liabilities                                                                         |  |      | 125,790,574 |      |   | 103,740,495 |   |   | 93,046,708  |  
|                                                                                          |  |      |             |      |   |             |   |   |             |  
|MEMBERS INVESTMENT                                                                       |  |      |             |      |   |             |   |   |             |  
|Preferred stock                                                                           |  |      |             |      |   |             |   |   |             |  
|Class A - 100,000 shares authorized, $105 par value;72,200 shares
 issued and outstanding |  |      | 7,581,000   |      |   | 7,581,000   |   |   | 7,581,000   |  
|Class B - 100,000 shares authorized $75 par value;72,200 shares
 issued and outstanding   |  |      | 5,415,000   |      |   | 5,415,000   |   |   | 5,415,000   |  
|Class C - 100,000 shares authorized, $76 par value;72,200 shares
 issued and outstanding  |  |      | 5,487,200   |      |   | 5,487,200   |   |   | 5,487,200   |  
|                                                                                          |  |      | 18,483,200  |      |   | 18,483,200  |   |   | 18,483,200  |  
|Common stock, 600 shares authorized, $250 par value;                                      |  |      |             |      |   |             |   |   |             |  
|477 shares issued and outstanding on 8-31-10,                                             |  |      | 119,250     |      |   | 118,500     |   |   | 120,750     |  
|474 shares outstanding on 8-31-09 and                                                     |  |      |             |      |   |             |   |   |             |  
|483 shares outstanding on 8-31-08 and                                                     |  |      |             |      |   |             |   |   |             |  
|Paid in capital in excess of par value                                                    |  |      | 32,094,407  |      |   | 32,094,407  |   |   | 32,094,407  |  
|Nonqualified allocated patronage                                                          |  |      | 28,298,571  |      |   | 28,298,718  |   |   | 28,298,508  |  
|Accumulated other comprehensive loss                                                      |  |      | (18,837,157 | )    |   | (12,811,235 | ) |   | (4,890,516  | )
|Retained earnings                                                                         |  |      | 11,116,217  |      |   | 9,959,810   |   |   | 9,909,845   |  
|                                                                                          |  |      | 71,274,488  |      |   | 76,143,400  |   |   | 84,016,194  |  
|                                                                                          |  |      |             |      |   |             |   |   |             |  
|                                                                                          |  | $    | 197,065,062 |      | $ | 179,883,895 |   | $ | 177,062,902 |  

53

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MINN-DAK FARMERS COOPERATIVE
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED AUGUST 31, 2010, 2009, AND 2008

|                                                                                |  |      |             |      |   |             |   |   |             | 
|------------------------------------------------------------------------------- |  | ---- | ----------- | ---- | - | ----------- | - | - | ----------- | 
|                                                                                |  | 2010 |             | 2009 |   | 2008        |  
|REVENUE                                                                         |  |      |             |      |   |             |   |   |             | 
|From sales of sugar, sugar co-products, and yeast, net of discounts             |  | $    | 214,311,789 |      | $ | 225,034,020 |   | $ | 243,573,467 | 
|                                                                                |  |      |             |      |   |             |   |   |             | 
|EXPENSES                                                                        |  |      |             |      |   |             |   |   |             | 
|Production costs of sugar, co-products, and yeast sold                          |  |      | 72,008,374  |      |   | 79,586,897  |   |   | 73,592,738  | 
|Sales and distribution costs                                                    |  |      | 40,451,329  |      |   | 43,308,982  |   |   | 48,667,319  | 
|General and administrative                                                      |  |      | 7,079,301   |      |   | 7,065,675   |   |   | 7,275,736   | 
|Interest                                                                        |  |      | 1,974,363   |      |   | 2,017,946   |   |   | 3,230,496   | 
|                                                                                |  |      | 121,513,367 |      |   | 131,979,500 |   |   | 132,766,289 | 
|                                                                                |  |      |             |      |   |             |   |   |             | 
|OTHER INCOME                                                                    |  |      | 7,777,785   |      |   | 2,493,245   |   |   | 1,299,870   | 
|                                                                                |  |      |             |      |   |             |   |   |             | 
|NET PROCEEDS RESULTING FROM MEMBER AND NON-MEMBER BUSINESS BEFORE
 INCOME TAXES |  |      | 100,576,207 |      |   | 95,547,765  |   |   | 112,107,049 | 
|                                                                                |  |      |             |      |   |             |   |   |             | 
|INCOME TAXES EXPENSE (BENEFIT)                                                  |  |      | 343,580     |      |   | (505,145    | ) |   | 1,243,679   | 
|                                                                                |  |      |             |      |   |             |   |   |             | 
|NET PROCEEDS RESULTING FROM MEMBER AND NON-MEMBER BUSINESS                      |  | $    | 100,232,627 |      | $ | 96,052,910  |   | $ | 110,863,370 | 
|                                                                                |  |      |             |      |   |             |   |   |             | 
|DISTRIBUTION OF NET PROCEEDS                                                    |  |      |             |      |   |             |   |   |             | 
|Credited to members investment                                                 |  |      |             |      |   |             |   |   |             | 
|Components of net income                                                        |  |      |             |      |   |             |   |   |             | 
|Income from non-member business                                                 |  | $    | 1,156,407   |      | $ | 334,861     |   | $ | 2,721,265   | 
|Patronage income                                                                |  |      | 4,020,142   |      |   | 3,727,840   |   |   | 5,117,244   | 
|                                                                                |  |      |             |      |   |             |   |   |             | 
|Net
 income credited to members investment                                     |  |      | 5,176,549   |      |   | 4,062,701   |   |   | 7,838,509   | 
|                                                                                |  |      |             |      |   |             |   |   |             | 
|Payments to members for sugarbeets, net of unit retention capital               |  |      | 95,056,078  |      |   | 91,990,209  |   |   | 103,024,861 | 
|                                                                                |  |      |             |      |   |             |   |   |             | 
|NET PROCEEDS RESULTING FROM MEMBER AND NONMEMBER BUSINESS                       |  | $    | 100,232,627 |      | $ | 96,052,910  |   | $ | 110,863,370 | 

See Notes to Consolidated
Financial Statements.

54

---



|                                                         
|---------------------------------------------------------
|MINN-DAK
FARMERS COOPERATIVE                             
|CONSOLIDATED STATEMENTS OF CHANGES IN MEMBERS
INVESTMENT
|YEARS
ENDED AUGUST 31, 2010, 2009, AND 2008              
|                                                         

|                                                |  |                 |            |              |   |                                        |   |                                   |            |                                               |   |                   |   |       |             |                              |   |            |   |   |            |   |   |            |  
|----------------------------------------------- |  | --------------- | ---------- | ------------ | - | -------------------------------------- | - | --------------------------------- | ---------- | --------------------------------------------- | - | ----------------- | - | ----- | ----------- | ---------------------------- | - | ---------- | - | - | ---------- | - | - | ---------- | -
|                                                |  | Preferred
Stock |            | Common
Stock |   | Paid in Capital
In Excess of
Par Value |   | Non-Qualified
Allocated
Patronage |            | Accumulated
Other
Comprehensive
Income (Loss) |   | Retained
Earnings |   | Total |             | Comprehensive
Income/
(Loss) |  
|BALANCE, AUGUST 31, 2007                        |  | $               | 18,483,200 |              | $ | 121,000                                |   | $                                 | 32,094,407 |                                               | $ | 27,598,667        |   | $     | (2,368,458  | )                            | $ | 7,444,091  |   | $ | 83,372,907 |   |   |            |  
|Stock - Sales - common (8 shares)               |  |                 |            |              |   | 2,000                                  |   |                                   |            |                                               |   |                   |   |       |             |                              |   |            |   |   | 2,000      |   |   |            |  
|Repurchases
- common (9 shares)                 |  |                 |            |              |   | (2,250                                 | ) |                                   |            |                                               |   |                   |   |       |             |                              |   |            |   |   | (2,250     | ) |   |            |  
|Revolvement of unit retention capital           |  |                 |            |              |   |                                        |   |                                   |            |                                               |   |                   |   |       |             |                              |   |            |   |   |           |   |   |            |  
|Revolvement of prior years allocated patronage |  |                 |            |              |   |                                        |   |                                   |            |                                               |   | (4,417,403        | ) |       |             |                              |   |            |   |   | (4,417,403 | ) |   |            |  
|Adoption of FIN 48                              |  |                 |            |              |   |                                        |   |                                   |            |                                               |   |                   |   |       |             |                              |   | (255,511   | ) |   | (255,511   | ) |   |            |  
|Net income for the year ended August 31, 2008   |  |                 |            |              |   |                                        |   |                                   |            |                                               |   | 5,117,244         |   |       |             |                              |   | 2,721,265  |   |   | 7,838,509  |   | $ | 7,838,509  |  
|Pension liability adjustment                    |  |                 |            |              |   |                                        |   |                                   |            |                                               |   |                   |   |       | (2,522,058  | )                            |   |            |   |   | (2,522,058 | ) |   | (2,522,058 | )
|Comprehensive Income (Loss)                     |  |                 |            |              |   |                                        |   |                                   |            |                                               |   |                   |   |       |             |                              |   |            |   |   |            |   | $ | 5,316,451  |  
|BALANCE, AUGUST 31, 2008                        |  |                 | 18,483,200 |              |   | 120,750                                |   |                                   | 32,094,407 |                                               |   | 28,298,508        |   |       | (4,890,516  | )                            |   | 9,909,845  |   |   | 84,016,194 |   |   |            |  
|Stock - Sales - common (6 shares)               |  |                 |            |              |   | 1,500                                  |   |                                   |            |                                               |   |                   |   |       |             |                              |   |            |   |   | 1,500      |   |   |            |  
|Repurchases
- common (15 shares)                |  |                 |            |              |   | (3,750                                 | ) |                                   |            |                                               |   |                   |   |       |             |                              |   |            |   |   | (3,750     | ) |   |            |  
|Revolvement of patronage-Estate                 |  |                 |            |              |   |                                        |   |                                   |            |                                               |   | (101,701          | ) |       |             |                              |   |            |   |   | (101,701   | ) |   |            |  
|Revolvement of prior years allocated patronage |  |                 |            |              |   |                                        |   |                                   |            |                                               |   | (3,625,929        | ) |       |             |                              |   |            |   |   | (3,625,929 | ) |   |            |  
|Effects of FAS 158 Adjustments                  |  |                 |            |              |   |                                        |   |                                   |            |                                               |   |                   |   |       |             |                              |   | (284,896   | ) |   | (284,896   | ) |   |            |  
|Net income for the year ended August 31, 2009   |  |                 |            |              |   |                                        |   |                                   |            |                                               |   | 3,727,840         |   |       |             |                              |   | 334,861    |   |   | 4,062,701  |   | $ | 4,062,701  |  
|Pension liability adjustment                    |  |                 |            |              |   |                                        |   |                                   |            |                                               |   |                   |   |       | (7,920,719  | )                            |   |            |   |   | (7,920,719 | ) |   | (7,920,719 | )
|Comprehensive Income (Loss)                     |  |                 |            |              |   |                                        |   |                                   |            |                                               |   |                   |   |       |             |                              |   |            |   |   |            |   | $ | (3,858,018 | )
|BALANCE, AUGUST 31, 2009                        |  |                 | 18,483,200 |              |   | 118,500                                |   |                                   | 32,094,407 |                                               |   | 28,298,718        |   |       | (12,811,235 | )                            |   | 9,959,810  |   |   | 76,143,400 |   |   |            |  
|Stock - Sales - common (10 shares)              |  |                 |            |              |   | 2,500                                  |   |                                   |            |                                               |   |                   |   |       |             |                              |   |            |   |   | 2,500      |   |   |            |  
|Repurchases
- common (7 shares)                 |  |                 |            |              |   | (1,750                                 | ) |                                   |            |                                               |   |                   |   |       |             |                              |   |            |   |   | (1,750     | ) |   |            |  
|Revolvement of patronage-Estate                 |  |                 |            |              |   |                                        |   |                                   |            |                                               |   |                   |   |       |             |                              |   |            |   |   |           |   |   |            |  
|Revolvement of prior years allocated patronage |  |                 |            |              |   |                                        |   |                                   |            |                                               |   | (4,020,289        | ) |       |             |                              |   |            |   |   | (4,020,289 | ) |   |            |  
|Effects of FAS 158 Adjustments                  |  |                 |            |              |   |                                        |   |                                   |            |                                               |   |                   |   |       |             |                              |   |            |   |   |           |   |   |            |  
|Net income for the year ended August 31, 2010   |  |                 |            |              |   |                                        |   |                                   |            |                                               |   | 4,020,142         |   |       |             |                              |   | 1,156,407  |   |   | 5,176,549  |   | $ | 5,176,549  |  
|Pension liability adjustment                    |  |                 |            |              |   |                                        |   |                                   |            |                                               |   |                   |   |       | (6,025,922  | )                            |   |            |   |   | (6,025,922 | ) |   | (6,025,922 | )
|Comprehensive Income (Loss)                     |  |                 |            |              |   |                                        |   |                                   |            |                                               |   |                   |   |       |             |                              |   |            |   |   |            |   | $ | (849,374   | )
|BALANCE, AUGUST 31, 2010                        |  | $               | 18,483,200 |              | $ | 119,250                                |   | $                                 | 32,094,407 |                                               | $ | 28,298,571        |   | $     | (18,837,157 | )                            | $ | 11,116,217 |   | $ | 71,274,488 |   |   |            |  
|                                                |  |                 |            |              |   |                                        |   |                                   |            |                                               |   |                   |   |       |             |                              |   |            |   |   |            |   |   |            |  
|See Notes to Consolidated
Financial Statements.

55

---



MINN-DAK FARMERS
COOPERATIVE 
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED AUGUST 31, 2010, 2009, AND 2008

|                                                                          |  |      |            |      |   |            |   |   |            |  
|------------------------------------------------------------------------- |  | ---- | ---------- | ---- | - | ---------- | - | - | ---------- | -
|                                                                          |  | 2010 |            | 2009 |   | 2008       |  
|OPERATING ACTIVITIES                                                      |  |      |            |      |   |            |   |   |            |  
|Income allocated to members investment                                   |  | $    | 5,176,549  |      | $ | 4,062,701  |   | $ | 7,838,509  |  
|Accumulated other comprehensive loss                                      |  |      | (6,025,922 | )    |   | (7,920,718 | ) |   | (2,522,058 | )
|Add (deduct) noncash items                                                |  |      |            |      |   |            |   |   |            |  
|Depreciation                                                              |  |      | 8,808,312  |      |   | 8,440,002  |   |   | 8,115,079  |  
|Amortization                                                              |  |      | 752,461    |      |   | 359,548    |   |   | 436,512    |  
|(Gain) Loss on disposal of equipment                                      |  |      | (25,553    | )    |   | (108,602   | ) |   | 112,747    |  
|(Gain)Loss allocated from unconsolidated marketing cooperatives           |  |      | 84,761     |      |   | (115,543   | ) |   | 43,419     |  
|Noncash portion of patronage capital credits                              |  |      | 32,396     |      |   | (974,925   | ) |   | (644,842   | )
|Deferred income taxes                                                     |  |      | (63,000    | )    |   | 30,800     |   |   | 1,136,000  |  
|(Increase)/Decrease in cash surrender of retired executive life
insurance |  |      | 11,651     |      |   | 49,555     |   |   | 20,224     |  
|Changes in assets and liabilities:                                        |  |      |            |      |   |            |   |   |            |  
|Accounts receivable and advances                                          |  |      | (608,351   | )    |   | (420,329   | ) |   | (2,408,377 | )
|Inventory and prepaid expenses                                            |  |      | (7,192,687 | )    |   | (815,803   | ) |   | 1,299,903  |  
|Deferred charges and other                                                |  |      | (2,873,808 | )    |   | 114,473    |   |   | 629,083    |  
|Accounts payable, accrued liabilities, and other liabilities              |  |      | 10,158,503 |      |   | 9,665,509  |   |   | (662,766   | )
|                                                                          |  |      |            |      |   |            |   |   |            |  
|NET CASH FROM OPERATING ACTIVITIES                                        |  |      | 8,235,312  |      |   | 12,366,668 |   |   | 13,393,433 |  
|                                                                          |  |      |            |      |   |            |   |   |            |  
|INVESTING ACTIVITIES                                                      |  |      |            |      |   |            |   |   |            |  
|Proceeds from disposition of property, plant and equipment                |  |      | 125,666    |      |   | 332,455    |   |   | 11,170     |  
|Capital expenditures                                                      |  |      | (7,987,929 | )    |   | (8,817,485 | ) |   | (7,975,759 | )
|Capital adjustment of unconsolidated marketing cooperatives               |  |      | (237,248   | )    |   | 871,094    |   |   | 325,357    |  
|Proceeds from patronage refunds and equity revolvements                   |  |      | 367,407    |      |   | 418,184    |   |   | 272,726    |  
|                                                                          |  |      |            |      |   |            |   |   |            |  
|NET
CASH USED FOR INVESTING ACTIVITIES                                    |  |      | (7,732,104 | )    |   | (7,195,752 | ) |   | (7,366,506 | )
|                                                                          |  |      |            |      |   |            |   |   |            |  
|FINANCING ACTIVITIES                                                      |  |      |            |      |   |            |   |   |            |  
|Sale (repurchase) of common stock, net                                    |  |      | 750        |      |   | (2,250     | ) |   | (250       | )
|Net proceeds (repayments) of short-term debt                              |  |      | 8,579,703  |      |   | (5,462,022 | ) |   | 5,440,000  |  
|Checks outstanding                                                        |  |      | 462,098    |      |   | 545,766    |   |   |           |  
|Proceeds from long term debt                                              |  |      |           |      |   | 10,000,000 |   |   |           |  
|Payment of financing fees                                                 |  |      | (753,447   | )    |   | (207,405   | ) |   | (284,410   | )
|Payment of long-term debt/lease                                           |  |      | (5,030,020 | )    |   | (5,692,828 | ) |   | (5,239,138 | )
|Payment of unit retains and allocated patronage                           |  |      | (3,727,630 | )    |   | (4,417,403 | ) |   | (6,038,860 | )
|                                                                          |  |      |            |      |   |            |   |   |            |  
|NET CASH USED FOR FINANCING ACTIVITIES                                    |  |      | (468,546   | )    |   | (5,236,142 | ) |   | (6,122,658 | )
|                                                                          |  |      |            |      |   |            |   |   |            |  
|NET CHANGE IN CASH                                                        |  |      | 34,662     |      |   | (65,226    | ) |   | (95,731    | )
|                                                                          |  |      |            |      |   |            |   |   |            |  
|CASH, BEGINNING OF YEAR                                                   |  |      | 93,949     |      |   | 159,175    |   |   | 254,906    |  
|                                                                          |  |      |            |      |   |            |   |   |            |  
|CASH, END OF YEAR                                                         |  | $    | 128,611    |      | $ | 93,949     |   | $ | 159,175    |  

56

---



MINN-DAK
FARMERS COOPERATIVE 
CONSOLIDATED STATEMENTS OF CASHFLOWS 
YEARS ENDED AUGUST 31, 2010, 2009, AND 2008

|                                                                        |  |      |           |      |   |           |   |   |           | 
|----------------------------------------------------------------------- |  | ---- | --------- | ---- | - | --------- | - | - | --------- | 
|                                                                        |  | 2010 |           | 2009 |   | 2008      |  
|                                                                        |  |      |           |      |   |           |   |   |           | 
|SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION                       |  |      |           |      |   |           |   |   |           | 
|Cash payments for Interest                                              |  | $    | 1,861,232 |      | $ | 2,067,437 |   | $ | 3,438,931 | 
|Income tax net payments (refunds)                                       |  | $    | 485,910   |      | $ | (790,406  | ) | $ | 1,930,729 | 
|                                                                        |  |      |           |      |   |           |   |   |           | 
|SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING
ACTIVITIES |  |      |           |      |   |           |   |   |           | 
|                                                                        |  |      |           |      |   |           |   |   |           | 
|Proceeds for bond issuance transferred to restricted investment         |  | $    | 7,000,000 |      |   |          |   |   |          | 
|                                                                        |  |      |           |      |   |           |   |   |           | 
|Equipment purchased by issuance of capital lease                        |  | $    | 392,259   |      | $ | 2,365,296 |   | $ | 746,210   | 
|                                                                        |  |      |           |      |   |           |   |   |           | 
|See Notes to Consolidated Financial Statements.                         |  |      |           |      |   |           |   |   |           | 

57

---



NOTE 1 -
PRINCIPAL ACTIVITY AND SIGNIFICANT ACCOUNTING POLICIES

Minn-Dak
Farmers Cooperative (the Company) is a North Dakota cooperative association
owned by its member-growers for the purpose of processing sugarbeets and
marketing sugar and co-products. Minn-Dak Yeast Company, Inc. (Minn-Dak Yeast)
is a North Dakota corporation engaged primarily in the production and marketing
of bakers yeast. Link Acquisition Company LLC (Link) was formed to advance
possible strategic business activities by the Company. Approximately 93% of net
sales are related to sugarbeet operations and 7% are related to yeast
operations.

The majority
of the net proceeds from the Company are from member patronage business.

Principles of Consolidation

The financial
statements include the accounts of the Company and its wholly owned
subsidiaries, Minn-Dak Yeast and Link. Significant intercompany activity has
been eliminated from the Balance Sheet, Statement of Operations, Statement of
Members Investment and Statements of Cash Flows.

Cash and Cash
Equivalents

Cash Equivalents are assets which are readily
convertible into cash within three months. The Company does not consider Bond
Trust assets as Cash Equivalents.

Receivable and Credit Policy

Trade
receivables are uncollateralized customer obligations due under normal trade
terms requiring payment within 15 to 90 days from the invoice date. Trade
receivables are stated at the amount billed to the customer. Customer account
balances with invoices dated over 90 days old are considered delinquent.
Payments of trade receivables are allocated to the specific invoices identified
on the customers remittance advice or, if unspecified, are applied to the
earliest unpaid invoices. The carrying amount of trade receivables is reduced
by a valuation allowance that reflects Managements best estimate of the
amounts that will not be collected. Management reviews all trade receivable
balances that exceed 90 days from the invoice date and based on an assessment
of current creditworthiness, estimates the portion, if any, of the balance that
will not be collected. Additionally, Management estimates an allowance to apply
to the aggregate trade receivables to create a general allowance covering those
amounts. The allowance is based on an evaluation of the receivables account
with particular attention paid to the largest customer balances and the risk
profile of the entire portfolio.

Credit Risk

The Company
via United Sugars and Midwest Agri-Commodities and Minn-Dak Yeast grant credit
to food processors located throughout the United States. In addition, the
Company grants credit to member-growers located in North Dakota and Minnesota,
for sugarbeet seed, technology fees, and co-products.

Inventories

Inventories of
refined sugar, thick juice, 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 the 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 price that approximates weighted
average cost. During the periods when sugarbeets are purchased from growers,
but not yet converted into bin sugar or thick juice, 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.

58

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Reclassifications

Certain
accounts in the prior-year financial statements have been reclassified for
comparative purposes to conform to the presentation in the current-year
financial statements.

Prepaid Expense and Other Assets

Purchased
sugar allocation and prepaid insurance costs related to subsequent fiscals year
are recorded as assets and subsequently expensed to those years.

Deferred Costs and Product Values

All costs
incurred prior to the beginning of the Companys fiscal year that relate to
agricultural development and labor procurement costs, receiving and processing
the subsequent years sugarbeet crop are deferred. Similarly, the net
realizable values of products produced prior to the beginning of the Companys
fiscal year that relate to the subsequent years sugarbeet crop are deferred.
The net result of these deferred costs and grower sugar beet payables as of
August 31, 2010 of $8,825,181 has been recorded in the Companys balance sheet
in Deferred liabilities. Deferred costs as of August 31, 2009 and August 31,
2008 of $1,324,343 and $1,436,316 respectively were recorded in the Companys
balance sheet as current assets under the heading Deferred charges. There
were no deferred products produced prior to the fiscal years ending August 31,
2009 and August 31, 2008.

Property, Plant, Equipment and Depreciation

Property,
plant and equipment are stated at cost. Additions, renewals and betterments are
capitalized, whereas expenditures for maintenance and repairs are charged to
expense. The cost and related accumulated depreciation of assets retired or
sold are removed from the appropriate asset and depreciation accounts and the
resulting gain or loss is reflected in income.

It is the
policy of the Company to provide depreciation based on methods designed to
amortize the cost of the properties over their estimated useful lives.
Property, plant and equipment are depreciated for financial reporting purposes,
principally using declining balance methods, with estimated useful lives
ranging from 3 to 40 years. Statutory lives and methods are used for income tax
reporting purposes. Capital lease equipment is depreciated in accordance with
FASB ASC 840, Accounting for Leases.

Capitalized
assets include indirect costs such as fringe benefits, interest and engineering
when appropriate. The indirect costs capitalized for the years ended August 31,
2010, 2009 and 2008 were $257,391, $205,240, and $133,775, respectively. There
was no construction-period interest capitalized for the years ended August 31,
2010, 2009 and 2008.

Goodwill and Other Intangible Assets

In accordance
with Statement of Financial Accounting Standards FASB ASC 350 (Accounting
Standards Codification), Intangibles 
Goodwill and Other, the Company does not amortize goodwill. The
Company has annually evaluated goodwill and other intangible assets for
impairment and concluded that no impairment charge was necessary.

Costs
associated with the acquisition of permanent allocation rights will be
amortized over the remaining life of the farm program, currently estimated at
four crop years.

59

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Investments in Other Cooperatives and
Unconsolidated Marketing Cooperatives

Equity Value
Investments in Unconsolidated Marketing Cooperatives Investments - The
investments in United Sugars Corporation and Midwest -Commodities Company are
accounted for using the equity method, wherein the investment is recorded at
the amount of the underlying equity in the net assets of the investments and
adjusted to recognize the Companys share of the undistributed earnings or
losses. Transactions with these companies are considered to be related party
transactions.

Investments in
Other Cooperatives - The investments in stocks and capital credits of other
cooperatives are stated at cost, plus the Companys share of allocated
patronage and capital credits.

Income Taxes

A consolidated
federal income tax return is filed for the Company and its wholly owned
subsidiaries. Deferred income taxes are provided for in the timing of certain
temporary deductions/increases for financial and income tax reporting purposes.

Revenue Recognition

The Company
generally recognizes revenue at the point of customer receipt of product.

Accounting Estimates

The
preparation of financial statements in conformity with generally accepted
accounting principles requires Management to make estimates and assumptions
that affect the reported amounts of assets and liabilities at the date of the
financial statements and reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

Bond Origination Costs

Bond financing
costs incurred in connection with the financing of the construction projects
related to the processing facility have been capitalized. The Company is
amortizing the bond financing costs over the terms of the financing obtained
using a straight line method.

Amortization
of bond financing cost for the years ended August 31, 2010, 2009, and 2008
totaled $21,650, $28,362 and $28,362, respectively.

Self-Funded Insurance

The Contract
year for the Companys employee health plan starts January 1 and ends December
31. In fiscal year 2008, the Company operated with a fully insured employee
health plan through December 2007. In fiscal years ending August 31, 2009 and
2010, the Company operated with a self-funded employee health plan administered
by Blue Cross Blue Shield of North Dakota (BCBS) for the entire fiscal year. In
addition to administering claims, BCBS insures individual health claims in
excess of $100,000 and aggregate annual claims in excess of 120% of expected
claims for the plan year. The Company has exposure for claims incurred but not
paid at the end of each reporting period. Historical information supplied by
BCBS, based on employee enrollment and factors that are established at each
contract renewal, is used to estimate its liability for these claims. This
liability is estimated, actual claims experience may differ from Company
estimates.

60

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Uninsured Cash Balance

The Company
maintains cash balances at various financial institutions. Accounts at each
institution are insured by the Federal Deposit Insurance Corporation up to
certain limits. At times during the year, the Companys balances exceeded these
limits. The Company does not consider this a material risk.

Impairment and Disposal of Long-Lived Assets

The Company
accounts for impairment or disposal of long-lived assets in accordance with the
provisions of FASB ASC 144, Impairment or
Disposal of Long-Lived Assets.

Shipping and Handling Costs

Shipping and
handling costs are included in cost of product sold upon receipt of the
Companys product by its customers as well as the net realizable value
calculations of the inventory through allocations from the Companys marketing
cooperatives.

Advertising

The Companys
advertising costs are expensed as incurred. Advertising expense for the years
ended August 31, 2010, 2009 and 2008 totaled $19,875, $19,955 and $21,568,
respectively.

Pension Liability

In accordance
with FASB ASC 715, Accounting for Defined
Benefit Pension and Other Postretirement Plans, the Company records
the liability for its defined benefit retirement plan as the benefit obligation
in the financial statements. The Company has determined that the future tax
benefits associated with FASB ASC 715 are patronage sourced and, therefore,
will flow directly to the shareholder/growers. As a result, no future tax
benefit to the Company is recorded.

Fair Value

Fair value is
defined under FASB ASC 820, Accounting for
Fair Value Measurements as the exchange 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. Valuation
techniques used to measure fair value under FASB ASC 820 must maximize the use
of observable inputs and minimize the use of unobservable inputs. FASB ASC 820
established a fair value hierarchy that prioritizes the assumptions, or
inputs, used in applying valuation techniques. The three levels of inputs
within fair value hierarchy include:

| |   |                                                                                                                                                                                                                                                                                                                  
| | - | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | o | Level 1
 inputs were quoted prices (unadjusted) in active markets for identical assets
 or liabilities.                                                                                                                                                                                                          
| |   |                                                                                                                                                                                                                                                                                                                  
| | o | Level 2
 inputs include quoted prices for similar assets or liabilities in active
 markets, quoted prices for identical or similar assets or liabilities in
 markets that were not active, and inputs (other than quoted prices) that were
 observable for the asset or liability, either directly or indirectly.
| |   |                                                                                                                                                                                                                                                                                                                  
| | o | Level 3
 inputs are unobservable inputs for the asset or liability. Categorization
 within the valuation hierarchy is based upon the lowest level of input that
 is significant to the fair value measurement.                                                                                                   

Recently Issued Accounting Pronouncements

In January
2010, the FASB issued new standards in the ASC 820, Fair Value Measurements. 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 roll forward 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.

61

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Recently Adopted 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.

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.

In September
of 2006, the FASB issued FASB ASC 715, Accounting
for Defined Benefit Pension and Other Postretirement Plans. This
pronouncement was adopted by the Company with the notation that the Company
would continue to measure its plans liabilities as of May 31. However, with
full adoption of FASB ASC 715, the new measurement date for the plans
liabilities is August 31. In 2009, this resulted in a one-time addition to
liability and reduction of retained earnings of $284,896 for the August 31,
2009 financial statements.

Concentration and Sources of Labor

The Companys
total factory campaign and full time workforce consists of 457 employees, of
which 61% are covered by a collective bargaining agreement. The agreement
expires on May 31, 2011.

Risks and Uncertainties

Interest costs
- The Company is at risk for interest rate changes in both seasonal and
long-term debt. The Company has variable rates on a substantial majority of its
seasonal and long-term debt. Interest rate risk is not expected to have a
material impact on the Companys annual return to its growers. During the first
quarter of the Companys fiscal year ending August 31, 2011, the Company
adopted a policy to manage future risks associated with interest rate
variability.

Accumulated Other Comprehensive Income (Loss)

FASB ASC 220, Reporting Comprehensive Income (Loss),
establishes rules for reporting comprehensive income and loss and its
components. Accumulated other comprehensive loss consists of the FASB ASC 715, Accounting for Defined Benefit Pension and Other
Postretirement Plans adjustment and is presented in the Statement of
Members Investment. See Note 12.

NOTE 2 - INTANGIBLE ASSETS

Intangible
assets derived from the purchase of the non-controlling interest in Minn-Dak
Yeast include $110,152 of Goodwill, which is not being amortized; $514,000 for
Customer Relations and $62,000 for a Non-Compete Agreement, which are being
amortized on a straight-line basis over 5 years. The amortization of these
intangible assets for the years ended August 31, 2010, 2009 and 2008 was
$143,127, $143,127 and $143,127, respectively. The cumulative amortization of
these intangible assets as of August 31, 2010, 2009 and 2008 is $480,582,
$337,455 and $194,327 respectively.

62

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NOTE 3 - INVESTMENTS

The investment
in stock of other cooperatives and unconsolidated marketing cooperatives
consists of the following:

|                                    |  |      |            |      |   |            |  |   |            | 
|----------------------------------- |  | ---- | ---------- | ---- | - | ---------- |  | - | ---------- | 
|                                    |  | 2010 |            | 2009 |   | 2008       | 
|                                    |  |      |            |      |   |            |  |   |            | 
|Dakota
 Valley Electric Cooperative |  | $    | 6,166,685  |      | $ | 5,978,829  |  | $ | 5,632,704  | 
|CoBank                              |  |      | 4,379,995  |      |   | 4,964,489  |  |   | 4,801,609  | 
|United
 Sugars Corporation          |  |      | 369,509    |      |   | 216,396    |  |   | 971,797    | 
|Midwest
 Agri-Commodities           |  |      | 10,091     |      |   | 10,717     |  |   | 10,867     | 
|Other                               |  |      | 189,392    |      |   | 173,171    |  |   | 106,047    | 
|                                    |  |      |            |      |   |            |  |   |            | 
|                                    |  | $    | 11,115,672 |      | $ | 11,343,602 |  | $ | 11,523,024 | 

|         |                                                                           
|-------- | --------------------------------------------------------------------------
|NOTE 4 - | SHORT-TERM DEBT, LONG-TERM DEBT, CAPITAL LEASE PAYABLE, AND BONDS
 PAYABLE

Short-Term Debt

Information
regarding short-term debt for the years ended August 31, is as follows:

|                                                                                                       |  |      |            |      |   |            |  |   |            | 
|------------------------------------------------------------------------------------------------------ |  | ---- | ---------- | ---- | - | ---------- |  | - | ---------- | 
|                                                                                                       |  | 2010 |            | 2009 |   | 2008       | 
|                                                                                                       |  |      |            |      |   |            |  |   |            | 
|Seasonal
 loan with CoBank, due December 31, 2010, the interest rate was 2.76% as of
 August 31, 2010. |  | $    | 27,557,680 |      | $ | 18,977,978 |  | $ | 24,440,000 | 

The Company
had a $45,000,000 seasonal line of credit with CoBank, with $17,442,320
available on August 31, 2010. On November 15, 2010, the Company obtained a
seasonal line of Credit renewal for $85,000,000 through May 31, 2011; with a
step down to $45,000,000 from June 1, 2011 through December 31, 2011. The lines
are secured with a first lien on substantially all property and equipment and
current assets of the Company. The Company utilizes the USDAs CCC Sugar Loan
Program to provide an additional source of seasonal financing. Un-advanced
funds remaining from the $85,000,000 and $45,000,000 seasonal debt lines are
subject to a 0.375% commitment fee.

Maximum
borrowings, average borrowing levels and average interest rates for short-term
debt for the years ended August 31, are as follows:

|                         |  |      |            |      |   |            |   |   |            |  
|------------------------ |  | ---- | ---------- | ---- | - | ---------- | - | - | ---------- | -
|                         |  | 2010 |            | 2009 |   | 2008       |  
|                         |  |      |            |      |   |            |   |   |            |  
|Maximum borrowings       |  | $    | 50,390,927 |      | $ | 45,551,000 |   | $ | 57,767,930 |  
|                         |  |      |            |      |   |            |   |   |            |  
|Average borrowing levels |  | $    | 31,524,428 |      | $ | 28,410,018 |   | $ | 36,003,083 |  
|                         |  |      |            |      |   |            |   |   |            |  
|Average interest rates   |  |      | 2.37       | %    |   | 2.23       | % |   | 4.23       | %

63

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Long-Term Debt

Information regarding
long-term debt at August 31 is as follows:

|                                                                                                                                                                                                                                                                                                                                                                      |  |      |            |      |   |            |   |   |            |  
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | ---------- | ---- | - | ---------- | - | - | ---------- | -
|                                                                                                                                                                                                                                                                                                                                                                      |  | 2010 |            | 2009 |   | 2008       |  
|CoBank term
 loan, with fixed and variable rates, due in varying principal repayments
 through August 20, 2016 as of August 31, 2010, fixed interest rate currently
 at 5.60% and the variable interest
 rate was 1.66% as of August 31, 2010 with a first lien on substantially all
 property, equipment, and current assets of the Company located in Wahpeton,
 ND |  | $    | 19,134,260 |      | $ | 22,461,958 |   | $ | 15,789,655 |  
|                                                                                                                                                                                                                                                                                                                                                                      |  |      |            |      |   |            |   |   |            |  
|Less current portion                                                                                                                                                                                                                                                                                                                                                  |  |      | (2,495,773 | )    |   | (2,495,773 | ) |   | (2,493,103 | )
|                                                                                                                                                                                                                                                                                                                                                                      |  |      |            |      |   |            |   |   |            |  
|Long term portion                                                                                                                                                                                                                                                                                                                                                     |  | $    | 16,638,487 |      | $ | 19,966,185 |   | $ | 13,296,552 |  

In addition,
the Company may make special advance payments on its term loans with CoBank
after its seasonal loans have been paid in full, with the understanding that
the special advance payments will be re-advanced subject to the reinstatement
provisions, prior to the granting of any new seasonal loans. Any such advance
payments are subject to a commitment fee of 0.375% of the daily un-advanced
commitment.

Interest
expense for the years ended August 31, 2010, 2009 and 2008 totaled $1,974,363,
$2,017,946 and $3,230,496, respectively.

Minimum
principal amounts due on the Companys long-term debt are as follows:

|                            |  |   |            |  | 
|--------------------------- |  | - | ---------- |  | 
|Years ending August 31,     |  |   |            |  | 
|                            |  |   |            | 
|2011                        |  | $ | 2,495,773  | 
|2012                        |  |   | 3,327,697  | 
|2013                        |  |   | 3,327,697  | 
|2014                        |  |   | 3,327,697  | 
|2015                        |  |   | 3,327,697  | 
|Thereafter                  |  |   | 3,327,699  | 
|                            |  |   |            | 
|Total Principal amounts due |  | $ | 19,134,260 | 

As of August
31, 2010, the Company was in compliance with all loan covenants with the Bank.

Capital Leases

The Company is
the lessee of equipment under capital leases with varying expiration dates. The
assets and liabilities under capital leases are recorded at the lower of the
present value of the minimum lease payments or the fair value of the asset. For
the years ended August 31, 2010, 2009 and 2008 the capitalized costs of the
leased assets were $3,352,917, $2,960,658 and $821,950 respectively and
accumulated amortization was $853,734, $365,403 and $468,472 respectively. This
equipment is being depreciated in accordance with FASB ASC 840, Accounting for Leases. Depreciation of
assets under these capital leases is included in depreciation expense.

64

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Minimum future
lease payments under capital leases are as follows:

|                                            |  |   |           |  | 
|------------------------------------------- |  | - | --------- |  | 
|Years ending August 31,                     |  |   |           |  | 
|                                            |  |   |           | 
|2011                                        |  | $ | 600,729   | 
|2012                                        |  |   | 609,416   | 
|2013                                        |  |   | 960,621   | 
|2014                                        |  |   | 212,886   | 
|2015                                        |  |   | 463,711   | 
|                                            |  |   |           | 
|Total
 minimum lease payments               |  | $ | 2,847,363 | 
|                                            |  |   |           | 
|Less: Amount
 representing interest         |  |   | 314,566   | 
|                                            |  |   |           | 
|Present
 value of net minimum lease payment |  | $ | 2,532,797 | 
|                                            |  |   |           | 
|Less:
 Current Portion                      |  |   | 481,262   | 
|                                            |  |   |           | 
|Long Term
 Portion                          |  | $ | 2,051,535 | 

Bonds Payable

The Company
financed capital expenditures related to the processing facility through the
sale of Industrial Development Revenue Bonds, Series 2002, by Richland County
North Dakota. 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 bond
proceeds, 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. The Company guarantees the bonds. The Company has letter of credit
arrangements expiring February 28, 2011 with a bank that provides security for
obligations under the bonds payable totaling approximately $19,814,564 at
August 31, 2010. There were no outstanding advances under these letter of
credit arrangements as of August 31, 2010.

The Company
also has the right, but not the obligation to sell an additional $8.8 million
of tax-exempt bonds prior to December 31, 2010.

65

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Information regarding tax
exempt bonds payable at August 31 is as follows:

|                                                                                                                                                      |  |      |            |      |   |            |   |   |            |  
|----------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | ---------- | ---- | - | ---------- | - | - | ---------- | -
|                                                                                                                                                      |  | 2010 |            | 2009 |   | 2008       |  
|Richland County North Dakota Bonds, with
 variable rates, due in varying principal repayments through January 2011
 Refinanced January 28, 2010.      |  | $    |           |      | $ | 2,570,000  |   | $ | 3,755,000  |  
|                                                                                                                                                      |  |      |            |      |   |            |   |   |            |  
|Bonds with repayments through April 2019.
 Refinanced January 28, 2010.                                                                               |  |      |           |      |   | 10,920,000 |   |   | 11,745,000 |  
|                                                                                                                                                      |  |      |            |      |   |            |   |   |            |  
|Richland County North Dakota bonds, with
 variable interest rates due February 1, 2023, the effective interest rate was
 3.10% as of August 31, 2010. |  |      | 12,240,000 |      |   |            |   |   |            |  
|                                                                                                                                                      |  |      |            |      |   |            |   |   |            |  
|Richland County North Dakota bonds with
 variable interest rate due February 1, 2025; the effective interest rate was
 2.81% as of August 31, 2010.   |  |      | 7,000,000  |      |   |           |   |   |           |  
|                                                                                                                                                      |  | $    | 19,240,000 |      | $ | 13,490,000 |   | $ | 15,500,000 |  
|                                                                                                                                                      |  |      |            |      |   |            |   |   |            |  
|Less Current Portion                                                                                                                                  |  |      |           |      |   | (2,120,000 | ) |   | (2,010,000 | )
|Long Term Portion                                                                                                                                     |  | $    | 19,240,000 |      | $ | 11,370,000 |   | $ | 13,490,000 |  

Minimum future
principal payments required on the obligations under bonds payable are as
follows:

|                        |  |  |   |            | 
|----------------------- |  |  | - | ---------- | 
|Years ending August 31, |  |  |   |            | 
|                       
|2011                    |  |  | $ |           | 
|2012                    |  |  |   |           | 
|2013                    |  |  |   |           | 
|2014                    |  |  |   |           | 
|2015                    |  |  |   |           | 
|Thereafter              |  |  |   | 19,240,000 | 
|                       
|                        |  |  | $ | 19,240,000 | 

|                                                         |  |   |           | 
|-------------------------------------------------------- |  | - | --------- | 
|Funds Held
 In Trust as of August 31, 2010               |  | $ | 7,000,000 | 
|Funds
 Eligible for Draw-Current as of August 31, 2010   |  |   | 4,731,005 | 
|Funds
 Eligible for Draw-Long Term as of August 31, 2010 |  | $ | 2,268,995 | 

66

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NOTE 5 - MEMBERS INVESTMENT AND GROWER PAYMENTS

The ownership of non-dividend bearing common stock is restricted to a
member-producer, as defined in the by-laws of the Company. Each
member-producer shall own only one share of common stock and is entitled to one
vote at any meeting of the members. Each member-producer is also required to
purchase units of preferred stock and is entitled to grow the maximum acres per
unit of preferred stock as is authorized by the Board of Directors each farming
year. The Companys Board of Directors authorized the members to plant for the
fiscal years 2010, 2009 and 2008, respectively 1.60, 1.60 and 1.50 acres per
unit of preferred stock.A unit
consists of one share each of Class A, Class B and Class C preferred stock. The
preferred shares are non-voting and non-dividend bearing. The Companys Board
of Directors must approve all transfers and sales of stock.

The Companys
net income, determined in accordance with generally accepted accounting
principles consistently applied, shall be distributed annually on the basis of
delivered pounds of sugar, in cash or in the form of credits to each
member-producers patronage credit account as established on the books of the
Company. In the event of a loss in any one-year, the Company shall act in such
a manner as to first recoup the loss from those patrons who were patrons in the
year in which the loss occurred.

Under the
terms of the Company sugarbeet growing contracts with each of its
member-producers, the Company is obligated to pay the member-producers for
sugarbeets delivered at a price per pound of extractable and bonus sugar.
However, if, in the opinion of the Companys Board of Directors, the working
capital position of the Company is insufficient, the Company shall withhold
and/or retain from the price to be paid per pound of extractable sugar such
amounts as are deemed by the Board of Directors to be necessary for operations,
the deductions to be made at such time and in a manner as the Board of
Directors shall decide. The amount so withheld and or retained shall be evidenced in the
records of the Company by allocated patronage and/or per unit retains in favor
of the member-producers. The Board of Directors has the power to determine
whether such allocated patronage and/or per unit retains shall be qualified
or nonqualified for income tax purposes.

The Company
allocated non-qualified patronage to the members for the years ended August 31,
2010, 2009 and 2008 of $4,020,142, $3,727,840, and $5,117,244, respectively.

During the
year ended August 31, 2010, the Company revolved the remaining 66% of the
allocated patronage for the fiscal year ended August 31, 2004 totaling
$2,876,660 and 31% of the allocated patronage for the fiscal year ended August
31, 2005, totaling $1,143,629. In addition, for the fiscal period ending August
31, 2010, 2009 and 2008 the Company revolved $-0-, $101,701, and $-0- of
allocated patronage to certain deceased members estates.

During the
year ended August 31, 2009, the Company revolved the remaining 46% of the
allocated patronage for the fiscal year ended August 31, 2003 totaling
$2,199,418 and 33% of the allocated patronage for the fiscal year ended August
31, 2004, totaling $1,426,511.

During the
year ended August 31, 2008, the Company revolved the remaining 52% of the
allocated patronage for the fiscal year ended August 31, 2002 totaling
$1,868,412 and 54% of the allocated patronage for the fiscal year ended August
31, 2003, totaling $2,548,991.

NOTE 6 - INVESTMENT IN MARKETING COOPERATIVES

The Company
has formed common marketing agency agreements with United Sugars Corporation
(United Sugars) and Midwest Agri-Commodities (Midwest) to be the exclusive
marketing agents for all products produced by the Company and other member
processors.

67

---



The Companys
ownership requirement in United Sugars is calculated periodically and is based
on the average volume of sugar produced during the five previous fiscal years.
The investment is accounted for on the equity method and the amount of sales
and related costs recognized by each member processor is allocated based on
their pro-rata share of production for the year. The Company provided United
Sugars with cash advances on an ongoing basis for its share of operating and
marketing expenses incurred. During the years ended August 31, 2010, 2009 and
2008, the Company had advanced $26,299,502, $30,087,285 and $34,383,138, for
operating and marketing expenses incurred respectively. The Company had
outstanding advances due to/(from) United Sugars as of August 31, 2010, 2009
and 2008 of $(1,424,545), $(1,740,649) and $(2,064,475), respectively. The
Company accounts for United Sugars FASB ASC 715, Accounting for Defined Benefit Pension and Other Postretirement Plans
adjustment as an additional change in accumulated other comprehensive income
(loss).

The Company
has a one-fourth ownership interest in Midwest. The amount of the investment is
accounted for using the equity method. All sugarbeet pulp and a portion of the
molasses produced are sold by Midwest as an agent for the Company. The amount
of sales and related costs to be recognized by each owner is allocated based on
their pro-rata share of production for the year. The Company provided Midwest
with cash advances on an ongoing basis for its share of operating and marketing
expenses incurred by Midwest. The Company advanced Midwest during the years
ended August 31, 2010, 2009 and 2008, $9,235,346, $8,440,062 and $9,026,985,
respectively. The Company had outstanding advances due to Midwest as of August
31, 2010, 2009 and 2008 of $1,708,006, $634,852 and $572,020, respectively. The
owners of Midwest guarantee, on a pro-rata basis, the $9,000,000 short-term
line of credit that Midwest has with its primary lender. The Company accounts
for Midwests FASB ASC 715, Accounting for
Defined Benefit Pension and Other Postretirement Plans adjustment as
an additional change in accumulated other comprehensive income (loss).

NOTE 7 - 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 distributed as prescribed in Section 1382 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
non-patronage business, the Company shall have taxable income subject to
corporate income tax rates.

68

---



The
significant components of deferred tax assets and liabilities included on the
balance sheet at August 31 are as follows:

|                                                                                                                           |  |      |            |      |   |            |   |   |            |  
|-------------------------------------------------------------------------------------------------------------------------- |  | ---- | ---------- | ---- | - | ---------- | - | - | ---------- | -
|                                                                                                                           |  | 2010 |            | 2009 |   | 2008       |  
|                                                                                                                           |  |      |            |      |   |            |   |   |            |  
|Deferred tax assets                                                                                                        |  |      |            |      |   |            |   |   |            |  
|Non-qualified unit retains and allocated
 patronage due to members                                                         |  | $    | 11,319,500 |      | $ | 11,319,000 |   | $ | 11,319,000 |  
|Net operating loss carry-forwards                                                                                          |  |      | 7,241,900  |      |   | 6,121,600  |   |   | 5,706,455  |  
|Other                                                                                                                      |  |      | 2,443,123  |      |   | 1,113,741  |   |   | 2,427,545  |  
|                                                                                                                           |  |      |            |      |   |            |   |   |            |  
|Total deferred tax assets                                                                                                  |  |      | 21,004,523 |      |   | 18,554,341 |   |   | 19,453,000 |  
|                                                                                                                           |  |      |            |      |   |            |   |   |            |  
|Deferred tax liabilities                                                                                                   |  |      |            |      |   |            |   |   |            |  
|Depreciation                                                                                                               |  |      | 18,503,239 |      |   | 18,528,741 |   |   | 16,325,000 |  
|Other                                                                                                                      |  |      | 2,767,083  |      |   | 354,400    |   |   | 3,426,000  |  
|                                                                                                                           |  |      |            |      |   |            |   |   |            |  
|Total deferred tax liabilities                                                                                             |  |      | 21,270,323 |      |   | 18,883,141 |   |   | 19,751,000 |  
|                                                                                                                           |  |      |            |      |   |            |   |   |            |  
|Net deferred tax asset (liability)                                                                                         |  | $    | (265,800   | )    | $ | (328,800   | ) | $ | (298,000   | )
|                                                                                                                           |  |      |            |      |   |            |   |   |            |  
|Classified as follows                                                                                                      |  |      |            |      |   |            |   |   |            |  
|Current asset                                                                                                              |  | $    |           |      | $ | 25,600     |   | $ | 145,000    |  
|Long-term asset (liability)                                                                                                |  |      | (265,800   | )    |   | (354,400   | ) |   | (443,000   | )
|                                                                                                                           |  |      |            |      |   |            |   |   |            |  
|Net deferred tax asset (liability)                                                                                         |  | $    | (265,800   | )    | $ | (328,800   | ) | $ | (298,000   | )
|                                                                                                                           |  |      |            |      |   |            |   |   |            |  
|The state
 and federal operating loss carry forwards totaling approximately $18,100,000
 will expire in 2015 through 2029. | 
|                                                                                                                           |  |      |            |      |   |            |   |   |            |  
|The
 provision for income taxes is as follows:                                                                             |  |      |            |      |   |            |   |   |            |  
|                                                                                                                           |  |      |            |      |   |            |   |   |            |  
|                                                                                                                           |  | 2010 |            | 2009 |   | 2008       |  
|                                                                                                                           |  |      |            |      |   |            |   |   |            |  
|Current
 expense (benefit)                                                                                                 |  | $    | 406,579    |      |   | (535,945   | ) |   | 107,679    |  
|Net change
 in temporary differences                                                                                       |  |      | (62,999    | )    |   | 30,800     |   |   | 1,136,000  |  
|                                                                                                                           |  |      |            |      |   |            |   |   |            |  
|Provision for income taxes                                                                                                 |  | $    | 343,580    |      | $ | (505,145   | ) | $ | 1,243,679  |  

Deferred tax
assets are reduced by a valuation allowance to the extent Management concludes
it is more likely than not that the assets will not be realized. For the years
ended August 31, 2010, 2009, and 2008 the Company had a valuation allowance of
$705,400, $335,300 and $-0- respectively.

The items
accounting for the difference between expected tax (benefit) computed at the
federal statutory rate of 35% and the provision of income taxes were as follows:

|                                                           |  |      |       |      |  |       |   |  |       |  
|---------------------------------------------------------- |  | ---- | ----- | ---- |  | ----- | - |  | ----- | -
|                                                           |  | 2010 |       | 2009 |  | 2008  |  
|Expected
 federal income tax expense at the statutory rate |  |      | 35.0  | %    |  | 35.0  | % |  | 35.0  | %
|State tax
 expense at statutory rate                       |  |      | 5.0   | %    |  | 5.0   | % |  | 5.0   | %
|Payments to
 members                                       |  |      | -39.4 | %    |  | -40.0 | % |  | -38.3 | %
|Other, net                                                 |  |      | -0.3  | %    |  | -0.5  | % |  | -0.6  | %
|                                                           |  |      |       |      |  |       |   |  |       |  
|Effective
 tax rate                                        |  |      | 0.3   | %    |  | -0.5  | % |  | 1.1   | %

The Company allocates the patronage related benefits of the Domestic
Production Activities Deduction directly to its patrons. During the years ended
August 31, 2010, 2009 and 2008 the Company passed through $5,944,573,
$5,742,508 and $-0- respectively to its patrons.

Significant
temporary timing differences between financial and income tax reporting are as
follows:

| |    |                                                                                                                                                                                                                                                            
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 1. | When
 non-qualified allocated patronage is elected by the Board of Directors, the
 Company is not allowed an income tax deduction until they are paid in cash to
 the member-producers, where as qualified allocated patronage is deducted when
 declared. 
| | 2. | Depreciation
 - For financial reporting purposes, the Company uses straight-line and
 accelerated methods of depreciation with lives of 3 to 40 years, while, for
 income tax purposes, the Company uses required statutory depreciable lives
 and methods.

69

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| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | -- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | 3. | Non-qualified
 patronage credits from investments in other cooperatives - For financial
 statement purposes, the Company recognizes income when the patronage credit
 notification is received while, for income tax purposes, the companies
 recognize income when the patronage is received in cash.                                                                                                                                                                                                                                                                                                                                                    
| | 4. | Inventory
 capitalization - For income tax reporting purposes, certain overhead costs
 are included as a part of inventory costs in accordance with inventory
 capitalization rules. These costs are charged to expense as incurred for
 financial reporting purposes.                                                                                                                                                                                                                                                                                                                                                                                    
| | 5. | Recognition
 of vacation pay - For financial reporting purposes, vacation pay is charged
 to expense as accrued, whereas, for income tax purposes, vacation pay is
 deducted to the extent paid within 2 1⁄2 months of year end.                                                                                                                                                                                                                                                                                                                                                                                                                            
| | 6. | On August
 31, 2006, the Company had a net $915,560 in non-patronage long-term tax
 liability resulting from a combination of non-patronage tax issues that will
 reverse over the life of certain assets now considered to be member business
 related. The Company will amortize the $915,560 long-term liability over the
 approximate remaining book life of those assets generating the liability. The
 amortization of the long-term tax liability for the years ended August 31,
 2010, 2009 and 2008 was $88,600, $88,600 and $236,280, respectively leaving a
 remaining balance on August 31, 2010 of $265,800 to be amortized in future
 years.
| | 7. | Non-qualified
 deferred compensation is deducted for book purposes as incurred and deducted
 for tax purposes as paid.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    

Adoption of FASB ASC 740-10, Accounting for Uncertainty in Income Taxes

On September 1, 2007 The Company adopted the provisions of FASB ASC
740-10, Accounting for Uncertainty in
Income Taxes  An Interpretation of FASB Statement No. 109. FASB
ASC 740-10 prescribes a threshold for the financial statement recognition and
measurement of a tax position taken or expected to be taken in an income tax
return. FASB ASC 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 our 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.

As of August
31, 2010, the companys financial statements reflect the final settlement
pertaining to its only income tax activity qualifying for FASB ASC 740-10
treatment. For
purposes of FASB ASC Topic 740-10, the Company recognizes any interest and
penalties accrued related to unrecognized tax benefits in tax expense.

The total
amount of unrecognized tax benefits as of August 31, 2010 is $-0-.

The aggregate
changes in the balance of the Companys gross unrecognized tax benefits were as
follows for the periods indicated:

|                                                        |  |      |          |      |   |         |  |   |         | 
|------------------------------------------------------- |  | ---- | -------- | ---- | - | ------- |  | - | ------- | 
|Year Ended
 August 31,                                  |  | 2010 |          | 2009 |   | 2008    | 
|                                                       
|Balance of
 unrecognized tax benefits beginning balance |  | $    | 274,075  |      | $ | 256,075 |  | $ |        | 
|Increases for tax positions related to
 current year    |  |      | 13,500   |      |   | 18,000  |  |   |        | 
|Increases for tax positions related to
 prior year      |  |      |         |      |   |         |  |   | 256,075 | 
|Reductions for tax positions of prior years             |  |      |         |      |   |        |  |   |        | 
|Decreases related to settlements                        |  |      | (287,575 | )    |   |        |  |   |        | 
|Reductions due to lapsed statute of
 limitations        |  |      |         |      |   |        |  |   |        | 
|Balance of
 unrecognized tax benefits at August 31      |  | $    |         |      | $ | 274,075 |  | $ | 256,075 | 

70

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Tax returns
filed as of August 31, 2004 through current filings are open for examination.

NOTE 8 - DEPRECIATION

The Companys
depreciation expense for the years ended August 31, 2010, 2009 and 2008 was
$8,808,312, $8,440,002 and $8,115,079, respectively.

NOTE 9 - ENVIRONMENTAL MATTERS

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 and expanding control program designed
to meet these environmental laws and regulations. While the Company will
continue to have ongoing environmental compliance requirements, currently there
are no pending regulatory enforcement actions and the Company believes that it
is in substantial compliance with applicable environmental laws and
regulations.

The Company
cannot predict whether future changes in environmental laws or regulations
might increase the cost of operating its facilities and conducting its
business. Any such changes could have financial consequences for the Company
and its members.

NOTE 10 - COMMITMENTS AND CONTINGENCIES

During fiscal
year 1997, the Company entered into a long-term lease agreement on a property,
which included providing a guarantee for the notes to finance the leased
property. The Companys contingent liability related to these notes totaled
$555,286 as of August 31, 2010.

During fiscal
year 2000, the Company sold certain notes receivable with recourse. The
Companys contingent liability related to these notes totaled $23,585 as of
August 31, 2010.

During the fiscal year 2010, the Company entered into a coal purchase
agreement requiring a minimum annual purchase of coal in the amount of $1.6 million for each of the
fiscal years ending August 31, 2011, 2012 and 2013 respectively.

NOTE 11 - OPERATING LEASES

The Company is
a party to various operating leases for vehicles and equipment. Future minimum
payments for long-term leases for the years ending August 31, under these
obligations, are as follows:

|                        |  |   |         | 
|----------------------- |  | - | ------- | 
|Years ending August 31, |  |   |        
|                        |  |   |         | 
|2011                    |  | $ | 74,540  | 
|2012                    |  |   | 67,258  | 
|2013                    |  |   | 38,222  | 
|                        |  | $ | 180,020 | 

Operating
lease and contract expenses for the years ended August 31, 2010, 2009 and 2008,
totaled $960,068, $1,145,998 and $1,535,475, respectively.

71

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NOTE 12 - EMPLOYEE BENEFIT PLANS

401(k) Plan

The Company
has a qualified 401(k) employee benefit plan that covers all employees meeting
eligibility requirements. The Companys matching contribution to the plan is at
a level of 100% of employee contributions, with a maximum of 4% of
compensation. Employer contributions to the plan for the years ended August 31,
2010, 2009 and 2008 totaled $660,677, $637,822 and $631,063, respectively.

Effective
September 1, 2007, individual participating employees who have met the
non-elective eligibility requirements of the plan received a contribution of 4%
of their compensation each pay period as provided by the plan. Individuals
participating in this benefit are excluded from the non-contributory defined
benefit plan. Employer contributions to the plan for the years ended August 31,
2010, 2009, and 2008 totaled $79,385, $65,657 and $53,907, respectively.

Pension plan

The Company
has a non-contributory defined benefit plan, which covers substantially all
employees who meet certain requirements of age, hours worked per year, years of
service, and age at retirement or termination. The pension funding policy is to
deposit amounts allowable by law with independent trustees. Funds deposited
with independent trustees maintained to provide pension benefits to plan
participants and their beneficiaries. The Companys measurement date was
changed in 2009 which resulted in measurement dates of August 31, 2010 and
2009, and for the prior year the measurement date was May 31, 2008.

In August
2006, the Pension Protection Act (PPA) was signed into law. The PPA modified
the funding requirements for defined benefit pension plans by subjecting
defined benefit plans to 100% of the current liability-funding target. Defined
benefit plans with a funding status of less than 80% of the current liability
are defined as being at risk. These provisions do not apply to plans with
less than 500 participants. As of the last plan filing, the Companys plan had
477 participants.

In September
2006, the FASB issued FASB ASC 715, Accounting
for Defined Benefit Pension and Other Postretirement Plans. This
standard requires employers to recognize the underfunded or overfunded status
of defined benefit pension and Post-retirement plans as an asset or liability
in its statement of financial position, and recognize changes in the funded
status in the year in which the changes occur through accumulated other
comprehensive loss, which is a component of stockholders equity. As a result
of the application of FASB ASC 715, Accounting
for Defined Benefit Pension and Other Postretirement Plans as of
August 31, 2010, 2009 and 2008 the Company increased liabilities by $6,802,344,
$7,547,180 and $639,310. These liabilities were offset to accumulated other
comprehensive income (loss). As a result of FASB ASC 715, in the year ended
August 31, 2010, 2009 and 2008 the Company recognized an increase in
accumulated other comprehensive income/(loss) of ($6,274,921), ($7,080,155) and
($2,218,282), respectively. In accordance with FASB ASC 715, the measurement
date was moved from May 31, 2008 to August 31, 2009 creating a fifteen-month
period vs. twelve-month period the preceding year.

72

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The following
table sets forth the plans funded status at August 31:

|                                                   |  |      |             |      |   |             |   |   |            |  
|-------------------------------------------------- |  | ---- | ----------- | ---- | - | ----------- | - | - | ---------- | -
|                                                   |  | 2010 |             | 2009 |   | 2008        |  
|                                                   |  |      |             |      |   |             |   |   |            |  
|Change in pension benefit obligation               |  |      |             |      |   |             |   |   |            |  
|Benefit obligation at beginning of year            |  | $    | 31,076,170  |      | $ | 26,101,309  |   | $ | 25,712,339 |  
|Service cost                                       |  |      | 1,003,895   |      |   | 1,284,966   |   |   | 940,135    |  
|Interest cost                                      |  |      | 1,843,576   |      |   | 2,175,966   |   |   | 1,558,671  |  
|Experience (gain)/loss due to participant
 changes |  |      | 7,260,190   |      |   | 2,774,339   |   |   | (1,351,129 | )
|Benefits paid                                      |  |      | (1,051,850  | )    |   | (1,260,410  | ) |   | (758,707   | )
|                                                   |  |      |             |      |   |             |   |   |            |  
|Benefit obligation at end of year                  |  |      | 40,131,981  |      |   | 31,076,170  |   |   | 26,101,309 |  
|                                                   |  |      |             |      |   |             |   |   |            |  
|Change in plan assets                              |  |      |             |      |   |             |   |   |            |  
|Fair value of plan assets at beginning of
 year    |  |      | 18,480,578  |      |   | 20,158,363  |   |   | 20,277,824 |  
|Actual return on plan assets                       |  |      | 1,882,201   |      |   | (2,494,214  | ) |   | (360,683   | )
|Employer contribution                              |  |      | 1,512,580   |      |   | 2,097,024   |   |   | 1,060,000  |  
|Benefits and expenses paid                         |  |      | (1,068,267  | )    |   | (1,280,595  | ) |   | (818,778   | )
|                                                   |  |      |             |      |   |             |   |   |            |  
|Fair value of plan assets at end of year           |  |      | 20,807,092  |      |   | 18,480,578  |   |   | 20,158,363 |  
|                                                   |  |      |             |      |   |             |   |   |            |  
|Accrued pension benefit cost liability             |  | $    | (19,324,889 | )    | $ | (12,595,592 | ) | $ | (5,942,946 | )

|                       |  |                  |             |      |   |             |   |   |            |  
|---------------------- |  | ---------------- | ----------- | ---- | - | ----------- | - | - | ---------- | -
|                       |  | Pension Benefits |            
|                       |  | 2010             |             | 2009 |   | 2008        |  
|                       |  |                  |             |      |   |             |   |   |            |  
|Non-current
 assets    |  | $                |            |      | $ |            |   | $ |           |  
|Current
 liabilities   |  |                  |            |      |   |            |   |   |           |  
|Noncurrent liabilities |  |                  | (19,324,889 | )    |   | (12,595,592 | ) |   | (5,942,946 | )
|                       |  | $                | (19,324,889 | )    | $ | (12,595,592 | ) | $ | (5,942,946 | )

The estimated
amounts that will be amortized from Accumulated Other Comprehensive Income to
future fiscal years are as follows:

|                    |  |      |            |      |   |            |  |   |           | 
|------------------- |  | ---- | ---------- | ---- | - | ---------- |  | - | --------- | 
|                    |  | 2010 |            | 2009 |   | 2008       | 
|                    |  |      |            |      |   |            |  |   |           | 
|Accumulated
 loss   |  | $    | 17,802,784 |      | $ | 11,525,420 |  | $ | 4,436,275 | 
|Prior
 service cost |  |      | 104,828    |      |   | 136,860    |  |   | 169,107   | 
|                    |  | $    | 17,907,612 |      | $ | 11,662,280 |  | $ | 4,605,382 | 

The
accumulated benefit obligations for all defined benefit pension plans for the
years ended August 31, 2010, 2009 and 2008 were $29,641,358, $22,858,793 and
$19,721,092, respectively.

|                                             |  |      |      |      |  |      |  |  |      | 
|-------------------------------------------- |  | ---- | ---- | ---- |  | ---- |  |  | ---- | 
|                                             |  | 2010 |      | 2009 |  | 2008 | 
|                                             |  |      |      |      |  |      |  |  |      | 
|Weighted-average assumptions as of August 31 |  |      |      |      |  |      |  |  |      | 
|Discount rate                                |  |      | 5.2% |      |  | 6.2% |  |  | 6.5% | 
|Expected return on plan assets               |  |      | 8.0% |      |  | 8.0% |  |  | 8.0% | 
|Rate of total compensation increase          |  |      | 4.5% |      |  | 4.3% |  |  | 4.3% | 

73

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The net
periodic pension cost for the years ended August 31, includes the following
components:

|                                                |  |      |            |      |   |            |   |   |            |  
|----------------------------------------------- |  | ---- | ---------- | ---- | - | ---------- | - | - | ---------- | -
|                                                |  | 2010 |            | 2009 |   | 2008       |  
|                                                |  |      |            |      |   |            |   |   |            |  
|Components on net periodic pension benefit cost |  |      |            |      |   |            |   |   |            |  
|Service cost                                    |  | $    | 1,003,895  |      | $ | 1,284,966  |   | $ | 940,135    |  
|Interest cost                                   |  |      | 1,843,576  |      |   | 2,175,966  |   |   | 1,558,671  |  
|Expected return on plan assets                  |  |      | (1,492,426 | )    |   | (2,036,453 | ) |   | (1,621,109 | )
|Amortization of prior service cost              |  |      | 32,032     |      |   | 32,247     |   |   | 32,782     |  
|Amortization of transition amount               |  |      |           |      |   |           |   |   |           |  
|Amortization of net (gain) or loss              |  |      | 609,468    |      |   | 236,046    |   |   |           |  
|                                                |  |      |            |      |   |            |   |   |            |  
|Net periodic pension benefit cost               |  | $    | 1,996,545  |      | $ | 1,692,772  |   | $ | 910,479    |  

The 2009 data
includes a fifteen-month period. The net periodic cost was allocated as follows:

|                                 |  |   |           | 
|-------------------------------- |  | - | --------- | 
|Current
 Period                  |  | $ | 1,407,876 | 
|Adjustment
 to Retained Earnings |  |   | 284,896   | 
|Total                            |  | $ | 1,692,772 | 

The Companys
pension plan weighted-average asset allocation at August 31, by asset category
is as follows:

|                   |  |      |     |      |  |      |   |  |     |  
|------------------ |  | ---- | --- | ---- |  | ---- | - |  | --- | -
|                   |  | 2010 |     | 2009 |  | 2008 |  
|                   |  |      |     |      |  |      |   |  |     |  
|Asset category     |  |      |     |      |  |      |   |  |     |  
|Equity
 securities |  |      | 59  | %    |  | 61   | % |  | 66  | %
|Debt
 securities   |  |      | 35  | %    |  | 37   | % |  | 31  | %
|Real estate        |  |      | 4   | %    |  | 0    | % |  | 0   | %
|Other              |  |      | 2   | %    |  | 2    | % |  | 3   | %
|                   |  |      |     |      |  |      |   |  |     |  
|Total              |  |      | 100 | %    |  | 100  | % |  | 100 | %

74

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The fair
values of the companys pension plan assets at August 31, 2010, by asset
category are as follows:

|                                                                 |  |       |            |                                             |   |                                           |  |                                             |   |  |   |   | 
|---------------------------------------------------------------- |  | ----- | ---------- | ------------------------------------------- | - | ----------------------------------------- |  | ------------------------------------------- | - |  | - | - | 
|Pension Plan Assets
 Fair Value Measurements at
 August 31, 2010 | 
|                                                                 |  |       |            |                                             |   |                                           |  |                                             |  
|                                                                 |  | Total |            | Quoted Prices in
 Active Markets
 (Level 1) |   | Significant
 Observable
 Inputs (Level 2) |  | Significant
 Unobservable
 Inputs (Level 3) |  
|                                                                 |  |       |            |                                             |   |                                           |  |                                             |   |  |   |   | 
|Cash and
 Cash Equivalents                                       |  | $     | 544,983    |                                             | $ | 544,983                                   |  | $                                           |  |  | $ |  | 
|Domestic
 Common Stocks                                          |  | $     | 2,708,722  |                                             | $ | 2,708,722                                 |  | $                                           |  |  | $ |  | 
|Foreign
 Stocks                                                  |  | $     | 85,377     |                                             | $ | 85,377                                    |  | $                                           |  |  | $ |  | 
|Mutual
 Funds-Equity                                             |  | $     | 8,018,686  |                                             | $ | 8,018,686                                 |  | $                                           |  |  | $ |  | 
|Mutual
 Funds-Fixed Income                                       |  | $     | 6,978,002  |                                             | $ | 6,978,002                                 |  | $                                           |  |  | $ |  | 
|Core Equity
 Account                                             |  | $     | 296,753    |                                             | $ | 296,753                                   |  | $                                           |  |  | $ |  | 
|International
 Equity Account                                    |  | $     | 2,174,569  |                                             | $ | 2,174,569                                 |  | $                                           |  |  | $ |  | 
|                                                                 |  | $     | 20,807,092 |                                             | $ | 20,807,092                                |  | $                                           |  |  | $ |  | 

The fair
values of the companys pension plan assets at August 31, 2009, by asset
category are as follows:

|                                                                 |  |       |            |                                             |   |                                           |  |                                             |   |  |   |   | 
|---------------------------------------------------------------- |  | ----- | ---------- | ------------------------------------------- | - | ----------------------------------------- |  | ------------------------------------------- | - |  | - | - | 
|Pension Plan Assets
 Fair Value Measurements at
 August 31, 2009 | 
|                                                                 |  |       |            |                                             |   |                                           |  |                                             |   |  |   |   | 
|                                                                 |  | Total |            | Quoted Prices in
 Active Markets
 (Level 1) |   | Significant
 Observable
 Inputs (Level 2) |  | Significant
 Unobservable
 Inputs (Level 3) |  
|                                                                 |  |       |            |                                             |   |                                           |  |                                             |   |  |   |   | 
|Cash and
 Cash Equivalents                                       |  | $     | 924,841    |                                             | $ | 924,841                                   |  | $                                           |  |  | $ |  | 
|Domestic
 Common Stocks                                          |  | $     | 2,400,669  |                                             | $ | 2,400,669                                 |  | $                                           |  |  | $ |  | 
|Foreign
 Stocks                                                  |  | $     | 131,010    |                                             | $ | 131,010                                   |  | $                                           |  |  | $ |  | 
|Mutual
 Funds-Equity                                             |  | $     | 6,482,750  |                                             | $ | 6,482,750                                 |  | $                                           |  |  | $ |  | 
|Mutual
 Funds-Fixed Income                                       |  | $     | 6,460,184  |                                             | $ | 6,460,184                                 |  | $                                           |  |  | $ |  | 
|Core Equity
 Account                                             |  | $     | 440,639    |                                             | $ | 440,639                                   |  | $                                           |  |  | $ |  | 
|International
 Equity Account                                    |  | $     | 1,640,485  |                                             | $ | 1,640,485                                 |  | $                                           |  |  | $ |  | 
|                                                                 |  | $     | 18,480,578 |                                             | $ | 18,480,578                                |  | $                                           |  |  | $ |  | 

75

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The fair values of the
companys pension plan assets at August 31, 2008, by asset category are as
follows:

|                                                                 |  |       |            |                                             |   |                                           |  |                                             |   |  |   |   | 
|---------------------------------------------------------------- |  | ----- | ---------- | ------------------------------------------- | - | ----------------------------------------- |  | ------------------------------------------- | - |  | - | - | 
|Pension Plan Assets
 Fair Value Measurements at
 August 31, 2008 | 
|                                                                 |  |       |            |                                             |   |                                           |  |                                             |  
|                                                                 |  | Total |            | Quoted Prices in
 Active Markets
 (Level 1) |   | Significant
 Observable
 Inputs (Level 2) |  | Significant
 Unobservable
 Inputs (Level 3) |  
|                                                                 |  |       |            |                                             |   |                                           |  |                                             |   |  |   |   | 
|Cash and
 Cash Equivalents                                       |  | $     | 943,634    |                                             | $ | 943,634                                   |  | $                                           |  |  | $ |  | 
|Domestic
 Common Stocks                                          |  | $     | 2,580,263  |                                             | $ | 2,580,263                                 |  | $                                           |  |  | $ |  | 
|Foreign
 Stocks                                                  |  | $     | 151,351    |                                             | $ | 151,351                                   |  | $                                           |  |  | $ |  | 
|Mutual
 Funds-Equity                                             |  | $     | 8,737,566  |                                             | $ | 8,737,566                                 |  | $                                           |  |  | $ |  | 
|Mutual
 Funds-Fixed Income                                       |  | $     | 5,893,353  |                                             | $ | 5,893,353                                 |  | $                                           |  |  | $ |  | 
|Core Equity
 Account                                             |  | $     | 568,645    |                                             | $ | 568,645                                   |  | $                                           |  |  | $ |  | 
|International
 Equity Account                                    |  | $     | 1,283,551  |                                             | $ | 1,283,551                                 |  | $                                           |  |  | $ |  | 
|                                                                 |  | $     | 20,158,363 |                                             | $ | 20,158,363                                |  | $                                           |  |  | $ |  | 

Discount Rate

The Companys
methodology for selecting the discount rate for the Companys plan was to seek
guidance from outside pension experts for determination of the appropriate
discount rate through August 31, 2008 and use the Mercer Index for dates
beginning September 1, 2008. The decision to use the Mercer index rate was
intended to provide an outside unbiased benchmark for this key accounting
assumption.

Investment Philosophy

The Companys Board of Directors appoints individuals to serve as Trustees of the Companys Pension Plans.
The Trustees approve the
Investment Policy Statement for the Companys Pension Plans.  The Pension Operating committee is responsible for administering and
following the Investment Policy Statement.  The independent Investment Consultant provides investment advice and assistance regarding
the investments of the Trust, analyzes investment expenses, and negotiates fees of Investment Managers and Custodians.  The
Investment Policy Statement is designed to diversify against the risk of large losses while still achieving long-term return goals on
a historical basis.  The Investment Policy is reviewed at least annually by the Operating Committee who recommends changes to the
Trustees.  Diversification of investment risk is consistent with other pension plans of similar size and demographics as reviewed by
the Companys independent Investment Consultant.  The asset allocation targets for the plan consist of five primary areas: Domestic
Equity, International Equity, Real Estate, Marketable Alternatives and Fixed Income.  Cash allocations are allowed only as necessary
for impending benefit payments.  The stated goal for each allocation target is to exceed the return of its corresponding benchmark
without exposure to excessive risk.

76

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Percentage of Pension Plan Assets by Asset
Class as of August 31, 2010

|                                   |  |              |  |                    |   | 
|---------------------------------- |  | ------------ |  | ------------------ | - | 
|Asset
 Class                       |  | Target Range |  | Actual Allocations |  
|                                   |  |              |  |                    |   | 
|Large Cap Us
 Common Stocks        |  | 25% - 30%    |  | 30.8               | % | 
|                                   |  |              |  |                    |   | 
|Mid and
 Small Cap US Common Stock |  | 10% - 20%    |  | 14.7               | % | 
|                                   |  |              |  |                    |   | 
|Total
 Domestic Equity             |  | 40% - 50%    |  | 45.5               | % | 
|                                   |  |              |  |                    |   | 
|International
 (Non US) Equity     |  | 15% - 21%    |  | 15.8               | % | 
|                                   |  |              |  |                    |   | 
|Total Equity                       |  | 58% - 68%    |  | 61.3               | % | 
|                                   |  |              |  |                    |   | 
|Real Estate                        |  | 2.5% - 5.5%  |  | 4.4                | % | 
|                                   |  |              |  |                    |   | 
|Marketable
 Alternatives           |  | 1.5% - 4.5%  |  | 3.3                | % | 
|                                   |  |              |  |                    |   | 
|Total Fixed
 Income                |  | 25% - 40%    |  | 31.0               | % | 
|                                   |  |              |  |                    |   | 
|Cash                               |  | 0% - 5%      |  | 0.0                | % | 
|                                   |  |              |  |                    |   | 

Prohibited InvestmentsNon-Marketable Securities 
Short Sales or Purchases on Margin

There have
been no changes in the valuation methodologies used at August 31, 2010, 2009
and 2008. The Plans investment in any category over 10% is diversified through
the use of multiple investment alternatives to reduce risk.

Expected Return on Plan Assets

The expected
long-term rate of return on plan assets should, over time, approximate the
historical 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.

Contributions

The Company
expects to contribute $1,790,000 to its pension plan in 2011.

Distributions (Expected Future)

The following
benefit payments, which reflect expected future service, as appropriate, are
expected to be paid:

77

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|                          |  |   |            | 
|------------------------- |  | - | ---------- | 
|2011                      |  | $ | 929,000    | 
|2012                      |  |   | 884,000    | 
|2013                      |  |   | 968,000    | 
|2014                      |  |   | 899,000    | 
|2015                      |  |   | 1,038,000  | 
|Thereafter,
 through 2020 |  |   | 8,426,000  | 
|                          |  | $ | 13,144,000 | 

As a result of
FASB ASC 715, Accounting for Defined Benefit
Pension and Other Postretirement Plans, the Company has recognized a
charge to accumulated other comprehensive loss as follows:

|                              |  |      |            |      |   |            |  |   |           | 
|----------------------------- |  | ---- | ---------- | ---- | - | ---------- |  | - | --------- | 
|Fiscal
 Year Ended August 31: |  | 2010 |            | 2009 |   | 2008       | 
|                              |  |      |            |      |   |            |  |   |           | 
|Beginning Balance             |  | $    | 12,811,235 |      | $ | 4,890,516  |  |   | 2,368,458 | 
|Minn Dak Farmers Cooperative  |  |      | 6,274,921  |      |   | 7,080,155  |  |   | 2,218,280 | 
|United Sugars                 |  |      | (315,151   | )    |   | 771,949    |  |   | 209,017   | 
|Midwest Agri                  |  |      | 66,152     |      |   | 68,615     |  |   | 94,761    | 
|                              |  |      |            |      |   |            |  |   |           | 
|Ending Balance                |  | $    | 18,837,157 |      | $ | 12,811,235 |  | $ | 4,890,516 | 

Non-qualified benefit plans

The Company has various non-qualified plans for those employees who
meet certain requirements.

The Supplemental Executive Retirement Plan (SERP) is designed to
provide an employee who exceeds the annual compensation limit of the Companys
defined benefit plan with a benefit as if the annual compensation limit didnt
apply. This plan is unfunded; therefore there are no assets associated with
this plan. The cumulative liability for this plan for the years ended August
31, 2010, 2009, and 2008 was $304,815, $231,768 and $276,562, respectively.

The Non-Qualified Deferred Compensation plan allows an employee to
defer wages to a future date. The deferment becomes part of the company assets.
To receive payments under this plan, the participant must meet the requirements
of the plan or separate from the Company. The cumulative assets and liabilities
for this plan for the years ended August 31, 2010, 2009, and 2008 were
$411,507, $365,015 and $385,745, respectively.

Non-Qualified key-life insurance - The Company has life insurance
policies on a former executive sufficient to cover a $500,000 obligation to the
former executives estate. The policies are self sufficient, and requiring no
additional funding for the term of the policies.

NOTE 13 - FAIR VALUE MEASUREMENTS

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.

78

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| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | o | Long-Term Debt, Inclusive of Current Maturities
 - Based upon discounted cash flows and current borrowing rates with similar
 maturities, the book value of the Bank debt of approximately $19.1 million,
 $22.5 million and $15.8 million compares to fair values of $19.2 million,
 $22.8 million and $16.1 million respectively as of August 31, 2010, 2009 and
 2008. Also included in the Companys long-term debt was $19.2 million, $13.5,
 million and $15.5 million in tax exempt bonds, in comparison to the fair
 value of $19.2 million, $13.5 million and $15.5 million respectively for the
 periods ending August 31, 2010, 2009 and 2008.
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | o | Proceeds for Bond Issuance Transferred to Restricted Investment included
 in the Companys current bond trust and restricted long-term other assets was
 $7.0 million in comparison to the fair value of $7.0 million as of August 31,
 2010.                                                                                                                                                                                                                                                                                                                                                                                                           
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | o | 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.                                                                                                                                                                                                                                        

NOTE 14  SUBSEQUENT EVENTS

The Company
has considered subsequent events through the date the financial statements were
issued.

79

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|          |         
|--------- | --------
|Item 15c. | Exhibits

|       |  |                                                                                                                                                                                                                                                                                                
|------ |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Index  |  |                                                                                                                                                                                                                                                                                                
|3(i)   |  | Articles of Amendment to the Articles of
 Incorporation of Minn-Dak Farmers Cooperative. Incorporated by reference from
 the Companys Annual Report on Form 10-K for the fiscal year ended August 31,
 1996 as filed on November 21, 1996.                                                    
|3(ii)  |  | Articles of Incorporation of Minn-Dak
 Farmers Cooperative. Incorporated by reference from the Companys
 Registration Statement on Form S-1 (File No. 33-94644), declared effective
 September 11, 1995.                                                                                      
|3(iii) |  | Amended Bylaws of Minn-Dak Farmers
 Cooperative. Incorporated by reference from the Companys7 Annual Report on
 Form 10-K for the fiscal year ended August 31, 2008 as filed on November 26,
 2008.                                                                                           
|10(a)  |  | Growers Agreement (example of agreement
 which each Shareholder is required to sign).                                                                                                                                                                                                         
|10(b)  |  | Amended and Restated Uniform Member
 Marketing Agreement by and between United Sugars Corporation and Minn-Dak
 Farmers Cooperative. Incorporated by reference from the Companys Annual
 Report on Form 10-k for the fiscal year ended August 31, 2007 as filed
 November 29, 2007.           
|10(e)  |  | Memorandum of Understanding and Uniform
 Member Agreement by and between Midwest Agri-Commodities Company and Minn-Dak
 Farmers Cooperative. Incorporated by reference from the Companys Annual Report
 on Form 10-K for the fiscal year ended August 31, 2006 as filed on November
 28, 2006.
|10(k)  |  | Agreement for Electrical Service.
 Incorporated by reference from the Companys Registration Statement on Form
 S-1 (File No. 33-94644), declared effective September 11, 1995.                                                                                                                
|10(l)  |  | Master Coal Purchase and Sale Agreement and
 Railroad Equipment Lease Agreement (Confidential Treatment has been requested
 as to certain provisions).                                                                                                                                         
|10(m)  |  | Minn-Dak Farmers Cooperative Pension Plan.
 Incorporated by reference from the Companys Registration Statement on Form
 S-1 (File No. 33-94644), declared effective September 11, 1995.                                                                                                       
|10(p)  |  | Amendment to Minn-Dak Farmers Cooperative
 Pension Plan. Incorporated by reference from the Companys Annual Report on
 Form 10-K for the fiscal year ended August 31, 1997 as filed on November 25,
 1997.                                                                                    
|10(q)  |  | Amendment to Minn-Dak Farmers Cooperative
 Pension Plan. Incorporated by reference from the Companys Annual Report on
 Form 10-K for the fiscal year ended August 31, 1998 as filed on November 24,
 1998.                                                                                    
|10(r)  |  | David H. Roche Employment Agreement.
 Incorporated by reference from the Companys Annual Report on Form 10-K for
 the fiscal year ended August 31, 2001 as filed on November 29, 2001 and
 Amended and Restated Agreement dated August 27, 2010.                                              
|10(s)  |  | Richland County Development Revenue
 Refunding Bond agreement dated February 18, 2010.                                                                                                                                                                                                         
|10(t)  |  | CoBank revolving credit supplement dated
 November 15, 2010.                                                                                                                                                                                                                                   
|12     |  | Statement re Computation of Ratio of Net
 Proceeds to Fixed Charges.                                                                                                                                                                                                                           
|21     |  | Subsidiaries of the Registrant.
 Incorporated by reference from the Companys Registration Statement on Form
 S-1 (File No. 33-94644), declared effective September 11, 1995.                                                                                                                  
|31.1   |  | Certification of the President/Chief
 Executive Officer in accordance with Section 302 of the Sarbanes-Oxley Act.                                                                                                                                                                              
|31.2   |  | Certification of the Executive Vice
 President/Chief Financial Officer in accordance with Section 302 of the
 Sarbanes-Oxley Act.                                                                                                                                                              
|31.3   |  | Certification of the Controller/Chief
 Accounting Officer in accordance with Section 302 of the Sarbanes-Oxley Act.                                                                                                                                                                            
|32     |  | Certification of the President/Chief
 Executive Officer and the Executive Vice President/Chief Financial Officer in
 accordance with Section 906 of the Sarbanes-Oxley Act.                                                                                                                    
|99.1   |  | Audit Committee Charter. Incorporated by
 reference from the Companys Annual Report on Form 10-K for the fiscal year
 ended August 31, 2003 as filed on November 26, 2003.                                                                                                                    

80

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SIGNATURES

PURSUANT TO
THE REQUIREMENTS OF SECTION 13 OR 15(d) 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
| |                               |                                                         
| | BY                            | /S/ David H.
 Roche                                     
| |                               | DAVID H.
 ROCHE, PRESIDENT 
 AND CHIEF EXECUTIVE OFFICER

PURSUANT TO
THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS REPORT HAS BEEN
SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE REGISTRANT AND IN THE
CAPACITIES AND ON THE DUTIES INDICATED.

|                       |  |                              |  |            
|---------------------- |  | ---------------------------- |  | -----------
|SIGNATURE              |  | TITLE                        |  | REPORT DATE
|                       |  |                              |  |            
|/s/ David H.
 Roche    |  | President and                |  | 11-24-10   
|David H.
 Roche        |  | Chief Executive Officer      |  |            
|                       |  |                              |  |            
|/s/ Steven
 M. Caspers |  | Executive Vice President and |  | 11-24-10   
|Steven M.
 Caspers     |  | Chief Financial Officer      |  |            
|                       |  |                              |  |            
|/s/ Allen E.
 Larson   |  | Controller and               |  | 11-24-10   
|Allen E.
 Larson       |  | Chief Accounting Officer     |  |            
|                       |  |                              |  |            
|/s/ Dale
 Blume        |  |                              |  | 11-24-10   
|Dale Blume             |  | Director                     |  |            
|                       |  |                              |  |            
|/s/ Dennis
 Butenhoff  |  |                              |  | 11-24-10   
|Dennis
 Butenhoff      |  | Director                     |  |            
|                       |  |                              |  |            
|/s/ Brent
 Davison     |  |                              |  | 11-24-10   
|Brent
 Davison         |  | Director                     |  |            
|                       |  |                              |  |            
|/s/ Doug
 Etten        |  |                              |  | 11-24-10   
|Doug Etten             |  | Director                     |  |            
|                       |  |                              |  |            
|/s/ Patrick
 Freese    |  |                              |  | 11-24-10   
|Patrick
 Freese        |  | Director                     |  |            
|                       |  |                              |  |            
|/s/ Dennis
 Klosterman |  |                              |  | 11-24-10   
|Dennis
 Klosterman     |  | Director                     |  |            
|                       |  |                              |  |            
|/s/ Russell
 Mauch     |  | Director                     |  | 11-24-10   
|Russell
 Mauch         |  |                              |  |            
|                       |  |                              |  |            
|/s/ C Kevin
 Kutzer    |  |                              |  | 11-24-10   
|C Kevin
 Kutzer        |  | Director                     |  |            
|                       |  |                              |  |            
|/s/ Charles
 Steiner   |  |                              |  | 11-24-10   
|Charles
 Steiner       |  | Director                     |  |            

81

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