UNITED STATES
SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549

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FORM 10-K


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xAnnual Report Pursuant to Section 13 or
15(d) of
The Securities Exchange Act of 1934
For the fiscal year ended
AUGUST 31, 2009
OroTransition Report Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934

Commission File
No. 33-94644

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

|                                         |                                        
|---------------------------------------- | ---------------------------------------
|North
 Dakota                            | 23-7222188                             
|(State 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 Act     o 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 x 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 oAccelerated
filer oNon-accelerated
filer xSmaller
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 (the Company or the Registrant) has previously
registered securities for offer and sale pursuant to the Securities Act of
1933, as amended (the Securities Act). As a result of that previous
registration under the Securities Act, under Sections 15(d) and 13 of the
Securities Exchange Act of 1934, as amended (the Exchange Act), the Company
is obligated to file quarterly reports on form 10-Q, annual reports on Form
10-K and supplemental reports on Form 8-K. However, the Company has not
registered any of its securities under Section 12(g) of the Exchange Act. The
Company is exempt from any obligation to register its securities under the
Exchange Act due to the provisions of Section 12(g)(2)(E), which exempts from
Exchange Act registration any security of an issuer, such as the Company, which
is a cooperative association as defined in the Agricultural Marketing Act of
1929. As a result, those provisions of the Exchange Act, which are applicable
only to securities registered under Section 12 of that act, do not apply to
shares issued by the Company. The provisions, which do not apply to the
Companys shares, include the regulation of proxies under Section 14 of the
Exchange Act and the reporting and other obligations of directors, officers and
principal stockholders under Section 16 of the Exchange Act.

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

SHAREHOLDER STOCK VALUE

The
Company is a closed cooperative whose common stock and preferred stock are
subject to significant restrictions on transfer and eligibility requirements.
No public market for voting and non-voting common equity of the Company is
established and it is unlikely in the foreseeable future that a public market
for its voting and non-voting common equity will develop.

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Stock
purchased by investors in the Company typically do not use valuation methods
that are commonly used for stock bought or sold on the open market for personal
or institutional investment purposes.

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.

As
of November 24, 2009, 474 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.

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.

There
is only a limited, private market for shares of the Companys Common or
Preferred Stock, as such shares may be held only by farmer-producers who are
eligible for membership in the Company. The Companys common stock and
preferred stock are not listed or admitted for trading on any stock market, any
system of inter-dealer quotation, or on the Pink Sheets, the OTC Bulletin Board
or any other quotation service for market makers. 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. Therefore, there is no established public trading market for any
class of common equity of the Company and it is unlikely that a public market
for the Companys units will develop in the foreseeable future.

A number of
stock transfers, representing approximately 7 percent of available stock, were
not arms length (estate settlements, estate planning from one generation to the
next, etc.) and an accurate value for that stock was not available. The Company
believes that less than 2 percent of its available stock was traded at arms
length during the fiscal year ended August 31, 2009. Of the stock transferred
at arms length, the transfers were made during the first, second and third
quarters of the Companys fiscal year and, to the best of the Companys
knowledge, ranged in price from $2,200 to $3,000 per unit with first quarter
sales being in the lower range and third quarter sales being in the higher
range. The fourth quarter did not have any arms length transactions. The value
of stock is highly dependent upon an individual stockholders ability to raise
sugarbeets successfully both agronomically and financially. Prior to purchasing
stock, a potential stockholder is advised to properly research the agronomic
aspect of stock ownership.

DOCUMENTS INCORPORATED BY REFERENCE

None

PART
I

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

GENERAL

The
Company is a North Dakota agricultural cooperative that was formed in 1972 and
currently has 474 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.

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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 6 percent of the Companys total revenues for the fiscal
year ended August 31, 2009.

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 March or April of the following year, depending on the
size of the crop.

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.

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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 2.0 million tons of sugarbeets from the 2009-crop,
approximately 9 percent less than the most recent 5-year average. The
Companys shareholder/growers were unable to harvest approximately 10 percent
of the crop due to extremely wet harvest conditions in a significant part of its
growing area. Sugar content of the 2009-crop at harvest was 7 percent below the
average of the five most recent years. Due to the lower harvested tons and
lower sugar content, the Companys production of sugar from the 2009-crop
sugarbeets is expected to be 18 percent less than the average of the five most
recent years of sugar production. This forward-looking material is based on the
Companys expectations regarding the processing of the 2009 sugarbeet crop; the
actual production results obtained by processing those sugarbeets could differ
materially from the Companys current estimate as a result of factors that
include changes in production efficiencies, purchase of non-patronage beets and
storage conditions for the Companys sugarbeets.

The
Companys initial sugarbeet payment estimate totals $40.00 per ton or
$0.15546174 per harvested /bonus extractible pound of sugar, with the final
sugarbeet payment determined in October of 2010. This projected payment is 19
percent less than the final 2008-crop payment per ton and 12 percent less per
pound of extractible sugar. The lower projected 2009-crop payment per ton
results from fewer total tons of beets processed, lower sugar content in the
sugarbeets, lower pulp prices versus the prior year and increased operating and
fixed costs per ton; offset somewhat by higher sugar prices versus the prior
year.

For
a discussion of the calendar 2008, 2007 and 2006 crops and results of
operations for fiscal years 2009, 2008 and 2007, 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 2009-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 2010-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 2010-crop. The
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 2010-crop production. (For a discussion of the
current farm bill sugar allocations, see Managements Discussion on Government
Programs and Regulations.)

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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 early 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.

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RESEARCH AND
DEVELOPMENT

The
Company conducts very little 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.

During
the fiscal year ended on August 31, 2009, 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 $0.4
million for research aimed at process improvements.

The
Company also has established a sugarbeet seed committee, 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 $0.2 million of environmental capital improvements budgeted for the
fiscal year ending August 31, 2010, slightly more than was budgeted for
the fiscal year ending August 31, 2009.

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.

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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), hydrofluorocarbons (HFCs), perfluorocarbons (PFCs), and other
fluorinated gasses. The Company is monitoring this and similar proposed
regulation changes and their potential impact to the Company.

MARKET AND COMPETITION

Current
U.S. Government statistics estimated total U.S. sugar deliveries for domestic
food and beverage consumption at 195.9 million cwt refined for its fiscal year
beginning October 1, 2008 and ending September 30, 2009 (fiscal year 2009). For
the same period ending in 2008 (fiscal year 2008), total deliveries were 196.4
million cwt refined. Comparing the two years shows demand decreased slightly
for U.S. sugar sellers. The U.S. Government estimates that fiscal year 2010 deliveries will
total 189.5 million cwt refined, about 3.3 percent less than fiscal year 2009.
The deliveries are expected to be lower due to less Mexican sugar imports to
the U.S. (tighter supplies and rising prices for semi-refined [estandar] sugar
in Mexico) and HFCS deliveries increasing to recapture a goodly portion of the
market share in fiscal year 2010 lost to sugar from Mexico in fiscal years
2008 and 2009. However, it remains to be seen if consumer preferences can
change sufficiently to accept HFCS in products that had made the switch to
sugar and/or if firms producing HFCS will aggressively market their product to
recapture markets lost to sugar. The Company cannot determine at this time
whether imports from Mexico will be reduced as much as the U.S. Governments
estimate. However, should that be the case, reduced imports from Mexico could
have the effect of supporting existing U.S. sugar prices.

Given
the size of the domestic market, the Companys sugar production and sales
represent approximately 2.8 percent of the total domestic market for refined
sugar in fiscal year 2009. United Sugars Corporation, which sells the Companys
production through a sugar marketing pool, represented approximately 25 percent
share of the fiscal year 2009 U.S. sugar market.

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 1percent 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. 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.

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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 23 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 Commodity Credit Corporation (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
without cost to the U.S. Treasury by regulating the supply of sugar in the U.S.
market through regulating 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 2010 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 2010 refined
TRQ at 99,251 STRV and estimated the entry from the Central American Free Trade
Agreement, the Dominican Republic Free Trade Agreement (CAFTA, DR trade
agreement) and the Singapore, Bahrain, Jordan and Peru Free Trade Agreements a
TRQ total of 126,481 STRV. The USDA has projected that the amount of raw and
refined sugar TRQ from all sources will total 1,182,229 STRV for fiscal year 2010,
or 83 percent of fiscal year 2009 estimated TRQ entries.

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 22.9 cents/lb for the 2008 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 2009 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.

9

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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 NAFTA 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 1,402,000 short tons raw value to the U.S. in
2008-2009, which would represent approximately 13.4 percent of domestic sugar
consumption for food and other; and 760,000 short tons raw value in 2009-2010,
representing approximately 7.5 percent of domestic sugar consumption for food.
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.

The
Company believes the North American Free Trade Agreement (NAFTA) may present
a potential serious public policy challenge to itself and the domestic sugar
industry. 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.

10

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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 US for a variety of reasons; mostly those reasons have to do
with the market conditions that currently exist in the US 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.
Unlimited additional quantities may be imported upon payment of a tariff of
15.36 cents per pound of refined sugar prior to shipment (to date, very little
sugar has been imported under this higher tariff level). 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
United States from the quota holding foreign countries.

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 US, 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.

11

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Regional and Bilateral Free Trade Agreements

The
United States government is pursuing an aggressive agenda on international
trade. It is seeking to negotiate new free trade agreements with a number of
countries and regions that are major producers of sugar. The Company believes
these agreements, if they reach fruition, could negatively impact the Companys
profitability.

The
U.S. Government has negotiated or is currently negotiating free trade
agreements with a number of countries and regions that are major producers of
sugar. The primary agreements under consideration that affect sugar, to the
Companys knowledge, are the Columbia Free Trade Agreement; the Thailand Free
Trade Agreement; the Panama Free Trade Agreement; the Free Trade Area of the
Americas; the South African Customs Union Free Trade Agreement, 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 can not be assessed at
this time due to the uncertainty concerning the terms of the agreements and
whether they will ultimately be implemented. It is possible, however, that the
passage of various trade agreements could have a material adverse effect on the
Company through a reduction in acreage that can be planted by the Companys
shareholders, and/or a reduction in sugar selling prices, and a corresponding
reduction in the sugarbeet payment to the shareholders and to the Company
earnings. The 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 November 2, 2009, the Company had 305 full time employees, of whom 268 were
hourly and 37 were salaried. It also employs approximately 395 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.

12

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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 our 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, is seeking improvements to NAFTA to address the
matter. If the sugar industry is unsuccessful in these and any other endeavors
it pursues to prevent the influx of Mexican sugar into the U.S. market, there
could be adverse financial consequences to the Company and its members.

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.

13

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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 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.

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 affect 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.

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 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. The actual direct impact of the decision on sugarbeet producers and the Company will become more clear during the remedy
phase of the case, which will occur over the next several months. The Center for Food Safety has not asked the Court to prohibit planting of Roundup
Ready® sugarbeets. However, if the Court restricts planting in 2010, 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.

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

There
are no unresolved written SEC staff comments regarding the Companys periodic
or current reports under the Securities Exchange Act of 1934.

|        |           
|------- | ----------
|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
properties are adequate to process normal and above normal crop sizes, and for
the last three years have averaged a slice rate of 9,587 tons per day. The
2006-crop was the largest tonnage in the history of the Company, amounting to
approximately 3,019,000 tons of sugarbeets. If the Company encounters normal
weather patterns, which will in turn provide normal long-term sugarbeet storage
conditions, then it does not anticipate having material difficulties in
processing crops equal in size to the 2006-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 2009, 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.

14

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|        |                  
|------- | -----------------
|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. | SUBMISSION OF MATTERS TO A VOTE OF
 SECURITY HOLDERS

There
were no matters submitted to a vote of the Companys shareholders during the
quarter ended August 31, 2009.

At
the Annual Meeting of Shareholders which is to be held on December 8th,
2009, the following seats on the board of directors will be up for election:
District #1, District #6, and District #8. A brief biography of each of the
candidates for the open seats follows.

DISTRICT #1

ALTON
THEEDE is the incumbent from this district and has decided not to run for
reelection.

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.

DISTRICT #6

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.

DISTRICT #8

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.

15

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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.

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.

Stock
is not purchased in the Company using the traditional valuation methods used
for stock commonly bought or sold for personal or institutional investment
purposes.

A
requirement for owning the Companys stock includes the shareholder being
actively engaged in farming and having an active interest in the crop being
produced.

The
Company believes a shareholder purchases the Companys stock in order to secure
acreage delivery rights, and therefore is based upon the purchasers ability to
make a profit by delivering sugarbeets to the Company.

The
Company believes each individual shareholder will have a different financial
model for its economic analysis of Company stock purchase. Estimates for direct
input costs to raise a sugarbeet crop vary significantly from shareholder to
shareholder. The Company has no direct knowledge of the total of the direct
input costs.

A
shareholder is at risk for the size and quality of the sugarbeet crop to be
raised. The ability of a shareholder to raise a quality crop of significant
quantity to not only cover the shareholders input costs, but also provide for
a return on stock ownership and stockholder management inputs is key to
determining the economic value the Companys stock holds for the shareholder or
potential shareholder.

A
shareholder is able to insure the risk of growing a crop through the purchase
of Federal Crop Insurance. The Federal Crop Insurance program is managed by
RMA, a branch of the United States Government. Changes in the Federal Crop
Insurance program may have a significant impact on the level of financial risk
that a shareholder may be able to insure.

A
shareholder is also at financial risk based on the ability of the Company to
pay the shareholder a sugarbeet payment that provides him/her with a profit.

Because
the return to a shareholder is based upon the results of an entire year, the
Company believes reliance upon one quarter of financial activity in comparison
to a similar quarter of activity in a prior year is of limited value versus
comparisons made at fiscal year end. Quarterly financial statements have
significant management judgments regarding the final crop value.

16

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Because
the Company and other sugar companies have different methods of describing and
paying their shareholders for sugarbeets delivered, the publicly announced
payments by companies need to be adjusted for quality, patronage, trucking, and
re-hauling costs to arrive at a comparable payment to the shareholder/grower
for the delivery of those sugar beets.

The
Companys common stock and preferred stock are not listed or admitted for
trading on any stock market, any system of inter-dealer quotation, or on the
Pink Sheets, the OTC Bulletin Board or any other quotation service for market
makers. 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. Therefore, there is no
established public trading market for any class of common equity of the Company
and it is unlikely that a public market for the Companys units will develop in
the foreseeable future.

Further,
the rules of the Securities and Exchange Commission require that the Company
provide a line graph presenting the cumulative, five-year returns on an indexed
basis with a broad market index and either a nationally recognized industry
standard or an index of peer companies selected by the Company. Because there
is no established public trading market for any class of the Companys equity
securities, the Company is unable to estimate the value of any class of the
Companys equity securities or present a line graph or any other information
comparing the value of any of the Companys equity securities with any index.

As
of November 24, 2009, there were 474 holders of the Companys common stock and
474 holders of units of the Companys preferred stock.

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

There
is only a limited, private market for shares of the Companys Common or
Preferred Stock. A number of stock
transfers, representing approximately 7 percent of available stock, were not
arms length (estate settlements, estate planning from one generation to the
next, etc.) and an accurate value for that stock was not available. The Company
believes that less than 2 percent of its available stock was traded at arms
length during the fiscal year ended August 31, 2009. Of the stock transferred at
arms length, the transfers were made during the first, second and third
quarters of the Companys fiscal year and, to the best of the Companys
knowledge, ranged in price from $2,200 to $3,000 per unit with first quarter
sales being in the lower range and third quarter sales being in the higher
range. The fourth quarter did not have any arms length transactions. The value
of stock is highly dependent upon an individual stockholders ability to raise
sugarbeets successfully both agronomically and financially. Prior to purchasing
stock, a potential stockholder is advised to properly research the agronomic
aspect of stock ownership.

17

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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.

18

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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 in Item 8. of this report.

|                                                                                                    |  |                              |           |      |   |           |  |      |           |      |   |           |  |   |           | 
|--------------------------------------------------------------------------------------------------- |  | ---------------------------- | --------- | ---- | - | --------- |  | ---- | --------- | ---- | - | --------- |  | - | --------- | 
|                                                                                                    |  | Fiscal Year Ended August 31, |          
|FINANCIAL DATA                                                                                      |  | 2009                         |           | 2008 |   | 2007      |  | 2006 |           | 2005 |  
|(in thousands)                                                                                      |  |                              |           |      |   |           |  |      |           |      |   |           |  |   |           | 
|Revenues                                                                                            |  | $                            | 225,034   |      | $ | 243,573   |  | $    | 278,571   |      | $ | 176,967   |  | $ | 189,681   | 
|Distribution of net proceeds
 (1)                                                                   |  |                              | 96,053    |      |   | 110,863   |  |      | 148,415   |      |   | 76,096    |  |   | 88,408    | 
|Total assets                                                                                        |  |                              | 179,884   |      |   | 177,063   |  |      | 177,666   |      |   | 163,129   |  |   | 158,996   | 
|Long-term debt, including
 current maturities                                                       |  |                              | 38,545    |      |   | 31,872    |  |      | 36,931    |      |   | 42,008    |  |   | 44,455    | 
|Members investment (2)                                                                             |  |                              | 76,143    |      |   | 84,016    |  |      | 83,373    |      |   | 83,951    |  |   | 83,410    | 
|Property and equipment
 additions, net of retirements                                               |  |                              | 9,246     |      |   | 8,560     |  |      | 4,947     |      |   | 4,426     |  |   | 4,916     | 
|Working capital                                                                                     |  |                              | 13,387    |      |   | 10,163    |  |      | 13,265    |      |   | 14,025    |  |   | 12,433    | 
|                                                                                                   
|RATIOS                                                                                              |  |                              |           |      |   |           |  |      |           |      |   |           |  |   |           | 
|Ratio of long-term debt to
 equity (3)                                                              |  |                              | .44       |      |   | .32       |  |      | .39       |      |   | .45       |  |   | .47       | 
|Ratio of net proceeds to fixed
 charges (4)                                                         |  |                              | 48.64     |      |   | 35.36     |  |      | 35.56     |      |   | 22.50     |  |   | 31.42     | 
|Current ratio                                                                                       |  |                              | 1.24      |      |   | 1.17      |  |      | 1.23      |      |   | 1.36      |  |   | 1.38      | 
|                                                                                                   
|PRODUCTION DATA (5)                                                                                 |  |                              |           |      |   |           |  |      |           |      |   |           |  |   |           | 
|Acres harvested (members)                                                                           |  |                              | 75,097    |      |   | 107,649   |  |      | 116,646   |      |   | 102,121   |  |   | 98,819    | 
|Tons of sugarbeets purchased
 (members)                                                             |  |                              | 1,863,920 |      |   | 2,208,622 |  |      | 3,019,475 |      |   | 1,810,269 |  |   | 2,295,904 | 
|Tons purchased per acre
 harvested                                                                  |  |                              | 24.82     |      |   | 20.52     |  |      | 25.89     |      |   | 17.73     |  |   | 23.23     | 
|Payment to members per ton of
 sugarbeets delivered, plus allocated
 patronage and unit retains (6) |  | $                            | 51.35     |      | $ | 48.96     |  | $    | 49.06     |      | $ | 41.89     |  | $ | 38.08     | 
|                                                                                                    |  |                              |           |      |   |           |  |      |           |      |   |           |  |   |           | 
|Sugar (cwts):                                                                                       |  |                              |           |      |   |           |  |      |           |      |   |           |  |   |           | 
|Produced (from member and
 purchased sugarbeets, includes high raw)                                 |  |                              | 5,427,888 |      |   | 6,914,346 |  |      | 7,822,687 |      |   | 4,848,804 |  |   | 5,868,576 | 
|Sold (includes purchased
 sugar)                                                                    |  |                              | 5,834,662 |      |   | 7,060,619 |  |      | 7,301,360 |      |   | 4,844,315 |  |   | 6,093,437 | 
|                                                                                                    |  |                              |           |      |   |           |  |      |           |      |   |           |  |   |           | 
|Beet pulp pellets (tons):                                                                           |  |                              |           |      |   |           |  |      |           |      |   |           |  |   |           | 
|Produced                                                                                            |  |                              | 102,073   |      |   | 107,600   |  |      | 147,888   |      |   | 101,328   |  |   | 119,054   | 
|Sold                                                                                                |  |                              | 90,715    |      |   | 106,006   |  |      | 151,791   |      |   | 105,138   |  |   | 113,913   | 
|                                                                                                    |  |                              |           |      |   |           |  |      |           |      |   |           |  |   |           | 
|Beet molasses (tons):                                                                               |  |                              |           |      |   |           |  |      |           |      |   |           |  |   |           | 
|Produced                                                                                            |  |                              | 87,647    |      |   | 99,349    |  |      | 130,878   |      |   | 79,599    |  |   | 89,797    | 
|Sold                                                                                                |  |                              | 61,240    |      |   | 87,803    |  |      | 88,652    |      |   | 47,007    |  |   | 73,824    | 
|Sold for Yeast Subsidiary Production                                                                |  |                              | 23,531    |      |   | 25,307    |  |      | 31,513    |      |   | 21,821    |  |   | 23,586    | 
|                                                                                                    |  |                              |           |      |   |           |  |      |           |      |   |           |  |   |           | 
|Yeast (pounds, in thousands):                                                                       |  |                              |           |      |   |           |  |      |           |      |   |           |  |   |           | 
|Produced                                                                                            |  |                              | 35,975    |      |   | 37,436    |  |      | 39,248    |      |   | 34,787    |  |   | 32,043    | 
|Sold                                                                                                |  |                              | 36,071    |      |   | 37,436    |  |      | 39,152    |      |   | 34,670    |  |   | 31,984    | 

19

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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, 2008,
relates to the 2007 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:

20

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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 SFAS No. 87, Employers Accounting for
Pensions, (SFAS No 87) 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.

21

---

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

|                                     |  |  |      |  |  |      |  |  |      | 
|------------------------------------ |  |  | ---- |  |  | ---- |  |  | ---- | 
|                                     |  |  | 2009 |  |  | 2008 |  |  | 2007 | 
|Discount
 Rate                       |  |  | 6.2% |  |  | 6.5% |  |  | 6.5% | 
|Expected
 return on plan assets      |  |  | 8.0% |  |  | 8.0% |  |  | 8.0% | 
|Rate of
 total Compensation Increase |  |  | 4.3% |  |  | 4.3% |  |  | 4.3% | 

Discount
Rate: An assumed discount rate is required to be used in the pension plan
actuarial valuation. The discount rate is a significant assumption. The
Company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.

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

Rate
of Total Compensation Increase: The Rate of Total Compensation Increase should,
over time, approximate the actual compensation increases of the plan
participants. The Companys methodology for selecting the Rate of Total
Compensation Increase is to seek guidance from outside pension experts for
determination of the approximate rate.

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 percent of the current
liability-funding target. Defined benefit plans with a funding status of less
than 80 percent 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 458 participants.

In
September 2006, the FASB issued SFAS No. 158, Employers Accounting for
Defined Benefit Pension and Other Post-retirement Plans, an amendment of FASB
Statements No. 87, 88, 106 and 132R. This standard requires employers to recognize
the under funded or over funded 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. This standard also eliminates the
requirement for Additional Minimum Pension Liability (AML) required under SFAS
No. 87. As a result of the application of SFAS No. 158 as of August 31, 2009,
2008 and 2007 the Company increased liabilities by $7,547,180, $639,310 and
$3,947,430. These liabilities were offset to accumulate other comprehensive
income (loss). As a result of SFAS No. 158, in the year ended August 31, 2009,
2008 and 2007 the Company recognized an increase in accumulated other
comprehensive income (loss) of ($7,080,155), ($2,218,282) and ($2,368,458),
respectively. In accordance with FAS 158 the measurement date was moved from
May 31 to August 31 creating a fifteen-month period for the current year vs.
twelve-month periods the preceding two years. Full adoption of FAS 158s the
new measurement date for the plans liabilities resulted in a one-time addition
to liability and reduction of retained earnings of $284,896 as of August 31,
2009.

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.

22

---

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.

On
September 1, 2007 The Company adopted the provisions of FASB Interpretation
(FIN) No. 48, Accounting for Uncertainty in
Income Taxes  An Interpretation of FASB Statement No. 109. FIN 48
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. FIN 48
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.

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.

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). The Company has a short-term line of credit with the
Bank totaling $50.0 million, of which $31.0 million was available as of August
31, 2009. The Company also has a $15.0 million bid loan supplement facility
through the Bank. 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.

23

---

On October
30, 2008 the Company and its primary lender agreed to a new set of loan
agreements which maintained the same levels of seasonal borrowing capacity and
bid loan capacity, but added $10.0 million to its term loan agreement, with the
repayment of these additional funds being amortized over twelve quarterly
payments and added to the end of the prior amortization period.

On October
15, 2009, the Companys primary lender extended the Companys
seasonal loan agreements, which are due to expire on November 1, 2009, for a
period of 60 days. The seasonal loan agreements will now expire December 31,
2009. The extension will allow the Company and its primary lender additional
time after the completion of the 2009 crop harvest to more accurately determine
seasonal borrowing needs, and reflect those needs in the seasonal loan
agreements renewal.

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

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

As of
August 31, 2009 the Company was in compliance with its loan agreement covenants
with the Bank.

Net Cash
provided by operations totaled $12.4 million for the year ended August 31,
2009, as compared to $13.3 million for the previous year. This decrease of $1.1
million was primarily due to changes in the amount of income allocated to
members investment of $3.8 million and an increase in Other Comprehensive Loss
of $5.4 million offset by changes in the Accounts payable, accrued liabilities,
other liabilities of $10.4 million and all other factors of $0.3 million.

The net
cash used in investing activities totaled $7.2 million for the year ended
August 31, 2009, as compared to $7.3 million for the previous year. The
decrease of $0.1 million was primarily due to increased levels of capital
expenditures related to improved factory efficiencies, safety and replacement
activities offset by capital adjustments of unconsolidated marketing
subsidiaries and proceeds from patronage refunds and equity revolvements.

The net
cash used in financing activities totaled $5.2 million for the year ended
August 31, 2009 as compared to $6.1 million for the previous year. This
decrease of $0.9 million was primarily due to decreased seasonal debt of $10.9
million offset by increased long-term debt of $10.0 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.

Working
capital increased $3.2 million for fiscal year 2009. The Company funds its
capital expenditure and debt retirement needs primarily from operating
activities. As of August 31, 2009 the Company had approximately 7-years of
long-term debt remaining with the Bank and it has two tax exempt bond issues,
series 1996 with $2.6 million remaining to be paid and series 2002 with $10.9
million remaining to be paid.

24

---

The
Company has protected itself from interest rate fluctuations through a strategy
of using tax-exempt bond financing and a term debt portfolio that fixes rates
and maturities into the future on set amounts of debt. The Bank current term
debt portfolio, comprised of $14.6 million using variable interest rates and
$7.9 million using fixed interest rates over various maturities, is expected to
provide the Company stable term debt interest rates over the next four years at
similar rates to current market rates for maturities of the same type. An
increase or decrease in the interest rate market of the recent historic past is
expected to be immaterial on the profitability of the Company as a result of
its interest rate strategy. Capital expenditures for the years ended August 31,
2009, 2008 and 2007 totaled $8.8 million, $8.0 million and $4.9 million,
respectively. The Companys purchase of equipment by issuance of capital lease
debt for the years ended August 31, 2009, 2008, and 2007 totaled $2.4 million,
$0.7 million and $0.0 million respectively.

Capital
expenditures for fiscal year 2010 have been approved at $6.0 million. The
capital expenditures are for normal efficiency, 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 and increase operating efficiencies.

The Bonds
are secured by a letter of Credit from Wells Fargo 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                        |  | $22.5 |  | $2.5                |  | $9.9        |  | $6.7       |  | $3.4           | 
|Bonds
 Payable                         |  | 13.5  |  | 2.1                 |  | 4.2         |  | 2.1        |  | 5.1            | 
|Capital
 Leases                        |  | 2.9   |  | 0.5                 |  | 1.9         |  | 0.5        |  | 0.0            | 
|Unconditional
 Purchase Obligations    |  | 0.0   |  | 0.0                 |  | 0.0         |  | 0.0        |  | 0.0            | 
|Other
 Long-Term Obligations - Pension |  | 12.8  |  | 1.0                 |  | 2.4         |  | 1.7        |  | 7.7            | 
|Total Long Term Obligations            |  | $51.7 |  | $6.1                |  | $18.4       |  | $11.0      |  | $16.2          | 
|Interest on
 Long Term Debt & Bond     |  | 2.8   |  | 0.6                 |  | 1.5         |  | 0.5        |  | 0.2            | 
|Operating
 Leases                      |  | 0.9   |  | 0.8                 |  | 0.1         |  | 0.0        |  | 0.0            | 
|Total Contractual Obligations          |  | $55.4 |  | $7.5                |  | $20.0       |  | $11.5      |  | $16.4          | 

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.

25

---

RESULTS OF OPERATIONS

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.

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 were 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.

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.

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.

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.

26

---

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.

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.

27

---

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.

Comparison of the years ended August 31, 2007
and 2006

Net
payments to members for sugarbeets delivered by the shareholder/growers,
increased by $69.0 million or 96 percent in fiscal year 2007 and totaled $140.6
million. As of August 31, 2007, 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 $6.0 million to
shareholders compared to $3.6 million in the previous year. The payment of $6.0
million will leave approximately 4.5 years of prior years patronage and per
unit retains withheld versus the prior year of 4.9 years withheld.

Revenues
for the year ended August 31, 2007 were comprised of Sugar 84 percent, Pulp 7
percent, Yeast 5 percent and Molasses 4 percent.

Revenue
for the year ended August 31, 2007, increased $101.6 million or 57 percent from
2006. Revenue from total sugar sales increased $73.5 million or 50 percent
reflecting a 47 percent increase in cwt. sold, and a 3 percent increase in the
average net selling price per cwt. Revenue from co-products increased 68
percent, reflecting an increase of 38 percent in volume, and a 30 percent
increase in the average selling price per ton. The increase in volume of sugar
and co-products sold from the 2006-crop is attributable to the larger crop size
and quality when compared to the 2005 crop of beets delivered by
shareholder/growers plus the 2005-crop non-member purchased beets.

Revenues
from yeast sales increased 37 percent reflecting an increase in volume of 13
percent, and an increase in the average net selling price of 24 percent.
Selling prices increased due to a combination of two factors: (1) a change in
the way that yeast selling prices are determined under a different marketing
agreement that Minn Dak Yeast Company (MDYC) entered into in May 2006, and
which accounted for the majority of increase in the calculation of the yeast
price, and (2) somewhat higher selling prices for yeast.

The
value of finished product inventories in fiscal year 2007 increased $12.6
million from fiscal year 2006, mostly the result of an increase in the volume
of ending sugar inventory. Sugar inventory was larger due to the timing of
contract off-take for a select number of customers.

Expenses,
exclusive of grower payments for sugarbeets and cost of non-member purchased
beets, increased $30.1 million or 30 percent. Minn-Dak Farmers Cooperative
(MDFC) expenses increased $27.9 million, while Minn-Dak Yeast Company expenses
increased $2.2 million.

The
production cost per cwt. of sugar produced decreased 31 percent versus the
prior year due to a combination of a 62 percent increase in sugar produced with
only a corresponding 12 percent increase in total costs.

Of
the $27.9 million increase in the MDFC expenses, the cost of operations
increased $7.0 million, or 12 percent due to the record volume of sugarbeets processed,
including the record length of the 2006-crop processing period.

Sales
and Distribution costs increased $21.4 million or 74 percent. Increases are
mainly the result of the increase in the production and sale of finished goods
from the larger sugarbeet crop and from the cost of sugar marketing
allocations. Sugar marketing allocation costs increased $5.0 million or 400
percent from the 2005-crop and were due to the amount of allocation acquired to
allow for the marketing of the large 2006 crop. General and Administrative
expenses increased $0.9 million or 15 percent. Employee costs, beet
transportation equipment depreciation and expenses associated with sugar policy
and farm bill renewal was the primary reasons for the increase. Interest
expense increased $0.8 reflecting a higher level of seasonal debt and an
increased rate of interest.

28

---

Other
business income increased $0.7 million in fiscal year 2007 due primarily to the
yeast business being accounted for as patronage business and income on the
yeast business qualifying for cooperative tax treatment.

Estimated Fiscal Year 2010 Information

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

The
Companys members harvested 2.0 million tons of sugarbeets from the 2009-crop,
approximately 9 percent less than the most recent 5-year average. The
Companys shareholder/growers were unable to harvest approximately 10 percent
of the crop due to extremely wet harvest conditions in a significant part of its
growing area. Sugar content of the 2009-crop at harvest was 7 percent below the
average of the five most recent years. Due to the lower harvested tons and
lower sugar content, the Companys production of sugar from the 2009-crop
sugarbeets is expected to be 18 percent less than the average of the five most
recent years of sugar production.

The
Companys initial sugarbeet payment estimate totals $40.00 per ton or
$0.15546174 per harvested /bonus extractible pound of sugar, with the final
sugarbeet payment determined in October of 2010. This projected payment is 19
percent less than the final 2008-crop payment per ton and 12 percent less per
pound of extractible sugar. The lower projected 2009-crop payment per ton
results from fewer total tons of beets processed, lower sugar content in the
sugarbeets and increased operating and fixed costs per ton; offset somewhat by
higher sugar prices versus the prior year.

For
a discussion of the 2008, 2007 and 2006 crops and results of operations for fiscal
years 2009, 2008 and 2007, 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.

29

---

The
Companys long-term debt interest costs are stabilized through the use of
multi-year interest rate locks on various amounts and terms through its primary
lender CoBank. This strategy allows the Company to project future interest
costs and cash flows with a reasonable degree of accuracy.

The
Company has long-term tax-exempt bonds using a variable interest rate.
Borrowing levels have been $13.5 million for 2009, $15.5 million for 2008 and
$17.4 million for 2007. The historic interest rates for these instruments have
been under 6 percent with anticipated fluctuations in interest rates being less
than financial debt benchmarked to LIBOR.

The
Companys short-term debt rates will vary from year to year based on the
short-term interest rate market changes. Average short-term debt borrowing
levels have been $28.47 million, $36.0 million and $39.2 million for the years
2009, 2008 and 2007, respectively. Because each years short-term debt is
closely associated with each years crop size and the finished goods market
value from that crop, the interest fluctuations will have a direct impact on
the final grower sugarbeet crop payment.

The
Company will from time to time have purchase obligations in foreign currency as
a result of approved capital expenditure projects, and may reduce the risk of
currency exchange by forward purchasing the applicable currency required for
the expenditures.

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 years ended
August 31, 2009, 2008 and 2007 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(T). | CONTROLS AND PROCEDURES

Sarbanes-Oxley Act:
The Sarbanes-Oxley Act continues to have the interpretation of its rules
reviewed and changed. The Company is in compliance with the rules and
interpretations of these rules as they are stated. The below listed areas of
activity are not to be considered an all inclusive list, but rather an
indication of how the Companys Board of Directors and Management are
approaching future compliance requirements.

30

---

Audit
Committee: The audit committee is active in the oversight of the Companys
accounting, auditing, and key risk management areas. The Companys bylaws
require any board member to be actively engaged in the production of
sugarbeets, therefore, the financial expert requirement for the audit committee
is restricted to the pool of available directors who are eligible to serve on
the audit committee. Therefore there is no financial expert, as defined within
the provisions contained in the Securities and Exchange Commission that serves
on the Audit Committee. 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. The Audit Committee has formulated a
confidential and anonymous employee system to allow employees to report
concerns regarding questionable accounting or auditing matters. The Audit
Committee has adopted a code of ethics policy for top management.

The
Audit Committee has reviewed and discussed separately with management, the
independent auditors, and within the Audit Committee the financial statements
and the quality of accounting principles and significant judgments affecting
the financial statements contained in this Form 10-K filing. As a result of
these reviews and discussions, the Audit Committee considers the financial
statements contained here to be fairly presented.

Internal Controls:The
Companys payments to growers are derived from crop pools with each years
harvest creating a Crop Pool. It is the Companys practice to use accounting
methods to allocate revenues and costs in a manner that such revenues and
expenses associated with each pool are consistently applied on a year-to-year
and a pool-to-pool basis. The Company has formalized a process whereby the
material risks associated with the Company are determined, documented as to how
these risks are to be managed and, where appropriate, reviewed by the Audit
Committee.

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. 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,
 2009                                                                                                                                                                                                                                                                           
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|(b) | Disclosure Controls and Procedures. As of the end of the period covered by
 this report, the Company carried out an evaluation, under the supervision and
 with the participation of its management, including the Chief Executive
 Officer and Chief Financial Officer, of the effectiveness of the design and
 operation of the Companys disclosure controls and procedures, as such term
 is defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act. Based upon
 that evaluation, the Companys Chief Executive Officer and Chief Financial
 Officer concluded that as of the end of the period covered by this report,
 the Companys disclosure controls and procedures were effective to ensure
 that information required to be disclosed by it in reports it files or
 submits under the Exchange Act is (1) recorded, processed, summarized and
 reported within the time periods specified in SEC rules and forms, and (2)
 accumulated and communicated to the Companys management, including its Chief
 Executive Officer and Chief Financial Officer, to allow timely decisions
 regarding required disclosure
|    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|(c) | Attestation. This annual Report does not include an
 attestation report of the Companys registered public accounting firm
 regarding internal control over financial reporting. Managements report was
 not subject to attestation by the Companys registered public accounting firm
 pursuant to temporary rules of the Securities and Exchange Commission that
 permit the Company to provide only managements report in this annual report.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 

31

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|    |                                                                                                                                                                                                                                                                                                                    
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(d) | 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, 2009 that has materially affected, or is reasonably likely to
 materially affect, its internal control over financial reporting.

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:

| |   |                                                                                                                                                                                                                                                                                                                                     
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | 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.

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

On
August 27, 2009, the Company and Mr. Roche entered into an amended and restated
employment agreement with a term from September 1, 2009 to August 31, 2010. The
amended and restated employment agreement supersedes the previous employment
agreement and renewals. Pursuant to the amended and restated employment
agreement, Mr. Roche will hold the position of President and Chief Executive
Officer at a base salary of $352,300 per year. The matrix applicable to the
profit sharing bonus as set forth in the amended and restated employment
agreement is the same as applicable to fiscal year 2009, except that the
amended and restated employment agreement provides that in determining the
return per acre, the acre number shall be those acres available for harvest the
day harvest or preharvest begins, whichever is earlier. Also, no Profit Sharing
Bonus will be paid if 30 percent or more of the crop, based on planted acres,
is lost or unharvested. Further, if there is a separation from employment due
to retirement, termination with or without cause, or any unforeseen reason,
during the Companys fiscal year, any profit sharing bonus shall be calculated
at the end of the fiscal year, pro-rated as of the employment separation date
and Mr. Roche will be deemed to have earned the pro-rata portion of the profit
sharing bonus up to his separation date. No profit sharing bonus is payable
until the end of the fiscal year and the return per acre has been calculated.
The matrix associated with the profit sharing bonus will be reviewed every two
years with the first review August 31, 2010.

32

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As
with the original employment agreement, 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. 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 must also
submit to an annual physical examination at the Companys expense.

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. Through the amended and restated employment agreement, Mr. Roche
is eligible beginning September 1, 2009 for an extension of the standard
Company match to its 401(k) plan (matching contribution on 100 percent of the
first 4 percent of compensation provided that the employee contributes at least
4 percent to the plan) to compensation in excess of the current qualified plan
compensation limit (currently $245,000), with the matching contribution amounts
being applied to the Companys Non-Qualified Deferred Compensation Plan.

Under
the amended and restated 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.

The
provisions of the prior renewal agreement relating to termination of employment
were also retained in the amended and restated employment agreement. During any
term of the amended and restated 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 and upon Mr. Roches death or 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.

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 confidentiality of Company 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 amended and restated employment agreement also contains a provision
relating to the confidentiality of Company information during the term of his
employment with the Company and following termination of employment.

33

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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.

|                                                                   |  |     |  |                            |  |                 |  |                            
|------------------------------------------------------------------ |  | --- |  | -------------------------- |  | --------------- |  | ---------------------------
|Name and
 Address                                                  |  | Age |  | District                   |  | Director
 Since |  | Term
 Expires 
 in December
|Dale Blume 
 17668 CO RD 11 
 Norcross, MN 56274-3050              |  | 59  |  | District #7  Lehman       |  | 2005            |  | 2011                       
|                                                                   |  |     |  |                            |  |                 |  |                            
|Dennis Butenhoff
 
 14319 150th ST So 
 Barnesville, MN 56274-3050 |  | 63  |  | District #9  Peet         |  | 2004            |  | 2010                       
|                                                                   |  |     |  |                            |  |                 |  |                            
|Brent Davison 
 7950 770th AV 
 Tintah, MN 56583                   |  | 58  |  | District #5  Hawes        |  | 2003            |  | 2011                       
|                                                                   |  |     |  |                            |  |                 |  |                            
|Douglas Etten 
 30427 W. Stalker Road 
 Dalton, MN 56324           |  | 58  |  | District #8  Lyngaas      |  | 1997            |  | 2009(1)                    
|                                                                   |  |     |  |                            |  |                 |  |                            
|Patrick Freese 
 1745 270th ST 
 Kent, MN 56553                    |  | 50  |  | District #4  Factory East |  | 2008            |  | 2011                       
|                                                                   |  |     |  |                            |  |                 |  |                            
|Dennis
 Klosterman 
 7942 CTY RD 1 
 Mooreton, ND 58061            |  | 49  |  | District #3  Gorder       |  | 2004            |  | 2010                       
|                                                                   |  |     |  |                            |  |                 |  |                            
|Kevin Kutzer 
 9005 182nd Ave Se 
 Fairmount, ND 58030             |  | 56  |  | District #1  Tyler        |  | Nominee         |  |                            
|                                                                   |  |     |  |                            |  |                 |  |                            
|Russell Mauch 
 16305 Hwy 13 
 Barney, ND 58008                    |  | 54  |  | District #2  Factory West |  | 1998            |  | 2010                       
|                                                                   |  |     |  |                            |  |                 |  |                            
|Charles Steiner 
 2851 310th AV 
 Foxhome, MN 56543-9312           |  | 59  |  | District #6  Yaggie       |  | 2000            |  | 2009(2)                    
|                                                                   |  |     |  |                            |  |                 |  |                            
|Alton Theede 
 609 3rd AV SE 
 Hankinson, ND 58041                 |  | 65  |  | District #1  Tyler        |  | 2003            |  | 2009(3)                    

34

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|   |                                                                                                                                                                                      
|-- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|1) | Mr. Ettens term as a director of the Company from
 District #8-Lyngaas expires on December 8, 2009.                                                                                 
|2) | Mr. Steiners term as a director of the Company from
 District #6-Yaggie expires on December 8, 2009.                                                                                
|3) | Mr. Theedes term as director of the Company from
 District #1-Factory East expires on December 8, 2009. Mr. Theede has decided not
 to run for reelection to the board of directors.

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. 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. He also
serves on the board of directors of Midwest Agri-Commodities Company.

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 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.

35

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Kevin Kutzer(nominee) 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 B.S. 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.

Alton Theede has been a director since
2003. Mr. Theede has been farming in the Fairmount, North Dakota area since
1966. He earned his B.S. degree in Business Administration from the University
of North Dakota, Grand Forks, ND. Mr. Theede currently serves on the board of
directors for the local CHS (Cenex Harvest States) and is very involved in
community service. Mr. Theede has been and continues to be active in serving
the congregation of St. Phillips Catholic Church in Hankinson, ND. He also
serves on the board of directors for Minn-Dak Yeast Company.

The
Board of Directors meets monthly. The Company provides its directors with
minimal compensation, consisting of (i) a payment of $280.00 per meeting for
regular and special board meetings, (ii) the greater (a) $140.00 for any day in
which directors partake in activities on the Companys behalf that take less
than five hours or (b) $280.00 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 $500.00 per month to compensate
for the extra duties associated with that position.

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
2009, the members of the Compensation Committee are Messrs. Charles Steiner
(Chair), Dale Blume, Dennis Klosterman, Brent Davison and Alton Theede.

36

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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 2009, the members of
the Nominating Committee were Messrs. Chris Johnson (Chair), Tim Deal, Quinn
Schreiber, Butch Fuder, Brent Torkelson and Bruce Miller. In fiscal 2009, there have not been any
material changes to the procedures by which shareholders may recommend nominees
to the Companys Board of Directors.

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 2009, the Audit Committee consisted of Messrs. Russ Mauch (Chair), Dale
Blume, Dennis Butenhoff, Brent Davison and Alton Theede.

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.

Executive
Officers

The
table below lists the 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     |  | 62 |     | President and Chief Executive Officer               
|                   |  |    |     |                                                     
|Steven M. Caspers  |  | 59 |     | Executive Vice President and Chief Financial Officer
|                   |  |    |     |                                                     
|Allen E. Larson    |  | 54 |     | Controller and Chief Accounting Officer             
|                   |  |    |     |                                                     
|Thomas D. Knudsen  |  | 55 |     | Vice President Agriculture                          
|                   |  |    |     |                                                     
|Greg J. Schmalz    |  | 58 |     | Director Human Resources                            
|                   |  |    |     |                                                     
|Jeffrey L. Carlson |  | 54 |     | Vice President Operations                           
|                   |  |    |     |                                                     
|John S. Nyquist    |  | 54 |     | Purchasing Manager                                  
|                   |  |    |     |                                                     
|Susan Johnson      |  | 62 |     | Communications Manager                              
|                   |  |    |     |                                                     
|Kevin R. Shannon   |  | 55 |     | Safety Director                                     
|                   |  |    |     |                                                     
|John Haugen        |  | 57 |     | Vice President Engineering                          

37

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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.

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.

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.

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.

Jeffrey L. Carlson is a graduate of the
University of Minnesota-Morris with a Bachelor of Arts in Chemistry and the
University of North Dakota with a Ph.D. in Physical Chemistry. He received his
MBA from North Dakota State University in 2001. Mr. Carlson began his career as
a research chemist and an assistant professor in 1986. Mr. Carlson began his
employment with the Company on June 4, 1990.

John S. Nyquist attended the North Dakota
State College of Science, majoring in Accounting and Computer Programs. Mr.
Nyquist began his purchasing and inventory control experience in 1975 in the
Company storeroom. Mr. Nyquist is active in local civic and fraternal
organizations. Mr. Nyquist began employment with the Company on September 15,
1975.

Susan M. Johnson has attended several
post-secondary education classes in fields related to her employment at the
Company. Ms. Johnson began her career in the accounting department as
receptionist and payroll clerk. She has also been employed in the human
resources department, the executive offices, and is currently in the position
of communications manager/executive administrative assistant. Ms. Johnson began
employment with the Company on June 26, 1978.

Kevin R. Shannon attended Taylor Institute
and Vanguard Vo-Tech, majoring in Instrumentation. He is active in local civic
organizations. Mr. Shannon began his technical and supervisory career in 1974.
His employment with the Company began on June 1, 1983. Prior to becoming the
safety director in September of 1992, Mr. Shannon was the Companys tare lab
supervisor.

38

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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.

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, 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;
| |  | John Haugen, Vice
 President Engineering;                                
| |  | Jeffrey L. Carlson, Vice
 President Operations; and                      
| |  | Allen Larson, Controller.                                                

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, 2009, as reported in the compensation tables and
accompanying narrative sections appearing on pages 42 to 45 of this Annual
Report on Form 10-K.

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 2009 compensation for the
Chief Executive Officer. The Compensation Committee may choose to use the
services of a compensation consultant in the future.

39

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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.

40

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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 return per acre is the measure that best quantifies
the Companys return to 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 2009, the Compensation Committee also considered the
aggregate return to shareholders and the financial performance of the Company
and shareholders for fiscal year 2009, which was impacted by delays in harvest
due to weather.

With
the renewal agreement entered into between the Company and the Chief Executive
Officer on August 31, 2008, the Profit Sharing Bonus criteria were adjusted to
make this bonus more challenging. For example, the new formula for fiscal year
2009 increased the minimum return per acre that must be achieved to result in
any bonus. The Compensation Committee believed that the higher minimum return
per acre was appropriate because it acknowledged increased expenses experienced
by shareholder/growers since the Profit Sharing Bonus formula was adopted in
2001. The new minimum return per acre is designed to ensure that bonuses will
be paid only when shareholders/growers receive a meaningful return.
Additionally, under the renewal agreement, the return per acre to growers that
would have resulted in the maximum bonus to the Chief Executive Officer
($50,000) in fiscal year 2008 would have resulted in a bonus amount that is
significantly less ($25,000) under the new formula for fiscal year 2009. The
Compensation Committee also attempted to provide greater incentives for
superior performance with the new formula for fiscal year 2009 by increasing
the amount of bonus that could be earned at the newly established highest level
of achievement. The Compensation Committee believed that these changes, which
were determined in fiscal year 2008 and effective beginning with fiscal year
2009, were consistent with the philosophy stated above. In accordance with the
terms of the renewal agreement entered into on August 31, 2008, 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 amended
by the renewal agreement and as subsequently amended and restated effective
August 27, 2009.

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.

41

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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 2009.

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, such as the Profit Sharing
Bonus formula. The Compensation Committee set Mr. Roches base salary in August
2008 at the time the Company entered into the renewal of Mr. Roches employment
agreement through August 31, 2009. Mr. Roches annual base salary for 2009 was
set at $343,700, an increase of 3.0 percent from the annual base salary of
$333,700 for 2008. 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
2008 and increased annual base salaries for fiscal year 2009.

The
following table sets forth the annual base salaries for 2009 and 2008 for each
of the other Named Executive Officers, as well as the percentage increase in
2009 as compared to 2008:

|                         |  |                          |  |                          |  |                           
|------------------------ |  | ------------------------ |  | ------------------------ |  | --------------------------
|Named
 Executive Officer |  | 2009 Annual
 Base Salary |  | 2008 Annual
 Base Salary |  | % Increase
 2009 Over 2008
|Steven M. Caspers        |  | $177,100                 |  | $171,100                 |  | 3.5%                      
|Jeffrey L. Carlson       |  | $145,000                 |  | $133,600                 |  | 8.5%                      
|John Haugen              |  | $120,000                 |  | $115,500                 |  | 3.9%                      
|Allen Larson             |  | $127,300                 |  | $123,000                 |  | 3.5%                      

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, a cash bonus
based upon the return per acre to growers in the fiscal year.

42

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In July 2009, the
Compensation Committee and the Board of Directors conducted a performance
review of Mr. Roche for fiscal 2009, 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 2009,
prior year compensation information (including salary, Performance Bonus and
Profit Sharing Bonus amounts) and the financial returns to the shareholders 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. Individual members of the Compensation Committee may
have given different weight to different factors. Due to the limited
availability of bonus dollars and Mr. Roches eligibility for a Profit Sharing
Bonus, the available dollars were directed to the fulfillment of the Profit
Sharing Bonus obligation. This determination does not reflect Mr. Roches performance
but rather reflects the challenges during the past crop year and the reduced
return to those shareholders affected by the challenges.

Mr.
Roche determined the discretionary performance bonus amounts to be paid to the
other Named Executive Officers and, consistent with past practice, he received
feedback from various members of the Compensation Committee and the Board of
Directors. In establishing the performance bonus awards for the other Named
Executive Officers, Mr. Roche considered their individual contribution toward
achieving the Company goals, and the level of return to shareholders measured
through dollars paid per acre of sugarbeets grown. 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 2009 and also shows the performance
bonus as a percentage of 2009 salary:

|                         |  |                        |   |                                |  |  |    |   | 
|------------------------ |  | ---------------------- | - | ------------------------------ |  |  | -- | - | 
|Named
 Executive Officer |  | 2009 Performance Bonus |   | % Of 2009 Annual 
 Base Salary | 
|Steven M. Caspers        |  |                        | $ | 30,000                         |  |  | 17 | % | 
|Jeffrey L. Carlson       |  |                        | $ | 10,000                         |  |  | 7  | % | 
|John Haugen              |  |                        | $ | 15,000                         |  |  | 12 | % | 
|Allen Larson             |  |                        | $ | 8,000                          |  |  | 6  | % | 

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 2009 was approved as part of the renewal agreement entered into
between the Company and the Chief Executive Officer on August 31, 2008 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 - $915                 |  | $25,000                     
|$976 - $1,050               |  | $35,000                     
|$1,105 - $1,125             |  | $45,000                     
|$1,126 - $1,200             |  | $55,000                     
|$1,201 and over             |  | $65,000                     

43

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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. For 2009, the return
per harvested acre to the growers was in excess of $1,200 per acre. Due to the
unusual situation where approximately 30 percent of the 2008 crop planted
acreage was unharvested; by mutual agreement between the Board of Directors and
Mr. Roche a Profit Sharing bonus of $55,000 or 16 percent of his 2009 base
annual salary was earned in fiscal year 2009. As part of Mr. Roches amended
and restated employment agreement effective August 27, 2009 no Profit Sharing
Bonus will be paid if 30 percent or more of the crop, based on planted acres,
is lost or unharvested.

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, which was amended
by a renewal agreement dated August 27, 2009 for the term of September 1, 2009
to August 31, 2010. Under this employment agreement as amended by the renewal
agreements, 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
renewal relating to confidentiality of Company 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, 2009, he
would receive $343,700 in post-termination benefits, payable over a twelve
month period.

Other
than with respect to Mr. Roche, 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 Mr. Roche under his employment
agreement, 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 2009, as well as Mr. Roches subsequently amended
and restated employment agreement effective August 27, 2009.

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 2009; (ii)
Steven M. Caspers, who served as the Companys Chief Financial Officer in
fiscal year 2009; and (iii) the three other most highly compensated executive
officers of the Company in fiscal year 2009 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).

44

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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,     |  |  | 2009 |  | $          | 343,509 |           | $ | 55,000                                                                            |  | $                            | 97,277  |       | $ | 22,133 |  | $ | 517,919 | 
|President
 & CEO     |  |  | 2008 |  | $          | 333,483 |           | $ | 81,000                                                                            |  | $                            | 54,772  |       | $ | 21,887 |  | $ | 491,142 | 
|                     |  |  | 2007 |  | $          | 322,232 |           | $ | 120,000                                                                           |  | $                            | 58,625  |       | $ | 20,459 |  | $ | 521,316 | 
|Steven M.
 Caspers,  |  |  | 2009 |  | $          | 177,390 |           | $ | 30,000                                                                            |  | $                            | 147,663 |       | $ | 12,025 |  | $ | 367,078 | 
|Executive VP
 & CFO  |  |  | 2008 |  | $          | 171,470 |           | $ | 45,000                                                                            |  | $                            | 72,623  |       | $ | 9,156  |  | $ | 298,249 | 
|                     |  |  | 2007 |  | $          | 165,701 |           | $ | 65,000                                                                            |  | $                            | 49,408  |       | $ | 19,476 |  | $ | 299,585 | 
|Jeffrey L.
 Carlson, |  |  | 2009 |  | $          | 145,232 |           | $ | 10,000                                                                            |  | $                            | 40,094  |       | $ | 8,264  |  | $ | 203,590 | 
|V.P.
 Operations     |  |  | 2008 |  | $          | 133,740 |           | $ | 27,000                                                                            |  | $                            | 24,477  |       | $ | 7,957  |  | $ | 193,174 | 
|                     |  |  | 2007 |  | $          | 126,113 |           | $ | 36,000                                                                            |  | $                            | 15,021  |       | $ | 6,488  |  | $ | 183,622 | 
|John Haugen,         |  |  | 2009 |  | $          | 125,209 |           | $ | 15,000                                                                            |  | $                            | 60,842  |       | $ | 20,013 |  | $ | 221,064 | 
|VP
 Engineering      |  |  | 2008 |  | $          | 120,309 |           | $ | 27,000                                                                            |  | $                            | 39,141  |       | $ | 8,023  |  | $ | 194,473 | 
|                     |  |  | 2007 |  | $          | 115,808 |           | $ | 36,000                                                                            |  | $                            | 25,231  |       | $ | 23,190 |  | $ | 200,229 | 
|Allen
 Larson,       |  |  | 2009 |  | $          | 127,502 |           | $ | 8,000                                                                             |  | $                            | 34,516  |       | $ | 13,786 |  | $ | 183,804 | 
|Controller           |  |  | 2008 |  | $          | 123,265 |           |   | 0                                                                                 |  | $                            | 29,676  |       | $ | 14,487 |  | $ | 167,428 | 
|                     |  |  | 2007 |  | $          | 118,811 |           | $ | 31,000                                                                            |  | $                            | 18,469  |       | $ | 13,090 |  | $ | 181,370 | 

| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | --- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (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 and supplemental 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 2009 change in Pension Value was also affected by a change in the
 discount rate of 6.5 percent in 2008 to 6.19 percent in 2009. An additional portion
 of the change is due to a change in the pension value measurement date from
 May 31st to August 31st. This required change resulted
 in 15 month period of pension value growth, rather than a 12 month period,
 that is reflected above.
| | (4) | Amounts in
 this column include:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   

45

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|                   |  |                                                             |       |                         |   |           |  |   |        | 
|------------------ |  | ----------------------------------------------------------- | ----- | ----------------------- | - | --------- |  | - | ------ | 
|                   |  | Fiscal Year 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     |  |   |       | 
|Jeffrey L. Carlson |  | $                                                           | 6,889 |                         | $ | 1,375     |  |   |       | 
|John Haugen        |  | $                                                           | 6,088 |                         | $ | 1,906     |  | $ | 12,019 | 
|Allen Larson       |  | $                                                           | 5,100 |                         | $ | 1,342     |  | $ | 7,344  | 

|                   |  |                                                             |       |                         |   |           |  |   |       | 
|------------------ |  | ----------------------------------------------------------- | ----- | ----------------------- | - | --------- |  | - | ----- | 
|                   |  | Fiscal Year 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     |  |   |      | 
|Jeffrey L. Carlson |  | $                                                           | 6,790 |                         | $ | 1,167     |  |   |      | 
|John Haugen        |  | $                                                           | 6,252 |                         | $ | 1,771     |  |   |      | 
|Allen Larson       |  | $                                                           | 6,171 |                         | $ | 1,220     |  | $ | 7,096 | 

|                   |  |                                                             |       |                         |   |           |  |   |        | 
|------------------ |  | ----------------------------------------------------------- | ----- | ----------------------- | - | --------- |  | - | ------ | 
|                   |  | Fiscal Year 2007                                            |      
|Name               |  | Company
 Contributions
 to Defined
 Contribution
 Plans (a) |       | Insurance
 Premiums (b) |   | Other (c) | 
|David H. Roche     |  | $                                                           | 8,963 |                         | $ | 11,495    |  |   |       | 
|Steven M. Caspers  |  | $                                                           | 7,198 |                         | $ | 2,742     |  | $ | 9,537  | 
|Jeffrey L. Carlson |  | $                                                           | 5,364 |                         | $ | 1,124     |  |   |       | 
|John Haugen        |  | $                                                           | 4,952 |                         | $ | 1,579     |  | $ | 16,659 | 
|Allen Larson       |  | $                                                           | 5,061 |                         | $ | 1,192     |  | $ | 6,837  | 

| |     |                                                                                                                                         
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------
| | (a) | Reflects the
 Companys contribution to the 401(k) plan for each Named Executive Officer.                                               
| | (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.                                                          

2009 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.

46

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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 2009. 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, 2009, 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 |                                       |  | 9                                         |  | $ | 238,539 | 
|                    |  |           | SERP         |                                       |  | 9                                         |  | $ | 217,682 | 
|Steven M.
 Caspers  |  |           | Pension Plan |                                       |  | 35                                        |  | $ | 737,568 | 
|                    |  |           | SERP         |                                       |  | 35                                        |  | $ | 15,110  | 
|Jeffrey L.
 Carlson |  |           | Pension Plan |                                       |  | 19                                        |  | $ | 194,781 | 
|John Haugen         |  |           | Pension Plan |                                       |  | 34                                        |  | $ | 371,733 | 
|Allen Larson        |  |           | Pension Plan |                                       |  | 28                                        |  | $ | 242,347 | 

| |     |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | --- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (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,
 2009. 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 interest assumption is 6.19 percent for
 fiscal year 2009. The post-retirement mortality assumption is based on the
 1983 Group Annuity Mortality Table.

Nonqualified Deferred Compensation

The
table below provides information on the non-qualified deferred compensation of
the Named Executive Officers in fiscal year 2009 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 Officers,
except Mr. Carlson, participate in the Deferred Compensation Plan.

47

---

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.

|                   |  |                                                    |        |                                            |    |                                                          |  |                                           |   |  |   |         | 
|------------------ |  | -------------------------------------------------- | ------ | ------------------------------------------ | -- | -------------------------------------------------------- |  | ----------------------------------------- | - |  | - | ------- | 
|Name               |  | Executive
 Contributions in
 Fiscal Year 2009
 (1) |        | Aggregate Earning in
 Fiscal Year 2009 (2) |    | Distribution
 and
 Withdrawals in
 Fiscal Year
 2009 (3) |  | Aggregate Balance at
 August 31, 2009 (4) |  
|David H.
 Roche    |  | $                                                  | 65,500 |                                            | ($ | 17,803)                                                  |  |                                           |  |  | $ | 212,733 | 
|Steven M.
 Caspers |  |                                                    |       |                                            | ($ | 12,073)                                                  |  |                                           |  |  | $ | 39,755  | 
|John Haugen        |  |                                                    |       |                                            | ($ | 2,176)                                                   |  |                                           |  |  | $ | 11,830  | 
|Allen Larson       |  |                                                    |       |                                            | ($ | 2,334)                                                   |  |                                           |  |  | $ | 8,918   | 

| |     |                                                                                                                                                                                                                                                             
| | --- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (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.                                  
| | (3) | Amounts in
 this column reflect the Distributions and Withdrawals in Fiscal Year 2009.                                                                                                                                                                      
| | (3) | Amounts in
 this column reflect the aggregate balance at 2009 fiscal year end.                                                                                                                                                                              

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. Under the terms of
the employment agreement, Mr. Roche is eligible for an increase in this base
salary based upon an annual performance review and 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. 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. 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 and
upon Mr. Roches death or 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.

48

---

On August
28, 2007, the Company and Mr. Roche entered into a renewal agreement that
operated as an amendment to the termination provisions of the 2001 employment
agreement. Under the employment agreement as modified by the renewal agreement,
Mr. Roches employment may be terminated by either party upon 90 days advance
notice, by the Company for material breach or just cause (as those terms
are defined in the renewal agreement) and upon Mr. Roches death or disability.
Under the renewal agreement, 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 confidentiality
of Company 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 renewal agreement also added a
provision to the employment agreement by which Mr. Roche agrees to keep
confidential certain Company information during the term of his employment with
the Company and following termination of employment.

On August
28, 2008, the Company and Mr. Roche entered into a renewal agreement for the
period September 1, 2008 to August 31, 2009. In the renewal agreement, Mr.
Roches annual base salary was set at $343,700 for the one-year period ended
August 31, 2009. The renewal agreement also operated as an amendment to the
profit sharing bonus provisions of the Mr. Roches employment agreement and
established a new matrix of return per acre to growers and corresponding profit
sharing bonus to Mr. Roche applicable to fiscal year 2009 that is set forth in
Compensation Discussion and Analysis  Elements of In-Service Compensation 
Cash Bonus Programs. The calculation of returns per acre is the same as under
the prior agreement, which is the amount received by the shareholders/growers
as a grower payment for sugarbeets not including patronage, retains or trucking
payments. The renewal agreement entered into on August 31, 2008 also states
that the scale set forth above will be reviewed every two years.

For a
description of the amended and restated employment agreement dated August 27,
2009 between the Company and Mr. Roche, see Item 9B. Other Information in this
Annual Report on Form 10-K.

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
2009, except through plans in which the Named Executive Officers participate
generally. The Company provides post-employment compensation for the Named
Executive Officers, David H. Roche, Steven M. Caspers,, Jeffrey L. Carlson,
John Haugen, and Allen Larson through the following plans:

| |   |                                               
| | - | ----------------------------------------------
| |  | Defined
 benefit retirement 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 2009, there were approximately 319 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. Benefits are reduced according to a formula if a person elects early
retirement before age 65. The plan also provides for the payment of certain
disability and death benefits. See the table entitled Pension Benefits under
Item 11. Executive Compensation of this Annual Report on Form 10-K for
information on the benefits for 2009 to each of the Named Executive Officers
under the Pension Plan.

49

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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 participated in the Supplemental Executive Retirement Plan in 2009. See
the table entitled Pension Benefits under Item 11. Executive Compensation
of this Annual Report on Form 10-K for information on the benefits for 2009 to
Messrs. Roche and Caspers 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. 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 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. While the Company does not
provide any matching contribution under the Companys 401(k) retirement savings
plan for compensation amounts deferred into the Deferred Compensation Plan, the
Company does have the discretion to make nonelective or matching contributions
to the Deferred Compensation Plan. 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 Item 11. Executive
Compensation in this Annual Report on Form 10-K for information on the
benefits for 2009 for each of the Named Executive Officers under the Deferred
Compensation Plan.

50

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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 percent of each
employees first 4 percent 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 limited employee pre-tax income contributions to $15,500 in
calendar year 2007 for each participating employee age 49 and under, and
$20,500 for each participating employee age 50 and older. For calendar year
2009, employee pre-tax income contributions were limited to $15,500 for each
participating employee age 49 and under and $20,500 for each participating
employee age 50 and older. See the table entitled Summary Compensation Table
for information on the benefits for 2009 to each of the Named Executive
Officers under the Companys 401(k) plan.

Beginning
in fiscal year 2008 and for fiscal year 2009, the Company also maintains 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.

51

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DIRECTOR COMPENSATION

Directors
of the Company received the following amounts for Board and committee service
in fiscal year 2009: $280 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 $140 per day for service of
less than five hours and $280 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
2009.

The
following table shows for fiscal year 2009, the cash and other compensation
earned by each of the Companys directors. Other than cash retainer and meeting
fees earned in fiscal year 2009 as described above, none of the Companys
directors earned any other cash or other compensation.

|                       |  |                                   |   |        |  |  |  |   |        |  | 
|---------------------- |  | --------------------------------- | - | ------ |  |  |  | - | ------ |  | 
|Name of
 Director      |  | Fees Earned or 
 Paid in Cash (1) |   | Total  | 
|Dale Blume             |  |                                   | $ | 9,685  |  |  |  | $ | 9,685  |  | 
|Dennis
 Butenhoff      |  |                                   | $ | 16,135 |  |  |  | $ | 16,135 |  | 
|Brent
 Davison         |  |                                   | $ | 13,615 |  |  |  | $ | 13,615 |  | 
|Doug Etten             |  |                                   | $ | 22,895 |  |  |  | $ | 22,895 |  | 
|Patrick
 Freese (2)    |  |                                   | $ | 5,725  |  |  |  | $ | 5,725  |  | 
|Michael
 Hasbargen (2) |  |                                   | $ | 2,430  |  |  |  | $ | 2,430  |  | 
|Dennis
 Klosterman     |  |                                   | $ | 11,950 |  |  |  | $ | 11,950 |  | 
|Russell
 Mauch         |  |                                   | $ | 16,625 |  |  |  | $ | 16,625 |  | 
|Charles
 Steiner       |  |                                   | $ | 12,320 |  |  |  | $ | 12,320 |  | 
|Alton Theede           |  |                                   | $ | 4,660  |  |  |  | $ | 4,660  |  | 

|    |                                                                                                                                                                                
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Includes the
 amount of cash compensation earned or paid in fiscal year 2009 for Board and
 committee service, as well as for attendance at meetings requested by the
 Company.
|(2) | Mr.
 Hasbargen served on the Board until his term ended on December 9, 2008. Mr.
 Freese was elected as his replacement on that date.                                          

52

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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, 2009 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, 2009 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 
Alton Theede

53

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

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, 2009, 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 4.85 percent of the outstanding
Preferred Stock.

|                   |  |                       |  |               |  |             |             
|------------------ |  | --------------------- |  | ------------- |  | ----------- | ------------
|Name               |  | Position with Company |  | No. of Shares |  | % of Shares
|                   |  |                       |  |               |  |            
|Dale Blume         |  | Director              |  | 213           |  |             | less than 1%
|                   |  |                       |  |               |  |             |             
|Dennis
 Butenhoff  |  | Director              |  | 185           |  |             | less than 1%
|                   |  |                       |  |               |  |             |             
|Brent
 Davison     |  | Director              |  | 1,000         |  |             | 1.4%        
|                   |  |                       |  |               |  |             |             
|Douglas
 Etten     |  | Director              |  | 430           |  |             | less than 1%
|                   |  |                       |  |               |  |             |             
|Patrick J
 Freese  |  | Director              |  | 93            |  |             | less than 1%
|                   |  |                       |  |               |  |             |             
|Dennis
 Klosterman |  | Director              |  | 400           |  |             | less than 1%
|                   |  |                       |  |               |  |             |             
|Russell
 Mauch     |  | Director              |  | 474           |  |             | less than 1%
|                   |  |                       |  |               |  |             |             
|Charles
 Steiner   |  | Director              |  | 380.5         |  |             | less than 1%
|                   |  |                       |  |               |  |             |             
|Alton Theede       |  | Director              |  | 325           |  |             | less than 1%
|                   |  |                       |  |               |  |             |             
|All
 Directors     |  |                       |  | 3,500.5       |  |             | 4.85%       

|         |                                                                           
|-------- | --------------------------------------------------------------------------
|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 2009,
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.

54

---

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;                                                                                                                                    
| |  | 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.                                                                                            

55

---

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 2009
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 Alton Theede 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.

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, 2009 totaled $96,550 (including a $16,000
 progress billing for the 2009 audit) and $78,750 (including a $3,000 progress
 billing for the 2008 audit) for the fiscal year ended August 31, 2008.
|   |                                                                                                                                                                                                                                                                                                                                                                                                           
|2. | Audit
 Related Fees  none                                                                                                                                                                                                                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                           
|3. | Tax Fees 
 paid to the Companys principal accountant for professional services rendered
 for tax compliance, tax advice, and tax planning totaled $20,700 for fiscal
 year ended August 31, 2009 and $19,380 for the fiscal year ended August 31,
 2008.                                                                                                                                                

56

---

|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|-- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|4. | All Other
 Fees (Employee Benefit and USDA Audits)  paid to the Companys principal
 accountant for services other than detailed in Items 1 thru 3 above total
 $19,500 for the fiscal year ended August 31, 2009 and $18,775 for the fiscal
 year ended August 31, 2008.                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
|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.                                                                                                                                                                                                                     

57

---

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
 Statements of Operations for the Years Ended August 31, 2009, 2008 and 2007                      
| |                                          | -                                                                                           | Consolidated
 Balance Sheet as of August 31, 2009, 2008 and 2007                                               
| |                                          | -                                                                                           | Consolidated
 Statements of Changes in Members Investments for the years ended August 31,
 2009, 2008 and 2007
| |                                          | -                                                                                           | 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.

58

---

|          |                                                         
|--------- | --------------------------------------------------------
|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, 2009, 2008, and 2007, and the
related consolidated statements of operations, change in members investments
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, 2009, 2008, and 2007, 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/S Eide
Bailly LLP

Fargo, North
Dakota November 24, 2009

59

---

MINN-DAK
FARMERS COOPERATIVE 
CONSOLIDATED BALANCE SHEETS 
YEARS ENDED AUGUST 31, 2009, 2008, AND 2007

|                                                                                     |  |      |             |      |   |             |  |   |             | 
|------------------------------------------------------------------------------------ |  | ---- | ----------- | ---- | - | ----------- |  | - | ----------- | 
|                                                                                     |  | 2009 |             | 2008 |   | 2007        | 
|ASSETS                                                                               |  |      |             |      |   |             |  |   |             | 
|                                                                                     |  |      |             |      |   |             |  |   |             | 
|CURRENT ASSETS                                                                       |  |      |             |      |   |             |  |   |             | 
|Cash                                                                                 |  | $    | 93,949      |      | $ | 159,175     |  | $ | 254,906     | 
|                                                                                     |  |      |             |      |   |             |  |   |             | 
|Receivables                                                                          |  |      |             |      |   |             |  |   |             | 
|Trade accounts                                                                       |  |      | 14,299,830  |      |   | 16,376,068  |  |   | 18,620,647  | 
|Growers                                                                              |  |      | 10,196,312  |      |   | 7,313,090   |  |   | 4,907,384   | 
|Income tax                                                                           |  |      |            |      |   | 234,461     |  |   |            | 
|Other                                                                                |  |      | 2,551       |      |   | 2,551       |  |   | 90,227      | 
|                                                                                     |  |      | 24,498,693  |      |   | 23,926,170  |  |   | 23,618,258  | 
|                                                                                     |  |      |             |      |   |             |  |   |             | 
|Advances to
 affiliates - Midwest Agri-Commodities Co. and United Sugars Corporation |  |      | 1,105,797   |      |   | 1,492,451   |  |   |            | 
|                                                                                     |  |      |             |      |   |             |  |   |             | 
|Inventories                                                                          |  |      |             |      |   |             |  |   |             | 
|Refined sugar,
 pulp and molasses to be sold on a pooled basis                       |  |      | 27,046,374  |      |   | 28,452,755  |  |   | 32,843,130  | 
|Nonmember
 refined sugar                                                             |  |      | 1,451,972   |      |   | 1,357,893   |  |   | 28,793      | 
|Yeast                                                                                |  |      | 200,317     |      |   | 167,799     |  |   | 167,808     | 
|Materials and
 supplies                                                              |  |      | 11,296,034  |      |   | 10,159,944  |  |   | 9,046,232   | 
|                                                                                     |  |      | 39,994,697  |      |   | 40,138,391  |  |   | 42,085,963  | 
|                                                                                     |  |      |             |      |   |             |  |   |             | 
|Deferred charges                                                                     |  |      | 1,324,353   |      |   | 1,436,316   |  |   | 2,038,296   | 
|                                                                                     |  |      |             |      |   |             |  |   |             | 
|Prepaid expenses
 and other assets                                                   |  |      | 3,109,313   |      |   | 2,149,816   |  |   | 1,502,146   | 
|                                                                                     |  |      |             |      |   |             |  |   |             | 
|Current deferred
 income tax asset                                                   |  |      | 25,600      |      |   | 145,000     |  |   | 688,000     | 
|                                                                                     |  |      |             |      |   |             |  |   |             | 
|Total current assets                                                                 |  |      | 70,152,402  |      |   | 69,447,319  |  |   | 70,187,569  | 
|                                                                                     |  |      |             |      |   |             |  |   |             | 
|                                                                                     |  |      |             |      |   |             |  |   |             | 
|PROPERTY, PLANT
 AND EQUIPMENT                                                       |  |      |             |      |   |             |  |   |             | 
|Land and land
 improvements                                                          |  |      | 27,130,273  |      |   | 26,476,273  |  |   | 25,183,905  | 
|Buildings                                                                            |  |      | 37,757,659  |      |   | 37,592,109  |  |   | 37,481,480  | 
|Factory/Ag
 equipment                                                                |  |      | 147,419,262 |      |   | 141,263,455 |  |   | 137,993,774 | 
|Other equipment                                                                      |  |      | 4,675,425   |      |   | 3,766,400   |  |   | 4,096,525   | 
|Capitalized
 Leases                                                                  |  |      | 2,960,658   |      |   | 746,210     |  |   |            | 
|Construction in
 progress                                                            |  |      | 4,690,526   |      |   | 4,500,912   |  |   | 1,382,936   | 
|                                                                                     |  |      | 224,633,803 |      |   | 214,345,359 |  |   | 206,138,620 | 
|Less accumulated
 depreciation                                                       |  |      | 127,336,389 |      |   | 119,566,871 |  |   | 111,843,105 | 
|                                                                                     |  |      | 97,297,414  |      |   | 94,778,488  |  |   | 94,295,515  | 
|                                                                                     |  |      |             |      |   |             |  |   |             | 
|OTHER ASSETS                                                                         |  |      |             |      |   |             |  |   |             | 
|                                                                                     |  |      |             |      |   |             |  |   |             | 
|Investment in
 other cooperatives and unconsolidated marketing cooperatives          |  |      | 11,343,602  |      |   | 11,523,024  |  |   | 11,500,298  | 
|Long-term
 deferred income taxes                                                     |  |      |            |      |   |            |  |   | 150,000     | 
|Other                                                                                |  |      | 1,090,477   |      |   | 1,314,071   |  |   | 1,532,847   | 
|                                                                                     |  |      | 12,434,079  |      |   | 12,837,095  |  |   | 13,183,145  | 
|                                                                                     |  |      |             |      |   |             |  |   |             | 
|                                                                                     |  | $    | 179,883,895 |      | $ | 177,062,902 |  | $ | 177,666,229 | 

See Notes to Consolidated Financial Statements.

60

---

MINN-DAK
FARMERS COOPERATIVE 
CONSOLIDATED BALANCE SHEETS 
YEARS ENDED AUGUST 31, 2009, 2008, AND 2007

|                                                                                                     |  |      |             |      |   |             |   |   |             |  
|---------------------------------------------------------------------------------------------------- |  | ---- | ----------- | ---- | - | ----------- | - | - | ----------- | -
|                                                                                                     |  | 2009 |             | 2008 |   | 2007        |  
|LIABILITIES AND MEMBERS INVESTMENT                                                                  |  |      |             |      |   |             |   |   |             |  
|                                                                                                     |  |      |             |      |   |             |   |   |             |  
|CURRENT LIABILITIES                                                                                  |  |      |             |      |   |             |   |   |             |  
|Short-term notes
 payable                                                                            |  | $    | 18,977,978  |      | $ | 24,440,000  |   | $ | 19,000,000  |  
|                                                                                                     |  |      |             |      |   |             |   |   |             |  
|Current portion
 of long-term debt and capital leases                                                |  |      | 2,905,841   |      |   | 2,594,188   |   |   | 2,591,849   |  
|Current portion
 of bonds payable                                                                    |  |      | 2,120,000   |      |   | 2,010,000   |   |   | 1,915,000   |  
|                                                                                                     |  |      | 5,025,841   |      |   | 4,604,188   |   |   | 4,506,849   |  
|Accounts payable                                                                                     |  |      |             |      |   |             |   |   |             |  
|Trade                                                                                                |  |      | 11,566,445  |      |   | 9,511,224   |   |   | 4,840,632   |  
|Checks
 Outstanding                                                                                  |  |      | 545,766     |      |   |            |   |   |            |  
|Growers                                                                                              |  |      | 17,704,288  |      |   | 17,429,879  |   |   | 23,289,239  |  
|Income tax                                                                                           |  |      |            |      |   |            |   |   | 122,271     |  
|                                                                                                     |  |      | 29,816,499  |      |   | 26,941,103  |   |   | 28,252,142  |  
|Payable to
 affiliates - Midwest Agri-Commodities Co. and United Sugars Corporation                  |  |      |            |      |   |            |   |   | 842,476     |  
|                                                                                                     |  |      |             |      |   |             |   |   |             |  
|Accrued
 liabilities                                                                                 |  |      | 2,945,383   |      |   | 3,299,010   |   |   | 4,320,742   |  
|                                                                                                     |  |      |             |      |   |             |   |   |             |  
|Total current
 liabilities                                                                           |  |      | 56,765,701  |      |   | 59,284,301  |   |   | 56,922,209  |  
|                                                                                                     |  |      |             |      |   |             |   |   |             |  
|LONG-TERM DEBT
 AND CAPITAL LEASES, NET OF CURRENT PORTION                                           |  |      | 22,148,959  |      |   | 13,778,143  |   |   | 16,923,816  |  
|                                                                                                     |  |      |             |      |   |             |   |   |             |  
|BONDS PAYABLE                                                                                        |  |      | 11,370,000  |      |   | 13,490,000  |   |   | 15,500,000  |  
|                                                                                                     |  |      |             |      |   |             |   |   |             |  
|LONG-TERM
 DEFERRED INCOME TAX LIABILITY                                                             |  |      | 354,400     |      |   | 443,000     |   |   |            |  
|                                                                                                     |  |      |             |      |   |             |   |   |             |  
|LONG-TERM
 UNRECOGNIZED TAX BENEFITS LIABILITY                                                       |  |      | 274,075     |      |   | 256,075     |   |   |            |  
|                                                                                                     |  |      |             |      |   |             |   |   |             |  
|LONG-TERM
 PENSION LIABILITY                                                                         |  |      | 12,827,360  |      |   | 5,795,189   |   |   | 4,947,297   |  
|                                                                                                     |  |      |             |      |   |             |   |   |             |  
|COMMITMENTS AND
 CONTINGENCIES (NOTE 10)                                                             |  |      |             |      |   |             |   |   |             |  
|                                                                                                     |  |      |             |      |   |             |   |   |             |  
|Total liabilities                                                                                    |  |      | 103,740,495 |      |   | 93,046,708  |   |   | 94,293,322  |  
|                                                                                                     |  |      |             |      |   |             |   |   |             |  
|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; 474 shares issued and outstanding on
 8-31-09, |  |      |             |      |   |             |   |   |             |  
|483 shares
 outstanding on 8-31-08 and                                                               |  |      |             |      |   |             |   |   |             |  
|484 shares
 outstanding on 8-31-07                                                                   |  |      | 118,500     |      |   | 120,750     |   |   | 121,000     |  
|Paid in capital
 in excess of par                                                                    |  |      | 32,094,407  |      |   | 32,094,407  |   |   | 32,094,407  |  
|Nonqualified
 allocated patronage                                                                    |  |      | 28,298,718  |      |   | 28,298,508  |   |   | 27,598,667  |  
|Accumulated
 other comprehensive loss                                                                |  |      | (12,811,235 | )    |   | (4,890,516  | ) |   | (2,368,458  | )
|Retained
 earnings                                                                                   |  |      | 9,959,810   |      |   | 9,909,845   |   |   | 7,444,091   |  
|                                                                                                     |  |      | 76,143,400  |      |   | 84,016,194  |   |   | 83,372,907  |  
|                                                                                                     |  |      |             |      |   |             |   |   |             |  
|                                                                                                     |  | $    | 179,883,895 |      | $ | 177,062,902 |   | $ | 177,666,229 |  

61

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MINN-DAK
FARMERS COOPERATIVE
CONSOLIDATED STATEMENTS OF OPERATIONS 
YEARS ENDED AUGUST 31, 2009, 2008, AND 2007

|                                                                                |  |      |             |      |   |             |  |   |             | 
|------------------------------------------------------------------------------- |  | ---- | ----------- | ---- | - | ----------- |  | - | ----------- | 
|                                                                                |  | 2009 |             | 2008 |   | 2007        | 
|                                                                                |  |      |             |      |   |             |  |   |             | 
|REVENUE                                                                         |  |      |             |      |   |             |  |   |             | 
|From sales of
 sugar, sugar co-products, and yeast, net of discounts            |  | $    | 225,034,020 |      | $ | 243,573,467 |  | $ | 278,571,049 | 
|                                                                                |  |      |             |      |   |             |  |   |             | 
|EXPENSES                                                                        |  |      |             |      |   |             |  |   |             | 
|Production costs
 of sugar, co-products, and yeast sold                         |  |      | 79,586,897  |      |   | 73,592,737  |  |   | 69,697,547  | 
|Sales and
 distribution costs                                                   |  |      | 43,308,982  |      |   | 48,667,319  |  |   | 50,494,042  | 
|General and
 administrative                                                     |  |      | 7,065,675   |      |   | 7,275,736   |  |   | 7,104,136   | 
|Interest                                                                        |  |      | 2,017,946   |      |   | 3,230,496   |  |   | 4,296,972   | 
|                                                                                |  |      | 131,979,500 |      |   | 132,766,288 |  |   | 131,592,697 | 
|                                                                                |  |      |             |      |   |             |  |   |             | 
|OTHER INCOME                                                                    |  |      | 2,493,245   |      |   | 1,299,870   |  |   | 1,436,693   | 
|                                                                                |  |      |             |      |   |             |  |   |             | 
|NET PROCEEDS
 RESULTING FROM MEMBER AND NON-MEMBER BUSINESS BEFORE INCOME TAXES |  |      | 95,547,765  |      |   | 112,107,049 |  |   | 148,415,045 | 
|                                                                                |  |      |             |      |   |             |  |   |             | 
|INCOME TAXES
 EXPENSE (BENEFIT)                                                 |  |      | (505,145    | )    |   | 1,243,679   |  |   |            | 
|                                                                                |  |      |             |      |   |             |  |   |             | 
|NET PROCEEDS
 RESULTING FROM MEMBER AND NON-MEMBER BUSINESS                     |  | $    | 96,052,910  |      | $ | 110,863,370 |  | $ | 148,415,045 | 
|                                                                                |  |      |             |      |   |             |  |   |             | 
|DISTRIBUTION OF
 NET PROCEEDS                                                   |  |      |             |      |   |             |  |   |             | 
|Credited to
 members investment                                                |  |      |             |      |   |             |  |   |             | 
|Components of
 net income                                                       |  |      |             |      |   |             |  |   |             | 
|Income from non-member
 business                                                |  | $    | 334,861     |      | $ | 2,721,265   |  | $ | 267,785     | 
|Patronage income                                                                |  |      | 3,727,840   |      |   | 5,117,244   |  |   | 7,560,504   | 
|                                                                                |  |      |             |      |   |             |  |   |             | 
|Net income
 credited to members investment                                     |  |      | 4,062,701   |      |   | 7,838,509   |  |   | 7,828,289   | 
|                                                                                |  |      |             |      |   |             |  |   |             | 
|Payments to
 members for sugarbeets, net of unit retention capital              |  |      | 91,990,209  |      |   | 103,024,861 |  |   | 140,586,756 | 
|                                                                                |  |      |             |      |   |             |  |   |             | 
|NET PROCEEDS
 RESULTING FROM MEMBER AND NONMEMBER BUSINESS                      |  | $    | 96,052,910  |      | $ | 110,863,370 |  | $ | 148,415,045 | 

See Notes to Consolidated Financial Statements.

62

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|                                                          
|----------------------------------------------------------
|MINN-DAK
 FARMERS COOPERATIVE                             
|CONSOLIDATED
 STATEMENTS OF CHANGES IN MEMBERS INVESTMENT
|YEARS ENDED AUGUST 31,
 2009, 2008, AND 2007              

|                                                |  |                  |            |               |   |                                          |   |                                     |            |                                                  |   |                    |   |       |             |                                |   |           |   |   |            |   |   |            |  
|----------------------------------------------- |  | ---------------- | ---------- | ------------- | - | ---------------------------------------- | - | ----------------------------------- | ---------- | ------------------------------------------------ | - | ------------------ | - | ----- | ----------- | ------------------------------ | - | --------- | - | - | ---------- | - | - | ---------- | -
|                                                |  | 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, 2006                        |  | $                | 18,483,200 |               | $ | 120,000                                  |   | $                                   | 32,094,407 |                                                  | $ | 26,077,023         |   | $     |            |                                | $ | 7,176,306 |   | $ | 83,950,936 |   |   |            |  
|Stock - Sales - common(10 shares)               |  |                  |            |               |   | 2,500                                    |   |                                     |            |                                                  |   |                    |   |       |             |                                |   |           |   |   | 2,500      |   |   |            |  
|Repurchases
 - common(6 shares)                 |  |                  |            |               |   | (1,500                                   | ) |                                     |            |                                                  |   |                    |   |       |             |                                |   |           |   |   | (1,500     | ) |   |            |  
|Revolvement of unit retention capital           |  |                  |            |               |   |                                          |   |                                     |            |                                                  |   |                    |   |       |             |                                |   |           |   |   |           |   |   |            |  
|Revolvement of prior years allocated patronage |  |                  |            |               |   |                                          |   |                                     |            |                                                  |   | (6,038,860         | ) |       |             |                                |   |           |   |   | (6,038,860 | ) |   |            |  
|Net income for the year ended August 31, 2007   |  |                  |            |               |   |                                          |   |                                     |            |                                                  |   | 7,560,504          |   |       |             |                                |   | 267,785   |   |   | 7,828,289  |   | $ | 7,828,289  |  
|Pension liability adjustment                    |  |                  |            |               |   |                                          |   |                                     |            |                                                  |   |                    |   |       | (2,368,458  | )                              |   |           |   |   | (2,368,458 | ) |   | (2,368,458 | )
|                                                |  |                  |            |               |   |                                          |   |                                     |            |                                                  |   |                    |   |       |             |                                |   |           |   |   |            |   |   |            |  
|Comprehensive Income (Loss)                     |  |                  |            |               |   |                                          |   |                                     |            |                                                  |   |                    |   |       |             |                                |   |           |   |   |            |   | $ | 5,459,831  |  
|                                                |  |                  |            |               |   |                                          |   |                                     |            |                                                  |   |                    |   |       |             |                                |   |           |   |   |            |   |   |            |  
|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 |   |   |            |  

See Notes to Consolidated
Financial Statements.

63

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MINN-DAK FARMERS COOPERATIVE
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED AUGUST 31, 2009, 2008, AND 2007

|                                                                           |  |      |            |      |   |            |   |   |             |  
|-------------------------------------------------------------------------- |  | ---- | ---------- | ---- | - | ---------- | - | - | ----------- | -
|                                                                           |  | 2009 |            | 2008 |   | 2007       |  
|OPERATING ACTIVITIES                                                       |  |      |            |      |   |            |   |   |             |  
|Income allocated to members investment                                    |  | $    | 4,062,701  |      | $ | 7,838,509  |   | $ | 7,828,289   |  
|Accumulated other comprehensive loss                                       |  |      | (7,920,718 | )    |   | (2,522,058 | ) |   | (2,368,458  | )
|Add (deduct) noncash items                                                 |  |      |            |      |   |            |   |   |             |  
|Depreciation                                                               |  |      | 8,440,002  |      |   | 8,115,079  |   |   | 7,936,825   |  
|Amortization                                                               |  |      | 359,548    |      |   | 436,512    |   |   | 327,198     |  
|(Gain) Loss on disposal of equipment                                       |  |      | (108,602   | )    |   | 112,747    |   |   | 3,393       |  
|(Gain)Loss allocated from unconsolidated marketing subsidiaries            |  |      | (115,543   | )    |   | 43,419     |   |   | 57,149      |  
|Noncash portion of patronage capital credits                               |  |      | (974,925   | )    |   | (644,842   | ) |   | (714,194    | )
|Deferred income taxes                                                      |  |      | 30,800     |      |   | 1,136,000  |   |   | (2,071,000  | )
|(Increase)/Decrease in cash surrender of retired executive life
 insurance |  |      | 49,555     |      |   | 20,224     |   |   | (55,048     | )
|Changes in assets and liabilities:                                         |  |      |            |      |   |            |   |   |             |  
|Accounts receivable and advances                                           |  |      | (420,329   | )    |   | (2,408,377 | ) |   | (3,591,066  | )
|Inventory and prepaid expenses                                             |  |      | (815,803   | )    |   | 1,299,903  |   |   | (13,019,660 | )
|Deferred charges and other                                                 |  |      | 114,473    |      |   | 629,083    |   |   | 4,204       |  
|Accounts payable, accrued liabilities, and other liabilities               |  |      | 9,665,509  |      |   | (662,766   | ) |   | 15,071,712  |  
|                                                                           |  |      |            |      |   |            |   |   |             |  
|NET CASH FROM OPERATING
 ACTIVITIES                                        |  |      | 12,366,668 |      |   | 13,393,433 |   |   | 9,409,344   |  
|                                                                          
|INVESTING ACTIVITIES                                                       |  |      |            |      |   |            |   |   |             |  
|Proceeds from disposition of property, plant and equipment                 |  |      | 332,455    |      |   | 11,170     |   |   | 30,404      |  
|Capital expenditures                                                       |  |      | (8,817,485 | )    |   | (7,975,759 | ) |   | (4,865,834  | )
|Capital adjustment of unconsolidated marketing subsidiary                  |  |      | 871,094    |      |   | 325,357    |   |   | (61,072     | )
|Proceeds from patronage refunds and equity revolvements                    |  |      | 418,184    |      |   | 272,726    |   |   | 240,461     |  
|                                                                           |  |      |            |      |   |            |   |   |             |  
|NET CASH USED FOR
 INVESTING ACTIVITIES                                    |  |      | (7,195,752 | )    |   | (7,366,506 | ) |   | (4,656,041  | )
|                                                                          
|FINANCING ACTIVITIES                                                       |  |      |            |      |   |            |   |   |             |  
|Sale (repurchase) of common stock, net                                     |  |      | (2,250     | )    |   | (250       | ) |   | 1,000       |  
|Net proceeds (repayments) of short-term debt                               |  |      | (5,462,022 | )    |   | 5,440,000  |   |   | 4,555,000   |  
|Checks Outstanding                                                         |  |      | 545,766    |      |   |           |   |   |            |  
|Proceeds from long term debt                                               |  |      | 10,000,000 |      |   |           |   |   |            |  
|Payment of financing fees                                                  |  |      | (207,405   | )    |   | (284,410   | ) |   | (260,570    | )
|Payment of long-term debt/lease                                            |  |      | (5,692,828 | )    |   | (5,239,138 | ) |   | (5,076,890  | )
|Payment of unit retains and allocated patronage                            |  |      | (4,417,403 | )    |   | (6,038,860 | ) |   | (3,940,530  | )
|                                                                           |  |      |            |      |   |            |   |   |             |  
|NET CASH USED FOR
 FINANCING ACTIVITIES                                    |  |      | (5,236,142 | )    |   | (6,122,658 | ) |   | (4,721,990  | )
|                                                                           |  |      |            |      |   |            |   |   |             |  
|NET CHANGE IN CASH                                                         |  |      | (65,226    | )    |   | (95,731    | ) |   | 31,313      |  
|                                                                           |  |      |            |      |   |            |   |   |             |  
|CASH, BEGINNING OF YEAR                                                    |  |      | 159,175    |      |   | 254,906    |   |   | 223,593     |  
|                                                                           |  |      |            |      |   |            |   |   |             |  
|CASH, END OF YEAR                                                          |  | $    | 93,949     |      | $ | 159,175    |   | $ | 254,906     |  

64

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MINN-DAK FARMERS COOPERATIVE
CONSOLIDATED STATEMENTS OF CASHFLOWS
YEARS ENDED AUGUST 31, 2009, 2008, AND 2007

|                                                                         |  |      |           |      |   |           |  |   |           | 
|------------------------------------------------------------------------ |  | ---- | --------- | ---- | - | --------- |  | - | --------- | 
|                                                                         |  | 2009 |           | 2008 |   | 2007      | 
|                                                                         |  |      |           |      |   |           |  |   |           | 
|SUPPLEMENTAL DISCLOSURES
 OF CASH FLOW INFORMATION                       |  |      |           |      |   |           |  |   |           | 
|Cash payments for                                                        |  |      |           |      |   |           |  |   |           | 
|Interest                                                                 |  | $    | 2,067,437 |      | $ | 3,438,931 |  | $ | 4,848,602 | 
|                                                                         |  |      |           |      |   |           |  |   |           | 
|Income tax net payments (refunds)                                        |  | $    | (790,406  | )    | $ | 1,930,729 |  | $ | 160,050   | 
|                                                                         |  |      |           |      |   |           |  |   |           | 
|SUPPLEMENTAL DISCLOSURES OF NON-CASH INVESTING AND FINANCING
 ACTIVITIES |  |      |           |      |   |           |  |   |           | 
|Equipment purchased by issuance of capital lease                         |  | $    | 2,365,296 |      | $ | 746,210   |  | $ |          | 
|                                                                         |  |      |           |      |   |           |  |   |           | 
|See Notes to
 Consolidated Financial Statements.                         |  |      |           |      |   |           |  |   |           | 

65

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NOTE 1 - PRINCIPAL ACTIVITY AND SIGNIFICANT
ACCOUNTING POLICIES

Principal Business Activity

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 bakers
yeast. Link Acquisition Company LLC (Link) was formed to advance possible
strategic business activities by the Company.
Approximately 94% of net sales is related to sugarbeet operations and 6%
is 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.

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
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 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 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.

66

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Reclassifications

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

Prepaid Expense and Other Assets

Sugar allocation and prepaid insurance costs related to the subsequent
fiscal year are recorded as assets and subsequently expensed to the following
fiscal year.

Deferred Charges

Agricultural development and labor procurement costs incurred in
connection with the sugarbeet crop to be harvested in September and October of
the following fiscal year, are deferred and subsequently charged to expense for
the fiscal year applicable to the ensuing processing period.

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 SFAS No. 13.

Capitalized
assets include indirect costs such as fringe benefits, interest and engineering
when appropriate. The indirect costs
capitalized for the years ended August 31, 2009 and 2008 and 2007 were $205,240, $133,775 and $158,642,
respectively. There was no construction-period
interest capitalized for the years ended August 31, 2009, 2008 and 2007.

Goodwill and Other Intangible Assets

In accordance with Statement
of Financial Accounting Standards (SFAS) No. 142, 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.

Investments in Other Cooperatives and
Unconsolidated Marketing Subsidiaries

Equity Value Investments in Unconsolidated Marketing Investments - The
investments in United Sugars Corporation and Midwest Agri-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.

67

---

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 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.

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. The
Company switched to a self-funded employee health plan January 1, 2008.
Beginning January 1, 2008 the Company contracted with a North Dakota insurance
carrier to insure individual health claims exceeding $40,000 and aggregate
annual health claims in excess of 120% of expected claims for the plan year.
The Company estimates its exposure for claims incurred but not paid at the end
of each reporting period and uses historical information supplied by the
Companys insurance carrier to estimate its liability for these claims. This
liability is estimated, based on employee enrollment and factors that are
established at each contract renewal. Actual claims experience may differ from
Company estimates.

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 SFAS No. 144, Accounting for the Impairment or Disposal of
Long-Lived Assets. SFAS No. 144 requires that long-lived assets be reviewed
for impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Recoverability of
long-lived assets to be held and used is measured by a comparison of the
carrying amount of an asset to future net cash flows expected to be generated
by the asset. If such assets are considered to be impaired, the impairment to
be recognized is measured by the amount by which the carrying amount of the
assets exceeds the fair value of the assets. Long-lived assets to be disposed
of by sale are reported at the lower of the carrying amount or fair value less
costs to sell, and will cease to be depreciated. SFAS No. 144 also requires
long-lived assets to be disposed of, other than by sale, to be considered as
held and used until disposed of, requiring the depreciable life to be adjusted
as an accounting change.

68

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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 Subsidiary.

Advertising

The Companys advertising costs are expensed as incurred. Advertising
expense for the years ended August 31, 2009, 2008 and 2007 totaled $19,955,
$21,568 and $20,922, respectively.

Pension Liability

In accordance with FAS 158, 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 FAS 158 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

In
September 2006, the FASB issued FAS 157, Accounting for Fair Value
Measurements. FAS 157 defines fair value, and establishes a framework for
measuring fair value in GAAP, and expands disclosure about fair value
measurements. In February 2008, the FASB issued FSP FAS 157-2, Effective
Date of FASB Statement 157 to defer the effective date for nonfinancial assets
and liabilities that are recognized or disclosed at fair value in the financial
statements on a non-recurring basis until fiscal years beginning after
November 15, 2008. In February 2008, the FASB also issued FSP FAS
157-1, Application of FASB Statement 157 to FASB Statement 13 and Other
Accounting Pronouncements that Address Fair Value Measurements for Purposes of
Lease Classification or Measurement under Statement 13, which excludes FAS 13,
Accounting for Leases (FAS 13), as well as other accounting pronouncements
that address fair value measurements on lease classification or measurement
under FAS 13. The provisions of FAS 157 for financial assets and liabilities
and nonfinancial assets and liabilities that are recognized or disclosed at
fair value in the financial statements on a recurring basis (at least annually)
were effective for the Company for the fiscal year beginning September 1, 2008.
The Company accordingly adopted the provisions of FAS 157 for these items
on September 1, 2008, which did not have a material impact on its
consolidated financial statements.

The Company
elected to apply the deferral under FSP FAS 157-2, and accordingly, will not
apply FAS 157 to its non-financial assets and liabilities that are recognized
or disclosed at fair value, until fiscal year 2010. We do not expect that the
application of the deferred portion of FAS No. 157 will have a material impact
on the Companys consolidated financial statements.

69

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Fair value is
defined under SFAS 157 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 SFAS 157 must maximize the use of observable inputs
and minimize the use of unobservable inputs. SFAS No. 157 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 are 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 are not active, and inputs (other than quoted prices) that are
 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

FAS 141 (R)
Business Combinations  This statement defines the acquirer, establishes the
acquisition date, and defines how the acquisition method is applied to
financial statements. It also recognizes and measures goodwill or a gain from a
bargain purchase. On April 1, 2009 the FASB also released FSP No. FAS
141(R)-1, Accounting for Assets Acquired and
Liabilities Assumed in a Business Combination That Arise from Contingencies,
to address some of the application issues under SFAS No. 141(R) Business Combinations. FSP No. FAS
141(R)-1 deals with the initial recognition and measurement of an asset acquired
or a liability assumed in a business combination that arises from a contingency
provided the asset or liabilitys fair value on the date of acquisition can be
determined. When the fair value cant be determined, the FSP requires using the
guidance under SFAS No. 5, Accounting
for Contingencies and FASB Interpretation (FIN) No. 14, Reasonable Estimation of the Amount of a Loss. The application of these statements will
only apply and be effective should the Company acquire the business assets of
another entity after August 31, 2009.

The FASB has
issued statement No. 168, The FASB
Accounting Standards Codification and the Hierarchy of Generally Accepted
Accounting Principles. This statement replaces Statement No. 162 and
establishes the FASB Accounting Standards
CodificationTM. (Codification) as the source of
authoritative preparation of financial statements in conformity with GAAP.
Rules and interpretive releases of the Securities and Exchange Commission (SEC)
under authority of federal securities laws are also sources of authoritative
GAAP for SEC Registrants. All guidance constrained in the Codification carries
and equal level of authority. This statement becomes effective for the Company
for the first quarter of fiscal 2010. The Company does not expect that the
adoption of this statement will have a material effect on the Companys
financial statements.

The FASB has
issued Accounting Standards Update (ASU) No. 2009-05, Fair Value Measurements and Disclosures (Topic 820).
This ASU provides amendments to Subtopic 820-10, Fair Value Measurements and
Disclosures  Overall, for the fair value measurement of liabilities. This ASU
provides clarification: of the measurement techniques required in circumstances
in which a quoted price in an active market for the identical liability is not
available; of the requirements related to restrictions that prevent a transfer
of a liability; and of the requirements for certain Level 1 fair value
measurement situations. This ASU becomes effective for the Company for the first
quarter of 2010. The Company does not expect that the adoption of this ASU will
have a material effect on the Companys financial statements.

Change in Accounting Policy

FAS 158
Employers Accounting for Defined Benefit Pension Plans and other Post-retirement
Plans  This statement requires an employer that is a business entity and
sponsors one or more single employer defined benefit plans to recognize the
funded status of a benefit plan, measured as the difference between plan assets
at fair value and the projected benefit obligation in the financial statement.

70

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In September
of 2006, the FASB issued FAS No. 158 Employers Accounting for Defined Benefit
Pension Plans and Other Post-retirement 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 FAS 158, the
new measurement date for the plans liabilities is August 31, 2009, which
resulted in a one-time addition to liability and reduction of retained earnings
of $284,896.

Concentration and Sources of Labor

The Companys
total factory campaign and full time workforce consists of 463 employees, of
which 57% is 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 long-term variable and fixed
rates on a substantial portion of its long-term debt. The variable rate has limited variability on its rate; therefore
the Company does not consider its interest rate risk for long-term debt to be
material. Short-term debt risk is not
expected to have a material impact on the Companys annual return to its
growers.

Accumulated Other Comprehensive Income (Loss)

SFAS No. 130, Reporting Comprehensive Income (Loss), establishes rules
for reporting comprehensive income and loss and its components. Accumulated
other comprehensive loss consists of the SFAS No. 158 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, 2009, 2008 and 2007 was $143,127, $143,127 and $38,400,
respectively. The cumulative
amortization of these intangible assets for the years ended August 31, 2009,
2008 and 2007 is $337,455, $194,327 and $51,200, respectively.

NOTE 3 - INVESTMENTS

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

|                                   |  |      |            |      |   |            |  |   |            | 
|---------------------------------- |  | ---- | ---------- | ---- | - | ---------- |  | - | ---------- | 
|                                   |  | 2009 |            | 2008 |   | 2007       | 
|                                   |  |      |            |      |   |            |  |   |            | 
|Dakota Valley Electric Cooperative |  | $    | 5,978,829  |      | $ | 5,632,704  |  | $ | 5,409,916  | 
|CoBank                             |  |      | 4,964,489  |      |   | 4,801,609  |  |   | 4,676,881  | 
|United Sugars Corporation          |  |      | 216,396    |      |   | 971,797    |  |   | 1,255,082  | 
|Midwest Agri-Commodities           |  |      | 10,717     |      |   | 10,867     |  |   | 96,359     | 
|Other                              |  |      | 173,171    |      |   | 106,047    |  |   | 62,060     | 
|                                   |  |      |            |      |   |            |  |   |            | 
|                                   |  | $    | 11,343,602 |      | $ | 11,523,024 |  | $ | 11,500,298 | 

71

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|         |                                                                           
|-------- | --------------------------------------------------------------------------
|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, are as follows:

|                                                                                        |  |      |            |      |   |            |  |   |            | 
|--------------------------------------------------------------------------------------- |  | ---- | ---------- | ---- | - | ---------- |  | - | ---------- | 
|                                                                                        |  | 2009 |            | 2008 |   | 2007       | 
|                                                                                       
|Seasonal loan with CoBank, due December 1,
 2009, interest variable, currently at 1.65% |  | $    | 18,977,978 |      | $ | 24,440,000 |  | $ | 19,000,000 | 

On October 15,
2009 Co-Bank extended the maturity date for the seasonal debt line and
supplemental facility from November 1, 2009 to December 31, 2009.

The Company
has a $50,000,000 seasonal line of credit with CoBank, with $31,022,022
available on August 31, 2009. The Company also has a $15,000,000 bid loan
supplemental facility with CoBank. As of August 31, 2009 there were no advances
against this line. Advances, maturity dates, and interest rates on the
supplemental facility, which expires on December 31, 2009, are not guaranteed.
The lines are secured with a first lien on substantially all property and
equipment and current assets of the Company. The Company also utilizes the
USDAs CCC Sugar Loan Program to provide an additional source of seasonal
financing. Un-advanced funds remaining from the $50,000,000 seasonal debt line
are subject to a 0.25% commitment fee.

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

|                          |  |      |            |      |   |            |   |   |            |  
|------------------------- |  | ---- | ---------- | ---- | - | ---------- | - | - | ---------- | -
|                          |  | 2009 |            | 2008 |   | 2007       |  
|                          |  |      |            |      |   |            |   |   |            |  
|Maximum
 borrowings       |  | $    | 45,551,000 |      | $ | 57,767,930 |   | $ | 74,850,000 |  
|                          |  |      |            |      |   |            |   |   |            |  
|Average
 borrowing levels |  | $    | 28,410,018 |      | $ | 36,003,083 |   | $ | 39,241,154 |  
|                          |  |      |            |      |   |            |   |   |            |  
|Average
 interest rates   |  |      | 2.23       | %    |   | 4.23       | % |   | 6.32       | %
|                          |  |      |            |      |   |            |   |   |            |  

72

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Long-Term Debt

On October 30,
2008, the Company increased the term debt line with CoBank by $10.0 million.

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

|                                                                                                                                                                                                                                                                                                                                         |  |      |            |      |   |            |   |   |            |  
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | ---------- | ---- | - | ---------- | - | - | ---------- | -
|                                                                                                                                                                                                                                                                                                                                         |  | 2009 |            | 2008 |   | 2007       |  
|CoBank term
 loan, with fixed and variable rates, due in varying principal repayments
 through August 20, 2016, fixed interest rates currently at 5.60% to 6.26% and
 variable interest rate currently at 1.65%, with a first lien on substantially
 all property, equipment, and current assets of the Company located in
 Wahpeton, ND |  | $    | 22,461,958 |      | $ | 15,789,655 |   | $ | 19,113,793 |  
|                                                                                                                                                                                                                                                                                                                                         |  |      |            |      |   |            |   |   |            |  
|Less current maturities                                                                                                                                                                                                                                                                                                                  |  |      | (2,495,773 | )    |   | (2,493,103 | ) |   | (2,493,103 | )
|                                                                                                                                                                                                                                                                                                                                         |  |      |            |      |   |            |   |   |            |  
|Long term maturities                                                                                                                                                                                                                                                                                                                     |  | $    | 19,966,185 |      | $ | 13,296,552 |   | $ | 16,620,690 |  

In addition,
the Company can 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 0.25% of the daily un-advanced
commitment.

Interest
expense for the years ended August 31, 2009, 2008 and 2007 totaled $2,017,945,
$3,230,496 and $4,296,972, respectively.

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

|                             |  |  |   |            | 
|---------------------------- |  |  | - | ---------- | 
|Years ending August 31,      |  |  |   |            | 
|                             |  |  |   |            | 
|2010                         |  |  | $ | 2,495,773  | 
|2011                         |  |  |   | 3,327,697  | 
|2012                         |  |  |   | 3,327,697  | 
|2013                         |  |  |   | 3,327,697  | 
|2014                         |  |  |   | 3,327,697  | 
|Thereafter                   |  |  |   | 6,655,397  | 
|                             |  |  |   |            | 
|Total
 Principal amounts due |  |  | $ | 22,461,958 | 

73

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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. On
August 31, 2009 the Capitalized Costs of the leased assets were $2,960,658 and
accumulated depreciation was $365,403. This equipment is being depreciated in
accordance with SFAS No. 13. Depreciation of assets under these capital leases
is included in depreciation expense.

Minimum future
lease payments under capital leases are as follows:

|                                            |  |   |           |           | 
|------------------------------------------- |  | - | --------- | --------- | 
|Years ending August 31,                     |  |   |           |           | 
|                                            |  |   |           |           | 
|2010                                        |  |   | $         | 534,573   | 
|2011                                        |  |   |           | 534,573   | 
|2012                                        |  |   |           | 534,573   | 
|2013                                        |  |   |           | 900,184   | 
|2014                                        |  |   |           | 152,450   | 
|2015                                        |  |   |           | 320,754   | 
|                                            |  |   |           |           | 
|Total
 minimum lease payments               |  |   | $         | 2,977,107 | 
|                                           
|Less: Amount
 representing interest         |  |   |           | 384,265   | 
|                                           
|Present
 value of net minimum lease payment |  | $ | 2,592,842 |          
|                                            |  |   |           |           | 
|Less:
 Current Maturities                   |  |   |           | 410,068   | 
|                                            |  |   |           |           | 
|Long Term
 Maturities                       |  |   | $         | 2,182,774 | 

Bonds Payable

The Company
financed construction projects related to the processing facility through the
sale of Solid Waste Disposal Revenue and Industrial Development Revenue Bonds,
Series 1996 and 2002, by Richland County North Dakota. The Company has leased
the property and equipment from the County for the sum of the annual principal
and interest payments on the bonds. Under the terms of the lease, the Company
is responsible for the real estate taxes, insurance, repairs and maintenance,
and other costs incident to the ownership of the property. The leased property
is included with property and equipment in the financial statements and the
bonds have been recorded as a direct obligation of the Company. Ownership of
the property and equipment will transfer to the Company when the bonds are
repaid in full. The Company guarantees the bonds. The Company has letter of
credit arrangements with a bank that provides security for obligations under
the bonds payable totaling approximately $13,947,022 at August 31, 2009. There
were no outstanding advances under these letter of credit arrangements as of
August 31, 2009.

74

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Information regarding Bonds
Payable at August 31 is as follows:

|                                                                                                                                                               |  |      |            |      |   |            |   |   |            |  
|-------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- | ---------- | ---- | - | ---------- | - | - | ---------- | -
|                                                                                                                                                               |  | 2009 |            | 2008 |   | 2007       |  
|                                                                                                                                                              
|Richland County North Dakota Bonds, with
 variable rates, due in varying principal repayments through January 2011.
 Variable interest rate currently at 0.79% |  | $    | 2,570,000  |      | $ | 3,755,000  |   | $ | 4,880,000  |  
|                                                                                                                                                               |  |      |            |      |   |            |   |   |            |  
|Richland County North Dakota Bonds, with
 variable rates, due in varying principal repayments through April 2019.
 Variable interest rate currently at 0.69%   |  | $    | 10,920,000 |      | $ | 11,745,000 |   | $ | 12,535,000 |  
|                                                                                                                                                               |  |      |            |      |   |            |   |   |            |  
|                                                                                                                                                               |  | $    | 13,490,000 |      | $ | 15,500,000 |   | $ | 17,415,000 |  
|                                                                                                                                                               |  |      |            |      |   |            |   |   |            |  
|Less Current Maturities                                                                                                                                        |  |      | (2,120,000 | )    |   | (2,010,000 | ) |   | (1,915,000 | )
|                                                                                                                                                               |  |      |            |      |   |            |   |   |            |  
|Long Term Maturities                                                                                                                                           |  | $    | 11,370,000 |      | $ | 13,490,000 |   | $ | 15,500,000 |  

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

|                        |  |  |   |            | 
|----------------------- |  |  | - | ---------- | 
|Years ending August 31, |  |  |   |            | 
|                        |  |  |   |            | 
|2010                    |  |  | $ | 2,120,000  | 
|2011                    |  |  |   | 2,230,000  | 
|2012                    |  |  |   | 955,000    | 
|2013                    |  |  |   | 1,005,000  | 
|2014                    |  |  |   | 1,055,000  | 
|Thereafter              |  |  |   | 6,125,000  | 
|                        |  |  |   |            | 
|                        |  |  | $ | 13,490,000 | 

75

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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.

Amortization of bond financing cost for the years ended August 31,
2009, 2008 and 2007 totaled $28,362, $28,362 and $33,340, respectively.

NOTE 5 - MEMBERS INVESTMENT AND GROWER
PAYMENTS

The ownership of nondividend 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 1.60,
1.50 and 1.60 acres per unit of preferred stock for the fiscal years 2009, 2008
and 2007, respectively. A unit
consists of one share each of Class A, Class B and Class C preferred stock. The
preferred shares are nonvoting and nondividend 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 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 growers.
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,
2009, 2008 and 2007 of $3,727,840, $5,117,244 and $7,560,504, respectively.
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. In addition, for the fiscal the period ending August 31,
2009, 2008 and 2007 the Company revolved $101,701, $-0-, and $-0- of allocated
patronage to certain deceased members estates.

76

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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.

During the
year ended August 31, 2007, the Company revolved the remaining 94% of the
allocated patronage for the fiscal year ended August 31, 2001, totaling
$4,324,506 and 48% of the allocated patronage for the fiscal year ended August
31, 2002, totaling $1,714,354.

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.

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, 2009, 2008 and 2007, the
Company had advanced $30,078,285, $34,383,138 and $30,775,443, for operating
and marketing expenses incurred respectively. The Company had outstanding
advances due to/(from) United Sugars as of August 31, 2009, 2008 and 2007 of
$(1,740,649), $(2,064,472) and $36,638, respectively. The Company accounts for
United Sugars SFAS No. 158 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, 2009, 2008 and 2007, $8,440,062, $9,026,985 and $9,410,648,
respectively. The Company had outstanding advances due to Midwest as of August
31, 2009, 2008 and 2007 of $634,852, $572,020 and $805,838, 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 SFAS No. 158 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.

77

---

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

|                                                                                                                           |  |      |            |      |   |            |   |   |            |  
|-------------------------------------------------------------------------------------------------------------------------- |  | ---- | ---------- | ---- | - | ---------- | - | - | ---------- | -
|                                                                                                                           |  | 2009 |            | 2008 |   | 2007       |  
|                                                                                                                           |  |      |            |      |   |            |   |   |            |  
|Deferred tax
 assets                                                                                                       |  |      |            |      |   |            |   |   |            |  
|Non-qualified allocated patronage due to
 members                                                                          |  | $    | 11,319,000 |      | $ | 11,319,000 |   | $ | 11,040,000 |  
|Net operating loss carry forwards                                                                                          |  |      | 6,121,600  |      |   | 5,706,455  |   |   | 4,393,000  |  
|Other                                                                                                                      |  |      | 1,113,741  |      |   | 2,427,545  |   |   | 3,428,000  |  
|                                                                                                                           |  |      |            |      |   |            |   |   |            |  
|Total deferred tax assets                                                                                                  |  |      | 18,554,341 |      |   | 19,453,000 |   |   | 18,861,000 |  
|                                                                                                                           |  |      |            |      |   |            |   |   |            |  
|Deferred tax liabilities                                                                                                   |  |      |            |      |   |            |   |   |            |  
|Depreciation                                                                                                               |  |      | 18,528,741 |      |   | 16,325,000 |   |   | 15,834,000 |  
|Other                                                                                                                      |  |      | 354,400    |      |   | 3,426,000  |   |   | 2,189,000  |  
|                                                                                                                           |  |      |            |      |   |            |   |   |            |  
|Total deferred tax liabilities                                                                                             |  |      | 18,883,141 |      |   | 19,751,000 |   |   | 18,023,000 |  
|                                                                                                                           |  |      |            |      |   |            |   |   |            |  
|Net deferred tax asset (liability)                                                                                         |  | $    | (328,800   | )    | $ | (298,000   | ) | $ | 838,000    |  
|                                                                                                                           |  |      |            |      |   |            |   |   |            |  
|Classified
 as follows                                                                                                     |  |      |            |      |   |            |   |   |            |  
|Current asset                                                                                                              |  | $    | 25,600     |      | $ | 145,000    |   | $ | 688,000    |  
|Long-term asset (liability)                                                                                                |  |      | (354,400   | )    |   | (443,000   | ) |   | 150,000    |  
|                                                                                                                           |  |      |            |      |   |            |   |   |            |  
|Net deferred tax asset (liability)                                                                                         |  | $    | (328,800   | )    | $ | (298,000   | ) | $ | 838,000    |  
|                                                                                                                           |  |      |            |      |   |            |   |   |            |  
|The state
 and federal operating loss carry forwards totaling approximately $15,303,976
 will expire in 2015 through 2026. | 
|                                                                                                                           |  |      |            |      |   |            |   |   |            |  
|The
 provision for income taxes is as follows:                                                                             |  |      |            |      |   |            |   |   |            |  
|                                                                                                                           |  |      |            |      |   |            |   |   |            |  
|                                                                                                                           |  | 2009 |            | 2008 |   | 2007       |  
|                                                                                                                           |  |      |            |      |   |            |   |   |            |  
|Current
 expense (benefit)                                                                                                 |  | $    | (535,945   | )    | $ | 107,679    |   | $ | 2,071,000  |  
|Net change
 in temporary differences                                                                                       |  |      | 30,800     |      |   | 1,136,000  |   |   | (2,071,000 | )
|                                                                                                                           |  |      |            |      |   |            |   |   |            |  
|Provision for income taxes                                                                                                 |  | $    | (505,145   | )    | $ | 1,243,679  |   | $ |           |  

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:

|                                                           |  |      |       |      |  |       |   |  |       |  
|---------------------------------------------------------- |  | ---- | ----- | ---- |  | ----- | - |  | ----- | -
|                                                           |  | 2009 |       | 2008 |  | 2007  |  
|Expected
 federal income tax expense at the statutory rate |  |      | 35.0  | %    |  | 35.0  | % |  | 46.2  | %
|State tax
 expense at statutory rate                       |  |      | 5.0   | %    |  | 5.0   | % |  | 6.6   | %
|Payments to
 members                                       |  |      | -40.0 | %    |  | -38.3 | % |  | -52.2 | %
|Other, net                                                 |  |      | -0.5  | %    |  | -0.6  | % |  | -0.6  | %
|                                                           |  |      |       |      |  |       |   |  |       |  
|Effective
 tax rate                                        |  |      | -0.5  | %    |  | 1.1   | % |  | 0.0   | %

78

---

The Company
allocates the patronage related benefits of the Domestic Production Activities
Deduction directly to its patrons. During the years ended August 31, 2009, 2008
and 2007 the Company passed through $5,742,508, $-0- 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 companies use straight-line and
 accelerated methods of depreciation with lives of 3 to 40 years, while, for
 income tax purposes, the companies use required statutory depreciable lives
 and methods.                                                                                                                                                                                                                                                                                                                                                                                              
| | 3. | Non-qualified
 patronage credits from investments in other cooperatives - For financial
 statement purposes, the companies recognize 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,
 2009, 2008 and 2007 was $88,600, $236,280 and $236,280, respectively leaving
 a remaining balance on August 31, 2009 of $354,400 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 Interpretation No. 48

On September 1, 2007 The Company adopted the provisions of FASB
Interpretation (FIN) No. 48, Accounting for
Uncertainty in Income Taxes  An Interpretation of FASB Statement No. 109.
FIN 48 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. FIN 48 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.

79

---

The total
amount of unrecognized tax benefits as of August 31, 2009 is $274,075. These
amounts include accrued interest and penalties of $91,692.

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,                               |  | 2009 |         | 2008 |   | 2007    | 
|                                                     |  |      |         |      |   |         |  |   |   | 
|Balance
 unrecognized tax benefits                   |  | $    | 256,075 |      | $ |        |  | $ |  | 
|Increases for tax positions related to
 current year |  |      | 18,000  |      |   |        |  |   |  | 
|Increases for tax positions related to
 prior year   |  |      |        |      |   | 256,075 |  |   |  | 
|Reductions for tax positions of prior years          |  |      |        |      |   |        |  |   |  | 
|Decreases related to settlements                     |  |      |        |      |   |        |  |   |  | 
|Reductions due to lapsed statute of
 limitations     |  |      |        |      |   |        |  |   |  | 
|Balance
 unrecognized tax benefits                   |  | $    | 274,075 |      | $ | 256,075 |  | $ |  | 

Tax returns
filed as of August 31, 2003 through current filings are open for examination.

NOTE 8 - DEPRECIATION

The Companys
depreciation expense for the years ended August 31, 2009, 2008 and 2007 was
$8,420,580, $8,095,659 and $7,953,469, 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
$571,648 as of August 31, 2009.

80

---

During fiscal
year 2000, the Company sold certain notes receivable with recourse. The
Companys contingent liability related to these notes totaled $110,262 as of
August 31, 2009.

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, |  |   |        
|                         |  |   |         | 
|2010                     |  | $ | 868,930 | 
|2011                     |  |   | 57,975  | 
|2012                     |  |   | 674     | 
|                         |  | $ | 927,579 | 

Operating
lease and contract expenses for the years ended August 31, 2009, 2008 and 2007,
totaled $1,145,998, $1,535,475 and $1,834,441, respectively.

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,
2009, 2008 and 2007 totaled $637,822, $631,063 and $570,045, 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,
2009 and 2008 totaled $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 with independent trustees amounts allowable by law. Funds deposited
with trusts and insurance companies are maintained to provide pension benefits
to plan participants and their beneficiaries. The Companys measurement date
was changed to August 31, 2009 and for the prior years the measurement date was
May 31, 2008 and 2007, respectively.

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
458 participants.

81

---

In September
2006, the FASB issued SFAS No. 158, Employers Accounting for Defined Benefit
Pension and Other Post-retirement Plans, an amendment of FASB Statements No.
87, 88, 106 and 132R. This standard requires employers to recognize the under
funded or over funded 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. This standard also eliminates the requirement for
Additional Minimum Pension Liability (AML) required under SFAS No. 87. As a
result of the application of SFAS No. 158 as of August 31, 2009, 2008 and 2007
the Company increased liabilities by $7,547,180, $639,310 and $3,947,430. These
liabilities were offset to accumulate other comprehensive income (loss). As a
result of SFAS No. 158, in the year ended August 31, 2009, 2008 and 2007 the
Company recognized an increase in accumulated other comprehensive income (loss)
of ($7,080,155), ($2,218,282) and ($2,368,458), respectively. In accordance with
FAS 158 the measurement date was moved from May 31, 2007 and May 31, 2008 to
August 31, 2009 creating a fifteen-month period vs. twelve-month periods the
preceding two years.

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

|                                                   |  |      |             |      |   |            |   |   |            |  
|-------------------------------------------------- |  | ---- | ----------- | ---- | - | ---------- | - | - | ---------- | -
|                                                   |  | 2009 |             | 2008 |   | 2007       |  
|                                                   |  |      |             |      |   |            |   |   |            |  
|Change in benefit obligation                       |  |      |             |      |   |            |   |   |            |  
|Benefit obligation at beginning of year            |  | $    | 26,101,309  |      | $ | 25,712,339 |   | $ | 23,525,263 |  
|Service cost                                       |  |      | 1,284,966   |      |   | 940,135    |   |   | 958,696    |  
|Interest cost                                      |  |      | 2,175,966   |      |   | 1,558,671  |   |   | 1,530,008  |  
|Experience (gain)/loss due to participant
 changes |  |      | 2,774,339   |      |   | (1,351,129 | ) |   | 370,582    |  
|Benefits paid                                      |  |      | (1,260,410  | )    |   | (758,707   | ) |   | (672,210   | )
|                                                   |  |      |             |      |   |            |   |   |            |  
|Benefit obligation at end of year                  |  |      | 31,076,170  |      |   | 26,101,309 |   |   | 25,712,339 |  
|                                                   |  |      |             |      |   |            |   |   |            |  
|Change in plan assets                              |  |      |             |      |   |            |   |   |            |  
|Fair value of plan assets at beginning of
 year    |  |      | 20,158,363  |      |   | 20,277,824 |   |   | 16,961,551 |  
|Actual return on plan assets                       |  |      | (2,494,214  | )    |   | (360,683   | ) |   | 2,990,887  |  
|Employer contribution                              |  |      | 2,097,024   |      |   | 1,060,000  |   |   | 1,075,000  |  
|Benefits and expenses paid                         |  |      | (1,280,595  | )    |   | (818,778   | ) |   | (749,614   | )
|                                                   |  |      |             |      |   |            |   |   |            |  
|Fair value of plan assets at end of year           |  |      | 18,480,578  |      |   | 20,158,363 |   |   | 20,277,824 |  
|                                                   |  |      |             |      |   |            |   |   |            |  
|Funded status                                      |  |      | (12,595,592 | )    |   | (5,942,946 | ) |   | (5,434,515 | )
|Unrecognized net actuarial loss                    |  |      |            |      |   |           |   |   |           |  
|Unrecognized prior service cost                    |  |      |            |      |   |           |   |   |           |  
|Unrecognized transition (asset) obligation         |  |      |            |      |   |           |   |   |           |  
|                                                   |  |      |             |      |   |            |   |   |            |  
|Accrued benefit cost liability                     |  | $    | (12,595,592 | )    | $ | (5,942,946 | ) | $ | (5,434,515 | )

82

---

|                        |  |                  |             |      |   |            |   |   |            |  
|----------------------- |  | ---------------- | ----------- | ---- | - | ---------- | - | - | ---------- | -
|                        |  | Pension Benefits |            
|                        |  | 2009             |             | 2008 |   | 2007       |  
|                       
|Non-current
 assets     |  | $                |            |      | $ |           |   | $ |           |  
|Current
 liabilities    |  |                  |            |      |   |           |   |   | (660,125   | )
|Noncurrent
 liabilities |  |                  | (12,595,592 | )    |   | (5,942,946 | ) |   | (4,774,390 | )
|                        |  | $                | (12,595,592 | )    | $ | (5,942,946 | ) | $ | (5,434,515 | )
|                        |  |                  |             |      |   |            |   |   |            |  
|                        |  | 2009             |             | 2008 |   | 2007       |  
|                       
|Net loss                |  | $                | 11,466,409  |      | $ | 4,436,275  |   | $ | 3,745,541  |  
|Prior
 service cost     |  |                  | 128,798     |      |   | 169,107    |   |   | 201,889    |  
|                        |  | $                | 11,595,207  |      | $ | 4,605,382  |   | $ | 3,947,430  |  

The
accumulated benefit obligation for all defined benefit pension plans for the
years ended August 31, 2009, 2008 and 2007 were $22,858,793, $19,721,092 and
$18,725,646, respectively.

|                                             |  |      |   |      |     |      |  |     |   | 
|-------------------------------------------- |  | ---- | - | ---- | --- | ---- |  | --- | - | 
|                                             |  | 2009 |   | 2008 |     | 2007 | 
|                                             |  |      |   |      |     |      |  |     |   | 
|Weighted-average assumptions as of August 31 |  |      |   |      |     |      |  |     |   | 
|Discount rate                                |  | 6.2  | % |      | 6.5 | %    |  | 6.5 | % | 
|Expected return on plan assets               |  | 8.0  | % |      | 8.0 | %    |  | 8.0 | % | 
|Rate of total compensation increase          |  | 4.3  | % |      | 4.3 | %    |  | 4.3 | % | 

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

|                                        |  |      |            |      |   |            |   |   |            |  
|--------------------------------------- |  | ---- | ---------- | ---- | - | ---------- | - | - | ---------- | -
|                                        |  | 2009 |            | 2008 |   | 2007       |  
|                                        |  |      |            |      |   |            |   |   |            |  
|Components on net periodic benefit cost |  |      |            |      |   |            |   |   |            |  
|Service cost                            |  | $    | 1,284,966  |      | $ | 940,135    |   | $ | 958,696    |  
|Interest cost                           |  |      | 2,175,966  |      |   | 1,558,671  |   |   | 1,530,008  |  
|Expected return on plan assets          |  |      | (2,036,453 | )    |   | (1,621,109 | ) |   | (1,362,530 | )
|Amortization of prior service cost      |  |      | 40,309     |      |   | 32,782     |   |   | 56,848     |  
|Amortization of transition amount       |  |      |           |      |   |           |   |   |           |  
|Amortization of net (gain) or loss      |  |      | 295,057    |      |   |           |   |   | 239,581    |  
|                                        |  |      |            |      |   |            |   |   |            |  
|Net periodic benefit cost               |  | $    | 1,759,845  |      | $ | 910,479    |   | $ | 1,422,603  |  

83

---

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

|                                 |  |   |           | 
|-------------------------------- |  | - | --------- | 
|Current
 Period                  |  | $ | 1,474,949 | 
|Adjustment
 to Retained Earnings |  |   | 284,896   | 
|Total                            |  | $ | 1,759,845 | 

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

|                   |  |      |     |      |  |      |   |  |     |  
|------------------ |  | ---- | --- | ---- |  | ---- | - |  | --- | -
|                   |  | 2009 |     | 2008 |  | 2007 |  
|Asset category     |  |      |     |      |  |      |   |  |     |  
|Equity
 securities |  |      | 61  | %    |  | 66   | % |  | 69  | %
|Debt
 securities   |  |      | 37  | %    |  | 31   | % |  | 27  | %
|Other              |  |      | 2   | %    |  | 3    | % |  | 4   | %
|                   |  |      |     |      |  |      |   |  |     |  
|Total              |  |      | 100 | %    |  | 100  | % |  | 100 | %

Investment Philosophy

The Companys
investment philosophy to achieve acceptable returns with reasonable risks
involves diversification into different investment asset classes, which in
turn, mitigates an over exposure to any one segment of investment alternatives,
avoids market timing, and controls fees.

Expected Return on Plan Assets

The Companys
Pension Committee has relied upon the advice of an independent pension fund
consultant to determine the expected return on plan assets for similar funds
using similar investment philosophies.

Contributions

The Company
expects to contribute $2,800,000 to its pension plan in 2010.

Distributions (Expected Future)

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

|                          |  |   |           | 
|------------------------- |  | - | --------- | 
|2010                      |  | $ | 989,219   | 
|2011                      |  |   | 800,842   | 
|2012                      |  |   | 733,877   | 
|2013                      |  |   | 881,539   | 
|2014                      |  |   | 888,594   | 
|Thereafter,
 through 2019 |  |   | 6,795,845 | 

84

---

As a result of
SFAS No. 158, the Company has recognized a charge to accumulated other
comprehensive loss as follows:

|                              |  |      |            |      |   |           |  |   |           | 
|----------------------------- |  | ---- | ---------- | ---- | - | --------- |  | - | --------- | 
|Fiscal
 Year Ended August 31: |  | 2009 |            | 2008 |   | 2007      | 
|                              |  |      |            |      |   |           |  |   |           | 
|Beginning Balance             |  | $    | 4,890,516  |      | $ | 2,368,458 |  |   |          | 
|Minn Dak Farmers Cooperative  |  |      | 7,080,155  |      |   | 2,218,280 |  |   | 2,368,458 | 
|United Sugars                 |  |      | 771,949    |      |   | 209,017   |  |   |          | 
|Midwest Agri                  |  |      | 68,615     |      |   | 94,761    |  |   |          | 
|                              |  |      |            |      |   |           |  |   |           | 
|Ending Balance                |  | $    | 12,811,235 |      | $ | 4,890,516 |  | $ | 2,368,458 | 

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, 2009,
2008 and 2007 was $231,768, $276,562 and $117,243, 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, 2009, 2008 and 2007 were $365,015, $385,745
and $579,599, 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

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.

NOTE 14  SUBSEQUENT EVENTS

The Company
has considered subsequent events through November 24, 2009.

85

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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s Annual Report on Form 10-K for the fiscal year
 ended August 31, 2008 as filed on November 26, 2008.                                                                                                       
|10(a)  |  | Growers Agreement (three-year 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). 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(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, 2009.                                                        
|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.                                                                                                                              



86

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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                |  | 11-24-09   
|David H.
 Roche        |  | Chief Executive Officer      |  |            
|                       |  |                              |  |            
|/s/ Steven
 M. Caspers |  | Executive Vice President and |  | 11-24-09   
|Steven M.
 Caspers     |  | Chief Financial Officer      |  |            
|                       |  |                              |  |            
|/s/ Allen E.
 Larson   |  | Controller and               |  | 11-24-09   
|Allen E.
 Larson       |  | Chief Accounting Officer     |  |            
|                       |  |                              |  |            
|/s/ Dale
 Blume        |  |                              |  | 11-24-09   
|Dale Blume             |  | Director                     |  |            
|                       |  |                              |  |            
|/s/ Dennis
 Butenhoff  |  |                              |  | 11-24-09   
|Dennis
 Butenhoff      |  | Director                     |  |            
|                       |  |                              |  |            
|/s/ Brent
 Davison     |  |                              |  | 11-24-09   
|Brent
 Davison         |  | Director                     |  |            
|                       |  |                              |  |            
|/s/ Doug
 Etten        |  |                              |  | 11-24-09   
|Doug Etten             |  | Director                     |  |            
|                       |  |                              |  |            
|/s/ Patrick
 Freese    |  |                              |  | 11-24-09   
|Patrick
 Freese        |  | Director                     |  |            
|                       |  |                              |  |            
|/s/ Dennis
 Klosterman |  |                              |  | 11-24-09   
|Dennis Klosterman      |  | Director                     |  |            
|                       |  |                              |  |            
|/s/ Russell
 Mauch     |  |                              |  | 11-24-09   
|Russell
 Mauch         |  | Director                     |  |            
|                       |  |                              |  |            
|/s/ Charles
 Steiner   |  |                              |  | 11-24-09   
|Charles Steiner        |  | Director                     |  |            
|                       |  |                              |  |            
|/s/ Alton
 Theede      |  |                              |  | 11-24-09   
|Alton Theede           |  | Director                     |  |            

87

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