UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION

                            Washington, D.C.  20549


                                  FORM 10-QSB


                   QUARTERLY REPORT UNDER SECTION 13 or 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934



For Quarter Ended                                      Commission File
May 31, 1998                                         Number 0000927536




                     ALLIANCE FARMS COOPERATIVE ASSOCIATION
             (Exact name of registrant as specified in its charter)



Colorado                                                   84-1270685
(State or other jurisdiction of  (I.R.S. Employer Identification No.)
Incorporation or Organization)



                   302 Idlewild Street, Yuma, Colorado  80759
                    (Address of principal executive offices)

                                  970-848-3231
                           (Issuers telephone number)


Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 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.  Yes [X]  No [  ]

At July 15, 1998, there were 155 shares of the issuers common stock outstanding,
of which 119 were shares of Class A common stock and 36 were shares of Class B
common stock.

Transitional Small Business Disclosure Format (check one):  Yes [  ]   No [X]



                             ALLIANCE FARMS COOPERATIVE ASSOCIATION
                                         BALANCE SHEETS
                                            UNAUDITED
<TABLE>
<CAPTION>

                                                      May 31, 1998                 August 31, 1997

<S>                                                  <C>                           <C>
ASSETS
Current Assets:
   Receivables, trade                                         13,589                        69,550
   Receivables, non-trade (Note 3)                           191,376                       200,137
   Inventory  (Note 4)                                     3,720,201                     3,179,402
   Other current assets                                       68,025                             0

       Total current assets                                3,993,191                     3,449,089

   Property, plant and equipment, at cost (Note 5)        24,376,151                    19,610,833
   Less accumulated depreciation                           2,982,345                     2,193,650

                                                          21,393,806                    17,417,183


   Breeding stock                                          4,190,176                     4,603,996
   Less accumulated depreciation                           1,055,288                     1,353,650

                                                           3,134,888                     3,250,346
   Other assets, net of $100,476 and $77,261
     accumulated amortization                                333,351                       263,788

                                                         $28,855,236                   $24,380,406



LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
   Bank Overdraft                                            400,074                     1,106,122
   Current maturities of long-term debt (Note 5)           1,744,800                     1,262,700
   Accounts payable (Note 3)                               1,464,717                       952,431
   Accrued expenses                                          390,955                       242,261

     Total current liabilities                             4,000,546                     3,563,514

Long-term debt (Note 5)                                   15,100,561                    14,320,724

Shareholders' equity
   Class A common stock of $.01 par value;
authorized
     5,000 shares, issued and outstanding 119 shares               1                             1
   Class B common stock of $.01 par value;
authorized
     2,500 shares, issued and outstanding 36 shares                0                             0
   Class C common stock of $.01 par value;
     authorized 2,500 shares, none issued                          0                             0
   Additional paid-in capital                             10,751,325                     8,719,237
   Accumulated deficit                                     (997,197)                   (2,223,070)

      Total shareholders' equity                           9,754,129                     6,496,168
     Commitments (Note 6)
                                                     ------                        ------

                                                         $28,855,236                   $24,380,406



                   See accompanying notes to financial statements
</TABLE>
<TABLE>
<CAPTION>

                                      ALLIANCE FARMS COOPERATIVE ASSOCIATION
                                        CONDENSED STATEMENTS OF OPERATIONS

                                                     UNAUDITED





                                           Three Month Periods Ended                  Nine Month Periods Ended
                                                     May 31                                    May 31

                                             1998               1997                   1998               1997


<S>                                     <C>                <C>                    <C>                 <C>
Net sales  (Note 2)                         $4,375,672         $3,351,997            $13,346,482         $9,871,995
Cost of goods sold                           3,355,709          2,690,524              9,587,739          8,239,573


     Gross income                            1,019,963            661,473              3,758,743          1,632,422

Expenses related to start-up
  of new production facilities                 342,814             98,547                791,861            174,215
Administrative expenses                        424,610            111,174                751,269            326,170
(Gain) Loss on sale of breeding stock          103,518            (4,310)                159,057             76,710


Operating income                              $149,021           $456,062             $2,056,556         $1,055,327

Other income (expense):
   Interest expense                          (412,924)          (238,776)            (1,129,039)          (919,360)
   Other                                       246,194             15,325                298,355            101,111

                                             (166,730)          (223,451)              (830,684)          (818,249)



Net income (loss)                            ($17,709)           $232,611             $1,225,872           $237,078





             See accompanying notes to condensed financial statements


</TABLE>

<TABLE>
<CAPTION>

                                ALLIANCE FARMS COOPERATIVE ASSOCIATION
                                       STATEMENTS OF CASH FLOWS
                                               UNAUDITED


                                                                    Nine Month Periods Ended
                                                                             May 31
                                                                  1998                    1997

<S>                                                       <C>                     <C>
Cash flows from operating activities:
   Net income                                                   $    1,225,872            $     237,078
   Adjustment to reconcile net income to net cash
     provided by operating activities:
        Provision for depreciation and amortization                  1,922,780                1,581,526
        Loss on sale of breeding stock                                 159,057                   76,710
   Changes in assets and liabilities:
        Receivables                                                     64,722                   13,138
        Inventory                                                    (540,799)                (594,810)
        Other current assets                                          (68,025)                 (39,945)
        Other assets                                                 (104,778)                 (70,897)
        Accounts payable                                               512,286                  741,510
        Accrued expenses                                               148,694                  105,882

            Net cash provided by operating activities                3,319,809                2,050,192

Cash flows from investing activities:
   Capital expenditures                                            (7,305,367)              (3,888,065)
   Proceeds from sale of breeding stock                              1,385,582                  609,636

          Net cash used in investing activities                    (5,919,785)              (3,278,429)


Cash flows from financing activities:
   Proceeds from issuance of long term debt                          2,658,785                  422,000
   Net decrease in revolving term credit                             (309,782)                  151,000
   Payment on long term debt                                         (970,400)                (652,500)
   Increase (decrease) in note payable to Farmland                   (116,666)                1,340,000
   Loan origination fees                                                12,000                        0
   Issuance of common shares, net of offering cost                   2,032,087                        0
   Increase (decrease) in bank overdraft                             (706,048)                 (32,263)
            Net cash provided by

                    financing activities:                            2,599,976                1,228,237


            Change in cash and cash
                 equivalents                                                 0                        0

Cash and cash equivalents at beginning of period                             0                        0

Cash and cash equivalents at end of period                                   $                        $
                                                                             0                        0



                   See accompanying notes to financial statements
</TABLE>


                     Alliance Farms Cooperative Association

                    Notes to Condensed Financial Statements

                                  (Unaudited)

1.   Interim Financial Statements

     The accompanying condensed unaudited financial statements reflect all
     adjustments (consisting of only normal recurring adjustments) which in the
     opinion of management, are necessary for a fair presentation of the
     financial position, results of operations and cash flows for the interim
     periods presented.

     Certain information and footnote disclosures normally included in financial
     statements presented in accordance with generally accepted accounting
     principles have been condensed or omitted.  The accompanying unaudited
     condensed financial statements should be read in conjunction with the
     financial statements and notes in Alliance's August 31, 1997 Annual Report
     on Form 10-KSB.

2.   Sales

     Alliance sold nearly 100% of its feeder pigs to its members for the three
     and nine month periods ended May 31, 1998 and 1997 at a contractual price
     which is based on Alliance's operating costs (which are based on a twelve
     month rolling average), debt service and an additional $4.50 per pig sold.

     Because the contractual price for the sale of a feeder pig is determined
     based upon, among other things, a twelve month historical rolling average
     of operating costs and to the extent that current operating costs per pig
     exceed the historical average operating costs, Alliance may incur a
     negative gross margin on the sale of its feeder pigs during periods of
     rising costs.  Conversely, in periods of falling costs, Alliance may earn
     higher than normal gross margins.

     Alliance's average net sales price and the average industry market price
     for feeder pigs were as follows:

                           Three Months Ended   Nine Months Ended
                                 May 31             May 31

                             1998       1997     1998       1997

    Average Net Sales Price  56.05      59.16    58.53      58.26
    Average Industry Market* 35.14      64.99    39.48      57.65

    *As published by the USDA's Market News Service


3.   Transactions with Farmland and Yuma


     Alliance purchased feed from Yuma Farmers' Milling and Mercantile
     Cooperative (Yuma), and animal health supplies and breeding stock from
     Farmland Industries, Inc. (Farmland) based on market prices. Yuma and
     Farmland are members of Alliance.  Alliance also sold feeder pigs to
     Farmland and Yuma.  Such purchases and sales were as follows:
     <TABLE>
     <CAPTION>
     Three Months Ended                        Nine Months Ended
                                                    May 31                            May 31        

                                             1998           1997             1998             1997

     <S>...............................<C>             <C>            <C>                <C>
     Feed Purchases....................$      806,062     $1,072,431  $     2,874,834       $3,167,871
     Animal Health Purchases...........        82,698        172,686          169,736          549,933
     Breeding Stock....................       795,685        789,328        2,308,245        1,284,084
     Feeder Pig Sales..................     2,293,777      2,111,550        8,009,564        6,072,633
     </TABLE>



     Farmland also pays Alliance a royalty for any pigs raised by Alliance and
     sold to a Farmland finisher that are then selected as breeding stock for
     Farmland's contract herds pursuant to a swine production services
     agreement.  The royalty, which is $10 per head selected, paid to Alliance
     under such agreement was as follows:
     <TABLE>
     <CAPTION>
     Three Months Ended                        Nine Months Ended
                                                    May 31                            May 31        

                                             1998           1997             1998             1997


     <S>...............................<c              <C>            <C>                <C>
     Royalty Income.............           $  0            $7,240           $21,100          $79,840
     </TABLE>



     Alliance had $191,376 and $200,137 of non-trade receivables at May 31,1998
     and August 31, 1997, respectively. The $191,376 due to Alliance at May 31,
     1998 was due from Farmland for royalties as described above and for items
     received by Farmland out of Alliance's shop stock inventory, and from Pig
     Producers I, LP ("Pig Producers"), a limited partnership in which Farmland
     holds a 12.5% interest, for the reimbursement of wages, benefits and other
     costs attributable to Alliance employees that are assigned to perform
     various duties at Pig Producers, as well as for items received by Pig
     Producers out of Alliance's shop stock inventory. Of the $200,137 due to
     Alliance at August 31, 1997, $120,195 was due from Yuma Cooperative as a
     result of a feed pricing adjustment and the remainder was due for wages and
     benefits as described above from Pig Producers, in addition to charges for
     items received out of Alliance's shop stock inventory by both Pig Producers
     and Farmland.

     Farmland performs administrative, advisory and consulting services on
     behalf of Alliance pursuant to a contractual agreement.  The agreement
     provides that Farmland will be compensated for such services in an amount
     equal to one dollar per pig shipped adjusted annually for inflation for a
     term of ten years commencing July 13, 1994.  Amounts paid by Alliance to
     Farmland under such agreement were as follows:
     <TABLE>
     <CAPTION>

                                               Three Months Ended               Nine Months Ended
                                                    May 31                            May 31        

                                             1998           1997             1998             1997


     <S>...............................<C>             <C>            <C>                <C>
     Management Fee                    $     87,277    $   61,701        $ 254,344         $ 183,297


     </TABLE>

     Alliance owed $60,762 and $188,849 at May 31, 1998 and $197,755 and
     $185,413 at August 31, 1997 to Farmland and Yuma, respectively, for goods
     and services.  Alliance is also obligated to Farmland in the amounts of
     $499,758 and $616,424 at May 31, 1998 and August 31, 1997, respectively,
     pursuant to a promissory note.  See note 5.



4.   Major components of inventories as of May 31, 1998 and August 31, 1997 are
     as follows:
<TABLE>
<CAPTION>
                                May 31            August 31
                                 1998                1997


<S>                          <C>               <C>
         Feeder Pigs.......$    3,590,694     $       2,922,594
         Other.............       129,507               256,808

         ..................$   3,720,201     $       3,179,402




</TABLE>

5.   Long-Term Debt


     Long term debt at May 31, 1998 and August 31, 1997 consisted of the
     following:
<TABLE>
<CAPTION>

                                                May 31                    August 31
                                                 1998                         1997


<S>                          <C>               <C>
         CoBank Term Loan.................$      12,209,600         $      12,525,131
         CoBank Construction Loan.........$       2,003,916         $               0
         CoBank Revolving
             Term Credit..................$       2,132,087         $       2,441,869
         Note Payable, Farmland...........$         499,758                   616,424

                                          $      16,845,361         $      15,583,424

         Less Current Maturities..........$       1,744,800         $       1,262,700

                                          $      15,100,561         $      14,320,724





     </TABLE>

     On March 18, 1998, Alliance entered into a new $34,506,700 secured credit
     facility with CoBank to provide financing for the debt portion of the
     construction of up to six 2,450-sow weaned and/or feeder pig production
     facilities, related support facilities and initial breeding stock
     associated with each unit and to restate and modify the terms and
     conditions of the existing loan agreements, including the commitments for
     financing the debt portion of the two 2,450-sow weaned pig facilities
     already under construction, along with these units related support
     facilities, initial breeding stock and capitalized start-up costs.  This
     agreement provides for $26,846,700 of term loans and $7,660,000 of
     revolving term credit.  The availability of non-revolving term debt and
     revolving term credit under the CoBank credit facility is subject to
     specified equity investment levels in the Company being satisfied.  There
     is no assurance that additional shares of common stock will be sold and the
     specified equity investment levels satisfied.  Under this new credit
     facility, proceeds from the construction loan are used for construction of
     facilities and are advanced by CoBank as construction costs are incurred by
     Alliance.  Proceeds from the term loans and revolving term credit are used
     to repay the construction loan upon completion of a facility, and for
     working capital.

     The credit facility was also amended to accommodate the construction of two
     weaned pig facilities in place of two feeder pig facilities.  The unused
     revolving term credit expires June 20, 2006.  Interest accrues on the
     outstanding principle balance of the loan at a rate equal to CoBank's
     national variable rate, plus 1.25% (9.75% at May 31, 1998).  Alliance
     capitalized $38,606 and $8,241 of interest on construction for the nine
     months ended May 31, 1998 and 1997 respectively.

     At May 31, 1998, Alliance had $3,564,000 immediately available under its
     credit facility with CoBank, consisting of $2,316,000 of term loans and
     $1,248,000 of revolving term credit.  An additional $4,320,000 is to become
     available following CoBank's acceptance of certain documents, as specified
     in the loan agreement.

     The new credit facility provides for the monthly payment of principal and
     interest.  The existing non-revolving term loans will change from ten year
     to eight year terms effective August 31, 1998.  Each new tranche of non-
     revolving term credit will be repaid with monthly interest payments and
     with 97 monthly principal payments of $21,800 for feeder pig facilities and
     $17,300 for weaned pig facilities to begin 18 months after the initial
     advance on each new construction loan commitment.  The revolving credit
     facility will mature on August 31, 2010 and will decrease in 40 equal
     amounts at the end of each of the Company's fiscal quarters based on the
     amount of available commitment at August 31, 2001.

     Alliance is required to comply with various covenants, including, but not
     limited to (i) maintaining a total equity to total assets ratio of not less
     than .25, (ii) maintaining a debt service coverage ratio of not less than
     1.00 (calculated as average annual cash flow divided by current debt),
     (iii) restrictions on the occurrence of additional indebtedness.  As of May
     31, 1998, Alliance was in compliance with all covenants.  Alliance may be
     required to make equity investments in CoBank in an amount not to exceed 1%
     of the average five-year principal loan balance until Alliance meets
     CoBank's target level of equity investment, which is currently 11.5% of the
     average five-year principal loan balance.  As of May 31, 1998,
     substantially all assets of Alliance were pledged to CoBank.

     At May 31, 1998, $499,758 had been borrowed from Farmland pursuant to a
     $760,000 loan agreement.  The $760,000 loan agreement provides for interest
     at CoBank's prime rate and requires repayment in 2005.

     Long-term debt as of May 31, 1998 matures during the fiscal years ending
     August 31 in the following amounts:

                        1998........$    385,800
                        1999........   1,812,000
                        2000........   2,227,200
                        2001........   2,280,502
                        2002........   2,440,409
                        Thereafter..   7,699,450

                                    $ 16,845,361




6. Alliance Farms is currently operating seven 2,450 sow feeder pig facilities
  and has one weaned pig facility under construction in Yuma County, Colorado
  and in Wayne County, Illinois.  As of May 31, 1998, commitments for
  construction of these two facilities totaled $261,396.  Also, there is a
  commitment of $3,243,200 for an additional 5,000 sow facility in Yuma County,
  Colorado.  As of May 31, 1998 construction had not begun.

 MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION


EXCEPT FOR THE HISTORICAL INFORMATION CONTAINED HEREIN, THE STATEMENTS MADE IN
THIS REPORT ON FORM 10-QSB ARE FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND
UNCERTAINTIES.  ALLIANCE'S ACTUAL RESULTS, FINANCIAL CONDITION OR BUSINESS COULD
DIFFER MATERIALLY FROM ITS HISTORICAL RESULTS, FINANCIAL CONDITION OR BUSINESS,
OR THE RESULTS OF OPERATIONS, FINANCIAL CONDITION OR BUSINESS CONTEMPLATED BY
SUCH FORWARD-LOOKING STATEMENTS.  FACTORS THAT COULD CAUSE OR CONTRIBUTE TO SUCH
DIFFERENCES INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED IN ALLIANCE FARMS'
AUGUST 31, 1997 ANNUAL REPORT ON FORM 10-KSB UNDER THE CAPTION "FACTORS THAT MAY
AFFECT FUTURE RESULTS OF OPERATIONS, FINANCIAL CONDITION OR BUSINESS", AS WELL
AS THOSE DISCUSSED ELSEWHERE IN ALLIANCE'S REPORTS FILED WITH THE SECURITIES AND
EXCHANGE COMMISSION.



FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES

     At May  31, 1998, Alliance reported a working capital deficit of $7,355 and
total assets of $28,855,236.  Alliance issued 17 shares of Class A common stock
in August 1997 for net proceeds of $1,231,584.  Alliance used these funds, in
combination with $2,110,000 of borrowings through May 31, 1998 for the repayment
of a $1,360,000 loan made by Farmland, and for the development, population, and
start-up of its second feeder pig facility in Wayne County, Illinois. Alliance
issued 36 shares of Class B common stock in November 1997 for net proceeds of
$2,032,087.  Alliance used these funds to repay the balance owed Farmland
pursuant to another $1,360,000 loan agreement, and for the development,
population, and start-up of one weaned pig facility in Yuma County, Colorado and
one in Wayne County, Illinois.

     As of the date of this report, Alliance has 119 shares of Class A Common
Stock issued and outstanding, 36 shares of Class B Common Stock issued and
outstanding, no issued and outstanding shares of Class C Common Stock and is
offering an additional 34 shares of Class A Common Stock, 18 shares of Class B
Common Stock, and 72 shares of Class C Common Stock to qualified prospective
investors.   At May 31, 1998, Alliance had $3,564,000 immediately available
under its credit facility with CoBank, consisting of $2,316,000 of term loans
and $1,248,000 of revolving term credit.  An additional $4,320,000 is to become
available following CoBank's acceptance of certain documents, as specified in
the loan agreement.  The availability of non-revolving term debt and revolving
term credit under the CoBank credit facility is subject to specified equity
investment levels in the Company being satisfied.

     As of May 31, 1998, Alliance has borrowed $499,758 from Farmland to
purchase land for future expansion. 
     During the nine month period ended May 31, 1998, Alliance had capital
expenditures of $2,349,630 for construction of its first weaned pig production
facility in Yuma County, Colorado and $1,735,736 for its first weaned pig
production facility in Wayne County, Illinois.  The remaining capital
expenditures were for replacement breeding stock and building construction for
the first seven production facilities.

     Major uses of cash during the nine months ended May 31, 1998 include:
$7,305,367 for capital expenditures on new and existing facilities, $309,782
decrease in revolving term credit, $970,400 of principal payments on long term
debt, and $116,666 paid to Farmland pursuant to a $760,000 loan agreement.
Major sources of cash include:  $2,032,087 of proceeds, net of offering costs,
from the issuance of capital stock, $2,658,785 of proceeds from the issuance of
long term debt and $3,319,809 in cash provided by operating activities.

     On March 18, 1998, Alliance entered into a new $34,506,700 secured credit
facility with CoBank to provide financing for the debt portion of the
construction of up to six 2,450-sow weaned and/or feeder pig production
facilities, related support facilities and initial breeding stock associated
with each unit and to restate and modify the terms and conditions of the
existing loan agreements, including the commitments for financing the debt
portion of the two 2,450-sow weaned pig facilities already under construction,
along with these units related support facilities, initial breeding stock and
capitalized start-up costs.  This agreement provides for $26,846,700 of term
loans and $7,660,000 of revolving term credit.  The availability of non-
revolving term debt and revolving term credit under the CoBank credit facility
is subject to specified equity investment levels in the Company being satisfied.
There is no assurance that additional shares of common stock will be sold and
the specified equity investment levels satisfied.  Under this new credit
facility, proceeds from the construction loan are used for construction of
facilities and are advanced by CoBank as construction costs are incurred by
Alliance.  Proceeds from the term loans and revolving term credit are used to
repay the construction loan upon completion of a facility, and for working
capital.

     The new credit facility provides for the monthly payment of principal and
interest.  The existing non-revolving term loans will change from ten year to
eight year terms effective August 31, 1998.  Each new tranche of non-revolving
term credit will be repaid with monthly interest payments and with 97 monthly
principal payments of $21,800 for feeder pig facilities and $17,300 for weaned
pig facilities to begin 18 months after the initial advance on each new
construction loan commitment.  The revolving credit facility will mature on
August 31, 2010 and will decrease in 40 equal amounts at the end of each of the
Company's fiscal quarters based on the amount of available commitment at August
31, 2001.

     Alliance is required to comply with various covenants, including, but not
limited to (i) maintaining a total equity to total assets ratio of not less than
 .25, (ii) maintaining a debt service coverage ratio of not less than 1.00
(calculated as average annual cash flow divided by current debt), (iii)
restrictions on the occurrence of additional indebtedness.  As of May 31, 1998,
Alliance was in compliance with all covenants.  Alliance may be required to make
equity investments in CoBank in an amount not to exceed 1% of the average five-
year principal loan balance until Alliance meets CoBank's target level of equity
investment, which is currently 11.5% of the average five-year principal loan
balance.  As of May 31, 1998, substantially all assets of Alliance were pledged
to CoBank.

THREE MONTHS ENDED MAY 31, 1998 AND 1997

     Shipments of feeder pigs were higher for the three months ended May 31,
1998 than in the prior year's period.  Alliance shipped 78,065 feeder pigs for
the quarter ended May 31, 1998 compared to 56,659 feeder pigs shipped for the
quarter ended May 31, 1997 for an increase of 38%.  Net sales for the quarter
ended May 31, 1998 increased to $4,375,672 from $3,351,997 for the prior year
period, an increase of $1,023,675, or 31%.  The selling price per pig is
determined pursuant to the formula established under Alliance's Feeder Pig
Purchase Agreement with its members.  The selling price is based on Alliance's
operating costs (which are based on a twelve month rolling average), debt
service and an additional $4.50 per pig.  The above increase in volume and sales
dollars is partially a result of having seven units in production for the
quarter ended May 31, 1998 as compared to six units in production for the
quarter ended May 31, 1997, in addition to improved productivity during the
quarter ended May 31, 1998.  The per pig sales price was lower during the three
months ended May 31, 1998 compared to the three months ended May 31, 1997 due to
higher pig production partially offset by higher expenses.  Average net sales
price was $56.05 and $59.16 during the quarter ended May 31, 1998 and 1997,
respectively.

     Alliance earned gross margins of $1,019,963 and $661,473 for the three
month periods ended May 31, 1998 and 1997, respectively.  This improvement in
gross margin is primarily due to the nature of the contractual pricing
arrangements applicable to Alliance's sale of feeder pigs to its members.  As
previously described, the selling price is based on, among other things,
Alliance's operating costs on a twelve month historical rolling average.  For
the third quarter of fiscal 1998, Alliance's net sales price exceeded then
current production costs by $13.07 per pig sold.  For the third quarter of
fiscal 1997, the net sales price exceeded then current production costs by
$11.67 per pig sold.

     Sales to Farmland for the three month periods ended May 31, 1998 and 1997
were $2,293,777 and $2,111,550, respectively.   The average net sales price per
head was $56.05 and $59.16 and the average industry market price per head was
$35.14 and $64.99 during 1998 and 1997, respectively.

     Alliance recorded $342,814 of start-up costs relating to the operation of
it's two newest production facilities under construction during the three months
ended May 31, 1998.  Start-up costs for the three month period ended May 31,
1998 were comprised of utilities, feed, labor and other general expenses prior
to the operation of the new feeder pig production facilities.

     Administrative expenses were $424,610 for the three months ended May 31,
1998 compared to $111,174 for the prior year period. This increase reflects the
increased operations and includes higher administrative, payroll and
professional fees, related primarily to additional facilities being in
operation.

     Loss on sale of breeding stock was $103,518 for the three months ended May
31, 1998 as compared to a gain of $4,310 for the prior year period.  This change
is attributable to an accelerated cull rate during the third quarter of fiscal
1998 compared to the third quarter of fiscal 1997.

     Interest expense of $412,924 for the three months ended May 31, 1998 as
compared to $238,776 for the prior year period, was incurred in financing the
development of seven existing and two new pig production facilities.  This
increase is primarily due to the increase in the outstanding loan balance.  As
of May 31, 1998, Alliance had borrowed $16,345,603 from CoBank for construction
and start up costs and $499,758 from Farmland for the purchase of land which is
intended to be used for future expansion.

     Alliance incurred a net loss of $17,709 for the three months ended May 31,
1998 compared to a net gain of $232,611 for the prior year period. The net loss
for the third quarter of fiscal 1998 was due to losses incurred related to the
two pig production facilities under construction.  These losses were
significantly offset by the rolling average cost that the per pig sales prices
are based on exceeding then current costs per pig by $4.16 per pig shipped,
caused primarily by an improvement in productivity.  The net gain for the third
quarter of fiscal 1997 was attributable to improved gross margins resulting from
the per pig sales price exceeding current operating costs.  In addition to
operating risks and uncertainties associated with any business, Alliance's
ability to generate net income is limited by any start-up expenses that are
incurred with respect to facilities development and by the selling price formula
for feeder pigs that contains a $4.50 production margin.


NINE MONTHS ENDED MAY 31, 1998 AND 1997

     Shipments of feeder pigs were higher for the nine months ended May 31, 1998
than in the prior year's period.  Alliance shipped 228,040 feeder pigs for the
nine months ended May 31, 1998 compared to 169,459 feeder pigs shipped for the
nine months ended May 31, 1997 for an increase of 35%.  Net sales for the nine
months ended May 31, 1998 increased to $13,346,482 from $9,871,995 for the prior
year period, an increase of $3,474,487, or 35%.  The selling price per pig is
determined pursuant to the formula established under Alliance's Feeder Pig
Purchase Agreement with its members.  The selling price is based on Alliance's
operating costs (which are based on a twelve month rolling average), debt
service and an additional $4.50 per pig.  The above increase in volume and sales
dollars is partially a result of having six units in production for nineteen
weeks and seven units in production for twenty weeks of the first nine months of
fiscal 1998 as compared to five units in production for nine weeks and six units
in production for thirty weeks of the first nine months of fiscal 1997, in
addition to improved productivity for the first nine months of fiscal 1998 as
compared to the first nine months of fiscal 1997.  The per pig sales price was
slightly higher during the first nine months of fiscal 1998 compared to the
first nine months of fiscal 1997 partially because the pigs shipped weighed more
and partially because the twelve months of costs used to compute the per pig
prices was slightly higher and the twelve months of productivity used to compute
the per pig prices was lower for the first nine months of fiscal 1998 than the
first nine months of fiscal 1997.  Average net sales price was $58.53 and $58.26
during the nine months ended May 31, 1998 and 1997, respectively.

     Alliance earned a gross margin of $3,758,743 and $1,632,422 for the first
nine months of fiscal 1998 and fiscal 1997, respectively.  This improvement in
gross margin is primarily due to the nature of the contractual pricing
arrangements applicable to Alliance's sale of feeder pigs to its members.  As
previously described, the selling price is based on, among other things,
Alliance's operating costs on a twelve month historical rolling average. For the
first nine months of fiscal 1998, Alliance's net sales price exceeded then
current production costs by $16.48 per pig sold.  For the first nine months of
fiscal 1997, the net sales price exceeded then current production costs by $9.64
per pig sold.

     Sales to Farmland for the first nine months of fiscal 1998 and 1997 were
$8,009,564 and $6,072,633, respectively.   The average net sales price per head
was $58.53 and $58.26 and the average industry market price per head was $39.48
and $57.65 during 1998 and 1997, respectively.

          Alliance recorded $791,861 of start-up costs relating to the operation
of it's two newest production facilities under construction during the first
nine months of fiscal 1998 and $174,215 of start-up costs relating to the two
facilities under construction during the first nine months of fiscal 1997.
Start-up costs for the first nine months of fiscal 1998 and 1997 were comprised
of utilities, feed, labor and other general expenses prior to the operation of
the new feeder pig production facilities.

     Administrative expenses were $751,269 for the nine months ended May 31,
1998 compared to $326,170 for the prior year period.  This increase reflects the
increased operations and includes higher administrative, payroll and
professional fees, related primarily to additional facilities being in
operation.

     Loss on sale of breeding stock was $159,057 for the nine months ended May
31, 1998 as compared to $76,710 for the prior year period.  This is attributable
to an accelerated cull rate during the third quarter of fiscal 1998, partially
offset with the existence of more mature facilities culling animals during the
first nine months of fiscal 1998 as compared to more newly developed facilities
culling animals during the first nine months of fiscal 1997.

     Interest expense of $1,129,039 for the nine months ended May 31, 1998 as
compared to $919,360 for the prior year period, was incurred in financing the
development of four existing and two new pig production facilities. This
increase is primarily due to the increase in the outstanding loan balance,
partially offset by the capitalization of $38,606 of interest in the first nine
months of fiscal 1998 compared to $8,241 in the first nine months of fiscal
1997.  As of May 31, 1998, Alliance had borrowed $16,345,603 from CoBank for
construction and start up costs and $499,758 from Farmland for the purchase of
land which is intended to be used for future expansion.

     Alliance earned net income of $1,225,872 for the nine months ended May 31,
1998 compared to $237,078 for the prior year period.  The net income for the
first nine months of fiscal 1998 was attributable to the rolling average cost
that the per pig sales prices are based on exceeding then current costs per pig
by $8.84 per pig shipped, caused primarily by an improvement in productivity.
This net income was partially offset due to losses incurred in the third quarter
of fiscal 1998 related to the construction of the two new pig production
facilities.  The net income for the first nine months of fiscal 1997 was
partially attributable to an improvement in productivity at the beginning of the
fiscal year which decreased throughout the first half of fiscal 1997 due to herd
health issues, and increased again during the third quarter of fiscal 1997.

     RECENT ACCOUNTING PRONOUNCEMENTS


     In 1998, the FASB issued Statement Number 133, "Accounting for Derivative
Instruments and Hedging Activities." This statement, which is effective for all
fiscal quarters beginning after June 15, 1999, will have no impact on Alliance's
reported financial position, results of operations or cash flows.


























Item 6.     Exhibits and Report on Form 8-K


(a)  Exhibits

     The exhibits listed below are filed as part of Form 10-QSB for the quarter
     ended May 31, 1998.

   27       Financial Data Schedule


(b)  No reports on Form 8-K were filed during the quarter ended May 31, 1998.


                                   SIGNATURES



In accordance with the requirements of the Securities Exchange Act of 1934, the
Registrant caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.


                            ALLIANCE FARMS COOPERATIVE ASSOCIATION
                                         (Registrant)




                                                                  
                                          Wayne Snyder
                                Chairman of the Board, President
                                          and Director
                              (Principal Executive Officer and Principal
                               Financial and Accounting Officer)

Dated:  July 15, 1998